As We Noted Yesterday … Cameron Warns UK of “Decades” of Hard Times
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Like everyone else, we love to have our analysis of things confirmed by the turn of events … 😉 …
Like everyone else, we love to have our analysis of things confirmed by the turn of events … 😉 …
But even we were a bit suprised by how quickly the piece we published yesterday – pay no attention to the dating system … it’s computerized –
on the mess the British economy is in was confirmed by a stark announcement from newly elected Conservative / coalition Prime Minister David Cameron
that the country faces literally “decades” of austerity, as related in this article from the New York Times.
Cameron said Monday that Britain’s financial situation was “even worse than we thought”
and that the country would have to make savage spending cuts to bring its swelling deficit under control.
Stern and grim-faced in a speech in Milton Keynes, north of London, Mr. Cameron said, “How we deal with these things will affect our economy, our society — indeed our whole way of life.”
“The decisions we make will affect every single person in our country,” he said. “And the effects of those decisions will stay with us for years, perhaps decades, to come.”
Mr. Cameron said that at more than 11 percent, Britain’s budget deficit was the largest ever faced by the country in peacetime.
But he warned that the structural deficit – which, again, we stressed yesterday – was more worrisome.
Britain owes more than $1.12 trillion, he said, and in five years will owe nearly double that if nothing is done now.
The country already spends more on interest payments on its debt than it does running its schools, he said, —
adding that determining how to reduce the deficit and cut down on borrowing is “the most urgent issue facing Britain today.”
Mr. Cameron’s government, a coalition of Conservatives from his party and Liberal Democrats, led by Deputy Prime Minister Nick Clegg, faces a difficult political road.
With its grip on power untested, it will have to contend with critics on the right and left of both parties to get its spending plans through Parliament.
At the same time, the government risks alienating Britons, particularly workers in the state sector, which Mr. Cameron singled out as an example of public spending run amok.
Mr. Cameron tried to soften the blow by saying that the cuts would not disproportionately affect the vulnerable.
Mr. Clegg told The Observer over the weekend that Britain would not face “a repeat of the 1980s” and the budget cuts of the Margaret Thatcher years.
Dave Prentis, the general secretary of Unison, a union that represents many public service workers, nonetheless told the Press Association news agency that
Mr. Cameron’s speech was “a chilling attack on the public sector, public sector workers, the poor, the sick and the vulnerable, and a warning that their way of life will change.”
The prime minister laid the blame for the situation squarely on what he called “reckless” spending by the Labour government, which was in power for 13 years before being defeated in last month’s election.
He said that as the financial crisis was “Labour’s legacy,” so, too, would be the spending cuts.
Labour argued that spending would help stimulate the economy, Mr. Cameron said, “conveniently forgetting that if you start with a large structural deficit, ramping up spending even further is likely to undermine confidence and investment, not encourage it.”
Details of proposed spending cuts have not been public.
The chancellor of the Exchequer, George Osborne, plans to set out the principles underlying his spending plans on Tuesday and to announce an emergency budget June 22.
Mr. Cameron said the cuts would come after wide consultation with members of the British public, driving home a recurring theme in his election campaign that “we’re all in this together.”
“It is precisely because these decisions are so momentous, because they will have such enormous implications,
and because we cannot afford either to duck them or to get them wrong that I want to make sure we go about the urgent task of cutting our deficit in a way that is open, responsible and fair,” he said.
He said the financial situation had been worsened by the sovereign debt crisis in Europe.
“The global financial markets are no longer focusing simply on the financial position of the banks,” he said.
“They want to know that the governments that have supported the banks over the last 18 months are taking the actions to bring their own finances under control.”
As a cautionary tale, he mentioned Greece, where profligate spending led to a huge budget deficit and a downgrading on financial markets.
While Britain’s economic position is stronger than Greece’s, he said, “Greece stands as a warning of what happens to countries that lose their credibility, or whose governments pretend that difficult decisions can be avoided.”
David Caploe PhD
Editor-in-Chief
EconomyWatch.com
President / acalaha.com
