Saturday, 9 March 2013

Oh OBR ed

After accusing There Is No Alternative (TINA) of being pretty deaf, turns a blind eye and does do what she says she will do, today I must add misrepresentation.

The Office of Budget Responsibility (OBR) has written to the Prime Minister to tell him he has misrepresented the commentary offered in regard to the government policies on the economic handling of the economy.

The OBR was constituted by this government and has constantly over estimated the level of growth in the economy, so perhaps it is unusual for OBR to correct the impression made by the prime Minister.

It seems logical, that if you take money out of the economy, higher taxes and you cut spending by the government, removing wages and supply chain and you do nothing about rising food and utility costs, you end up with less spending and the economy slows, to quote Nick Clegg (1.5.2010), "his 8 year old son could be able to work this out -- you shouldn't start slamming on the brakes when the economy is barely growing. If you do that you create more joblessness, you create heavier costs on the state, the deficit goes up even further and the pain with dealing with it is even greater. So it is completely irrational."

Who says Nick Clegg always get it wrong, he was right then so why did the Lib Dems support a policy he knew would result in the current situation where the OBR rebuts the Prime Minister?

The OBR says “it is important to point out that every forecast published by the OBR since June 2010 has incorporated the widely held assumption that tax increases and spending cuts reduce economic growth in the short term”. We believe that fiscal consolidation measures have reduced economic growth over the past couple of years.”

It is worth noting that since the Conservative Lib Dem government first budget in June 2010 the countrys GDP has fallen by 6%, this due to the governments policy.

Some economists have argued the OBR underestimated the negative impact of the cuts, particularly its cuts to infrastructure spending, which has been slashed by 40 per cent over the past two years. Senior economists from the International Monetary Fund argue that many forecasters – including itself – misjudged the size of these so-called “fiscal multipliers” three years ago

We can only hope that David Cameron MP is spinning his own policy, if he actually believes that raising taxes, cutting spending and allowing inflation through a devalued currency will not adversly affect growth then we are really in trouble.


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