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smoke and mirrors

What exactly do David Cameron’s Tory conference promises mean? George Osborne said on Monday that there is no money and austerity must continue. The working poor must be penalised by another £2000 cut in support whereas, only two days later, the Prime Minister is spraying cash about like a man with six arms to buy the voters.

This is a Prime Minister who seems more afraid than he shows – he’s terrified of Ukip, his own back benchers and, rightly, very afraid of Labour. It is from a man who says he knows where he’s going but does not seem to know how to get there because he’s ham-strung, both from within and without his own party, some of whom dislike him intensely.

Cameron promises to produce a budget surplus, lift spending and hand out £7billion in tax cuts, nearly all in the same sentence, when he knows that he simply cannot! Take his so-called tax cuts for people earning under £12500. It will not be given until after the deficit is removed which may be 5 years ahead under the Tory plans and in any case will give far more money to people on much higher incomes People earning under £12500 are the working poo r. They are claiming benefits whilst still in work simply because they cannot afford to live on their wages alone. What they need is a living wage now which is why Labour will make it a condition of government contracts and give firms a tax break for a year if they become living wage employers.

Cameron’s admission in November that the “public aren’t stupid”, and need to know how cuts are financed, will surely come back to haunt him. His delivery may have been better than Milibands’s (although from the floor of the hall where I was for Miliband’s speech, his WAS good), granted, but what of the substance? Everything that Ed Miliband, Ed Balls and Andy Burnham pledged was carefully thought through and costed; they even asked the Chancellor to have the Office of Budget Responsibility examine Labour’s pledges to verify the costings. Osborne refused and now we know why – because his and Cameron’s would not stand up to the same scrutiny. They have not shown how tax cuts would be funded. As the ad says – simples!

What about the claims made by this Con-Dem government to try and park the blame for all the country’s financial woes on Labour’s lawn? Let’s examine the claim that the last Labour government left behind the biggest debt in the developed world. It simply doesn’t stand up to scrutiny.

George Osborne continuously states that the UK had the biggest debt in the world (purely in cash terms) before the 2010 election. It’s like comparing apples with pears. George Osborne had to admit to the Treasury Select Committee, under questioning from Labour members Chuka Umunna and John Mann, that he did not know the UK had the lowest debt in the G7, contrary to what he had been saying in public; it was a Tory lie.

Compare this with the fact that Labour in 1997 inherited a debt of 42% of GDP. By the start of the global banking crises, in 2008, the debt had fallen to 35% – a near 22% reduction (Office of National Statistics). Surprisingly, a debt of 42% was not seen then (Tory debt) as a major problem and yet at 35% (Labour debt) it was perceived to be such a huge problem that only austerity could fix it?

The next spurious claim is that Labour created the biggest deficit in the developed world by overspending.

Firstly, the much banded about 2010 deficit of over 11% is false not least because this is the Public Sector Net Borrowing figure and not the actual budget deficit which was -7.7% according to the Office for National Statistics in its Fiscal Outlook March 2012.

In addition, in 1997, Labour inherited a deficit of 3.9% of GDP (not a balanced budget) and by 2008 it had fallen to 2.1% – a reduction of a near 50% which you might think is quite impressive. So, one might say, it’s simply untrue to claim there was overspending. The deficit was then exacerbated by the global banking crises after 2008. To confirm this even further the IMF has also come to that view. It states that the UK experienced an increase in the deficit as result of a large loss in output/GDP caused by the global banking crisis and not even as result of the bank bailouts, fiscal stimulus and bringing forward of capital spending. It’s economics for dummies, really – when output falls the deficit increases.

Finally, the large loss in output occurred because the UK and the United States have the biggest financial centres and as this was a global banking crisis we suffered the most. Hence, the UK had the 2nd highest deficit in the G7 (Not the World) after the US and not as a result of overspending prior to and after 2008.

The third claim is that the UK’s borrowing costs are low because the markets have confidence in George Osborne’s austerity plan and without it the UK will end up like Greece.

The real reason why our borrowing costs have fallen and remained low since 2008 is because, savings have increased. As a result, the demand and price for bonds has increased and as there is inverse relationship between the price of bonds and its yield (interest rate) the rates have fallen. Also, according to Huffington Post and others, the markets expect the economy to remain flat. This of course means that the price of bonds will remain high and so borrowing costs will remain low as a direct consequence.

David Cameron would have you believe the markets lend in the same way as high street and internet banks lend to you and me. Of course we all know that this is not true or realistic.

Osborne, Cameron & even Clegg are all playing the blame game to depress confidence and growth which, in turn (they say) justifies austerity and also serve to use austerity as an excuse (the only excuse) as justification for lower taxes which mainly only help the already wealthy. They further use these as excuses, to paint Labour as a party that cannot be trusted with the country’s finances again. Therefore, they hope to convince you that the Conservatives deserve to win a second term – in the hope that people vote out of fear.

The lie was given to this on 1st October when Standard & Poors (one of the leading international credit agencies) stated that the UK’s AAA+ rating would only be credible under a Labour Government which was unashamedly pro-Europe.

This strategy will not work this time because; despite the promise of Osborne in 2010 to eradicate the deficit by 2015 he has absolutely failed to do so.

In his conference speech Cameron might not have forgotten to mention the deficit but, as I say above, he did not specify a single new cut that he proposed to make.  His throw-away, uncosted £7.2 billion cut in tax, which even the Tory Chairman struggled with (and he’s a proven fantasist; remember Richard Green?) is completely unrealistic given Osborne’s continued vicious attack on welfare. Instead, he repeated that the Conservatives would cut a further £25bn in the early years of the next parliament. He insisted the reductions were “do-able”, but the lack of any detail suggests that the global figure is easy to restate while the actual cuts will be much harder to implement or even to outline in advance of the election.

Many Tory cabinet Ministers struggled to make sense of these uncosted measures which, let’s not forget, would have been shamelessly lambasted and picked apart if they had come from either of the two Eds’ lips.

Miliband’s speech might have had an off-the-wall quality to it as he outlined his meetings with strangers on Hampstead Heath, but Cameron’s “tax and spend” sequence was a dream in a different way. If Labour’s strategists and speech writers could get their collective acts together, they would assuredly be shooting at a massive open goal – because there are huge discrepancies in Cameron’s proposals.

We know that leadership is partly an art form, especially when a leader makes a speech. Cameron seemed in command and at ease in front of his (mainly) rapturous audience. He gave the impression that he had a vision for the next five years and, as if his new policies had been thought through. Once the artist had left the stage, various cabinet ministers struggled to explain how the tax cuts would be made or when. They are nearly silent on the precise spending cuts.

Ed Miliband’s speech was, by contrast, generally lambasted by the right-wing press and, to some extent, on TV. But here’s the thing – the measures announced in the speech (and that of Ed Balls) was backed up by carefully calculated costings; we were told how the proposed measures were going to be paid for, details which were markedly missing from the Osborne & Cameron’s speeches a week later.