Destroying society

Another couple of weeks of economic madness.

In the desperate search for cuts the Building Schools for the Future bites the dust, and 735 schools who have spent anything up to the last 4 years planning for the future now find their plans trashed.  To add insult to injury we are meant to believe that somehow this waste of effort, energy, time and money is designed to eliminate waste from the programme.  How does that work??  A new expression has started to feature in conversations between educationalists - to be 'Goved', as in 'we've been Goved' when referring to a big cut or closure.

The Autumn spending review will likely find some capital investment for schools, provided they are in line with Government policy (new style academy's or even the so called 'free schools'). The grand strategy will be to standardise what building takes place - so BSF becomes 'back to the future' as we repeat all the mistakes of previous generations in seeking quick short-term fixes that mend todays leaking roofs, but do nothing to prepare for future changes.

Schools aren't alone in seeing this scorched earth approach in which useful public projects are scrapped in the name of austerity, only to be partially replaced by a new policy that favours the private sector - the Coalitions bizarre approach to food safety is a model of their ideological approach. Gary Younge has also highlighted the combination of double-speak and history re-writing that characterises the approach of the right in his piece "The coalition doesn't want to heal Britain's broken leg, but amputate it". More importantly he highlights the work that progressive forces must do if they want to properly fight this nonsense.

If anyone has any doubts as to where this is all leading us, they would do well to read the excellent 'Secret Diary of a Civil servant' and especially the most recent offering "Here comes the Tesco Value state'.  This Government is far to the right of Thatcher, and they are unleashing an economic strategy that will have enormous repercussions on society.  For all this there is no 'Plan B', as Larry Elliot carefully outlines in his article "George Osborne hopes spending cuts will boost growth, but what if they don't?" and whilst anything in the public sector seems to be characterised as 'wasteful' and 'bureaucratic' banks have already put aside £5bn to pay bonuses and a hedge fund corners the market on Cocoa.  All of which seem to be productive activities by virtue of taking place in the private sector.

Budget myths and the phoney war

The budget was every bit as swingeing as anticipated, but with the effects abstract and only likely to be felt in the winter and next spring, it was difficult to get too worked up about the announced measures.

What was very irritating was the way in which blatant lies were asserted as fact, or the skimpiest of fig-leaves given the status of a 3 piece wool suit as the Lib Dem members of the coalition desperately tried to convince themselves that black was actually white.

Annoying myths:
1. That this was the 'unavoidable budget' - a myth based on other myths:

• The 'budget deficit was much worse than expected' has frequently been asserted and used to justify both the immediate need for cuts, and for this so-called 'emergency budget'.  Yet the official borrowing totals have twice revised down since the election, and the budget report included confirmation that the borrowing totals were less than predicted in the spring budget.
• Irresponsible spending by Labour in their last few months in office had left 'black-holes' in the countries finances, with Ministers making almost daily claims of new information on the finances that 'proved' things were much worse than they had feared. In fact, there was no new information - it had all been available prior to the election in the Treasury Red book. 
• Labour was doing nothing to reduce the deficit - Cameron asserted both during the election and as recently as his statements in the House following the budget.  This is wrong, and Cameron must know it is wrong and therefore it should be described as a lie.  The last Labour budget set out a deficit reduction plan that involved substantial cuts in public spending.
• The lib-dems are fond of pointing to the  'sovereign debt' crisis triggered in Greece as new circumstances justifying their change to support for early swingeing cuts.  Britain is no Greece in either the totals or structure of its deficit.  To the extent that 'market confidence' is important, however,  a far bigger influence in undermining confidence must surely arise from the Government's own dire statements and trashing of the UK financial situation. The hysterical doom-mongering as to how much worse things were can only have undermined already nervous markets.  After all the talk, there had to be action, - so a self-fulfilling prophecy was generated.

2. That this is a 'progressive' budget - progressive has a very specific meaning for economists and means that the wealthier you are the proportionally more you have lost out through the budget.   The Lib-dems especially have clung to a few measures that were introduced to argue that the budget was 'tough, but fair' thanks to their influence.  A couple of measures - the rise in tax allowances, protection of child tax credit and the rise in CGT, are unlikely to have been implemented were it not for the coalition agreement.  None, however, were that substantial and were much less than the lib dems had campaigned for.  They were also more than cancelled out by other business friendly tax changes, such as reducing Corporation Tax.  In return they had to swallow the VAT 'bombshell' they had rightly campaigned against because of its disproportionate impact on people the lower down the income scale they are.  The problem in claiming the budget as 'progressive' and the VAT rise as unavoidable is succinctly explained in a Telegraph Online article:

"The Institute for Fiscal Studies, the respected economic think-tank, has dismissed claims by Mr Clegg that the rise was “unavoidable”. It said it would not have been needed if George Osborne had not cut other taxes on businesses.


Asked whether the move was regressive, Mr Cable said: “In some respects it is.” However he insisted: “If you look at the package as a whole that makes the balance much better and more equitable.”"

3. That this is 'Labours mess' that they are having to clear up. A prime example of the collective brain erasure that has forgotten the banking crisis, who caused it and how the deficit was incurred both to shore up the banking system and to prevent the economy from going into meltdown.  The siren voices calling loudest for cuts are those responsible for the original crisis and, as if to prove the inherent contradictions within capitalism, seem determined to reward themselves whilst screwing the economy.

The budget, with its attack on useful public spending and the welfare system whilst also cutting taxes for business is a kind of nationalisation of the bonus culture.  Just as the short-termism of bankers bonuses led to the financial manipulation of derivatives and ultimately the crisis,  then so will the short-termism of this budget (and the other European 'austerity' measures) also lead to an economic crisis.

There is one positive thing to say about all this - it is very much a 'kill or cure' approach after which there can be no excuses for the economic nonsense that underpins the current austerity fetishism.  A small up tick in unemployment (say 1 - 200k)  followed by growth and recovery and the think tanks will prove to have been right.  On the other hand, a double-dip and a steady increase in unemployment and their lunacy will be exposed.  There is one more possibility that some economists have touted - a Japanese style long period of stagnation in which the economy bumps along with no growth.  Even this stagnation  model will require a moderation of the fiscal stance of this bunch of economic neanderthals, and the economists (such as Will Hutton) who have predicted it do so on the basis that the Government will be forced to moderate their cuts programme.  In this scenario, faced with reality the cuts  of 25 - 33% in departmental spending will be quietly moderated.  Of course, anticipating this the right of the Tory Party (the Daily Mail lobby) are arguing for bigger cuts in welfare payments and against the guarantees on health spending.

'breathtaking hypocrisy'

It isn't often that I find myself applauding a trade union leader, but whilst the rhetoric may be a bit simplistic perhaps Dave Prentis (Unison) matches the mood better than all the reasoned arguments in the articles listed earlier. Describing what he wanted from the new Labour leader he said:

"Stop taking money from schools, hospitals, care homes.  Have the guts to go back to the banks. the speculators, the profiteers, and tell them on our behalf - you created this mess, you pay for it."

Speaking before the 'vindictive cuts' announced on Friday - a warm-up for the carnage to be wrought in the budget, he captured the absurdity of the coalitions position and especially Clegg's observation on "gold-plated and unaffordable (public-sector) pensions":

"Now, six weeks after the election, the Tories say they can't ask big business to pay tax, they'll discourage enterprise.  They can't regulate the financial system or there'll be fewer jobs in the City ...... but with breathtaking hypocrisy, they'' take away benefits, they'll undermine our job security, they'll let our communities take the pain while the City speculators get off scot free .... these pension myths are scaremongering."

'The lunatics are back in charge'

Today saw the first offering from the Office for Budget Responsibility. Hardly surprising to see growth forecasts downgraded given that the planned cuts to public spending make this something of a self-fulfilling prophecy.

More worrying are the insights that think-tank supporters of the coalition give us into the economic principles under-pinning their policies. A few are summarised in "The Big Question: should Britain cut its deficit so fast and so deep?" but the most revealing is probably Andrew Lilico, Chief economist at Policy Exchange, who argues that "We need growth, and early cuts are likely to promote growth, even in the short term". He gives three reasons for this:

1. less public spending = a faster growing economy, which in turn means wages rise faster. Anticipating this 'households' will borrow and consume more.
2. less public spending = greater confidence that the deficit will be met through spending cuts rather than tax rises, with the same impact as in 1.
3. less public spending = happier markets, who won't raise interest rates on our debts

My incredulity at the absurdity of this is probably only matched by the fact that a fat salary is probably being paid for this historic twaddle! If you share my incredulity, then you may be comforted to know that you are not alone. To get the ball rolling here are a few articles that reflect what is increasingly the 'incredulous' view on the latest prognostications, and the conclusions that will be drawn by the Coalition.

• "The lunatics are back in charge of the economy and they want cuts, cuts, cuts" - Larry Elliot in the Guardian, who deduces that either "the real agenda is to complete the demolition job on welfare states that was started in the 1980s?" or those planing to cut spending "are simply crackers"
• "The self-fulfilling deficit spiral" - Adam Lent demonstrating why the forecast reduction in growth is self-fulfilling (and pointing out that the deficit prediction has been revised down as well - guess which we'll hear most about!)
• "The Conservatives call it 'pain with a purpose'. What purpose, exactly?" - William Keegan who provides a different take on agreeing with Larry Elliot.

Welcome

So, the lunatics have control of the asylum and a collective 'brain wipe' is rewriting history in ways George Orwell would have been proud of. The limitations and failures of 'the market' abound, yet the con-dems - supported by a strident media - see market solutions as the way forward. The 'looney right' dominate debate and the left seems relatively quiet whilst enormous damage is about to be inflicted on the economy and the social fabric. Against this background Tressell's broad brush will shine an occasional light in highlighting the idiocies being inflicted upon us.