Mark Carney: spending cuts have been "a drag on growth"

The Bank of England governor tells MPs what George Osborne doesn't want you to hear.

The most politically significant moment during Mark Carney's apperance before the Treasury select committee came when the Bank of England governor stated that "fiscal adjustment" (spending cuts and tax rises) "has been a drag on growth". 

This might appear to put him at odds with George Osborne who in his speech on the economy earlier this week, derided the "fiscalists" who claimed that the cuts had been more damaging than expected. But the Tory Treasury Twitter account has responded by stating that Carney's comments are "consistent" with Osborne's argument that the OBR's 2010 fiscal multipliers (which measure the effect of cuts and tax rises on growth) were not too optimistic. 

The Treasury did, however, refuse to concede that the cuts had, at least to some extent, depressed growth. As David Cameron was reminded by Robert Chote earlier this year (when he suggested that austerity had not hit output), the OBR's multipliers assume that "every £100 of fiscal consolidation measures reduce GDP in that year by around £100 for capital spending cuts, £60 for welfare and public services, £35 for increases in the VAT rate and £30 for income tax and National Insurance increases". Fiscal consolidation is estimated to have reduced GDP by 1.4 per cent in 2011-12 alone.

Cameron and Osborne are understandably reluctant to admit that the cuts mean growth has been lower than in normal circumstances. It allows Labour to argue that a less aggressive deficit reduction plan would have enabled higher levels of output. Which explains why you can expect Ed Balls and Ed Miliband to leap with glee on Carney's quote and the Tories to try and act as if they never heard him. 

Mark Carney, governor of the Bank of England, during a press conference following an address to business leaders in Nottingham on August 28, 2013. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty Images
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Autumn Statement 2015: will women bear the brunt again?

Time and time again, the Chancellor has chosen to balance the books on the backs of women. There's still hope for a better way. 

Today, the Chancellor, George Osborne, presents his Autumn Statement to parliament. Attention will be focused on how he tries to dig himself out of the tax credits hole that he got himself into with his hubristic summer budget.

He’s got options, both in terms of the sweeteners he can offer, and in how he finds the funds to pay for them. But what we will be looking for is a wholesale rethink from the chancellor that acknowledges something he’s shown total indifference to so far: the gender impact of his policy choices, which have hurt not helped women.

In every single budget and autumn statement under this Chancellor, it has been women that have lost out. From his very first so-called “emergency  budget” in 2010, when Yvette Cooper pointed out that women had been hit twice as hard as men, to his post-election budget this summer, the cumulative effects of his policy announcements are that women have borne a staggering 85 per cent of cuts to tax credits and benefits. Working mums in particular have taken much of the pain.

We don’t think this is an accident. It reflects the old-fashioned Tory world view, where dad goes out to work to provide for the family, and mum looks after the kids, while supplementing the family income with some modest part-time work of her own. The fact that most families don’t live like that is overlooked: it doesn’t fit the narrative. But it’s led to a set of policies that are exceptionally damaging for gender equality.

Take the married couple’s tax break – 80 per cent of the benefit of that goes to men. The universal credit, designed in such a way that it actively disincentivises second earners – usually the woman in the family. Cuts and freezes to benefits for children - the child tax credit two-child policy, cuts to child benefit – are cuts in benefits mostly paid to women. Cuts to working tax credit have hit lone parents particularly hard, the vast majority of whom are women.

None of these cuts has been adequately compensated by the increase in the personal tax threshold (many low paid women are below the threshold already), the extension of free childcare (coming in long after the cuts take effect) or the introduction of the so-called national living wage. Indeed, the IFS has said it’s ‘arithmetically impossible’ that they can do so. And at the same time, women’s work remains poorly remunerated, concentrated in low-pay sectors, more often part time, and increasingly unstable.

This is putting terrible pressure on women and families now, but it will also have long-term impact. We are proud that Labour lifted one million children out of poverty between 1997 and 2010. But under the Tories, child poverty has flat-lined in relative terms since 2011/12, while, shockingly, absolute child poverty has risen by 500,000, reflecting the damage that has been by the tax and benefits changes, especially to working families. Today, two thirds of children growing up poor do so in a working family. The cost to those children, the long-term scarring effect on them of growing up poor, and the long-term damage to our society, will be laid at the door of this chancellor.

Meanwhile, at the other end of the age spectrum, low-earning women who are financially stretched won’t have anything left over to save for their pension. More are falling out of auto-enrolment and face a bleak old age in poverty.

Now that the Chancellor has put his calculator away, we will discover when he has considered both about the impact and the consequences of his policies for women. But we have no great hopes he’ll do so. After all, this is the government that scrapped the equality impact assessments, saying they were simply a matter of ‘common sense’ – common sense that appears to elude the chancellor. In their place, we have a flaky ‘family test’ – but with women, mothers and children the big losers so far, there’s no sign he’s going to pass that one either.

That’s why we are putting the Chancellor on notice: we, like women across the country, will be listening very carefully to what you announce today, and will judge it by whether you are hurting not helping Britain’s families. The Prime Minister’s claims that he cares about equality are going to sound very hollow if it’s women who take the pain yet again.