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Falling inflation in the context of worsening credit rating is not an achievement
Falling inflation is not an achievement for the Bank of England. It is the result of the Coalition, consisting of the Conservatives and the Labour, being untrustworthy with the economy. Increasing the rate of VAT throttled domestic consumer demand, and the only thing keeping prices are inadequately regulated utilities by the State. Public sector cuts which have yet to take full effect have partly contributed to soaring unemployment, devastating the personal lives of millions. More spending on unemployment benefits, with the additional factor of decreased tax revenues from people actually in work, means that the Coalition have created through their austerity agenda an incredible mess in the economy. George Osborne knows if the public understood that the general public would revolt.
It is therefore no wonder that we are now on “negative watch”. If the credit ratings, which George Osborne has been praising thus far, deteriorate, the cost of borrowing potentially could worsen, if we were not for the fact that the Eurozone bond market is much worse than the UK bond market. By the time unemployment hits the roof and the economy is still stagnant in 2015, with cuts to reach full potential, the Liberal Democrats will be totally unelectable. The destruction of legal aid and the NHS will not be forgotten either. The Tories and the Liberal Democrats cannot be trusted with the economy; the mess we’re in is directly their fault.
The budget
I have a terrific regard for the University of Oxford and the PPE course (Politics, Philosophy and Economics).
As an educationalist, I think it is a very clever combination of three subjects taught to a hugh standard by three separate examination schools. However, as a neuroscientist, I think the subject is ahead of its time. For me, it represents whether the markets operate with free will or deterministically, and whether its expedient for governments to make decisions around such findings, inter alia. And the list of PPE graduates is a wonder to behold: Andreas Whittam-Smith, Guto Harri, Mary Ann Sieghart, Nick Cohen, Nick Robinson; and of course, Stephanie Flanders, Hugh Pym and Ed Balls. I was disappointed, but not particularly surprised, to see George Osborne not on this list.
With the ritualistic nature of the Budget, it is easy to forget that the budget for any business entity represents the pivotal focus of budgeting (as the name would imply) and forecasting. This is interesting in the context of the overall business strategy, and provides an important exercise for seeing the progress of the organisation with its economic goals. In summary, we saw inflation go up to 4.4% yesterday, GDP is going down (although hopefully it is likely we will avoid a ‘double dip’ of two quarters of negative growth seeing us back into recession), unemployment rising particularly youth unemployment, and interest rates probably about to go up. The danger with the cuts strategy, of cutting quite so much fast so fast, was that we would risk slow growth, with people being laid off in the public sector with the private sector not picking up the slack, as the Tory-led government had hoped. This would mean there would be less spending power, more unemployment benefit being paid, less tax revenue, and the deficit actually not being cut as fast as desirable. It is also incredibly depressing for morale. Many of us have felt that even if the deficit is paid off fast the wreckage that would be produced socially would be difficult to recover from. Hence, we at Cambridge, have a somewhat different emphasis. We don’t call it “Politics, Philosophy and Economics”, but “Social and Political Sciences”. You’ll see this perhaps this Saturday…
