George Osborne is right about one thing: the British economy is sailing dangerously close to another recession, insofar as it is likely to be swept up in the ever-increasing turmoil present within the global economy (of which Brexit, a headwind of the Conservative Party’s own making, is a key dimension). It may result in the economic depression that Britain and the rest of the world only narrowly avoided after the financial crisis of 2008.
Yet he is entirely wrong to prescribe yet more austerity as the only way for Britain to mitigate the next crisis. In fact, the coalition and Conservative governments’ decimation of the public sector, and reliance on regressive and largely ineffective monetary policy stimuli, is probably the main reason that, when the crisis hits, it will hit Britain harder than most. The British economy remains far too dependent on the housing market and finance sector, both of which are volatile at the best of times, let alone the worst. Today’s budget had little of substance to say about Britain’s productivity problem, despite reporting significant downwards revisions to productivity growth forecasts.
It is doubtful of course that even a full-on embrace of Keynesianism can save us now. It is a highly unlikely scenario anyway, given that Osborne has staked his reputation on the idea that the budget deficit is an inherently bad thing, and that only he can be trusted to tackle it. Government debt is George Osborne’s raison d’etre – which explains why he has been so content, contrary to what he would like us to believe, to create so much of it. The budget announced that debt will remain close to 80 per cent of GDP by 2020 ; in 2010 he told us it would have fallen to 70 per cent by 2015.
Austerity has always been a political agenda, not an economic necessity. Increasingly, however, as the wider political objectives of austerity around undermining the idea of the state and inculcating self-sufficiency at the individual level are achieved, the continuation of austerity seems to be driven now purely by Osborne’s own political ambitions.
Today’s budget saw Osborne focus on another of his pet projects, the Northern Powerhouse. While he announced various infrastructure projects in the North, in an attempt to put some flesh on the bones of this skeletal programme, overall the budget further reveals that the Northern Powerhouse agenda is rather hollow.
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