Britain’s bet: boom or recession
With his emergency budget, the UK’s
George Osborne, Britain’s finance minister, has delivered what appears to be one of the harshest budgets in the last 40 years.
It had to be – the markets needed to know that the UK understood it had a problem. A debt problem.
After this budget, Britain’s AAA credit rating will remain intact.
While Europe has entered a period of rehabilitation, taking on tough austerity measures, Barack Obama, the US president, is warning the continent to slow the pace of withdrawing billions of dollars of stimulus spending.
Economists are split on what should be done, make swingeing cuts or keep spending to avoid a double dip recession.
Britain will find out in three years time if its austere budget bet has paid off.
The theory being, take radical measures to cut budget deficits by taking $100bn out now, and that void will be filled by the private sector. That being taxes, inflation and interest rates will remain low, encouraging investment.
Take, for example, the northeast of England, an economy built on a property boom.
Having collapsed, we find that the only people propping up two-thirds of the economy there are those people employed by the public sector.
For far too long the state has interfered with the functioning of the market economy.
Rather than allowing the private sector to spread its wings, it was easier to allow government to step in and provide jobs.
That has led to a legacy of dependency. Some eight million people are unemployable choosing to sit at home rather than look for work.
You can claim unemployment benefit indefinitely in the UK, at no point will the state tell you to get on your bike and find work. Or take away your benefits.
The benefits across the rest of Europe are a joke.
Take Spain: to encourage young adults to leave the family home they’re given $300 a month.
There has been a lot of commentary about the budget having to be equitable: that some should carry more of the burden than others.
The financial sector and the rich taking on a bigger share of the pain to come.
And there is no doubt markets do need regulation the financial crisis has proved that. Even if it is to reign in unbridled greed.
But this crisis was not the sole responsibility of the banking sector – every citizen had a hand in this.
From the former finance minister/prime minister to the man/woman who mortgaged their homes to the hilt.
All must accept their share of the credit-fueled economic boom.
This was a once in a lifetime opportunity for Britain’s government to scale back the welfare state. Osborne started to make a dent – but he just didn’t cut deep enough!