The British double-dip recession has proven to be more ingrained than feared, and the uncompromising austerity programme implemented by the coalition has so far failed to significantly improve the situation.
The latest information has indicated that if Chancellor George Osborne sticks with his aim of eradicating the majority of the deficit by 2017 then far worse cuts are to come. Osborne’s unpopular austerity programme, which has included measures like condensed investment and tax hikes, has been unsuccessful in making a notable dent in the deficit. Many have argued that Britain is on the wrong path, and a return to sturdy growth is not predicted to occur for at least a couple of years. But, despite mounting objections to Osborne’s methods, widespread cuts to benefits and central government spending are still in the offing. Even after all the cuts which have already occurred 90 per cent of cuts in these sectors have yet to be implemented.
However the population may feel about this, Britain’s finance ministry has strongly backed Osborne’s goal for eliminating the budget deficit and advocated no deviation from the current path. Last week Junior Finance Minister Chloe Smith stated in an interview: ‘The coalition inherited… a huge fiscal challenge, and we have always been clear that dealing with that was going to be a slow and difficult process.’
Other financial experts have reiterated this point. The Chief UK economist at Barclays, Simon Hayes, acknowledged that the worst was yet to come and commented on the difficulties attending the current recovery programme. He asserted: ‘It is going to be a long, hard slog. Reforms of welfare have only just started. It is inevitably the case that the first things you do are the easiest, and things get tougher as you go on […] This would be easier if the economy was growing more strongly. The longer the economy stagnates, the more difficult it will be to go through with the plan, both in terms of the bare maths of public finances and the politics.’
In a poll conducted by Reuters news agency earlier in the month economists forecast an economic contraction of 0.3 per cent for 2012 and lukewarm growth of 1.3 per cent for 2013. Meanwhile, the Bank of England has commented that the resumption of normal growth is at least two years away.
With Britain’s recovery so slow, and the nation remaining as one of the only major world economies back in recession, some are now urging drastic action.
During an interview for The Guardian Deputy Prime Minister Nick Clegg insisted that wealthy Briton’s should make a bigger contribution to the ‘economic war’. Clegg talked of his current attempts at convincing his Conservative partners that an emergency tax levelled at persons of ‘very considerable wealth’ is necessary to support the ‘national effort’.
The leader of the Liberal Democrats asserted that the rich could afford to shoulder more of the economic burden and that a so called rich tax would be in the interests of fairness. Clegg expressed some level of support for the steps already taken by the government but maintained that this proposal is important and viable. He said; ‘While I am proud of some of the things we have done as a government I actually think we need to really hard-wire fairness into what we do in the next phases of fiscal restraint. If we don’t do that I don’t think the process will be either socially or politically sustainable or acceptable.’
During a lengthy interview, which touched on a variety of subjects, Clegg is also quoted as saying: ‘If we are going to ask people for more sacrifices over a longer period of time, a longer period of belt tightening as a country, then we just have to make sure that people see it is being done as fairly and as progressively as possible […] If we want to remain cohesive and prosperous as a society, people of very considerable personal wealth have got to make a bit of an extra contribution […] The action is making sure that very high asset wealth is reflected in the tax system in the way that it isn’t now, making sure that we continue to crack down on tax avoidance, making sure that tax breaks don’t go disproportionately to people at the very top. What people once thought might have been a short sharp economic battle, a short sharp recession, is clearly turning into a longer term process of economic recovery and fiscal restraint. That begs big questions’.
Clegg implied that any ‘rich tax’ would be applied to wealth rather than income and that presently there is no intention of altering the new income tax top rate of 45 pence.
Whether or not the Conservative party will approve such a measure remains to be seen, but with reports claiming that bigger, harsher cuts are on the horizon many will be hoping for some form of positive action.
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