You could not make it up.
Our ultra-smooth prime minister has complained to the Conservative leader of Oxfordshire county council about the cuts to local authority services being made in David Cameron’s constituency, which is itself in Oxfordshire. We owe this great story to the Oxford Mail, to which organ a certain exchange of letters, or possibly emails, was leaked.
Welcome to the real world, Dave! When a prime minister finally wakes up to the consequences of the ideologically driven austerity policies of his own chancellor, then perhaps he should be tempted to follow the example of his hero, Harold Macmillan, and sack him.
Of course he cannot. The prime minister and chancellor are, to coin a phrase, in this together. Cameron has now discovered what dawned on many of his fellow Conservative MPs some time ago in the case of the tax credits fiasco: that Osborne’s austerity policies are not as popular as they assumed when they were re-elected.
As Gordon Brown says: “The majority of today’s poor, and the biggest losers from [Osborne’s] tax credit changes, are not the unemployed or ‘chaotic’ families but hardworking parents and their children.”
It is good, by the way, that Brown has emerged from hiding and is speaking out. The first Big Lie perpetrated by Osborne was that the Great Recession was caused by Labour’s spending rather than by the banking crisis. The second was that the budgetary problems of the UK were comparable to those of Greece. The third was that a vast proportion of the welfare budget went on the unemployed and the “feckless”. As Brown points out, 1.5% of the welfare budget goes to the registered unemployed, not the 40% that the British people apparently believe, according to polls – a belief shamelessly fomented by the rightwing press.
And now, hey presto, we have a fourth Big Lie: that, again according to the Gospel of Osborne, the budget deficit is a threat to national security.
The truth is that the budget cuts being demanded of the armed forces and the police are themselves a serious threat to national security. The cuts being demanded of other departments, and of local authorities, such as those affecting the prime minister’s constituents, may not threaten the security of the nation, but they do not do much to relieve the anxiety of people who are already experiencing financial hardship. Many people feel nervous for their own security.
I fear that this egregious chancellor of the exchequer is a quintessential exponent of Orwell’s dictum that “political language is designed to make lies sound truthful”.
If the underlying situation were not so serious, Osborne’s policies and Big Lies would be laughable. Unfortunately they are not.
Meanwhile, there is a potential economic crisis in store for the government in general and the chancellor in particular that is much more serious than the putative budgetary one. Even various erstwhile cheerleaders for Osborne, including the Financial Times, are beginning to wake up to the possibility. If it happens – and you never quite know in this mad world of financial flows – it will be a deficit crisis, but not a budget deficit crisis. It will be an old-fashioned balance of payments crisis, evoking memories of the Black Wednesday debacle in 1992.
The financial markets are slowly becoming aware that the UK has been experiencing the biggest deficit on its current balance of payments in recorded history – in peacetime, that is. It had been obvious for some time that the overseas trade figures, which record the total cost of imports and the value of exports, are in marked deficit. This has reflected the cumulative impact of the damage done to manufacturing industry by the neglect of this sector during the Thatcher years, and the aggravation of this situation by sporadic periods when the pound has been too strong for the good of British industry – under governments of both major parties.
Manufacturing may account for a small proportion of gross domestic product, but it still accounts for more than half of our export earnings.
Until relatively recently the deleterious impact of the trade gap has been largely offset by a positive balance of investment income from our assets overseas. But it now looks as though the outflows of income from all those foreign-owned sectors of “British” industry have been eating into the traditional surplus.
This is the real problem facing the British economy, and austerity policies that have contributed to the slowest recovery from recession on record have not helped when it comes to investing in the plant, machinery and service sectors that should be providing the capacity for Britain to pay its way in the world.
It is truly remarkable that so much of the public debate has focused on the so-called need to cut the budget deficit faster than the balance of the economy requires. It has been a characteristic of British economic policymakers for decades that they become obsessed with the pursuit of something they think will lead them to the economic philosopher’s stone. Cameron’s constituents are not the only victims of this obsession, but it is good that the message has been delivered to his doorstep.
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