Opinion: Cameron disingenuous over budget
Updated on 24 March 2010
A leading economist tells Channel 4 News that David Cameron is "disingenuous and extreme" in his criticism of today’s budget. Prof David Blanchflower, a former member of the influential Monetary Policy Committee, has broadly praised Alistair Darling's announcements, but warned his growth predictions might be optimistic.
This budget brought good news and bad, writes Prof Blanchflower. On the bad side both public sector borrowing and unemployment are high, but on the good side they are quite a lot lower than many of us had feared a year ago.
Dramatic cuts in interest rates, quantitative easing, cuts in VAT, help for the unemployed, cash for bangers, they have all helped to prevent the economy dropping off the cliff.
The improvement in the financial positions of Northern Rock, and the recent increases since February in the share prices of RBS and Lloyds, suggest that the British people may ultimately even make a profit on their interventions in the financial sector.
Darling made it clear he was not going to give in to the voices calling for immediate cuts, and announced measures that would pay off some of the debt but would also help the young, first-time buyers and small businesses especially.
There is a worry though that the growth forecast does look rather strong. It seems to have been received pretty well by the markets.
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There has been little movement in the pound or the FTSE. Not so good though if you are a cider drinker. Measures to help small firms and entrepreneurs are especially welcomed.
There is a good deal of evidence that they are capital constrained with inadequate access to credit. Darling announced he had told RBS and Lloyds to lend nearly fifty billion to them.
The big issue is whether this will actually happen given that these essentially state-owned banks made lending promises in the past that they didn't keep. The credit adjudicator service may help but I doubt it.
Two measures that were taken directly from the Tories' playbook, were, first, the doubling of the limit on stamp-duty for first-time buyers and second, the increase in the number of university places.
There are too few first-time buyers in the housing market and that will be a welcome boost.
I am particularly pleased with the announcement that the government will make a once off payment of 270m to fund 20,000 more university places in 2010-2011 in science, engineering, technology and maths.
This trumps David Willetts’ proposal for an extra 10,000 places. Increasing the number of places makes sense in a time of high youth unemployment.
Applications are up by a lot and it is much better to have young people in university than on the dole.
I have been calling for this for some time and it is much welcomed. This will motivate many young people to study hard for their A-levels knowing there is a university place for them.
Also welcome is the extension of the guarantee of a job or training for every 18-24 year old after six months out of work which was to run until March 2011 that Darling has now extended for a further year.
It makes complete sense to keep the stimulus going and not to cut further right now.
I was especially struck by David Cameron's response to the budget where he criticised the government for the increase in the debt.
This is disingenuous in the extreme and he knows it. We have been faced with the worst global financial crisis in a hundred years and the government had little alternative to recapitalise the banks and stimulate the economy.
Without this swift action unemployment could well have been as high as five million. There was no alternative. Cutting public spending right now is not a strategy for growth. Alastair did a commendable job.
He has helped first-time buyers, the young and small firms. I am pretty impressed."
David Blanchflower is the Bruce V. Rauner Professor of Economics at Dartmouth College, and the University of Stirling. He is the economics columnist at the New Statesman and a columnist at Bloomberg. He was a member of the MPC from 2006-2009.