Updated: May 16
Originally Published in 2016, co-authored by Andrew Lilico and Seema Malhotra
George Osborne was appointed Chancellor of the Exchequer in 2010, in the wake of the Global Financial Crisis of 2008 and the subsequent Conservative-Liberal Democrat coalition government. Avowing that he would be ‘tougher than Thatcher’ on the budget deficit, Osborne initially had his work cut out for him in attempting to deal with problems unlike that of any Chancellor in the 80 years previously. This included sharply declining productivity, mounting government debt, the bailing out of banks and the decreasing value of the pound. While there is little doubt that the current economic climate is vastly different to that of 2010, many argue that Osborne slowed an already recovering economy with hugely detrimental austerity measures (a government plan committed to spending reduction). Nonetheless, many economists point to an excellent record of recovery, with Osborne at the forefront of a lot of difficult economic decisions that ultimately kick-started one of the healthiest levels of economic growth in Europe. Here we discuss: George Osborne, success, or failure?
Andrew Lilico: Success:
Cutting Public Spending – Public spending has gone down from 46% in 2010 to 40% in 2016. This has managed to reverse the abysmal 1% economic growth rate and return it to normal levels. Only Chancellor Nigel Lawson has managed to lower public spending relative to GDP more in the past 50 years.
Increasing Productivity – Between 1997 and 2007 productivity fell around 0.3% per year. This parliament has seen it grow at around 2% per year. This is due to Osborne’s strategies of encouraging older workers to remain in work with reforms to pensions, along with improved education. More workers equal more output
Strength in Conviction – Constantly under pressure from left-wing politicians, the public and even other Conservatives, Osborne stuck to his plan without making rattled decisions – he knew what needed to be done and didn’t attempt to fix what wasn’t broken. He has managed this without passing over budgetary control to the IMF or EU, like many others.
Unemployment Record – In the past, recessions have often caused unemployment effects to long outlast the immediate recession and continue to grow. Not only did Osborne prevent this, unemployment has fallen from 8% in 2010 to 5.6% now, with record levels of falling unemployment.
Emergency Budget – Arguably Osborne’s biggest task was reducing the huge budget deficit. His 2010 Emergency Plan set out a way to do this in clear, flexible fashion. It was this flexibleness that allowed him to delay his initial predictions for the reduction of the deficit with the Eurozone crises of 2011 and 2012, rather than take the hit to the deficit that it would have brought otherwise.
Seema Malhotra: Failure:
Increasing Debt – Osborne’s austerity measures have come hand-in-hand with increased borrowing, and thus a much larger government debt. Debt, as a percentage of GDP, has increased from 62% to 80% since 2010.
Austerity Measures – Osborne’s committed plan of reducing government spending forces the government to adhere to a strict policy without taking the current situation into account. For instance, the government cannot invest further in vital infrastructure that could improve economic prosperity long term, in favour of cutting spending now.
Deficit Reduction Failure – Osborne claimed that by 2014-15, the deficit would be £37bn. In fact, the deficit was almost three times that at just less than £100bn. Despite his austerity plan, his measures have failed in what was arguably their biggest task.
Masking his Policies – Osborne is seen as a specialist in over-exaggerating his successes, and masking possible failures within his policies. For instance, he has coupled the increase to minimum wage with a significant reduction of in-work benefits, making low-paid workers much worse off.
Lower Living Standards – only in October 2015 did living standards return to pre-crisis levels. Prior to this, it had been dangerously low and Osborne seemingly did little to deal with one of the most important components of a successful economy. Despite the standards finally returning to normal levels, many argue they are worse off than before anyway, with lowered benefits to disabled people amongst the complaints.
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