The curve of Britain’s economic output shows a sharp decline from mid-2008 to mid-2009. Then from mid-2009 to late 2010 there was a slight recovery.
Since the coalition government’s social cuts have started kicking in, from late 2010, output has mostly stagnated or declined further.
The government’s own Office of Budgetary Responsibility felt obliged on 8 March to write to David Cameron saying that, contrary to Cameron’s claims, the OBR was sure that public spending cuts had reduced overall output, and might have reduced it more than the OBR thought.
Yet a large wing of the Tories, people like Liam Fox, are baying for more cuts. It is near-certain that in his Budget on 20 March chancellor George Osborne will dig deeper into the cuts hole.
The government said back in 2010 that it was making cuts in order to end the government’s deficit (its excess of spending over income) and to stabilise the government’s debt (the running total of what it owes to financiers).
In fact the deficit for 2012-3 will probably be higher than in 2011-2. In 2014-5 the deficit will probably be £64 billion bigger than George Osborne projected in 2010. That £64 billion is a larger sum (in one year) than the projected total over five years of the cruel social cuts we all know about.
Osborne digs deeper because cutting the deficit (though he’d have been glad to do it) was in fact never the fundamental reason for his measures.
The fundamental motive was always as stated by Barack Obama’s former chief of staff, Rahm Emanuel: “You never want a serious crisis to go to waste”.
Hurtful though capitalist slumps always are, usually inequality is somewhat reduced during slumps, if only because the rich can fall further, and still stay rich, than the poor can fall and still subsist.
In this slump, both in the USA and Britain, inequality has increased. While Osborne is making huge cuts in benefits for the worse-off, he has also cut corporation tax and the top rate of income tax. Liam Fox wants him to cut more from benefits — and health — so he can cut capital gains tax!
The Labour leadership could demolish Osborne just by pointing to the graph of (slight) recovery when Labour was still in office and (if only because an election was due) making few cuts, and recalling Ed Balls’s speeches from 2010 about “growth, not cuts” being the answer to slump.
It doesn’t do that because it is scared of the financiers who might call that “irresponsible”. But haven’t the financiers had their own way long enough?