So, George Osborne has given his 2014 Budget speech. It was good news if you enjoy drinking beer, as there will be 1p less tax on a pint, although whether your local landlord will pay any attention to it, I can't be sure. Gamblers; you're bang out of luck, because there's going to be a new 25 percent tax on roulette machines in bookies, so it looks like your odds of winning just went way down. On the plus side, the minimum wage increased and the amount you can earn before paying tax has increased by £500 to £10,500. But if you're earning little enough that the £500 would actually make a difference, you might be sad to know that benefits have been capped.
Osborne made a big play for those that he called the "makers, the doers and the savers", without really pointing out that makers, doers and savers tend to be a rich minority. As for the rest of us, he made a lot of noise about the amount of jobs that have been created, "with each job meaning a family more secure". He didn't mention that a lot of the job creation comes from self-employment, which might just be jobseekers getting desperate, and low-paid, insecure service work, which sucks.
Picking these sorts of holes is one thing, but for me, the whole premise of the budget was wrong. On three fundamental points, Osborne is full of shit, which turned the whole thing into a blur of half-truths and nonsense.
Osborne says: The recovery is really impressive.
The truth: It's really not.
Osborne kicked the whole thing off by hailing his own success, saying:
"Mr Deputy Speaker, I can report today that the economy is continuing to recover – and recovering faster than forecast."
He shouldn't be so smug. Calculations by the UK Office of National Statistics show the current "recovery" to be the slowest for 40 years. For the three previous recessions the economy got back to where it was pre-crash in an average of less than three years. This time it has taken six years – over twice as long. If that is vindication, the bar for success is very, very low.
He later went on to say:
"In fact, there is no major advanced economy in the world growing faster than Britain today."
This is not true. Our 2.7 percent growth rate is pipped by America's 2.8 percent. Okay, it's point one of a percent but still it's about time for some growth anyway, since he has presided over the longest stagnation on record.
Osborne says: The cuts have reduced borrowing.
The truth: Not really.
So, the economy is growing, slowly, but what about the claim that cuts have reduced the fiscal deficit? According to Osborne's speech:
"This year we expect to borrow £108 billion. That’s £12 billion less than forecast a year ago. Indeed even since the Autumn Statement the Office of Budget Responsibility [OBR] have revised down borrowing in every single year... In 2018-19 we won’t be borrowing at all.
Funnily enough, the Office of National Statistics tells the real story, which looks pretty different:
"For the financial year to date 2013/14, public sector net borrowing excluding temporary effects of financial interventions was £78.5 billion. This was £15.6 billion higher than the same period in 2012/13, when it was £62.8 billion."
So, despite more brutal cuts, borrowing has risen in this financial year so far compared to the last. So how come Osborne seemed to contradict this? Because he was basing his figures on OBR predictions – predictions that have consistently been proved wrong in the past, erring towards saying things that favour Osborne.
The other thing to say is that, on this count, Osborne is not completely full of shit. Osborne said it was down by "a third". The ONS shows that the deficit as a share of GDP was 11 percent in 2009/10, down to 7.3 percent in 2012/13. "A third" sounds way more impressive than less than four percent, but fair enough, I guess. Anyway, his pride in reducing the deficit by a mighty third reminds me of the joke about the two women on a New York bus. One asks the other, "How's your husband, Shirley?" Shirley replies, "Compared to what?" Osborne was keen to hype the fact that in 2008 we had the "biggest deficit since the war". It's taken him six years to reduce it by 4 percent.
Osborne says: Despite his "success" we need more cuts.
The truth: The cuts are keeping us poor and miserable, and keep the economy weak.
It wouldn't really be an Osborne budget without him taking the axe to the welfare state. Sure enough:
"Securing Britain’s economic future means there will have to be more hard decisions; more cuts... in addition to the cuts this year and next, there will be cuts in the next Parliament too."
The idea is that cuts are saving us in the long run. It’s like watching someone continually punching themselves in the liver to try to cure their Cirrhosis. Fiscal deficits are the gap between what the government is spending and the money that’s coming in. They decline as a result of the increases in revenue generated by economic growth. Cuts reduce the rate of growth, so reduce revenue growth, so don’t really reduce public borrowing.
In other words, the Chancellor's expenditure cuts are the cause of the stubbornly steady level of public borrowing, not a solution. If he would stop cutting expenditure, the economy would grow faster and household incomes would rise and borrowing would decline. However, that would leave the Chancellor with no justification for more budget cuts, which perhaps explains why he keeps cutting. The fact that cuts have little or no impact on borrowing levels enables Osborne to say, “We still have more to do,” and sanction another round of misery.
While the cuts don't really reduce the debt, they do reduce one thing: quality of life. The Chancellor's policies have proved so successful at depressing economic growth that living standards have fallen across every level of income since the Coalition government came to power in May 2010. Which kind of undermines what Osborne described as, "our central mission: economic security for the people of Britain."
See you at the next budget. I'll be the one crying into my beer that I paid a penny less tax on.
John Weeks is professor emeritus of the University of London. His latest book is The Economics of the 1%: How mainstream economics serves the rich, obscures reality and distorts policy (Anthem).
Images by Marta Parszeniew