To cut or not to cut?

One of the most interesting aspects of last week's Budget was the divide in the press reaction. Edmund Conway writing for the Daily Telegraph said "this was – in both senses of the word – one of the most "courageous" Budgets in living memory" before going on to argue that the extent of cuts to public spending further needed is likely to test the Government to its limit. While Polly Toynbee, who David Cameron famously said he wanted the Conservative party to be more like, writing in the Guardian, said of the Budget and its central aim; "there was no necessity to create a surplus in six years, returning to depression economics with mortal risk of sinking the country into second recession or slump."

Okay so these are only two viewpoints. And yes, they're from two of the most diametrically opposed national newspapers in regards to political leaning. Yet, after twenty five years of broad ideological consensus between the main parties, the budgetary deficit we are now facing appears to be creating some clear divides in Britain's political class. The coalition government believes in the need to slash the budget and raise taxes while the Labour Party, and whoever is chosen to lead it, argue that it is important not to slash governmental spending to drastically in the midst of a recession.

Are we seeing a return to ideological politics? Are the Government's and the Labour opposition's disparity motivated by some genuine difference of opinion as to how to solve the economic crisis? Probably not, and to this extent most interesting is the response of Vince Cable, who over two months ago was against budgetary cuts but now is regularly reeled out in front of the TV cameras to justify them. Mr Cable argues that he has grave concerns that if Britain didn't start cutting today, we would be tomorrow's Greece. Whether this is correct or not is debatable. However, what is clear is that Mr Cable now believes that cuts are necessary to ensure that foreign investors who own pounds (principally emerging market central banks, who own the vast majority) don't lose confidence in Britain. It is pure political pragmatism.

So are we returning to ideological politics and does it even matter? It probably doesn't matter as even though the majority of voters, those who voted for Labour and the Liberal Democrats, were against cutting before the election, the cuts remain. This begs the question, in a global market economy, is a country's destiny no longer shaped by its own people but rather the views of outside investors, and if so what does this mean - not only for our political parties but also for the sovereignty of the nation state. "To cut or not to cut", is no longer a question for the electorate but rather the wider global economy. It's interesting in this context to refer back to comments made back in February by the then shadow Chancellor, George Osborne, warning that significant early cuts were the only way to preserve Britain's economic sovereignty.

JCL