Sunday, 3 May 2015

How will economic historians judge this UK government?

So, now that this Parliament is over, how will economic historians judge the Government's policies?

Well, if we're any judge here, pretty harshly. The Conservative - Liberal Democrat coalition went all out to shape economic policy around a political falsehood - that Britain was 'on the verge of bankruptcy', that 'there was no money left', and that Labour had 'overspent'. So they spent the first two years of their tenure making all the wrong noises if they wanted the economy to recover - exactly the same mistake (if you want a non-partisan viewpoint) that Harold Wilson, Jim Callaghan and George Brown made when they arrived in Downing Street during October 1964, duly proceeding to shout about how bad Britain's trade balance was to paint the Conservatives as a bunch of incompetents - and in so doing making things worse.

Don't get us wrong. Clearly spending reductions were required. But the Coalition set off like a rocket, trying to get the UK into total budgetary balance in one Parliament. This was never going to happen. It was a total fantasy that did a great deal of damage to the UK's financial reputation. And all for what? To preserve the country's triple-A credit rating, which we lost anyway. Then, in 2012/13, seeing how disastrously things were going, Chancellor George Osborne (above) performed one of the most skilful and successful U-turns of all - going straight back to Labour's plans for the Parliament of 2010-15, while claiming that they had been his 'Plan A' all along. Well, they weren't. He fell back on Plan B, as his increasingly monotonous and unconvincing repetition-by-rote of this particular intellectual fraud make quite clear. It was only then that the economy started to grow - proving that the critics of 'cuts' had been right all along.

And the worse thing about all that? Before Mr Osborne discovered his recent zeal for big infrastructure projects (High Speed Rail 2, for instance), and before he started talking about Manchester as a 'Northern Powerhouse' all the time, the main thing that the Coalition cut in the first half of its tenure was infrastructure spending - at least proportionately. At a time of historically low interest rates, when demand was sagging and Britain was crying out for some replacement work on its creaking roads and rail network, the Conservatives and Liberal Democrats actually cut physical investment. Well, super work.

The emerging consensus about the Conservatives' last long period in office is that some of the micro-economic reforms effected were necessary and productive - but that macro-economic policy was often mad, bad and dangerous to be near (in 1980-82 and 1988-92, for instance). This time things are rather similar. There have been some interesting (but expensive and complicated) initiatives to try to lever foreign direct investment into UK research and development clusters, to match dynamic developing countries' desire to find places to invest with the UK's dire need for spending, and at least to ringfence the science and research budget at a time of great budgetary stringency.

It's in most ways a miserable performance, with employment buoyed up by absolutely miserable labour productivity that means that Britons are stuck doing jobs they would rather not. What a story, eh? Unemployment fell, because everyone had to work the coffee machines that continentals can work on their own.

There are some points of light, and the Chancellor must get at least some marks for reversing engines when he was clearly taking the economy off a cliff. But it's thin stuff to set against two years of wasted efforts - and a host of micro-economic mistakes that can only be put down to crude populism at best, and sheer nihilism at worst. University tuition fees that'll cost more than leaving well alone would have done. Getting in private contractors to run large chunks of the welfare system - including a Work Programme that didn't work, a Universal Credit that crashed and burned and a Work Capability Assessment that seemed to spend more money re-running tests and punishing people than actually helping people find meaningful work.

What would we give this government? Three or four out of ten - a generous mark that shows just how soft we've become in our old age.

But you know what? It'll probably be just about enough to carry on in government after next Thursday. The line about 'cuts' being 'necessary', pressed home by an obedient press, worked - as Labour leader Ed Miliband's grilling on the BBC's Question Time last week demonstrated all too well. Labour will probably have to regroup in Opposition, around a new leader, having lost most of its seats in a previous heartland - Scotland. The only consolation will be that the Prime Minister, David Cameron, won't have much of a mandate (or a majority) either, even if he can rely on the Liberal Democrats and the Democratic Unionists to back him in a confidence vote.

No-one ever said that life was fair.

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