“Stop turning off all the taps,” Mark Blyth, Dundonian and professor of political economy at Brown University in the US, told German online journal Zeit-Online on March 16 about how Europe got and still gets it wrong by stifling growth with spending cuts.
Five days earlier, the author of Austerity: The History of a Dangerous Idea, told the US Senate budget committee: “The more they (the Eurozone) tightened, the more debt they got because the underlying GDP got smaller. And the same constant stock of debt got bigger rather than smaller.” The nub of the matter: “You don’t really have a spending problem. You have a revenue problem.”.
Well, with a few exceptions, we’re all agreed about that in Scotland, aren’t we? We pretty well all share the overwhelming majority view of the Centre for Macroeconomics that austerity between 2010 and now has cost the UK between 5 and 10% lost output. (One of the economists polled put it as much as 15%). And the blame can be lain at the door of the coalition government, the vicious Tories and their supine but willing accomplices in the cruel folly of austerity, the LibDems. The also-rans, don’t-counts on May 7.
Except that the two main protagonists in #GE2015, the SNP and Labour, are at each other’s throats in clattering accusations they are outright (or closet) austerians. Normally mild-mannered (as we used to say in the public prints) John Swinney, SNP deputy leader, tells 3000 at the party’s spring conference: “They (Labour) are up to their oxters in Tory cuts.” On April Fool’s Day, commenting on the shadow chancellor’s visit to Glasgow, he shouts: “Ed Balls’ daytrip to Scotland has fallen completely flat as his pretence of being anti-austerity fell apart at the first sign of scrutiny.”
Balls countered: “The biggest lie in this general election is the claim that the SNP are the anti-austerity party when, in fact, they are the additional-austerity party … A vote for the SNP is a vote for continued Tory austerity.” Gordon Brown weighed in a day later, slaying the SNP as: “complicit in the Tory spending sell-out of the people of Scotland.”
This can all be dismissed as pre-nuptial tension before the post-election deal-making between Ed Miliband and Nicola Sturgeon and their teams. It’s certainly tiresomely tactical for it’s true that, as numerous observers have said, the differences between the two parties in their plans for UK government spending and borrowing are much closer to each other’s than they are to those bequeathed by George Osborne.
As Paul Johnson of the IFS told the David Hume Institute in early March (before Osborne’s last budget speech), the difference between Labour and SNP could be just £12bn: Balls would cut around £5-7bn, Sturgeon/Swinney’s “modest” increase in spending would be some £7bn. The gap between the two could be much less. Labour plans to reach a balanced current budget over the lifetime of the next parliament, i.e. by 2019-20, hardly amount to “Tory austerity.” The much-talked about £30bn (in the Charter for Budget Responsibility) is a totemic number, nothing else. And the Scottish government presided over a 4.2% cut in non-oil spending in real terms last year.
These are indeed plans; outcomes might well be very different (as they were between 2010 and 2015, with even Osborne loosening his tight grip on the tap towards the end of his current tenure). The truth is that Sturgeon supports “sensible” deficit reduction as, effectively, does Labour. Balls wants the tap on borrowing to invest released, as does Swinney. (Even Labour and the LibDems may not be that far apart as Gavin Kelly suggests. Certainly, any claim that Labour under the two Eds has sighed up for a further £12bn of welfare cuts – out of some £100n non-pension spending – is unfounded.
As Gavin Kelly of Resolution Foundation put it in his analysis of the difference between Labour and the SNP:
The difference between the SNP and Labour could therefore be relatively large, or fairly modest, depending on the date at which Labour targets current balance which still remains unclear. And, crucially, all these figures are subject to huge uncertainty. Which isn’t to say that we shouldn’t carefully scrutinise the apparent differences and similarities between the parties’ fiscal commitments as they emerge. We’ll do just that. It’s just that when we do, we should always bear in mind how easy it would be for all these plans to be blown far off course.
It is far more honest to highlight significant differences over “full fiscal autonomy” – or “devo max” – giving Holyrood responsibility for receiving/managing all taxes levied here and for the overwhelming bulk of spending. Here Labour relies on IFS analysis showing Scotland running a budget deficit of 8.6% this fiscal year (compared with one of 4% in rUK) or of £7.6bn because of the collapsing oil price. If we do ever see a nuclear deal with Teheran and Iranian oil returns to the market, depressing the price even further, the funding gap would be even larger and heralding very nasty austerity over several years…Sturgeon/Swinney argue that FFA would enable much higher and more sustained growth generating more revenue for repairing public services, including welfare.
Peter Jones has written: “Scotland’s fiscal problem is not lack of tax revenues, it is public spending that is too high for the size of the economy.” In fact, it’s both, as the performance of the UK economy in the last five years has rammed home: stellar employment levels have simply failed to yield the requires tax revenues to enable sensible public investment and welfare spending because people have been paid too little. The UK, what’s more, suffers from chronically low productivity. The allegedly basket-case economy of France, with government spending at 57% of GDP, is 20% more productive than the UK, i.e. its entire workforce could take Friday off and still be as productive as the UK. Indeed, ONS figures show productivity growth at its weakest since WW2.
Allied to the worst current account deficit (5.5%) since 1948, here is fertile ground for a post-election agenda: genuinely rebalancing the economy by raising productivity, boosting wage growth (including the living wage), increasing exports, redistributing wealth to offset the appalling inequalities disclosed in the recent Wealth and Assets report, etc. That is a genuine “long-term economic plan.” It would end the current blame game on austerity that is going nowhere.
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