FT.com / UK / Politics & policy - Darling sharpens axe on spending.
The FT notes:
Alistair Darling will order ministers this week to start work on the most swingeing public spending review in a generation, as officials acknowledged that some departments could see cuts of about 16 per cent over three years.
With no real sign of recession being at an end and with deflation still a high risk this is madness.
The Compass report 'In Place of Cuts' sets out a clear alternative that will work. Labour has to be radical. Darling has been captured by the Treasury. If, by chance, they win an election he will have to be moved.
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Richard,
Although you may think the risk of deflation is still high, the facts (http://news.bbc.co.uk/1/hi/business/8467305.stm) show that CPI is the highest it has been since records began in 1997.
This doesn’t mean – in my view – that you are wrong. What I think it does clearly indicate is that we live in very unpredictable times. I suspect if we emerge from the current downturn without further difficulty it will be more down to luck than judgment.
The risk of deflation is zilch. The CPI rose by 1 per cent just in the last month. It is now 2.9% and will breach 4% next month when the effects of the return to 17.5% of VAT are factored in. A major inflationary wave is about to be unleashed. All that money sloshing around from “quantitative easing”, which was always just a means of recapitalising the banks via the back door (and thus their bonus pools). Rising inflation, rising unemployment, crumbling currency, anaemic growth, rising public debt: yet again the Tories are have to clear up a Labour mess, and probably get blamed for it.
@Peter
Nonsense. Wages are deflating in real terms. The current CPI numbers are a red herring.
JD,
Well yes, real wages tend to fall in periods of rising inflation. Duh….