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.
– 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