Tuesday, 22 June 2010

Of Apprehension and Austerity…

It’s an apprehensive time and the mood of tension and dread is almost palpable. Today is the long-awaited emergency Budget presented by George Osborne and tomorrow England’s footballers face Slovenia. Both events are essentially make-or-break and both will shape the national mood and mind-set for years to come.

Both will last around 90 minutes (the Budget will probably be a little shorter) and both will be unpleasant to watch and listen to. It’s little wonder that people are both anxious and nervous with trepidation very much the order of the day.

As far as the Budget is concerned, today marks a significant turning of the page. It is in many ways Day 1 of Austerity Britain and the end of the period of cheap food, cheap fuel, cheap money and rising asset prices which sustained us with barely a pause from 1992 to 2007. Since 2007, we have lived in a disconnected world with the private sector suffering and global markets crashing before recovering on the back of substantial Government support. For many, though, the good times have continued. Interest rates are at an all-time low and for those in secure work, it’s been a great time to pay down those mortgages or pay off those debts.

Since 1999, the public sector has enjoyed the not-inconsiderable largesse of Government spending but the binge of spending collided head-on with the recession and the result has been spiralling debt and spending which now looks unsustainable. Like an alcoholic waking up after a bender or a drug user coming down, the smell and sound and taste of reality is far from pleasant.

The unpalatable truth is that all political parties rode the gravy train, all backed higher spending and therefore singling out Labour is unfair. Yes, Brown made matters worse with his spending binge but that binge was universally supported in 1999 and for years after.

Austerity Britain rewrites the rules and we should draw a line under the history. Today is the day we begin to sober up, clean up our act, go straight etc, etc. Going “cold turkey” won’t be easy – jobs will be lost, lives destroyed, families blighted, communities ravaged and above all hope and confidence undermined.

As Matthew d’Ancona, who seems to ply his trade writing pro-Conservative pieces for any rag that will take his incoherent ramblings, opined in a rare moment of wisdom in yesterday’s Evening Standard: “If Osborne looks like he is enjoying himself, all will be lost”. There are elements in the Conservative Party who are positively ecstatic about cuts in the public sector and who take as perverse pleasure in seeing public sector workers (who they believe, wrongly, to be Labour voters) out on the streets.

There are other pro-Conservative factions in the City who have argued for mercy from tax rises, especially Capital Gains Tax. I do see some merit in limiting CGT rates where it would discourage savings or where it impacts the elderly but I see no argument for the spivs or speculators to be spared.

In my field of expertise, local Government, a number of Councils have already instigated additional cuts within this financial year. Some are getting out of leasehold property, others looking to lose jobs. The next few years will be especially painful for those Councils who have derived the greater part of their funding from central Government while those which have planned or derive more of their income locally may do better.

More than anything else, today’s Budget needs to mark the beginning of a change in the country’s economic culture. We need to move away from a consumption and debt-based economic and social model to a model predicated on saving and creating a mindset where we buy only the goods and services we can afford. That doesn’t mean we should never borrow but that borrowing should be an avenue of last resort rather than an avenue of first choice and that means the financial services industry acting with far more responsibility than it did in the good times.

As for the football tomorrow, failure to qualify for the last 16 will be a catastrophic psychological and emotional blow for England. Fabio Capello will resign or be sacked and questions will be asked not only about the  team selection and tactics but whether in an age of Austerity, individuals who are paid so much and achieve so little are genuinely worth the enormous sums they are paid. We could well see a backlash against excessive wages in football which would not be a uniformly bad thing.

For now, all we can do is wait – the Budget is barely an hour away. Reckoning is at hand.

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