Fundamentally there is on two types of news on the economy, bad and absolutely awful. Given that the government might as well take it on the chin and express their beliefs.
George Osbourne, The Chancellor, said he would find more money through benefit cuts. This plays surprisingly well outside of the Conservative Party with the general public. It remains to be seen if it can be done and whether people will accept the reality.
The Prime Minister asserted the cuts will continue, despite the growth forecast for the UK by the IMF being cut. (Well we all knew that!). He pointed out that one million new private sector jobs have been created and this is compensating for public sector cuts.
The government argues that the deficit needs to be reduced to avoid problems in the future. The Opposition says a boost is needed to get the economy growing again.
The IMF says that a short term stimulus might be appropriate, but that the markets will take fright on any large scale and longer term rise in spending that will raise the deficit. So some support for both sides there.
One issue that is clear is that the government has not reduced the deficit as far as they wanted to. This shows just how difficult it is to cut spending. Good luck with the plan George.
The case for austerity was not a particularly strong one to begin with, we have already seen how plans like the 'new deal' in the 30s helped the world out of the great depression. It seems governments have a fear of debt not entirely proportional to it's danger, and even then, despite these austerity measures our deficit is still huge and we are still in recession or at least very low growth. Unemployment is still high as there is little to stimulate the economy. Hopefully the big investment bank will go some way to changing this, but banks still aren't lending as much as they should.
ReplyDeleteThere is no evidence whatever that the 'New Deal' helped recovery in the 1930's. There were some high profile projects but no really big boost to Aggregate Demand. FDR met Keynes during the period and confessed he never understood a word of what he was told.
DeleteWhy do the government refuse to change their plans, even after continously not getting anywhere near their targets? Especially now that the IMF has cut the UK growth forecast again, surely it is time for George Osborne to admit defeat. I cannot see any reason, other than keeping face, to continue with the current plan. I do not agree with cutting benefits for the vulnerable and needy when the money could be coming from those who can afford it. In fact the government seems to be actively stopping this, having ruled out the mansion tax. Hopefully the government will listen to the IMF and support short term stimulus to boost the economy, but there is little chance of this.
ReplyDeleteGeorge Osborne is right to say we need to cut the deficit and that is right but it is what he is cutting and how it is cutting which is the problem. He is cutting capital investment programmes and also he increased VAT which is putting people out of work. Where is the strategy for growth (apart from cutting the 50p rate which is based on the Laffer curve). He needs to cut taxes for small businesses (how make up half of our GDP), he needs something to boost employment and demand in the economy.
ReplyDeleteInstead of failed Osbornomics, shouldn't we have a National Investment Bank, a lower rate of VAT, cuts to National Insurance for businesses, breaking RBS into local banks to channel credit to businesses, a massive growth in building social housing and a slower rate of spending cuts rather than continuing with economic masochism. Osborne claims to be a One Nation Tory, he should follow Harold Macmillan and build more houses. Instead of listening to Paul Ryan, he should follow Obama and boost growth as well as having proper plans for fiscal discipline.
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