The Government is running out of excuses

25th November, 2011 9:44 am

“It’s a hard road to a better Britain, but we’re on the right track” were the words David Cameron used a year ago to justify their economy-crushing austerity measures. Yet the Government’s assertion, with unemployment at a 17-year high and more than a million young people out of work, that it may be hurting but it is working flies in the face of mounting evidence to the contrary. In the autumn statement next week, George Osborne will be forced to admit that as growth has all but evaporated, he will have to increase his forecasts for government borrowing.  The plan is definitely hurting, but it isn’t working.

The Office for Budget Responsibility (OBR) has already said that government borrowing over the course of the Parliament will be over £46 billion higher than the Government had planned.  And this figure is set to rise next week when we get the OBR’s new forecasts.  If they are in line with the average of independent forecasts, published by the treasury last week, then the Government could be set to borrow over £100 billion more than planned.  Shadow chief secretary, Rachel Reeves, has rightly argued that these forecasts expose the myth that the Government’s reckless economic plan is working when in reality it is backfiring badly.

This is precisely why we need a plan for jobs and growth. As Labour has set out, there are five clear steps the government can take immediately. First, a £2 billion tax on bank bonuses would fund the building of 25,000 new homes and create some 100,000 jobs for young people.  Second, bringing forward long-term investment projects would help get people back to work and strengthen our economy. Third, reversing January’s damaging VAT rise would help high streets as well as struggling families. Fourth, a one-year cut in VAT to 5% on home improvements would help homeowners and small businesses. And finally, a one-year national insurance tax break, for every small firm which takes on extra workers would help small businesses grow and create jobs.

The Conservatives blamed the impact of the previous global economic crisis – the collapse in tax revenues that followed the banking crash – on the last Labour government. This is the ridiculous assertion that, as Ed Balls has summed up so well, somehow Lehmans collapsed in the US because Labour built too many schools and hospitals.  It is a supreme irony that the Tories are now blaming the impact of their own decisions – the fact that growth has all but disappeared in the last year, as the spending cuts and tax rises have gone too far and too fast – on a global economic crisis, principally on what has been happening in the eurozone.

David Cameron argued at PMQs earlier this month that the tiny growth figures should be welcomed amid “a global storm in the world economy”.  And touring the TV studios last week, the employment minister Chris Grayling, said the surge in unemployment was the “fault of the eurozone”.

The truth is the British economy slowed down well before the current eurozone crisis. Figures from the Office of National Statistics show that exports from the UK to eurozone countries in the third quarter of 2011 actually increased by 17% compared to the same quarter of 2010. The last time youth unemployment fell was between February-April 2011, well before the onset of the current eurozone crisis. The Lib Dem peer and former coalition treasury spokesman Lord Oakeshott put it rather well last week when he said:

“It is ridiculous to blame these figures on the eurozone crisis as any economist will tell you it would take between six to twelve months for its effects to have an impact on unemployment here — unemployment lags behind economic indicators.”

Treasury minister David Gauke tried to claim recently on Newsnight that the UK had grown as much as the US.  But the truth is that over the last 12 months the UK has grown by 0.5% (compared to 2.6% in the previous 12 months) while the US has grown by 1.5%.  In fact, over the last year, only Greece, Portugal and Cyprus have grown more slowly than the UK in the EU and only Japan in the G7.

In opposition, David Cameron criticised Gordon Brown for saying the global economic crisis was to blame for the worldwide recession, arguing instead that it was a recession made in Downing Street.  But since coming to power, this out-of-touch Government has become a government of excuses. First they blamed the Labour party. Then they blamed the Royal wedding and even the snow. Now it’s all the fault of the eurozone crisis. Next they’ll be blaming the strikes, if they go ahead next week.  But the government is fast running out of excuses.

The next few weeks will see a number of office Christmas parties taking place in Whitehall. As the mince pies and sherry are being dished out at their bash this year, no doubt the treasury will be reverberating to the traditional sound of Dean Martin’s Let it Snow and Bing Crosby’s White Christmas. As the evidence mounts that their economic plan is failing, I bet George Osborne is carefully studying the weather forecasts, as well as the markets, this year and hoping for an unusually white Christmas.

Michael Dugher is Labour MP for Barnsley East and shadow minister without portfolio

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