Roll up for the Bullingdon Bros circus of cuts

A trip to Barnum & Bailey’s big top had nothing on Osborne and Cameron’s laughable charade at the To

Last Sunday I did something I have wanted to do since I was a kid. I went to see Ringling Bros and Barnum & Bailey's three-ring circus in Manchester, New Hampshire. It is advertised as "the greatest show on earth" and believe me, it is. It was like Chipperfield's and Billy Smart's rolled into one and multiplied by five.

They had a few zebras, which trotted round in circles, and 11 elephants, which were applauded every time they entered the ring. The highlight was when one walked round the arena with an American flag across its back while the audience sang the national anthem.

The elephants held each other's tails, as elephants are wont to do, and rolled over, which looked pretty exhausting. And there was a group of tigers, including some white ones, which jumped over things and then lay down together in a long line. They had probably just had dinner. As they didn't eat the trainer or escape, the audience gave the tigers a standing ovation.

Just outside the auditorium, we came across the World's Championship Chilli Cookoff. It was a three-day event. I kid you not. For five bucks you got tickets to sample chilli from a host of stalls and there was a free concert. Tom Hoover became the 2010 World's Chilli Champion, pocketing $25,000. There were chilli verde and salsa champions, too. Only in America.

Cameron fails the test

Then there was that other circus, the Tory party conference, where George Osborne announced cuts to child benefit. That caused a storm of protest even in the Daily Mail and the Telegraph. And David Cameron had to apologise because it wasn't in the Tory manifesto. There is much more of that to come.
Cameron's speech to conference contained a number of choice economic nuggets:

1) "£6bn of spending saved this year." Actually, all the coalition government did was announce it was going to make these efficiency savings. There is no evidence as yet that it has made any. My calls to the Treasury press office about this were not returned.

2) "The mess this country is in - it's not all because of Labour." This, despite Cameron's many claims to the contrary.

3) "Labour failed to regulate the City properly." If I recall correctly, the Tory party has always been against regulation.

4) "The big society is not about creating cover for cuts." It is becoming clear to everyone that
it is just that - hence the cancellation of those town-hall meetings.

5) "And [the cuts have] stopped us slipping into the nightmare they've seen in Greece, confidence falling, interest rates rising, jobs lost and in the end not less but more drastic spending cuts than if you'd acted decisively in the first place." No, they have not. Business and consumer confidence have collapsed since the coalition came to power and ten-year government bond rates have fallen less fast than in the US, which is not engaging in a suicidal austerity programme.

6) "Growing industries, better jobs, stronger prospects for our young people." Not with your policies.

7) "The spending cuts we do have to make, we'll make in a way that is fair." Not so far, you haven't: they are falling disproportionately on the poor and stay-at-home mums.

8) "So we are acting to build a more entrepreneurial economy." There is absolutely no evidence that this is the case.

9) "Tens of thousands of university and apprenticeship places and a new generation of technical schools." Not enough of them.

10) "This year, we're going to spend £43bn on debt interest payments alone." So what? There are two sides to the balance sheet - these are simply liabilities. It makes no sense to ignore the asset side to the balance sheet, which includes roads, schools, hospitals, libraries and so on, which bring benefits to the British people.

Dave, you just failed your intro economics exam. You will have to repeat the class. You have obviously not been looking at the data.

The slow, steady drip of bad news is becoming a flood. The Halifax House Price Index fell by 3.6 per cent in September, the fastest monthly fall since the series began in 1983. House prices are now about 12 per cent below their peak in August 2007. The ratio of house prices to earnings is 4.56, which suggests prices will have to fall by another 20 per cent to return to the pre-boom (1983-2003) average of 3.67. Falling prices are good for first-time buyers, but the worry is that homeowners will reduce their consumption, which will lower growth.

On the point of collapse

Meanwhile, the Markit/CIPS Purchasing Managers' Index (PMI) for UK services showed that new business growth slipped to a 15-month low in September. Chris Williamson, chief eco­nomist at Markit, noted that the survey shows how "inflows of new work and prospects for the year ahead have been hit by widespread worries that the recovery is losing steam, cancelled government contracts and the prospect of more cuts to come, as well as uncertainty regarding the impact of October's Comprehensive Spending Review".

The Markit/CIPS PMI for UK construction suggested that confidence about future business suffered a sharp knock in September, dipping to its lowest level since March 2009, and jobs were cut at the fastest pace in six months.

There was further bad news on the employment front in the latest REC/KPMG Report on Jobs, which showed that both permanent staff placements and temporary or contract staff billings rose at weaker rates in September. As the graph (below) shows, the latest increase in permanent appointments was the slowest for a year, while the growth of temporary billings eased to an 11-month low. Placement rates are back to their levels at the beginning of 2008, just as the labour market was about to collapse.

blanchflower graph

In response to these job figures, a spokesman for the Department for Work and Pensions said that "the Office for Budget Responsibility forecasts rising employment and falling unemployment for every year until 2015/2016". So that's fine, then. Problem solved.

David Blanchflower is a labour economist and a professor at Dartmouth College, New Hampshire, and the University of Stirling