UK Economy: Osborne Incapable of Balancing the Nations Budget

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George Osborne. Courtesy: Leon Neal

By Ann-Marie de Veer
Saturday 23 January 2016

With just over a month to go before the UK General Election on the 8 May 2015, George Osborne, the most fiscally illiterate and economically incompetent Chancellor of the Exchequer the British people have ever had the misfortune to endure, was lauding the nations GDP growth for 2014: the UK's Office for National Statistics (ONS) stated that the British economy had grown its GDP by 2.8 per cent in 2014, marginally higher than the projected ONS rate of 2.6 per cent. Osborne was jubilant, not least because the timely news, albeit predicated on the unsustainable growth in the sale of goods and services to the detriment of construction and manufacturing, helped to revive the flagging political fortunes of Cameron's Conservatives who were seriously lagging in the polls at that time. For the next five weeks Cameron, Osborne and the Conservative cabal used the timely blip in the economy to promote their fiscal policies of austerity and growth as a panacea in balancing the nations budget.

As is commonly known, in a perverse manipulation of representative parliamentary democracy, the Cameron regime were returned to office with just 24.4 per cent of the peoples vote: the UK's First-Past-the-Post (FPP) electoral system, unlike all variants of the Proportional Representation (PR) system, can, and invariably does, promote a prospective candidate to office with less than a majority (<=50%) of the vote for a given seat.

Not unexpectedly, the financial gloss of Osborne's economy has completely worn off.

It is worth noting at this juncture that the UK economy is structurally imbalanced, not just in the primary sources of its revenue, i.e. the financial and the service sectors account for almost 75 per cent of the nations GDP while commerce, construction and manufacturing make up the rest, but also the lack of revenue these sources provide, i.e. corporate tax receipts have dwindled significantly, year after year, as businesses have adopted aggressive tax avoidance and tax evasion schemes to minimise their tax liabilities. Osborne, like most of the Chancellors before him, has failed to address either of these core issues and, in doing so, has squandered countless opportunity's in reviving the fiscal fortunes of the nation and its people.

While the GDP growth of 2014 was welcome, it was nothing more than a momentary blip on the financial radar in Osborne's first term as Chancellor: Osborne's record on GDP growth since taking office in 2010 is a matter of public record and widely acknowledged as being lacklustre at best. In late 2010, early 2011, Osborne boasted that he would address the UK's growing budget deficit and balance the books by 2016 but failed to do so because of a lack of growth and, in particular, diminishing corporate tax receipts as a result of aggressive tax avoidance and tax evasion schemes. In 2013 his forecast for a balanced budget had slipped from 2016 to 2018 and remained there in the run-up to the May 2015 General Election. Then, in late 2015, as the GDP growth figures for the year to date could clearly be seen to have dropped back to their previous levels, the forecast in balancing the nations budget deficit was pushed out even further, from 2018 to 2020. In other words, Osborne's plan of using GDP growth as the primary tool in addressing the nations budget deficit had failed.

Thus, in late 2015 Osborne reversed the priorities of his policies: while GDP growth, i.e. revenue, had previously been the primary driver in his plan to address the deficit he would now focus on austerity, i.e. expenditure, by viciously cutting the social security programmes upon which the poor and disadvantaged in society rely upon to survive. Osborne's focus on expenditure, akin to most other Western nations who are nursing massive budget deficits and attempting to rebalance their books by choking off social security spending, simply demonstrates that fiscal illiteracy and economic incompetence is contagious.

Nonetheless, Osborne continues to fiddle while Rome burns.

The fact that austerity, beyond its short-term use, will inevitably lead to a recession and, if prolonged, eventually a depression, is common knowledge. It is also a fact that the UK's budget deficit would disappear practically overnight if the aggressive corporate tax avoidance and tax evasion schemes used by many national and multi-national corporations were immediately curtailed. Osborne has no intention whatsoever of changing direction on either of these issues: his austerity policies specifically focuses on the weakest and most vulnerable in society, i.e. the low-hanging fruit, as they are the easiest group to target and the least likely to fight back while his acquiescence of tax avoidance and tax evasion schemes is simply lubricating the revolving door through which he intends to pass in securing a career in big business when he is finally kicked out of public office. The fact that austerity, i.e. the implementation of fiscally regressive policies, will only serve to make the budget deficit worse appears to be of little consequence.

Thus the notion that Osborne will balance the nations budget in the short to medium term, let alone repay the deficit the country has accrued over the longer term, is quite fanciful in the extreme. Like most of his predecessors, Osborne clearly does not have the ability or any interest in rebalancing the nations economy: a task that would require a high degree of fiscal literacy and economic competence plus an interest in the greater good of the nation and its people.

That Osborne is not only incapable of rising to this challenge but also too absorbed in the pursuit of his own self-interest is blindingly obvious.

Never give a sword to a man who cannot dance.
孔子, (Kong Zi, aka. Confucius)