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The budget—so it’s all our fault then?

The budget—so it's all our fault then?

The chancellor’s concerned about lack of growth, which he attributes to poor productivity (we need to work harder) and fears about brexit (we need to stop worrying). So it’s all our fault then, that GDP is less now than it was ten years ago. Nothing to do with austerity?

Yeah, right!

Apparently the concern about productivity comes about because the OBR has noticed that the 2% per annum growth that they’ve been assuming for the last few years hasn’t actually been happening. So they’ve stopped assuming it. Well, that’s sensible at least, though one wonders why they assumed it in the first place given that the government was doing its level best to prevent the economy from growing by persisting with austerity.

Still, we are where we are. But rather than come right out and admit that austerity is the cause of the problem, Mr H. blames ‘poor productivity’ resulting from ‘lack of investment in technology’. Well, he’s probably right about that, but it’s hardly a surprise; austerity depresses everything, including investment in technology. But to give credit where it’s due, ‘seeding the British Business Bank with £2.5bn’ is probably a good idea, as are his projected new investments in technologies such as artificial intelligence, improving broadband, and 5G.

But as usual it misses the important point, which is that we have a seriously depressed economy with a lot of poverty and homelessness, and public services that are seriously underfunded—inequality, in other words. The rich get richer while the poor get poorer, and the poor get the blame for not being sufficiently productive.

Growth, if that’s what we want (and it probably is), can be generated by two things: tax cuts and increased government spending.

Suppose that instead of (or as well as, if you prefer) putting money into tech industries, where it will mostly end up in the hands of the already pretty comfortably off, the chancellor put it into (a) funding the NHS properly, (b) a major investment in affordable housing, and (c) fixing all the properties that are at risk of catastrophic fires like Grenfell Tower. That investment would end up predominantly in the hands of the poor, who would spend it back into the economy, creating growth and prosperity, and reducing poverty and inequality.

Of course, he won’t do that, because increased spending would, he thinks, increase the deficit. In fact it wouldn’t, in the long run, because tax receipts would go up by a similar amount. This is one of the nice things about investing in the bottom end of an economy—because the recipients are poor they will spend any income increase back into the economy, promoting growth, while the rich would have saved a chunk of it. But even if it did increase the deficit, that wouldn’t matter in the slightest. The government is not a household and the deficit is not a debt, just an accounting number.

And to add insult to injury he won’t allow local authorities to borrow to invest in new housing ‘because,’ according to Kamal Ahmed on Radio 4, ‘of his concerns about the deficit’. What? Local authority borrowing doesn’t affect the deficit—the deficit is about government spending, not local authority spending. One despairs!

As for the ‘U-turn’ on ‘universal credit’ payments—it’s barely a swerve. Mean-spirited and miserly, in my opinion.
 

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