After enacting extreme austerity measure in the UK with the promise that cutting spending would solve the economic crisis, the Conservative government has a lot of explaining to do after it was announced last week that Britain was falling back into recession again.
David Cameron has desperately tried to argue that his problems were inherited, that the debt crisis was so bad that it has made a speedy recovery impossible, but the historical record shows otherwise. The recession and economic recovery has been one of the slowest in history -- a testament to the failure of the austerity measures passed by the coalition government.
The Office for National Statistics has stated that the cause of the recession stems from a sharp fall in construction output, due in large part to government austerity measures (via the BBC):
The ONS said output of the production industries decreased by 0.4 percent, construction decreased by 3 percent. Output of the services sector, which includes retail, increased by 0.1 percent, after falling a month earlier.It added that a fall in government spending had contributed to the particularly large fall in the construction sector.
"The huge cuts to public spending -- 25 percent in public sector housing and 24 percent in public non-housing and with a further 10 percent cuts to both anticipated for 2013 -- have left a hole too big for other sectors to fill," said Judy Lowe, deputy chairman of industry body CITB-ConstructionSkills.
Labour leader Ed Miliband has been raking Cameron over the coals, hammering home the point that it is too late for the Prime Minister to blame anyone else. In a heated debate in Parliament, Miliband also pointed to Cameron's privileged social background as a key reason behind his lack of understanding:
"This is a recession made by him and the chancellor in Downing Street. It is his catastrophic economic policy that has landed us back in recession... Arrogant, posh boys just don't get it."
I think that Miliband has a point here -- Cameron and virtually everyone he is surrounded by come from enormously privileged backgrounds. Haven risen through the exclusive British private schooling system, then onto Oxford, Cameron has been bred to believe that the wealthy know what is best for the country. The notion that the rich should not determine economic policy is completely alien to him, and his government reflects the values of his social class -- and those values place self interest above all else.
Cutting social spending and giving tax breaks to big business does two things: Firstly, it stops the poor and middle classes from buying anything, and secondly, rather than encouraging business to reinvest in the economy, it encourages them to hold onto their wealth. As Richard Darlington in New Statesman writes:
Businesses in Britain and around the world are sitting on record piles of cash: $2 trillion globally. But they won't invest that cash and create jobs until they see the demand for their products and services rising. And squeezed consumers won't create that demand until they have confidence they can spend a bit more and manage their debts.
It is then up to the government to increase confidence in the economy through investment -- something now so blatantly self evident that is is remarkable the Conservatives won't entertain it. Given they will have to call an election within the next two and a half years, they might have to if they want a chance of staying in power. Otherwise, the Tories will be about as successful as their economic policies -- and so far, they are proving to be an utter failure.
Ben Cohen is the editor of the recently relaunched TheDailyBanter.com
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Its no good telling him to go running on the beach , as this will give him a heart attack and he will die .
best to feed him lettuce leaves for a few years , get the weight down gradually and then take him for the odd run ,
Not very pleasant its true , but eating all that pizza in the first place must have been fun
So either borrow it or print it , both will raise Interest rates
and what would this country do if they were 6% ?
its the same odds i suppose whether you pay a bigger mortgage or spend more on fuel .
I dont see how racking up a trillion in debt is going to be solved by racking up another trillion
Our deficit arises because we spend more tha we take in tax ,, So we could reduce what we spend , or reduce tax and reduce the welfare state accordingly .
that will stimulate growth as well , even though it will be seismic
This may trigger the kind of Interest rate rises we are seeing Spain and Italy cope with .
Could the level of persoanl debt in the UK cope with a 6% base rate ? what would it do the property market ?
fair enough your Idea may stimulate demand and get the economy moving , and certainly millions would have to move house and lose their house , as they can barely pay their mortgage as it is .
the Coalition did inherit a 150 billion deficit and a 1.2 trillion National debt , It was not albours fault there was a world crisis , but Labour could hav ebeen better ready by living within their means when
the economy was booming , instead of borrowing ever more .
I do beleive the UK needs a Structural dismantling and rebuilding , and this may be beyond the scope of a 5 year term of Parliament
The reason is twofold, first in the short term deficits are not dangerous, secondly a strong economy makes it easier to cut government spending and bring in higher tax revenue
A growing economy with low (below 5%) unemployment is the perfect time to cut back on government spending
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Most cuts have not come into effect, so coming two years will be much worse if there is no change in direction. Government has not actually reduced spending yet - they have just seriously cut back the rate of increase.
The need is to find money to create wealth-creating jobs. This will not happen. Any expansion (increased borrowing/spending) will create service jobs which leads to more imports and greater inflation.
Any solution requires reallocation of resources from those who have to investment in industrial production. But this will not happen either.
Long-term prospects are dismal. But the rich will be fine.
First Collector: Plenty of prisons.
Ebenezer: And the union workhouses - are they still in operation?
First Collector: They are. I wish I could say they were not.