I can’t help wondering whether doing the right political PR will in the end skewer the current government.
Clearly the top team are being advised that they need to emphasise the hard times ahead and blame everything on the Labour government. In that way they stand a chance of avoiding Mervyn King’s perceptive obervations that the “election victor will be out of power for a generation” because of the unpopular austerity cuts to be taken.
We all know the mantra – we need to get the budget deficit under control to maintain the market’s faith in government debt and a robust economy. To do this we cut expenditure in government and accept some tax hikes and in a few years everything will be OK again and (think the government) everybody will remember that it was all the Labour government’s fault.
There are problems with this though. PR does not operate in an economic vacuum. Economic behaviour operates as much on expectations as current experience and the PR I have described is designed to influence expectations in the hope of influencing political consequences. The problem is that the PR is more likely in the short term to influence economic behaviour. If you tell people times are going to be tough they will hunker down. Savings ratios are increasing as people try to put money aside for the bad times, they are paying down their mortgages and stuffing their mattresses with gold bars (metaphorically!). What they don’t do is spend. So immediately the government loses VAT revenue, companies lose sales, lay off staff and the government loses NI, PAYE and corporation tax. So without doing anything else, the income line on the government account has been adversely affected by their own PR pronouncements, with the effect that the deficit that has to be closed is even bigger.
All around us we hear people suddenly talking about double dip recession and fears of moving into depression – all fostered by the government’s own spin doctors.
I am willing to bet that the tax revenue losses this year simply from expectations effects will be a big multiple of the £6 billion of cuts that are planned – so by trying to protect their political behinds the government are making the economy much harder to turn around.
This makes a lot of sense. As a former newspaper photographer, I know how much the media focus on gloom & doom bad news stories and back in 2007 when I was getting plenty of photographic work from large firms, the media were talking about downturns and recession.
I remember thinking “I wish they’d not harp on about it, as before long everyone will start believing it and stop spending”. People saved, plus greedy banker’s irresponsible lending coming to light has brought the economy to a massive slowdown.
If everyone is being told to tighten their belts still further, then it will make it that much more painful and take longer to get back to economic growth.
Spike the Nottingham Photographer