Monday 17 November 2014

What can you do with a UK Government £1?

I read in the FT, last week, that for every UK Government £1 used in support of QE the UK economy benefited by 80p, for every UK Government £1 spent on UK infrastructure the UK economy benefits by £2.80p; for UK Government £1, read taxpayer or borrowed on the taxpayer's behalf by the UK Government £1.
 
Currently the UK multi-national manufacturing and business sector is claimed to be sitting on a whole load of cash, held in UK tax havens such as the British Virgin Islands, it will not invest in the UK, in the current economic climate, while giving chunks away to its international shareholders to keep them happy. The idea that the UK business world, as a whole, is 'cash strapped' does not impact on the UK's  global conglomerates but the UK SME's which do most of the new product development, innovation, new market penetration which the global conglomerates then latch onto by 'buying' the SME for its intellectual content until the 2008 crash and the political fad for 'austerity' destroyed many SME's through cash starvation and the destruction of their new, usually niche, markets. Hence the 'Globals' are sitting on cash mountains because the SME's which create their new profit streams are just not there to be purchased.

In 2008, in Scotland, SME's were responsible for employing some 70% of the non public work force. Many of Scotland's engineering SME's have the luxury of clients in the oil and gas industry who still required their innovative skills and products; if not in the North Sea across the world. Many others were not that fortunate and as overdrafts were withdrawn, loan deals became like hen's teeth as the impact of QE on cash availability and reduced cash flow hit home hard.

So austerity and QE have sucked money out of 'public' circulation and fed them into global corporate bank balances while increasing UK Government borrowing to ludicrous heights, increasing the trade deficit, reducing Sterling's foreign exchange earnings while increasing unemployment and poverty to levels not seen since the 1930's in the UK through 'down sizing' and 'zero hours' scams. 


The 2012 Welfare Reform Act is now applying the same industrial tactics of 'downsizing' and 'zero hours' on the unemployed, sick and disabled under the title of 'sanctions' which impact these at risk groups' ability to feed, keep warm and house themselves - a basic human right the UK Government is supposed to provide for all its citizens under UN and OECD charters and treaties. For those who understand the concept of the 'triangle of needs' it is clear those at the top can do what they want, those at the bottom are struggling just to survive while us in the middle vary from finding life pretty stressful to get by to almost feeling comfortable until: the next crash, a Sterling devaluation, inflation and rapidly rising base interest rates which will increase the number of strugglers at the bottom shifting others, like electrons which loose energy, to lower and lower survival states - a re-run of the 1980's based on much the same political thinking, by the same Thatcherite Tory Party and its new best pal, a still predominantly Blairite Labour Party.

In Scotland the SNP have applied Keynesian economic principles where ever they have seen the opportunity and their limited funding and borrowing allows, by bringing forward public projects such as the second Forth Crossing and the Border's Railway project. In public funding in, for example, the NHS the SNP have ditched the Gordon Brown PFI scam and created a not for profit system within the private / public borrowing restrictions still imposed by the UK Treasury. New public buildings are now costing councils / Health Boards no more, relatively, than they did under previous public borrowing schemes, with 'savings' of around 60% of total cost compared to Gordon Brown's PFI scam.


Surprise, surprise, as forecast by the CBI in 2009 (no less) Scotland's economy continues to lead the UK out of recession or is at least preventing the UK economy from stagnating and bumping along the bottom, while continuing to attract high levels of international inward investment and currently enjoying levels of full employment not seen in a very long time. This all suggests that possibly the SNP's Keynesian economic solutions are not the mad house the UK Labour and Tory Parties of the right try to claim, in their defence of 'austerity'.

I may be economically illiterate but surely increasing unemployment and poverty amongst the UK population, as a whole, has a seriously adverse effect on UK Government tax income from all sources, is a driver for increased Government borrowing, increasing trade gaps and is made worse by more 'austerity' and not alleviated by more 'austerity'.

2 comments:

  1. What a perceptive article Mr Thomson.

    It would look out of place in one of our Scottish rags and therefore would never see the light of day in any of them.

    Some bimbo waggling her arse is of far more interest.

    I long for the day when you could open a newspaper and be informed.

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  2. I am no economist and maths was my weakest subject many moons ago at school, but even when the tories wrapped up their austerity agenda in brown paper with silver ribbon I could see that their attack on the people would create more debt and more suffering, mostly for the poor, jobless, sick and vulnerable. Their deliberate attack on the people and mismanagement of the economy is nothing short of criminal. I was at an AGM for a charity which supports people with learning disabilities today. With the introduction of universal benefit, the change to PIP and more cuts on the way, things are looking horrendous, in the near future, even in Scotland. The Scottish government will need to work magic to further cushion the blows from westminster and the thing is, many will and do blame the Scottish gov for the hardship, how ironic and misguided. Let's hope the majority see through labour and tory lies in the lead up to the GE in May 2015. If not we will see many more vulnerable people suffer and even die as a result of these stupid cuts to benefits and services. Everyone, at some point will need to rely on essential services, we all pay for it. you know just what are westminster doing with people's taxes these days? Must look at their annual accounts! Do they have such things ha ha..

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