The Budget 2013: More of the same failed strategy

What this Budget has done is entrench this chancellor’s misguided policy and has squandered the opportunity of the last three years to significantly invest in UK infrastructure to make the country fit to compete in the 21st century.

As the OBR announced a larger then expected cut of the growth for the UK  to 0.6 for 2013, we need to consider some larger facts.

In the financial year 2014/15 the Chancellor will, as Carl Emmerson, deputy director of the IFS put it, “borrow £65 billion more than he had planning two years earlier” due to lack of growth.

If the UK government economy grew as predicted by the OBR from 2010, our economy would have grown by 9.5 per cent by the end of 2013. Instead we are now scheduled to grow only by £44.6 billion – that is lost growth of £98 billion, as large as the total Education budget for the country.

UK business are holding a record £650 billion in their bank accounts, which is three times higher than usual. The graph below shows a reason: a drop in  business confidence in the UK since 2010 due to our lack of growth, leading to the hoarding of funds.

The effect is the equivalent of half of the country’s yearly GDP sitting in business accounts instead of being invested.

Budget graph 3

So facing this terrible situation what would be the sensible response to this?

China, in September, announced spending of  £156 billion on infrastructure in September, as the economist Lu Ting of Myrrell Lynch put it: “China’s central government finally took real actions to arrest the worsening slowdown”.

This investment in highways, ports and transport was seen positively by markets and commentators alike. If the UK were to do a like for like infrastructure investment it would be £86 billion investment.

The US, as mentioned writing here and contrary to what the chancellor said today in the Budget, is now enjoying improved growth and the economy is on the mend due to President Obama resisting the call for cuts. The US growth forecast for 2013 was revised up to 3 per cent, while ours have been revised down to a mere 0.6 per cent today.

The above examples show how the UK government , with its own independent monetary and fiscal policy, could have invested in growth.

So what was the response to our catastrophic last three years? The only concrete action was to announce  a further restriction on pay and savings of £11.5 billion – a further drag on the economy as spending power is sapped from people’s pockets.

What this Budget has done is entrench this chancellor’s misguided policy and has squandered the opportunity of the last three years to significantly invest in UK infrastructure to make the country fit to compete in the 21st century.

Perhaps even sadder, this government has done the opposite, and has refused to make a significant investment in the infrastructure that could have got us out of this mess.

2 Responses to “The Budget 2013: More of the same failed strategy”

  1. LB

    2005-2010, the off the book pensions debt run up by people like you grew by 736 bn a year.

    How are you going to pay that?

  2. Newsbot9

    From current funds.

    Any more stupid questions, anti-pension crusader?

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