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Thursday, December 6, 2012
Age of austerity stretches out for UK - but there is no turning back, writes Richard Porritt
BRITAIN is on the floor.
But she is, bloodied and beaten, crawling in the right direction - however slowly.
The big question is would we be any better off if the bitter pill families and businesses are being force-fed was prescribed in a different way, in different doses?
Anyone who was feeling slightly more rosy after the country clambered out of recession was yesterday left in no doubt about the perilous situation everyone still faces.
The finances have not been worse since the Second World War and in all but the bloodshed on foreign fields the current situation is akin to a global conflict. And the human impact remains palpable.
The five-year plan to turn around the economy – which many winced at when it was announced – now stretches on seemingly in to the distance future. This Christmas, like the last one and undoubtedly the next one, is going to be tough for families up and down Britain.
There is now no doubt that a generation of children will grow up with memories of the “age of austerity” littered with desperate parents, visits to food banks and the deep scars of missed opportunities that will impact the rest of their lives.
Chewing over the causes and flinging blame at bankers – where is their industry defining inquiry? – is next to pointless. Now is a time to decide if the cuts being dished out by the Coalition are working. The gloom of yesterday’s announcements in the Autumn Statement suggest it is not working quite as hoped but that does not necessarily mean a radical change of direction is needed.
There are elements to be applauded. The plans for infrastructure investment – backed by making it easier for private funds to underpin the projects – has long been called for in this column. Chancellor George Osborne claimed the measures were a “revolution” in infrastructure investment in which the public finances can now share in the profits not just the dangers as was the case, he claims, under the “discredited” PFI programme.
The £5billion worth of proposals include more new schools, an extension of the Northern Line and High Speed Rail 2, and upgrades for the A1, A30 and M25. All good news that will create jobs and in time some wealth – but why has it taken so long and where is the much needed air capacity expansion? Shadow Chancellor Ed Balls is right to point out that the Prime Minister has been banging on about infrastructure improvements for some time now but work never seems to begin.
Mr Osborne also not only delayed the 3p fuel increase planned for January but scrapped it altogether. That move is good news for many but also a shrewd political decision which will in the grand scheme have only a tiny impact either way.
And small and medium businesses will be pleased with the corporation tax cut and the significant increase in relief on capital assets up to £250,000.
But there was no more good news. For the most part it was wall-to-wall, page-after-page, chock-a-block gloom. Britain knew it was never going to be easy, but no-one thought it was going to be this hard. Will the struggle be worth it? No one seems to know. The Office of Budget Responsibility cannot even be sure if the shifting targets will stay still long enough for anyone to hit them. After the statement the OBR said it predicted the Government had only a 50-50 chance of meeting its broad new targets - a coin toss.
It was not a day for laughs but there were hearty guffaws when the Chancellor stated: “It is taking time – but the British economy is healing.” It certainly does not feel that way.
The Chancellor wanted the message to be “we are making progress” - well yes but that is a bit like a football manager popping open the Bollinger in the changing room after a 4-0 drubbing because last week the opposition netted five.
Targets are being missed badly and promises are being broken. The Prime Minister and his neighbour in Number 11 hope that although they are failing the public will conclude any change in the hand on the tiller will only unsettle things more. And a stumbling performance from Mr Balls in reply to the Chancellor – which included a frankly toe-curling gag to which the punchline ran “I am the Chancellor …. get me out of here” – will have done very little to convince voters otherwise.
This mini Budget was a raid on the three Bs – benefits, bureaucracy and the better off. Few will argue that Whitehall needed to be modernised and savings can still be made there. Voices of disdain about raids on the super-rich are few and far between but at the other end of the income spectrum things are not quite as black and white as the Tories would have us believe.
The average yearly wage increase has hovered around 1% for some time now so there is no reason why benefits should be climbing by more than double that. Pinning those hikes back to something more in-line with everyone else is admirable.
And the Coalition’s clampdown on the work shy, malingerers and the down-right lazy continues at pace. But any moves to punish people getting more than they deserve will have casualties. Those at the very bottom always suffer the most. It is sobering and flabbergasting at the same time that in 2012, in one of the world’s richest countries, soup kitchens and food banks are opening quicker than new businesses.
The excellent work Tony Blair began when he was in Number 10 to lift Britain’s children out of poverty has been all but eroded now and desperate people will continue to have to sleep in their cars - these cases exist - because they cannot afford to commute to work each dayb even after the 3p rise being scrapped.
Reacting to the statement Skills Minister and West Suffolk MP Matthew Hancock said: “The size of the crash was bigger than we thought. These are difficult times – what we have to do is be very frank with people. Crucially borrowing and the deficit are coming down.
“The reason that we can be confident we are doing the right things are the deficit is coming down and job creation is reasonably
“The opposition says things are not happening quickly enough so we should borrow more – which I don’t think anyone agrees with.”
And the raid on benefits? “I do think it is fair to hold down increases. Those going out to work are the people who pay for benefits.”
What if the deficit was still spiralling further out of control? What if borrowing was continuing to spike unchecked? You cannot run an economy like you run a household budget so simply cutting back here and paying down the credit card is not the way out for Britain. But the principle of not making it any worse must now be accepted as a sensible one.
Britain has little choice but to back Mr Osborne. The country has gone too far down the road for other options. The public chose quick and painful rather than less quick and less painful when they did not vote Labour back into power in 2010.
The only aspect that has changed is the side-effects have been revised: Very slow and very painful.