Saturday, 13 June 2015

Osborne moves from gormless to criminally irresponsible

The chutzpah of George Osborne knows no bounds.  There is no room for anyone else to hold a high opinion of him, as his ego and arrogance fill every available space.  From the smug gurning that accompanies every economically-illiterate and politically-charged pronouncement on the legacy of neo-liberalism, buried in anti-Labour platitudes, to the announcement of policy that would have been viewed as demented a century ago, he may be the most inadequate Chancellor of the Exchequer yet recorded.

This week's twin pronouncements of idiocy merit some considerable dissection.  Starting with the decision to sell off the residual stake in Royal Mail and the acceleration, at a loss, of disposal of government involvement at RBS, this is the mark of a man with his eyes on the party leadership and the gratitude of the financial services sector.  About the only charge that sticks for Brown and Darling is that their removal of individual moral hazard from bankers preserved an illusion of special pleading.  This is another robbery of the taxpayer and the citizen, and a further transfer of wealth to a self-styled enterprise class who make their profits through stealing and mishandling other people's assets.

Predictably, the RBS management welcomed the disposal, on the basis that it will enable them to increase their bonus payments.  This was picked up upon by the sceptical media, most notably the Financial Times, as an example of why these special interest groups should not continue close proximity to the Chancellor's various orifices.  The fact that the sale will be at below the price paid to bail out the failed bank seven years ago did not attract as much outrage as it should have done - the wider economy has bailed out a loss-making institution and the least we should have expected is restitution not just for the purchase price but by the opportunity costs of maintaining a loss-making business.

Osborne, blithe cretin that he is, glosses over this as vital for the economy.  Apparently bankers and their apparatchiks are of greater value to society than the rest of us, even to the extent of maintaining corporate welfare at levels that the sanctioned benefit claimant could not consider.  The numbers are so huge, and so incomprehensible, that the Tories think that they can get away with the illusion of restitution from the sale price rather than retrieving the direct and indirect costs to the rest of the country from the generosity to a bleating interest group of corporate state welfare junkies.

At the same time, Osborne is mapping out his approach to running the economy as a whole.  It would be risible and insulting to any child to suggest that his level of competency would aspire to a shrieking toddler's, as he is jettisoning common sense, historical awareness and the credibility of his motley crew of Tory cronies going forward.

The first cretinism was the competitive pledge not to increase VAT, income tax and National Insurance for the duration of the current Parliament.  Not through an undertaking, but through legislation.  Gesture politics, designed to discomfit Labour, not to run a major economy.  Whatever the good intentions, this assumes that there is perfect foresight, and that should there be any requirement for further government revenue, it will have to come from other areas uncovered.  Stamp duty, corporation tax, pensions are all in the firing line - and without the opportunity to develop a strategy that is both fair and that delivers the best overall economic outcome.

Then you add the attempt to play politics through legislation to running a budget surplus ad infinitum.  Gordon Brown tried this, with a much more sensible initial approach - based around the economic cycle.  Having studied the impact of the depressions of the 1880s, 1930s and 1980s, any rational historian and economist would consider that such an approach would castrate a government should it wish to perform its correct duty to citizens and promote economic growth and stability.  Osborne clearly considers that this is old hat, dull, and unlikely to divert profits to private sector cronies.

Osborne's spinners portrayed this as returning to the Micawber dictum of balancing the household budget.  Osborne, unlike some of his predecessors, does not look Dickensian - but his real hero is Gradgrind from Hard Times without the softer side.  Economics is an art which requires the use of reasoning rather than formulae - and the responsibility of running a major economy is to ensure that the impact of government is benign.  There is nothing wrong with running a surplus on current account in times of strong growth - it reduces the stock of national debt and the need for borrowing.  There is equally nothing wrong with investing through the issue of bonds and other instruments, either to stimulate growth in a downturn or to protect the future economy.  There is a need for sustainability, which is a judgement call not a golden rule.

The Tories are not just disingenuous but liars when they compare running the national economy to that of household financial management - especially since they consider the in-year balancing to be the sole arbiter of prudence.  Households borrow all the time - indeed part of the Tory snake-oil is to encourage the continued inflation of property prices - and the impact of reduction of household borrowing is always cited as an example why uncontrolled access to credit is an essential component of Osborne's strategy.  Credit cards and mortgages are all aids to sound management - both for the individual and for the economy - with the salient feature that future income must be sufficient to finance both repayment of the capital and interest.

Investing in infrastructure, education and social capital does not have a clear in-year payback, bur depleting the stock of national wealth over time reduces future potential.  Osborne is right that current expenditure and debt repayment should be central to government policy - but when he has tied himself up in foolish commitments around tax and spend, he has in effect resigned from any responsibility for the consequences beyond his little, insulated, plutocratic world.  This is getting close to the economic equivalent of carpet bombing, and only a Chancellor without morals would have been prepared to sacrifice vestigial credibility for political advantage.  Not a surprise that it's this one who has overstepped the mark.

No comments:

Post a Comment

Note: only a member of this blog may post a comment.