Osborne “absolutely not for turning”
The Chancellor of the Exchequer is “absolutely not for turning”.
He did actually say the words to me, fully conscious of their historical resonance. That was a fairly uncompromising response from George Osborne to my attempts to test the limits of his flexibility on deficit reduction in an interview he gave to me this afternoon.
Perhaps as interesting is the new tack from Number 11 on yet another disappointing GDP number was his “safe haven” strategy. The growth figure was “positive” he told me, which is factually unarguable.
But 0.2 per cent is not what he came to the Treasury to deliver. Not over 3 months. Not over 9 months. 0.2 per cent is how much the economy has grown in the three full economic quarters that this Coalition has been in power, for which the data has been released- 0.2 per cent since the Chancellor got his feet under the desk.
So no Brownian boasts about growth. Instead he constantly mentioned his role in Britain becoming a “safe haven in a storm”. The benefit of his policies can be seen in the absence of a Eurozone or US-style fiscal crisis. “Britain is stable,” he told me, referring to politics and economics. It was almost as if he was saying, we may not be growing much, but at least we are not mired in crisis.
That’s a significant downgrade in expectations. Does it mean that his policies are to blame for weak growth? Not necessarily, and you basically can’t tell yet. But as I showed last month, some 84 per cent of jobs created in the year to April were created in the first half of the year. A better question, might be: has the economic temperature in Britain cooled since August? Why not respond flexibly to these changed conditions (even setting aside whether or not their your fault)?
“I don’t think there’s been a particular change in the British economic temperature… I think world economic conditions have changed. They have been a lot more challenging in the last months. there’s been a huge increase in the oil price, which personally I think has had the biggest impact on consumer confidence both in Britain and in America,” the Chancellor told me. I put it to him that he was having to revise up his estimates for the deficit, partly as growth falters. His response: “We are on track with the public finance figures … our AAA rating has been reaffirmed under this Government”.
Another tack. Surely the recently announced collapse in UK living standards, as measured by real wages (largest drop since 1977) was not in his economic plan.
His response? That the banking crisis and recession had made Britain poorer, and this is what we’re seeing now.
There are 17 comments on this post
Faisal,
Watched the interview. I don’t think you could have handled it much better, though naturally I would have enjoyed seeing Osborne squirm even more.
As time wears on I get more enjoyment seeing the interviewees trying to deal with your youthful appearance…remember Merv the Swerve ducking and diving behind a cheap, puerile insult?
I don’t think they’re ready for somebody with such an obvious command of the subject and the determined questioning to go with it. This will change of course, but it can be damned funny while it lasts.
Long may it continue. I hope you never lose your idealism, determination and common sense.
To be fair Philip, I’m only six years younger than the Chancellor… but thanks for your comments
George’s only way out of the recession is to put more money into peoples pockets so that we start spending again. The best way to do that, is to increase the National Minimum Wage. It’ll help the poorest workers, it’ll create a greater incentive to work so it’ll fit in with IDS’s plans and it’ll chip away at the huge differential between what those at the top earn for themselves and what they think it is acceptable to pay that peasants that do all the hard work for them…!
The man is clearly in denial. God help us, he is running the economy.
The snow, price of oil, cold weather, warm weather, bank holidays, the price of the pound, the US economy, the Eurozone and now the Royal Family.
Is there anyone else left he can blame for the dire GDP performance since he became chancellor?
You are the economist Faisal, what he said is true. How would you increase the growth without jeopardising the stability?
In an unstable world[understatement] eurozone, America,etc. etc. I think stability must be important for long term growth.There seems to be coalition concensus on much of the economic plan.We were living beyond our means.
Sure there is a slightly lower standard of living, but perhaps the emphasis on spend ,spend,spend was part of the cause of the trouble. Boom and bust.
Hi Barbara,
I was pointing out that this sounded to me like a change in tone, a conscious attempt to gain credit for not being in the Euro/US-style fiscal crisis, in the absence of decent growth figures. Ideally he’d have wanted both.
Interesting that the only part of a plan B George seems willing to consider is to cut the 50% tax rate.
He will deny the claims of old leftie cynics like me that he is only helping out his wealthy chums and say it will attract more big hitters to do business in this country and as the economy grows, that will be good for all of us.
But will it. George W Bush, that giant intellectual figure, cut taxes for the wealthiest people in the USA and I have yet to read a report of the benefits trickling down in the classic economists model to those poor sods who have lost their jobs in increasing numbers.
All it has done – and all it will do here – is to give the wealthy another hedge against losses they may have made when their banker pals let them down.
Once again we are being told that those who have enough money that they are barely touched by recession, need incentives to make themselves even richer while people who are finding it harder and harder to get by are told they must accept austerity, pay freezes and unemployment to save the country.
Great system
Boy George is just one of a long line of Chancellors to claim he can control the economy with a big plan. He can’t control the economy under the current debt-based system, just like Gordon Brown couldn’t and every other Chancellor before him.
The solution is 2-fold. Governments should not borrow money into existence from private banks. And banks should not be allowed to lend money they don’t have.
It’s about time we restored a level playing field in the economy.
Two rogue Tories, Douglas Carswell and Steve Baker have introduced a private members bill to this effect and yet it has received virtually no attention from MPs or the media. I have never voted Tory before … but I would vote for any party that introduced debt-free currency monetary reform.
Barbara wrote: We were living beyond our means.
Sure there is a slightly lower standard of living, but perhaps the emphasis on spend ,spend,spend was part of the cause of the trouble.
Go to the following webpage:
http://www.ukpublicspending.co.uk/downchart_ukgs.php?year=1900_2011&chart=G0-total&units=p
Look at this graph of UK national debt from 1900 to the present day. Please tell me where there is a surplus year – I’m not fussy. Just one will do.
Ray Turner – you’ve got the right idea but all this money is debt-based. Nothing will change until we have more debt-free money in the economy.
So to get more debt free money into the economy, we’ve got to start taking it off the Bankers, Chief Execs and Company Directors who pay themselves millions whilst keeping everybody else in poverty. I genuinely don’t see that as being a debt-based solution. A Robin-Hood solution possibly…!
Hi Faisal,
Very thought provoking article. Just a thought: perhaps like in the 1930s do we need a New Deal now? Also, just like in the 1930s when perhaps it took a few years for the full impact of the post crash stagnant economy to be known, we might not know until too late that the stimulus package (unlike in China where they have invested in plants, machinery and infrastructure) has not worked and indeed has gone to the wrong guys (i.e. the banks who are not lending)?
Hi Noel,
Interesting thought. Actually I interviewed a very senior chinese official at a world economic institution and he advocated just that. Massive infrastructure spending. His entire economic reconstruction plan for the world was so widely different from what we have in UK and Europe that I might well blog about it soon.
Osborne is a politician first, Chancellor of the Exchequer second. Who loses out inthe present economic cliamte? Whogains? How does that correlate with fixed/likely Conservative voters? You have to understand that equation first. That’s why cutting the deficit through cutting public sector jobs/other government spending is OK – Conservative voters want lower taxes at the end of this. Putting up the minimum wage or cutting VAT don’t fly either. How many Conservative voters do they make a difference to? But possibly NI & certainly the 50% rate hit the spot nicely. 20+ years of “trickle down” neo-con economics has failed dismally – in economic terms, but in terms of rewarding your wealthier supporters it’s played a blinder.
Ray Turner – you misunderstand my terminology. A Robin Hood tax won’t work as a long-term solution although I have sympathies with it.
The paradox of money is that it is in 2 forms:
(a) Cash, notes or their electronic equivalent. This is debt-free money and is purely an asset. For it to exist, somebody else doesn’t need a negative of it. The ten pound note in my pocket doesn’t mean that elsewhere exists an anti-matter tenner!
(b) Money created as an interest-bearing debt to a private bank is both an asset and a liability. This is debt-based currency and exists purely on computers.
There is nothing necessarily wrong with debt-based money if it is limited by the level of savings in an economy and is used for self-liquidating debt instead of consumptive debt but the interest is killing us and it now takes up 97% of our money supply. This is a debilitating drag on our economy and we are forever chasing our tails trying to pay it off. It’s also a debt trap because all UK debts (govt, personal, mortgage & business) are at an average interest rate of about 5% APR and yet we have only 3% debt-free money with which to pay it off. UK PLC is borrowing to pay interest!
As Premiership football clubs appear to be the only part of British ‘industry’ unaffected by the economic downturn, why doesn’t Osborne slap a 10% levy on all transfer fees?
Ideally, the money could be ring fenced as EXTRA to the aid budget except that does seem to be used more on a political basis than to help those who really need it most.
Hi Faisal, my sister in Poland is writing a thesis on British economic problems, she found your interview most helpful and interesting, is there any possibility of getting a script. Many thanks in advance!