It is Obvious

Chris Rick has got altogether too much to say

Oh no – not the economy again!

Posted by chrisrick13 on December 8, 2009

It is obvious: this is the lull before the storm.

I wanted to talk about motorway driving but it seems pointless when there is so much economic stuff to look at.

Yesterday the PM outlined expenditure savings of a few billion.  Based upon the audit office analysis of the last round of ‘savings’ that were made some years ago, the net saving of his measures is likely to be of the order of £3bn.

Efficiency is a good tack.  Nobody will lose out.  Simply, we will get the same as before, but done better.  Nobody seems willing to say that as a result of what has happened over the last few years there will have to be painful cuts in the standard of living for all of us.  Policing will be reduced and criminals will, literally, get away with murder.  Health service will be reduced and people will die sooner than they might otherwise.  Roads will not be maintained and our cars will die sooner than they might otherwise.  Food safety inspections will be reduced and we will get more illnesses from our food than we otherwise might have.  You get the general idea.

Why am I so sure of this?  The estimates of the budget deficit for this year stand at £200bn or more.  At 3% the interest bill on the UK’s total borrowings (PFI, pension underfund, and actual visible debt) will be £60bn.  Therefore in order to stand still on our debts, not reduce them one jot, we have to save £260bn on expenditure…CUT.  This has to be done at a time of reducing government income.  Don’t forget that we are probably already at the point of maximum tax take, or close to it.  Don’t forget that any cut in expenditure involves a balancing cost and will likely reduce economic activity, thereby reducing the tax take.  Don’t forget we have little industry to export ourselves out of trouble.

The world markets are standing by waiting for the election.  At this point we might get a new government that can open the books, throw their hands up in mock horror and then carry through the cuts needed.  If that does not happen then the storm starts in a very short time at full intensity.  If the cuts are made then we will be on a boat in a storm being sailed properly.  Not at all pleasant but survivable…and, I believe, not very likely.

There are a lot of people amongst our 60 million population who are making these realisations.  They are not persuaded one bit by politicians’ words and are taking action to protect their position.  They are having a bad effect on the economy, just making the problems worse.

It is obvious: this is the lull before the storm, but for many people it has started already.

One Response to “Oh no – not the economy again!”

  1. Bill said

    I think that the current tack from Gordon is that although tough decisions are needed they will hit someone else not you. We will tax the super-rich, name and shame top earning civil servants, stop waste do away with Quangos. This doesn’t threaten their voters and indeed traditional labour will just love to hear about the rich being squeezed!

    Nothing wrong with any of these but, as you say, at the moment its mostly fluff and there need to be real figures on the net savings and potential tax increases (AND yields!!). Nothing said (so far) on taxing the middle class, higher VAT, freezing benefits or moving Civil Servants onto a non-Final Salary pension scheme – but these must be on the cards. The trouble with tax-the-rich is that the rich are rather clever with their money and can probably avoid tax. The poor probably don’t have much to tax (?) – so it comes down to middle England again.

    I predict a lot of spin (how bad the Tories are – Load of Toffs – Tories protect the wealthy etc.) but as little substance to the promises as possible. I just wish I had your faith in the majority of the population understanding what’s happening and what it means to them. I doubt most people are even able to remember what has happened over the last year. People have very short memories and are rather fickle PLUS Alastair Cambell is back on the team…

    Bill

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