A world in economic crisis

Britain’s deficit third worst in the world, table – Telegraph

Posted in United Kingdom by Aussie on February 20, 2010

Britain’s deficit third worst in the world, table – Telegraph

The table says it all:

Deficit as a % of GDP
Iceland 15.7
Greece 12.7
Britain 12.6
Ireland 12.2
United States 11.2
Spain 9.6
France 8.2
Japan 7.4
Portugal 6.7
Canada 4.8
Australia 4
Germany 3.2

* Figures from OCED forecast in November 2009.

Great Britain is in real trouble. Its spending is out of control. The problem is that the Socialist Govt in Great Britain is wedded to the notion of “fairness” with regard to “redistribution of income”. What these people do not realize is that this “fairness”, especially when it is tied to PC attitudes is the cause of this deficit disaster.

Unless a British Govt is willing to confront the issue of immigration which is not based upon the skill sets of the immigrants, it will not be able to contain costs associated with Welfare spending. These costs include the failing NHS scheme, as well as housing and other welfare benefits given to immigrants after only a period of 12 months in the country. The Social Security type people need to be more vigilant because they seem to be unaware of the harm that is done to the economy because of welfare cheats.

Some people seem to think that this present problem is due to low real wages. This is the usual argument of Socialists who have no clue about what makes an economy tick. The same goes for those who want to “blame the banks” instead of the Government. The structural debt has nothing to do with the excesses of any banks but it has to do with the excesses of government.  Take for example some of the more recent scandals involving government members relating to allowances. A good case could be made for reducing such allowances and also for ensuring that all claims made by members of the Parliament are properly scrutinized. A good start would be to remove any allowances and privileges given to ex-members of the Parliament, including to ex-Prime Ministers. By now they should be getting enough money of their own, they do not need to continue to feed off the public purse. Any member of parliament who wants to travel overseas should be asked to reduce their travel expenses. If they go over the allowed yearly amount for travel, then they should pay for the out of pocket extra expenses. They should also seek to use the least expense mode of transport necessary for the trip. (yes I know, first class travel is GREAT). The reduction could take the form of reducing the number of extra staff if it is necessary to travel first class. Instead of flying they might like to choose the train (but not in winter).

Also, the government should stop wasting money on useless Green projects that are not providing any return on investment. What good is wind turbines when they are made in China? What use are they if they freeze up during a snow storm?

In another area, the Govt should be looking at its education objectives. The provision of free education for families who are in poverty is laudable, however, what about those families who could afford to pay something towards the education of their children? There must be ways of cutting education expenses in the future. Allowing families greater school choices might bring about a better outcome. Not all children are suited to staying on for extra years at school and it would be better to send them out to be apprentices (which should include some schooling anyway), then keeping them within the classroom and being disruptive.

This present situation though, is not truly surprising once it is recognized that we have in fact hit a new period of stagflation and that the measures required to get out of the stagflation will indeed cause pain, but they are needed to tackle a situation that has been allowed to get out of hand, because of the burgeoning Welfare State.

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2 Responses

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  1. charlesrowley said, on February 20, 2010 at 8:55 pm

    As your table clearly indicates, the UK is in an especially serious fiscal mess. It has been poorly governed over the past decade and now confronts a major crisis. It is interesting that the Keynesian economists are urging upon the British government more not less deficit financing, a policy that assuredly would lead to a major run on sterling.

    Because the budget is so badly out of balance major spending cuts are essential and must be supplemented by tax increases, probably in the foirm of increases in VAT.

    The UK situation is precisely where the US is headed unless major policy changes are initiated, designed to cut public expenditures significantly, and to tighten monetary policy.

  2. Aussie said, on February 20, 2010 at 10:38 pm

    I think this is the nub of the whole issue, that we have a situation that is not the classical deep recession, rather it is stagflation. As such, other measures, including if necessary an increase in the VAT for GB is necessary.

    Australia introduced a GST under the Howard Government. The rate is 10% and I believe that it should not go higher given the size of our population. The State Govts are supposed to get a share of the GST receipts as a trade-off for dropping various taxes. The State governments did not keep their end of the bargain. There is a lot of expenditure wastage at this level of government.

    At this point in time it might be worth having a look at what policies worked in the 1980s & 1990s that helped to turn around the economies in UK, Australia and USA.

    I agree that public expenditures must be cut significantly. In the USA the proposed Health insurance scheme will add to the inflationary trend in the future because of the various variables that are involved.

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