Yesterday was the day that the Coalition became a majority Conservative Government. There is little identifiable Liberal Democrat influence on this Government any more in any significant way. With the hammer blow of the withdrawal of the loan offer to the Sheffield Forgemasters, the Government showed that it has taken leave of its senses. By facilitating investment it could have created a role for Sheffield in a low carbon future providing jobs in the process. But nothing escapes the cuts machine.
Cuts will happen though all the mood music on the deficit is better than expected as Fraser Nelson pointed out yesterday. Deficit reduction is absolutely necessary and unavoidable- when the time is right. Better forecast deficits do mean that masochistic cuts- like the Forgemasters loan, the abolition of the Future Jobs Fund, the 2 year Job Seekers’ Guarantee and the 6 month young persons’ guarantee- can be avoided for now until there is a better sense of how the economy will go.
Government expenditure or investment (the Forgemasters cash was a loan for goodness sake!) that keeps people in work or invests in current and future growth should be protected. Absolutely. But these are no longer the calculations that are being made. It’s about the deficit and nothing else.
And it’s clear what is going on to anyone with eyes in their head. Despite better deficit forecasts and undershooting the cuts are going deeper and deeper and becoming more and more damaging. And next week we’ll get tax rises that hit the poorest hardest too it would seem. What is going on? Well, George Osborne is deliberately administering pain now so that he can cut taxes later. And who will those tax cuts focus on? You can bet that the top rate of tax will be the first to go followed by an increase in inheritance tax thresholds that are targeted on the wealthy few and maybe a marriage tax credit too? All these things are regressive in their impact.
We will all have to pay for this in lost growth and economic output. And the least well-off will pay as they they lose their jobs and social support. It’s cynical and the Liberal Democrats gleefully collude in this. This isn’t a Coalition. It’s a Tory Government with Liberal Democrat Ministers. And it’s becoming clearer by the day.
June 18th, 2010 at 12:32
Yep. They’ve given up the new era/new politics stuff and they’re charging unashamedly back to the 1980s.
The CIPD is now forecasting 3m unemployed this year.
3m unemployed – sound familiar?
Any minute now, we’ll be seeing Thatcher in No 10. Oh, hang on….
June 18th, 2010 at 13:04
A lot of these pre-Budget cuts seem almost designed to increase youth unemployment, I truly don;t know what they’re thinking.
And the Sheffield thing was interesting – it’s almost as if Clegg has been forced to prove his commitment by agreeing to single out his own home turf for special harsh treatment.
June 18th, 2010 at 14:23
No jobs were actually cut. They were speculattive and were equivalent to GBP500,000 per job. Pretty expensive. Are you suggesting that the country should be subsidising the nuclear industry?
With it being Clegg’s seat it shows the Government is serious about cutting the deficit and getting the UK to live within its mean. I can see why you are surprised by principled Government decisions after 13 years of spin and Mandelsonian politics.
June 18th, 2010 at 14:37
That’s a pretty disingenuous point re jobs Mike. And as the article makes clear it wasn’t a subsidy.
June 18th, 2010 at 14:40
Is it disingenuous to point out that no-one is losing a job. Yes some are not being created with public subsidy. A loan, but why cannot the company get a loan from the bank? The interest rate was subsidised – anyway it is still very expensive and are you claiming we should be subsidising the nuclear industry.
At least you are not complaining about the National Coalition Government cutting wasteful spending like free swimming lessons.
June 18th, 2010 at 14:46
You and Labour like to say we should cut our deficit at the RIGHT time. Everyone agrees, but when is the time right to cut the biggest deficit in the world (after Ireland). Bigger than France, Germany, the US and others. Why did we have a deficit of over 10% of GDP especially when unemployment stayed below 3 million (for now). We have been overspending for too long. Some will say raise taxes – do you propose raising them by GBP150 billion? Why didn`t Labour, when they had the chance in 13 years, raise them sufficiently since we have run a deficit ever since 2002 (that covers many “good” economic years and predate the global recession).
June 18th, 2010 at 14:53
Cutting spending that harms current employment and future growth is daft.
Social programmes like free swimming are in a different category. Nice to have but non essential.
June 18th, 2010 at 14:55
And unemployment stayed low *because* of the stimulus/ labour market interventions. You’ve got the line of causality the wrong way round.
June 18th, 2010 at 15:09
Anthony – I agree that cutting jobs is stupid. However spending GBP500,000 per job is also stupid since you could employ more people on that. Or alternatively cut taxes and let people and businesses spend – thge private sector is the engine of growth. Teh public sector does not “create” wealth and only spends money created by the private sector. I am not meaning to denigrate the public sector because a lot of what it does is necessary and supportive of private sector growth.
Glad to see you agree that free swimming lessons etc are not essential.
June 18th, 2010 at 18:53
It’s not ‘spending’ £500,000 per job, because it’s a loan, so all it actually costs the government is the subsidy on the interest. Not much at all. It also creates more jobs than the ones directly at the plant, in the local economy and down the supply chain.
And of course the public sector creates wealth. Or do private education and private healthcare do something amazing that the state system and the NHS don’t, besides charging people to use them?
June 18th, 2010 at 23:24
Mike, the loan would have meant a UK-based company expanding to produce goods for which there will be growing demand both for domestic and export markets.
Creating jobs in tradeable part of private sector is important for rebalancing – the failure to give the go-ahead signals the coalition isn’t serious about industrial development. No wonder business confidence has slumped.
June 19th, 2010 at 23:53
I wonder how Clegg will justify to the great proportion of public sector workers in his constituency what he said to them before the election and what he is willing to do to them now.
http://www.twitvid.com/ERX9W
June 21st, 2010 at 13:57
Tom, the Government by definition does not “create wealth”. That is not to say it is not important in what it should be doing. However it is people employed by private companies who pay the majority of tax it is companies who pay corporation tax (don`t think the NHS pays that). It is private transactions like house buying (stamp duty) that contribute to the exchequer. Without the private sector there would be no tax revenue to pay for all the Government services – most of which can be provided privately (not saying they should be but they can be).