Obama should give Cameron an economics lesson

Only one of the two leaders is stimulating the global recovery.

No meeting between Barack Obama and David Cameron is now complete without a joint article lauding the "special" (or, in this case, the "essential") relationship and recalling the two countries' past triumphs. The Washington Post is the venue for today's op-ed and the first sentence hasn't even elapsed before the obligatory reference to Churchill.

Rather than the sections on Afghanistan, Iran and Syria (where there is consensus between the two men), the most intriguing passage is on the economy (where there is not). Obama and Cameron write:

As leading world economies, we are coordinating closely with our G-8 and G-20 partners to put people back to work, sustain the global recovery, stand with our European friends as they resolve their debt crisis and curb the reckless financial practices that have cost our taxpayers dearly. We're committed to expanding the trade and investment that support millions of jobs in our two countries.

That's sufficiently bland to avoid any controversy. But it disguises the fact that while one country (the US) is stimulating "the global recovery", another (the UK) is acting as a drag anchor on it. George Osborne was once fond of boasting that the UK had grown faster than the US, "despite fiscal stimulus in the former and fiscal consolidation in the latter, showing that the problem is not too much fiscal responsibility."

But that's not a claim he can make now. The final figures for 2011 showed that the US grew by 1.7 per cent, while the UK grew by just 0.8 per cent (see graph) - one of the worst growth rates in the EU. On employment, the picture is a similar one. While Obama is putting people back to work, Cameron is putting them on the dole. US unemployment is now at its lowest level since the recession, while UK unemployment is at its highest level since 1996.

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What explains the contrasting data? Well, while Obama chose to stimulate growth, Cameron chose to strangle it. Obama introduced an extended payroll tax cut, Cameron raised VAT to a record high of 20 per cent. As the ippr's Eric Beinhocker notes in today's Times (£), the US President's tax cut injected $92 billion a year of stimulus into the US economy, with the result that consumer spending increased by 2.2 per cent last year while it shrank by 0.8 per cent in Britain.

When Obama visited Britain last year he refused, to the despair of the Tories, to endorse Cameron's deficit reduction plan. Noting that the pair come from "different political traditions", he added that the "sequencing and pace" of fiscal contraction would be different in each country.

If and when the subject of the economy arises during Cameron's visit, it will be worth watching the two leaders' language. Having been vindicted by the data, Obama has every reason to offer some free economics tuition.

George Eaton is political editor of the New Statesman.

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PMQs review: Jeremy Corbyn prompts Tory outrage as he blames Grenfell Tower fire on austerity

To Conservative cries of "shame on you!", the Labour leader warned that "we all pay a price in public safety" for spending cuts.

A fortnight after the Grenfell Tower fire erupted, the tragedy continues to cast a shadow over British politics. Rather than probing Theresa May on the DUP deal, Jeremy Corbyn asked a series of forensic questions on the incident, in which at least 79 people are confirmed to have died.

In the first PMQs of the new parliament, May revealed that the number of buildings that had failed fire safety tests had risen to 120 (a 100 per cent failure rate) and that the cladding used on Grenfell Tower was "non-compliant" with building regulations (Corbyn had asked whether it was "legal").

After several factual questions, the Labour leader rose to his political argument. To cries of "shame on you!" from Tory MPs, he warned that local authority cuts of 40 per cent meant "we all pay a price in public safety". Corbyn added: “What the tragedy of Grenfell Tower has exposed is the disastrous effects of austerity. The disregard for working-class communities, the terrible consequences of deregulation and cutting corners." Corbyn noted that 11,000 firefighters had been cut and that the public sector pay cap (which Labour has tabled a Queen's Speech amendment against) was hindering recruitment. "This disaster must be a wake-up call," he concluded.

But May, who fared better than many expected, had a ready retort. "The cladding of tower blocks did not start under this government, it did not start under the previous coalition governments, the cladding of tower blocks began under the Blair government," she said. “In 2005 it was a Labour government that introduced the regulatory reform fire safety order which changed the requirements to inspect a building on fire safety from the local fire authority to a 'responsible person'." In this regard, however, Corbyn's lack of frontbench experience is a virtue – no action by the last Labour government can be pinned on him. 

Whether or not the Conservatives accept the link between Grenfell and austerity, their reluctance to defend continued cuts shows an awareness of how politically vulnerable they have become (No10 has announced that the public sector pay cap is under review).

Though Tory MP Philip Davies accused May of having an "aversion" to policies "that might be popular with the public" (he demanded the abolition of the 0.7 per cent foreign aid target), there was little dissent from the backbenches – reflecting the new consensus that the Prime Minister is safe (in the absence of an attractive alternative).

And May, whose jokes sometimes fall painfully flat, was able to accuse Corbyn of saying "one thing to the many and another thing to the few" in reference to his alleged Trident comments to Glastonbury festival founder Michael Eavis. But the Labour leader, no longer looking fearfully over his shoulder, displayed his increased authority today. Though the Conservatives may jeer him, the lingering fear in Tory minds is that they and the country are on divergent paths. 

George Eaton is political editor of the New Statesman.

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