No amount of nagging from the European Commission – no matter how well it may be justified – will likely do much other than fall on deaf ears at the UK Treasury. It gets worse for no matter who one speaks to in government these days the answer is the same – stop worrying, Gordon Brown and Alastair Darling (ed. they are never quite sure which!) has got the matter in hand meaning government plans to bring the deficit back down to below the 3% level it effectively signed up to in the Lisbon treaty together with all those other nasty economic stability rules it is supposed to adhere. So stop worrying – forget all those nasty sounding figures like a budget deficit hitting near 13% by the end of this year, all that horrid temporary borrowing we are having to do to balance the requirement and those nasty rating agencies that keep on threatening to remove our fantastic credit rating. Would that any of us could stop worrying but I am afraid we can’t. And the reason we can’t allow ourselves to believe that just because it’s always come out right on the night before it will do this time is that each day that goes by the situation of deficit and debt gets worse. Perhaps it wouldn’t be quite so bad if we really could see a genuine recovery going on before our eyes. But we can’t see that and if we can’t even see the recovery that Mr. Brown and Mr Darling keep talking about how on earth are we going to even begin to believe that eventually we might even begin to see real growth?
What Mr. Brown and Mr. Darling do not shout over the rooftops of course is that under current government plans it will be 2015 at the very earliest before there is the remotest chance of the UK budget deficit hitting 4.7% let alone the 3% level that is supposed to be the maximum under the Lisbon treaty it signed. Indeed, even if the present government finds itself chucked out on its ear in May and the Conservatives just happened to win a five year term it would surely take the most stringent and extraordinary of budgets in 2010, 2011 and 2012 complete with various excessively tight measures comprising more government spending cuts in each year plus various tax rises to bring the deficit down 3% target date down by the end of a first five year term. True, that view assumes limited or minimal growth in the economy. It could be better than that under the Tories of course provided they can find ways of reviving investment in the economy and creating new jobs. In any case and to be fair, the last time that Britain found itself in a similar deficit and debt position back in the very late 1970’s the Tories were very quick to put things right.
Meanwhile I suppose that if the present UK government wanted to split hairs with the EU point of view on the huge UK deficit it could have a go at France and Germany. After all, it wasn’t that long ago that both EU and Euro member nations put two fingers up to similar deficit rules that they, as opposed to Britain at that time, signed up to when they joined the Euro back in 1999. Nevertheless, those of us that can see the huge additional damage that the Brown government is doing to the UK economy by its ‘do nothing’ electoral policies together with ridiculous notions such as believing that recovery and export benefits will soon begin to flow through as a result of the much devalued and debased value of sterling and that although there is tacit admission that ‘recovery’ is certainly fragile it is recovery nonetheless! In fact all that is nonsense – garbage of the first degree. What recovery there is in my view may be put down purely to various stimulus measures that are now fast running out of steam. For instance, very soon the car scrappage scheme will end – a factor that I suggest will lead to a fast slowing of car sales in the late spring. VAT has of course been raised and maybe it could be raised again in the budget next week. Moreover grounds for recovery are reduced by many factors including:
1.) Still rising unemployment and no willingness or visible signs yet of employers beginning to invest – why should they?
2.) Rising personal tax rates such as the 50% rate that together with increased NHS costs come into effect in three weeks time plus other unknowns that may come in the budget.
3.) House prices having risen back from lows are probably now set for a period of flat or even downward projection – an important basis for consumers to decide what they spend.
4.) A widely held perception that Britain is headed for a double dip recession and yet personal levels of debt are still very high.
5.) A similarly widely held perception that the General Election may result in a hung parliament
6.) That having seriously damaged our manufacturing ability and having all too little to export the net effect of the devaluation of sterling means that our huge import bill particularly on commodities such as oil, metals and minerals together with all those cars and consumer goods like clothes, shoes, brown and white electrical goods and the like that we continue to buy from abroad mainly because we no longer have the ability let alone capacity to produce them ourselves will in price terms just keep on going up.
7.) Forget stagflation or stagnation – the word in Britain could be inflation
8.) Not content with hammering the nails of what remains of our once proud manufacturing industries into the ground leaving just defence (which I am in little doubt that our government would also love to kill off given the chance) aerospace in which it has to be fair given reasonable support, car production in the form of Jaguar Land Rover and car assembly in the form of all the Japanese transplant operations in Britain and Vauxhall plus of course many thousands of ill supported small and medium sized enterprises (SME’s) it seems that the government along with HM Opposition and even the Lib Dems are all determined to wreck what is left of the UK banking industry.
9.) Taking the above point further and seeing the various proposals that include splitting away investment banking and essentially giving away underlying regulation of British banks to our EU competitors it seems that we have totally forgotten the thousands of jobs that are employed in the UK banking industry and also the £ millions of tax revenues they bring in for the UK exchequer.
Enough, enough …… well, for one day at least!
