Plan B - The Defamation of George Osborne

New Spin Doctor: Corporal Jones

Don't panic, don't panic! The Institute of Fiscal Studies has endorsed George Osborne's strategy to cut the deficit. The endorsement comes in the shape of the IFS's 'Green Budget' in collaboration with Barclays Wealth and Barclays Capital, an assessment of the government's underlying assumptions about the economy before the Chancellor presents his real budget on 23rd March. They insist that George should press on with his fiscal strategy. Stop the marches! Endure the cuts! Were we wrong to complain?

Well, no. The report is reminiscent of a crew of a sinking ship, reassuring the passengers, while causally edging closer to the last lifeboat. Why? Because Osborne's whole strategy to sort out the public finances rests upon strong economic growth, but as the 0.5% reduction in GDP during the last quarter showed, that recovery should not be taken for granted. We can't rely on it not snowing again, can we?

The IFS looked at five key 'demand drivers' to test the robustness of the recovery. The first indicator was the 'impact of fiscal tightening'. This measures the reduction in GDP in relation to government cuts and tax rises. In normal circumstances, for an economy the size of the UK,  it would be assumed that a £1 reduction in government spending would result in a reduction in demand between 50p and £1, a 'multiplier of somewhere between 0.5 and 1. Meanwhile, it is assumed, a 1% tax reduction would reduce GDP by 0.25%-0.5%.

According to the IMF these assumptions only apply where the central bank can ease the process by reducing interest rates. In circumstances, like ours, where that is not an option - the overall reduction on GDP can be much larger. More worrying is when fiscal tightening occurs alongside other trading partners going through the same process, the 'multiplier' in GDP reduction can be double the government cuts or tax increases. The IFS concludes that the likely 'multiplier will be 1.5, much higher than the government has forecast. It means they think the cuts will bite much deeper than has been anticipated.

The IFS have a similarly pessimistic outlook for 'household income growth'. Having grown 1% in 2010, the government has assumed a similar growth rate in 2011. However, the IFS confirm that rising inflation means that household purchasing power is dropping in real terms and will not reach a healthy growth rate until 2015.  They also predict that their will not be a substantial increase in employment to drive demand. Confidence is low:

"psychologically speaking, most households are feeling vulnerable: many feel that they have yet to join in the supposed economic recovery that they have read about in the papers."  

As a consequence they foresee the VAT increase having a stronger effect on spending than would usually be the case. Ironically, the level of consumer spending as a proportion of income is well above historical levels already, but it is predicted to fall substantially before rising to even higher levels. It seems that we can't wait to restart of shopping spree. In the long run our insatiable desire for the latest patio furniture might just drag us out of the mire, what a happy thought. In the short term we can assume that the recovery will not emerge from consumer spending.

What about an industrial recovery? The government made a lot out of the 9% increase in business investment in the third quarter of 2010. However, the IFS suggest this was a response to the 'unprecedented' collapse of 19% in 2009 and warn against seeing the growth as an indicator of future growth. In fact, they conclude that the lack of confidence undermining consumer expenditure is reflected in the prospects for British industry:

"Recent surveys of business confidence suggest firms are concerned about the uncertainty over both consumption at home and export performance, in light of weakness in some of the UK's major export markets."

Quite simply firms will not invest if the prospects for domestic sales and exports are poor. The IFS also notes that in previous recessions, business investment has not driven recovery but has lagged behind other 'drivers'. Finally, they point out that following the previous four recessions business investment has declined. That doesn't bode well for long-term competitiveness, as we shall see.

The one note of optimism is that the UK may regain lost market share. This 'rebalancing', it is suggested, will result naturally from the devaluation of the pound against other currencies, making British exports relatively cheaper. However, the cloud on that horizon is the possibility that UK exports will not recover. It appears that despite a very competitive pound (16% below its 2007 average), exports have not recovered at the expected rate. The concern is that this is not a blip but part of a structural decline as Britain loses market share to other countries. The overall reduction in business investment following the last four recessions may be coming back to bite the UK.

The final ''driver' is the labour market. Again the outlook appears bleak. The recession has been characterised by firms' reluctance to reduce their workforce. However, this high employment has inevitably resulted in a sharp decline in productivity, 8% lower than pre-recession levels. The IFS speculate that with growth not returning as quickly as expected, firms may embark on a US style reduction in workforce in order to regain a higher productivity level. In this worst case scenario, unemployment could rise as high as 12% with the relative decline in household demand. 

The more likely outcome is that firms 'hold steady'. However, with inflation above the level of wage increases this will also squeeze demand. The IFS also point out the number of people employed includes an increasing number of people who work part-time but would prefer to work full-time. This under- employer may be disguising some of the real pain that unemployment figures don't fully reflect. The excess capacity ensures that there will be little pressure for wage growth for the foreseeable future.

The final point I wish to highlight is, by the standards of other governments, Osborne has taken a particularly sharp axe to the public sector. As Stephanie Flanders said in her blog,

"the report gives the lie to the suggestion that the government's cuts are similar to the consolidation plans of other countries. Out of 29 industrialised countries, only Greece is planning a sharper decline in structural borrowing between 2010 and 2015. And only Ireland and Iceland are planning a larger reduction over this period in public spending as a share of GDP."

The government's justification was that the debt was so large that the country may not be able to refinance it, like Ireland and Greece. There is no doubt that our debt is very large. Only the USA and Ireland, those free market miracles, have higher debt as a % of GDP. However, 'crisis, what crisis?' Britain ranks 4th overall, in the ability of the government to raise finance and service the debt. The report states that investor demand for UK debt has remained strong. However, it should be recognised that some of that confidence from the markets is in response to the Tory strategy. Whether we like it or not, that is important, but, the UK currently sits 32nd out of 60 industrialised countries in the Barclays Capital Fiscal Vulnerability Index, and with the governments ability to raise finance, there seems little doubt that the case for the cuts has been overstated. 

The IFS's 'endorsement' comes in the shape of them confirming the government's assumptions. However, as I have attempted to illustrate, the IFS believes there are some serious 'downside' risks to the government strategy. They believe that there is a significant threat from high inflation and without 'roaring' growth it will be virtually impossible to control because it won't raise interest rates without damaging the economy.  

No u-turns?

Their conclusion? The BBC reported that at the press conference launching the report, Carl Emmerson, the IFS director, made it clear that the IFS believes that the Chancellor needs a Plan B. Both Barclays and the IFS, believe that this would boost market confidence. Only Mr Osborne disagrees. Even the US have delayed making cuts for another year. US Treasury Secretary, Tim Geithner, warned that premature cuts could damage the recovery. 

It is rare that you can get a consensus, but what commentators from all sides agree, is Osborne's position has more to do with protecting his own credibility rather than doing what is right for the UK economy. 

Should rapists get the vote?

After a hard day in court...  

What has the power to unite MPs from all parties in a chorus of disapproval? Opposition to NHS reforms? Join the waiting list and think again. Support for Egyptian protesters? Wipe the tear gas from your eyes and have another go. A rethink on the public sector cuts? Of course not, they would have to give up their place on company boards. No, the only thing guaranteed to unite our politicians in opposition is when a European Court of Human Rights decision goes against British courts. Political correctness gone mad is the cry as Johnny Van der Foreigner imposes another crazy rule (to be said in the manner of a stereotypical Dutchman) before, inevitably, retiring to the nearest hottub with some young friends. 


As you may know, back in November, the Coalition agreed to remove the ban on voting from 70,000 inmates. This followed a legal case brought by convicted murderer, John Hirst, who fought a ten year battle to get the ban overturned whilst serving a 25 year sentence for manslaughter. In an interview with the BBC Mr Hirst stated that once he decided to 'reform' himself, he recognised that the rights of prisoners needed reforming also:


"I was reading a piece in a book where it said that there are no votes in prison… it inspired me to find out why and I started studying the suffragette movement, things like that and I thought there's no valid reason why prisoners shouldn't have the vote. So once the Human Rights Act came in I decided to go for it. I really believe in [this campaign] and someone has got to protect vulnerable people in society and prisoners are very vulnerable. They've got no vote so therefore no voice in parliament. All they can do is riot."

Mr Hirst

In 2005 the British government lost their appeal after Mr Hirst won a landmark decision in 2004. After failing to comply, in 2010 the ECHR gave the government a three month deadline to apply the ruling. Why the government dragged its feet on the issue was made immediately clear by 'Ian Huntley gets the vote' style headlines, which have provoked Jack Straw and David Davies to force a vote on the issue. In the current climate it is unlikely that the Commons will pass a proposal that could grant 1700 sex offenders and 6,000 violent criminals the vote. David Cameron has said that the prospect makes him feel "physically ill". So there is a silver lining. 


It's interesting that amongst all the rather distasteful policies being pushed through, the thing that really gets our MPs exercised is a civil liberties issue. To put the matter in some perspective, we should consider that only Romania, Bulgaria and Armenia, those 'lands of the free', also impose a 'blanket ban' on prisoners voting. Germany, France and Italy all allow most prisoners to vote. If you look beyond the headlines, the issue is not really about stopping prisoners voting, it is about imposing an arbitrary rule upon all prisoners and not addressing them as individuals. It's a pretty important principle. Not long ago our courts assumed that every Irishman was a terrorist. Now they assume that only a few of them may be. It has improved the quality of justice in our courts no end. Perspective is a powerful thing. 


Prisoner voting has been banned since the Forfeiture Act 1870. At that time there was no attempt to reform prisoners, they were simply removed from society. I'm sure many would approve of that logic but nowadays only a handful of prisoners will remain in jail for life. Juliet Lyon, from the Prison Reform Trust, has commented that, 'alienation from mainstream life and the reluctance to take responsibility are major springboards for crime, therefore, whatever can be done to encourage prisoners to become participating members of the wider society should be.' Judges have speculated that the solution will probably be for judges to make a ban on voting part of the sentence, or give all prisoners the vote when they become eligible for parole.  


David Davies has claimed we are in a 'constitutional crisis' and has said, "I yield to no one in my defence of human rights, but giving rapists the vote is not human rights." Well, technically, it is human rights but I know wheat he means. In terms of the 'constitutional crisis', is the EHRC staging a coup and riding roughshod over our ancient democratic institutions? Given that the two Governments have had six years to bring this matter to a vote and have refused until being given a deadline by the ECHR, it is a bit rich to talk in 'crisis' terms. 

Two world wars, one world cup and one
European Court of Human Rights decision

We are a long way off having a fat central European Monarch being imposed on us as a new Head of State (again). However, if the MPs vote against the proposal then it may come to that because the Government really don't have many options. Especially since the Tories' rabble rousing manifesto promise, to amend the Human Rights Act, seems to have slipped off the campaign table into the box marked, 'Gullible Tory Voters.' Yes, you lot have been lied to as well, so don't be so smug. Also, given the dire economic circumstances, Tories everywhere should support the change. After all, it has been estimated that not implementing the appropriate legislation will provoke £160 million of damages to prisoners. 


Can you imagine the Daily Mail headlines? 

The green shoots of recovery

As part of my continuing programme to occasionally look on the Mr Brightside: Things Can Only Get Better.

Somebody grab Osborne! The first green shoots of recovery are visible and becoming stronger every day. Missed by the national press and ignored locally - I am able to confirm evidence of growth against the current gloomy backdrop. Hope! It counts for a lot and when things look particularly bleak, you have to hold on to any sign of regeneration, no matter how unpalatable. That is joy of rhubarb.

What can rhubarb teach us? One of the many pleasant aspects of having an allotment is that during the worst part of the year, when the cold is as bitter as the Christmas credit card bills, without fail, the rhubarb provides a gentle counterpoint to the general decay and desolation. Spring may still be months away and the Bathavonton growing season, on the dark side of the valley, even further away, but my rhubarb provides just enough encouragement to get me out and start preparing our vegetable plot for another year.

Ironic that it's rhubarb. Not the most fashionable vegetable. Yes, vegetable. Only in New York - thanks to a legal case that was fought to uphold a tax dodge, is rhubarb legally a fruit. But surely a fruit in all but name - Laura Ingall Wilder of Little House on the Prairie fame called it the "pie plant" - how else do we eat it, if not accompanied by a ton of sugar and preferably with a crumble topping? But it's not everybody's first choice.

I remember being completely shocked to be offered a rhubarb dessert only minutes after my older cousins had explained that it was the most poisonous thing in the garden...and my parents were encouraging me to eat it! After this close shave with death I made it a policy for the next twenty years or so to avoid all contact with rhubarb. Unless you are from the 'Rhubarb Triangle' of Leeds, Morley and Wakefield - where rhubarb,  grown in dark sheds, grows so fast you can hear it and they pick it by candlelight - it's unlikely the thought of rhubarb provokes too many strong feelings, apart from a slight sense of guilt.

Unlike everything else, which needs regular love and attention, my two rhubarb plants seem to thrive with no help from me at all. They die with the first frosts, completely disappear, and then break out again each year with renewed vigour despite me devoting no time at all to their care. And that first crumble tastes so good. Especially because you have done nothing to deserve it. It's like a payment on account for all those more needy crops you'll lose to pests and diseases.

What an advance it is. By April, when hardly anything else is growing out of the greenhouse, you will be completely overwhelmed. I admit, the children can become mutinous. Even I have a limit. Thank goodness, therefore, that friends and family love being given rhubarb (as long as they don't have their own rhubarb plants, of course). They love it and, if you check out the price in the supermarkets, they think they are getting a bargain too. Only the slight twitch and relief on my face would give the game away. Oh, and writing a post about it.

I don't pretend to have any great aspirations for my allotment, beyond moments like these. Despite my regular Felicity Kendal fantasies, we'll never be self-sufficient, I don't really understand the technicalities of organic growing, although I try not to use any chemicals and I would really love to learn to just grow vaguely recognisable produce. We ate the last of our Savoy cabbage, leeks and parsnips last week and, given my time, seeds and a few bits kit, I suspect that they were not much cheaper than the supermarket.

I'm not sure that is the point. Those veggies gave the family and I a lot of pleasure; from planting to my four year old washing the last of the rather deformed looking parsnips, it beat watching the TV or any of the indulgences to which I am far too easily prone. There was quite a lot of work involved and hope this doesn't sound too trite but it felt like there was something human about the process. Why? Because whether it is growing veggies, making a pot of jam of some produce or simply having a chat with the other plotholders, I felt like we were creating and not consuming. These days that is possibly one of the biggest political statements you can make.

Got to go, that nice down to earth Old Etonian, Hugh Fearnley-Whittingstall, has made a new TV series based on his latest book about his exploits about buying a farm in Dorset.