Most businesses are backing George Osborne’s spending cuts, but there will be more pain before the benefits are felt.
Most businesses are backing George Osborne’s spending cuts, but there will be more pain before the benefits are felt.
On the plus side, entrepreneurs will be pleased that spending cuts, not tax rises, are making up the bulk of Osborne’s austerity package. Though of course that will be of little comfort to those who rely on public sector contracts which will now not be renewed.
But then there’s the half a million unemployed, which PricewaterhouseCoopers actually estimates at a full million. The impact of public sector redundancies will be felt throughout the whole economy, and the private sector will struggle to absorb more than a fraction of those out of work.
Meanwhile, borrowing continues to rise. It hit £16.2 billion in September, £2 billion higher than feared and the highest figure since records began.
Osborne’s learned a few tricks from the last government. He’s still putting his faith in ‘efficiency savings’ whose efficacy is, quite frankly, hard to credit.
That’s not to say there isn’t waste on a massive scale in the public sector. Anyone with a friend or family member who is a teacher, nurse or council worker knows that.
But how to apply the scalpel so skilfully that the waste is cut out and services remain unaffected? There simply aren’t the mechanisms to do that, and employing armies of expensive consultants would defeat the object. It’s the kind of effort that needs long-term thinking, even investment, and the government needs to cut spending right away.
To sum up, the deficit is still massive, and rising. Spending cuts and tax rises will have an undeniable impact on the economy. And there will be a terrible human cost.
If it works, the government will be praised for taking decisive action. If it’s judged to have made a bad situation worse, the unpopularity of the last administration will look mild compared to how the leading parties will be vilified.
You can’t help but feel the jubilation displayed on the government benches yesterday was a bit premature.
