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UK Fiscal Policy, a Chancellor & the Squirrel (that lost its nuts)

I get so angry with George Osborne on so many levels it’s probably impossible to write about the current economic position in a coherent manner.

I’ll try. He rolls into town less that two years ago (why does it seem so much longer?) with his gun-toting, whey-faced public school colleagues, desperate to reduce the deficit and sets about shrinking the state to fit his own political ideology: small state, big business, or something. He’s never been overly explicit about his evangelical zeal, but I smell it on him.

The problems he has engendered with his approach, as I see them, include:

#1 – you can shrink the state much more quickly than you can grow a business

#2 – shrinking the state manifests itself, amongst other things, as shrinking confidence and the money to fund the products and services that businesses might offer

#3 – in the meantime, whilst the state shrinks and businesses fail to grow immediately into the gap, the government exacerbate the inflation problem with the one tax hits all unequally VAT, allow energy companies to run absolutely riot with their charges to consumers and defend the continuation of the policy whereby the tax system is run to suit the rich and banks can carry on like one-armed bloody bandits

Anyone with half an eye and an incoherent blog could have predicted rising unemployment, high inflation, low confidence and the failure of the business sector to pull new jobs like rabbits out of hats. And they did.

The Autumn Statement came then as no surprise; having cut the state and reaped the rewards, George announced he was going to cut it a bit more, and a bit more. And then he was going to, once he had saved up some money (and perhaps borrowed some too) spend a bit on roads and rails to stimulate growth (sounds like public spending).

Maybe I’m just an idiot, but isn’t cutting public spending, which is working so well so far as we have seen not, to save money, to fund future public spending a bit whack? Or maybe it’s just the type of public spending Osborne prefers ideologically: roads and rail a more fitting testament to the soundness of his ideology. And that’s even before we mention cutting public spending to reduce borrowing, before announcing more borrowing. Isn’t that an #epic fail by Twitter standards?

I am certain that doing more of the same (cuts) will get more of the same (unemployment, cuts in income and confidence, a battle with inflation etc.). I can’t give you a theory-based reason why, but as I run things round here, I don’t actually have to. George is wrong; he is wrong not least because the economic model he bases his policy on is fucked.

Here is an article from Bloomberg that might elucidate one reason better than I can. It is by an American entrepreneur. It explains why business doesn’t create jobs, that the demand of the middle income citizens does. You can agree or disagree with that, but you’ve got to love the following line:

When businesspeople take credit for creating jobs, it is like squirrels taking credit for creating evolution. In fact, it’s the other way around.

Of course, the whole pact with the devil, consumerist capitalist shebang is busted up, perhaps beyond repair now. We are chastened over-consumers and that, to my mind, is probably the positive in all this. World debt is killing economies like nothing on earth. Tinkering around the edges and putting people out of jobs, reducing your PAYE returns as a result, and failing to get tough with corporate greed is going to continue to get us nowhere fast. There is some radical thinking required. And soon. I am going to get on to that later.

In the meantime, here’s an example of a rather disobedient and impertinent red squirrel that would like to tease the Chancellor.

Squirrel Nutkin by Beatrix Potter

He’s gonna “say the words”

What?

I love you!
Amen
That the world is flat
That God doesn’t exist
That oil is going to run out next week…
or perhaps
Marry Me?

No, apparently, and according to the news last night and this morning Gordon Brown, Labour Prime Minister, is going to say the words:- “public spending cuts”.

We are also told today, the first anniversary of Lehman Brothers collapse, that we must never let another bank fail. Maybe I am simple folk but we will be taking money away from our services in the future having propped up the banking system last year and although I have listened to a lot of explanations as to why this had to be so – I am still not feeling it.

Allowing such a powerful section of society to fall on its knees at the temple of Mammon and our fundamentally not understanding how it works (and why should we, as they sliced and diced to minimise their risk which they weren’t underwriting themselves anyway!) has come round to bite us badly in our collective bum.

Reportedly first to go is the extension of maternity pay from 9 months to a year, although parents may now have a choice as to who can take the leave (and pay). What will be next is anyone’s guess although the benefit bill will surely be re-crunched. I’m not saying that all cuts are necessarily bad, being a lean and mean governing machine is in all our interests surely given the mind-boggling amount of UK debt. I will confess though to a selfish thought as I wonder what impact it might have on our good ship as we work respectively in housing and adult education…

The Lib Dems reckon they can make the necessary savings without cutting front line services – that’s going to be interesting. I don’t know why I have bothered mentioning them though, if David Cameron is not nailed on to end up in No. 10 at the next election, then I am going to eat my laptop; possibly a more palatable meal than the “words” Gordon will be eating this afternoon.

The Worship of Mammon - Evelyn de Morgan

"The Worship of Mammon" - Evelyn de Morgan