With thanks to Joe C. |
On Friday, the
ratings agency Moody’s decided that the country’s growth prospects were so poor
that the AAA credit rating should be downgraded. As almost every commentator has pointed out,
preserving the credit rating has been cited on many occasions by Osborne as the
acid test of his economic policy. In
2010 he said ‘Our first benchmark is to cut the deficit more quickly to
safeguard Britain ’s credit
rating… we will protect Britain ’s
credit rating.’
And are we likely to
see any changes from Osborne now that his ‘first benchmark’ has failed? In
brief, no: he has assured us that the downgrading confirms that his approach is
right, so he'll carry on with the austerity programme. Osborne’s behaving like a mediaeval blood-letting physician: “We drew a pint of blood from the patient but he’s not
recovered yet so we'll just draw a few more pints…’
Anyone who knows me
(or who has read any of the earlier posts) won’t be surprised that an old
Leftie should think the Chancellor’s got it massively wrong. But I'm not alone. Others, not best known for their left-wing
views (unless they are the best-disguised Entrists since the Militant Tendency)
agree with me. Those urging a change of
tack include:
- The Daily Telegraph: One last chance to go for growth - Telegraph – an editorial opened bluntly by saying ‘The Coalition’s economic policy is not working.’
- The CBI – last summer the Director General strongly criticised the government for the “really disappointing” implementation of its growth plan
- The IMF – until recently a (somewhat half-hearted) support of the austerity package, whose chief economist said in January: "We said that if things look bad at the beginning of 2013 – which they do – then there should be a reassessment of fiscal policy."
It’s not clear that
anything will persuade Osborne not only that the policy isn’t working, but that
it’s actually making it harder to reduce the deficit. There was an interesting analysis recently by
the Resolution Foundation (Squeezed
Britain). They calculated that if all public sector workers’ pay were
raised to the Living Wage standard, it could result in a net saving of £2.2
billion – because of increased income tax receipts and reduced benefit
payments. And as those receiving the
extra money are still on low incomes and are therefore unlikely to save a great
deal, it would go straight into the economy buying goods and services and of
course, generating extra VAT.
If the Resolution
Foundation is correct this seems a sensible course of action. But it won’t
happen under this government because that would mean George admitting he is wrong
– and it seems that won’t happen anytime soon.
*Oh by the way, it stands for Arseholes Anonymous.
*Oh by the way, it stands for Arseholes Anonymous.