Now, although it wouldn't
have been my personal choice to listen to George Osborne wittering away to the
party faithful in Manchester, as it turned out, having to listen to his 35
minute speech and watch as he pushed against an open door was no great hardship
really, considering that he made such a half-assed job of it in the end. I'm
not quite sure whether his new hairstyle was designed to make him more
likeable, or possibly more electable, but whatever the reason, he still came
across to me as a faltering, out-of-touch and deeply dishonest spiv, which
probably accounted for the content of his conference speech, with its overspill
of political and personal hyperbole, jingoism and rhetoric.
I've said it before, but
I'll say it again, I'm no financial expert! However, as far as I'm concerned
neither are many of our elected representatives, most of whom couldn't run a
bath, let alone a multi billion pound economy like our own; and Osborne has to
be one of our least capable politicians, with a degree in history! Mind you
considering that we have a modern day snake oil salesman actually running the
country, we really shouldn't be surprised at the sorts of second-raters that Mr
Cameron chooses to surround himself with. Compared to the likes of Osborne,
Gove, May, Duncan Smith and Hague, Cameron probably looks golden, although it's
a shame that in reality he's nothing more than Iron Pyrite.
Anyhow, to get back to Mr
Osborne and his set-piece speech to the Conservative party faithful! Even
though it had been heavily trailed beforehand, the central announcement was to
inform the country that true to their party values and based on the ideology
that they had inherited from the late Lady Thatcher; that they were going to
give the unemployed yet another severe kicking. In line with the ethos of the
Daily Mail's readership, all of the welfare scroungers, layabouts and shirkers
were going to be targeted by SS (Social Security) Chief Iain Duncan Smith and
his department, in order to ensure that they earned the £70 per week that was
allowing them to live the "high life" at ordinary taxpayers expense.
From now on, the 200,000 long term unemployed would be required to attend their
local jobcentre each and every working day, or made to cook meals for the
elderly, would be compelled to pick up litter, or if they were unemployed
through addiction, lack of education, or training, then they'd receive as much
help as was needed to get them back onto the right path.
Unfortunately, Mr Osborne
failed to explain how this new shiny Welfare programme would help the remaining
90% of the country's unemployed. Bearing in mind that we currently have 2.5
million people out of work and that the 200,000 mentioned only represents 10%
of that total figure, what is he going to do about the other 2.3 million that
are looking for work? Also, on a basic calculation, the cost of the scheme is
reported to be in the region of £300 million, which if divided by 200,000
jobseekers, works out at £1500 per person. Just who is going to monitor and
oversee these unemployed jobseekers, when they turn up at the various
jobcentres, when they are cooking meals for the elderly, when they are picking
up litter, or when they're being retrained, re-educated, or weaned off their
various addictions? And how is £1500 per person going to pay for that in the
long term?
Even though most
Conservative politician's seem loathe to describe the new programme as a
workfare project, in essence that is exactly what it is, a more modern version
of the Victorian workhouse, where inmates (or in this case claimants) are
compelled to work for their supper (or benefits). The danger is of course, is
that in common with the old workhouses, how can one ensure that abuses within
such a wholly compulsive work programme do not arise through the actions of
those people overseeing the project; and the compliance of the participants, or
indeed at the hands of some of the various commercial organisations that will
ultimately benefit, from what is after all a free labour resource. It is no
great secret that a significant number of Britain's major employers made full
use of jobseekers under the terms of the Coalition government's previous
employment scheme, to the extent that some high street businesses were able to
save themselves the regular cost of paid worker's wages, simply by accepting
jobseekers from the government's work scheme, at no cost to themselves. At the
time, the Coalition were openly accused of offering "cheap labour" to
some of the UK's wealthiest employers, a charge that both vigorously denied,
but which continues to taint their corporate reputations right through to the
present day.
It cannot be a
coincidence that Britain's 2.5 million unemployed closely mirrors the 2.9
million foreign workers that both Labour and Conservative parties have allowed
to come into our country over the past two decades, something that Mr Osborne
was keen to lay at Labour's door alone. Although no-one should doubt the
serious damage that both Tony Blair and Gordon Brown's administrations actually
did to the indigenous population's employment prospects, the harm done by John
Major and that continues to be done by David Cameron and Nick Clegg's parties
in coalition should not be understated especially by George Osborne, one of the
chief architects of their overall strategy. After all, it wasn't Tony Blair or
Gordon Brown who decided to take a fiscal knife to the UK's Public Sector
workforce, to the NHS, to the Police Force, to the Armed Forces; and in the
process putting tens of thousands of workers on the dole. That was entirely the
work of the Coalition government, of David Cameron, Nick Clegg, George Osborne,
Liam Fox, Philip Hammond, Andrew Lansley and their own cost cutting cohort.
But of course the financial
probity of George Osborne's Coalition government is another one of those great
deceits that have become a characteristic of British government over the past
few decades. As the Chancellor of the Exchequer, one would expect Mr Osborne to
know the difference between the Government's Borrowing Deficit and the UK's
National Debt, which are entirely different to one another, but often confused,
either accidentally, or sometimes deliberately, to confuse the general public.
The Deficit is actually
known as Public Sector Net Cash Requirement, which was previously known as the
Public Sector Borrowing requirement. This is the rate that the UK government
must borrow in order to maintain its financial commitments on an annual basis.
In his speech today, George Osborne told his party conference that he had cut
the deficit, the PSNCR (or the PSBR) by one third, even though at the beginning
of the coalition's first term in office, the intention had been to cut the
deficit entirely by the end of their first five year term, an objective that
has now been put back until 2018 at the earliest. Bearing in mind the austerity
measures introduced by the coalition government, including the billions saved
on the cost of the NHS, Public Sector workforces, the Armed Forces, etc. this
explains the reduction of one third in the deficit claimed by Mr Osborne. As he
is spending less on government projects, he therefore needs to borrow less from
the international markets, hence the overall reduction in the deficit. However,
the deficit is entirely different to the UK's National Debt, which is still
rising and that is explained below. As an example in the year 2011/12 the UK
government's total spending was an estimated £710 billion, while its total
income was only £589 billion, leaving a shortfall of £121 billion, which it had
to borrow from the international markets. This £121 billion then became the
deficit and currently cost some £2 billion per week on the National Debt simply to service it.
The UK's National Debt is
the total amount of money owed at any one time through the issue of securities
(gilts, etc) by the UK government. As of the first quarter of 2013 the UK's
total National Debt was said to equal £1,377.4 billion, or 90.7% of Gross
Domestic Product. The cost of servicing the UK's National debt was estimated to
be £43 billion per year, or 3% of GDP. Forecasts suggest that the UK's National
Debt is expected to rise to 95.6% of GDP by the end of 2013, to 98.7% of GDP in
2014. Because of the still relatively high Budget Deficit, as mentioned above,
the Coalition government's National Debt is reported to be increasing by £121
billion per annum, or £2.3 billion per week. It was in part due to this
stubbornly high Deficit that the International Credit Rating Agency Moody's
downgraded the UK's Debt worthiness from AAA to Aa1.
By peacetime standards
the UK's National Debt is fairly high, but during World War II Britain's
National Debt was reported to have risen to 180% of GDP, although given the
circumstances such a high rate was hardly remarkable. Depending on who you ask,
some sources believe that the UK's total National Debt, including all
outstanding government pensions, etc might be as high as £5 trillion, whilst
most other estimates suggest a figure of between £845 to £900 billion, around
35% of which is owed to overseas investors.
The point is this. Along
with David Cameron and many other politician's, there is a suggestion that Mr
Osborne likes to play fast and loose when talking about both the Deficit and
the National Debt and how exactly that message is being put across to the
viewing public. Although Mr Osborne has undoubtedly reduced the deficit, mainly
through introducing austerity measures to big spending sections of the economy,
it is clear that the National Debt has continued to grow; and will continue to
do so. As of 2012, it is reported that the National debt costs every British
household around £2000 per year to service, a situation that is likely to get
worse in the coming years.
The other great
announcements made by Mr Osborne at conference were the "Help To Buy"
campaign and his support for the proposed HS2 Rail Scheme, both of which he
believes will be hugely beneficial to the UK economy. Making the point that
house prices are falling in the North, as opposed to rising in London and the
South, Mr Osborne's entire argument was flawed right from the start, although
he didn't seem to let a little thing like that get in the way of his argument.
Surely if house prices are artificially high, due to a shortage of homes, then
maintaining the high prices with government backed mortgages is simply going to
drive prices even higher again, as affordable homes become an even scarcer
commodity. Surely commonsense would dictate that prices need to be allowed to
fall, thereby making properties more affordable. Rather than London and the
South being the exception, by maintaining the high property prices, the
Coalition is simply replicating the London price model nationally? The last
recession was caused in part by the huge sub-prime market in America, where house
buyers were actively encouraged to take on excessive debt, only for their
investment to go belly-up when the interest rates increased. So George Osborne
is encouraging first-time home buyers to take on excessive debt with government
help, when interest rates are almost non-existent, so what happens when
interest rates start to rise, which they inevitably will at some point in time,
possibly when the unemployment rates reach 7%, as suggested by Mark Carney, the
new Governor of the Bank of England.
Like I say, I'm no
expert, but neither does it appear that George Osborne is either. Most experts
believe that you have one of two options to drive an economy forward, you
either save your way out, or you spend your way out. Clearly the former option,
as adopted by George Osborne, with all of his cost cutting, services cutting,
welfare cutting, jobs cutting and every other sort of cutting, is still driving
our National debt through the roof. What began as a five year plan to eliminate
the deficit completely, has now become an eight year plan, assuming of course
that he doesn't change his mind again in the next couple of years. That's the
trouble though when you appoint someone who isn't an economist, to do an
economist's job, they're almost certain to screw it up! But then maybe that's
why you get a speech like Mr Osborne gave today, long on rhetoric and short on good
ideas, because that's what people do when they haven't got a clue?
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