GEORGE, THERE ARE GOING TO BE TEARS WELL BEFORE BEDTIME
Precisely as the right-wing Institute for Fiscal studies predicted before the Election, George Osborne is now under pressure (from the Institute of Directors) to “slash spending”. The IoD has gone one on from “cut”: perhaps next time the verb will be “decimate”. And then “obliterate”.
Note that few if any of the IoD’s members will suffer a jot from the cuts. Also note that the IoD is specifically ruling out tax rises….which would, of course, hit most of their members very hard indeed.
The Chancellor has promised yet another budget in the summer (we might just as well make them quarterly and have done with it) and has said it will be “a budget for working people”. This is another little weasel phrase invented by the Aussie spin doctor Lynton Crosby; what it means is “people in a full-time contractual private sector job”. As only 22% of us are these days, it isn’t going to be terribly good news for the unemployed, the State retired, or indeed the NHS: get out of that, Jeremy Hunt.
I think a few more people need to take time out here and study what exactly is going on rather more fully. In a nutshell, it is this: because the ConDem coalition spectacularly failed over the last five years to (a) wipe out the UK deficit (b) diversify the UK economy out of financial services and (c) gain new export contracts beyond the EU, those people out of jobs as a result of that failure, or on benefits, or ill will be asked to cough up. The business organisation members who aided in this abject failure, however, won’t be asked to cough up. They’ll just see their salaries and bonuses continuing to go up.
So, Government screws up and business acts as its accomplice; labour force, the ill and the poor foot the bill.
Sorry to repeat the question for the 50th time, but you see so far I haven’t had an answer. As a neoliberal economy is based on eternal consumption and a ready supply of credit, how are lower incomes and dried-up banks going to produce more consumption?
They can’t, period. But still the financial press calls the UK’s Q1 slowdown ‘disappointing’ (to whom – idiots?) and still the talk of China being ‘back on course’ gets blown off course every time data emerges from Beijing….a deceleration rate of 5.2% YOY being the latest one last Friday.
Look around at the overall situation and think: until very recently we had a situation where people were paying governments to borrow money off them. Banks are still offering ‘savers’ virtually no interest on their savings. There isn’t a Western economy booming anywhere: not one. But not a single Western bourse is reflecting that fact: not one. Every week another lunatic (usually German) insists that the eurozone is turning the corner. No it isn’t: it’s in the ER room with severe brain damage being kept alive by experimental drugs.
A 2% rise in interest rates – just 2% people – would move US debt management expenditure from 2 in 5 of all tax dollars to $2.50. In 1976, the UK’s deficit to gdp ratio was 6%…but we had to call in the IMF to avoid insolvency – because interest rates were a staggering 14.25% average during the year.
The latest UK projected deficit in 2015 is 4.8%. BUT that’s with near-zero interest rates. Just a rise of 1.5% would would take our deficit higher than it was when we nearly went bust under Labour. An even remotely normal level at 4% would double it. At that point, bond yields would go into orbit around Saturn.
When the Conservatives came to power in 2010, the national debt was £900bn. It’s closer to £1.6trillion today…80% higher in five years.
No matter what any politician tries to tell you, our current woefully negative trading account means that the UK National Debt is as unrepayable as that of Greece. The big difference being that we have far, far more to lose than they do.
There is no way further spending cuts can have any effect on that, because the welfare and health bills for government aren’t the real problem. The real problem is an unreformed economy ludicrously overdependent on financial services, and a Conservative administration with almost no commercial experience in its ranks to switch to high-margin manufacturing and retraining of the workforce to make stuff.
The money saved by Osborne was a minute part of even the deficit reduction. In relation to the debt, the best analogy I can offer you is that more expenditure cuts now would be like putting one pipette into the Pacific in an effort to stem rising sea levels. The idea that austerity on the one hand is part of the cure for long-term British commercial and business failure is obscenely infantile.
The Conservatives know this, but don’t know what to do except take away our right to resist. The Labour Party doesn’t even understand it in the first place. Nigel Farage probably gave up on this piece after paragraph six. And Nicola Sturgeon cares not for any of it just so long as she gets independence for the Scots.
That is the depth of our political crisis in 2015. Only a drastic change in socio-economic culture, education and our Constitutional processes can even begin to change it.
Earlier at The Slog: Rabidly avid business secretary in new hypocrisy shocker
The Slog 