Janan Ganesh has the latest in a long line of columns reminding readers how deficit reduction has been nothing like as unpopular for the Coalition as foretold.* Anyone looking at Thatcher austerity and extrapolating public sentiment from that era would be hugely surprised. And so, gradually there has grown a compelling story that bluff has been called. The actual experience of austerity has been so much less searing than the doom-mongers warned that it has gained esteem as a technique of economic management, one the lack of which is now a serious impediment to Labour’s credibility.  Insert you own polling link here.

Ganesh’s reading of the public’s mood is surely correct, and also his analysis of what this means for critics of the future spending pathway.  For those like me who fret about having £30 billion too little in 2018 for decent services, the Big Austerity Meh is a problem and the deeper cause of my grumpy earlier post.  As I see it, the Meh has many causes:

Public opinion is less warm to public spending than it was.  See anything from the BSA survey or graphs like this: “Tax more and spend more” has fallen steadily from 2002.

F_Welfare_1.1

The reality HAS been less harsh than expected: in the same FT we can read that “Within Whitehall there is genuine surprise, however, at how well local authorities have coped – and a growing belief that a further steep round of reductions may be equally readily absorbed” (read the whole thing and subsribe)

Various arguments about austerity get conflated.  Labour put its early chips on jousts about how austerity damages growth. This is now virtually over. “Austerity weakens GDP growth all other things being equal” is actually the OBR view.  “If you cut spending you can never expect growth ever again” was what many seemed to hear Labour saying, so that when some ordinary-paced growth did return, it was greeted like a macroeconomic event to rival the great Inflation of the 1970s, used by some to kill Keynesian ideas.

Apparently there was a violent debate in HMT about whether the IMF should be made to grovel on one knee or two for questioning the strategy.  In my view, this says nothing about whether the IMF was ex ante wrong – but everything about how HMT  set up the question so brilliantly that long delayed growth well below the OBR’s original projection scores a 10/10.

– In other ways the Coalition has very skilfully positioned the argument. As one commenter says, ostensibly implausible fiscal numbers are used to paint Labour into a corner.  And they have: even the Fabians assume what is in the OBR is what is to come. Brilliant job.

Basic marginal analysis.  The first cut is actually the shallowest (Rod Stewart is a reliably unreliable in economics). Last in, first out will tend to remove the least essential services.  As my Bloodletting Analogy argues, it is the latter cuts that have you going dizzy and dying. But they are in the future.

– And that also means the first cuts will be those that don’t show an immediate effect – but cannot be repeated. A classic example is the raising of tuition fees, which resemble extra borrowing in terms of financial flows.  Somewhere out in 2040 some richer graduates will pay. But only once.

– I won’t cry media conspiracy.  Apart from Ganesh I access too few good right wing commentators. (The Times, behind a paywall, is a bit cheerleader-ish in its headlines: see “Every Child to Read and Write“).  But there have been plenty of opportunities to criticize the government, and I remember the middle of 2012 was quite hairy.

– The final point is the political configuration.  I don’t think you can underestimate how important the Liberal Democrats have been.  Rather than being on the other benches lobbing bricks, they have stood stalwart alongside Osborne as the announcements have come out. Instead of the configuration being 55% plays 35%, it has been the other way round. Furthermore, the core LibDem brand is “nice people” (simplifying horribly!).  If you want people to think austerity is basically fine, having LibDems help announce it is hugely useful.  The trouble for the LibDems is that rather than this gaining them some flinty credibility, it just damages a core perceived attribute.  Most unfair …

Some austerity was inevitable.  Some more is also inevitable. None of this invalidates the basic maths I have been putting on this blog.  Worry about the last two pints of blood, not the first.  Something is going to have to give.  But as for the politics – is announcing fiscal numbers that really cannot sustain public services damaging politically? Meh.

(I have updated this post for sense etc)

*See, for example, the Secret Diary of a Civil Servant and his warnings of a Tesco Value State

 

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3 thoughts on “The big Austerity Meh

  1. On the comment of Thatcher, I don’t think her anti-state rhetoric was all that unpopular as her opponents thought. Remember she was actually re-elected twice, and her successor was also re-elected with basically the same policies minus the poll tax. What actually finally did in the Conservatives was the shear dysfunction of the party due to their Euro squabbles and Labour basically coming round to the Conservatives fiscal position (Balls and Brown outright saying they would not change the basic structure of the economy anymore). Thatcher was interesting in that there was a small segment of the population with which she was very very unpopular, and that’s what people remember not the reality that a lot of the silent majority agreed with her. During the Labour years there was gradual boiling of the frog as the size of the state slowly expanded, not enough really to frighten anyone, and hidden somewhat by the underlying strength of the economy. So Labour could basically argue there was no trade off of growth versus state size until the crisis hit. But was there really a change in “silent majority” towards accepting a Scandinavian sized state during Labour years? I think not and this is why the alliance was getting support despite the scale of some of the cuts even during the early years of the Govt. The noisy opposition is not there to the same extent of course as during the Thatcher years, but that may be due to the diffuse nature of the targets, like the local authorities, and the nature of the jobs. Its harder to be enraged by say a local authority middle manager in the Cotswolds losing his job, than say a mining community being wiped out in South Wales.

    I agree on the alliance being a great help, maybe it was luck, but the strategy as it has been played out by the Tories has been masterful. Cameron must be thanking his lucky stars he didn’t get a majority. And the austerity doomsters look so silly now they can’t get a hearing.

    The interesting thing is now why Lib Dems are not getting more of the credit for the success. I wonder if a better strategy for them would not have been to enter the Government but agree to support the Tories forming a Government (in return for certain concessions) and allow the Tories to take the blame for cuts (perhaps agreeing to abstain for a couple of years budget votes) while urging a more loose monetary and fiscal policy overall from the sidelines. Interested in your thoughts on this as someone close to the Lib dem leadership, Of course this retrospective, but interesting speculation.

    On the scale of future cuts, one thing I would say is that it is always surprising to me in my experience in business how much fat there is. People really do not take hard decisions about what people to let go and activities to cut unless they are forced to. So don’t be too surprised if a good chunk of further contraction is possible, way beyond our expectations.

    1. Wow, great comment and too much to chew on. Very difficult to compare with Thatcher era because of so many different variables. Much higher real wage growth; particularly in terms of disposable incomes, since tax rates also had far further to fall. Obvious, cartoonish and ideal enemies like Scargill, and genuine recent memories of serious industrial dispute. Far greater range of opinions to choose between – Labour really did sing the Red Flag, they really did believe Clause 4. And, you are right – far different political dispositions in the public. You could hurt pensioners, allow fiscal drag, underfund public services, and still get elected.

      The consumer boom was astonishing.

      I obviously agree with what you say about the Tory strategy. Every time a LibDem stands up and sounds stern is sort of helps them. Cameron with a majority of 15 would have had a dreadful time. Britain wouldn’t have done all that well either.

      But the minority-support approach you outline is risky. You can still be blamed for everything the Government does, and face the constant charge “why are you not stopping this?” There may be no link between possession of ministerial office and popularity – certainly not one I can see in the LD poll ratings! – but the experience gained is really valuable for any party, and may be incubating a generation of really competent LibDems down the line. And there are a host of achievements that the LibDems will remain proud of for decades.

      You are right about the fat in business. I now know not to be surprised by anything. But so much of public service is about human delivery of services …

      1. I agree with Chris about Thatcher. There was a huge amount of anger among the general population about the strength of unions in certain sectors, particularly the miners because of people’s memories of the three-day week, strikes and power cuts. But the IMF’s intervention in 1976 was not forgotten either, and there was a widespread popular view that public spending was too high and had to be cut. Austerity under Thatcher WAS popular – just not among the people who were losing their jobs and the communities that were being destroyed, which is all you tend to hear about now. Nowadays when you read descriptions of life in Thatcher’s Britain you do tend to get the impression she was horribly unpopular. But she wasn’t. She was one of the most popular peacetime prime ministers and her policies had majority popular support. As Chris says, there was a silent majority in favour of what was done. The trouble is that silent majorities don’t get remembered, precisely because they are silent.

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