He may not be right, but he's not wrong

Saturday, June 8, 2013

Last week my fellow commentator James Wand extended the quintessential Labour viewpoint of Chancellor Osborne in his article ‘He is Wrong’; grossly over exaggerating his ‘unnecessary’ cuts, yet providing an alternative solution (unlike his party) to some evident problems. 

Labour spin has put Osborne in a precarious position. If he carries on with his programmes he’s a heartless Bullingdon Tory boy who won’t change course despite the country's needs; if he does change course then he’s a man who can’t stick to his principles and consequently can’t be trusted. It’s a lose lose situation for the Chancellor.

 

Say what you like about George Osborne, but the commitment he has displayed to what he believes is correct, reducing the burden on future generations by tackling problems head on, is something that must be commended no matter which side of the bench you reside on. Similarly, he has made no effort to avoid tying his legacy to his performance instead of dodging the consequences of his tenure. His goals were to cut the deficit and maintain Britain's economic standing in the world and he knows he will be judged by this.

However, the multi-million pound debt which we have built up was Labour’s brainchild, and cannot be reduced until welfare costs are fully covered by export increases and interest rate growth (i.e. the deficit), a completely unfeasible development at this stage of economic recovery.

The crux of Osborne’s chancellorship has been his deficit reduction programme, which admittedly has come under fire from a series of economic institutions, notably the IMF. However, I optimistically point to Geoffrey Howe’s quote from the 1981 budget: ‘an economist is a man who knows 364 ways of making love, but doesn't know any women’, and more concretely point to the OECD economic report from a few weeks ago. A synopsis of the report would show that government quantitative easing saved the country from the brink, inflation is at the desired 2.5 per cent and unemployment has stabilized due to private sector job growth, yet there is much room for improvement with levels as high as 8 per cent. Additionally and fundamentally, it commends Osborne’s deficit reduction programme as the epoch for British fiscal responsibility- the deficit has been trimmed by half and a surplus has been projected by 2015/16.

Clearly then, it’s not all bad like James suggests, nonetheless he does have some critiques which are valid and that I feel Osborne should take on board and expand upon. The 50p/£ tax rate shouldn’t have been cut until sustainable growth and deficit control was truly under way, (I stop short of accepting James’ calls for a 65p/£ top tax rate), whilst personal allowances should be increased.  Moreover, investment is needed in infrastructure to open job creation windows, as well as creating a stimulus competition by allowing them to compete for contracts. The government costs for such projects can be earned back in tax from workers and travel sales. And finally, following President Obama’s model, I propose another stimulus- this time aimed across the board and not just at banks. This, in Keynesian fashion, stimulates demand, and when coupled with infrastructure spending could boost supply and demand equilibriums allowing for increased business production, consumer spending and economic growth as a consequence of the spiral.

Whilst things have been better in the past, currently economic turmoil is being grossly overestimated. Osborne undeniably has made some poor decisions, but he’s not all wrong as James suggests. Is he, the man charged with the near impossible task of salvaging a ship steered at an iceberg any worse than Gordon Brown- the perpetrator? Is he Britain's most useless politician? No. That accolade can surely only go to the his opposite number, a man yet to provide an insight into a single Labour policy, except increasing winter fuel allowances (a measure that would trim a mighty 1/1000th off the deficit), a man who ardently defends his party’s boom and bust strategy, a man without a plan to tackle an imminent crisis, yet a man who shouts down all of Osborne’s policies irrespective of their content. Osborne may not be totally right, but unlike Ed Balls he is not utterly wrong.

By Adam Isaacs

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