A different take on cuts

In: Uncategorized

18 Jun 2009

Many commentators have made the correct point that the next British government, whichever political stripe, will have to make public spending cuts. Forecasts of economic growth, tax revenue and debt repayments suggest cuts will be substantial. What the pundits have missed is that the reluctance of political parties to be open about austerity is consistent with their more general growth sceptic outlook.

New Labour is the clearest example. Gordon Brown’s linguistic convulsions to avoid admitting his party was planning cuts was like watching a worm wriggle at the end of a hook. Brown implied cuts were necessary but was determined not to use the word in relation to his own plans. This is entirely in line with the growth sceptic approach of suggesting austerity is necessary without advocating it openly. He clearly wants to “nudge” people into being more “prudent” but does not want to lose their electoral support.

The Conservatives and Liberal Democrats are little better. Both parties have started to talk openly about austerity and the need for cuts. But only after it became obvious to virtually everyone that the current path of Britain’s finances is unsustainable.

Paradoxically there is probably a roughly inverse relationship between those who believe in economic growth and those willing to talk openly about cuts. The Tory government of the 1980s had many faults but it was explicit about cuts as it believed economic restructuring meant Britain could resume reasonable growth. New Labour, in contrast, is fearful of restructuring and has little confidence in growth.

Of course the ideal solution would be to make the world economy resume a strong growth path as quick as possible. The larger the economy the more scope there is for public spending where necessary. Unfortunately this is a discussion that few commentators seem to want to have.

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