"Elections are not often won by telling voters they will have to pay more for less, and work longer into the bargain," says The Economist. But George Osborne, the shadow chancellor, leapt from "boy wonder to national pallbearer" last week by detailing some of the "harsh medicine" needed to deal with the £175bn budget deficit (equivalent to 12.4% of GDP). This includes public-sector pay freezes, the withdrawal of some middle-class tax breaks, retention of Labour's 50% top tax rate and a retirement age of 66. It was a bold step, and "all credit to him".
Credit? Osborne's "harebrained" proposals are a "disaster that would drive us into a depression, and fast", says David Blanchflower, a former member of the Bank of England's Monetary Policy Committee, in the Daily Express. We are still in the deepest recession since the 1930s and the bad times are far from over. The biggest danger we face is that governments tighten policy too soon. "We are in an economic war. If you go into war you have to keep going. Clearly you need to control the debt, but why now? Did Churchill say we can't carry on fighting the Germans because of worries about the debt?"
Indeed, our entire political class has "National Debt Hysteria" and has decided the remedy is to slash spending, even though many experts, including Nobel Prize-winning economist Professor Paul Krugman, warn this will bring our real sickness back "with a vengeance", says Johann Hari in The Independent.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Britain went into this recession with one of the lowest debt levels in the developed world and is still only "nudging the middle of the league table". For the Tories to say that a national debt at 75% of GDP makes a country 'bust' makes Japan, Germany and the US bust, and makes Britain bust almost continuously since the 1750s. There have only been two 40-year periods when we had a debt below Cameron's 'catastrophe-level': the end of the 19th century and from the 1970s until now. "So is the world and Britain's history bankrupt, or is Cameron's reasoning?"
Osborne's £7bn of cuts won't make much of a dent in our deficit anyway, says Leo McKinstry in the Daily Express. For all his supposed nastiness, his economic medicine isn't going to cure our ailing economy. "If he really wanted to be bold he would take an axe to the ludicrously profligate" £8bn Overseas Aid budget, "smash" the quangos, "radically cut welfare entitlements" and eliminate bureaucracy in the NHS, education, and Whitehall.
Starving the "leviathan" of rations for a year or so won't bring it under control, agrees Jeremy Warner in The Daily Telegraph. But worse than Osborne's failure to get to the "nub of the overspending problem" was his failure to spell out what is needed to get Britain back on a path to growth, which has always been the best long-term solution to "mountainous public borrowing".
"The myriad of employment protections of the past 12 years needs to be swept away, as do all forms of taxation other than ordinary income tax for entrepreneurial endeavour." Corporation tax must be switched to other forms of taxation. "Once the barriers to wealth creation are removed, a thousand flowers will bloom and the problem in public finances will melt away."
