It’s even worse than the Thirties
Fiscal Deficit
Two years down the track, where do things stand?
Lots of pain is being experienced, without much gain. Inflation – largely a consequence of a 25 per cent fall in sterling’s exchange rate in the global financial crisis – has soared.
Households have suffered the biggest squeeze on their disposable incomes for more than 30 years, reflecting a nasty combination of poor earnings growth and high inflation, the latter a consequence of higher cost of imports and tax rises.
Pensioners, current and future, are being devastated by higher living costs and the effects of the central bank’s easy-money policies, including £325 billion of “printing.” Pension funds have seen their value cut by about £120 billion, according to industry estimates.
Unemployment is rising towards the 3 million level, with young people most affected (although things are far worse in some European countries, such as Spain).
Public services are being cut back savagely. Hundreds of thousands of the elderly have been deprived of necessary help at home. To free hospital beds, patients are being discharged and sent home in the middle of the night. After-school provision for children of working parents has been abolished. Because of cutbacks in immigration staff, foreigners arriving by air have to queue for up to three hours to enter the country.
The FT reports that the UK is now suffering “a longer and costlier depression – a period when output remains below the previous peak – than it did in the 1930s.”
Yet there is a lot more distress coming. Osborne warned in his November Budget statement that families will suffer more years of economic pain in the form of falling living standards, rising unemployment, and a series of further public spending cuts.
In the first two years of austerity the government made cuts in annual expenditure of £23 billion and raised annual taxes by £18 billion. But only a quarter of the planned spending cuts have taken place so far.
Britain continues to run a huge fiscal deficit of about £120 billion a year, financed by ever-greater borrowing. National debt, already around £1 trillion, is expected to reach £1.4 trillion in three years’ time.
this article follow on from – Britain: a Culture Hostile to Growth
CopyRight – OnTarget 2012 by Martin Spring
