Philip Hammond has admitted that seven years of obsessing about the public sector deficit and shrinking the state has left the economy enfeebled and smaller than before the crisis. But he continues to put ideology above evidence
The last seven years has been an experiment in politics; testing a hypothesis about whether you could lop your way to growth. Philip Hammond’s budget suggests that you cannot. The government’s argument has been that only a programme of rigid deficit reduction and public spending cuts would heal a sick,bloated economy. The damaging consequences of that strategy were laid bare by the Treasury nowadays. Rolling back key public services and declining to invest for the future has meant the economy is smaller than it was forecast to be. Even worse, it has become enfeebled, and unable to grow as fast as it historically has done. The result is a poorer,more indebted British state less able to act in the name of economic justice: the higher pay pledged to low-paid workers by the government under the national living wage scheme won’t now materialise when ministers had promised. The UK has experienced nearly a lost decade of stagnating wages and shrivelling the state. It is true that Mr Hammond can say that the economy is now recuperating. But the nation has not recovered its pre-crisis vigour. Nor can the chancellor say when, or if, and it ever will.
This budget represents a missed opportunity for Mr Hammond to reset the narrative and build up much-needed political capital with his own side by signalling a recent direction about where the government is going. What he did in an hour-long speech was to please neither the state-shrinkers on the Conservative backbenches nor those critics who propose he should fire up growth with the immense bazooka of public spending. Instead the chancellor produced a pea shooter: announcing the only post-election giveaway budget since the millennium by borrowing an additional £14bn over the next five years. More cash for an industrial strategy,infrastructure investment and hi-tech research should be welcomed. As should Mr Hammond’s attempts to tax internet giants, which contrasts with his silence over the recent revelations of offshore tax avoidance.
Continue reading...
Source: guardian.co.uk