Like a drunk trying to grab a drink, the coalition aims for one policy and then stumbles in the opposite direction
The media’s “narrative” is fixed. After trying the most unlikely and contradictory descriptions of this government, they have decided that nervous PR men rule us. David Cameron is a lost soul who does not know what he thinks or where he is going. Instead of principles, he has an opinion pollster, one Andrew Cooper. Every day Mr Cooper presents his findings and his masters decide what policies they should drop to appease public opinion – a tax the chancellor swore was needed to balance the books here, a rise in fuel duty ministers said would help them become the “greenest government ever” there.
When the coalition presents a budget, it is not stating anything as solid as a policy. Rather it is offering an opening bid; a polite suggestion it may withdraw if the numbers turn negative. Like a drunk trying to grab at a drink, the Cameron administration staggers and sways, wibbles and wobbles, as it tries to catch the popularity that eludes it.
The new consensus is true on the detail – no one can remember a government that has changed its mind on small issues so frequently – but cannot explain the wider failure. Although it is easy to damn David Cameron, Nick Clegg and, above all, George Osborne, as boys doing men’s jobs, it is not true that they are incapable of taking bold decisions. In 2010, they took the audacious step of stopping Gordon Brown and Alistair Darling’s Keynesian efforts to nurse Britain out of the crash.
No one could doubt their decisiveness then. Public spending was crowding out private spending, they argued. If the government imposed austerity, the private sector would revive like a seesaw rising. Newly confident businesses would hire the unemployed and provide the tax revenues to eliminate the structural deficit by 2015. With a speed that looks like recklessness in retrospect – and struck some of us as reckless at the time – politicians with no experience of office decided to cut all departments apart from the NHS and overseas aid.
Conservatives and Liberal Democrats made the case for emergency measures by describing the mess Labour left them in terrifying language. While they spread fear in public, they believed in private that Britain would “return to normal”. When it did, they could offer pre-election tax cuts in 2015, and defeat a Labour party whose reputation for economic competence they had so compressively destroyed.
Every hope they had and prediction they made has turned out to be false. They behaved as if the 1930s had never happened, and assumed that they could treat the worst economic crisis of our lifetime as a blip. The partisan prophecies of doom killed Keynes’s “animal spirits”. Why would a business invest in a country where frightened consumers were paying down debts? More seriously, as Paul Krugman, Richard Layard and the other economists who signed the Manifesto for Economic Sense said last week, only government borrowing could compensate for the collapse of private demand. The International Monetary Fund has studied 173 cases of budget cuts and found that the consistent result was economic contraction, which a country can handle when the economy is growing but not when it is on its knees.
The coalition’s revolution in economic policy has failed, as it was always going to fail. And in coalition hearts they know it, which is why you see panic spreading across the governing clique.
Mervyn King’s language is becoming ever wilder. He told the Commons Treasury select committee that we are not even halfway through the economic crisis. I am sure he is right, but noticed that he blamed the eurozone crisis rather than his own actions for prolonging stagnation. It makes a change from the coalition and its officials blaming the weather or the royal wedding for the refusal of the economy to behave as its theories predicted, but it will not wash. Britain’s performance has been worse than all but the most devastated eurozone countries. Only recently did growth in economic output manage to overtake Spain.
Commentators are not seeing Britain clearly. What they mock as indecision is really fear. No one, least of all ministers, knows where austerity will go next. Paul Johnson, director of the Institute for Fiscal Studies, an organisation that is an impartial as a judge, struggles to keep a neutral tone when he tells me of the chaos in the public finances. How can the government cope without growth-producing tax revenues to fund the national debt? Should it introduce a mansion tax, as Vince Cable suggested? On no account, for that would upset the wealthy and this is a government out of agitprop nightmare: of the rich, by the rich and for the rich. Extend VAT to food and children’s clothes? Would working people accept public schoolboys taxing the essentials of life?
The bulk of the spending cuts in this parliament have not happened yet. Now Mr Osborne tells us that the continuing crisis means there must be more in the next. Where they will fall, no one knows. The government might remove the ring fence around the NHS or slash welfare yet again and push people from poverty to abject poverty. All options are awful. All underline the collapse of the hopes of 2010.
The answer that will occur to most Observer readers is that the government should swallow its pride, and make a U-turn that matters by borrowing to revive the economy. But David Blanchflower, one of the few economists to have emerged from the great recession with his reputation enhanced, warns that a switch to a Keynesian approach would take years. You cannot just turn on spending on infrastructure. Projects need to be planned and approved – “shovel-ready” as the cliché has it. A few months ago Alex Salmond told David Cameron that he had 36 building schemes ready to go in Scotland if the Treasury gave the nod. “How many do you have for England and Wales?” Not one, Cameron replied
I have an aversion to Westminster journalists whose sole concern is the prospects of politicians. The first victims of the austerity programme have not been Conservative and Liberal Democrats, but all those millions who had their aspirations crushed and needs left unmet. But if you want to describe Britain in purely political terms, it is true that the coalition can do little to turn the economy and its fortunes round by the next election. It made a calamitous mistake when it made its big decision. Poll-watching and populist stunts are all that is left to it now.
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