I’ve always hating terminology like “in real terms” and “cash value”. As an avid watcher of BBC Question Time, of which I think it should be renamed “avoid the question”, I also don’t buy into the phrase “the (insert synonym for the word ‘big’) debt inherited from the last administration”
A brief History of What got us into this Mess
Apparently the ability for a person on little income could be given a mortgage that they never would have been able to keep up with; in America, people were taking out mortgages and not making a single payment.
It’s easier for financial institutions to make more money when the regulatory ties are lessened, if not removed, or auditors look the other way – because then advantage can be taken and where as it can be perceived as a time of boom, it’s all an illusion – everything is borrowed, nothing is genuine – yes, that is a lovely BMW 5 series in your drive, but you don’t own it – it’s not yours.
When labour, during their tenure tried to keep everyone happy – they lessened the grip on the financial institutions; but institutions abused it. They packed and sold groups of bad debt, passing it around as currencies fluctuated and then it run out of steam, as the individuals on the ground defaulted, so did small businesses, then medium ones.. then large ones.. then multinationals.. (see where I’m going with this) and then finally entire countries defaulted on their debt payments.
This is what we mean by a global financial crisis.
It didn’t just happen because of the labour government, in America George Bush and his cronies were interested in serving the needs of the (very) rich, cutting their taxes and loosing the regulation on the financial sector. In France the same.. so when one bank came tumbling down, it was only a matter of time before everyone crumbled with them.
As people lost their jobs, they claimed benefits, those with savings, held on to them as interest rates dropped – everyone began to cut back, find cheaper alternatives and were living from month to month.
As we spend on the bare essentials, supermarkets began to flourish, they have been able to achieve economies of scale and thus passed the savings onto their customers – leaving high street stores out cold, so they soon began to disappear – and their owners and employees began to claim benefits – in the tens of thousands.
As interest on national debt grew, the new coalition government found their their budget was not able to sustain the public sector services that had been established in the last government. So they all got cut by around 20% (on average) – more people loose their jobs and more people claim benefits.
As a country, we have maintained a AAA credit rating and have borrowing at under 2% interest, which, according to the government is because we have implemented austerity measures and used the money from cuts to reduce the deficit by a quarter.
Too Hard and Too Fast?
Ed Balls (Shadow Chancellor) was on the news warning “you’re cutting too hard and too fast” but no one was listening. The idea of promoting growth wasn’t in the agenda of the coalition, and as more and more people lost their jobs and claimed benefits – the number of unemployed topped 1 million and kept growing
In Greece people became homeless as the German Chancellor, who seems to be pulling all the strings in the Eurozone forced the government to inflict hard and fast austerity measures which crippled the people. The Greek government was turfed out and currently there is no replacement.
All the above had happened because we, individuals have lived outside of our means – so we need to grow our wealth so we can pay our debts and restore prosperity.
According to a report that earlier today I was directed to from twitter, an analysis has shown that the coalition is actually not spending any less money than it’s predecessor. In fact, public spending is only 1% lower, and what is most disturbing is that (according to the report) the government is relying on raising taxes to pay off the deficit.
If the government is then actually not cutting, but people are loosing their jobs – where is the money going?
A lot of the money will probably be invested into the private sector – Virgin Care, for example, who will be taking about £500m from the healthcare budget in one of the earliest moves at the capitalist tory-led coalition begins to break down our nationalised health service.
The Deficit is Going Down
According to Dr Tim Morgan:
“To be sure, the deficit has been reduced, from £161bn (at 2010-11 values) in 2009-10 to £123bn in
2011-12 (fig. 2).
But some very serious qualifications need to be made even over this seemingly-positive out-turn:
- At £123bn, the deficit remains higher than it was in 2008-09 (£100bn), the year which preceded the Labour government’s £31bn pre-election hike in spending.
- Of the £38bn fiscal consolidation achieved since 2009-10, three-quarters has resulted from higher taxes and only one quarter (£8bn) from spending cuts.
- At constant (2010-11) values, taxes have increased by £30bn since 2009-10, absorbing three quarters of the entire increase in real GDP (£40bn) over that period.
- Far from driving down indebtedness, public debt (on the Maastricht Treaty definition) has increased from £1,032bn in March 2010 to £1,250bn in March 2012, and the ratio of debt to GDP has risen from 71% to 84%.”
Altering the Economic Infrastructure
Obviously with the 45p tax rate coming into effect, should government spending continue in this manner the rate in which the deficit can be reduced will decrease – this is because the spending cuts, from what I’m reading – and I’ll admit, I’m not a doctor of Economics – are non existent. They are a rouse, an illusion which can only last so long.
People are hurting and as blame is shifting to the problems in the Eurozone, and the term “austerity” is rehashed into “efficiencies”, the change of language used to by coalition to try and alter public attitude may have come a bit late -as the electorate doesn’t care about details – they care about whether their jobs will be safe and how much a loaf of bread costs.
I believe that changing the economic infrastructure is the true aim of the cabinet. It’s got nothing to do with this “all in this together” rubbish, because we’re not. The fact of the matter is that there the richest people are getting richer and the poorer people are getting poorer and this is what happens when you cut expenditure and use the money to alter the economic framework – because, and this is just my opinion, the government is only working for those who can afford austerity to begin with.