For George Osborne the Economic News gets Worse

So we have austerity Britain, and the narrative is set.  David Cameron and George Osborne insist on the biggest cuts seen since WWII, the deficit must be eliminated within this parliament, and the UK economy will be stagnating for some time.

The Labour Party have contributed to this ridiculous narrative by also stating they would halve the deficit within 4 years and these alone would have been bigger cuts to public services than Mrs Thatcher achieved in the 1980’s.

The phrase, “cutting too far too quickly”, is becoming as sickening as the insistence that every single policy of the government is justified on the basis that we have a deficit.

However, figures out today have both the left and the right rather questioning their own rhetoric.

Over the past few months we have seen the blame for bad news in the economy blamed on the wrong type of snow; the late Easter holiday; too many bank holidays; and even a dry year! Every growth forecast is revised downwards and every time we think the last bail out has been carried out, another one comes onto the horizon.

Today figures for government borrowing show that despite the flat lining of the economy; no growth for 6 months; higher taxation; the cutting of funding to countless charities; the reversal of promises on not increasing VAT – not getting rid of EMA, Sure Start or reducing family allowance; that the deficit is INCREASING.

As the diagram below shows, kindly provided by the Spectator, borrowing is increasingly rising.  In short the rhetoric is not matching reality.

Over the past year, each month the government has spent MORE than in the equivalent month under the previous government under Gordon Brown.

The austerity narrative has been written and people are scared about their jobs and their standard of living is constantly reducing, yet the problem that the government has said is their main priority, is not being dealt with.

So far, we are experiencing all the downsides of an austerity Britain, but not any of the upsides – the deficit is still growing.

This is especially hard to take when many are now worse off than they have been in the last 7 years, yet the actual real austerity measures have not even taken effect.

The question has to be asked, when they do finally come through, how bad will it get?  If the economy is already flat lining, will we be plunged back into recession?

Time after time we are told that we avoided a slump.  Yet the evidence may not support this view.  It is 3 1/2 years since the crisis started in the financial sector and there is no end in sight.  There are many more shocks to the world economy still to take effect and we are yet to employ the stringent medicine advocated by the IMF and others to reduce the deficits in the UK and elsewhere.

The Labour party have nothing to offer either.  Their policies are incredibly similar to  the governments, yet you would never believe it with the rhetoric we are offered.  Both parties are so hell bent on providing a rhetoric of difference between them, yet in reality there is little difference.  Just where is the alternative?

In recent weeks David Cameron has started changing the governments tack on this as they are pointing out just how similar the spending cuts would be.  The government has recognised that they have been so successful in their rhetoric and publicity machine that they are taking the flack of austerity that the Labour party should be at least taking in part.

So people are scared and confidence is low; banks are still not reaching their lending targets to small businesses; consumer behaviour has already changed affecting growth – yet the real cuts are yet to bite.

I think the understatement would be “This will be a tough year”.

bb

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2 responses to “For George Osborne the Economic News gets Worse

  1. The austerity wont work. its your Godwins sectorial balance law, innit-

    http://www.nakedcapitalism.com/2010/05/mmt-the-accounting-of-government-budget-deficits.html

    What needs to happen is that he Governemnt needs to increase contingent capital requirements on banks.
    This lowers household debt as banks cant widen the money supply by issuing as much debt.
    To prevent a slump formt he moeny supply contracting and to acoid all the need tf austeirty the governemtn can then directly creeate the money (as reduced taxes, higher public spending or a Citizens allwoance, investment ro whatever).
    No need to raise money on the international money markets and pay interest on the debt. Less household debt. Tamed banking system. No autsterity. Better control of inflation as governemnt rather than banks control the money supply. No repeat foth e 2008 crash as the business cycle is dmpened and there is assett bubble or build up of extreme household debt.

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