The real state of the UK economy?

[tzijlstra]

Didnt the Tory cuts end up being watered down, similar to what Labour were proposing?

And how much did growth decline, just a matter of a few percentage points? The real decline was caused by people panicing, and to a certain extent Government, reducing spending and reducing their planned borrowing.

 

I think that is a slight over-simplification. The crisis started because it all of a sudden dawned on people that banks had got themselves into a right mess. This lead to panic, but that was to be expected. The government didn't have any real choice but to bail banks out, otherwise the economy wouldn't just have shrunk a little as it did, it would have completely collapsed (people and companies would have lost their savings, pensions and in the worst case scenario houses).

 

I don't think people always appreciate how close to a financial armageddon we all got. I have many Greek friends from having worked in a European project, a lot of them lost well over 40% of their income in real terms in a matter of two years. They shut down entire Universities... the UK wasn't far off from falling into that abyss as well, the only difference was that Greece already had borrowed more than 100% GDP and the UK had just about enough room to borrow what it required, you could even argue that this was down to prudent government during the Labour years, although that would be a very unpopular argument seeing as how lending still increased during the boom years.

 

Also, it is difficult to say what Labour would have done had they been re-elected, they simply didn't put anything alternative on the table because they knew they didn't really have anything to gain from it. In my opinion it would have graced Labour if they had, I personally feel they have been rather disingenuous throughout the last years.

 

PS one final point: although the real drop in GDP might only have been a few percent, you need to take inflation into account as well. The cost of living is (and has been) on a significant upward trend, if the crisis hadn't happened and we had carried on the way we were we would all be about ten percent better off now, that is a rather significant amount of money for anybody!