by Mark Hopkins

Created on: January 28, 2011   Last Updated: January 29, 2011

No country can continue indefinitely with a budget deficit as great as that which the U.K. has had since 2008 and the onset of the Banking Crisis. Sadly though, Mr Osborne seems set on repeating the mistakes made in 1931 by a previous, Conservative dominated, 'National Government', which tried to sort out the mess left by the effects of the Wall Street Crash of 1929.

The speed with which George Osborne wishes to bring national expenditure back into line with national income risks having the opposite effect to that which he declares he wishes. Massive and on-going cuts to government expenditure in the public sector will take a vast amount of spending power out of the U.K. economy at a time when it is in a very fragile state. The rise in VAT, paid on almost all purchases of goods and services, to 20% from 17 and a half %, will exacerbate the situation.

The government of 1931 did similar things for similar reasons. There was an emergency budget in September 1931. Public spending and public sector wages were cut and income tax went up from 4 shillings and six pence to five shillings in the pound ( 22.5 % to 25%). These deflationary measures made unemployment soar to over 3 million and remain very high for years, taking further spending power out of the economy and further reducing government income while necessitating expenditure on (admittedly very meagre) unemployment  relief.

Although interest rates were cut to one percent, the much-lauded 'private sector' was unable to fill the gap. 'Depression' went on through the 1930s until eventually British re-armament from 1936 onwards, in response to German militarism, began to provide the stimulus the U.K. economy needed.  There is no reason to suppose it will be much different this time, although we must hope it will not take a world war to get the government to provide some stimulus to the economy.

Mr Osborne and the Prime Minister are both 'Toffs',  both millionaires, born in the lap of luxury, who have never done an honest day's work in  their lives. They have the effrontery to tell the nation, 'We're all in it together'. Yeah, right!  They continue to spectate as the Bankers pig-out with their obscene salaries and bonus bonanzas and leave the banks' practices essentially unreformed, inviting another disaster sooner or later.  Of course, while a student at Oxford University, Mr. Osborne joined the notorious

• 1
• 2
• Next Page >>