Tuesday, May 24, 2011

The UK: the spendthrift of Europe

The latest government borrowing numbers for the UK are spectacularly bad. To increase borrowing by 25% compared to the same month last year (excluding bank bailout costs) is a major failure for a government that must stand or fall by the way it tackles the deficit. Borrowing £10 billion in a month is not tackling the deficit, it is widening it.

Meanwhile the Bank of England has failed, yet again, to address the acceleration in inflation. They continue to pretend that a 4.5% inflation rate can be ignored because it is only a function of "temporary conditions". This is false- there is now a clear structural problem and the failure of the MPC to recognize this, still less to tackle it, is continuing to penalize savers. It also distorts the housing market in a way that is set to exclude an ever growing proportion of people from ever owning their own property. The fact is that, far from encouraging an orderly reduction of debt, the continued artificially low interest rates permits the UK, especially its government, to continue to live well beyond its means -if only for a few more months, .

UK debt, whether government or private sector, must be expanded no further!

Without a serious reduction in the total level of UK debt, the country faces a further lurch downwards. The continued expansion of public debt coupled with dangerously low interest rates will ultimately undermine the value of Sterling internationally - and lead to a crushing fall in the standards of living of those living in the UK.

The fact is that the right wing nutters who constantly predict the fall of the Euro should be paying a lot more attention to the disaster happening on their own doorstep. It is not just that the UK government is overspending, it is that the returns on what it is spending are pitiful. There is little infrastructure improvement, there is simply a giant job creation scheme: the kind of scheme that suggests that tax simplification should not happen because this would lead to tax inspectors being made redundant. The kind of waste exemplified by politicians who do not think a Police inquiry of Chris Huhne is enough: they want to spend millions on an independent inquiry, which would have no legal force and therefore be utterly pointless. People who want to waste public money on that scale are the ones that should be forced from office.

On an increasing number of measures, the UK now has a significantly worse fiscal and monetary position that the Eurozone. It can not go on like this. On current trends the British Treasury can expect the markets to have a heart attack within a matter of a few months.

Fine words butter no parsnips: without significant, radical action the Labour legacy of-out-of-control debt will destroy the prosperity of the nation. Indeed given the surge of the SNP in Scotland, it may even lead to the destruction of the nation itself.

The coalition must get a grip on debt now- failure can not be an option.

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