10 lies the Coalition are teling about the Economy #7

george-osborne-pic-afp-getty-images-376852918LIE #7

The Con Dem cuts will improve confidence in the UK economy, and encourage investment in the UK as well as reduce the cost of Government borrowing

“This Budget is needed to give confidence to our economy.”
“[The Budget] will help companies invest, attract foreign investment, and boost growth.”
(Source: George Osborne, Budget Speech, 22 June 2010)

TRUTH: 

Business confidence is now dropping specifically because of the budget and the ConDems’ cuts proposals. Both businesses and economic analysts have a very pessimistic view of the next 12 months. Inward investors are being put off coming to the UK. And far from the cuts improving Britain’s economic reputation, they risk undermining it.
Martin Wolf of the FT says that the Coalition’s fear of a loss of confidence in the UK’s fiscal credibility if there are  no severe cuts does not make economic sense:
“…
the market is screaming its lack of concern about UK fiscal credibility. UK government 10-year bonds are yielding 2.9 per cent and the real interest rate on index-linked bonds is below 1 per cent. Yes, markets can be wrong. But these are the most liquid and transparent markets of all. Moreover, those now doubting the wisdom of markets are the strongest believers. Why do they have these doubts? Furthermore, there is no sign of crowding out of private spending by government borrowing. Finally, UK government debt is long-term with an average maturity of 14 years and denominated in the domestic currency. We are terrified of a confidence bogey who is asleep.”

Michael Izza, chief executive of accountancy body ICAEW, said:
“UK businesses that came through the recession are now facing the challenge of surviving the recovery. They still don’t know what the future holds and are uncertain about how the mood of fiscal austerity will impact the economic recovery.”
(Source: Guardian, 23 August 2010)

A survey by the Bank of England of its regional agents reported that business confidence had fallen, with companies ascribing their increased nervousness to the cutbacks.

From Howard Dawber

www.howarddawber.org.uk

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