In his article, Matthew d’Ancona (Osborne’s coup: converting Labour to fiscal conservatism, 22 June) accepts the conventional wisdom that Labour’s prodigal spending after 1997 made worse the global financial crisis a decade later. He quotes David Cameron asserting in 2010 that Labour had “maxed out its credit card” and Chuka Umunna’s rueful question: “If government can’t run a surplus in the 15th year of economic expansion, when can it run one?” The fact is that debt-to-GDP ratio fell from 42.5% in 1996-97, the year Labour took power, to 35.9% in 2006-07, the year before the banks failed. Moreover, no government surplus, however large, could have funded the £300bn exposure the UK government was forced to take on to keep the banks open, nor the fact that when, as a direct result of the bank failures, GDP fell 6% in 2009-10 – one of the largest and fastest falls in history – and tax take fell 18%. This was what caused the deficit, not prodigal spending on health, education and welfare, nor Labour’s failure to run a surplus.
Patrick Renshaw
Sheffield
• Matthew d’Ancona is of course correct about “George Osborne’s coup” in converting Labour to the false god of harsh fiscal conservatism. What is surprising is the utter lack of a robust counter-narrative, especially when there is an almost blindingly obvious response to the charge of New Labour economic mismanagement and excessive borrowing: just ask the bond markets. Was the bond market closed to New Labour? If not, then clearly the market gods sanctified New Labour’s economic credentials. A simple look at the interest rates of UK government 10-year gilts over the New Labour period should therefore be enough to win the argument.
The UK was no Greece. The interest rate on Britain’s benchmark bond fluctuated sedately and relatively narrowly over the entire period of New Labour rule, even as government debt remained virtually flat as a percentage of GDP. The slight bump in rates in 2007 came as a result of the Bank of England’s monetary contraction in trying to cool off a booming economy rather than a bond market reaction.
It might chafe those on the left to cite market reason as evidence of sound economic management, and financial markets are of course far from rational. Yet the tactical use of market evidence against the Tories puts them in a bind. Either they would have to deny the rationality of the markets, thus entirely abandoning the case for so-called sound finance, or confect a convoluted reason as to why the bond markets didn’t bark. Either way, Labour would be turning Tory weapons against them rather than agreeing to play by their damaging rules.
Dr Anush Kapadia
Lecturer, international politics, City University London
• The whirring noise that Matthew d’Ancona can hear in his ear is the sound of John Maynard Keynes revolving in his grave at d’Ancona’s contention that George Osborne has managed to traduce Keynes’s deep insights merely by endlessly repeating a lie. A truly great politician (think Franklin D Roosevelt) – of which we are today desperately short – would have sought to convince the public that their “commonsense” view that government spending in a recession was wrong was itself misguided. Instead, Osborne and the rest of the coalition, assisted by the rightwing press (ie most of the press), merely used people’s gullibility for their own nefarious ends. D’Ancona should be presenting this as dishonest rather than clever.
David Quinn
London
• We now know (The vicious cycle of inequality that must be broken, Larry Elliott, 22 June) that one half of the IMF (the economists) believes that inequality damages the economy and supports investment in education, an enhanced role for trade unions and higher taxes on the rich. The other half (the financiers) goes on demanding measures that add to poverty, hit growth, and make inequality worse. We know which IMF the chancellor supports. Is there any chance that any of the candidates for Labour leader might back the economists? Larry Elliott lists 15 measures that together would reverse the slide to inequality and destructive wealth extraction we have seen since 1980 or so. The simplest include making a living wage the minimum wage; a regularly updated and progressive property tax; a wealth tax; and a 65% top rate of income tax. It is clear that the US and UK functioned better when top rates were around 80% or above, so 65% is extremely modest but might be sufficient. The economic case is overwhelming if the aspirations of ordinary people are to be met. So Mr Burnham, Ms Cooper, Mr Corbyn, how about it?
Richard Gravil
Penrith, Cumbria
• Larry Elliott has set out the case for the end of neoliberal economic policy very clearly. As he says, the IMF, the Organisation for Economic Cooperation and Development, the World Bank and the World Economic Forum have all recognised that inequality is a threat to economic stability. And austerity – the policy opposed by 250,000 marching on the streets of London on Saturday – is a discredited, failed approach, even on its own terms.
Referring to the work of author Tony Atkinson, Elliott lists seven of his proposals for the UK to tackle inequality. Among them, five were in the Green party manifesto: a minimum wage set at the level of a living wage, a wealth tax, a universal basic income, replacement of council tax, and a rise in the top level of income tax (he said 65%, we said 60%).
These won the backing of more than 1.1 million voters – many of them first-time voters for the Green party – although as a result of our outdated electoral system their choice is represented in parliament by only one MP – Caroline Lucas. As Elliott says, these are bold changes but necessary ones – the economic status quo, as championed by our current government, is not an option.
Natalie Bennett
Green party leader
• Suzanne Moore’s excellent article (However you twist the figures child poverty does not exist in some vacuum, 25 June) misses one point. David Cameron is quite right that the method of measuring poverty becomes distorted over time. The incomes of families have and are being depressed by the austerity imposed by the governments he has led since 2010. This means that 60% of average earnings is now considerably lower than it was five years ago, which means that the number of children in poverty is exponentially larger than government figures show.
Let’s look at another measure. Trussell Trust statistics show that 46,018 children were provided with emergency food in the financial year ending 2012. By March 2015 the number had increased to 396,997 children – more than eight times as many in just three years. These figures demonstrate the shameful impact of government policies on our children. And people who are forced to use food banks in order to feed themselves and their families are but the tip of the poverty iceberg.
Brian Fullaway
Kings Worthy, Hampshire
• Matthew d’Ancona’s claim is presumptuous, but deserves an answer. The fundamental point is that austerity is the wrong way to cut the deficit, for three reasons. It flattens growth by squeezing demand out of the economy, which is exactly what happened in 2012 after two years of Osborne’s austerity which forced him to backpedal on cuts in order to kickstart the economy into a (temporary) surge of growth in 2013 by printing money galore (QE) and setting off another housing bubble. The same is about to recur, as growth has once again petered out with the last quarter’s rate plummeting to 0.3%.
Second, austerity is ineffective in cutting the deficit. Alistair Darling’s economic stimulus in 2009-10 – the right way to deal with the deficit – cut it from £153bn in 2010 to £113bn in 2012, a huge reduction of £40bn in two years. Osborne’s austerity package then kicked in, and the deficit began to rise to £125bn at the end of 2012. Only when Osborne was forced to reverse engines in 2013 did it start to go down again, to £99bn in 2014, a feeble net reduction of just £14bn in two and a half years. The record makes it as plain as a pikestaff: austerity doesn’t work, growth does.
Third, given that Osborne has so far cut the deficit by an average of only £7bn a year, his claim that he will eliminate it altogether by 2018-19 is plain delusional. On his past record it could take him to 2028. Even this leaves out the grotesque injustice that very painful cuts are now about to be imposed on the bottom half of the population to atone for the arrogance and incompetence of the top 1%.
Pace d’Ancona, Labour has not converted to fiscal conservatism. Rather it has pusillanimously succumbed to the prevailing ideological canard about deficits. It’s high time the Labour leadership contestants now stood up and told the truth: Osborne’s austerity has been a disaster and should be jettisoned in favour of an unqualified commitment to growth.
Michael Meacher MP
Labour, Oldham West and Royton
• George Osborne has borrowed about £2bn every week, more than the three previous governments together, even allowing for the 2008 US induced financial crisis and the purchase by Gordon Brown of sizeable parts of major banks during his office.
In fact, the sum borrowed over the last parliament is the highest in history and more than it costs to run the whole of the NHS for the five-year period. (You could say the NHS has been run on borrowed money for the last five years, not a comforting thought.)
Selling cheap part-state-owned bank shares is to try, by any means, to reduce borrowing. Likewise, the cutting of tax credits. But £12bn will barely cover the interest on the £500bn that Osborne has borrowed – and it is still at record levels.
Cliff Billings
Droitwich Spa, Worcestershire
• Larry Elliott records 15 proposals for reducing inequality in the UK. May I add a 16th, which would also contribute to reversing intergenerational inequality? Pensioners’ freebies like TV licences, heating allowances and bus passes should become taxable benefits for those with incomes above, say, £30,000pa. Many of us better-off pensioners from professional and managerial backgrounds have in recent decades benefited from three unearned financial windfalls. First, by living on average 10 or so years longer than our occupational and state pension contributions allowed for, our later years are being financed largely out of taxes and pension contributions from the younger working population. Second, many of us have received unearned capital gains in real terms from house-price inflation. Third, the real burden of our mortgage repayments was whittled away by the high inflation rates of the 70s and 80s. Hence there has been a redistribution of income and wealth in favour of better-off pensioners, at the expense of the younger generations. Let us at least claw some of this back.
Lawrence Lockhart
Bath
• The Labour party could hardly do better than adopt Professor Sir Tony Atkinson’s proposals, commended by Larry Elliott. Even if Tory cuts are broadly popular, public opinion has also shown itself in favour of policies against inequality. They would also be more effective in dealing with the economy than cuts would be. Too few yet grasp that cuts are about the drive to hack back the state, not the economy. Perhaps Labour could show some political initiative by questioning whose state it is and adopt Atkinson’s proposals as economically sophisticated and credible steps towards the reply: “It’s all the people’s state, not George Osborne’s.”
John Veit-Wilson
Newcastle upon Tyne
