In My View: The Economy
I’m grateful to fellow Liberal Democrat, Stephen Tall, who has exposed five great myths about the economy that keep popping up again and again.
I’m pretty sure the cause is lazy journalism, but it suits politicians wanting to put a spin on things. If something is said again and again, it is accepted as fact, even when the complete reverse is true!
The first of these myths is that UK public spending is reducing. In fact, it is going up year on year under the Coalition government. It was £690 billion in 2010-11. It will increase to £744 billion by 2014-15. This doesn’t seem to me to be the very stern belt tightening and austerity that we read about in the national newspapers every day.
The second myth is that government policies are bringing the national debt down. In fact, it is forecast to rise in every year of this Parliament. Public Sector net debt stood at £903 billion in 2010-11. It will rise to £1,125 billion in 2014-15. Here it seems politicians are often allowed to get away with making claims about reducing the deficit (the gap between what we spend and earn in a year), when they are answering questions about debt (the accumulation over the years of all our borrowing).
Third myth, often used by the Labour party, that government cuts have gone “too far, too fast”. As already explained public spending has not been reducing as most people perceive. An analysis carried out by Ernst&Young, using a similar model known to be used by The Treasury reveals that Labours looser fiscal policy would have resulted in lower growth in 2010, identical to the Coalition government in 2011 and only slightly increased growth, (less than 1%) in 2012. This isn’t exactly the stark choice portrayed by politicians!
Fourth myth, Obama policies in the USA are opposite to that of our current UK government. You often hear politicians talk about the stronger economic recovery in the USA as evidence that are own austere policies aren’t working. Guess what ? Obama cut federal spending by 0.9% in real terms from 2010-11. This is the same cut as in the UK. The US deficit reduction plan is forecast to cut further and faster than that of the UK.
And finally, the fifth myth is that there is an easy and immediate solution to all of this. Neither Labour or the Coalition government have found a way to spark the economy back into life. Consumers, businesses and the government are acting in much the same way, reducing debt after a decade or more of maxing out the credit card. Despite lowering interest rates to nearly zero, pumping money into the economy, some £825 billion, through a combination of quantitive easing and deficit spending, nothing has yet worked.
Maybe things will work out and it just takes some time before confidence returns. For my part, it would help build confidence if politicians were straight with people, or is that just too much to hope for?