The Thick of It


Thursday, October 06, 2011

#cpc11 Cameron & Osborne have no plan B, sort of

The key messages of this week's Tory conference were that the government will stick forthrightly to its debt reduction plan. There will not be any loosening of the purse strings in an attempt to stem the nosediving growth figures.

That much was to be expected. The deficit reduction programme overrides everything else. It seems that it does even when the IMF, economists suck as Irwin Stelzer and the public think it is the wrong approach. Put simply, cutting government spending so sharply has turned off the life support to may parts of the economy. That  means companies lose income from government contracts, rising unemployment means government is paying to support people rather than having them pay taxes.

That George Osborne has allowed the Bank of England to enact another raft of quantitative easing today is very surprising. I'm pleased he did, but it is far from expected. Osborne's single track approach to our economic woes has been to focus on cutting spending and getting the deficit down. Nothing else. He hasn't shown much concern for collapsing consumer demand, so anything like this that seeks to stimulate is, isn't from his manifesto.

Politically this shows Osborne's weakness. While we've seen a show of confidence and strength from the Tories in Manchester this week, scratching the surface reveals a worried party. The Tories are worried that the economy won't get better by 2015. If that happens then nobody will thank them for their harsh medicine of austerity.

Their worries about popularity have led to U-turns on the NHS and now quantitative easing. In 2009 Osborne said:

"(quantitative easing)  an admission of failure and carries considerable risk"

You can see for yourself what Osborne thinks of his own policy on the Conservative Party website. At the very least you'd have thought someone would have thought to take it down to hide a bit of embarrassment before announcing their U-turn and show of weakness wouldn't you? 

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