It was announced today that credit ratings agency Moody’s has downgraded the UK government’s credit worthiness from AAA to Aa1. This in the same week that Chancellor George Osborne was forced to admit that both the national debt and the deficit of the UK are up as borrowing this year is on the rise. Whatever damage done to UK fortunes by the credit downgrade, surely the greater peril lies in leaving this discredited chancellor in charge of the nation’s finances.
Budget 2012 Revisited
George Osborne laid out his economic strategy in last year’s Budget. However, in reviewing these plans less than one year on, it is not hard to see the Chancellor is a straw man clutching at straws.
“The Office for Budget Responsibility is slightly revising up in their growth forecast for the UK this year to 0.8%”
The UK economy shrank by 0.4% in 2012.
“Today, I can report that the deficit is falling and is forecast to reach 7.6% next year.”
The budget deficit grew in November 2012 by £1.2bn.
“Borrowing this year is set to come in at £126 billion, £1 billion lower than I forecast in the autumn. Borrowing will then fall to £120 billion next year, if you exclude the transfer of Royal Mail pension assets.”
“We are also passing on our low interest rates to small businesses, through the National Loan Guarantee Scheme. This started operation yesterday. Barclays, Lloyds, the RBS, Santander and the new business bank Aldermore are all involved.£20 billion of guarantees in total will be available.”
“So there will be no deficit funded giveaways today.”
Despite shockingly bad economic performance the chancellor gave an income tax cut to the UKs top earners (costing £3bn a year) and a cut in Corporation Tax (costing £2.6bn over two years) in the Autumn Budget of 2012.
The Office for Budget Irresponsibility
Osborne has side stepped personal responsibility for dodgy forecasting by setting up the Office for Budget Responsibility. The OBR was sold as an independent forecaster of the public finances led by neo classical economist and founding member of the Bank of England Monetary Policy Alan Budd. The OBR is actually housed just off George Osborne’s office in the Treasury and their performance has been tantamount to propaganda over the years of their operation, as the picture above demonstrates.
The OBR has received criticism from most quarters outside the government and its circle of friends. The New Economics Foundation claim the OBR simply predicts the future required to justify the Government’s ideological position.
The replacement of Osborne’s pal Alan Budd by his cooler relationship with former IFS chief Robert Chote in August 2012 has seen the OBR appear to challenge government more and present a gloomier picture of the outcomes of Austerity policy than Budd’s OBR has hitherto…but perhaps it is too little too late.
A Case of Ideology over Evidence
“Our first benchmark is to cut the deficit more quickly to safeguard Britain’s credit rating. I know that we are taking a political gamble to set this up as a measure of success. Protecting the credit rating will not be easy… The pace of fiscal consolidation will be co-ordinated with monetary policy. And we will protect Britain’s credit rating and international reputation.” – George Osborne, 2 February 2010.
Osborne’s chancellorship has been an unmitigated failure by his own measures. Surely, if he was a believer in evidence based policy, Osborne would be assessing what went wrong and creating new policy which generated the growth and the ratings that he purports to seek. Instead, his reaction to the news reads as follows:
In most people’s lexicon, a recovery is best characterised by a situation getting better. How this government has the nerve to call this a recovery when the economy is worsening and we’ve lost our AAA credit rating for the first time since the 1970’s simply beggars belief. This is the economic equivalent of administering rat poison to a cancer sufferer, and as the patient’s situation worsens yelling ‘See, I told you they were sick! We must keep administering my medicine!’
This chancellor’s boots are cemented and the UK economy destined to sink with him, because of his ideological commitment to austerity.
Osborne talked in his 2012 budget of being forced to make ‘difficult decisions’ – but since when has it been a difficult decision for a conservative chancellor to roll back the welfare state, privatise public services and cut taxes on corporations and high earners? This is business as usual for a Tory chancellor. Osborne is following the same plan he would always have followed, deficit or no deficit. The fact is this government has exercised ‘fingers crossed’ economics, hoping that growth would naturally return as the markets settled and using the 2008 financial crisis as a fall guy for their ideological cuts. Instead, their policies have exacerbated the situation.
Georgie Boy, It’s Time to Go
It is almost pointless to call for Osborne’s removal by Prime Minister David Cameron, as like so many other stooges in this government they are following the path set for them. They are indeed, all in this together. But nonetheless, it does make sense to cry foul more generally and raise the pressure to unmanageable levels anyway. The truth is, this chancellor is eviscerating the UK economy along with it’s welfare state at a pace which would have made even Margaret Thatcher’s head spin. The man is an oaf, an ideologue and a menace to Britain at large. Georgie Boy, it’s time to go.