The man’s not for turning

Osborne’s lack of a plan B could prove his undoing. But it is the British people who will pay the pr

George Osborne grandly set out his economic vision in his Mais Lecture to City luminaries earlier this year. A smaller state coupled with higher exports and increased investment were his stated objectives. As Chancellor, he is now pursing these goals and keeping his fingers crossed that after he has hacked off chunks of the public sector, the private sector will step in to fill the gap.

If the unprecedented boom in exports and business investment needed to realise Osborne's plan doesn't show up, his approach, to borrow a phrase from Lady Thatcher, can be described thus: "You turn if you want to; the man's not for turning." Urged on by Tory backbenchers, the Chancellor refuses to countenance a plan B, while his Liberal Democrat coalition partners wonder what brake, if any, the Chief Secretary to the Treasury, Danny Alexander, is applying to this ideological adventure.

Alistair Darling, Osborne's predecessor, set out a plan to halve the deficit in four years starting in March 2011. This was controversial with many within Labour: the balance of tax rises to spending cuts was questioned, as was the need for such rapid fiscal consolidation. Despite this, the judgement of the new Office for Budget Responsibility was clear: the deficit would have been reduced from over 10 per cent of GDP in 2010/11 to 3.9 per cent by 2014/15 under Labour's plans.

Crucially Darling had a plan B. If the economy got worse and the prospects of high unemployment or a double-dip recession increased, the tempo of deficit reduction could be changed accordingly – the pace of fiscal tightening would be set by the pace of economic recovery (Vince Cable, too, argued for this during the election campaign).

Conversely, Osborne has decided to go further and faster. He is planning on tightening by an additional £40bn over Darling's plans by 2014/15, as set out in his June Budget and this month's Spending Review. He has rhetorically lashed himself to the mast of eliminating the structural deficit in one parliament, allowing very little flexibility if the outlook changes. He is also relying more on spending cuts, and less on tax rises, putting him at odds not only with Labour, but also with Ken Clarke.

The Justice Secretary, while chancellor under John Major in the 1990s, achieved a similar rebalancing of the economy and relied much more on tax rises and less on spending cuts to repair the public finances, in the wake of the last recession, than Osborne proposes now. Then exports and business investment grew strongly, although not as strongly as Osborne needs them to at present. And conditions then were very different from those in 2010: exports were helped by a booming world economy and investment increased by the need for business to respond to the revolution in information technology and communications. Neither seems likely over the next few years.

We should also remember the 1930s and the 1980s. In both cases, state spending was cut back as Tory governments, clinging to approaches variously referred to as "the Treasury view", "sound money" and "monetarism", waited for a private-sector recovery to take hold. Yet, when the problem is too little demand, who seriously advocates cutting back demand further? This is economics driven by ideology and lacking in common sense.

Today the Chancellor's rhetoric has made dealing with the deficit the sole aim of macroeconomic policy but, as the axe falls and jobs are lost from the public sector, there is a great danger that the private sector is not strong enough to absorb the newly unemployed workers. If this proves to be the case, unemployment will rise and, with it, the welfare bill as tax income falls. The deficit will worsen, forcing Osborne, who has left himself with no option, to cut spending further. It is self-defeating austerity that could well create an economic death spiral.

Moreover, in the 1930s and the 1980s the recovery did eventually come, but years later than it had to, and with a high social cost in unemployment, poverty and crime. In both cases the lack of an active regional policy, as now, left pockets of higher deprivation blighted by structural joblessness. And in both cases there was an alternative that could have been taken if the government had not been so blinkered.

One hopes that the private sector will be strong enough to counteract the effects of Osborne's measures, and that Britain will enjoy an exporting and investment renaissance and workers move near-seamlessly from the public payroll to newly created jobs in industry. However, history suggests that the odds of this occurring, especially at a time of continued global economic turmoil, are not high.

Osborne's lack of a plan B could prove his undoing. Unfortunately it is the British people, and not the likes of Osborne, who ultimately will pay the price.

Chuka Umunna is the Labour MP for Streatham and a member of the House of Commons Treasury select committee. Duncan Weldon is an economist and former adviser to the opposition Treasury team.

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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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