The ConDem government’s plan to, in effect, engineer a state-financed, speculative housing boom in a bid to stimulate expansion, sums up the increasingly desperate state of both the economy and the political classes.
So much so that a leading Tory commentator suggests that yesterday’s Budget signals the absolute inability of representative democracy to tackle the crisis. A Coalition brought together to tackle the budget deficit and restore some balance to the economy, has patently failed to do either. Moreover, there are indications that the ConDems don’t really have a clue what to do next.
Chancellor George Osborne’s package of tax cuts for big business and state funding to underwrite house buying, combined with cheaper beer and a continuing pay freeze for public sector workers, was announced against a background of a worsening economy.
The Office for Budget Responsibility has revised its forecasts for growth down (yet again) and its projections for government debt up (yet again). Despite the savagery of Osborne’s austerity policies, the total of state debt is actually rising.
According to yesterday’s figures, it is scheduled to stand at approximately £1,400 billion in 2015, up from the £800 billion inherited from Labour in 2010 – a rise of £600 billion in just five years. Net debt is forecast to peak at 85.6% per cent of GDP in 2016-17. Back in June 2010, it was forecast to peak at 70.3% of GDP this year.
The expansion of the economy that would bring the levels down through greater tax receipts exists only in the imagination. As the Financial Times gloomily commented: “Growth is, once again, jam tomorrow but never jam today.”
As to underwriting house buying through mortgage guarantees, the verdict is pretty unanimous. Builders and estate agents will get rich quickly, while house prices will soar and create another asset bubble ready to go pop when someone misses a payment.
Ian Williams, analyst at Peel Hunt, said: “As a policy for driving economic growth – limited. For solving the national shortage of housing – no impact. For wrecking long-term affordability of housing – tremendous.”
With incentives to extract shale gas and various other concessions, the chancellor budget’s will accelerate climate change in pursuit of growth that simply won’t happen, in
or anywhere else. Today’s news about deepening
downturn in leading eurozone economies confirms that.
With the Financial Times, describing the Budget as a “failure” which won’t make a difference, what will? The paper that speaks for significant sections of capitalism demands “greater radicalism”, without further elaboration.
As resistance to austerity grows across in
and the rest of Europe, the ruling classes are
faced with a serious problem. There are no rabbit-in-the-hat solutions, as the
Budget shows. Political elites are struggling to cope, which brings us back to Peter
Oborne of the Daily Telegraph.
An astute commentator, whose Triumph of the political class is worth reading, he now concludes that the political system is incapable of doing what’s necessary. He derides not only the chancellor but Labour for not having “the faintest idea how to confront the economic crisis” or appreciates of “the scale, let alone the nature, of the disaster we are now facing”. In other words, the political will to take the axe to public spending is not there (not that would actually do the trick, anyway). Oborne adds:
“So we should all ponder whether there is an ugly truth lurking out there: is the British electoral system simply incapable of coping any more with serious economic crises? Alexis de Tocqueville remarked that: 'The
until the day Congress discovers it can bribe the public with the public’s
money.' This observation is just as true of British representative democracy. American
“The Coalition, brought together to confront the national economic emergency, has failed in its mission. So we are entering a momentous period in our national life: if the politicians cannot address the problem – and they can’t – who will?”
So we have a combined crisis of the economy, politics and ecology which parliament cannot address. The implication of Oborne’s article is that some form of dictatorship may be the outcome. With the Bank of England getting new powers and the Privy Council dusted down for action, you can’t say we haven’t been warned.