Monday, 7 June 2010

No Dot Com Bubble, No 3G auction, No joke, we're broke!!!

The General Election has come on and gone and we've certainly come down to earth with a bump. We all knew how bad the economic situation was but a quick back of the envelope calculation of the astonishing £770 billion worth of debt would mean that if we paid the back of the rate of one pound every second we would not finish paying off the debt until the year 24,416. We may pay off the debt before the Sun explodes. The thing is we know, and have known, this for some time so there is no "new" news here. But it will be news to some people.

During the 1990’s recession I worked as at Bolton Council. Okay, so that recession was nowhere near as big or as hard as the one we’ve just had but it was tough; people lost their homes, lost their jobs and most of us found it very hard to make ends meet. The most protected people were people like me. I lived in a council house on a council rent, I had a very, very safe job with the local authority and you could say that I was somewhat recession proof. In fact, looking back, I was pretty much armour plated. I’ve spent the last 10 years working in the private sector but still keep in touch with all of my local authority colleagues and nothing seems to have changed. Even during the darkest days of recent recession none of my local authority friends really cottoned on as to how bad the situation was. During conversations about our personal economic woes comment would be made such as "yes we’ll have to do tighten our belts". It was very clear that they weren’t being affected in the least by even the worst that the recession could throw at us. I know that because it's exactly how I felt, and talked, back in the early 1990s.

This will be a very unpopular thing to say but the public sector have been mere spectators over the past 12 to 18 months. In the private sector we've had our fears and worries many have lost jobs and livelihoods many small businesses have gone to the wall (and large ones for that matter, taking many jobs with them). Now there is a very fragile recovery there is room for cautious optimism and we can breathe a little easier, but only a little. Not that I'm wishing this onto anybody but the one thing that would cripple any hope of a strong recovery, and believe me recovery needs to be strong to get us out of this hole, would be public sector industrial action the likes of which we saw in the 1970s.

The hard sell is not to convince us that the cuts are necessary as we all know, or will we should know, how much we need to cut back public spending to get the economy moving again. The hard sell will be to convince all of us, public and private, that things will have to change. The last Labour government built the economy on a series of very fortunate windfalls which happened at fortuitous intervals in the economic cycle, and not moments of the government is making. First we had the windfall tax on the privatised public utilities then we had the dot-com boom in the stock market and finally we had the sell-off of 3G Telecom licenses. The 3G sell off alone raised £22.4 billion or 2.5% of GNP or enough to build 400 hospitals. Further into the first decade of the 21st century the government saw no more windfalls and no more opportunities for a quick buck. The inevitable happened and we sank, slowly at first, then very definitely into deep recessive debt. The only option for a Labour government, with the windfalls gone, and lines of credit exhausted is to go to the last resort -- the IMF. This is what happened last time and it is almost certainly would have happened had we seen a Labour victory.

We've got our Conservative Prime Minister just in time. With no unions to be in hock to, the coalition is free to make the difficult choices that are required to make sure we go into growth.

We can get the economy on track .... don't let the public sector screw it up!