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« We Cannot Afford to Double Dip | Main | Dollar Loss is Golds Gain »
Tuesday
Jun222010

The UK Budget: The Party is finally Over

UK Budget 23 June 2010.jpg

The British government has just delivered one of the toughest budgets in living memory, signaling that the borrow and spend lifestyle enjoyed under New Labour has finally hit the wall.

With the GDP running at 11%, Britain's budget deficit mirrors that of the club med countries such as Greece as the previous Labour government borrowed, printed and spent in an attempt to remain popular and keep their precious seats in Parliament. The new chancellor is looking to cut the GDP to just 1% over the next five years, for a reduction of approximately £135 billion. Anyone who has watched the sit-com 'Yes Prime Minister' will be aware that this move is easier to talk about than to actually implement, so we will see in twelve months time just how far the UK has progressed along this path of austerity.

Of note, is that VAT will be increased to 20% from 17.5%, higher taxes, benefits to be cut and slashing spending such as departmental budgets to decrease by 25% in real terms over the next four years. So, the two million or so new jobs created under the previous government are now under threat, a saving of 25% must surely involve the loss of jobs for some. We can only hope that these people can find some entrepreneurial spirit and find something useful to do. There is also a two-year public sector pay freeze along with £11 billion in cuts to welfare spending, including a three-year freeze on child tax credits.

The Chancellor, George Osborne, emphasized the taxpayers' huge liabilities in terms of public-sector pensions commitments, whereby the country would need to find billions of pounds a year by 2015.

Fitch Ratings commented that the U.K.'s emergency budget should materially strengthen confidence in the country's public finances and its triple-A rating providing the government can deliver on its planned measures. Well, its a question of wait and see, but those words should help to reduce the possibility of a downgrade.

"The specific measures announced today are substantial and enhance confidence in the U.K. public finances," Fitch said.

Finally, listening to discussions on various UK Radio stations the commentators reckoned another 500,000 people will be made unemployed over the next six months. The party is definitely over with the hangover cure being administered by the new government. In our opinion this had to be done and hopefully the UK will come out of it fitter and slimmer, however, in the short term it will be very hard indeed all round.

Its not just the UK thats up against it, you are going to here that word austerity more and more wherever you are.

Have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

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Reader Comments (3)

Interesting article on the financial crisis in Britain, as well as the rest of Europe and America. I have read a lot of articles on the Economic collapse by a prominent Chartered Accountant-cum-Economist and a prominent columnist of the INDIAN EXPRESS, Mr. S.GURUMURTHY. His hypothesis is that the colapse of the 'Family'in the western world is the cause of the collapse of the Economy in the USA and the western World. A citizen , with no family ties, doesnot have the reason or compulsion to save for his or his family's future; in fact it has led to a situation wherein he spends more than he earns, by borrowing thro'credit cards etc. The absence of the family has led the older people to the old-age homes in their twilight years, and their living/medical expenses are looked after by the Govt. Here in India , the family (son) looks after the aged parents. The Government in USA or Europe is left to do what each individual has to do- Social Security, Medical Insurance for the old people etc. The Individual also doesnot have any savings; so the Govt has to go in for external borrowings. During the Asian Financial crisis , India was not affected due to the very high level of domestic savings and the Govt could borrow from internal sources to ward of the crisis. A change in the mind-set of the Western population towards a more family-oriented life will only change the situation for the better.

June 23, 2010 | Unregistered CommenterKRISHNAMURTHY

U K, the party is finally over, I heard last week that one in every 6 dollars of retirement pensions in U K comes directly from B P. So if this oil gusher goes on and on, plus the clean up cost, then of course the law suits, could be a further loss of monies in U K

June 23, 2010 | Unregistered CommenterDennis Black

The Western way of living and lifestyle is totally unsustainable. And it was only a matter of time when it would finally come crashing down..just like the oil rig in the Gulf of Mexico. The waters in the Gulf, Mississippi river and the rain are all polluted just like Western and American society. It is an ironic connection. And it boggles the mind how people of the West could do so much harm to themselves socially, mentally and spiritually, just for transient benefits economic and outward. Now you have a lifetime of pain and suffering ahead of you and generations to come in this world will look back with shock and horror at how Western peoples could do so much harm to themselves..totally unbelievable! May Gods blessings be upon us as we live through this horrific economic collapse.

June 23, 2010 | Unregistered CommenterBarry

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