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23 June 2010
The budget reverses decades of irresponsibility
Earlier this year, I wrote about the previous Government’s economic policies, warning that its reckless approach to spending would damage the public finances. With the new budget now behind us, there is a chance to put right some of those wrongs.
The case for a reduction in the Government’s current levels of spending is clear. The UK economy is not generating as much tax revenue as it has in the past. If current spending plans are maintained, future generations will be saddled with colossal debts. Equally, a continued reliance upon borrowing will eventually result in inflation, making prices more expensive. Even those who have managed their personal finances well will feel the pinch.
These problems have been with us since the outbreak of the financial crisis. Yet what has changed, is that there is now a real opportunity to address them. Supporters of a more balanced approach have two reasons to be optimistic. The first is that there is now cross-party consensus on the need to get to grips with the deficit. The new coalition Government has committed itself to securing the long term health of the economy. That will not only increase the chances of securing Parliamentary support for decisive measures. It will also help to convince those in the country that some cuts are necessary.
In addition, the policies put before the new Parliament by the new Government will be based upon a more accurate account of the public finances. Rather than relying on the Treasury alone, the Prime Minister has established an independent group to provide its own assessment. The Office for Budget Responsibility’s recommendations will puncture any wishful thinking, forcing more honest proposals. The markets will like that, as will the taxpayers, who have to pay for the Government’s commitments.
Although public spending cuts are never popular, they are sometimes necessary. Now that the stars are aligned, I am hopeful that a sensible approach will win through this time.
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