Simon Wren-Lewis, an Economics professor at Oxford University, asks: “Can austerity survive such hypocrisy?”
He says there is “no economic problem with ending austerity”, but recognises austerity is a “vote loser” for the Tories, especially with top Tories such as Phillip Hammond claiming the current deficit is ‘not sustainable’.
He accuses Osborne of “pulling off the trick” of convincing the electorate that economic competence can be reduced to a single economic measure – the deficit. Wren-Lewis was one of many economists who spoke against focusing on bringing down the deficit, but says he was “drowned out”.
The second problem with abandoning deficit reduction is that, at best, it does no more than maintain public services at today’s levels. There will be nothing to match the largesse of Labour’s 2017 election manifesto. The current target for 2020 is a deficit of 1 per cent of GDP. If Hammond relaxes austerity by raising the target to 2 per cent of GDP, that gives him about £20 billion more to play with. That sounds a lot, but more than half of it would be required merely to keep the NHS standing still. Abolish the planned cuts to welfare spending and schools, and there wouldn’t be anything left. Of course the Tories would have more money to play with if they were willing to increase the deficit, but that would risk handing the mantle of economic competence to Labour.
- London Review of Books – Short Cuts