Growth won't just happen: so when will Osborne get a grip?

Dec 6, 2012
Richard Ehrman

Reform of planning and employment law has been endlessly promised but never seems to happen

IT IS NOT surprising George Osborne looked so nervous when he got up to deliver his Autumn Statement in the Commons yesterday. On virtually every measure, things have turned out worse than he expected even nine months ago, at the time of his "omnishambles" Budget, and they were hardly looking rosy then.

To be fair to the Chancellor, he is right when he claims that many of his problems are not of his own making. Whatever his shadow Ed Balls may say (and his performance yesterday was far from impressive), Labour left the public finances in a truly shocking mess. Even if everything else was going swimmingly, recovering from the Gordon Brown years would have been long and arduous.

And, of course, everything else is not going swimmingly – far from it. No one dreamt when the coalition took over, that the eurozone would get itself into such an intractable tangle. The inexorable upward pressure on energy and commodity prices, caused by demand from China et al, is another factor that cannot be laid at Osborne's door.

But it is not just excuses that have characterised his tenure at the Treasury. He has also been relentlessly over-optimistic. Again, he can argue in his defence that he has not been alone.

Back in 2010 he set up the independent Office for Budget Responsibility and gave it the task of preparing the official forecasts. Its forecast at the time was that the economy would now be growing by 2.8 per cent, a figure it has been downgrading ever since. In March the OBR prediction was that this year growth would be just 0.8 per cent. Now it is minus 0.1 per cent.

You might think once bitten twice shy. Yesterday, however, the Chancellor assured us, on the authority of the OBR, that growth will indeed return to 2.8 per cent. It's just that we will now have to wait until 2017 for it to happen.

In the meantime, he intends to trundle along much as at present. A little more spending on some things will be paid for by smallish cuts elsewhere, and while some taxes will go up a bit, others will go down a little. And so it will go on, apparently, until the economy somehow sparks back into life.

The question Osborne and the OBR never seem to ask themselves is - what if it doesn't? What if today's stagnant conditions are the new normal? The danger in the coalition's approach is that, if ministers think that growth will resume largely of its own accord, the temptation to fudge difficult but necessary decisions can easily become overwhelming.

We can see this with the banks, which still won't lend despite the Treasury's threats and the Bank of England's blandishments. We can see it with public expenditure, and the way current spending continues to rise despite the rhetoric about cuts, while capital spending is down despite the grandiose talk of investment. And we can see it in the absence of supply side reform, on matters like planning and employment law, which has been endlessly promised but never seems to happen.

The longer the recession drags on, the clearer it becomes that until someone can really get a grip on issues like these the economy will struggle to regain its mojo. The problem, of course, is that along the way a lot of powerful interests would be upset, ranging from the City to the National Trust. With the government in low water, perhaps it is understandable that embattled ministers think they have got enough on their plates to be going on with.

It is plain, however, that we can't rely on help from elsewhere. Even the OBR can't be so optimistic as to think that the eurozone is going to sort itself out any time soon, or, for that matter, that the Chinese are suddenly going to moderate their demand for oil.

Contrary to what the OBR and the Chancellor still appear to believe, growth is not just going to happen. It is going to have to be down to our own efforts, and especially the government's. At the moment, unfortunately, there is little sign the government gets this.

Looking beyond the heated but rather esoteric debate about debt and borrowing targets, the economy, like the Chancellor, is stuck in a rut. On yesterday's showing it is hard to see how either is going to get out of it.

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Where is Gordon Brown? He seldom attends the House of Commons and did not bother to turn up for an important economic statement yesterday. We are still waiting for him to apologise for the disastrous mess that he left behind.

Inexperience and and inability to learn from the past hamper this coalition government. Cameron is callow and inexperienced - and, alas, far too detached and arrogant, to be able to hold a mirror up to himself. Osborne is from the same mould - again, terribly inexperienced but quite unable to learn from past mistakes - both his own and the mistakes made by his predecessors.

Humility and self-enlightenment are called for now in this time of national crisis. The Lib Dems seem to be quite incapable of understanding the urgent needs of the economy and the nation, by constantly trying to "impose" their economically illiterate and idealogical agenda, albeit they are in such a minority within the coalition.

As for Gordon Brown - his terms in office, both as Chancellor of the Exchequer and then as Prime Minister, will be judged by history - it seems that he will be regarded as something akin to a traitor - his over-developed sense of entitlement to office, coupled with his uncertain temperament, combine to make him entirely unsuited to public office.

Instead of listening to Tory propaganda you should get your fact right. It was the banks that put Britiain in a mess not Gordon Brown. Here is a little light reading for you, not my words copied from facts published on the internet:

For much of the party's 13 years in power, rising growth,low inflation, and record levels of employment were matched by sharpimprovements in productivity: an average annual rise of2.8% between 1997 and the start of the 2008 recession,13 years of relatively successful economic management seems unwarranted.
Indeed, sustained investment in skills, science, research and development, and public infrastructure encouraged strong performance in high-value manufacturing sectors far removed from financial markets in the UK, including pharmaceuticals and aerospace. The regional growth divide was
narrowing sharply by the mid-2000s. And as the banking crisis unfolded in 2007-8, the Labour government's interventions were purposeful and decisive,leading the Nobel prize-winning economist, Paul Krugman, to offer high praise for Gordon Brown's leadership.

In March 2009 Brown was named World Statesman of the Year by the Appeal of Conscience Foundation, an American organisationdedicated to promoting peace, human rights and understanding between religious faiths. The award was presented by Rabbi Arthur Schneier who praised Brown's"compassionate leadership in dealing with the challenging issues facing
humanity, his commitment to freedom, human dignity and the environment, and for the major role he
has played in helping to stabilize the world's financial system".[152][153][154]

Your right about this government's inability to learn from the past, one has only to read why we went into a deep depression in the 1930s, that was down to the Tories and Liberals too and the gullibility of Philip Snowden, Labour Chancellor for taking their advice. However I would ask you to read my reply to Beth Williams (just before your post) for a little bit of enlightenment about Gordon Brown and the Labour party.

More ill-informed criticism of Labour's economic record, on the basis it seems that if you repeat a lie enough times ignorant people will believe you. Good post from Tegwyn, to put some of the record straight, because even two and a half years into this incompetent,inexperienced,arrogant shower of overgrown schoolboys masquerading as a 'government' people still trot out the same old rubbish about Labour and Gordon Brown.

Watch my lips; it was the banks that got us into this mess, and who have got off scott free because of articles like the above.

No-one is yet in prison, very few people have been 'named and shamed' and the freemasonry of the City and the banking community still blithely rip off ordinary, hard working folk who are being demonised as 'shirkers and scroungers' by Gidiot and his minions in the press.

Let us say it again; when Gidiot took over from Alistair Darling the economy had been GROWING for four consecutive quarters. Gidiot stopped that dead in its tracks. He stopped spending on flood protection schemes (that worked out well) building affordable and social housing (ditto) school building etc etc.He is now intent on dismantling the welfare safety net built up over the past seventy years,which must not be allowed to happen.

The sooner we are able to get this latest version of the 'nasty' party out, the better off we will all be.