Goldman Sachs’ boss Lloyd Blankfein says we must stick with austerity

Enough to make you weep.

You wonder if George Osborne’s tears at Margaret Thatcher’s funeral were as much to do with sorrow at having adopted her not for turning mantle, as regret at the passing of a political hero who didn’t feel the need to speak estuary to up her popularity ratings.

Today you wonder whether the tears are flowing more copiously, or have just dried up in resignation on hearing from Goldman Sachs’ boss Lloyd Blankfein, sitting comfortably atop first quarter profits of £1.47bn (1.2% of UK government borrowing in 2012), that Osborne is stuck with his austerity approach, like it or lump it.

Talk about a rock and a hard place.  Speaking on Radio 4’s Today Programme, Blankfein fundamentally concurred with the conclusions of IMF chief economist Olivier Blanchard last week, and the thinking behind the decisions of first Moody’s and latterly Fitch to downgrade the UK’s triple A credit rating.  If the country’s efforts to escape the downturn are to not to continue to resemble those of a spider climbing out of the bath, it needs an economic plan B.

“You would like it at this part of the cycle not to cut, to push out austerity and not to shrink the economy,” said Blankfein.  But, tough, he added. That course is only permitted to countries, which have done their housekeeping, balanced the books and not cranked up an enormous deficit, otherwise the markets will react badly.

“If you have a big deficit, you lose optionality,” said Blankfein. “The choices get taken away from you.”

So no chance then of that preferable loosening of the purse strings to let the economy breathe. Instead, continued snail-paced growth, with the likelihood of the further credit rating downgrades that entails, followed, in turn, by probable higher government borrowing costs and, consequently, even less flexibility for pump priming business and industry.

Reading between Mr Blankfein’s lines, businesses, especially small to medium-sized ones (SMEs), can’t expect the banks to stump up much more of the cash that government can’t provide either. The reason? They’re frightened, poor loves.

“Businesses are starving for cash and banks have cash idle, but they’re afraid, for want of a better word,” said Blankfein. And he understood their anxiety, he added, uttering the words you probably wouldn’t expect or hope to hear from a Jedi master among masters of the universe; that “lending money to businesses is one of the riskiest things you can do”.

Goldman Sachs, however, does a little something for the small business community. It won’t lend them the cash they’re starving for (they’re way too small and it’s way too frightening), but it will teach them new skills. Blankfein is over here to talk up and talk about his company’s programme for improving the general business nous of SMEs and “professionalising” them, an international offshoot of its USA 10,000 Small Businesses scheme.

Participating businesses in the UK do rate the initiative. But facing flat demand in a stagnating economy, those SMEs which have seen their or their customers’ credit ratings cut by the banks are likely to utter a hollow laugh, or shed an Osborne like tear, at any suggestion that such projects are going to do much to lift their or the UK’s fortunes in the near future. 

Lloyd Blankfein Photograph: Getty Images

Mike Jeffree edits the Timber Trades Journal.

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
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Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

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