United Kingdom Heading Back Into Recession?
When the Conservative and Liberal Democrat coalition formed, one could forgive the pair for wanting to take a different approach to the economy. The argument has been made by political pundits that they inherited an economy in tatters from the Labour government and this certainly has some credence. New Labour under Tony Blair borrowed from the International Monetary Fund at abhorrent interest rates, rates that are still being serviced today.
Back in 2010 alone the United Kingdom was paying just north of over £42 billion to service debt annually. That alone amounts to more than the United Kingdom’s entire defence budget. What it is also indicative of this is for decades after the Second World War, disingenuous politicians have been wasting tens of billions of pounds each year by spending too much and not taxing enough. This had to be done in order to create a budget surplus to finance sacred institutions like the National Health Service, which too are presently running in the red.
This in turn has been leading to what I call our economic judgement day, in which the country would be staring down the barrel of a lender’s shotgun as they will look to collect the borrowed monies with interest. Of course we’re aware that it won’t be payable because the deal that oversees Britain’s borrow and pay interest on that lent money is comparable to a loan-shark’s deal.
Such is the debt, it is estimated that each household is in the red by up to £55,000. So even with the persistent austerity cuts that have been made to the public sector, a few billion cut here and there still won’t mend the gaping hole that gradually grows bigger and bigger.
The news of doom and gloom comes on the heels of the recent announcement by those expert economists at the International Monetary Fund. They downgraded the United Kingdom’s chance of economic growth this year and stated it would be the weakest growing economy of any other developed nation. What was previously forecast of at least 0.8 per cent growth rate has been slashed to 0.2 per cent. Effectively the economy won’t be stagnating but we’re hardly on the road to recovery either, which leaves us where we began at the beginning of this atrocious government’s reign in power.
The news called great panic among in the international markets. Upon the breaking news of the International Monetary Fund, there was a great dash to stash trillions of pounds in financial safe havens. What proved the most popular yesterday was United States treasury bonds, as they were highly sought after. The tumult even led to the FTSE losing a few points.
Despite the bad news about the United Kingdom’s economy, the biggest dweeb of them all weighed in with her own assertions, which will certainly come as a kick in the crotch to the vast majority of the UK’s populace. Christine Lagarde was pressing for European states to continue with the implementation of repulsive cuts and these will bite into family’s incomes, even more so than they’re doing now.
George Osborne’s opposition in parliament Ed Balls took the opportunity to weigh in on the failures of the current government. To a large degree he was right, stating that cuts and higher taxes are ingredients for a depression. But this too was a case of “pot, kettle, black,” as the problems the Conservative and Liberal Democrat government inherited from an economic standpoint were caused to excessive levels by Ed Balls and Gordon Brown. They both practically amount to two peas in a decrepit looking pod with no real solution to help stimulate the economy and get us out of recession. Instead of suggesting solutions, they place politics and look to point fingers.
It is also worth noting that Ed Balls favours stimulating growth through measures similar to that conducted by Barack Obama in the United States. Through printing exorbitant amounts of money and trying to liquidate the financial system by throwing tens of billions of pounds at government initiated schemes in the vain hope that somehow the economy will pick up.
This economic plan will only lead to even more of a burden being placed on the future taxpaying generations within the United Kingdom. Clearly it’s intended as a short-term fix and the delaying of the inevitable. One would also consider it a ploy to immediately get back into office by lining voters coffers with petty cash short-term savings, ignoring the massive deficit that the country is facing.
To stimulate the economy you clearly need to invest in a number of things. Infrastructure needs rebuilding, engineers need encouraging through grants and more emphasis has to be placed on hi-tech technology. Of course tax incentives for corporations should be offered to bring back manufacturing business, which has rapidly migrated eastwards to booming countries like China and India, which are growing at a rapid rate.
Then of course there’s the saving of hundreds of billions of pounds by ending these frugal wars in Afghanistan and Iraq, whilst cutting unnecessary defence spending.
Together this will amalgamate into great savings and a surplus for the countries economy. Once these measures have been put in place, employment will rise, spending will increase on consumer goods, thus creating more jobs and tax revenues will help restore the countries balance sheet in the black, instead of the red. Than the IMF’s forecast reading will be anything but negative for the future.