{"id":324,"date":"2015-04-02T16:19:12","date_gmt":"2015-04-02T16:19:12","guid":{"rendered":"https:\/\/sceptical.scot\/staging\/?p=324"},"modified":"2025-12-27T14:09:04","modified_gmt":"2025-12-27T14:09:04","slug":"ending-the-sterile-row-over-austerity","status":"publish","type":"post","link":"https:\/\/sceptical.scot\/staging\/2015\/04\/ending-the-sterile-row-over-austerity\/","title":{"rendered":"Ending the sterile row over austerity"},"content":{"rendered":"\n

\u201cStop turning off all the taps,\u201d 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.<\/strong><\/p>\n\n\n\n

Five days earlier, the author of Austerity: The History of a Dangerous Idea<\/a>, told the US Senate budget committee<\/a>: \u201cThe 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.\u201d The nub of the matter: \u201cYou don\u2019t really have a spending problem. You have a revenue problem.\u201d.<\/p>\n\n\n\n

Well, with a few exceptions, we\u2019re all agreed about that in Scotland, aren\u2019t we? We pretty well all share the overwhelming majority view of the Centre for Macroeconomics<\/a> 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\u2019t-counts on May 7.<\/p>\n\n\n\n

Except that the two main protagonists in #GE2015<\/a>, the SNP and Labour, are at each other\u2019s 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\u2019s spring conference: \u201cThey (Labour) are up to their oxters in Tory cuts.\u201d On April Fool\u2019s Day, commenting on the shadow chancellor\u2019s visit to Glasgow, he shouts: \u201cEd Balls’ daytrip to Scotland has fallen completely flat as his pretence of being anti-austerity fell apart at the first sign of scrutiny.\u201d<\/p>\n\n\n\n

Balls countered: \u201cThe 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.\u201d Gordon Brown weighed in a day later, slaying the SNP as: \u201ccomplicit in the Tory spending sell-out of the people of Scotland.\u201d<\/p>\n\n\n\n

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\u2019s certainly tiresomely tactical for it\u2019s 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\u2019s than they are to those bequeathed by George Osborne.<\/p>\n\n\n\n

As Paul Johnson of the IFS told the David Hume Institute in early March (before Osborne\u2019s last budget speech), the difference between Labour and SNP could be just \u00a312bn: Balls would cut around \u00a35-7bn, Sturgeon\/Swinney\u2019s \u201cmodest\u201d increase in spending would be some \u00a37bn. 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 \u201cTory austerity.\u201d The much-talked about \u00a330bn (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.<\/p>\n\n\n\n

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 \u201csensible\u201d 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<\/a>. Certainly, any claim that Labour under the two Eds has sighed up for a further \u00a312bn of welfare cuts – out of some \u00a3100n non-pension spending – is unfounded<\/a>.<\/p>\n\n\n\n

As Gavin Kelly of Resolution Foundation put it in his analysis of the difference between Labour and the SNP<\/a>:<\/p>\n\n\n\n

\n

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\u2019t to say that we shouldn\u2019t carefully scrutinise the apparent differences and similarities between the parties\u2019 fiscal commitments as they emerge. We\u2019ll do just that. It\u2019s 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.<\/p>\n<\/blockquote>\n\n\n\n

It is far more honest to highlight significant differences over \u201cfull fiscal autonomy\u201d – or \u201cdevo max\u201d – 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 \u00a37.6bn 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\u2026Sturgeon\/Swinney argue that FFA would enable much higher and more sustained growth generating more revenue for repairing public services, including welfare.<\/p>\n\n\n\n

Peter Jones has written<\/a>: \u201cScotland\u2019s fiscal problem is not lack of tax revenues, it is public spending that is too high for the size of the economy.\u201d In fact, it\u2019s 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\u2019s 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.<\/p>\n\n\n\n

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 \u201clong-term economic plan.\u201d It would end the current blame game on austerity that is going nowhere.<\/p>\n","protected":false},"excerpt":{"rendered":"

The differences between Labour and the SNP in their plans for UK government spending and borrowing are much closer to each other\u2019s than they are to those bequeathed by George Osborne.<\/p>\n","protected":false},"author":2,"featured_media":408,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[319],"tags":[],"class_list":["post-324","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy"],"_links":{"self":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/324","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/comments?post=324"}],"version-history":[{"count":1,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/324\/revisions"}],"predecessor-version":[{"id":18309,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/324\/revisions\/18309"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/media\/408"}],"wp:attachment":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/media?parent=324"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/categories?post=324"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/tags?post=324"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}