BRITAIN’S ECONOMIC RECOVERY DROWNING IN DEBT – Brace yourselves for despite George Osborne’s assertion that Britain is recovering from its economic woes the average family is in for at least another 18 years of economic strife.
PwC is now warning consumers that spending will grow on average by 2% above inflation for at least the next 18 years; a trend similar to the 1950s and 1960s.
What does this mean to the average household and why should you care?
At the current rate of spending it will ultimately place families in financial difficulty with rising household bills that will most likely take up one third of the household income.
There is already a growing trend of people shopping on websites such as ebay or turning to charity shops in order to save money. Families are already finding it difficult to make ends meet as taxation and energy prices continue to rise.
George Osborne is now being put under severe pressure to ease the cost of living which ultimately means lowering taxation.
Unfortunately such a move may result in the economy collapsing altogether and Britain declaring bankruptcy – if this were to come to pass the collapse would be so catastrophic that it would make Greece look like a walk in the park.
Britain currently has approximately £1.4 trillion worth of debt; that’s approximately 500% more than its national income.
Lowering taxation would simply not allow the Government to service that debt – in other words keep up with interest payments.
Despite a number of Tories calling on George Osborne to cut taxes it simply isn’t feasible. Lowering taxes would indeed put more money back into the pockets of the people; this in turn would increase consumer spending in which inflation would then rise.
Once inflation rises it is a natural progress that interest rates will rise and any such increase will push Britain’s debt over the edge, effectively forcing Britain to default on its loans and then having to declare bankruptcy.
There is the ideology that bankruptcy is not really a big issue for the EU will simply bail Britain out. This notion is pure folly for the EU is currently facing a financial meltdown and itself recently demanded £3.5 billion from member states in order for it to meet its legal obligations.
Of course we could turn to the International Monetary Fund (IMF) but that doesn’t dissolve the debt; it rather adds to it.
Why would people want a decrease in taxation? Simply put people are going to need more money in order to meet the increase costs of living.
Since the financial crash of 2008 the average wage increase has been approximately 0.7% per annum and yet inflation has risen by 2.7% – the math to this issue simply state that we are not earning sufficient and therefore either wages rise above inflation or we decrease taxation.
It is plain to see that this Government, or indeed any other, could not reduce taxation at this point in time so what are the alternatives?
Unfortunately there are only two ways in which to put more money in the pockets of the public and that is to increase wages and or to decrease taxation.
It is a vicious circle and yet not without possibility and the key lies within public sector borrowing; that is the Government needs to drastically reduce it’s spending.
There are key areas where this Government could in fact cut costs significantly in order to provide the public with a reduction in tax.
EU – Pulling out of the EU would save Britain approximately £50 million a day.
Civil Servants – Currently the Government employs 500,000 civil servants; a figure that could be drastically reduced if competency levels were risen; that is employing key personnel who are in fact qualified.
Foreign Aid – It’s time Britain cut the purse strings and this alone would save over £12 billion a year.
Welfare – Yes our current perception of entitlement needs changing so that almost all types of welfare are cut to the bone. It will be painful but the answer to that is … get a job.
Just these four key areas alone could not only drastically reduce public spending and therefore borrowing but would allow for a reduction in taxes and even, if managed properly, allow Britain to start repaying its massive debt and not merely the interest on it.