In a significant development, the Chief Economist from the Organisation for Economic Co-operation and Development (OECD) has advised Osborne to start revising his spending cuts as their impact on economuc growth becomes clear.
This view has been supported in recent weeks by large falls in consumer confidence and poor figures for household spending and business investment.
Interesting that the OECD, which has been a supporter of austerity-heavy budgets across the continent, is now revising their view. This, of course, will come of little or no surprise to the high-profile experts who have been warning for some time of the folly of the sledgehammer approach to tackling public deficits, such as the Nobel-prize winning economists Paul Krugman and Joseph Stiglitz.
Krugman calls the Osborne approach "expansionary austerity" - the idea that dramatic spending cuts can 'free' business to grow the economy. In the past he has attacked this "delusional" approach:
"Slashing spending in the face of high unemployment is a mistake...Why not slash deficits immediately? Because tax increases and cuts in government spending would depress economies further, worsening unemployment. And cutting spending in a deeply depressed economy is largely self-defeating even in purely fiscal terms: any savings achieved at the front end are partly offset by lower revenue, as the economy shrinks".
Krugman has also pointed out that Osborne's last budget made assumptions that as state deficits would be cut, private debt would rise rapidly:
"The only way the economy can avoid taking a hit from government cuts is if private spending rises to fill the gap — and although you rarely hear the austerians admitting this, the only way that can happen is if people take on more debt. So we have the spectacle of a government that inveighs against the evils of debt pinning all its hopes on an assumption that over-indebted households will dig their hole even deeper. All in all, it’s quite a spectacle. It would be funny, except that millions of people will suffer the cost of this folly".
UPDATE FRIDAY 27 MAY:
The Guardian has picked up this theme today in its editorial.
Thursday 26 May 2011
Friday 20 May 2011
Clegg: the NHS is our red line
He may have supported Lansley's Health and Social Care Bill in its original form, but one angry conference and an electoral battering later, and Nick Clegg is now all over the media attacking Tory plans for the NHS.
The Liberal Democrats want substantive changes to the role of Monitor - to ensure it isn't a force for the promotion of competition. It is, apparently, the Lib Dem's elusive red line.
Whether it will work, it's hard to say. The Tories, previously staring at a growing gap in the polls with Labour have recently recovered ground. They may be a little over-confident, considering they are currently maintaining (at best) a vote share that failed to win them the last General Election, but this may result in a certain degree of intransigence in their dealings with their weaker Lib Dem partners.
Meanwhile it's left to an Tory ex-minister, Stephen Dorrell, to rightly focus on one of the longest problems with health care provision in the UK - the lack of co-ordination between social care and health care...something that Lansley's aim of fragmenting the service will only make much, much worse.
No-wonder rumours are abound that Dorrell may be in line for Lansley's job.
The Liberal Democrats want substantive changes to the role of Monitor - to ensure it isn't a force for the promotion of competition. It is, apparently, the Lib Dem's elusive red line.
Whether it will work, it's hard to say. The Tories, previously staring at a growing gap in the polls with Labour have recently recovered ground. They may be a little over-confident, considering they are currently maintaining (at best) a vote share that failed to win them the last General Election, but this may result in a certain degree of intransigence in their dealings with their weaker Lib Dem partners.
Meanwhile it's left to an Tory ex-minister, Stephen Dorrell, to rightly focus on one of the longest problems with health care provision in the UK - the lack of co-ordination between social care and health care...something that Lansley's aim of fragmenting the service will only make much, much worse.
No-wonder rumours are abound that Dorrell may be in line for Lansley's job.
Monday 16 May 2011
Majority of Britons believe NHS to be amongst the best in the world
After a well-documented delay, the Government has finally - reluctantly - released the latest NHS public satisfaction data.
Amongst its crucial findings are that satisfaction with the service remains very high, only little behind the record highs seen last year - with (unfortunately for the Government) 70% happy with how the NHS is currently run and 73% of those that have used the service satisfied with their experience.
In addition, 66% expressed the view that the NHS was amongst the best in the world (a figure that was even higher when posed in 2010):
Following on from the recent YouGov polling showing that almost half of Britons rate the NHS as the best system in the developed world - and other recent research findings - it demonstrates the mountain that Cameron is going to have to climb if he tries to force through Lansley's plans without major changes.
Amongst its crucial findings are that satisfaction with the service remains very high, only little behind the record highs seen last year - with (unfortunately for the Government) 70% happy with how the NHS is currently run and 73% of those that have used the service satisfied with their experience.
In addition, 66% expressed the view that the NHS was amongst the best in the world (a figure that was even higher when posed in 2010):
 |
| http://www.dh.gov.uk/en/MediaCentre/Statements/DH_126747 |
Following on from the recent YouGov polling showing that almost half of Britons rate the NHS as the best system in the developed world - and other recent research findings - it demonstrates the mountain that Cameron is going to have to climb if he tries to force through Lansley's plans without major changes.
Sunday 15 May 2011
TaxPayers' Alliance 'pro-cuts' rally draws about ten people
A heavily-trailed pro-cuts rally, backed by a motley crew of groups including UKIP and the ubiquitous TaxPayer's Alliance drew a crowd to Westminster so small that they were probably outnumbered by the pigeons, and certainly by random passers-by.
Nice to know that a UK Tea Party has precisely zero chance of success this side of the Atlantic. As you can see below, it was about as busy as Jim Davidson's latest tour:
Saturday 14 May 2011
Chair of NHS 'listening' exercise: competition-led provision may destroy services
After the hammering the Liberal Democrats received in the local elections, their newly strident tone on the NHS reforms (which, let's not forget, they had supported mere months earlier) looks likely to derail Lansley's vision for a quasi-free market health system.
However, if Lansley and other members of the Tory Party had hoped that they could ignore Lib Dem pressure and ensure that the listening exercise would be a pause and not much more, then today's news that the man chairing the consultation process, Steve Field, has attacked the original proposals as having the potential to "destroy essential services" will not be welcome.
He is, of course, correct - a free-market, competition-led approach to health care provision would both fragment the health service in this country and has been demonstrated to be an approach that will result in a system that is less fair and - crucially - less efficient.
However, if Lansley and other members of the Tory Party had hoped that they could ignore Lib Dem pressure and ensure that the listening exercise would be a pause and not much more, then today's news that the man chairing the consultation process, Steve Field, has attacked the original proposals as having the potential to "destroy essential services" will not be welcome.
He is, of course, correct - a free-market, competition-led approach to health care provision would both fragment the health service in this country and has been demonstrated to be an approach that will result in a system that is less fair and - crucially - less efficient.
Thursday 5 May 2011
Are the Tory Party finally awakening to public opposition to mass privatisation?
Last year, this blog drew attention to the desire by Suffolk County Council to use the budget crisis to fulfil their Thatcherite dreams. Well, it appears that they are now having second thoughts. In an eerily similar process to Cameron's 'listening exercise' on the NHS, Suffolk have announced what they have termed a 'period of 'reflection'.
The key question is this: are the Tories really rethinking their plans, or is this an attempt to turn down the political heat for a while (particularly until after today's elections)?
If they are reconsidering, then why? Is this the influence of the apparently resurgent left-wing of the Liberal Democrats? Or is it a sudden realisation, in the wake of the NHS reform debacle, that the public aren't prepared to sit back as quiety as Cameron hopes while a Conservative Party that failed to win the last general election dismantles public services without a mandate, all in the name of deficit reduction?
Oh. There is a third option, which that the senior Tories have suddenly grown a conscience... but that's the least plausible of all.
Monday 2 May 2011
Finally - a decent AV campaign video
Witty, clear and - best of all - not full of the kind of misleading guff that has afflicted both official campaigns to date, this pro-AV video is worth a watch. Sadly, with the weight of the Tory Party, major donors and its press allies ranged against it, probably too little too late.
Sunday 1 May 2011
Why Osborne's austerity-addiction will cost us dear
Etonmess is back from a break overseas and has noticed that the economic news hasn't got any better.
An article in the Financial Times asks if Osborne's right-wing monetary policies are making the situation worse, suggesting that the approach of shifting debt held by the state 'most creditworthy entity in the economy' onto the individual may well be precisely the wrong thing to do (and, it wouldn't be unfair for this blog to suggest, pretty hypocritical given previous comments by the Chancellor and his PM).
This, of course, is a long-time theme of the economist David Blanchflower, who offers this typically intelligent dissection of a recent set of comments by Fraser Nelson:
"Cutting too deeply and too quickly as this government is doing, compromises growth. Investing in the infrastructure and giving firms incentives to invest and hire in the long run will lower the deficit. A growing economy generates revenues. As Larry Summers said at Bretton Woods the whole idea of an expansionary fiscal contraction is 'oxymoronic'. The empirical evidence from the real world, rather than Nelson's made up one, is that austerity in the depths of a recession doesn't work. In the US when a similar policy was implemented in the 1930s it plunged the economy into a double-dip recession".
Why Osborne's comparison with Greece is wrong
And, for good measure, this paper Paul De Grauwe of the University of Leuven, which neatly explains why Osborne's repeated argument that the UK must cut or "be like Greece or Spain" is bunkum.
"In a nutshell the difference in the nature of sovereign debt between members and non-members of a monetary union boils down to the following. Members of a monetary union issue debt in a currency over which they have no control. It follows that financial markets acquire the power to force default on these countries. This is not the case in countries that are not part of a monetary union, and have kept control over the currency in which they issue debt. These countries cannot easily be forced into default by financial markets".
An article in the Financial Times asks if Osborne's right-wing monetary policies are making the situation worse, suggesting that the approach of shifting debt held by the state 'most creditworthy entity in the economy' onto the individual may well be precisely the wrong thing to do (and, it wouldn't be unfair for this blog to suggest, pretty hypocritical given previous comments by the Chancellor and his PM).
This, of course, is a long-time theme of the economist David Blanchflower, who offers this typically intelligent dissection of a recent set of comments by Fraser Nelson:
"Cutting too deeply and too quickly as this government is doing, compromises growth. Investing in the infrastructure and giving firms incentives to invest and hire in the long run will lower the deficit. A growing economy generates revenues. As Larry Summers said at Bretton Woods the whole idea of an expansionary fiscal contraction is 'oxymoronic'. The empirical evidence from the real world, rather than Nelson's made up one, is that austerity in the depths of a recession doesn't work. In the US when a similar policy was implemented in the 1930s it plunged the economy into a double-dip recession".
Why Osborne's comparison with Greece is wrong
And, for good measure, this paper Paul De Grauwe of the University of Leuven, which neatly explains why Osborne's repeated argument that the UK must cut or "be like Greece or Spain" is bunkum.
"In a nutshell the difference in the nature of sovereign debt between members and non-members of a monetary union boils down to the following. Members of a monetary union issue debt in a currency over which they have no control. It follows that financial markets acquire the power to force default on these countries. This is not the case in countries that are not part of a monetary union, and have kept control over the currency in which they issue debt. These countries cannot easily be forced into default by financial markets".
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