We all want this dreadful recession to end.  Many of us have friends who have been affected by this harsh recession be it, losing their job, falling into debt, having their house re-possessed, destroying their marriage/family life, through the stress of potential redundancy / working longer hours to hold their jobs.  The sooner we see ‘green shoots’ the better.  Alastair Darling has been more encouraging lately as he sees those green shoots emerging and that the UK is back into recovery mode.  He has to be positive to talk up the markets but economic data paints a darker picture and one which shows that whilst the economy is fighting to get out of recession, the dangers of a double dip recession are serious and real.  For that we must all be worried.

Politics is currently in suspended animation.  Everything on hold until the next election.  The Government are deferring key decisions until after that election.  Tough medicine the economy needs NOW is being held until post election….why?….because tough decisions are unpopular and this Government wants to win the next election.  The lack of decision making, total procrastination at the heart of Government is damaging the economy still further.  Let’s have that election today and get on with the job of getting people back to work and this great economy on its path to recovery and prosperity.

Key economic data yesterday painted a worrying position.  Government debt is far worse than expected and spiralling.  Government revenue received through tax receipts is dropping like a stone whilst benefit payments are shooting skywards.  Bank lending, seen as key to small businesses rejuvenation, is again falling.  Banks, several of which this Government now own, (ie we do as British tax payers), are failing in their duty and stated promises to push bank lending again and get the economy moving.  These stated goals are not being implemented and not evident.  Many small businesses are delaying on investment decisions because they cannot get bank funding, (we heard that story from a recent post by Russ Rec).  In the meantime, whilst banks don’t lend, they are grabbing with the other hand.  Credit card rates are rising.  Bank charges reappearing for minuscule errors.  Private household debt the highest of European nations.

Despite the abuse Gordon Brown threw at David Cameron over the Conservatives Spending plans ie branding DC Mr 10%, we now see from leaked Treasury papers that the Government are planning 10% across the board cuts.  Hypocritical is one word Mr Brown!  The politics of dishonesty is never attractive and this electorate have long memories.

Lets make no bones about it, tough spending cuts HAVE to follow.  For the sake of the economy.  Whoever wins power.  Cuts will involved public sector job losses, hence adding to the unemployment queues.  But if we don’t, we are in danger of having to go cap in hand to the IMF for a bail out by them….again!.  They will impose tough conditions to the bail out and cuts could be even more savage.  We all know that UK PLC is in danger of losing its ‘AAA’ credit rating on the world stage. 

Any public sector losses, especially job losses/pay freezes, WILL see the Unions swing into action.  A winter of discontent beckons.  The Post Office have balloted members for strike action.  The Tube Drivers have been striking this year already.  We can expect the nation grinding to a halt at various stages this winter due to Union protests, hence damaging the recovery.  Power workers have threatened walkouts, hence the return of black outs is a real possibility.

So a lot can undermine our economy.  Double dip recession is a real possibility.  But lets take a closer look at the stats……

Our debt situation is horrific.  No over word describes the cancerous, spiralling debt this country is storing up for our children.  Yesterday we learn that bankrupt Britain borrowed £6,000 every second last month.  The Government amassed a humongous £16.1 billion debt in one month…the largest on record.  This was a 63% increase borrowed in the same month last year.  The Government has borrowed £63.5bn since the beginning of the financial year in April.  Britain’s overall debt now stands at £800bn—heading for the £1 trillion mark. That is frightening.

Our nation’s finances are out of control.  This is shameful mismanagement of the economy on a criminal scale.  Quantative easing draws mixed responses from the world’s best economists and whether it is having any effect on the UK economy.  The IMF even stated that they could not assess whether any impact had been made by pumping a huge amount into the economy.  Bank of England data shows that broad money supply grew by just 0.1% in August, after a 1.3% increase in July.  This dragged the annual growth rate down to 12.6% from 14.4% a month earlier, hence demonstrating quantative easing’s limited/zero effect.

It now looks like we are on track to amass a debt of over £200bn by the end of the fiscal year, some predicting an overshoot of Govt Spending targets by £50bn.

With the economy still seeing dire unemployment figures, predictably total tax take over the first five months of the year to the end of August was 11.4% lower compared to the first 5 months of last year, while benefits spending was 9.5% higher.

Net lending to British businesses also fell in July, (by the largest amount since records began).  it fell by £15.5bn, even more sharply than the £3.6bn drop in June.  Why?  Companies paid back more than banks lent.  The figures for August are projected to worsen.

We cannot gamble our nation”s future any more….for the sake of our children let’s have that election now and let the people decide.

The Governor of the Bank of England was again in feisty mood last night at Mansion House.  He speaks his own mind and that is something we should all respect.  Remember pre G20 when Brown was spending like crazy to try and drag Britain out of recession and was on the verge of committing millions of more pounds at G20, King stepped in and effectively changed the shape of Brown’s G20, as Brown’s cheque book was ripped up very publicly.

The big debate at the moment is the level of spending and closely tied to that is the level of deficit.  Last night King argued that in 5 years the level of national Debt will be more than double its current level of around 40% of GDP.  King stated at mansion House: ‘It is also necessary to produce a clear plan to show how prospective deficits will be reduced in the next parliament.  King makes the point cleanly.  There is no room for borrowing more money and we have to start repaying our debt.

We live in frightening times with the Government set to borrow a record £175bn this year.  But the level of dishonesty coming from the Prime Minister is staggering.  The PM yesterday, under pressure from David Cameron, told MP’s that government spending on capital projects would rise every year until 2012 Olympics.  But the Treasury’s figures, Official Government stats, indicate it will fall from April 2010.  The budget, states that net investment will be £44bn in 2009-10 and will fall every year until 2013-14, when it will be £22bn.

Obviously caught out, Downing Street had to clarify this later.  They stated that total investment would be higher as the Prime Minister stated because of a Treasury Plan to raise £16bn from selling government buildings and other assets.  However, guess what, that does not add up as it would take another £39 billion to even maintain capital expenditure at its current levels until 2012.  Laughably, Down Street would not comment how the £16bn in asset sales could fill the gap.  Famous sources, (always anonymous), stated: ‘You’re talking about things that are four or five years off’!.

So, what we can clearly see is that the Prime Minister is being ‘economical with the truth’, a byword for a liar.  Whilst Gordon rants in the chamber ‘we are the party of the many, the Tories are the party of the few’, Tory cuts v Labour Investment’, this all sounds very hollow, as whoever wins the next election faces big choices and cuts in spending.

I think Alastair Darling gets this.  He speaks more calmly and wont promise increase but his boss is hell bent on pushing forward.  I wonder if Darling made the right choice staying in place.  He is doing a job that he knows he was going to get the chop from.  He is not following the policies he believes in, (hence why King has got more vocal and Darling & King are good friends and I am sure that King is a public mouthpiece for the Chancellor’s fears).  When you are in that position, heading for election defeat, Darling will no doubt be made the scapegoat by Brown and his advisers for that electoral defeat when it comes.  Is it really worth staying round Alastair.  Do you want to save some credibility?  You are a man looking down, depressed and your strings being pulled by the Puppet Master Brown!

DC & George O, place Brown on the spot.  ‘How will you repay the current deficit when you claim spending is increasing’?

Every parent’s dream is to have a healthy baby and for that baby to have a long and successful life.

The shocking truth to Britain’s debt crisis is that this baby will be 23 before we are out of this current debt mountain.  Take a deep breath and really think about that.   The Institute of Fiscal Studies, (IFS), states that ‘debt freedom day’, the day when national debt returns to sustainable levels, will not be reached until 2032.  That is truly astonishing. 

Up until that point, families will face years of tax rises to pay for the Government’s record borrowing.  Hence why the Tories must push home with their campaign highlighting the debt burden:  (shown in the Sun launching their recent poster campaign):

Government debt, according to Government budget estimates—always should be viewed sceptically from ‘Alastair in Wonderland’,  will reach £1.4 trillion, equal to almost 80 per cent of GDP.  That is just jaw dropping.  Putting that in perspective, the interest on that debt is estimated at £58 billion a year, which is more than annual spending on Schools in the UK. 

If grave robber Brown had his way, this debt would be far far more.  The brakes were thankfully put on him by his governor of the Bank of England, Mervin King, who firmly told him that the UK has NO MORE MONEY. 

Interestingly, what was Brown’s first response to the recession?  To cut VAT to get people spending.  What effect did it have?  None.  Prices were falling in retail shops like a stone anyway, the Government lost tax revenue and helped reduce exchequer receipts.  Obvious that this was not working, Brown fell into the old Keynesian drug of trying to spend his way out of recession, propping up Banks, (the very ones he removed regulatory frameworks to prevent crashes), then spending on public works projects.  Brown does not get that the key to the recession is confidence.  People will start to spend again when they feel secure and happy to do so and they feel the recession has reached rock bottom.

People will not buy a new tv today if they can buy it next month for £100 cheaper.  People will not buy a washing machine today, if next month it is cheaper and have a 5 years free guarantee and service history.  People will not buy a new car, because the moment they drive off the forecourt, value is decimated before the inevitable price drop in another month.  But of course, Darling thinks we will now rush to buy a car with the bribe of £2k for our old car.  No Alastair, I will wait a few months for car prices to fall even more, then I will use your bribe.  Genius.

What’s the answer?  Well for one, hard decisions need to be taken TODAY.  This includes spending cuts, hard public sector pay agreements, (yes people in the public sector, you are blessed to be protected from recessions, in the real world ie private sector companies, a lot of us are suffering job losses, pay freezes, cuts in hours, 3 day weeks, pay cuts, whilst you obviously live in another world, wanting inflation busting pay rises and job security).

Drastic times call for bold decisions.  It’s time for change.