Osborne’s budget is “stupid” and “unfair”
- David Byrne is a professor at the School of Applied Social Sciences, Durham University. The opinions expressed are his own. -
Reuters’ guest blogger Laurence Copeland omitted two words in his description of Tuesday’s budget – the words being ‘stupid’ and ‘unfair’.
It is stupid first because it is cutting demand – both from the public sector and through multiplier effects across the economy as a whole.
Lord Skidelsky, a Conservative peer, let us remember but also someone who has learned the lessons Keynes taught us, has warned us of the dangers of cutting public sector stimulated demand when the private sector is incapable of responding to a monetary stimulus.
When President Franklin D. Roosevelt cut the deficit in the U.S. Federal Budget in 1937, the U.S. economy promptly started to fall back into recession / depression and it took the Second World War to dig it out of that condition.
It is stupid second because, taken together with pre-budget cuts such as the loan to Sheffield Forgemasters, it completely fails to address the fundamental problem of the UK economy which is what is that we actually do to earn a living on a global scale.
The betting that our speculators in the financial sector would be better than everybody else’s speculators, New Labour’s commitment as much as the Tories since Thatcher, has been blown apart as we have been forced to realize that these so called ‘wealth creators’ have in fact destroyed wealth globally on a massive scale.
A serious attempt to address this issue would have put the development of a coherent industrial policy, with industry understood in the widest sense of real production in all spheres, at the heart of government policy. Vince Cable surely realizes this so what is he actually doing as head of the relevant department?
The budget is unfair because – despite what are really some token gestures in relation to targeting higher income tax payers – those people in the top decile who actually pay tax as opposed to the top percentile who systematically avoid it wholesale – much of the burden will fall not just on the poorest through real cuts in benefits by shifting the index used to upgrade all benefits other than pensions but also on middle Britain through the cuts in the real incomes of public sector workers – (and had the government actually forgotten that the significant economic unit is the household and that many households consist of both a public sector and a private sector worker? If so more fool them) – and cuts in public services across the board including higher education.
The increase in VAT is of course grossly regressive.
Let us be clear – we will see a massive rise in unemployment again as in the early 1980s. And all this could have been avoided. Skidelsky has pointed out that British public debt is perfectly saleable on good terms in the market.
Indeed in times of crisis money flows towards public bonds as a safe resource in order to retain value – this absolutely happened at the height of the recent crisis.
The myth that the 18 millionaires in the cabinet (minus the one who would have gone to jail if his misclaim had been of housing benefit rather than parliamentary allowances) have promulgated is that cuts were both essential and desirable. Both contentions are complete rubbish.
So, bluntly put, is this budget.
Picture Credit: Demonstrators hold placards outside the Houses of Parliament as Chancellor George Osborne presents his first budget inside, in central London, June 22, 2010. REUTERS/Andrew Winning