Thursday, December 06, 2012

 

Osborne wins Political Contest, Having Lost Economic Argument

Listening to the PM programme yesterday as I drove home on the motorway, I heard junior minister Michael Fallon and Baroness Cramer for the Coalition discussing the Autumn statement.The ultra-loyal Fallon, Minister of State in Business Department, you might expect to support Osborne's best efforts but his enthusiasm and complacency defied belief.

His initial predictions of growth when he first was assigned to Number 11, was 5.7% by the summer of this year. Actual growth? 0.9% with minimal extra  predicted by the OBR over the next two years. In 2010 he forecast debt of £60bn - actual figure when one-off figures are removed? £112bn. According to Larry Elliott, Osborne:

".... insisted that Britain was on the right track. What he didn't tell us was that it's a slow moving train, with expensive tickets and uncomfortable conditions for those travelling third class."

Yet, one has to allow, George did very well. Just like Fallon he managed to appear uber bullish and super confident. He played his rubbish hand as if he was holding three aces close to his chest and the trick worked, especially as Ed Balls blustered his potentially powerful position away. 

But if those three aces were Britain's triple A credit rating, then Fitch, the rating agency,  which prefers fact to rhetoric, warned that lack of growth placed this hugely valued accolade to our credit-worthiness, is now in deepest jeopardy. I fear that Alistair Darling's preferred strategy of cutting half as deep and fast as the Coalition is coming about by default in any case. The difference is, by not obliterating demand, Darling's approach would have produced the growth to actually reduce debt, not increase it..       


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