THE GLOBAL financial crisis continues to reverberate across Europe. Public finances are on the chopping block in England and Germany, but the butchers are using butter knifes and soup spoons. Given the enormity of the problem, a well sharpened cleaver may be needed.
Britain’s new coalition government recently announced the first round of what might fairly be considered rather mild “austerity” measures for one of the world’s most indebted nations. Chancellor of the Exchequer George Osborne and Chief Secretary to the Treasury David Law detailed their plan in the garden of Her Majesty’s Treasury on Monday.
According to The Wall Street Journal, the cuts “include £120 million (BDS$351.82 million) from a civil service recruitment freeze; about £1.15 billion (BDS$3.37bn) in reductions from discretionary spending items such as consultancy fees and travel costs; and £1.7 billion (BDS$4.98bn) from stopping projects and renegotiating large government contracts with suppliers. Local governments will be expected to find £1.17 billion (BDS$3.43bn) in savings”.
The measures aim at reducing the annual deficit by £6.25 billion (BDS$18.33bn). Impressive though it is, it is a drop in the bucket when viewed next to Britain’s record-breaking £156 billion (BDS$457.47bn) deficit for the last financial year.
As a percentage of gross domestic product, Britain’s budget deficit is only fractionally “healthier” than those of Greece and Spain, both of which recently saw their sovereign credit ratings decapitated by the ratings agencies.
These early cuts were described as a “down payment”, to show government departments that “the years of public sector plenty” are over and were “only the first steps needed to be taken in order to put our public finances back in shape”.
Tough talk is a political prerequisite, of course, but tough action is what ultimately counts. In what is seen as a concession to the Liberal Democrats, some £500 million (BDS$1.46bn) of the coalition’s proposed savings will be siphoned right back into government welfare programmes.
The government also vowed to protect spending on health care, defence and overseas aid budgets, adding that it will not take the knife to public school outlays and various other education programmes.
It’s not difficult to understand why a new government would opt for a “soft” approach. Budgetary savings must be weighed against a cost to political capital. In other words, a dollar saved is a vote lost.
What happens in Britain is going to be watched very carefully in the Caribbean as this situation is going to affect all of us. As we’ve seen in Greece and, more recently, in Spain, workers are ready to protest.
Like their counterparts in neighbouring economies, Britain’s budget butchers have some tough choices to make in the coming months. Let’s hope they wouldn’t have to resort to sterner measures.
