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UK economy living on borrowing – and borrowed time

There’s one thing that prime minister Cameron got right during his speech to the City – the need for a “fundamental culture change”, because the UK economy is diving deeper into debt in a bid by the ConDems to engineer a mini-boom.

Cameron is now promising a continuing assault on public spending, and a permanent reduction in the size of the public sector, whilst drawing as many people as he can into a life of permanent debt servitude as the ConDems pump up house price inflation.

Imagining what that might add up to isn’t going to cheer up anyone who uses health, education, social services, or anyone dependent on benefits. But as the BBC has been investigating, it’ll be a roll-over bonanza for companies like Serco, Virgin Care and Circle competing for the rapidly expanding marketplace in privatised service provision.

In Wales, it’s not the future that looks grim, but immediately now, this winter. Huge Westminster imposed cuts on budgets have dramatically reduced health and local government spending.

The announcement from local health board Hywel Dda, covering Pembrokeshire, Cardiganshire and Carmarthenshire, that it will cancel elective surgical procedures from November 22 throughout the winter period has sent shock waves throughout the country. Local councils throughout Wales are also hard at work on plans to slash the services they provide.

Many are claiming that the new turn in Cameron’s speech, when the economy is supposedly “returning to growth”, proves that the attack on living standards is driven by “ideology” rather than necessity. This is clearly not the case.

Despite Cameron’s proud claim to have reduced the government's budget deficit by a third, only last week the European Commission forecast that Britain's current account deficit – trade in goods and services – will rise to 4.4% of GDP in 2014, with little improvement after that.

This is the highest trade deficit of any major industrial country, and far higher than the US, as its exploitation of shale moves the world’s richest country towards energy independence.

The Commission said Britain still has a structural government budget deficit of 5.7% of GDP even after years of austerity. This compares to minus 1.5% in the eurozone, minus 0.8% in Italy, and a surplus of 0.5% in Germany.

So-called growth in the UK economy is being driven by a steady fall in the household savings rate, down to 6.2% this year from 7.3% in 2010. The Commission said it expects UK consumers to "dip into their savings" to cover spending. "The debt burden of households remains a distinct risk to private consumption."

Clearly, the UK economy is living not just on borrowing but borrowed time.

The pressure from the ongoing global economic crisis of capitalism continues to bear down on the UK as it does on the rest of Europe.

Greece’s coalition government will step up its version of permanent, deepening austerity after it survived a no-confidence vote. The challenge was launched by the anti-austerity Syrizia party after riot police ended the five-month occupation by former employees of the ERT broadcasting station.

Their jobs were sacrificed to demands from the Troika – the European Commission, the European Central Bank and the International Monetary Fund – for 2,000 public sector job cuts by last June.

Now the Troika wants to see a further 15,000 jobs go by 2015 in the budget to be finalised next week, adding to the 27% unemployment rate, and giving no hope at all to the close to 60% of unemployed young people.

Misery for the majority throughout Europe and the rest of the world is certain to increase as corporate control of the democratic process tightens its grip. Talks delayed by the shut-down of the US government have begun between the EU and the US on TAFTA, a transatlantic free trade agreement. This is intended to remove regulatory barriers impeding the growth of the big global corporations.

What’s needed is a different kind of culture change from the one envisaged by Cameron. Or, as Bob Dylan put it ‘"There must be some way out of here" said the joker to the thief "There's too much confusion."’ Global, democratic, not-for-profit alternatives anyone?

Gerry Gold
Economics editor
13 November 2013

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