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My advice to Ed Balls: don’t follow Slasher’s lead and promise the earth

Who has really been telling "shameful lies"?

In a speech at the 2009 Conservative party conference in Manchester, George “Slasher” Osborne offered a sneering overview of Labour policy with all sorts of claims about how the streets would be paved with gold if only the Tories were to win the next general election and he was made chancellor. The following spring, after an election a ham sandwich could have won but no one did, the Tories had to form a coalition with a turncoat party that for years had opposed austerity but paused a few days and reversed all of that, once ministerial cars were on offer.

The Lib Dems banked all on the UK economy rising from the ashes; they hoped that there would be an “expansionary fiscal contraction” and growth would emerge before 2015. The governor of the Bank of England, Mervyn King, has what must be the worst economic forecasting record of any governor in living memory. He failed to spot the recession and the subsequent double dip; he thought that the UK and the US had decoupled; he thought that there would be a wage spiral as a result of union power and appeared to have no clue that LIBOR (the London Inter-bank Offered Rate) was being fiddled, even though it was arguably his job to know. King told the coalition posh boys to slash away and all would be well. But it wasn’t.

Some of us even had the audacity to say all of that stuff was for the birds and warned that the government was committing economic suicide; but nobody much listened and on they ploughed. Sadly, the government is now in deep trouble and knows it. It will be interesting to hear how Slasher plans to wriggle out of this mess at the Tory conference in Birmingham.

Look back in anger

Before that, it seems appropriate to go back and look at the claims Osborne made, in his speech in 2009, about what he would deliver. First, he said that the Tory party would “lead the economy out of crisis”. That could hardly be further from the truth, as the coalition has pushed us into an even deeper crisis. We are in the slowest recovery since the Second World War and are perhaps even heading for a triple dip.

The chart below shows the current estimates of GDP growth along with the initial estimates, as data gets revised all the time. The economy was growing nicely when the coalition took over; it grew for five successive quarters from the third quarter of 2009 up to the third quarter of 2010, under Alistair Darling’s policies. Output is now 4.4 per cent lower than it was at the start of the recession in 2008 and has shrunk in five of the past seven quarters. It takes time for policies to feed through to the data, so if we assume that the coalition owns the data from the fourth quarter of 2010, the economy has shrunk 0.6 per cent.

The recession deniers are clueless. The recession hasn’t been revised away and isn’t going to be; the revisions average 0.1 per cent down over the past 20 quarters. Consumer and business confidence today is lower than it was when the coalition took office. The latest European Union sentiment index for the UK (reported in the second chart, below), which is a combination of business and consumer surveys, stands at 91.9, against 102.4 in May 2010, when the coalition took over. It is markedly lower than in Sweden (100.0), which recently moved to inject a stimulus into its economy. Confidence is especially low in the services sector, with a score of -22, compared to -10 in May 2010.

In November 2010, there were 2,477,000 unemployed, with an unemployment rate of 7.9 per cent. The latest data shows 2,645,000 unemployed in July 2012, with an unemployment rate of 8.2 per cent. Over the same period, average weekly earnings rose 3.3 per cent, while the Consumer Price Index has risen by 6.5 per cent, so real earnings have fallen sharply.

Far from leading us out of crisis, Osborne has made matters worse and pushed the UK economy into a double-dip recession. The latest UK PMI for manufacturing was disappointing, falling from 49.6 to 48.4 (anything below 50 indicates decline). This is the third month of declines and job losses are beginning to mount. The PMI for construction in September showed the biggest decline in new business since April 2009, so there’s little sign of green shoots.

I have every expectation that GDP in the next quarter may be positive but the fourth quarter is likely to be negative. Plus, the deficit is up by 22 per cent so far this year. As the shadow chancellor, Ed Balls, said in his Labour conference speech, we are seeing “rising borrowing, not to invest in the jobs of the future but to pay for the mounting costs of this government’s economic failure. There is nothing credible about a plan that leads to a double-dip recession . . . That’s not credible, that is just plain wrong.”

Holidays in the sun

Second, Osborne argued in 2009 that the Tories would protect public services, claiming: “We’re all in this together.” He had the audacity to repeat this phrase seven times. He then claimed: “Our determination as compassionate Conservatives [is] to protect the most vulnerable.” In truth, the poor are all in it together and the rich are holidaying in the south of France.

Sensibly, Balls hasn’t fallen into the same trap as Osborne did just before the election. He doesn’t need to say too much about what Labour would do, other than to reiterate that he will wait and see how serious is the mess he is likely to inherit. He is entitled to say he warned that this economic disaster was looming and things would have been a lot better had he been in charge. My main advice to Balls, though, is to stay away from the pork pies. We all know who told “shameful lies”.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

This article first appeared in the 08 October 2012 issue of the New Statesman, Conservative conference special

The Prime Minister still has questions to answer about his plans for Syria

Cameron needs a better plan for Syria than mere party-politicking, says Ian Lucas.

I was unfortunate enough to hear our Prime Minister discussing the vexed issue of military action in Syria on the Today programme yesterday. It was a shocking experience - David Cameron simply cannot resist trying to take party political advantage of an extremely serious crisis. It is quite clear that there are massive humanitarian, military and political issues at stake in Syria. A number of international and national powers including the United States and Russia are taking military action within Syria and David Cameron said in the broadest terms that he thought that the UK should do so too.

The questions then arise - what should we do, and why should we do it?

Let me make it clear that I do believe there are circumstances in which we should take military action - to assist in issues which either affect this country's national interest and defence, or which are so serious as to justify immediate action on humanitarian grounds. It is for the Prime Minister, if he believes that such circumstances are in place, to make the case.

The Prime Minister was severely shaken by the vote of the House of Commons to reject military action against President Assad in 2013. This was a military course which was decided upon in a very short time scale, in discussion with allies including France and the United States.

As we all know, Parliament, led by Ed Miliband’s Labour Opposition and supported by a significant number of Conservative MPs, voted against the Government’s proposals. David Cameron's reaction to that vote was one of immediate petulance. He ruled out military action, actually going beyond the position of most of his opponents. The proposed action against Assad action was stressed at the time by President Obama to be very limited in scope and directed specifically against the use of chemical weapons. It was not intended to lead to the political end of President Assad and no argument was made by the governments either in the United States or in the UK that this was an aim. What was proposed was short, sharp military action to deal specifically with the threat of chemical weapons. Following the vote in the House of Commons, there was an immediate reaction from both United States and France. I was an Opposition spokesman at the time, and at the beginning of the week, when the vote was taken, France was very strident in its support for military action. The House of Commons vote changed the position immediately and the language that was used by President Obama, by John Kerry and others .

The chemical weapons threat was the focus of negotiation and agreement, involving Russian foreign minister Sergei Lavrov and his connections with Syria.  The result was that Assad agreed to dispense with chemical weapons on a consensual basis and no military action took place.

David Cameron felt humiliated by this outcome and loses no opportunity to suggest that the decision was wrong.  He is determined that he should revisit the issue of bombing in Syria, though now action there has elided to action against Islamic State. He has delegated Michael Fallon to prepare the ground for a vote on military action in Parliament. Fallon is the most political of Defence Secretaries - before he became a minister he was regularly presented by the Conservative party as its attack dog against Labour. He gives me the impression of putting the Conservative Party’s interest, at all times, above the national interest. Nothing in his tenure at Defence has changed my view of him.

I was therefore very sceptical what when, in September, Fallon suggested that there should be briefings of members of Parliament to inform us of the latest position on Syria. It turns out that I was right - at the Conservative party conference, Mr Fallon has been referring to these briefings as part of the process that is changing minds in the House of Commons towards taking military action in Syria. He is doubtless taking his orders from the Prime Minister, who is determined to have a vote on taking part in military action in Syria, this time against Islamic State.  

If the Prime Minister wishes to have the support of the House of Commons for military action he needs to answer the following questions: 

What is the nature of the action that he proposes?

What additional impact would action by the UK have, above and beyond that undertaken by the United States and France?

What is the difference in principle between military action in Syria by the UK and military action in Syria by Russia?

What would be the humanitarian impact of such action?

What political steps would follow action and what political strategy does the government have to resolve the Syrian crisis?

The reality is that the United States, UK, France and other western powers have been hamstrung on Syria by their insistence Assad should go. This situation has continued for four years now and there is no end in sight.

The Prime Minister and his Defence Secretary have yet to convince me that additional military action in Syria, this time by the United Kingdom, would help to end Syria's agony and stem the human tragedy that is the refugee crisis engulfing the region and beyond. If the Prime Minister wishes to have support from across the House of Commons, he should start behaving like the Prime Minister of a nation with responsibilities on the United Nations Security Council and stop behaving like a party politician who seeks to extract political advantage from the most serious of international situations.

Ian Lucas is the Labour MP for Wrexham.