Where’s the big debate we really need on the economy?

It is extraordinary that despite warnings from the UK Government's own advisory body the Sustainable Development Commission, in its new report, Prosperity without Growth? published immediately before the G20 summit, hosted by British Prime Minister Gordon Brown, world leaders were more intent on spending billions they haven't got to restore business as usual rather than listening to new ideas. The media has largely ignored these issues as well in its fixation to aportion blame on whose responsible for the current crisis and how did we get there. At the G20 summit world leaders tried to resolve the economic crisis, where are we really heading? Many key issues are being ignored in the rush to “restore growth” at any price.

Back in May 2008 seven former European heads of state, five former finance ministers and two former presidents of the European Commission wrote a prophetic open letter to the EU Commission. They warned that the global financial system risked systemic collapse. The financial world, they argued, “has accumulated a massive amount of ‘fictitious capital’ with very little improvement for humanity”.

Among the measures they proposed, was a world conference to reconsider the current international financial system. “When everything is for sale, social cohesion melts and the system breaks down.” Were Gordon Brown and other world leaders asleep?

At the centre of UK economic policy for 12 years, Brown is forced to wake up to the biggest economic crisis we face and but claims the UK is particularly well placed to ride the storm. As we hit the grim reality, he tries to tell the world he can lead us back to prosperity. If he succeeds in this manoeuvring it will be an unworthy triumph of spin.

Lost in a maze of targets, controls and sticking plaster policies, Brown first promised a weary electorate to “let the work of change begin”. “Change in our National Health Service, change in our schools.” The British public is weary of endless calls for “change”. His speeches are mindless, recycled clichés devoid of real ideas.

Despite well-documented criticisms of his “stealth taxes” and warnings by the International Monetary Fund that the UK tax burden is the highest in 20 years, Brown pointed to his “prudent” grasp of the economy and relatively low unemployment - now rising rapidly. As we now realise, much of the feel good factor in the UK economy was not down to underlying strength, but more to do with property price inflation fuelling spending and Britain’s record £1.3 trillion debt mountain.

In truth, Brown breaks much of what he touches. The think tank Civitas concluded “that big spending promises on health and education have been tested to destruction and have not produced the expected improvements”. Like most politicians, Brown does little more than kick the usual political footballs and repackaged promises on education, health and crime, where ever-more money is spent with little effect.

Now he is spending public money big-time, like a gambler trying to recoup his losses. After promising billions of taxpayers’ money to bail out greedy money markets and watching the pound plummet, Gordon Brown and his crew have thrown the savers overboard in a last ditch attempt to float the sinking British economy.

Zero interest rates and printing money to fuel inflation lie ahead and still we have high lending rates. Many fat-cat bankers will be laughing all the way to their offshore bank accounts. The public is given no say. Unlike the US Congress, where are the big debates in Parliament and on TV as the Government hoses billions around to little avail? With weasel words of “fiscal stimulus” and “bank restructuring”, he increases the medicine of debt and bailouts to restore the financial web that got us into this mess. Instead of bailing out failed banks and toxic debts, where is the strategic thinking to build a genuinely sustainable economy in a sustainable environment?

Euro miscalculation

After fudging for years over his “five economic tests” on whether Britain should join the euro, sterling’s collapse after the Bank of England slashed interest rates to half a per cent in a matter of weeks, will make it more difficult to persuade lenders to invest in the pound and they will demand high returns - adding to the UK’s debt burden. The merits of saving investment have also been ditched.

Britain’s gloomy economic vision and the plummeting pound is hitting businesses, devastating pensions for British retirees in Europe and squeezing holiday makers into deeper debt. The UK is no longer a big exporting economy like Germany, so claims this will be good for exports are overstated. We are a major importing economy and the weak pound is already inflating prices. How will markets now judge the City of London’s financial competence, when it is a key part of the UK economy?

The Treasury Select Committee now discovers that the taxpayers’ bail out is potentially liable for billions more in bank debts and assets based on foreign lending, subject to exchange rate risks and a weak pound. We are back to the instability and speculation of the ‘90’s and may bitterly regret not joining the strong and stable Euro Gordon Brown and opposition spokesman George Osbourne disdain.