Tim Page

We are now three days into the FT’s excellent series, ‘The austerity debate’, looking at the pros and cons of an early repayment of the fiscal deficit. The issue of deficit repayment is the main political divide of the moment and the FT has performed a valuable service, bringing together commentators from both sides of the argument to thrash out this question. It is time for a TUC comment and Kenneth Rogoff’s article, ‘No need for a panicked fiscal surge’, published today, provides me with a hook.

Rogoff speaks of a “growing chorus for indefinitely sustaining aggressive post-crisis fiscal stimulus”. He adds: “Governments that instead propose gradually reducing deficits and ultimately stabilising debt to income levels – such as both Germany and the UK – are accused of pig-headed fiscal conservatism.”

Hmm. I accept that Kenneth Rogoff is a professor at Harvard and this may be the way things look to a conservative across the Pond, but nobody in the UK is calling for “indefinitely” sustaining the stimulus, or against “gradually” reducing deficits. The issue is simply one of timing.

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Nigel Stanley

There’s a shorter version of my cuts article at Liberal Conspiracy with a lively discussion thread.

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Ruth Lister

When we apply the fairness test, our starting point is, rightly, the overall distributional impact according to income level.  But gender and family-friendliness are also important factors when deciding whether the Budget passed the fairness test.

The Conservative Manifesto promised to ‘make Britain the most family-friendly country in Europe’.  In a recent speech, Nick Clegg declared that the government’s agenda for children and families stands ‘at the heart of our coalition’. [1] Yet in some ways it looks as if families with children have been singled out to bear the brunt of cutting the deficit and there is no attempt to assess overall how the Budget will or will not contribute to this family-friendly agenda.

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Richard Exell

The cancellation of the £80 million loan to Forgemasters, the Sheffield engineering company, is in the headlines again, after the news emerged that the Deputy Prime Minister had admitted that claims he had made in the Commons were wrong. As Tim has reported, the loan to Forgemasters would have created 180 new jobs in the nuclear energy industry and marked a real commitment to the future of British manufacturing.

The coalition’s position on the cancellation of the loan has not always been entirely clear. Sometimes the Prime Minister and Deputy Prime Minister have seemed to suggest that affordability wasn’t their only reason and that the loan was unreasonable, because the company’s owners were unwilling to sacrifice their capital stake. At Deputy PM’s Questions on 22 June, Mr Clegg certainly seemed to be saying that the owners were unwilling to finance the venture at the expense of their private interests:

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Richard Exell

The day after the Prime Minister launched his Big Society in Liverpool it emerged that the City’s Primary Care Trust has written to its employees, offering them a “mutually agreed leaver’s scheme”.

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Nigel Stanley

The dominant political issue for the life of this government is going to be public spending. Almost all their policies will flow from, or be constrained by, their overwhelming belief that we need to deal with the deficit by cutting spending and doing it quickly.

Some coalition supporters will do this reluctantly. They will recognise the damage that cuts can do to the wider economy, public services and social cohesion. Others are revelling in this opportunity to shrink the state – and certainly “not letting this crisis go to waste”.

Many outside government of course are deeply opposed, and the debate has already started about how best to resist the cuts. Already there are calls for events, campaigns and demonstrations. Today’s lobby against the cuts to new schools is an early candidate for having captured this mood most successfully.

But it is important to think strategically about campaigns if we want them to have a result. That starts with working out where we are now, where we want to get to and how we make that journey.

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Richard Exell

Credit rating agency Moody’s today downgraded Ireland’s credit rating from Aa1 to Aa2, just a day before an auction of one and a half billion Euros in government bonds.

Moody’s cited an expected slowdown in Irish growth (and consequent loss of tax revenues) and the high cost of Ireland’s bank rescues which added up to “gradual but significant loss of financial strength.”

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Richard Exell

Yesterday’s Observer reports that the Treasury has told the Department for Work and Pensions to “do its sums” because Iain Duncan Smith’s plans for welfare reform would either cost too much or disadvantage too many people. The Parliamentary timetable means that the conflict will have to be resolved soon.

Last month, I pointed out that the DWP’s options for major reform necessarily involve a choice between cutting the benefits of current claimants (including many who will suffer real hardship as a result) and spending more money – £3.6 billion to implement the ‘Dynamic Benefits’ proposals the Secretary of State developed when he was in Opposition.

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Richard Exell

Culture Secretary Jeremy Hunt has floated the possibility of a cut in the licence fee – and thus in funding for the BBC. In an interview with the Daily Telegraph, Mr. Hunt said that “there are huge numbers of things that need to be changed at the BBC” and “they need to demonstrate the very constrained financial situation we are now in.”

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Richard Exell

The government has postponed the guarantee of universal 2Mbps broadband to 2015.

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