George Osborne carries the Budget box, March 2012. Photograph: Getty Images
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Mehdi Hasan on why Austerity isn't working -- but no-one in the government is listening

There's nothing wrong with saying "I told you so".

Yesterday I returned to London from a family holiday in the United States - where a small stimulus has led to a growing economy and 25 consecutive months of job growth - to discover that the British economy has now re-entered recession, after shrinking a further 0.2 per cent in the first quarter of 2012. Or, as the Tory-supporting Sun put it on its front page today:

Official: Dip's a double

Don't say we didn't warn you. In fact, don't say I didn't warn you.

If any further evidence was needed that austerity isn't working, that cuts don't work, that George Osborne is a "kamikaze chancellor", this is it. Critics of the New Statesman's economics editor, David Blanchflower, must feel rather foolish right now. Once again, Blanchflower and the Keynesians are vindicated while Osborne and the Austerians are humiliated.

Surveying the empirical evidence from across the continent, Yahoo finance blogger Henry Blodget put it best:

IT'S OFFICIAL: Keynes Was Right

Blodget explained:

Now, this is not to say that the global debt-and-deficit situation is not a huge problem. It is. It is merely to say that, of the two painful ways to work our way out of the problem – "austerity now" or "stimulus now and cuts later" – the second one seems more effective.

In other words, based on the experience of the last five years, it seems that Keynes was right and the Austerians are wrong.

As I said, none of this should really come as a surprise to anyone as all of this was predictable - and predicted. As Paul Krugman has noted:

It’s important to understand that what we’re seeing isn’t a failure of orthodox economics. Standard economics in this case – that is, economics based on what the profession has learned these past three generations, and for that matter on most textbooks – was the Keynesian position. The austerity thing was just invented out of thin air and a few dubious historical examples to serve the prejudices of the elite.

And now the results are in: Keynesians have been completely right, Austerians utterly wrong – at vast human cost.

But the Austerians won't give up without a fight. They seem to have two tactics. The first is to blame the lack of growth on anything other than the cuts - be it the euro crisis, the weather, health-and-safety regulations, the family dog, etc, etc. Yesterday I tweeted this quote from City AM editor Allister Heath, from June 2010:

The years ahead will be very tough - but there will be no double-dip recession made in Downing Street.

Heath responded with this tweet:

Unfortunately, I underestimated this government's competence and commitment to supply-side reforms. They haven't delivered.

Good of him to say so. But "supply-side reforms"? Er, the UK economy, like the global economy, is suffering from an epic lack of demand. Households aren't spending, banks aren't lending, companies aren't investing. "Red tape" isn't what's behind the record rate of unemployment or the absence of growth and confidence. The main reason why the UK economy contracted in the first quarter of this year is because there was a 3 per cent decline in the construction sector - driven, of course, by the Chancellor's crazy decision to slash capital spending.  

Even Heath's fellow Austerian, the Telegraph's Jeremy Warner, grudgingly acknowledges this point today at the end of a desperate if heavily caveated defence of Osbornomics and "consolidation":

When companies won’t borrow to invest, there’s a strong case for governments to do so in their place. And yet when you look at where the axe is falling hardest, it is on government investment – spending on schools, hospitals, roads, bridges, affordable housing, and so on. This is the easiest thing to chop, so that’s where the coalition has acted first.

In fact, this form of state spending should be doubled, tripled or even quadrupled. . .

Hear, hear!

The second tactic is to pretend that those of us who draw attention to the political and economic significance of this double-dip recession are somehow "enjoying" or taking "pleasure" from the catastrophic (lack of) growth figures. I've had lots of tweets from Tory trolls using this line of attack. This isn't just nonsensical and offensive but a brazen and desperate attempt to try and divert attention away from those damning figures, which deserve highlighting, and away from the Austerians in Westminster and Fleet Street, who deserve criticising.

We're also told by the cuts-defending Austerians that it is "irresponsible" to talk down the UK economy. But I, for one, won't take lessons in "responsibility" from those who happily, shamelessly and opportunistically talked down the economy when they were in opposition, going so far as to claim that the UK was on the verge of defaulting on its debts and making ludicrous comparisons between the British and Greek economies.

One of the presenters on ITV1's Daybreak programme tried this "You're far too pleased about the recession" tactic this morning, in an interview with Ed Balls. The shadow chancellor's response, however, was spot on:
 

Interviewer:  Well let’s talk about that then, talk about the recession, we are in a double dip recession, I guess you’re sitting there saying: ‘I told you so’?

Balls: Well I sat here on this sofa, one and two years ago and said if the government tries to cut spending and raise taxes too quickly, faster then other countries it will backfire. And the thing which makes me angry is that George Osborne and David Cameron were so personally just dismissive, they just said it was rubbish and now we are back in recession. Their plan has categorically failed, families and businesses are now really paying the price. That self-defeating austerity has put us through such pain and we need an alternative plan. We’ve got to get jobs and growth moving, they should’ve done this much earlier.


Showing anger at the coalition's arrogance, incompetence and failure to listen or respond is the right response to such questions. Now is the time for the Labour leadership to sit on the fence or split the difference or triangulate; now is the moment to channel the public's anger and discontent. It seems to be working for President Obama.

Remember: we are not all in this together. And the argument over the cuts isn't just about politics or economics; it's about real people's lives and livelihoods. Britons are suffering. According to new figures from the Trussell Trust charity, for example, the number of people visiting foodbanks for emergency food in the UK has doubled in the last year, to over 128,000 people.

So let's be clear: Ed Miliband is doing a fine job on phone-hacking, the Murdochs and Huntgate but these aren't the issues that will win him the next general election. The economy was, is and will continue to be the defining issue of this parliament - and, as yesterday's GDP figures conclusively demonstrate, the coalition government has made a mess of it. If the Labour leader is able to stand before voters in May 2015 and pull a Reagan, Cameron and Clegg will be in big trouble. And Osborne's much-hyped reputation as a master strategist will be buried for good.


 

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

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Is defeat in Stoke the beginning of the end for Paul Nuttall?

The Ukip leader was his party's unity candidate. But after his defeat in Stoke, the old divisions are beginning to show again

In a speech to Ukip’s spring conference in Bolton on February 17, the party’s once and probably future leader Nigel Farage laid down the gauntlet for his successor, Paul Nuttall. Stoke’s by-election was “fundamental” to the future of the party – and Nuttall had to win.
 
One week on, Nuttall has failed that test miserably and thrown the fundamental questions hanging over Ukip’s future into harsh relief. 

For all his bullish talk of supplanting Labour in its industrial heartlands, the Ukip leader only managed to increase the party’s vote share by 2.2 percentage points on 2015. This paltry increase came despite Stoke’s 70 per cent Brexit majority, and a media narrative that was, until the revelations around Nuttall and Hillsborough, talking the party’s chances up.
 
So what now for Nuttall? There is, for the time being, little chance of him resigning – and, in truth, few inside Ukip expected him to win. Nuttall was relying on two well-rehearsed lines as get-out-of-jail free cards very early on in the campaign. 

The first was that the seat was a lowly 72 on Ukip’s target list. The second was that he had been leader of party whose image had been tarnished by infighting both figurative and literal for all of 12 weeks – the real work of his project had yet to begin. 

The chances of that project ever succeeding were modest at the very best. After yesterday’s defeat, it looks even more unlikely. Nuttall had originally stated his intention to run in the likely by-election in Leigh, Greater Manchester, when Andy Burnham wins the Greater Manchester metro mayoralty as is expected in May (Wigan, the borough of which Leigh is part, voted 64 per cent for Brexit).

If he goes ahead and stands – which he may well do – he will have to overturn a Labour majority of over 14,000. That, even before the unedifying row over the veracity of his Hillsborough recollections, was always going to be a big challenge. If he goes for it and loses, his leadership – predicated as it is on his supposed ability to win votes in the north - will be dead in the water. 

Nuttall is not entirely to blame, but he is a big part of Ukip’s problem. I visited Stoke the day before The Guardian published its initial report on Nuttall’s Hillsborough claims, and even then Nuttall’s campaign manager admitted that he was unlikely to convince the “hard core” of Conservative voters to back him. 

There are manifold reasons for this, but chief among them is that Nuttall, despite his newfound love of tweed, is no Nigel Farage. Not only does he lack his name recognition and box office appeal, but the sad truth is that the Tory voters Ukip need to attract are much less likely to vote for a party led by a Scouser whose platform consists of reassuring working-class voters their NHS and benefits are safe.
 
It is Farage and his allies – most notably the party’s main donor Arron Banks – who hold the most power over Nuttall’s future. Banks, who Nuttall publicly disowned as a non-member after he said he was “sick to death” of people “milking” the Hillsborough disaster, said on the eve of the Stoke poll that Ukip had to “remain radical” if it wanted to keep receiving his money. Farage himself has said the party’s campaign ought to have been “clearer” on immigration. 

Senior party figures are already briefing against Nuttall and his team in the Telegraph, whose proprietors are chummy with the beer-swilling Farage-Banks axis. They deride him for his efforts to turn Ukip into “NiceKip” or “Nukip” in order to appeal to more women voters, and for the heavy-handedness of his pitch to Labour voters (“There were times when I wondered whether I’ve got a purple rosette or a red one on”, one told the paper). 

It is Nuttall’s policy advisers - the anti-Farage awkward squad of Suzanne Evans, MEP Patrick O’Flynn (who famously branded Farage "snarling, thin-skinned and aggressive") and former leadership candidate Lisa Duffy – come in for the harshest criticism. Herein lies the leader's almost impossible task. Despite having pitched to members as a unity candidate, the two sides’ visions for Ukip are irreconcilable – one urges him to emulate Trump (who Nuttall says he would not have voted for), and the other urges a more moderate tack. 

Endorsing his leader on Question Time last night, Ukip’s sole MP Douglas Carswell blamed the legacy of the party’s Tea Party-inspired 2015 general election campaign, which saw Farage complain about foreigners with HIV using the NHS in ITV’s leaders debate, for the party’s poor performance in Stoke. Others, such as MEP Bill Etheridge, say precisely the opposite – that Nuttall must be more like Farage. 

Neither side has yet called for Nuttall’s head. He insists he is “not going anywhere”. With his febrile party no stranger to abortive coup and counter-coup, he is unlikely to be the one who has the final say.