Burying good news

You would think that the Government could do with some good news. And that, if it found some, however tenuous, it would trumpet it to the heavens. At the end of February, it had some solid good news to proclaim, neither tenuous nor ephemeral. It was reported in a low-key way. In fact, it has taken until now for me to be aware of it.  

Britain has eliminated the deficit on its day-to-day budget.

This has been achieved at the expense of painful cuts to public services. It does not take into account capital expenditure, which means that, in total, government spending still exceeds its income. But Britain has eliminated the deficit on its day-to-day budget. When did we last achieve this? In 2002.

I sometimes despair at democratic politics. For two or three years after a new government is elected, it is allowed to blame its predecessor for economic problems. After that, it takes the rap itself. This is not a party political point: it applies equally to governments of all colours. Public opinion appears to hold that two or three years is quite enough to deal with any legacy, no matter how appalling.

This is ridiculous. Some economic legacies are so dire it can take decades to recover from them. Others are so benign that no recovery is required. There are good grounds for saying that the legacy left by Gordon Brown in 2010 was the worst in history, worse even than Jim Callaghan’s in 1979.

The charge against Gordon Brown (and against Tony Blair for presiding over it) is not that they caused the 2008 financial crash. They might have done more to foresee and forestall it, but so might every other government in the world. The charges are, first, that they acted as if there would never be another recession, when all history and experience says that recessions are cyclical occurrences. Second and consequentially, that they continued to run current account deficits throughout an economic boom. And, third, that these deficits had built into them huge future spending commitments, whatever the state of the economy.

All but the most zealous monetarist puritans acknowledge that, in times of recession, government expenditure needs to rise as a percentage of GDP to stimulate renewed growth and to mitigate the social effects of recession. In which case, unless the deficit is to balloon constantly into the future, it is essential that, when times are good, governments run a budget surplus to pay for the bad times.

In the years 2003-2008, Britain’s GDP was the highest it had ever been in real terms. In those same years, the government’s revenues were the highest they had ever been in real terms. In 2008, revenues peaked at a level 43% higher than they had been in 1997, after allowing for inflation. Yet, in every one of those years, Gordon Brown ran a current account deficit.

It has taken until now, and with all the hardship involved, for that situation to be brought under control and reversed. In overall terms, the public finances and the national debt remain perilous.

The policies through which public expenditure has been curbed have become known collectively as ‘austerity’. Because it is now many years since the electorate allowed the Conservatives to blame Labour for the public finances, austerity is now held to be the ‘policy’ of this Government. “Austerity and inequality are choices, they are not necessities,” said Jeremy Corbyn last year. “They are a choice to make life worse for the many to maintain the privilege of the few.”

Literally, austerity is a choice. But the only other choice available would have been to let the deficit soar to even more unimaginable levels. Is this what a Corbyn government would allow to happen? Probably, yes. And, if and when there is a Corbyn government, it may be able to claim truthfully that its deficit is lower than in 2010-2013, thus proving that Labour ‘investment’ is better than Tory ‘austerity’. It won’t prove any such thing, but that is the crazy world in which we live.

These inanities lie in the future. In the meantime, let us celebrate a significant milestone. Its achievement has been the cornerstone of economic policy for eight years. It has been accomplished at a huge political and social cost. Which is perhaps why this Government is so reluctant to vaunt it – that and the fear that people will now think that happy days are here again, so let’s go and blow a lot more money we don’t have.