Friday, 20 July 2012

A Self serving prophecy

So Mr Osbourne, Austerity is working (sic).

Today we have discovered that it is likely the government will have to borrow an additional £20 billion, this financial year.

A rise in government spending to cope with higher social security bills, combined with a fall in tax receipts, has left the Treasury scrabbling to meet its borrowing target for the end of the year.

The International Monetary Fund has also warned the government that it risks permanently damaging economic output unless it spends more on infrastructure projects and delays welfare cuts to boost confidence and private consumption.

Mr Osborne now has a very difficult choice, he can either scrap the national debt target, which would be a political embarrassment, or he can impose greater cuts and tax rises in an attempt to get back on track. If Mr Osbourne is consistent and believes that his targets need to be hit, further cuts would almost certainly further weaken an economy suffering its second recession in three years.

The UK is back in recession after the economy shrank by 0.4% in the final quarter of 2011 and by 0.3% in the first three months of this year.

On Monday, the IMF lowered its growth forecasts for the UK to 0.2% in 2012 and 1.4% in 2013. In the spring, it had forecast growth of 0.8% this year and 2% next year, every economic organisations have over estimated the level of growth within our economy, but like all monetarists cannot accept their medicine is in part the cause of the lack of growth.

This is the problem for this government, economic activity is likely to fall short of what it forecast earlier this year, and this is likely to see the deficit rising higher both from extra spending but also from a lack of tax receipts, so in effect this is Austerity policy is a self serving prophecy.

The government needs to invest in infrastructure and develop an industrial strategy as a foundation for future growth, as Einstein said doing the same thing over and over again expecting different results, well that's insanity.

Mr Osbourne, time for a holiday? Call an Election and you can have a permanent one, before you cause more misery.

No comments:

Post a Comment