Big cuts based on a big lie
The scandal of this summer’s budget is that the poorest will be hit the worst. Increasing VAT to 20% will affect everyone, most of all pensioners and those in poverty. As the Financial Times has said, areas like Wales that rely most on the public sector will be hit hardest by the deep cuts announced to public spending.
Worse still, these big cuts are based upon a big lie: that the public finances are so terrible, the cuts must be faster and deeper than Labour’s very tough deficit reduction plan which would have halved borrowing within four years. Cameron and Osborne have been deliberately scaring the public, with Clegg and Cable joining in.
But, as their own Office for Budget Responsibility said last week, the situation they inherited is actually better than was forecast as recently as Alistair Darling’s Budget in March! Borrowing is £9 billion lower this year and £22 billion lower over the coming four years. Growth is higher and unemployment is lower. Business bankruptcies and home repossessions are half the rate of the 1980s and 1990s Tory recessions. This is all because of Labour’s government action and investment to support jobs, businesses and struggling home owners which has left Britain much better placed than America or the rest of Europe to recover from the worst recession for eighty years.
These brutal cuts are ideological not economic. The new ConDem Government is not cutting savagely because it needs to; it is cutting savagely because it wants to.
One thing has certainly changed since Labour left office: the Eurozone countries – especially Greece, Portugal – are now in huge difficulty. Without Labour’s progressive influence, fiscal conservatism is now dominant in Europe, with huge cuts in public investment and jobs on the way. As President Obama has warned, this endangers the world recovery. It also means a downturn in the very market where a majority of our trade takes place.
So this is precisely the moment not to cut public spending savagely because it will put at risk the still fragile British recovery. Cutting deeper and faster repeats the mistakes of the 1930s, 1980s and 1990s when Tory Governments turned recessions into depressions.
John Maynard Keynes – a signed up Liberal – will be turning in his grave, not just at this damaging folly, but at the manner in which the Liberal Democrats have breathtakingly somersaulted, trading tens of thousands of jobs that will be lost in Wales (hundreds of thousands across Britain) for their own jobs in Government.
Nick Clegg, Kirsty Williams and even the once-saintly Vince Cable are now arguing the precise opposite of what they did in the election campaign. Big cuts based upon a big lie – a real tragedy for Wales.