Monday, May 17, 2010

Feeble and pointless

The big argument between Labour and the Tories during the election was whether to cut spending immediately or wait a bit. The Labour party argument was that cutting spending now may harm the "recovery" while the Tories claimed it was vital to make cuts at the earliest opportunity to boost confidence.

To be honest, my own personal views crossed into both camps. Cuts in public spending are absolutely essential if we are ever going to get out of this economic mire the Labour Party have landed us in, but you either cut hard or don't bother - and a measly £6 billion off of a deficit of £165 billion is not going to make a blind bit of difference.

Remember, this is not making any difference to our growing debt problem - we're talking about the budget deficit here, not the national debt. In other words, we're talking about knocking a tiny off of the amount we're overspending. The 6 billion quid that Osborne hopes to save will be swallowed up by interest payments on the amount he is still having to borrow.

Think of it this way - your credit cards are almost maxed out, but each month you are still putting another £165 on them and all you resolve to do is cut that to £159 a month - and you still get clobbered for another £80 in interest.

It's as pointless spending £6 billion less in the government terms as it is spending £6 less in that scenario I just mentioned - it is nothing, It is a feeble and pointless amount and Osborne may as well not bother. And thanks to the coalition with the Lib Dems, the Tories have abandoned their plans to cut the taxes that might have given some stimulation to the economy (the £10,000 tax threshold will not make a difference if employers are still getting hammered on National Insurance).

My view is that you either cut now and cut substantially - I mean 50% or more not 3,5% - and plough many of those savings into tax cuts or you leave alone and take the opportunity to borrow money while you can to start investing in the things that will ensure your future - industry, infrastructure and energy - because, sooner or later, Britain will default on that debt or face hyper inflation (or both) and then nothing will make a difference.


Richard Matthews said...

Britain could save £65 billion a year by leaving the EU. Of course they won't do that - these politicians desparately want to cling onto power that the United States of Europe gives them at the expense of democracy. Adolf Hitler would be delighted.

Obviously, Britain isn't the only country in Europe to be suffering with debt problems. Britain is at least fortunate it has the ability to devalue its currency (a luxury denied to the Eurozone freaks).

I wonder if, eventually, Spain, Italy, Portugal or Ireland will take the drastic measure of ditching the Euro in order to regain some semblance of control of their own economies. I am hoping this debt mountain will also see the end of the EU.

Yugoslavia, the USSR, the UK. These supra-national organisations always seem to crash and burn. Eventually...

TheFatBigot said...

It astonishes me that the new government has made so little of the size of both the deficit and the debt. They should be making the point that £6billion is a tiny drop in the ocean and should be explaining how the previous government created this mess.

They appear to have a fair amount of goodwill, so now is the time to tell the whole truth and ensure the blame is placed exactly where it lies.