On Cheryl, Cameron’s kitchen and why Obama rebuffed Osborne’s plans on the deficit
Posted on 26 May 2011 | 8:05am
I am hoping the sound of helicopters above means the President is on his way to France, able to escape Britain before he and the Prime Minister get asked about what Cheryl Cole’s exit from American X Factor says about the special-essential relationship.
Be in no doubt – had the departure of the People’s Panellist been one day earlier, then both Obama and Cameron would have been asked about it at yesterday’s press conference, in between the serious stuff on Libya, Afghanistan and the world economy.
The visit went very well for both leaders, and Obama went a long way towards dispelling the coolness with which his view of the UK has been characterised. His speech to both Houses of Parliament yesterday will not make the Great Speech anthologies but it was a tremendous event and the reception for him was very warm. Meanwhile Tony and Gordon got to be reminded that they are an important part of the fabric of the State, post wedding faux pas, and both President and Mrs Obama got to see the benefits of Labour’s education policies pre the ‘we’re all in this together’ cuts to Building Schools for the Future.
We also got to see the Camerons’ new kitchen, seen in photos today with Samantha and Michelle chatting happily on a yellow sofa. Now I do not begrudge the Camerons a single penny spent on a kitchen. It is such an important part of the home, and they are entitled in my view to have a nice one as they try to raise a family in one of the most pressurised situations imaginable.
But if I may revert to one of my favourite themes – the extraordinary double standards of our media – I cannot resist pointing out the contrast between the serenity with which our papers have accepted a shiny new kitchen in Downing Street, and the screaming headlines which greeted any such attempt to improve the living conditions of TB and Cherie. I can remember a holiday being interrupted with some fake Dacreised ‘scandal’ about a bathroom. And as for the kitchen, it was virtually impossible to get a bin, a toaster or a pot and pan without some rentaquote Tory MP saying what the Mail and Co needed for another cheap thrill headline.
Anyway, Mail lowlifeness and media double standards are not newsworthy so I will pass by saying, sincerely, I hope the Camerons enjoy the new kitchen, and by moving to something that is newsworthy. I refer to the economy, and the failure of George Osborne’s Plan A.
The one part of the Cameron-Osborne strategy that failed re the Obama visit was their attempt to ally him to their deficit reduction plan. I suspect the Americans would have been a little irked by the pre briefing to that effect. Obama’s words were carefully chosen, but they did amount to something of a slapdown, and a definite distancing from the Osborne approach.
I give you a few edited highlights from this morning’s Labour Party media brief that might give you some indicators as to why, and I look forward to a posting from Olli, my Finnish economics adviser who ought to be Osborne’s.
‘Osborne told to think again on pace of spending cuts’ (Ti p49) – ‘OECD rethinks its stance on deficit reduction’ (FT p2) – ‘OECD urges BoE to raise rates’ (Indy p37) – ‘Put interest rates up by end of year, OECD urges’ (Tele b4) – ‘Interest rates must rise, OECD warns’ (Mail p2) – One of the leading advocates of Osborne’s deficit-cutting plans has warned that they may need to be watered down in the face of disappointing growth. The OECD said that the Chancellor shld cut spending more slowly if the muted pace of expansion seen so far this year continues. Padoan: ‘We see merit in slowing the pace of fiscal consolidation if there is not so good news on the growth front … We have seen that [growth numbers] are a bit weaker than expected; shld that continue to be the case, there is scope for slowing the pace … ’ With inflation persistently hovering at 4% or higher, the Bank of England will soon need to start raising interest rates, the OECD warned, which will only add to the growth headwinds. Balls: ‘This is a very significant intervention. Even the OECD, which has traditionally supported govt economic policy and George Osborne’s deficit reduction plan, is now saying the Chancellor shld consider changing course. We need more jobs and strong growth to get the deficit down in a sustainable way. But since the Conservative-led Govt decided to cut further and faster than any other major economy, growth has been much weaker and both unemployment and inflation higher than expected. We know the Govt’s most senior civil servants have drawn up a plan B, which ministers have hastily rejected. But it’s now time Osborne listened to wise advice, looked at what is happening to the economy and thought again about the speed and scale of his cuts.’ (Ti)
Spending ‘Slump in household spending raises fears for economic recovery’ (Guard online) – ‘Inflation brings recession even nearer’ (FT p2) – ‘Osborne’s squeeze takes its toll on investment and consumer spending’ (Ti p57) – ‘UK growth depressed by household spending slump’ (Indy p37) – ‘Spending falls back as families feel the squeeze’ (Tele b1) – ‘Brits cut back on spending’ (Sun p2) – Britain’s fragile recovery was dealt a severe blow ystr after figures revealed a slump in household spending that cld severely restrict growth and knock the govt’s debt reduction plans off course, write Inamn/Elliott. A shock collapse in business investment in the first three months of the year added to the gloomy picture of a sluggish economy sliding back into recession. Several economists said a downturn in key areas of the economy meant there was unlikely to be an interest rate rise until at least November and possibly next year. Danny Gabay of Fathom Consulting said the UK was already back in recession if exceptional items were stripped out of the ONS’ revised GDP figures. Household spending declined by 0.6% to a two-year low, said the ONS as it confirmed that the economy overall had been flat over the last six months, after a 0.5% contraction in the last quarter of 2010 was offset by a 0.5% rise in the first three months of this year. Business investment fell 7.1%, partly in response to a decline in spending on executive jets, after a rush to buy private aircraft at the end of last year ahead of the VAT rise in January, but also as businesses prepared for a difficult year. Ed Balls: ‘Osborne now faces the prospect of the Office for Budget Responsibility’s growth forecast for 2011 being downgraded a fourth time. Growth of just 1.4% this year compares to the independent OBR’s forecast of 2.6% growth before Osborne decided to cut further and faster.’ However, the OECD, one of the west’s leading economic thinktanks, called on the Bank of England to start raising interest rates this year to prevent inflation – currently at 4.5% – taking hold in the UK. In its twice-yearly report, the Paris-based organisation said Threadneedle Street ought to steadily increase borrowing costs over the next 18 months despite weak economic growth. (Guard) … Inflation is helping to drive the economy perilously close to recession as consumers are squeezed by rising prices, while businesses appear unwilling to pile cash into new investments, writes Pimlott. Revised GDP figures on Wednesday confirmed the economy grew by 0.5 % in the first quarter, after a 0.5 % drop in the fourth quarter partly caused by snow-related stoppages. Output across the economy in March was £11m less than it had been in September, suggesting a tiny contraction, although the ONS said growth was essentially flat over the six-month period. A toxic mix of high inflation, tax rises, slow wage rises and low confidence provoked by the govt cuts is hitting consumers, driving spending down in four out of the past five quarters and leaving consumption 4.3 % below its pre-crisis level. (FT)
‘Cable warns of ‘hydrogen bomb’ risk to economy’ (Mail p6) – ‘Britain faces another crash, warns Cable’ (Tele p6) – ‘Cable crash fear’ (Sun p2) – Cable warned ystr that ‘hydrogen bombs’ in the economy were set to plunge Britain into a new economic disaster.
Therefore it would appear to stand to reason why … ‘Obama backs GB’s handling of global recession’ (Guard online) – ‘Labour claims victory on deficit’ (FT p3) – ‘Obama fails to endorse Coalition’s spending cuts’ (Indy p4) – ‘US cuts at ‘slower pace’ than in UK’ (Tele p4) – Obama has dashed Cameron’s hopes that he might endorse his deficit reduction strategy, instead praising the way the UK’s chairmanship of the G20 under GB had dragged the world out of recession, write Watt/Wintour. It is understood that the White House had been angered by previous Tory claims that Obama had effectively adopted Conservative policy on deficit reduction. Obama: ‘Obviously the nature and role of the public sector in the United Kingdom is different than it has been in the United States. The pressures that each country are under from world capital markets are different, the nature of the debt and deficits are different and, as a consequence, the sequencing or pace may end up being different.’