Wrong on the recession, wrong on the recovery: Darling turns up the heat on Osborne

By Mark Ferguson / @markfergusonuk

Writing in the Observer today, Alistair Darling attacks the thinking behind the cuts agenda as we head into “emergency budget” week, and outlines what he believes will be the headline policies – a VAT rise and benefit cuts, as well as the ideological notion of “seesaw” economics. Darling writes:

“The chancellor’s proposal of quicker and bigger reductions in government borrowing rests on the belief that, if the public sector comes down, the private sector automatically rises – the seesaw. If government spending falls faster, the private sector grows more quickly to fill the gap. But in times like these, this is wrong. It is not inevitable that the private sector steps in when government cuts back. That’s why government had to support demand when confidence in the private sector drained away after the financial crisis. And it is why we must now avoid derailing a fragile recovery. There is nothing sacrosanct about the numbers the state employs. With recovery more will work in the private sector.”

Darling also alludes to an emerging line also being pushed by leadership candidates – that comparisons with Greece today may be wrong, but comparisons with 1990’s Japan could be apt in coming years:

“There is a seam of orthodox economists, and rightwing politicians, who have believed that the simple act of cutting public sector jobs will create them in the private sector – that because it can be written as an equation the real world must fall into line. But, as the Office of Budget Responsibility notes, the recent past teaches us that government support for demand can make a difference. This is not a zero-sum game. The more distant history of Japan in the 1990s and Britain in 1931 provides a lesson in what happens if you get this wrong. Removing demand when the private sector cannot pick up the slack leaves economies bumping along the bottom.”

Darling has already announced that he will be moving to the back benches after the leadership race and shadow cabinet elections. This week may weel be his last hurrah as a front-line politician, and he will be determined to defend his record.