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Banking Crisis - Structural Deficit –Austerity Measures – Taxation – Economic Development – Growth - Inflation, and all that kind of stuff PDF Print E-mail
Written by John Boardman   
Sunday, 27 January 2013 17:14

George Osborne has been extremely successful in convincing many people that the structural deficit is our biggest problem.
The reality however is that the deficit is a product of the much bigger problem of a depressed global economy. The bigger problem was mainly caused by the global banking system which actively encouraged the creation of unsupportable mortgage debt and then compounded the problem by trading in that debt.

In truth, it is quite normal in time of a depressed economy, for governments to run with a deficit to support overall demand. The reason for this is not ‘rocket science’: as demand rises unemployment falls, unemployment related benefit payments reduce and revenue from taxation increases, thereby reducing the deficit and providing the opportunity to pay back debt.

George Osborne is treating the side effects rather than the malignant disease created by the banks. The only conclusion that I can reach is that George Osborne’s ‘Austerity Measures’ to reduce the deficit are at best misplaced by over-focusing on low interest rates, or at worst are simply ideologically driven to reduce state spending so that if and when a recovery takes place, he will have more leeway to engineer the Conservative Party agenda which includes even more privatisation of services and tax reductions for the wealthy.

On 6th April George Osborne will increase the personal allowance for everyone of working age by £630 to £8,105 p.a. At the same time he will be reducing the top tax rate for those earning over £150,000 by 5%. You can do your own sums to work out what this means for someone paid £500,000 or £2,000,000 for example. To me it hardly seems like “we are all in it together”.

We all know that for over four decades, many manufacturing jobs from the North West have been off-shored in pursuit of higher profits. There is a desperate need for these jobs to be replaced with new employment in higher technology industries, which will generate the decent wages, which in turn will feed the demand side of our economy.

Over the last 5 years average earnings in the North West have only increased by 8.1 % (I believe that this is about 5% less than inflation over the same period).

Because of low interest rates, inflation has wiped about 10% off the value of people’s savings over the last five years; obviously this is not helping pensioners who have saved throughout their working lives for retirement.

Add to this the loss of income from people who have been made redundant or had their working hours reduced and it paints a picture of our declining spending power in Pendle.

The Governments answer to this is to cut benefits and family tax credits on the grounds of ‘fairness’.

It is hardly surprising that we no longer hear the tills ringing on Pendle’s high Street.

I have no problem with Mary Portas looking at our high streets, but the best opportunity for attracting new retail business to Pendle’s ailing streets, is new and better paid employment that puts a modest amount of disposable income into working people’s empty pockets. 

It is not just about spending power, most of the social problems in our society are directly linked to poverty and the unfair distribution of wealth.

We need a government which will focus upon putting mechanisms into place for creating sustainable growth and providing education and training for skills, rather than looking for diversionary headlines about European Referenda which will have a serious impact upon inward investment.


 

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The articles are written by individual members so do not necessarily represent the view of Pendle Labour Party.

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