Welfare to Work Scandal: The Inevitable Consequence of Cameronomics

Terrifying spending

If Cameron’s Coalition weren’t so utterly crap, I would have said that today’s new revelations about the multi-billion pound welfare-to-work scandal were the government’s Gerald Ratner moment – the one where the credibility of Cameron plc finally plummeted to lows from which it could never recover.

But I can’t say that because the Ratner moment happened ages before that. Indeed, if you believe Iain Martin’s superb analysis yesterday – and I do – the terminal rot set in to the Cameroon project as long ago as the general election campaign, when Cameron’s lot got it into their heads that the way to beat arguably the worst prime minister in British history Gordon Brown was to promise to copy all his policies but just in a more user-friendly watered-down, green-tinged way, and with a nicely spoken semi-toff in charge rather than a dour, beetle-browed Scotsman. Unsurprisingly, the voting public was less than thrilled.

Martin’s piece began with a glorious insider anecdote which bears repeating:

One of the most senior cabinet ministers under Gordon Brown likes to recall how during the run-up to to the 2010 general election he kept expecting one morning to wake up, turn on the Today programme and discover that the atrocious campaign the Tories had been running up until that point had been a feint, similar to that organised before D Day to lull the enemy into complacency. The proper campaign would then start. But the day never came and the Tories went into the election without any clear and coherent offer to the country. David Cameron should, says the Brown-era cabinet minister, have won by fifty seats.

Exactly. I can’t be the only one here who finds himself constantly driven to a state of planetstruck incomprehension by the sheer asininity, the counterproductivity, the gormlessness, the stupidity, the truly epic wrongness of almost every new policy the government introduces. If this were a Labour government, led by Ed Balls, you could understand it. It would all make perfect sense. But it’s not. This, believe it or not – and I’m not sure that I can any more – is a Conservative-led administration running the country. Since when did Britain’s Conservatives end up so terminally useless?

Since, I would argue, they began subscribing to the Keynesian “consensus”. (A bit like the “consensus” on Climate Change, though even more expensive and dangerous). This is the idea – hugely popular with left-wing governments, for obvious reasons – that the state has the miraculous ability to create more jobs and boost economic growth by spending more taxpayers’ money.

It can’t.

I don’t dispute that the state can create “jobs”. For example, it could create a “job” by paying people to dig holes and fill them up again. Or, more absurdly still, it could “create” “jobs” by paying people to “work” – via hidden tariffs forced on energy users –  in the renewables industry (solar, wind, etc).

But these aren’t real jobs. In fact you might say they’re the opposite of jobs. Anti-jobs, even. For example, in Spain, research has shown that for every pretend job created by government spending in the renewables industry, 2.2 jobs are destroyed in the real economy. In Britain, the figure is more depressing still. For every one of the “green jobs” “created” by David Cameron, 3.7 jobs are killed in the real economy.

The notion that government spending is capable of generating economic growth is more ludicrous still. On the contrary, as the excellent Allister Heath notes at City AM, there is plenty of evidence to suggest that there is an inverse correlation between government spending and economic growth.

Here are a few of the studies. A 2011 paper by Davide Furceri and Ricardo Sousa studying 145 countries over 47-years found every one per cent of GDP rise in government spending reduces private consumption and private investment by 1.9 per cent. A 2011 study by António Afonso and João Tovar Jalles of 108 countries over 38-years found that there is a significant negative effect of size of government on growth. A 2008 study by Asa Johansson and colleagues of 21 OECD countries over a 35-year period found that every one per cent rise in tax as a share of GDP is associated with a 0.14-0.27 per cent fall in GDP. A 2009 study of 15 EU member states by Mihai Mutascu and Marius Milos found that the optimal public spending share of GDP was 30 per cent. Others have found that the level of spending that maximises performance on the Human Development Index is 30-35 per cent of GDP. Public spending in the UK is close to half of GDP today.

What’s so truly terrifying about Cameron and Osborne is that their entire economic policy is based on doing the exact opposite of what needs to be done to get Britain’s economy back on track: money-printing; borrowing; spending on pointless projects like HS2; increasing the price of energy through the drive to renewables; putting obstacles in the way of shale gas developments.

The disastrous £5 billlion jobs scheme is just one more damned thing in the government’s litany of crimes against the taxpayer. How much better it would have been for us all if, rather than helping the grinning Emma “£8.6 million dividend? That will do nicely!” Harrison to buy her enormous Derbyshire mansion and amass a fortune at our expense, the money had instead been taken off our tax bills. That way, we would have had more money to spend in the real economy, creating real jobs rather than the pretend jobs

Cameron has attracted much flak for employing the deeply suspect Andy Coulson as his director of communications. But I would suggest that a far greater indicator of his abject unfitness for office is his extraordinarily ill-advised decision to appoint Harrison his Families Czar. What it shows is that his economic illiteracy is no unhappy aberration, nor the result of pressure from his coalition partners, but absolutely fundamental to his ideological vision.

The “Big Society”, it seems, is destined to do for Britain what Lyndon Johnson’s “Great Society” did for America. Johnson was not a conservative. Neither is David Cameron.

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