Gary's News and views

Gary writes a weekly article which appears in the Plympton Plymstock and Ivybridge News in South West Devon. The articles are published here.

 

Friday 18 June 2010

EMERGENCY BUDGET
Next Tuesday, at 12.30pm, the new chancellor, will stand at the despatch box and unveil his emergency budget. (Incidentally, the session in which I answer questions on behalf of the Electoral Commission is from 12.15am the same day, so for once I will be addressing a full House of Commons, most of whom will not be paying attention.)
The budget is necessary because, as we all know, we have a massive deficit – the amount each year the government has to borrow to pay its bills. This is now running at about £160 billion a year. If we do not tackle this urgently, then our credit status as a country will be down-graded and it will be more difficult and expensive to borrow money to pay the government's bills, so that interest rates would go spiralling up. This would choke of any economic recovery at birth and we would all be in deep doo-doos.
So we have no choice. The remedy is likely to be a combination of tax increases and public spending reductions which will take effect from April 2011. But it has to be done skilfully. If we cut too severely, then the recovery will again be put at risk.
The private sector has taken a lot of pain in the past 3 years since the banking crisis led to a full blown global recession. Many workers took a pay cut or a freeze, and for some this is still in place. I am afraid that in the next 3 years it will be the public sector feeling the pinch and it will mean job losses.
In Spain public sector salaries have all been cut, also in Greece, for similar reasons. In Britain we have seen a huge growth in public sector jobs in recent years and an absurd hike in top salaries. It was with horror that I discovered that the chap who runs Exeter University earns £290,000 a year. £25,000 a month – just imagine it. Why was this allowed to happen? We have to deal with all this overindulgence.
But because we have to prune public spending without blowing the recovery out of the water, the reduction in the deficit will have to be tapered over several years. If we get this right, we are in for several years of austerity in public finances. If we get this wrong, well don't even go there. Let's hope the new chancellor has had his Weetabix.

posted by Gary @ 09:39