Why Robert Chote gets my vote
With the latest trade figures pointing towards stalling recovery, Osborne may come to regret appoint
I am an avid reader of the daily data releases by the Office for National Statistics. On one day in the past week, we had releases on cereal usage by millers, brewers and maltsters, as well as on fly-tipping in England and Wales. Riveting stuff. One release that really was eye-opening was on recorded crime in Scotland in 2009-2010. Three findings stood out.
First, police officer numbers in Scotland increased by 598 (3.6 per cent) over the year from 31 December 2008. Second, overall crime in Scotland was down by 2 per cent on the previous year, which presumably was not unconnected to the greater number of police officers. Third, in 2008-2009, just as the recession hit, shoplifting rose by almost 10 per cent in Scotland. This is exactly the type of crime that increases as both unemployment and homelessness grow. It was also revealed on 8 September that the rate of workless homes in Scotland has gone up by 10 per cent since last year, compared with just 3 per cent in England.
So, it seemed entirely credible that the Police Federation should claim that budget cuts of 25 per cent could result in 40,000 fewer front-line police officers, rising crime and a "Christmas for criminals". Derek Barnett, president of the Police Superintendents' Association of England and Wales, warned that the cuts are likely to lead to a period of rising "disaffection [and] social and industrial tensions". Widespread disorder, he said, is "inevitable" at some point.
Truth in the data
The regressive nature of the cuts was confirmed in new research by Howard Reed and Tim Horton for the TUC and Unison, which suggested that the poorest will be hit 13 times harder by the spending cuts than the richest. The study, called Where the Money Goes, looked at the effects of implementing the planned public-service cuts of £34bn by 2013. It showed that the poorest tenth of the population will suffer reductions in services equivalent to 20 per cent of their household income, while the richest tenth will lose the equivalent of just 1.5 per cent.
This was before Osborne announced that he is going to cut the benefits budget for the unemployed by a further £4bn. Leaks of a secret plan to cut £2.5bn from the welfare bill for people who are disabled or too ill to work added fuel to the fire. We are not all in this together. This is well understood by Robert Chote, director of the Institute for Fiscal Studies and Alan Budd's successor as head of the Office for Budget Responsibility (OBR). He looks like a jolly good appointment. No poodle he. In June, two months before the IFS released research challenging the "progressive Budget", Chote said the argument that the rich will feel more pain than the poor was "debatable".
I suspect that Osborne will rue the day he appointed someone with a strong streak of independence running through him. At some point, young Robert is going to have to say - and it's a question of when, not if - that growth is not as strong as the OBR forecast under Budd. The data continues to flood in supporting my view that the coalition, through its austerity talk, has caused the economy to slow.
First, the latest trade figures are terrible. Both the OBR and the Bank of England had assumed in their forecasts that a good chunk of future growth in the economy would come about through a surge in exports. But in the three months to July, the UK ran a trade deficit in goods and services of £13.2bn - the highest figure since records began in the late 17th century. This means lower growth down the road.
Second, the Organisation for Economic Co-operation and Development, releasing its composite leading indicators, said that for the UK - as for Canada, China, France, Italy and India - there are "stronger signals of a slower pace of economic growth in coming months" than was anticipated in August's release.
Third, according to the accountancy firm BDO, it's going to be alarm bells - not jingle bells - for British businesses this Christmas. Its latest business trends report says that companies are the least optimistic they've been since the depths of the recession.
Fourth, the labour market seems to be turning downwards. According to the REC/KPMG Report on Jobs for August, permanent placements rose at the slowest pace in ten months.
Fifth, data from Markit's English regional Purchasing Managers' Index for August showed a widespread moderation in private-sector output growth. The report, commissioned by England's regional development agencies (RDAs), also pointed to a decline in employment in most regions, with the East Midlands and London posting the fastest declines.
Commenting on these figures, Nigel Jump, chief economist for the south-west of England RDA, said: "This month's survey results show more softness and raise concerns about the strength of the recovery. The growth in new orders was the weakest since the summer last year and many areas are now seeing a return to net job shedding."
Sixth, the prospect of job losses in the public sector is hurting house prices. The Royal Institution of Chartered Surveyors' headline house-price index dropped to -32 from -8, the sharpest one-month fall since June 2004. Newly agreed sales suffered their biggest fall in two years.
Blowing the cover
On 13 September, the TUC made it clear that a broad campaign of political and industrial action against the coalition is coming. And so it should. It is time for the people to stand up and be counted. Brendan Barber, the TUC's general secretary, is right that the cuts will make Britain a "darker, brutish and more frightening place".
On the same day, the heads of the IMF and the International Labour Organisation, along with several national leaders, called for an international commitment to a jobs-focused policy response to the global economic downturn. At a conference in Oslo, the IMF's managing director, Dominique Strauss-Kahn, argued: "Tackling the jobs crisis is critical not only for a meaningful global economic recovery but also for social cohesion and peace."
The British government's austerity package is based entirely on ideology, not on any economic rationale. It is not inconceivable that, by the time we get to the Comprehensive Spending Review in October, Chote may have had to revise down the OBR's growth forecast to one of double dip - and the political cover for the Con-Dem cuts would be blown.
David Blanchflower is a labour economist and a professor at Dartmouth College, New Hampshire, and the University of Stirling