Slash and burn

This morning’s news from the Office of National Statistics that the UK economy shrank by 0.5 per cent in the last quarter of 2010 adds another tricky dimension for economic decision makers.

Severe weather was expected to impact upon the figures but growth between 0.2 per cent and 0.6 per cent was still generally forecast. This follows the news last week that the inflation rate had risen to 3.7 per cent and leaves the Bank of England with a dilemma in the months ahead: does it protect the recovery with continued low interest rates or curb inflation by raising rates?

Also, there will be some very cutting questions aimed at our ‘slash and burn’ coalition if the recovery seriously begins to stumble. The simple point to make is that the UK’s levels of debt are not something out of the ordinary for governments down the years. Financing government is a matter of deficit financing and the UK government has borrowed for most of the period since the Second World War (despite inheriting a huge debt from that conflict) and only paid back debt in very brief periods.

The ideological mantra of ‘slash and burn’ is hinged upon an attempt by the state (and shared by all major political parties) to scale back and redefine its role in UK society in propitious circumstances.

Thatcherism is alive and well. Let’s hope that we don’t all suffer too much from the consequences.

Lyndon White
Editor, Processingtalk

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