Following the General Election of 2010, which resulted in a coalition government comprised in the main of a new generation of young progressive politicians, I was moved to describe them as acting like bullocks let lose in a china shop. This was because they were acting in haste with little thought for the long-term damage resulting from some of their decisions. The main justification for acting quickly was to reassure the markets as a result of the country – public, private and personal sectors – being up to its neck in debt. Instead of a considered forensic approach they were acting like lumberjacks. One of the bullocks was George Osborne who had master-minded the Tory campaign, just has he did for the 2015 election. He was rewarded with the position of Chancellor of the Exchequer and this time around has been given the additional role as First Secretary of State, for which he does not receive any additional remuneration. Five years on he has grown with experience, but has he grown up?
Now, with all the economic and financial data at his fingertips, he can be precise and methodical as he continues to mend and put the house in order before the next crisis; that he keeps hinting about but does not explain. This crisis is not the possibility of a Greek exit from the Euro Zone, which would be damaging for the Euro using countries but could actually benefit the £ Sterling, damaging in particular the competitiveness of Germany and improving the overall position of the UK. No, there is a much bigger crisis down the line. So to be clear, the concern is not about the general direction of travel, but about the route he is taking us. It has been a bumpy ride and many people have been hurt and a lot more have had a hard time of it. More could have been done to protect the most vulnerable in our society. Has it been worthwhile?
The task of eliminating the budget deficit by 2014-15 has defeated him and his new target for ridding us of the whole deficit during this Parliament looks to be remote with a prediction that there will still be a £20bn deficit in 2020. Time is running out. In our CDP Party Programme we set out a series of proposals as a foundation for the future. Key to this was sustainable public spending at 35% of GDP, running a balanced budget that did not require borrowing, and requiring the Executive to prepare a National Debt Reduction Plan to be submitted for the approval of the House of Commons. The exact level of public spending is now complicated because of the way GDP is calculated and increased due to the adoption of EU criteria to include criminal activity. The adoption of the EU preferred CPI calculation for inflation also has a bearing. The reporting of the budget deficit and national debt is misleading when ministers claim a reduction as a percentage of GDP while the actual figures are not reducing and in the case of the national debt are increasing rapidly – now over £1.5trn.
At the start of the general election campaign we took the BBC to task and complained that their reporters, such as Nick Robinson and Robert Peston, were fooling the public by referring to the 2008 financial crisis as the Great Crash when it was no such thing. Our situation in 2008 bears no comparison with 1929 and was nothing like what the Greeks are now going through. We also challenged the BBC to ask the main political parties the questions that we wanted answers to; namely a) when will you reverse Quantitative Easing?, b) which method will you use?, c) what will the impact on the economy be of your chosen method? The BBC did not rise to the challenge.
As you are aware there was no mention of QE in the March Budget. Cameron and Milliband were not questioned about QE on the Chanel 4/Sky News general election debate. None of the political parties contesting the election ventured to inform voters how they would deal with this issue that has serious and far-reaching consequences. In particular, Osborne and Ball as potential Chancellors were not put on the spot. They should have been asked about Mark Carney’s assertion that it was none of their business. The BBC failed dismally to fulfil its role and ask searching questions. In fact, when the US Federal Reserve ended its asset purchase programme, Robert Peston proclaimed that QE had ended, not with a bang but a whimper.
You and I know that QE is not over and done with. The QE circle has not been closed and we are in limbo, waiting for the Federal Reserve to act. The Bank of England appointed a Deputy Governor especially to deal with the exit from QE, but there has been no action so far. The economy cannot be said to have recovered because it is supported by the two crutches of QE and artificially low base interest rates. Only when these crutches are removed will we be able to see if the economy is able to stand unaided. The Great Crash that we predict for the second half of the 2020s will originate in the US. The concern is that our defences will not have been repaired in time to withstand the tsunami that threatens to engulf us. During the election campaign the political parties were bickering about how long the repair work should take. Now the election is over the problem is in the hands of George Osborne and Mark Carney. By now they should be planning to strengthen and increase the height of the defences. If not, just as in 2008, the Bank of England, Treasury and the Financial Regulator will be standing unawares as the tsunami hits. Those in the know will be heading for high ground and safety.