NOT always, but sometimes, the biggest but simplest of economic truths can be summed up perfectly within the confines of the Twitter character limit.
So it was earlier this week when Danny Blanchflower, the University of Stirling economics professor and former Monetary Policy Committee member, responded to news that the UK had racked up its worst August public sector net borrowing figure since 2012.
Underlying net borrowing amounted to £12.1 billion in August, much greater than the £9bn forecast by economists. Income tax receipts proved a disappointment.
Mr Blanchflower (with punctuation added) tweeted thus: “With more austerity about to hit to lower [the] deficit, public sector borrowing goes up to raise it. What could possibly go wrong with welfare cuts?”
He has not been alone in highlighting the significant downside risks to the UK economy, some domestic and others international.
Much of the focus in the media and financial markets has been on the international dimension in recent times, with worries over growth in China having sent the FTSE-100 index of leading shares gyrating wildly. The falls have outweighed the rebounds greatly, and the FTSE-100 closed below 6,000 points again last night.
Scottish engineering company Weir Group, with its exposure to the mining and oil and gas sectors, has found itself relegated from the FTSE-100 as the global situation has weighed on its trading and share price.
However, Mr Blanchflower is absolutely right to focus on the Conservatives’ management of the economy amid the mayhem.
Chancellor George Osborne, in his so-called “stability” Budget on July 8, outlined plans for a further £12bn of cuts in annual welfare spending.
We have already read distressing stories about the impact of the savage welfare cuts on individuals. Unfortunately, there appear likely to be many more such stories as Mr Osborne and Work and Pensions Secretary Iain Duncan Smith continue their campaign to slash welfare spending.
Mr Blanchflower is far from being the only eminent economist to have flagged the huge drag on the UK economy arising from cuts in welfare spending.
Brian Ashcroft, emeritus professor at the University of Strathclyde and economics editor of the Fraser of Allander Institute’s highly-regarded commentary, has also underlined the very direct impact of welfare cuts on demand in the economy.
The vast bulk of people who are unemployed or in low-paid jobs have to spend all they have to live.
Jeremy Peat, visiting professor of the International Public Policy Institute at Strathclyde University, put it well when writing in The Herald just ahead of Mr Osborne’s July Budget.
Mr Peat wrote: “We know he [the Chancellor] is committed to swingeing cuts in the welfare programme. These cuts look set to reduce disposable incomes of the ‘working poor’. These are people who perforce spend the great majority of their disposable income. Loss of income for them equates to loss of consumption for the economy.
“Any moves which tend to increase disposable income at the upper end of the spectrum will have far less - relatively - of an impact on consumption. Budget measures from Osborne-unconstrained could both further exacerbate inequalities and dampen the one significant source of momentum in our stuttering economy.”
Mr Peat concluded: “If only the Budget could focus on the longer-term necessities and announce a ‘pause’ in the austerity measures while we struggle to achieve more balanced, inclusive and sustainable growth. We can only wait and see, but not expect.”
The economist was right in his belief that such a pause could not be expected, and it certainly did not materialise.
Looking at where we are now, we should surely sit up and take note when the Bank of England’s chief economist reiterates a view that benchmark UK interest rates might need to be lowered, rather than raised.
In a speech last Friday entitled “How low can you go?”, Andrew Haldane made it plain he was not close to voting to raise UK base rates from their record low of 0.5 per cent and highlighted his belief that monetary policy might instead have to be loosened.
There has been much debate over whether the Federal Reserve should show confidence in economic prospects by starting to raise US interest rates.
However, you should surely only show confidence by raising rates where it is justified. In the UK, there seem few, if any, reasons to be confident about much when it comes to the economy.
There have been signs of a renewed slowdown in the UK economy, even before the latest swingeing cuts in welfare spending have their effect on demand.
So it is not surprising Mr Haldane is in no hurry to raise rates. And fellow Monetary Policy Committee member Ben Broadbent, citing global factors and signalling a belief that UK wage growth was far from being an inflationary threat, indicated yesterday that he was in no rush to raise rates.
The various downside risks to the UK economy highlighted by Messrs Blanchflower, Peat and Ashcroft, among others, certainly look like they are crystallising.
The global situation is undoubtedly difficult, and we should be concerned about slowing growth in China.
However, as Mr Blanchflower has highlighted again this week, the domestic situation is bleak and the last thing we need at a time when the public finances are in such grim shape is growth being depressed by welfare cuts.
The focus on the global situation is understandable. But we should not overlook the fact the Conservatives are certainly not covering themselves in glory with their economic stewardship.
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