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Something is going right with the British economy, and Chancellor George Osborne is keen to take the credit, “The plan is working”, he announced a few days ago in a speech in the West Midlands. But for many of those I meet, as I visit church supported projects across the Diocese of Manchester, if the plan really is working, then it’s the wrong plan.
I can offer one cheer for the chancellor. The figures for non-welfare related public spending grew year on year under the previous government in a quite unprecedented fashion, one that could only ever be sustained by a continuous rise in national wealth. Once the banker led scandals of six years ago broke, and plunged much of the globe into deep recession, that was never going to remain affordable. Deep cuts in public expenditure became inevitable; someone would have to bear the brunt. As the chancellor said this week, there are no easy answers; tough decisions still need to be made. In an economy that can never be trusted to grow consistently it is fair to say that the proportion of national income spent by government will need at some stage to return to something closer to the historic post-war average. Whether it should be falling so quickly, and whether Mr Osborne has in his head a long term target for it rather lower than the norm, are matters worthy of public debate.
I can raise a rather bigger cheer for British workers and their employers. Unlike many previous recessions this one was not a result of a systemic lack of international competitiveness. And so the solution didn’t have to be, and wasn’t, mass unemployment. A combination of loss of overtime, shorter working hours, miniscule pay increases and early retirement has allowed many British families to tighten their belts and survive. The independent decisions of the Bank of England to keep interest rates, and thereby mortgage payments, low have played an important part too. All of this has placed the nation in a better state of readiness to expand output now that the global economic climate is becoming warmer.
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