On believing Osborne

What is George Osborne up to? This is the question posed by what the OBR's Robert Chote calls (pdf) a "roller-coaster" path for public spending. He foresees current departmental spending falling by 9% in nominal terms between 2014-15 and 2018-19 - a cut of over 15 per cent in real terms - but then jumping by 7% in 2019-20.

Simon and Atul say that this jump has a cynical political purpose: it's intended to kill off Labour's claim that the Tories plan to cut the share of spending in GDP back to 1930s levels. Simon says:

Maybe there has been a clear plan all along: to reduce the size of the state over a ten year period, using the deficit as cover.

I've never been convinced by this: why use a lousy argument about the deficit as cover for a more respectable one, the desireability of a small state?

Instead, might it be that Mr Osborne doesn't have a hidden agenda? That jump in spending is consistent with what he says he believes - that cutting spending will no longer be necessary by 2020 because the deficit will have been eliminated: he foresees a surplus on PSNB of £5.2bn in 2018-19.

I have four reasons for suggesting this:

1. If he's so keen to avoid that "back to the 30s" jibe, why did he give Labour the chance to use it back in December? Could it be that, back then, he didn't have the projected benefits of asset sales and lower debt interest costs and so felt the need to cut the deficit through spending cuts?

2. If he sincerely believes, as genuine small staters do, that governments can do more with less, why not say so and not bother projecting a big rise in spending in 2020? Could it be that he's forecasting it because he fears small government is unsustainable?

3. Much of his speech yesterday was not that of a small-state free marketeer. His talk of building a "northern powerhouse" and supporting "insurgent industries" had more in common with Harold Wilson's "white heat of technology" (pdf) than Friedrich Hayek.  

4. He has not prepared the political ground for a permanently smaller state. For example, he's not especially encouraged economic research on the merits of small government, nor promoted studies of how (say) South Korea delivers decent public services at low cost, nor has he obviously encouraged those who want entire government departments shut down.

What I'm suggesting here is something radical. Maybe we should take Mr Osborne at face value. Perhaps there's less to him than meets the eye and he really does believe the guff about the necessity of austerity.

Comments

[gastro george]

Is this written with tongue firmly in cheek? You're being far too generous.

"Much of his speech yesterday was not that of a small-state free marketeer."

Much of his speech yesterday was 100% politics.

"He has not prepared the political ground for a permanently smaller state."

He doesn't need to if he can get there for other "reasons".

[BCFG]

Or maybe by 2019-20 the Tories expect a greater amount of the state budget will be going to the private sector. what is often forgotten in the austerity talk is how the tax money collected is being diverted from essential public services to lining the pockets of the wealthy.

By 2019-20 the Tories will have delivered enough structural changes to ensure even more money is siphoned off to their friends.

[SimonF]

"what is often forgotten in the austerity talk is how the tax money collected is being diverted from essential public services to lining the pockets of the wealthy."

Can you give some meaningful examples of that, please?

[BCFG]

SimonF

These schemes are often designed to be complex enough not to be obvious. There are hidden subsidies, tax breaks, state budgets for growing the local economy and all that stuff. Funding of enterprise zones etc etc.

The other thing to bear in mind is that this welfare for the 'entrepreneur' is growing at the expense of essential public services. So there is a trend toward the state as safety net for business.

There are literally too many to mention but Nick Clegg has recently been trumpeting the regional growth fund, look that up and do the research and discover all the other schemes that are designed to move money from the public to business.

Changing the nature of the state is a fundamental project of the Condemns.

And as more and more state functions are opened up to the private sector more and more public money becomes welfare for the wealthy and the so called risk takers. It is aptly called socialism for the rich.

Your ignorance of these trends only incriminates you.

[TowerBridge]

BCFC is quite right, of course - it's the rich who are benefiting from socialism.

Chris - you have advocated a smaller state previously but given global warming and the resource we will need to combat it I cannot see how a small state will work. We're going to need the state, the fire services, the police and potentially a lot of them when the storms hit.

[Strategist]

He's not the Messiah, he's just a very naughty boy

[Donald]

"I've never been convinced by this: why use a lousy argument about the deficit as cover for a more respectable one, the desirability of a small state?"

Because for most voters the deficit is a much better argument."1. If he's so keen to avoid that "back to the 30s" jibe, why did he give Labour the chance to use it back in December? Could it be that, back then, he didn't have the projected benefits of asset sales and lower debt interest costs and so felt the need to cut the deficit through spending cuts?

"1. If he's so keen to avoid that "back to the 30s" jibe, why did he give Labour the chance to use it back in December?"

Just missed it. His advisors probably noted that they were going back to about 2000 in real terms. Now Labour's attack has stuck he's putting spending projections up at the end.

"2. If he sincerely believes, as genuine small staters do, that governments can do more with less, why not say so and not bother projecting a big rise in spending in 2020? Could it be that he's forecasting it because he fears small government is unsustainable?"

A. He knows voters won't believe that.

B. His belief in a small state probably has little to do with doing more with less. I'd say that's true of a lot of 'genuine' small staters. (Not genuine in the sense that they genuinely believe it would be best for most people though)

3. Much of his speech yesterday was not that of a small-state free marketeer. His talk of building a "northern powerhouse" and supporting "insurgent industries" had more in common with Harold Wilson's "white heat of technology" (pdf) than Friedrich Hayek.

Again - it's about what the voters want to hear

4. He has not prepared the political ground for a permanently smaller state. For example, he's not especially encouraged economic research on the merits of small government, nor promoted studies of how (say) South Korea delivers decent public services at low cost, nor has he obviously encouraged those who want entire government departments shut down.

As above, people don't want a small state. His plan is to get one on the back of the deficit.

[Donald]

The problem with this post is that it assumes that if Osborne wants a small state he'd want it for the right reasons, and that voters respond better to good arguments.

Osborne's a genuine small stater in the sense that he genuinely wants a small state. Not in the sense that he genuinely thinks it's better for everyone, or that he'll make genuine arguments to achieve it.

There are much better arguments for a small state than the deficit but most voters don't know that, and Osborne knows that that they don't.

[SimonF]

@BFCG

"Your ignorance of these trends only incriminates you."

I'm well aware that corporate welfare is one of the biggest scourges of our time through regulation and the way services are bought. For example BDUKs spending with BT is well documented here: https://br0kent3l3ph0n3.wordpress.com/
The reason I asked you for some examples was because I'm genuinely interested in facts, why else would I have been reading this blog for over 5 years, and you stated with such authority that "what is often forgotten in the austerity talk is how the tax money collected is being diverted from essential public services to lining the pockets of the wealthy." that I thought you could give examples like the link I have given.

Instead all you provided was empty rhetoric, political posturing and an ad hominem attack. I can get those on any political blog from left or right, I expected better on here.

[Ralph Musgrave]

I just love the "northern powerhouse". It's a great catchy phrase. Should fool 95% of the population. Just one problem though: government has for years spent about 24 times as much in infrastructure per head in the South East as in the North. See:

http://www.theguardian.com/news/datablog/2014/aug/07/london-gets-24-times-as-much-infrastructure-north-east-england

[Alex]

Or he's a smartarse. He knows well enough that forecasts for 2020 may as well be written in green crayon, so why not fix the 30s thing by making the curve jag up at the end just enough? It's not as if anyone will care or remember.