The coalition government’s emphasis on public spending cuts will only worsen the deficit it seeks to eradicate, the TUC has warned.
In a report published as City traders bet on a 20 per cent fall in the value of the FTSE-100 if austerity measures in Greece, Spain and Ireland don’t go far enough, the TUC said a false comparison had been made between UK debt and that of countries like Greece. Comparisons to Canada were also misleading.
The warning came as Durham politicians spoke of the human cost as the north-east takes a disproportionate share of cuts.Simon Henig, Labour leader of Durham County Council, told Tribune the north-east region would be disproportionately hit by last week’s announcement of £1.166 billion cuts to local government grants. All but one of the north-east’s 12 councils are seeing their budgets cut by more than the national average of 0.7 per cent. “There’s a very clear north-south divide”, he said.
Durham’s losses of £16.5 million this year will hit road maintenance grants, young offender rehabilitation and careers advice among other areas. “All sorts of things have been put in place to counter deprivation. If those are taken away, that recreates a gaping wound that was created in the 1980s, throughout all the northern regions.” The TUC document All Pain, No Gain: The Case Against Cuts, argues that the UK situation is not comparable with Greece.
“The Greek debt has to be repaid quickly because of the type of agreements with lenders, much of the UK debt does not have to be repaid for years or even decades,” says the report. Job losses resulting from the cuts would lead to a fall in government tax receipts and a rise in benefit payments, deepening the deficit.
The Bank of England said in its Quarterly Bulletin that speculators continue to bet on a Black Monday-style crash on the London Stock Exchange. The number had more than doubled from five per cent to 13 per cent in the last month. Sir Alan Budd’s newly-created Office of Budget Responsibility report (OBR) said the economy will grow by 2.6 per cent in 2011, less than the 3.25 per cent predicted by Labour in its last Budget.
Borrowing was forecast to be £155 billion in the current financial year – below the £163 billion forecast in the Budget – with total net borrowing over the next five years £23 billion lower than expected. l
