George Osborne’s economic policy is based on lies

The budget is the fiscal equivalent of sticking your fingers in your ears and shouting ‘LALALALA NOT LISTENING’.

On Wednesday the Chancellor announced his plan, hailed by many as a “steady as she goes budget”. I confess some confusion as to how this might be a good thing, when according to most indicators “she” is steadily going to hell. I am also bemused by the attention this man’s policy announcements have attracted. It seems to me that intense dissemination of how these policies might work in practice, is tantamount to a spirited and detailed conversation about the quality of the stitching on the Emperor’s New Clothes.

The assumption that this Government will implement anything it says, let alone implement it successfully, flies in the face of evidence. Infrastructure projects which will not be completed during this Parliament (and some which will not even have started), Enterprize Zones which are still being set up, two years after being announced, and have delivered 5 per cent of the jobs projected, a Business Bank which is only now setting out a schedule for its creation, a Funding for Lending scheme (a replacement for the grand Loan Guarantee Scheme, scrapped after four months) which has actually seen lending drop dramatically, a Back To Work programme which is actually worse at getting people into jobs than doing nothing, a Green Investment Bank whose only action so far has been to appoint an expensive private consultant, a Right to Buy home ownership scheme which has delivered 1.5 per cent of the sales envisaged, a Big Society Bank for a Big Society which Cameron launched four times, that shows no signs of getting going and, in fact, hopes to have appointed a Chair by 2014! I could go on.

Why should anybody be interested in any big announcements this government makes? They are just that: announcements. With the economy stagnating for three years now, they are the equivalent of what I do when I am supposed to go out, but having a “fat day”; I try on every single outfit, having already decided to stay in and sob quietly, while having a large pepperoni pizza.

The only thing of interest in a budget nowadays is the actual data of how the Chancellor has performed – not his promises of how much better he is about to. In that respect, the budget was fascinating. Many commentators have assessed thoroughly and forensically the failures of this Government on growth, stagnating wages, lending, future borrowing et al – the IFS’s review does so as well as any. I am more interested in the two items claimed by the government as successes; the two planks to which this drowning Chancellor is clinging: the borrowing rate and the employment figures.

On these, I offer two short sentences from the OBR’s budget report.

On the Chancellor’s attempt to show – “by hook or by crook” according to the IFS – that we borrowed less this year compared to last, para. 4.27 explains that “the Government has taken action to ensure that central government departments spend less in 2012-13” and this includes “a number of elements”. Here is one:  “payments that were due to be made late in the current financial year (for example payments to international institutions), but which are being delayed into 2013-14.”

Read that again. Take it in. In order to keep his head above water, the Chancellor has asked Government departments to delay payments which were due this financial year until after 1 April. These payments, of course, still have to be made. Just not right now. The direct fiscal equivalent of sticking your fingers in your ears and shouting “LALALALA NOT LISTENING”. And this man, with his Delboy approach to state finance, is the person entrusted with the long-term health of the country’s economy.

On the employment rate, many have expressed doubts about the claim repeated with almost drummerlike monotony that “one million new private sector jobs have been created”. We know, for instance, that there has been an astonishing surge of hundreds of thousands of people who show as “self-employed”. We know there have been strange transfers of public service jobs directly to the private sector, as support services are privatised in every department.

The OBR hints at these irregularities in their executive summary: “The labour market continues to surprise on the upside, despite the continued weakness of GDP growth.” As a former civil servant, I would be tempted to read that as “there is something really dodgy about these figures”. Then, at para. 3.108, which talks about “people employed in government supported training and employment programmes” comes the confirmation: “Of the total increase in employment in 2012, compared to 2011, around 14 per cent reflects increased participation in those programmes.”

People on unpaid internships, training schemes, apprenticeships and workfare schemes, are counted as employed. One hundred and forty thousand of them are part of the Government’s job creation success story.

I never understood Hollywood’s obsession with the Evil Genius as the film villain of choice. It has always been clear that, given a position of power, an Clueless Idiot has infinitely more potential to cause harm. What I find astonishing is that Conservative MPs, many of whom are honourable men and women and all of whom are obsessed with fiscal responsibility, have not yet grabbed this man by his expensively tailored lapels and thrown him in the Thames.

British Finance Minister George Osborne poses for pictures outside 11 Downing Street. Photograph: Getty Images

Greek-born, Alex Andreou has a background in law and economics. He runs the Sturdy Beggars Theatre Company and blogs here You can find him on twitter @sturdyalex

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The tale of Battersea power station shows how affordable housing is lost

Initially, the developers promised 636 affordable homes. Now, they have reduced the number to 386. 

It’s the most predictable trick in the big book of property development. A developer signs an agreement with a local council promising to provide a barely acceptable level of barely affordable housing, then slashes these commitments at the first, second and third signs of trouble. It’s happened all over the country, from Hastings to Cumbria. But it happens most often in London, and most recently of all at Battersea power station, the Thames landmark and long-time London ruin which I wrote about in my 2016 book, Up In Smoke: The Failed Dreams of Battersea Power Station. For decades, the power station was one of London’s most popular buildings but now it represents some of the most depressing aspects of the capital’s attempts at regeneration. Almost in shame, the building itself has started to disappear from view behind a curtain of ugly gold-and-glass apartments aimed squarely at the international rich. The Battersea power station development is costing around £9bn. There will be around 4,200 flats, an office for Apple and a new Tube station. But only 386 of the new flats will be considered affordable

What makes the Battersea power station development worse is the developer’s argument for why there are so few affordable homes, which runs something like this. The bottom is falling out of the luxury homes market because too many are being built, which means developers can no longer afford to build the sort of homes that people actually want. It’s yet another sign of the failure of the housing market to provide what is most needed. But it also highlights the delusion of politicians who still seem to believe that property developers are going to provide the answers to one of the most pressing problems in politics.

A Malaysian consortium acquired the power station in 2012 and initially promised to build 517 affordable units, which then rose to 636. This was pretty meagre, but with four developers having already failed to develop the site, it was enough to satisfy Wandsworth council. By the time I wrote Up In Smoke, this had been reduced back to 565 units – around 15 per cent of the total number of new flats. Now the developers want to build only 386 affordable homes – around 9 per cent of the final residential offering, which includes expensive flats bought by the likes of Sting and Bear Grylls. 

The developers say this is because of escalating costs and the technical challenges of restoring the power station – but it’s also the case that the entire Nine Elms area between Battersea and Vauxhall is experiencing a glut of similar property, which is driving down prices. They want to focus instead on paying for the new Northern Line extension that joins the power station to Kennington. The slashing of affordable housing can be done without need for a new planning application or public consultation by using a “deed of variation”. It also means Mayor Sadiq Khan can’t do much more than write to Wandsworth urging the council to reject the new scheme. There’s little chance of that. Conservative Wandsworth has been committed to a developer-led solution to the power station for three decades and in that time has perfected the art of rolling over, despite several excruciating, and occasionally hilarious, disappointments.

The Battersea power station situation also highlights the sophistry developers will use to excuse any decision. When I interviewed Rob Tincknell, the developer’s chief executive, in 2014, he boasted it was the developer’s commitment to paying for the Northern Line extension (NLE) that was allowing the already limited amount of affordable housing to be built in the first place. Without the NLE, he insisted, they would never be able to build this number of affordable units. “The important point to note is that the NLE project allows the development density in the district of Nine Elms to nearly double,” he said. “Therefore, without the NLE the density at Battersea would be about half and even if there was a higher level of affordable, say 30 per cent, it would be a percentage of a lower figure and therefore the city wouldn’t get any more affordable than they do now.”

Now the argument is reversed. Because the developer has to pay for the transport infrastructure, they can’t afford to build as much affordable housing. Smart hey?

It’s not entirely hopeless. Wandsworth may yet reject the plan, while the developers say they hope to restore the missing 250 units at the end of the build.

But I wouldn’t hold your breath.

This is a version of a blog post which originally appeared here.

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