George Osborne has received little flak for his austerity programme. Opinion pollsters say the public is even more convinced of the need to balance the government's books than it was when the chancellor arrived at the Treasury three and a half years ago.
Voters need to be aware, though, that they are in this for the long haul. Osborne is only half done with spending cuts, which will continue not just for the current parliament but most of the next.
The single most arresting statistic in last week's autumn statement was that by 2018-19, the squeeze on Whitehall departments means government will be smaller than at any time since at least 1948, when consistent data was first collected.
A bit of care is needed with this comparison. It doesn't mean public spending as a share of national output will be lower than it was when Attlee was prime minister, because that figure includes welfare payments such as pensions, housing benefit and unemployment pay, which have increased since the 1940s.
But it does include just about everything else: the day-to-day government spending, investment in infrastructure projects and debt interest payments. To a degree this is recognition that Britain is a poorer country than it was before the Great Recession.
The level of GDP will not return to its pre-slump peak of early 2008 until the end of 2014 or the start of 2015, while it will take a full decade for real earnings to make up lost ground. But the shrinking of the state is also a political choice.
The chancellor has decided the vast bulk of the reduction in the budget deficit will occur though cuts in spending rather than increases in taxation: an 86%-14% split according to the Institute for Fiscal Studies.
On current Treasury plans, this means that cuts in spending by Whitehall departments will be deeper in the next parliament than they have been in the current one. Between April 2011 and March 2016, the IFS says that public service cuts will average 2.3% a year; from 2016 to 2019 they are scheduled to be 3.7%.
Put another way, so far the coalition has cut spending on public services by 8%; by 2018-19 this will have become a cut of 20%. There are alternatives if Osborne doubts whether the public's phlegmatic approach to austerity will endure an extension and a deepening of the programme.
He could continue to trim spending at the current rate of 2.3% a year but would have to find £12bn a year from tax increases or welfare cuts to do so. Either that or he has to get lucky.
The current deficit reduction plans are based on forecasts from the independent Office for Budget Responsibility on how much of the damage caused to the economy during the downturn of 2008-09 was permanent rather than temporary.
The OBR takes a pessimistic view. Normally, in the period after a recession there are several years in which growth can be above its long-term trend rate of 2.25-2.5% a year without any sign of inflationary pressures developing.
That's because there is plenty of spare capacity to use up. But the OBR believes the recession has impaired the supply side of the economy, particularly the financial sector.
It thinks the output gap (another way of describing the amount of spare capacity) is just over 2% of GDP, which means the economy can only grow above trend for a short period before inflation starts to be a problem.
It is worth pointing out that the OBR's forecasting record has not exactly been unblemished. It was over-optimistic about growth when the economy was flat-lining, and it may be too gloomy now.
If it is, and a larger chunk of the loss of output during the recession proves to be temporary, the economy will be able to grow above trend for longer.
By the time the output gap has been closed, the higher tax revenues from stronger growth will have reduced the size of the budget deficit and there will not be the need for so much austerity. But let's assume the OBR is right.
What happens then? Well, Osborne made his intentions clear last week when he announced fresh cuts in departmental spending and a cap on all welfare payments other than pensions and jobseekers' benefits.
He clearly has no intention of raising taxes. Indeed, the autumn statement includes plenty of giveaways – on fuel duties, marriage allowances and school meals – that will have to be funded out of smaller Whitehall budgets.
And while Osborne likes to draw a distinction between "scroungers" and "hard-working families", the fact is that many of these hard-working families rely on welfare – in the form of in-work benefits – to top up their poverty wages.
The autumn statement provided a taste of what is to come when it froze work allowances for three years, the amount low-paid workers can earn before their benefits are withdrawn. This will save Osborne £600m a year but make poor families poorer.
This is quite a contrast from the last Labour government, which introduced the minimum wage and tax credits to help those on low earnings.
The impact is well illustrated in a new paper by Christoph Lakner and Branko Milanovic, which looks at global income distribution from the fall of the Berlin wall to the Great Recession.
The study found that since the late 1980s, there has been a small fall in global inequality as measured by the Gini coefficient. (If everybody currently living on the planet had the same purchasing power Gini would be zero; if one person enjoyed all the riches Gini would be 100).
But the fall has been modest with the two-point decline in the Gini to 70.5 almost entirely due to the growth of the middle class in China. It disappears completely once the authors make allowance for the under-reporting of the incomes of the rich.
Lakner and Milanovic also look at those groups that did not fare well in the two decades from 1988 to 2008. This includes the poorest in the US but not the UK, where the 10% of the population on the lowest incomes did almost as well in terms of annual income growth as the Chinese middle class.
For this Gordon Brown deserves credit. Osborne says Labour lost control of public spending. He wants "a government that lives within its means, in a country that pays its way in the world".
His way of ensuring that the books balance involves pouring money into property speculation rather than productive investment, and by locking the UK into a low-productivity, low-investment, low-wage economy in which poverty rises and public services deteriorate.
Polls suggest voters are unhappy about falling living standards. Like Ed Miliband, they think this is a dead end. They are, though, yet to be convinced that the opposition has a better plan.
theguardian.com
Voters need to be aware, though, that they are in this for the long haul. Osborne is only half done with spending cuts, which will continue not just for the current parliament but most of the next.
The single most arresting statistic in last week's autumn statement was that by 2018-19, the squeeze on Whitehall departments means government will be smaller than at any time since at least 1948, when consistent data was first collected.
A bit of care is needed with this comparison. It doesn't mean public spending as a share of national output will be lower than it was when Attlee was prime minister, because that figure includes welfare payments such as pensions, housing benefit and unemployment pay, which have increased since the 1940s.
But it does include just about everything else: the day-to-day government spending, investment in infrastructure projects and debt interest payments. To a degree this is recognition that Britain is a poorer country than it was before the Great Recession.
The level of GDP will not return to its pre-slump peak of early 2008 until the end of 2014 or the start of 2015, while it will take a full decade for real earnings to make up lost ground. But the shrinking of the state is also a political choice.
The chancellor has decided the vast bulk of the reduction in the budget deficit will occur though cuts in spending rather than increases in taxation: an 86%-14% split according to the Institute for Fiscal Studies.
On current Treasury plans, this means that cuts in spending by Whitehall departments will be deeper in the next parliament than they have been in the current one. Between April 2011 and March 2016, the IFS says that public service cuts will average 2.3% a year; from 2016 to 2019 they are scheduled to be 3.7%.
Put another way, so far the coalition has cut spending on public services by 8%; by 2018-19 this will have become a cut of 20%. There are alternatives if Osborne doubts whether the public's phlegmatic approach to austerity will endure an extension and a deepening of the programme.
He could continue to trim spending at the current rate of 2.3% a year but would have to find £12bn a year from tax increases or welfare cuts to do so. Either that or he has to get lucky.
The current deficit reduction plans are based on forecasts from the independent Office for Budget Responsibility on how much of the damage caused to the economy during the downturn of 2008-09 was permanent rather than temporary.
The OBR takes a pessimistic view. Normally, in the period after a recession there are several years in which growth can be above its long-term trend rate of 2.25-2.5% a year without any sign of inflationary pressures developing.
That's because there is plenty of spare capacity to use up. But the OBR believes the recession has impaired the supply side of the economy, particularly the financial sector.
It thinks the output gap (another way of describing the amount of spare capacity) is just over 2% of GDP, which means the economy can only grow above trend for a short period before inflation starts to be a problem.
It is worth pointing out that the OBR's forecasting record has not exactly been unblemished. It was over-optimistic about growth when the economy was flat-lining, and it may be too gloomy now.
If it is, and a larger chunk of the loss of output during the recession proves to be temporary, the economy will be able to grow above trend for longer.
By the time the output gap has been closed, the higher tax revenues from stronger growth will have reduced the size of the budget deficit and there will not be the need for so much austerity. But let's assume the OBR is right.
What happens then? Well, Osborne made his intentions clear last week when he announced fresh cuts in departmental spending and a cap on all welfare payments other than pensions and jobseekers' benefits.
He clearly has no intention of raising taxes. Indeed, the autumn statement includes plenty of giveaways – on fuel duties, marriage allowances and school meals – that will have to be funded out of smaller Whitehall budgets.
And while Osborne likes to draw a distinction between "scroungers" and "hard-working families", the fact is that many of these hard-working families rely on welfare – in the form of in-work benefits – to top up their poverty wages.
The autumn statement provided a taste of what is to come when it froze work allowances for three years, the amount low-paid workers can earn before their benefits are withdrawn. This will save Osborne £600m a year but make poor families poorer.
This is quite a contrast from the last Labour government, which introduced the minimum wage and tax credits to help those on low earnings.
The impact is well illustrated in a new paper by Christoph Lakner and Branko Milanovic, which looks at global income distribution from the fall of the Berlin wall to the Great Recession.
The study found that since the late 1980s, there has been a small fall in global inequality as measured by the Gini coefficient. (If everybody currently living on the planet had the same purchasing power Gini would be zero; if one person enjoyed all the riches Gini would be 100).
But the fall has been modest with the two-point decline in the Gini to 70.5 almost entirely due to the growth of the middle class in China. It disappears completely once the authors make allowance for the under-reporting of the incomes of the rich.
Lakner and Milanovic also look at those groups that did not fare well in the two decades from 1988 to 2008. This includes the poorest in the US but not the UK, where the 10% of the population on the lowest incomes did almost as well in terms of annual income growth as the Chinese middle class.
For this Gordon Brown deserves credit. Osborne says Labour lost control of public spending. He wants "a government that lives within its means, in a country that pays its way in the world".
His way of ensuring that the books balance involves pouring money into property speculation rather than productive investment, and by locking the UK into a low-productivity, low-investment, low-wage economy in which poverty rises and public services deteriorate.
Polls suggest voters are unhappy about falling living standards. Like Ed Miliband, they think this is a dead end. They are, though, yet to be convinced that the opposition has a better plan.
theguardian.com
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