The Budget

It looks as if the scale of cuts will be quite spectacular. This blog remains politically impartial in terms of party, but is in no doubt that the fiscal deficit has to be cut back quickly so that the budget balances, which will still leave us years of debt reduction which may take a generation or more.

Most of the so called boom and prosperity which ended in the crash was a mirage based upon borrowing and asset inflation to the point where even the tax people paid was borrowed. Remember that the total overseas debt of this country and its people is the second highest sum in the world and 450% of GDP or four and a half times the world average. The economy makes far too little real wealth and is totally out of balance. Up to the crash it was based on borrowing, unsustainable asset inflation above true value and shopping, driven by mountainous public expenditure. Such a structure cannot last.

This has all got to be put right. If it means a double dip recession to fix it, it is a price worth paying. The alternative is to bounce through a boom and bust or two, followed by permanent and irreversable decline.  Keynes never said you could borrow your way out of recession if you were already over borrowed and running a deficit even in the preceding boom. What is important is for the cuts to affect those who may feel pain but can take the hit and protect those least well able to manage even now. Whether the government can do this will not be known until George Osborne sits down at the end of his speech in the Commons tomorrow afternoon.