Squeeze Time

SATURDAY, FEBRUARY 07, 2009

Squeeze Time

No time for a proper blog today, but I have been leafing through the latest IFS analysis of our fiscal outlook, which you will not be shocked to hear, is a pretty grim read.

On a positive note, the IFS (or rather their sponsors, the not-quite-bust Morgan Stanley) reckon that the combined effects of fiscal stimulus, lower interest rates, and sterling depreciation will be enough to stop us ditching in the Hudson. But on the downside, we'll be bumping scarily along at rooftop level for many years to come.

In particular, there will need to be a further savage fiscal squeeze post the 2010 election if the numbers are ever to add up again. The IFS suggest many government departments will have their budgets cut in real terms, the promised re-linking of state pensions to average earnings will be scrapped, and the always ludicrous pledge to "abolish" child poverty will be dropped.

Oh, and taxes will be going up.

A lot.

So far, so wrist-slittingly unsurprising. But they do make one novel (to me) point summarised in the chart above.

In essence, they say that Labour's fiscal record - dire though it is - is so far no worse than the last Tory government's (79-97). Both spent the first few years establishing a structural fiscal surplus (ie a surplus after adjusting for the economic cycle), and then spent the next decade frittering it away.

Assuming they've got their numbers right, they do seem to have a point.

Except of course, Maggie's surplus was pushed through in the teeth of a fearsome recession (and 364 economists), whereas Gordo's arrived in his lap courtesy of K Clarke's golden legacy. And Gordo's deficit has already far surpassed anything the Tories delivered.

But still, the overall pattern is certainly similar.

Which brings us back to George. George is the unlikely hatchet man chosen by Destiny to strongarm our finances back up to the break-even line. And somehow, it just don't feel natural.

Of course, Geoffrey Howe wasn't the most obvious hatchet man, and he did OK. And Dave will presumably back George, just as Maggs backed/directed Geoff. But it won't be pleasant work - nearly 30 years on, Maggs is still reviled by the entireProg Con establishment - yea, even unto the next generation.

So are Dave and George up for being the most hated men in Britain?

PS Gratuitous Dylan clip (yes, well, I was an impressionable adolescent male in the 60s):

It's his famous appearance at the 1965 Newport Folk Festival, shown last night on BBC4 (NB: it is the same event that apparently caused this). The assembled American folksy left were so outraged at his electrification, they booed him for selling out to "Beatlebeat" commercial music. Yet as I watched him sing this signature ditty, I really couldn't help thinking it was directed at all those dispossessed Masters of the Universe around us today. How does it feel, to be on your own? Isn't that a classic text of socialism? And yet the assembled socialists knew him not. The fact is that socialism has never been about pushing into the future - it's about stopping the clock and staying firmly in a comfort zone. It's actually a lot more conservative than conservatism.