It’s on the edges of living memory now, but in the folk memory it lives on. The very words – the 1930s – instantly evoke poverty and the Great Depression. Slum housing, queues for food, dirt-faced workers, children without shoes. Little wonder George Osborne took such exception to the suggestion by the BBC’s Norman Smith that if the chancellor implemented the cuts promised in his autumn statement, Britain would eventually reach 1930s levels of public spending.
Smith’s starting text was this week’s report by the Office for Budget Responsibility projecting a fall in government spending to just 35% of GDP. But his concluding text was George Orwell’s The Road to Wigan Pier, with its harrowing descriptions of prewar destitution. You’d be back to that world, Smith said. “It is utterly terrifying.”
It’s always a sign that a government is rattled when it turns on the BBC. Such spats have a long and inglorious history: the David Kelly affair began with a reporter’s remark just after 6am on the Today programme too. But Osborne’s fit of pique came as more of a surprise. He’d had good notices from most of the papers for his Wednesday performance, with applause focusing on his move on stamp duty. So why the outrage at the mention of the 1930s?
To answer that question, you have to peer deep into the fog that now surrounds much of our economic debate – most of it generated deliberately. Start with Osborne himself. What is the voter to make of the messages the chancellor sends out, which are not so much mixed as flat-out contradictory?
On the one hand, he says it’s all about debt, the deficit and getting the public finances under control. The small print makes clear that we’re less than halfway through the austerity we’ll need to balance the books. Hence those “utterly terrifying” projections from the OBR: a million public sector jobs to be axed by 2020, and a cut of £60bn in spending on non-protected departments. Crucially, these include local government – two unloved words that conceal spending on essentials such as care for children, the elderly and the disabled, as well as libraries, parks and emptying the bins.
Yet no sooner has Ebenezer Osborne delivered that stingy message than he’s coming down the chimney in red suit and white beard, boasting about the recovery and bearing gifts: £7bn in unfunded tax cuts here, a new road for Stonehenge there, to say nothing of nearly £1bn for the change on stamp duty. So which is it? Are we in the winter of austerity or the spring of recovery?
The contradiction reflects the pattern of the past four years. Osborne pursued austerity until he finally realised his critics’ warnings were coming true: austerity so close to a recession strangles an economy at just the moment it’s gasping for air. Without admitting it, Osborne quietly changed course – following the Keynesian advice he once derided and spending to kickstart an ailing economy. That’s one reason he’s borrowing at such a prodigious rate, with a deficit this year at £100bn, fully £65bn more than he promised.
Yet what’s curious is how little is said about this glaring contradiction between word and deed. It’s fallen to Fraser Nelson, the Spectator editor, to point out that Osborne’s hairshirt rhetoric is at odds with the blinging facts. As he wrote in the Telegraph today: “George Osborne has perfected the art of preaching sobriety while knocking back the tequila slammers.”
But why isn’t Labour making more of this? Surely it should be exultantly pointing out Osborne’s failure to keep his word, seizing on this as tacit vindication of Labour’s warnings. Yet Labour makes only scant mention of it. That’s because the party concluded long ago that if the focus of economic debate is debt and deficit, it loses. The polling is clear: even when he’s downing the tequilas, Osborne still looks less profligate and more prudent than Labour.
Which leaves Labour unable to give it both barrels when taking aim at the 1930s, 35% state Osborne envisages. It can’t eagerly offer itself as the party of more lavish spending. On fiscal prudence, Labour still has a credibility gap. So, rather than zero in on Osborne’s broken promises or the coming draconian squeeze, Labour is cautious – still hobbled by its own failure to debunk the Tory myth that it was Labour fiscal incontinence, rather than the global crash of 2008, that left the national kitty empty.
The curious result is that Labour and the Tories both end up being shy about the spending they are bound to undertake should they win in 2015. Labour doesn’t want to be the party of tax-and-spend; Osborne poses as the steely custodian of the public purse. If Gordon Brown was the master of stealth taxes, we are now in the age of stealth spending, with both main parties competing to show how miserly they will be. It’s an odd commentary on our times when voters are presumed to prefer Scrooge over Santa.
And yet it’s just possible Osborne has miscalculated. He clearly hopes his autumn statement has set a trap for Labour. He has, in effect, promised to balance the books by slashing “welfare”, daring Labour either to do the same or be forced to nominate another, more popular area of spending for the axe. If Labour tries to duck that Hobson’s choice, he’ll accuse it of reverting to extravagant type.
But there’s a risk. Such deep cuts, evoking 1930s hardship, cross the line that separates prudence from cruelty. The Tories have never fully dispelled the odour of the nasty party, and Osborne knows it. Hence the anger with the BBC (and perhaps the OBR for setting the 35% hare running). What’s more, the Osborne contradiction could start hurting him. Soon voters will ask: if there’s now enough money to pay for this tax break or that pet project, why are such severe spending cuts necessary? Is the 35% state the reluctant result of painful necessity, or the product of ideological, shrink-the-state zeal? Voters prepared to accept the former may balk at the latter.
There is a more obvious opening for Labour too. Deficits are not just a function of governments spending too much: they also arise when governments bring in too little. Britons on jobs paying meagre wages pay little or no tax. It means that low-wage jobs are not just making individual lives a misery; they’re also stopping us getting the deficit down.
That point is only just beginning to register, just as the spectre of the 1930s is only now coming into view. But, for Labour, both might just be a way through the fog.
