Nobody ever came clean with the public how bad the economy was before the last General Election, and this legacy continues to haunt Labour as it was the incumbent Government for the last decade at least. Labour may wish to argue that the VAT rise has throttled consumer spending, but Labour it seems wished to implement a VAT hike itself, and the VAT rate is indeed now comparable to the rest of Europe.
As George Osborne waits to deliver his Autumn statement on Tuesday, it is clear that the public are not satisfied with the running of the economy. And why should they? GDP is currently growing at +0.2%, but unemployment is rising, and inflation until recently had been rising. Public borrowing fell to £6.5billion in October, according to the Office of National Statistics – down from £7.7billion the year before, but below the City’s forecast of £6.8billion. However, there are increasing fears that the worsening state of the economy will scupper the deficit reduction plans by increasing the Government’s benefits bill and lowering its tax income. The Independent Office of Budget Responsibility will downgrade its forecasts for the economy next week, raising questions over whether the coalition can meet its pledge to eliminate the structural deficit by 2015. Interestingly, voters do not appear to be that moved by the objective financial growth data. We are spending more than ever before, £613 bn, so there’s a limit to the argument ‘we’re cutting too fast, too deep’. Labour’s strategy for growth, like various relaunches of the Big Society, has failed to gain any traction with the public; many voters are simply uncertain what that strategy is.
Whilst some pretty awful decisions were made regarding the construction industry last year, deteriorating growth, there is an Eurozone crisis which simply can’t be ignored. Destruction of the Euro might yet resurrect Tory and Liberal Democrat fortunes in 2015. The deficit is undeniably a huge issue for the UK as a whole, and if this deficit were not tackled the cost of borrowing would explode; however it is a lie to imply that we are Greece, and the scare stories by George Osborne were unrealistic and excessive.
The Government will underwrite loans to small businesses on Tuesday, and indeed Labour cannot oppose it as it is part of their own ‘growth package’, and indeed its attempts to get pension funds to invest in infrastructure projects is a meritorious one. It’s apparent that not everyone is on the Coalition’s side. Whenever the ‘It’s Labour’s fault’ rant gets delivered at Any Questions or Question Time, the audible groans became unbearable, but likewise the ‘the Tory-led government is cutting too fast too deep’ is wearing a bit thin with lack of specifics about what the Tory-lite economic policy actually provides.
We’ll see queues at Heathrow on Wednesday, and it’s going to be hard to say how the public will react to seeing Britain ‘shut for business’. Whilst people are blaming the Government for the cuts, many feel that the cuts are necessary, reject the Keynesian view of the need for further borrowing, but likewise may not jump at blaming Unions for a feeling of discontent in the country. Some of the unions threatening strikes have not been on strike for years (in some case decades). However, Labour in my view have failed to explain what the purpose of the unions is in protecting stakeholder rights, as opposed too the maximisation of shareholder dividend, and yet the Unions do not appear to be considered as toxic in the 1980s. Labour has failed to explain why maximisation of shareholder dividend, for example in the context of Southern Cross or News International Inc., may not have been necessarily for the benefit of wider society.
Anthony Wells is the Associate Director of YouGov was on BBC’s Westminster Hour last night (link here), and explained last night that by a margin of 2:1 the public feels that the Government is handling the economy badly. Whilst people appear to be unhappy with the Government, the public still seem to prefer Osborne and Cameron to Balls and Miliband, giving the impression that they prefer the Tory-led government to Labour. Labour are still blamed for the state of the economy; and price inflation seems to be a concern of most voters. In terms of political charisma, Ed Balls and Ed Miliband are yet to command confidence, trust and respect for the potential stewardship of the economy under Labour, and it is hard to see how this will be remedied fast by 2015. Nobody is particularly clear what the Liberal Democrats wish to do, apart from the massively important task of supporting the Coalition’s economic policy, but it is impossible to say that this will cause a resurrection in their fortunes in time for 2015 in much the same way that a rebranding in the genre of Oxfam would.
