Business Secretary Vince Cable, according to Harriet Harman, has gone from ‘national treasure’ to the ‘Treasury poodle’. Referring to both Mr Cable and his beleaguered Lib-Dem Coalition colleagues, Harriet told the House of Commons that while the Labour Party fought to support jobs for people, the Lib-Dems sought to secure jobs for themselves.
Harriet is, of course, right. By any stretch of the imagination, yesterday’s budget, the most right-wing since the Thatcher Government, demonstrated just how hollow the Lib- Dems election campaign pledges have turned out to be.
A mere 50 days ago the Deputy PM (Nick Clegg) denounced the public expenditure cuts favoured by the Tory Party in their general election campaign. Yet in yesterday’s budget the Lib-Dems showed support for virtually everything they had fought so hard against. It was difficult to watch, both in terms of content and the reactions of the junior members of the Coalition.
While the Chancellor told us to brace ourselves for a series of cuts and VAT hikes, I watched closely at how uncomfortable Deputy PM, Nick Clegg, and Treasury Secretary, Danny Alexander, looked despite being perfectly positioned either side of their Conservative Chancellor.
In contrast, I have not seen a performance as good as the one given by Harriet Harman for a very long time. She spoke with great passion and directed her reaction to the Budget not at the Conservatives, or the Con Lib-Dem coalition, but at the Liberal Democrats themselves. ‘How could they let down everyone who voted for them – how could they let the Tories so exploit them?’ she bellowed to the chamber. This budget she said was driven by ideology rather than economics.
In questioning quite how the Lib Dems could approve decisions they did not support less than two months ago Harriet exposed the fragility of the Con-Dem coalition. In this budget the Lib-Dems have had to swallow almost everything they have always fought against. It begs the huge question, “will they be able to deliver their MPs and activists a second time?”
For the LibDems Keynesianism is a religion to which they genuflect on bended knee, barely preach and never practise.
I believe that Keynesians would say that a cut in government expenditure would lead to a knock-on loss in GDP equivalent to the multiplier effect.
The multiplier effect effect relates to the marginal propensity to save(MPS) and can be very large if the MPS is low.
A loss in GDP will lead to a loss in tax revenues, so that a cut in spending will be counter-productive if the marginal tax revenues are greater than the marginal propensity to save(MPS).
To my mind you if you do not accept something like this, then you cannot be called a Keynesian.
I was going to add something to the entry titled “The Lib Dems campaign pledges were utterly meaningless”…
Can we now call Vince Cable an ideological Mr Bean ?
Hi Martin
I think that the government is trying to have it both ways; if we are in the situation most of my family and friends are in, the multiplier will be quite low because people cut consumption in a recession, or increase saving in the face of likely unemployment, so an injection of cash makes sense, especially towards low-income groups who tend to spend, and there won’t be a multiplier danger. But the coalition has then turned around and increased VAT, which is a regressive tax that precisely hurts those on low incomes.
The obvious inference is that this is a budget that makes some people feel they have more money, but then takes it away from them sneakily, whilst shakily propping up small businesses and doing very little to tackle the banks, or housing madness, or to help industry. Cutting Sheffield forgemasters, who were important for a safe nuclear future, and cutting access to justice whilst letting criminals out in much greater number confirms that this was a budget firstly for show and secondly, unconcerned with anything but Tory interests.
The name of the game at the minute is to get the press to pick off Liberal Democrats and Tory opponents of Cameron (watch out Boris Johnson) whilst giving them some trinkets to divert their attention.
Meanwhile, of course, the pfi and other off-balance sheet nonsense that Labour got seduced by is ticking away like a bomb…..
The most right wing budget since Margaret Thatcher?
Hardly. If you listen to what Osborne said you will understand they he plans to INCREASE spending but just as a lower rate than GDP growth.
Public spending will in fact rise ABOVE inflation (the CPI target of 2%)
Austerity? We don’t know the meaning of the word.
hi Martin Meenagh
Sorry for replying so late… I have only just seen your reply.
I am surprised that you say the MPS goes up in a recession. Usually when incomes fall, savings fall further.
What is your evidence?