The revolt against Osborne grows

Lib Dem MPs join economists in calling for a change of course.

Our exclusive story on how once supportive economists have turned against George Osborne has made the front page of today's Guardian, with the rest of Fleet Street, including the Mail and the Telegraph, also following up the piece, which appears in full in this week's magazine.

The Guardian leads on this week's New Statesman cover story.

And there's more bad news for Osborne today. The FT's Kiran Stacey reports that Lib Dem MPs are also now urging Osborne to take advantage of the UK's record low borrowing rates and stimulate growth through higher capital spending. John Pugh, the co-author of the party's 2010 economic policy, tells the paper:

We need to look again very carefully at the implications of the sharp reduction we have seen in capital expenditure.

There are a fair number of people who think that if we returned to the plans as conceived by Vince Cable . . . we would be in a slightly healthier position than we are.

Pugh is right. Osborne's decision to reduce capital expenditure - the most valuable spending, according to the OBR - by 48% (£24.3bn) is one of the main reasons why the UK, with the exception of Italy, is the only G20 member in recession.

When it was pointed out to Pugh that it would be difficult for the Chancellor to perform such a U-turn, he rightly replied:

The situation is serious enough now for people not to be bothered about what you call the plan.

Two other MPs - Annette Brooke and John Leech - make similar calls, and a senior economic adviser to the party comments: "We may have to resort to emergency measures to stimulate demand. We have already let the timetable on eliminating the deficit slip: we may have to do that again."

Perhaps most significantly, Stacey reports that party president Tim Farron is being urged by the Lib Dem leadership to call for deficit-funded spending "in order to give Nick Clegg, the deputy prime minister, a mandate to argue for it at the top of government."

The Lib Dems' restlessnes is unsurprising. As even the IMF has stated, there is no evidence that a reduced pace of deficit reduction would trigger a rise in British bond yields. With investors increasingly reluctant to lend to eurozone countries, the UK is, as Osborne has observed, a "safe haven". Yet, for no other reason other than political pride, the Chancellor is unwilling to change direction. Borrowing for growth would be a tacit admission that his nemesis, Ed Balls, was right and he was wrong. But until Osborne is prepared to take this step, there is no prospect of recovery, for either the economy or his party.

George Osborne is under increasing pressure to stimulate growth through higher infrastructure spending. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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In your 30s? You missed out on £26,000 and you're not even protesting

The 1980s kids seem resigned to their fate - for now. 

Imagine you’re in your thirties, and you’re renting in a shared house, on roughly the same pay you earned five years ago. Now imagine you have a friend, also in their thirties. This friend owns their own home, gets pay rises every year and has a more generous pension to beat. In fact, they are twice as rich as you. 

When you try to talk about how worried you are about your financial situation, the friend shrugs and says: “I was in that situation too.”

Un-friend, right? But this is, in fact, reality. A study from the Institute for Fiscal Studies found that Brits in their early thirties have a median wealth of £27,000. But ten years ago, a thirty something had £53,000. In other words, that unbearable friend is just someone exactly the same as you, who is now in their forties. 

Not only do Brits born in the early 1980s have half the wealth they would have had if they were born in the 1970s, but they are the first generation to be in this position since World War II.  According to the IFS study, each cohort has got progressively richer. But then, just as the 1980s kids were reaching adulthood, a couple of things happened at once.

House prices raced ahead of wages. Employers made pensions less generous. And, at the crucial point that the 1980s kids were finding their feet in the jobs market, the recession struck. The 1980s kids didn’t manage to buy homes in time to take advantage of low mortgage rates. Instead, they are stuck paying increasing amounts of rent. 

If the wealth distribution between someone in their 30s and someone in their 40s is stark, this is only the starting point in intergenerational inequality. The IFS expects pensioners’ incomes to race ahead of workers in the coming decade. 

So why, given this unprecedented reversal in fortunes, are Brits in their early thirties not marching in the streets? Why are they not burning tyres outside the Treasury while shouting: “Give us out £26k back?” 

The obvious fact that no one is going to be protesting their granny’s good fortune aside, it seems one reason for the 1980s kids’ resignation is they are still in denial. One thirty something wrote to The Staggers that the idea of being able to buy a house had become too abstract to worry about. Instead:

“You just try and get through this month and then worry about next month, which is probably self-defeating, but I think it's quite tough to get in the mindset that you're going to put something by so maybe in 10 years you can buy a shoebox a two-hour train ride from where you actually want to be.”

Another reflected that “people keep saying ‘something will turn up’”.

The Staggers turned to our resident thirty something, Yo Zushi, for his thoughts. He agreed with the IFS analysis that the recession mattered:

"We were spoiled by an artificially inflated balloon of cheap credit and growing up was something you did… later. Then the crash came in 2007-2008, and it became something we couldn’t afford to do. 

I would have got round to becoming comfortably off, I tell myself, had I been given another ten years of amoral capitalist boom to do so. Many of those who were born in the early 1970s drifted along, took a nap and woke up in possession of a house, all mod cons and a decent-paying job. But we slightly younger Gen X-ers followed in their slipstream and somehow fell off the edge. Oh well. "

Will the inertia of the1980s kids last? Perhaps – but Zushi sees in the support for Jeremy Corbyn, a swell of feeling at last. “Our lack of access to the life we were promised in our teens has woken many of us up to why things suck. That’s a good thing. 

“And now we have Corbyn to help sort it all out. That’s not meant sarcastically – I really think he’ll do it.”