Boris undermines Osborne's austerity argument

Mayor of London points out that "Greek austerity measures are making the economy worse".

Even by his own high standards, Boris Johnson is on combative form this morning. The Mayor of London uses his regular Telegraph column to urge EU leaders to let Greece default on its debts and force it to leave the euro, while in a piece for the Sun, he launches an assault on Ken Clarke's sentencing plans. "Soft is the perfect way to enjoy French cheese, but not how we should approach punishing criminals," he writes.

But it's a line in his Telegraph column that really stands out: "The trouble is that the Greek austerity measures are making the economy worse." It's a point that Ed Balls and others have made frequently in recent months but it's not one that you'll hear from George Osborne, for the simple reason that it contradicts his claim that spending cuts are a precondition for growth.

The austerity measures adopted by Ireland, Portugal (which went one better than Osborne and raised VAT twice) and Greece have exacerbated, rather than diminished, their economic problems. As Balls argued in his LSE lecture last week: "[W]hat they [Portugal], Ireland and Greece have all discovered - just like Argentina, Brazil and Turkey before them - is that it doesn't matter how much they cut spending or how much they raise taxes; if they can't create jobs and growth, their debt and deficit problems get even worse and market confidence falls further still."

Similarly, in Britain, rather than increasing growth, Osborne's austerity agenda has destroyed it. The economy, which grew by 1.8 per cent over Q2 and Q3 2010, has not grown for the last six months. Britain, which was at the top end of the European growth league table, is now fourth from bottom, with only Greece, Portugal and Denmark below it.

Yet according to Osborne's doctrine of "expasionary fiscal contraction", the reverse should have happened. As the state contracts, the economy should expand. But with consumer spending still depressed and the banks not lending enough, where will growth come from if not from active government? Britain, like Greece, cannot cut its way out of stagnation.

George Eaton is political editor of the New Statesman.

Getty
Show Hide image

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.”