Tuesday, 16 August 2011

There is no ‘them’ and ‘us’ – there is us.

The inflationary pressures continue, we have seen the utilities bills continue to rise, today the hike in train fares, with fares 28% higher than today by 2015.

The UK’s rate of inflation increased from 4.2% in June to 4.4% in July according to figures released today by the Office for National Statistics.

The latest increase in inflation will add to pressures on household budgets. Moreover, with inflation likely to increase to 5% in the next few months, the gap between increases in earnings and increases in prices could widen.

This makes it very unlikely that the pace of economic growth will pick up in the second half of the year. Retail sales volumes, which have barely increased over the last year, are likely to remain stagnant.

So the government does nothing to help with ever rising fuel prices, nothing on ever higher transport costs.

So them (the government and energy companies and train companies) and us (who have to pay).

This week we are expecting data on unemployment, we are expecting weak private sector employment with possible future rises in unemployment.

This will further reduce confidence.

Ed Balls said of the chancellor;
"He needs to realise that tax rises and cuts which go too far and too fast have crushed confidence and seen our economy flatline since last autumn. His reckless and incautious policies have left Britain vulnerable in the face of the global economic problems we are now seeing. And without strong growth and more people in work the government will find it much harder to get the deficit down."

The new IMF boss Christine Lagarde's attacks Osbornomics and is damning "For the advanced economies, there is an unmistakable need to restore fiscal sustainability through credible consolidation plans. At the same time we know that slamming on the brakes too quickly will hurt the recovery and worsen job prospects. So fiscal adjustment must resolve the conundrum of being neither too fast nor too slow... What is needed is a dual focus on medium-term consolidation and short-term support for growth and jobs.

That may sound contradictory, but the two are mutually reinforcing. Decisions on future consolidation, tackling the issues that will bring sustained fiscal improvement, create space in the near term for policies that support growth and jobs. By the same token, support for growth in the near term is vital to the credibility of any agreement on consolidation. After all, who will believe that commitments to cuts are going to survive a lengthy stagnation with prolonged high unemployment and social dissatisfaction?"

With low growth it is likely the government will miss it's borrowing target despite cuts to the public sector the country borrowing will not decrease and could even increase, so Osbournomics will demand even greater cuts to public services.

This will continue the cycle of public sector austerity, then private sector austerity and then lower consumer confidence, a stagnating economy.

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