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22 June 2010updated 27 Sep 2015 2:18am

Howling cuts consensus as Osborne delivers “emergency” Budget

Both the Tories and Lib Dems have made a clear choice. And it is a risky one.

By James Macintyre

First, credit where credit is due. If it is true that the government is to raise the income-tax threshold from £6,475 to £7,475, in a step on the path of lifting those who earn less than £10,000 out of income tax altogether, then this is a positive move that creates real incentive to work, and deserves praise. It also proves that the Liberal Democrats — Vince Cable and Nick Clegg in particular — have indeed helped to “shape” this Budget, as Lib Dem spin doctors are pointing out. But it also means they are locked in to the risks, too.

After all, as Sunder Katwala has pointed out, it is hard to make the case that this is, as George Osborne claims, a “progressive” Budget, when there will be regressive VAT hikes at the same time. It should be remembered, as Katwala highlights, that the richest 10 per cent pay £1 in every £25 of their income in VAT, while the poorest 10 per cent pay £1 in every £7 as VAT. As many have noted, there is precious little provision for the poorest in today’s Budget, which — we keep being told — marks a great moment in history.

Which brings us to the wider context of this Budget. There is no doubt that the coalition is gambling everything on cuts now, and that the Lib Dems paved the way for their own U-turns on fiscal policy from before the election.

Despite warnings by leading economists, including Danny Blanchflower, that withdrawing billions from the economy this year would lead to a “double-dip” recession next year, the government — egged on by the media pack, including the BBC — has taken an ideological decision, the merits of which we may not know until we are or are not in recession in 2011. The supposed lessons of the great financial crash, meanwhile, seem a very long way away.

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Last night, at the House of Commons, the Labour MP Jon Trickett called a meeting of MPs and members of the public in an attempt to form an alternative “narrative” to the cuts consensus that has prevailed across parliament and the media. On the panel was the NS‘s own Mehdi Hasan, who raised laughs and applause with his speech, extracts of which I copy below.

The genius of Osborne and Cameron . . . has been the way in which they’ve managed to shift the terms of the debate and create deficit hysteria. Just when you thought that the social-democratic moment had arrived, that Keynes had been reborn, that state intervention had been redeemed, the Tories, with the help of their supporters in the press, turned the entire focus of political and economic debate on its head.

It was a brilliant political manoeuvre. I mean, David Blaine could learn a lesson or two from Cameron and Osborne’s sleight of hand. And so, according to the Tories, not only is the biggest issue facing the country the national debt and the Budget deficit, rather than, say, the unreformed banking sector or the fragile economic recovery after the worst recession in decades, but the cause of that debt and that deficit is the state, is “big government”, not the bank bailouts, not the recession that the bankers caused and that led to a collapse in tax revenues.

Nope. It’s all about spending. And the mantra is “Cuts, cuts, cuts”. That’s all we’ve heard for the past year or so. That’s the prevailing narrative promulgated by Cameron’s Conservatives, aided and abetted, as I said, by a right-wing media echo chamber in which newspapers like the Daily Mail, for example, compare our public-sector pension arrangements to South Africa under apartheid and commentators like the Telegraph‘s Jeff Randall dismiss increased public spending as “Soviet-style dirigisme“.

I’m not sure how dirigisme, which is French and Gaullist, can simultaneously be “Soviet-style”, ie, Russian and communist, but I guess that’s what the Telegraph pays Randall the big bucks for: his impeccable analysis.

So, you add the Tory party to the right-wing media echo chamber and then you throw in a handful of free-market think tanks, which have been competing with each other to see who can suggest the most cuts: you’ve got Reform saying privatise the motorways, Policy Exchange advocating a total freeze on public-sector pay for five years and the Adam Smith Institute calling for the axing of a quarter of a million public-sector jobs.

And they’re salivating over all this, so much so, that some of their spokesmen have had to wipe the dribble from their chins when they appear on TV to make the case for cuts.

Oh, and I almost forgot the Institute of Economic Affairs, which wants to cut spending by around £140bn and which I suspect will never be happy until the state, and public spending, is almost completely eliminated. Somewhere like Somalia, I guess, would be the IEA’s model of a small-state utopia.

The Budget kicks off at 12 noon. Read our live blog during and analysis after on this site.

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