I Couldn't Care Less: Fool Economy

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A hypodermic needle and a vial

Fool Economy

Last week as I was writing I Couldn't Care Less1 the chancellor was announcing his autumn statement, which is to say what he is going to be doing with the money. It includes economic growth, forecasts for our GDP and borrowing and so on, as well as, crucially, spending. George Osborne argues that, since the economy is growing that his strategy of cutting expenditure is therefore working. The fact that we still have a massive and increasing deficit means, though, that there is still work to be done. So what's the plan?

Well, look, this is all terribly tricky because it's international economics, which I only understand a bit. My main fear with this is that there are enough numbers going up and down that it's very easy to claim that the ones going up are good and the ones going down are… also good. So the economy is growing, which I guess is good, but for my mind is only actually good when it impacts on the reality- how much money we have and whether the money we have enables us to buy the stuff we need. As a point of interest it's worth noting that the improvement is against the third set of figures George has produced, as it's actually a drop against either of the two sets of forecasts the treasury issued. This means that their forecasts probably need to be treated with caution. For example, our GDP turns out to have fallen by 7.2% in 08-09, not 6.3% as was previously thought. Small beer, perhaps, but it does make a difference of £112bn, which would buy you quite a lot of beer.

It doesn't get any less percentagey for a bit. Borrowing is still huge, however often anyone says ‘down' and yet somehow they are still managing to spend less money. Departmental budgets will be cut by around £1bn each for the next two years. That's a shedload of money, especially for, say, the NHS, who are struggling on the money they have already. It is true that sometimes if you're overspending it means you're not spending well enough, but it can also be true that you're overspending because you need more money. The NHS, as I think I have said before, is a huge behemoth, vastly expensive but surely as important as anything else this country is doing or will ever do. We have a population that is growing and ageing, and will be made to work for longer before claiming their state pensions. This is not going to ease pressure on the NHS, so budget all you want, the NHS will need more money.

My head, on this occasion, isn't totally in the clouds. There has been a big debate about the cost of living since Labour leader Ed Milliband used his party conference to announce his plan, if elected, to freeze energy prices. Well the Government had to respond to that, and they did. To ease our fuel prices they…. removed the green levy they placed on fuel companies. That accounts for just 10% of our fuel bills and was worth a whopping £440m to the taxpayer, but, y'know, we can't be telling private companies they can't charge what they want. You can call that weak kneed if you want to, and I do want to, so I am. On top of this there was the gross under-pricing of the royal mail when it was sold off, which probably cost us a couple of hundred million in lost income. Oops. But the Tory backbenchers had a clever retort to shadow chancellor Ed Balls when he pointed the cost of living out- the booed over him so he had to shout. Slick.

Anyway, this is all grist to my personal mill. Over the next two years the Department for Work and Pensions, which pays benefits for people too ill to work and for people too busy looking after the ill to work, will have to find another £2bn in cuts. The Department for Health will have to slash its budget by a similar figure. It's all economics at the cost of people. There's nothing much we can do to stop the cost of heating going up, or the cost of food. Our taxes may end up rising, our incomes (those of us that have incomes) aren't rising in line with inflation and our benefits (those that get benefits) seem likely to be reduced or removed altogether. At a time when benefits for married couples are being introduced, people and politics seem more and more to be completely divorced.

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