Dare I say a word in defence of Gideon George Osborne, the Bullingdon Club boy-turned-Chancellor of the Exchequer? I can’t help but feel sorry for him. The Chancellor has been having a hard time of late. Tory-supporting commentators are calling for his head; more Conservative Party members disapprove of his performance than approve of it; fewer than one in five members of the public say he should stay in his job, compared to almost 50 per cent who want him to be sacked. For the first time, he is trailing Labour’s Ed Balls on who would “make the most capable Chancellor” and rumours swirl around Westminster that he might even be replaced in the impending reshuffle – either by his former deputy Philip Hammond, the Defence Secretary, or in the form of a job swap with the Foreign Secretary, William Hague.
Now I’m not normally someone who springs to the defence of the Chancellor of the Exchequer but the scapegoating of Osborne is a bit bizarre. Don’t get me wrong: he has been a disastrous chancellor. On his watch, the economy has double-dipped back into recession, youth unemployment has crossed the one million mark and the UK’s much-vaunted triple-A credit rating – on which Osborne has staked his reputation – is on the verge of being downgraded.
Lording it over
His omnishambolic Budget in March was the result not just of bad economics but of bad politics, too – not to mention arrogance and overconfidence. Was Osborne burning the midnight oil in the run-up to the Budget, making sure he wouldn’t have to backtrack on pasty taxes or fuel duties? Nope. He’d gone off to the United States with the Prime Minister. Appearing on PBS’s Charlie Rose show was apparently much more important to the Chancellor than getting the numbers right.
But trying to pin all the blame on Osborne alone is as absurd as it is lazy. What about the role of the Prime Minister? David Cameron could have vetoed the cut in the 50p top rate of tax; he didn’t. He could have demanded a plan B from his Downing Street neighbour, once growth had ground to a halt; he didn’t. The PM, lest we forget, is the First Lord of the Treasury. Before replacing Osborne, he should reread his Harry Truman: the fiscal buck stops with him. Then there is collective responsibility. Not a single member of the coalition cabinet has resigned over the decision to choke off demand; few ministers dare to criticise or distance themselves from the oxymoronic idea of “expansionary fiscal contraction”.
I have lost track of the number of television and radio debates I’ve participated in with One Nation Tories, such as the Justice Secretary, Kenneth Clarke, and with centre-left Liberal Democrats, such as the Business Secretary, Vince Cable, only to discover that they are diehard defenders of the Treasury’s austerity mania – even in the off-the-record confines of the green room. “Deficit reduction,” as the Deputy Prime Minister, Nick Clegg, once fatefully remarked, “is the glue that binds the coalition together.”
Indeed, it is the glue that has bound together all those whom the economist Paul Krugman mocks as the “Very Serious People” (VSP). As Osborne reminded us in a triumphalist speech at the Conservative party conference in October 2010, his plan A for Austerity had the support of, among others, “the IMF, the OECD, the credit rating agencies, the bond markets, the European Commission, the Confederation of British Industry, the Institute of Directors, the British Chambers of Commerce [and] the governor of the Bank of England”.
The last name in particular stands out. Mervyn King’s tenure on Threadneedle Street has been marked by one misjudgement after another. In recent days, he has been criticised for blissfully ignoring warnings from across the Atlantic about the manipulation of the LIBOR rate.
As long ago as June 2008, King received an email from the New York Federal Reserve entitled “Recommendations for Enhancing the Credibility of LIBOR”. He did nothing. But the governor is guilty of a much bigger political and economic sin. Having, in the words of a former member of the Bank of England’s Monetary Policy Committee (MPC) who now works in the private sector, “resisted more imaginative stimulative measures” – which led to the financial crisis “being much worse than it might have been” – he then offered his enthusiastic endorsement of the coalition’s cuts, made spurious comparisons between the UK and Greece and refused to countenance a slowdown in the pace of fiscal consolidation.
Plan B from outer space
Yet there is another way. Several, in fact. Less than a year ago, in October 2011, the New Statesman published its “Plan B” special issue, in which some of the world’s top economists – including a Nobel economics laureate and three former members of the MPC – suggested a range of measures to stimulate growth and create jobs, including cutting VAT back to 17.5 per cent, reducing National Insurance contributions for anyone under the age of 25, printing money for the public to spend on goods and services and setting up a national investment bank.
Neither the coalition government nor the Bank has done any of this. On 16 July, the IMF announced that it is now forecasting growth of just 0.2 per cent in the UK in 2012 – down from its 2011 forecast of 1.6 per cent and the biggest downgrade of any G8 country.
If Osborne loses his job, so, too, should Governor King. But he won’t. Then again, swapping Osborne for Hague, or King for A N Other official from the Bank, will solve nothing.
This isn’t about individuals; it’s about a discredited world-view – in which austerity trumps stimulus, cuts spur growth and borrowing is bad – that was embraced by a wide range of public figures, from senior politicians to newspaper columnists, from central bankers to credit rating analysts. It’s time to hold the austerians to account. All of them – not just the hapless Chancellor.
Mehdi Hasan is the political director of the Huffington Post and a contributing writer to the New Statesman. This article can also be read at the Huffington Post here.