The details of yesterday’s Budget are still being dissected, but the economic and political arguments are well under way. On the face of it the Chancellor’s measures seemed to offer help to the British public: increases in personal tax allowances and duty rate cuts amongst the most heavily publicised. Yet these measures pale into insignificance given the context of this budget – the weakness in the British economy and last autumn’s Comprehensive Spending Review.
Osborne’s “Budget for Growth” saw UK growth figures for current and future years revised downward. This is where the opposition should – and has – primarily focused: Ed Miliband’s response to the budget was barely three minutes old before we were hearing, yet again, how government cuts were risking the fragile recovery and were going “too far, too fast”.
But this sound-bite is inadequate in contesting the ideological basis of the government’s economic policy.
Ideology was all too apparent in yesterday’s Budget; the country’s economic problems were tackled in a market-orientated fashion by a government determined not to use the state to its full potential to help people.
Labour failed and is still failing to communicate effectively that the size of Britain’s deficit is not the result of overzealous public spending but a calculated economic decision taken to protect Britain’s economy from the loss of private sector demand and investment caused by a global financial crises and severe recession which followed.
Labour made a moral decision to use the power and resources of the state to shield the ordinary people of this country from the worst effects of the recession and in so doing accepted the need to run a deficit. As the private sector recovered, tax receipts would have risen and public spending could have been withdrawn – this was a viable strategy focused at preventing excessive unemployment.
The Chancellor’s rhetoric may be about growth, but if he really cared about it he would spare the country the cuts in public spending and increases in VAT, which will reduce demand and therefore harm our economy’s prospects.
Criticising deficit reduction as “too far, too fast” concedes the argument in favour of some sort of mandatory deficit reduction, something which Labour’s plan to halve the deficit in four years is also guilty of.
Reductions in public spending should be wholly conditional on growth.
Labour, by failing to articulate the success of the stimulus and the continued viability of UK borrowing in the short term, has made it far too easy for the Coalition to argue that cuts are necessary immediately.
And this makes it harder to expose the coalition policy as one of ideology rather than one of economics.