Six reasons why Cameron is wrong on the economy

It is increasingly clear that the PM is out of his depth and out of touch. This is "nothing for noth

In a speech on the economy yesterday that was 2,235 words long, an out-of-touch David Cameron only mentioned jobs and unemployment once each. He didn't mention the young at all in a week when youth unemployment hit the million mark. It is becoming increasingly apparent that Cameron is a) totally out of his depth when it comes to the economy; b) has no clue what to do to fix the problem; c) has little sympathy for those who are less fortunate than he is. He just doesn't care. Cameron has failed to recognise that his government's economic policies are in complete disarray, and all he can do is resort to spin and obfuscation. Austerity in the UK has failed.

The part of the speech that really struck me was this:

[T]here are some who seriously try to argue that additional spending and borrowing will actually lead to less debt in the end ... despite the fact that no evidence supports this assertion. These arguments are just a way of avoiding difficult decisions ... the kind of something for nothing economics that got us into this mess ... which is why no indebted European country is taking that path. Nor are there any major European opposition parties in high deficit countries arguing for additional borrowing -­ except here in Britain.

It is about time we put this joker straight.

1) Actually, additional spending would stimulate growth and that would increase tax revenues, as it did in the US under the Clinton boom. In case you haven't noticed, Dave, your pal Osborne slashed spending and raised taxes, which increased borrowing. That is why you are in such a mess. What if the government borrowed £100bn that was funded by the MPC through QE, and used the money to say, build ten nuclear power stations. That would lower the cost of fuel, employ people and help masses of small and large firms. It would raise productivity and in the long-run lower our debts, wouldn't it? If not, why not, Prime Minister?

2) There is an enormous amount of evidence to suggest that fiscal and monetary stimulus can increase growth. There is actually no evidence from anywhere in the world to support the ideology you have been following of an expansionary fiscal contraction, especially when it is not possible to lower interest rates. Such a view is "oxymoronic", as Larry Summers has said.

3) These arguments are not a way of avoiding making difficult decisions. They are what has to happen, because your government made the wrong decisions by imposing austerity before the recovery was fully established. You can't blame the eurozone, as it was clear when you formed your government that there were major downside risks to UK recovery from the European periphery and European banks. You just chose to look the other way and go forward with your mistaken policies, wilfully disregarding the potential dangers for the British people.

4) "Something for nothing economics" is a nice phrase but is totally meaningless. If I recall, Dave, you matched Labour's spending plans, supported deregulation and opposed rescuing the banks. It looked like you may have to do the latter if things continue the way they are. Lloyds and RBS are in trouble again. What you did was slash and burn hoping for growth, but you killed off the tender shoots of recovery. The policies you have undertaken without a growth plan is "nothing for nothing economics".

5) "No indebted European country is taking this path." Well, actually, most other European countries grew faster than the UK did over the last twelve months. GDP growth was as follows. Belgium 1.8 per cent; Germany 2.6 per cent; France 1.6 per cent; Netherlands 1.1 per cent; Austria 2.8 per cent; Finland 2.8 per cent; and the UK 0.5 per cent. The eurozone is headed into recession because they are stuck in monetary union. Portugal this week went to the IMF and asked for more stimulus as austerity has failed there too. Austerity doesn't work when banks aren't lending and your major export market is heading into depression. The German central bank, the Bundesbank, today cut its 2012 growth forecast to between 0.5 per cent and 1 per cent, from a June prediction of 1.8 percent. It said a "pronounced" period of economic weakness can't be ruled out if the crisis worsens.

6) "Nor are there any major European opposition parties in high deficit countries arguing for additional borrowing -­ except here in Britain". Denmark has lower bond yields than the UK and lower unemployment, and its new government is introducing more fiscal stimulus. These other countries would do this if they could, but they are stuck in a fiscal and monetary straightjacket. That is why there is talk of the eurozone breaking up.

Dave, you are in a big mess on the economy. What are you going to do if the crisis worsens, as it looks like it might? Panic, I guess.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

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Michael Dugher interview: "A remarkable achievement" for Jeremy Corbyn to be doing so badly

In his first interview since announcing his departure, the Labour MP and former shadow cabinet minister takes aim at the left - and his own side's failings.

On the morning of 18 April, as news broke that Theresa May would make a surprise announcement, Michael Dugher was on the phone to his old friend Tom Watson. By chance, Labour’s deputy leader was “the person who had said most consistently that there would be an early election,” Dugher recalled. “I thought it was likely but once they decided not to have it at the same time as the locals I thought that ship had sailed.”

Two days after May revealed that a snap election would be held, the 42-year-old Barnsley East MP and former shadow cabinet minister announced that he would stand down. Labour allies and lobby journalists mourned the loss of one of Westminster’s characters: a pugnacious northerner full of authentic loathing of the Tories and contempt for his party’s hard-left.

When I met Dugher in his parliamentary office four days later, he told me that he longed to see more of his family (he has three children aged 11, nine and four) but also that the last two years had been “thoroughly miserable”. The former Brown spin doctor lamented: “Opposition is always really, really hard. People who like opposition and skip into the chamber every day, I kind of wonder whether all the lights are on ...  The only point of being in opposition is to try and get into government.” He would trade his seven years in parliament, he told me, for seven days on the backbenches in government.

Born into a working class family in Erdlington, a Doncaster mining village, Dugher hails from Labour’s “old right” - a tradition antithetical to that of Jeremy Corbyn. Like other standard-bearers such as Tom Watson and John Spellar (all former trade union officials), Dugher is pro-Trident, pro-NATO and devoted to the politics of power, rather than protest.

Four months after he became shadow culture secretary under Corbyn (having served as shadow transport secretary under Ed Miliband), Dugher was sacked for “disloyalty”. Corbyn privately cited a New Statesman article in which Dugher argued against a “revenge reshuffle” targeting supporters of Syrian intervention.

Ever since, he has warned that Labour is drifting remorselessly away from power. Though he insisted that electoral defeat was not inevitable (“Politics is wild and unpredictable. Who knows what could happen?”), he added: “You’d have to have a screw loose not to think things are pretty tough. I noticed when Jeremy addressed the PLP [Parliamentary Labour Party] he didn’t announce the key seats we’d need to take off the Tories to form a Labour government. I thought that was ominous.”

He continued: “It is a remarkable achievement for the leadership to have taken a catastrophic situation in Scotland and made it quite a lot worse. We seem to be doing worse in Wales ... We’ve gone backwards amongst every demographic, every region of the country. Jeremy is behind Theresa May on managing the NHS! It’s quite a special achievement to put all of that together in a short period of time. Hats off to Jeremy and Seumas [Milne], Diane [Abbott] and John [McDonnell]. That’s pretty special.”

Some Corbyn allies privately suggest that the Labour leader could retain office even after a heavy defeat (as Neil Kinnock did in 1987 - though he gained 20 seats). "If Jeremy loses the general election he’s got to go," Dugher said. "The election’s started, I want Labour to do as well as possible but if Labour lost again, particularly if we did worse than last time, it would be ridiculous and an act of profound self-indulgence and vanity to consider staying on in those circumstances.

"I don’t know what his office are so defensive about. They think Jeremy’s going to win. Jeremy’s office should have a bit more faith in him to win the election and then the issue won’t arise."

He added: "The left have always been in the fortunate position of being able to blame the moderates, the centre for when we’ve lost. But whenever we’ve won, they’ve banked it, saying anyone would have won. 'Jeremy Corbyn could have in 1997' - not sure that’s the case, actually. For the first time, they are going to be put to an electoral test themselves: they’ve got the leadership, it’s Jeremy’s shadow cabinet, it will be his manifesto, the public are fairly clear about what Jeremy believes in and the direction of the party, so let’s see how it does electorally.”

Dugher ridiculed the suggestion that party disunity and a hostile media were to blame for Labour's woes. “I recognise that disunity does not help. But the reason why we are so far behind in the polls, it comes down to very simple things: it’s about leadership, leadership is the dominant issue at every general election.

“The idea that Labour might do badly because of Michael Dugher’s tweets, someone who nobody has bloody heard of, rather than Jeremy Corbyn, who is standing to be prime minister, is just for the birds, it’s the politics of excuses.”

Dugher added: “We’ve had a Tory press forever and a day ... They’re a lot less powerful than they were. The Sun will never be able to claim it won anything now, it isn’t like 1992. And yet they [Corbyn supporters] use it as an excuse, it’s just deranged.”

He derided the pro-Corbyn sites The Canary and SKWAWKBOX as "total bollocks" and recalled tweets claiming YouGov was biased towards the Tories. "It’s a member of the British Polling Council! Have these people been smoking something? They should just quit the excuses.

"When I saw a [Momentum] demonstration outside the New Statesman, and you had a beautiful look of bemusement on your face as much as anything, and I just thought 'the left are demonstrating against the New Statesman!' Is the New Statesman now part of the Tory press? What do they want, Pravda?"

But Dugher, who managed Andy Burnham’s 2015 leadership campaign, conceded that it was “no good moderates blaming Corbyn”. Labour members, he said, were “lured to Corbyn out of desperation. What we offered didn’t inspire, it wasn’t radical, it was more of the same. I am as guilty as everyone else.” He insisted that he was not pessimistic about Labour’s future, singling out Rachel Reeves (“the biggest brain in the House of Commons”), Chuka Umunna (“incredibly talented”) and Dan Jarvis (“I knew him when he was in the army and I was at the MoD, a great talent for the future”) for praise.

Dugher is not a man who will struggle to entertain himself outside of Westminster. He delights in sport, cooking (tweeting photos of his homemade curry), karaoke (unlike most, he really can sing) and sharing his Beatles obsession (his office includes an Abbey Road sign and a framed Yellow Submarine cover). “I know but I’m not going to tell you yet,” he said of his future plans.

As Dugher prepared to meet fellow MPs for leaving drinks in Strangers’ Bar, I asked whether he would ever stand again. “I’m a big believer in never say never,” he replied. “I’m very proud of the very small contribution I played in previous Labour governments.

“Unlike Jeremy and Seumas and others, who have no idea about government, who learned about socialism in expensive private schools, my politics was because of where I was from. I was born into the politics of Labour because I grew up in a pit village in the strike ... There was a lot of poverty when I was a child, I have very strong memories of that. That’s made me who I am and that’s why representing that working class constituency, ex-pit villages, I’m really proud of that.”

George Eaton is political editor of the New Statesman.

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