Cameron warns US and Europe to tackle deficits.
…whilst failing to control UK PSBN?
I guess David Cameron is taking the right approach in trying to dissuade other nations from continuing to “live on tick” and to get a grip on their own structural deficits, we have gone through one of the most irresponsible economic phases in the modern post war history of the world, there are so many with their heads buried in the sand refusing to see or hear the warnings that eventually when the chickens come home to roost there will be no more corn. One cannot expect nations to borrow excessively without any means of being able to repay the debts, only the most manic households run their family budget on this basis, but after Gordon Brown and Barack Obama badgered the rest of the free world to “invest” in their economies and borrow to bail out the banks following the financial collapse of 2008 it follows that the strain on financial systems will eventually cause a very severe and painful recession as the cash runs out. Hence the need for a false solution known as quantitative easing, to you and I this more easily understood as turning on the presses and printing more money, a historical cause of inflationary pressures leading to increasing interest rates! The writing is already on the wall in respect of the UK economy although the Bank of England is extremely reluctant to allow base rates to rise in fear of depressing the fragile economy even further.
The greatest worry that I have over David Cameron’s fine words in the “new world” is that his coalition government is not making sufficient headway in its own efforts to tackle the budget deficit left by Labour’s wholly incompetent handling of our money, the latest figures for the UK’s Public Sector Net Borrowing requirements showed a record £15.9bn borrowing for last month, an increase of£1.9bn over July signalling a likely inability to meet the full year target set by the Office for Budget Responsibility. Those who warned that austerity measures were going too far too fast were too hasty to judge, and the reality is that the UK’s public spending and national debt are still far from being under any strict control, the coalition government’s problems are massively compounded by the crisis in the Eurozone propelling further injections of our cash into foreign banks to prop up states that (a) followed Gordon Brown’s advice to spend their way out of recession, and (b) did far too little far too late when they realised that no growth equated to no cash. On top of this it has been revealed that the build up of (off balance sheet) debt accruing to the “investment portfolio” of PFI schemes rolled out by Labour in their last term grows with inflation and is likely to have crippling effects on public bodies such as the NHS and Local Authorities as they face up to thirty years of heavy mortgage payments to private companies as well as being tied in to massively expensive maintenance agreements, much as new schools and hospitals are welcomed the method of paying for them is a scary business. South Tyneside will not be immune from this either and I predict that the future costs of our new schools and clinics will lead to even tougher decisions having to be made on expenditure for other services in a painful reality check (if only John Major’s government had not had this bright idea of mortgaging our children eh?).
A reality check is needed from Cameron and Clegg too, it is right to get the Obamas and the profligate spenders of this world to mend their ways, especially if we want China to lead the world into growth, but the PM can only safely harangue them if he is comfortable with the financial stability within his own country first, and for now I don’t think that the coalition has really got to grips sufficiently with the debts left by the disastrous Mr. Brown. Furthermore, spending cuts and austerity measures do only half of the job, the other half requires a complete change of direction, and it was “change” which Cameron campaigned on during the last election, to produce a radical and credible growth policy which involves reform of the taxation system. So far there have been very few signs that George Osborne wants to stimulate the economy with an effective plan that shifts the emphasis from public to private sector investment, the 50p tax rate needs to be abolished despite the howls of protest that will ensue, the Lib-Dem plan to take the low paid out of the taxation system needs to be enacted quickly, National Insurance contributions from start ups need to be reduced, and most importantly we need to re-adjust our relationship with the EU and throw off the shackles of its financial and political strictures we need to get back to having a great trading market with Europe as it was originally envisaged. Osborne needs to be reminded that lower taxes have always resulted in higher tax revenues, and if coupled with lower public spending this will encourage consumers to have more confidence in their own budget planning and spending power and their decisions will help foster a return to controlled growth in the economy.
In short Cameron’s warnings may be right, but he must put his own house in order first before lecturing the world, his government will stand or fall on this one single issue.