Austerity: is Ed Balls being outflanked on the left by the IMF?

Austerity has become the default mode of European – more especially British economic policy; in his speech to the Conservative Party conference last week David Cameron reiterated that there is no “Plan B” and mocked the Labour Party for its alleged tax and spend profligacy – even though the statements of shadow Chancellor Ed Balls appear to lock Labour into an endorsement of austerity that is in many respects more rigorous than that of the Coalition, raising the prospect of deep cuts after 2015 on top of those that the Tories have already made.

Against this background, it has been fascinating to read the assessment of Jonathan Portes, director of the National Institute of Economic and Social Research (NIESR), on his blog Not the Treasury View.  In my view his analysis is desperately important.

Portes’ assessment matters because it goes right to the heart of the theoretical justification for austerity economics.  Portes examines the multiplier – the key theoretical construct that underpins Keynsian economic analysis and explains the effect that changes in Government expenditure have on the economy as a whole.  The fundamental principle is that government and individuals behave in different ways.  Individuals consume and save (and, increasingly in the boom years before the 2008 crash) borrow.  Governments spending goes on procurement, projects, transfer payments (benefits and subsidies), and of course paying public workers.  They also borrow, and repay debt; but at different levels to individuals. Put crudely, a key assumption of Keynsian economics has been that Governments – especially in bad times – spend a higher proportion of their income directly than individuals, especially in an environment where they are borrowing, than individuals, who have a propensity to save or offshore – the wealthier they are, the more likely they are to take demand out of the economy in this way. Thus increasing Government expenditure is, other things being equal, more likely to stimulate economic activity than cutting taxes  – it’s the basic reason why many of us on the left see the Coalition’s economic policy as so utterly disastrous.

The multiplier, then, is the mathematical expression of this relationship.  It’s obviously something that is pretty approximate, based on a mixture of theory and observed effects in a massively complex economic world.  But as a rough rule of thumb it has plenty going for it.

Portes shows that there are three views of the way in which the multiplier operates under austerity.

• First there is the view articulated by the supporters of austerity – that empirical evidence suggests that, far from stimulating activity as Keynsian policy-makers have assumed, increasing government expenditure decreases it.  As Portes argues, this counter-intuitive view was based on a single influential paper by Alesina and Ardagna which emphasised confidence and exchange rate effects; it has the effect of telling politicians whose inclination was to reduce public expenditure what they wanted to hear. Portes concludes that this view was not very credible economically, but hugely influential politically.

• The second view – pretty mainstream among economists, including the IMF  – was that austerity would be damaging but not disastrous. Based on historical evidence it postulated a multiplier of around 0.5 – i.e. a reduction of 1% in public expenditure would lead to a fall in output of around 0.5%

• The third view was exemplified by the writings of Nobel Laureate Paul Krugman and numerous others, and argued that institutional factors meant that the multiplier was likely to be much higher; these economists crucially argued that rather than relying on historical data to understand an economic situation that had few precedents, it was necessary to revisit the macroeconomic theory. Krugman famously and scathingly caricatured the advocates of the first view as “waiting for the confidence fairy”.  They argued that this approach led to the conclusion that the multiplier would be far higher, certainly greater than 1 and possibly as high as 1.7.

Portes quotes from the latest IMF Bulletin which shows that the Fund is moving much closer to the third view – and points out the policy implications: first that the assumptions used by the OBR to feed into UK economic policy were way too optimistic (and its puzzlement over why things have not gone as it predicted misplaced); and that the impact of fiscal expansionism, the obverse of austerity, will be all the greater.  In other words – the bang for each buck of extra Government spending appears to be greater than many have assumed.

There are a number of conclusions that I draw from this.

• First – as Portes notes – there is the utter contradiction of using fiscal contraction as a means of restoring stability to economies after the 2008 blowout.  The feedback problem – that austerity is trashing tax revenues to the point where more austerity becomes necessary to achieve deficit reduction – is already savagely at work in the Greece, Spain and Portugal and is happening in the UK too.  The effect of the IMF’s shift in position is essentially to knock the legs out from underneath radical austerity.  Portes points to the contradiction between the aim of long-term stability and austerity’s effect of short-term upheaval and instability is crucial.

• Second, in shifting its position, the IMF is actually – if probably not explicity – responding to one of the fundamental Marxist critiques of capitalism, that the growth of capital requires, among other things, buoyant consumer demand to allow capital to expand.  Crises of demand could in the past be assuaged by things like colonial expansion and the monetization and privatisation of common assets, but the scope for doing that no longer really exists.  The IMF understands what politicians – with their ideological hostility to the state and their apparent desire to pursue regressive policies that transfer wealth from poor to rich – apparently do not; that economic stability in a capitalist society is dependent on people buying things (indeed, one can argue that the transfer of wealth from people who predominantly spend to those who accumulate has its own multiplier effect).  The IMF’s tone sounds rather like that of Keynes, whose mission was not to abolish capitalism but to save it from itself.  There are long term arguments about whether capitalism based on mass consumption is sustainable (my own view is that it isn’t) but the point is that on capitalism’s own terms the evidence against Plan A is becoming overwhelming.

• Third, as I have argued before, there is a huge failure on the social democratic left to challenge the austerity narrative with one that is altogether more grounded and evidenced.  The failure of the British Labour Party is salutary in this respect.  Ed Balls is far from being a stupid man, and is certainly one whose technical understanding of economics far outstrips that of George Osborne.  But he has become part of a political consensus that is simply unwilling to challenge the fundamentals of austerity, and to argue that even measured against the aim of achieving stable capitalism it simply isn’t working.

For me, one of the most frightening aspect of the politics of the right in general and of the UK Coalition in particular is the way in which ideology repeatedly triumphs over evidence – a major theme of the three weeks of party conferences that have just finished.  Is there anyone left in the political mainstream who is prepared to champion an evidence-based critique of austerity?

So … why isn’t Caroline speaking?

Saturday’s big London demonstration against the cuts matters.  It matters more in the face of a Budget that, predictably enough, has favoured big business and non-doms at the expense of ordinary people – and following economic indicators showing that Osborne’s slash-and-burn economic policies are failing.  Yes, marches don’t change the world. The biggest demonstration in London in recent years didn’t stop Blair going to war in Iraq.  But they can and do send important messages – especially where there is more than one party of Government.

So it’s unfortunate that, by playing party politics, the TUC appears to be setting itself up to reducing the impact of that march. It appears that the only politician invited to address the rally is Labour Party leader Ed Miliband.  Whether deliberate or not, the effect of that decision is to give the impression that the march is linked to the Labour Party.

But it needs to be bigger than that.  The movement against cuts is vast and inclusive – involving public sector workers, people defending their libraries in small towns in middle England, passers-by cheering on activists closing down Vodafone stores.  Many of those people voted for parties other than Labour – not a few voted Liberal Democrat, some will even have voted Tory on the basis of Cameron’s lies about defending the NHS.

Moreover, as the student demonstrations in London late last year showed, the game is changing.  Those who said that those demonstrations meant that we were entering post-party politics were, I think, wrong; but they did show that politics, especially the politics of opposition, is being re-moulded in a way that transcends traditional party politics.  The way in which the Liberal Democrats ditched overnight almost every commitment on which they fought the elections and became eager supporters of the Tory economic shock doctrine is part of that dynamic – the fact that their betrayal hit hardest an emerging generation of new voters was a key factor.

And this is about uniting all those who reject the economics of cuts and deficit extremism, and taking the economic debate into a different and new place. It’s actually a place where the Labour leadership – which fought the last election on a manifesto drafted by Ed Miliband that proposed cuts – is not yet comfortable, and is probably lagging behind its activists.

So, why just Ed Miliband?  Why not Caroline Lucas, who has become a far more consistent critic of the deficit consensus than Labour?  Why not other political groups like UK Uncut who have transcended the party system?  It seems to me that either you have a pluralism of party political speakers, or none at all.  I freely admit I have an interest in this; I’m a Green Party member (although circumstances mean my activism is about pounding the keys on my laptop than pounding the streets), and I’m proud that Caroline Lucas is my MP.  But what seems to me crucial is that the TUC recognise the strength that comes from diversity and pluralism in a situation where the big issues do not split along easy political lines.

Selling Wootton Bassett short

It has been announced that Wootton Bassett will henceforth be known as “Royal”, like Tunbridge Wells and Leamington Spa.  The decision was apparently taken in response to a personal initiative by David Cameron, and, we are told, recognises the vigils undertaken by people in the town as the bodies of British soldiers were repatriated after being landed at RAF Lyneham.  As that RAF base is closing, the bodies of British servicemen killed overseas will no longer pass through the town centre.  It’s a curious dedication – the two existing Royal towns acquired their honorific not to mark any particular distinction, but as places were Queen Victoria and her successor Edward VII enjoyed taking the waters.

When I heard this announcement, two thoughts came to mind.

First, I was reminded of Alan Bennett’s comments about remembrance in his play The History Boys:

We don’t like to admit the war was even partly our fault cos so many of our people died. And all the mourning’s veiled the truth. It’s not “lest we forget”, it’s “lest we remember”. That’s what all this is about – the memorials, the Cenotaph, the two minutes’ silence. Because there is no better way of forgetting something than by commemorating it.

I’ve long felt uneasy about the vigils at Wootton Bassett.  I don’t want in any way to impugn the intent or integrity of those taking part, and I do not want to denigrate the comfort that these vigils bring to those remaining behind, although it’s important to understand that some locals were concerned about what they regarded as “grief tourism”.  I do not want in any way to trivialise or disparage the bravery and loss that the vigils recognise.  But I do feel that they have been used – especially by the armchair generals of the tabloid press – to legitimise what is really a sordid and illegal war for oil, one which the West cannot win and one in which the deaths of young British men are utterly pointless and needless.  It uses solemnity and patriotism to deflect attention from the political reality, and to vindicate the politicians whose indefensible decisions have sent these young men to their deaths.

And, second, I wish I could rid myself of the belief that this gesture by Cameron’s government is utterly cynical.  Not just because of the wars in Iraq and Afghanistan, but because it is closely related to the Coalition’s domestic economic agenda.

The closure of RAF Lyneham will have a desperate economic effect on Wootton Bassett.  Local campaigners including former newspaper tycoon Eddy Shah claimed that some local business could lose up to half their trade.  Local Conservative MP James Gray told an adjournment debate in the House of Commons:

the local economy depends to a significant degree on the base. Something like 3,400 jobs are directly or indirectly dependent on it, according to a recent survey by Wiltshire council. About £90 million within the local economy comes from Lyneham. If the site were to be left vacant and nothing were to happen there it would be a disaster for the local economy.

In other words, Wootton Bassett is just one more community that is reeling at the effect of public expenditure cuts – another victim of the Coalition’s deficit fetishism.  One is bound to wonder whether this honorific is anything more than a rather hollow and empty sop to a town whose economic decline would conflict with the political narrative about the significance of the war in Afghanistan.

So it wasn’t the snow …

Updated GDP figures for the last quarter of 2010 give a clear picture of the British economy’s continued decline. The headline figure shows a fall of  0.6%, with the ONS still arguing that the impact of December’s cold weather was about 0.5%.  The ONS has stated that output both from manufacturing and service industries was lower than expected.

Ominously, household expenditure fell for the first time in 18 months.

The only positive number came in government expenditure, which rose by 0.7% – this of course is the period before the cuts come into effect.  The Guardian reports:

“The detail shows that government spending was the only positive growth driver,” said James Knightley at ING. “This is fairly worrying given we know about the wave of fiscal austerity that is now starting to hit the UK economy, meaning that we will soon be starting to see negative figures for this component.”

The Treasury said the figures do not affect its determination to tackle the country’s record budget deficit. “The chancellor said that the fourth quarter growth figures were disappointing and today’s revision doesn’t change that fact,” said a Treasury spokesman. “It also doesn’t change the need to deal with the nation’s credit card – the country is borrowing more this year than is spent on the entire NHS.” He also noted that surveys, which showed the economy bounced back at the start of the year, had “exceeded expectations”.

Two quick points:

• If these numbers faithfully reflect the trend, Osborne is in some trouble.  There’s no sign of the sort of increase in confidence that would lead to the creation of private sector jobs on the unprecedented scale that Osborne needs to deliver his strategy.  With hundreds of thousands of public sector jobs being lost, the outlook is grim indeed.
• The Treasury press officer’s response is more worrying still.  Talk of “the nation’s credit card” is not only misplaced in its own terms but demonstrates an astonishing degree of economic illiteracy – not just in the press office but presumably among the special advisers who cleared the line.  It becomes tedious to repeat that Government and household borrowing are not the same thing at all, but a Government department that has always been regarded (not least by its own inmates) as being among the intellectual elite really shouldn’t need reminding.  Moreover, if you’re going to claim that the snow damaged the economy in December, you need to accept that there will be a corresponding bounce back in the milder January.

These numbers need to be seen in the context of the consumer confidence figures, also released today – which show that February saw no more than the most marginal improvement in the historical lows of January.  For those of us who believe that the Coalition is tanking the economy, there is nothing here to change our view.

Osborne’s dishonest and ideological VAT hike

Happy new year from the Con Dem coalition. Bus and rail fairs soar, and most pernicious of all, the VAT hike.

It’s pernicious for two reasons: because the parties in Government pledged not to do it, and because it’s not necessary. Before the election Cameron consistently said that a Tory government would not raise VAT. And the Liberal Democrats argued that no VAT rise was necessary and famously issued a campaign poster warning of a Tory tax bombshell:

Now they themselves are acquiescing in such a tax increase.

The Coalition will doubtless argue that they have to do this because of the mess in which Labour left the public finances. But it’s not true. As Left Foot Forward pointed out, the increased revenue from the VAT rise is almost entirely offset by tax cuts elsewhere:

According to the Budget red book, The increase in VAT from 17.5 per cent to 20 per cent raises £13.5 billion by 2014-15. But cuts to income tax, national insurance, corporation tax, and council tax cost £12.4bn. Net of Tory tax cuts, the VAT rise brings in just £1.1bn.

£1.1 bn? A drop in the ocean compared with the size of the deficit, and a fraction of what Osborne wrote off in the Vodafone tax deal. And the same piece in Left Foot Forward points out the evidence that the VAT rise is regressive, and will hit the North harder than the South.

Finally, Osborne has made it clear in an interview in the Spectator that this is not a temporary or crisis measure. 20% VAT is here to stay:

But the VAT rise – it’s going up to 20 per cent on New Year’s Day – is here to stay. “The VAT rise is not temporary. It can’t be. We are talking about a totally different scale of revenue and the VAT rise is a structural change to the tax system to deal with a structural deficit.”

The only tax he speaks of lowering is corporation tax – and, on this, he is emphatic. “Show me a country in the world with our sort of fiscal challenge that is prepared to take the difficult political decision to cut the corporate tax rate from 28 per cent down to 24 per cent over four years, giving us the lowest corporate tax rate in the G7, the fifth lowest in the G20, the lowest of any major western economy. I think we’ve put our money where our mouth is. It would have been the easiest thing to say, ‘businesses don’t vote, let’s put the taxes up on them, no one’s going to notice’. We have done the exact reverse of that.”

The truth is that this is an explicitly ideological tax increase, shifting the burden of tax on to the less well-off, hitting those on lower incomes and in poorer parts of Britain hardest. It’s not a crisis measure, it makes little or no difference to the deficit, and it’s here to stay. And it’s further proof – if any were necessary – that the Liberal Democrats have abandoned every principle on which they fought the last election.

It’s not about fees, it’s about democracy

Now that things are settling down after this week’s massive student demonstration in London – and the events at the Conservative HQ building that followed it, it’s worth reflecting a little on what was really happened, and what it tells us about the temper of Con Dem Britain.

The media reactions have been predictable. It’s either a case of privileged youth after a free ride, or a riot by the usual suspects who disgraced the 50,000 students who had marched earlier. Of course, it’s neither – one of the most interesting things about what happened on 10 November is the complete inability of most of the mainstream media to “get” it, to ask whether there might be something going on here that’s a bit more profound or interesting.

Small riot, not many hurt

The riot angle is of course what the tabloids led on. Actually, stand back from it, and it’s not much – a few minor injuries (more to protesters than to police), a few arrests, a bit of criminal damage. Always excepting the moron who threw the fire extinguisher, not much more than a Bullingdon Club night out, really. Nothing quite gets a lazy journalist going more than a picture of a youth putting an object through a plate glass window. And it allows them to retreat behind all the usual tropes about political motivation, hard-core anarchists, Class War and all the rest of it.

A much more interesting account of the events at Millbank – from an eye-witness – is here. It makes a convincing case that what we saw here was not the “usual suspects” at all, but a group of angry people in a confused and confusing situation:

The majority were just plain old students, but angry. The kind of students who go to their lectures, go to parties, play sport at the weekends and sometimes get a bit drunk and lairy. And there were a lot of very young students there. Maybe they were first years, but many of them looked like school students. They weren’t all middle class, they weren’t all white, they hadn’t all come in on the student union buses. They were never looking at the Russell group education that private and grammar school educated kids could, until now, take for granted. These are the people who made up the majority of the people at Millbank – ordinary young people, working class and middle class, from school age up to university age, who hadn’t been on many demos before, whose only encounter with the police, or with agitated crowds, had been Saturday night lairiness or sports matches.

And that set the mood. It felt like a rowdy night in a busy town. People were angry and frustrated, and they hadn’t had the training or the experience to deal with the situation. If it was true that a militant anarchist faction had led the violence at Millbank then here’s what it would have looked like:

Everybody facing the police line would have had a mask on. Nobody wouldplan to feature prominently in national newspapers with their face clearly exposed, throwing a stick at a police officer or smashing a window. But what did we actually see? A few make-shift bandannas slipping down people’s faces and a huge number of students who hadn’t even tried to hide their identity.

The police line would have been stormed. There was a large plate glass window missing, right in front of the crowd. There were hundreds of protestors, there were a laughably small number of police. Very little organisation would have been required for everybody to link up and just walk through the police line, with little damage done to either side. Instead there a mass of people hanging back, and a handful of angry people launching themselves one by one at the police with fists or sticks to be beaten back with batons.

When the snatch squad was sent in their targets would have been surrounded and protected by fellow protestors. Instead the crowd allowed the police to get to their targets and then to carry them back out, right through the bulk of the protestors. The reaction was angry, and violent, but completely ineffective. It was clear that people didn’t understand what was happening until it was over.

There would have been a sense of purpose. I did quite a bit of chatting and eavesdropping. People didn’t know what was going on. Not just the people milling around near the back. Students in university hoodies who were right up near the front, the ones who were launching sticks as if they were javelins, were confused. They asked each other if anyone was in charge, they wondered if they were going to miss their bus back, they talked about ‘kettling’ as something that they’d heard of but never experienced. They had a slightly dazed look, part exhilaration, part anger, but partly just the look of someone trying to cope with a situation that they’ve never been in before. There was no one in charge, so they made it up. And a number of them got it wrong.

Degree to go with fries, please

The other misunderstanding is that this protest was about privileged kids looking after number one. But this was actually about far more than that. It was about tuition fees, yes, but also about massive cuts in funding especially to arts courses, with the increase in fees being part of a strategy that looks horribly like the privatisation of higher education.

Behind that assumption is an insidious and dangerous interpretation of what higher education is about. The mainstream trope runs, you get a degree, you earn more, you pay. Education is a commodity like a Big Mac or an iPhone, something that students consume.

But it isn’t, and as soon as the Left falls into that trap it’s lost the argument. The pioneers of education in Britain, who were largely on the left, didn’t do it so that their kids could get a well-paid job in a multi-national. They did it because education is at the root of what a decent society should be, and because of a belief that it should be freely available to all who wanted it. It wasn’t a commodity, it was the mark of a decent society. It was a collective good, something we all benefitted from, not a badge to be bought by the affluent, to, as Ivan Illich caustically put it, to rationalise the head start as achievement.

So when did we vote for this?

I think to understand the anger, we have to think about democracy. Anybody who was there at the march would have been in no doubt that the most virulent anger was reserved for Clegg and the Liberal Democrats. Tories are Tories; people expect nothing better of Cameron and Osborne.

But these were people to whom Clegg made a pledge that he would fight against tuition fees. Many of those students would have voted Liberal Democrat in May on that basis – voting, of course, for the first time. Some of them would have worked for Lib Dem candidates. And they’ve been shafted.

It is difficult to think of more pathetic examples of dishonesty turned to excuse-making than some of the attempts by Liberal Democrats to rationalise their sell-out. This extraordinary piece by John Hemming MP is fairly typical, its desperation of tone more illuminating than any of its content. (I should mention as an aside that I first met Hemming thirty years ago when he and I were at Oxford, and he was organising a rent strike at Magdalen College – something that makes me wonder just what sort of self-loathing and moral delinquency it takes for people who once believed in something to sit in Parliament meekly cheering as Osborne and Duncan Smith go to work on the most vulnerable in society).

I think this betrayal is part of a wider crisis in democracy. We now have three parties wedded to neo-liberal economics, whos political aim is not to serve the electorate but to get their aims past them. I think the electorate is beginning to wake up to it. The use of deficit scaremongering to override democratic accountability seems to me to be at the heart of the Con Dem agenda, and people realise this and are getting angrier. The spectacle of a handful of the extremely wealthy telling the rest of society to make sacrifices for the common good, while their chums in the banks continue to get their bonuses, is wearing thin. Is it any surprise that people are getting impatient with Westminster?

And in any case, given everything that’s happened, the broken pledges, the privatisation that the electorate never had their say on – given all that, who the hell are Clegg – not to mention people like Cameron and the ludicrous Boris Johnson, who as members of the Bulllingdon Club took a rather less rigid view of criminal damage in their student days – to lecture the students at Millbank about democracy? Who are they to tell students that they should channel their anger in establishment-approved ways?

The four big lies of Osborneomics

1.   The deficit is so big that we are in an economic emergency and we must take immediate action to reduce it – but the current deficit is, by the standards of the last two hundred years, not particularly large and is actually rather smaller than that run by the British economy for most of the nineteenth century.  Because Britain’s public debt matures later than that of most other Western economies – certainly than that of the oft-quoted Greece – the comparison with other economies is not valid; ironically enough it is the much-maligned Gordon Brown’s management of debt repayment as Chancellor that has put us in this beneficial position.  The deficit is a problem if it is allowed to continue, but as Keynes explained, the best way out of it is stimulus to create employment, not to take £80bn out of the economy.  Comparisons with the family housekeeping are, as Keynes pointed out, economically illiterate. Government funding doesn’t work like that. And Cameron gave the game away when he said that even when the deficit had been dealt with (fat chance) public expenditure would remain constrained.  There are plenty of eminent economists – from Nobel Laureate Paul Krugman on the centre-left to the doyen of British monetarism and one of Margaret Thatcher’s favourite economists, Samuel Brittan, on the right -  who claim that the current policy is madness. This is about ideology, not economics.

2.   Labour’s profligate spending took us to the edge of bankruptcy – complete nonsense. The problem we face is not a spending crisis, but a tax revenue problem.  Within the parameters of market capitalism (which I don’t really accept, but that’s another story) Labour actually did a rather good job, but the endemic failures of the system are bigger than the attempts of competent individuals to manage it. The basic problem arises from the more than £40bn that was sunk into bailing out the banks, brought low by speculators, and the economic shock that followed it, which , according to many economists, has resulted in a hit of between 10% and 15% to GDP – and as a result of which tax revenues have fallen of a cliff. Not only do cuts mean that the poor and vulnerable are made to pay for the bankers’ delinquency – while the bankers continue to pay themselves large bonuses (£7bn this year, or the equivalent of the cuts to the welfare budget announced yesterday), but the economic fact is that Osborne has got it the wrong way round – public expenditure cuts, which take demand out of the economy, will reduce the tax base further while increasing welfare spending.  A Tobin Tax on international financial transactions – most of which are speculative – would slash the deficit overnight.  There is an international appetite for it.  But the bankers would howl, and they’re in charge.  Which brings us on to …

3.   The newly liberated private sector will create the hundreds of thousands of jobs needed to offset those lost in the cuts – which is even more ludicrous than the last one.  The historical evidence is obvious and overwhelming – every time a Government has indulged in cuts of this magnitiude, it has tipped the economy into depression.  While the much-maligned Brown and Darling were trying desperately to manage the crisis in the least painful manner possible, with a deftness that was lauded around the world, Ireland embarked on precisely the course that Osborne is following now.  Four emergency budgets later, the Irish economy is on its knees.  And it’s the same whenever slash and burn economics is tried.  It happened in Britain in the 1920s and 1930s, in New Zealand in the 1980s, in Ireland now.  No economy in the world, even in boom times, has succeeded in creating jobs at the rate that Osborne is forecasting in the UK in the next few years, least of all one that has taken £80bn of demand out of the economy.  It’s sheer economic illiteracy.

4.   We’re all in this together – the most pernicious lie of all.  As the institute of Fiscal Studies has demonstrated, the effect of Gideon’s budget is deeply, profoundly regressive – the poorest and most vulnerable people on benefits will lose 10 per cent of their income.  Women, who represent the majority of workers in the public sector, will be hit particularly hard, as will families with children.  And yesterday’s announcements are only the start – the 30% cuts in local government funding will mean the evisceration of front line services like care for the elderly, home helps, children’s services, social work – areas which have not exactly boomed on New Labour’s watch. (The idea that New Labour promoted a benefits culture is frankly risible – the evidence base shows overwhelmingly shows that inequality widened dramatically after 1997, not least due to benefit cuts). Meanwhile, tax breaks for private schools are untouched.  Corporate taxation is reduced, and the Coalition – while referring to benefit cheats as “muggers” – does nothing to deal with big tax avoidance.  Vodafone owes £6bn tax from asset deals – Osborne looks the other way and it gets written off.  Most of all, the cuts in housing benefits will effectively mean an economic cleansing of parts of London in particular.  The return of Shirley Porter’s housing policy – with Liberal Democrats cheering on from the sidelines – is one of the most obnoxious pieces of social engineering even the British Conservative Party has ever proposed.  It takes us into territory normally associated with the rantings of Geert Wilders.

In other words – dishonest, wrong and economically illiterate, based on the belief that you can soften up the electorate with tabloid prejudice and the sonorous repetition of the claim that there is no alternative.

Cruelty, ignorance and George Osborne’s useful idiots

There’s plenty of virtual ink being used across the blogosphere to describe the enormity of what the Coalition announced in yesterday’s Spending Review, and I’m a bit loath to add to it. None of it is likely to match the eloquence of this superb piece by Johann Hari in the Independent.

He gets to the heart of the matter here:

It can’t be coincidental that this is being done to us by three men – Cameron, Osborne, and Nick Clegg – who have never worried about a bill in their lives. On a basic level, they do not understand the effects of these decisions on real people. Remember, Cameron said before the election: “The papers keep writing that [my wife, Samantha] comes from a very blue-blooded background”, but “she is actually very unconventional. She went to a day school.” Osborne is a beneficiary of a £4m trust fund he did nothing whatsoever to earn and which is stashed offshore to avoid tax. Clegg actually thought the state pension was £30 a week, a level that would kill pensioners.

These attitudes have real consequences. We’re not in this together. Who isn’t in it with us? Them, their friends, and their families. They were asked to pay nothing more in this CSR. On the contrary: they are being let off left, right and centre. To pluck a random example, one of the richest corporations in Britain, Vodafone, had an outstanding tax bill of £6bn – but Osborne simply cancelled it this year. If he had made them pay, he could have prevented nearly all the cuts to all the welfare recipients in Britain. You try refusing to pay your taxes next time, and see if George Osborne shows the same generosity to you as he does to the super-rich.

There is one stark symbol of how unjust the response to this economic disaster caused by bankers is. They have just paid themselves £7bn in bonuses – much of it our money – to reward themselves for failure. That’s the same sum Osborne took from the benefits of the British poor yesterday, who did nothing to cause this crash. And he has the chutzpah to brag about “fairness.”

Britain just became a colder and crueller country. And for what? To pantingly follow a disproven ideology over a cliff. On the eve of the general election, Cameron told us: “There’ll be no cuts to frontline services,” “we’re not talking about swingeing cuts,” and “all cuts will be fair”. Is it possible to call him anything but a liar and an ideologue today?

You can enjoy a long rest, Baroness Thatcher – your successors have embarked on a mephedrone-charged imitation that exceeds your most fantastical dreams.

And of course there’s a whole second wave of cuts – the ones that will really hit the vulnerable – when the huge cuts to local government funding take effect.

But there is a hugely important secondary issue here about the role of the Liberal Democrats. It’s not just that they’ve acquiesced fully and totally in this – Nick Clegg has described them as “fair”. Because there is a coalition, it’s that much easier for the Tories to make sonorous statements about the national interest. It’s pure ideology, of course, but the coalition gives the cover needed to promulgate the lie that we’re all in this together. Can anyone imagine Osborne being so brazen, so aggressive, so cruel without a cadre of middle-aged empty-headed men in yellow ties nodding like the dog in the Churchill car commercials?

The CSR is the Tories’ triumph. This is what Tories are in politics for, and it’s what they do. It’s also the Liberal Democrats’ moment of abject shame.

A counterblast to deficit fetishism

In the face of the massive public expenditure cuts proposed by the Con-Dem coalition, The New Left Project has launched a debate on the cuts and how to respond to them.

The first contribution, The Axeman’s Jazz, is a characteristically incisive essay by Richard Seymour, who blogs at Lenin’s Tomb and has recently published The Meaning of David Cameron

It’s a decisive rebuttal of the line peddled by Cameron, Clegg and Osborne that the deficit is the most important issue facing Britain today, and that it is the result of profligate spending under Labour.  This passage goes to the heart of the deficit myth:

In New Labour’s first term, a priority was to establish credibility with financial markets by reducing the public debt. The debt was reduced by a total of £34bn in the last year of the first time – a larger total reduction than all the cumulative debt reduction of previous governments for fifty years. Capital expenditure in most departments of government fell precipitously for the first years of the New Labour administration, and overall public spending fell from over 40% of GDP in 1997 to 38.1% in 2001. Even with successive fiscal problems in the ensuing years and a subsequent need to borrow to plug black holes, by 2004 Gordon Brown had reduced the debt from 44% of national income to 34%. By 2005, the combined spending on debt interest and unemployment benefits had fallen by a half. In the latter half of the 2000s, public spending rose to above 40% again, reaching 41.1% in 2007-08. Only with the credit crunch and following recession did it return to levels last seen in Thatcher’s first two terms, rising to 47.5% of GDP for 2009-10. This has been the result of a combination of two factors: stimulus spending, and the sudden contraction in the private sector. The deficit that arose resulted from the reduction in the tax base as unemployment soared and the economy shrank, and the massive bail-outs for the financial sector.

So, we can dispense with the fairy-tale that the deficit has been caused by profligate expenditure. New Labour adhered closely to neoliberal doctrines and policy nostrums.

Cameron’s declaration that the cuts will not be reversed once the immediate crisis is over, and that smaller government is here to stay, is the clinching evidence that the agenda is ideological; it’s important that the coalition is not allowed to get away with hiding behind the deficit.

Greens and science: why Caroline Lucas should not back homeopathy

I was disappointed to hear that Caroline Lucas MP had signed EDM 284 criticising the British Medical Association’s stance against funding for homeopathy within the National Health Service.

The BMA argues that there is no evidential basis for homeopathy and it should not receive NHS funding.  I support their view – homeopathy is not so much bad science as anti-science, a concept so ridiculous that it’s effectively raising two fingers to every known concept of scientific evidence.

Of course there is a placebo effect, and that needs proper research – although there’s in my view a huge ethical problem in telling people that something works when all the scientific evidence tells you otherwise, in order to kick-start the healing process.

And let’s not pretend that there are not real vested interests at stake here.  As with much “alternative” therapy, homeopathy seems pretty mainstream when it comes to adopting the values of market capitalism – much of it apparently aimed at allowing the post-Thatcher “me” generation to feel good about themselves .

Why does this matter for Caroline Lucas and the Greens?

It matters because the Green case, if it is to be anything at all, must be founded on hard scientific evidence.  Dr Lucas herself ran into a row before here election to Parliament when she compared climate change denial to Holocaust denial; her point – grossly misrepresented by the media but I believe entirely valid – was that in both cases the weight of hard evidence was overwhelming, with all that that implies for the motives of the deniers.

Elsewhere, the Green Party in Britain is the only party getting to grips with some of the big issues – like peak oil – where the political mainstream wants to ignore the evidence; or using evidence to attack politically expedient consensus, as in Dr Lucas’ admirable attacks on the deficit fetishism of the political mainstream.

I believe strongly that we need a Green alternative.  Greens are often portrayed as anti-science; I’d say that on climate change and peak oil – not to mention the physical and psychological damage caused by market capitalist values – they’re the only political grouping with the courage to embrace scientific evidence and to build political action on it.  Which is why Westminster’s only Green should not be backing motions in support of homeopathy.