The Treasury, with George Osborne driving from the front, based its economic policies on the calculation that every £1 of tax rises and spending cuts takes 50p off growth in Gross Domestic Product. This underpinned their austerity package and their 'road to recovery by 2015'.
Last weekend the International Monetary Fund reported that the real figure is that for every £1 of cuts and tax rises, it takes between 90p and £1.70 off GDP.
The TUC has claimed, at a possibly conservative estimate of £1.30 off GDP, that it leaves George Osborne with a hole of £76bn by 2015. The austerity package now looks like the route to endless economic stagnation without hope.
What was the response at No 11 Downing Street? Osborne came straight out and defended his austerity policies and his calculations, saying that the IMF maths did not take “into account offsetting monetary policy action”.
By this, Osborne is referring to the £375bn of quantitative easing, a tactic to deal with the liquidity of the banks. As ever, the position of Osborne and the Tory party clearly shows the stark ideological position of a party that wishes to use the economic crisis to extend neoliberalism.
There has been no public recognition of the huge personal cost to ordinary people. Neither has there been any public recognition of the fact that the current crisis is now a crisis of demand, more than liquidity. The average worker has suffered - and faces - real wage decreases and job insecurity, which suppresses spending. This is alongside public sector job cuts.
Some private firms are looking into the abyss, as there is lower demand for their products. Some are laying off workers. The government slashes benefits to the tune of £18bn, with £10bn more in cuts to be found, in order to force people to find work in an economy where there are now 6 unemployed people for every vacancy.
This government's austerity programme has delivered the sharpest fall in living standards for at least 80 years. Ordinary people simply cannot spend the economy out of trouble. The government is resorting to freeing up the banks to lend more (creating more personal debt) to drive spending.
Osborne has been using IMF justifications since 2010 to defend his cuts, whilst reshaping the economy in the neoliberal image of a shrunken public sector and a very limited welfare system where everything is privatised and up for profit.
The chancellor counted on exports driving growth, yet he failed to recognise that the horrors of austerity were being inflicted across our export markets leaving no room for growth. Then, when the IMF delivers the bad news, he says they have got it wrong and that he is right. The austerity project must continue.
Osborne has nothing to say to the young who cannot find work or ever hope to buy their own home, to the working families who are struggling to pay their food, heating and petrol bills, or to elderly people who cannot heat their own homes and enjoy dignity in old age.
IMF predictions undermine the government's policies. Osborne is committed to an austerity project that will line the pockets of the very rich and leave the rest facing endless recession. It is time to assert an alternative. The 20 October demonstration is the perfect place to start.
In the parks, halls and public spaces around Kings Cross
David Harvey, Tariq Ali, Tony Benn, Owen Jones, Nina Power, Sanum Ghafoor, Andrew Murray, Laurie Penny, Lindsey German, Jeremy Corbyn MP, Paul Le Blanc, Terry Eagleton, Paul Gilroy and more...
By Lindsey German
By Neil Faulkner
By Chris Nineham
By John Rees
By Lindsey German and John Rees
By John Rees and Joseph Daher
By John Rees
By Chris Nineham