It is tough being British! Over the last 5 years energy prices have risen 76%, flour 89%, bread 50% and petrol prices 42% whilst real wages have fallen. While inflation presently remains high at 4.5% average wages rose just 2.3% (in the year up to March). This means a significant fall in the standard of living for many British people especially those low or fixed income earners. Please read the attached article from the Daily Mail.
The continued depreciation of the £ has caused significant debate over the costs and benefits of a falling currency. Initially there was a strong belief that this could be the answer to the stagnating growth with calls for an "export led" recovery (exports become cheaper therefore more exports are demanded), however, as the pound has continued to fall others have expresses concerns about inflation (imports are more expensive) therefore leading to upward pressure on interest rates which diminishes the likelihood of a recovery. Either way more people will be staying in the UK this summer and London can look forward to becoming a tourist Mecca for the Europeans.
Increasing the British Opposition is asking the Government for a Plan B. They are claiming the economy rescue package is not working. Growth has been sluggish and forecasts have been downgraded. The Opposition has suggesting that this is because of the tight fiscal austerity package (tighter fiscal policy in order to control public debt). The Government, however claims that the low level interest rates (German style interest rates) are far more crucial than a few billion pounds in the budgets bottom line. This leads to an interesting discussion on which policy (fiscal or monetary) is best to deliver growth during a downturn. Please read the article below to get a greater understanding of the issue.
