No such thing as a painless recovery
Budget Day is a week away. Given that the General Election will take place only a few weeks later – well before any proposed measures can take place – you might wonder why we are having a Budget at all. But – as I expect you’ve already guessed – the purpose is to allow Gordon Brown to paint a picture of the Utopia that his economic wizardy will allow us to enjoy – provided we support him at the polls.
His message is that he alone holds the key to a painless recovery; that industry will be supported to avoid job losses, taxes will not rise; front-line services will be protected and interest rates will remain low so mortgages will remain affordable. But if you believe all that then you probably still believe in Father Christmas.
The truth is that there is likely to be a lot more pain before the recovery is complete – and that’s assuming we don’t have a double-dip recession. Britain’s budget deficit is £178bn. This can be funded only through massive Government borrowing, which in due course will inevitably force up interest rates. Money, after all, is just a finite commodity and excess demand will drive up the cost.
Furthermore, there are large swathes of the country – mostly in the North – where the public sector accounts for 60-70% of the local economy. Given that all parties have promised spending cuts, it’s hard to see how large-scale job losses can be avoided. But, of course, this will happen AFTER the election.
Experience tells us that, when nasty medicine is needed, the sooner you take it, the sooner you get better. So beware the siren voices counselling against early spending cuts – they probably have their own vested interests to protect.
