Does Anyone Still Believe The Coalition Is Doing The Right Thing?

Posted: January 2, 2011 in Politics
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First of all, Happy New Year to all my readers, hope you had a great time and best of luck for the year ahead.

January 1st 2011 saw the rise in fuel duty (unchanged by George Osborne in his emergency budget after the election). The 0.76p rise in fuel duty, combined with a VAT rise from 17.5% to 20% on the 4th January, will see motorists in England paying more than £6 per gallon, and some areas of Scotland will be facing £7 per gallon of fuel. There is a further increase in fuel duty of 1p due in April which will push prices even higher.

All political parties see the fuel duty income as a vital part of reducing the fiscal deficit, and prices will no doubt continue to rise with each successive budget. But is it really the best way forward?

The Road Haulage Association saw rises in operating costs in 2010 of 4.9%, with 3.2% of that rise being attributed to the rising cost of diesel to hauliers. On its own it doesn’t seem much, but in order to compensate for that rise, the hauliers have to rise their delivery charges to businesses, who in turn will have to rise the prices of the goods they sell to compensate for that delivery rise. By the time goods pass from manufacturer to consumer, the price will have risen dramatically in order to compensate for other rises and still deliver a profit. At the same time, the VAT increase will further pressurise the profit margin of many companies already on the brink, surviving but no more, and the pressurised financial situation in banks mean that many companies will be forced to shut down after being refused business loans. It’s a spiralling situation that can only be made worse by the stance of this Government regarding the desperate reduction of the deficit between Government spending and tax income.

David Cameron has been keen to try and compare the reduction of the deficit with households tightening their belts and paying off their credit cards. Simple fact of the matter is that there is absolutely no basis for the comparison at all, other than the fact it makes a healthy soundbite for the Tories. You have Government spending, which is part of what the Government is trying to reduce, and tax income, which the Government is trying to augment with fuel duty and VAT increases. But in order for the deficit to reduce, the Government needs a population which is able to spend, spend, spend on goods as well as work, work, work for that income tax revenue.

You see, the problem is that the Tories are flying this country blindly, and hoping things get better. With a high number of people on unemployment benefits there is a massive reduction of income tax generation which is why the Government wants everyone working. But there’s no jobs. A search on popular employment service Reed.co.uk shows that in the general labour market there are jobs attracting over 100 applications per job posting, whilst the Government Statistics website shows that unemployment in the UK was at 7.9%, and just 70.6% of 16-64 year olds in employment. Unemployment rose in this period, the first rise since the coalition came in. Once again, the Coalition cannot take the credit for the drops in unemployment whilst they’ve been in power as the first 12 months of any Government has negligible effect on a country.

The Government wants to reduce the benefits bill, which is fair enough, but it needs to understand that without jobs to go to then that will not happen.

I’m going to keep repeating the same points over and over, because it’s the only way to make people really understand the gravity of the situation. Unemployment will no doubt rise over the next year, and as a result, tax income will fall. This will perpetuate the deficit, no matter what the Government does in spending cuts. The only way to cut the deficit in times of recession is to spend money. There needs to be confidence in the jobs market, both public and private sector, and there needs to be money provided to back that confidence up. We saw this in the Major times, when unemployment fell for 22 months before he fell at the 1997 election. Although that drop in unemployment has to be mentioned with the fact that under Thatcher, unemployment was massively high through recession and ideological political decisions, and we saw rioting and strikes throughout the period. We’ve already had our first protests of this coalition over the inappropriate rise in tuition fees as well as the proposed cuts in Governmental university spending. Is this foreboding of a new bleak era?

The Government CANNOT make cuts on ideological reasons as we stand. The oft-repeated line of blaming the previous Government is wearing very thin amongst the public, and more people are seeing this sham Government for what it is. Yes, cuts are needed, but on an ever-increasing scale we can see that the cuts being made are completely ideological and not aimed at reducing the deficit, instead aimed at reducing the Government’s liabilities and ceding those liabilities to the private sector. Even the Government’s attempts to champion their alleged real-terms spending rise in the NHS is dependent on there being no rise in inflation. It’s incompetent and highly irresponsible.

If the Government wants this country to prosper it needs to make cuts sensibly and fairly, whilst ensuring that there is a good amount of spending and confidence-boosting in the employment sector. Does anyone really believe that this Government is capable of doing that? Really?

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