If the financier George Soros is right with his latest predictions the severe cuts being made by the Coalition will plunge Britain back into recession. Soros is not often wrong and it was his betting against the pound that led to Britain's exit from the European exchange rate mechanism during the time David Cameron was advising Norman Lamont.
This is not the kind of news that we want to hear, but it suggests how the financial situation might be continuing to spiral out of control. With Ed Balls as Shadow Chancellor you expect him to vehemently oppose George Osborne's economic policies. Labour has described the cuts as 'hurting not working' but Balls' own track record was counter-productive during the time he was advising Gordon Brown's during the period that virtually bankrupted the country. But Balls does not agree that Labour's spending policies and promise to end 'boom and bust' created the mess we are in and prefers to blame Britain's deficit problems on the global banking crisis. This may be partly true, but Brown is responsible for failing to control the banks.
But with the Alliance saying one thing and Labour saying the opposite, it is no wonder the economy is in dire straits. It is strange how opposing parties always disagree on economic policies which leads one to doubt whether any of them has a clue about controlling the economy. Political debates mean little more than point scoring and since the MP's expenses scandal and Labour's spending spree the public has every justification for not trusting them.
After the general election I was possibly misguided and believed the idea of a coalition could work by combining the best brains of both parties; now I'm less sure. Initially Vince Cable was extremely credible. After all, for a time he appeared to talk sense and many thought he had sound ideas that would steer the country back towards stability. That ended when he shot himself in the foot by making ridiculous remarks to undercover journalists about how he was going to declare war on Rupert Murdoch. Since his major faux pas Vince lost much of his popularity and now we hear little from him.
Osborne remains tunnel-visioned over his policies while the Consumer Price Index (CPI) continues to rise, moving from 3.3% in November to 3.7% in December, and the VAT increase to 20% will make high street trading tougher causing retail sales to fall. Fuel prices have increased by their fastest yearly rate and food costs soared by their highest annual increase since May 2009. The Bank of England got it wrong too and has confirmed it expects the CPI to be higher than they had estimated throughout 2011. While this is grim enough, the Retail Price Index (RPI) that accounts for housing expenses including mortgage repayments, council tax and insurance also increased by 1% to 4.8% - the highest rate in 8 months. None of this inspires confidence.
The public have had enough of political spin that regards them as stupid. They know that tough measures are necessary if the country is to return to prosperity, but they are growing impatient and tired of being punished by an enforced austerity that is hitting the poor the hardest. We know we are certainly not all in this together and while the lowest paid and those on benefits are being pushed deeper into poverty the filthy rich are cushioned from the cost of living increases suffered by the masses. The banking community, despite its blatant negligence, continues to reap unbelievable rewards while the government capitulates by refusing to kerb their obscene bonuses. One CEO's bonus alone would be sufficient to move hundreds from the breadline. In January a spokesperson for Cameron said: “We have made a broad statement which is about the need to see some restraint and some responsibility from the banks, but we are not going to set bonus pools for individual banks.” Of course not, because the Treasury stands to gain £20bn in taxes from the bankers. Cameron told the Andrew Marr Show that although the government wanted to see lower bonuses paid in 2011 the banks could not be "micro-managed." The PM added: “What I want to see is socially responsible banks behaving responsibly, lower bonus pools than last year's, responsible levels of remuneration, proper agreements on lending to businesses large and small, and being good citizens in the community.” But this won't happen. The banks have been allowed to become bigger than the State and this is unhealthy. The government resists restricting the banks fearing that if pushed too hard talented bankers would flee the country to some far away Shangri La where they can continue doing what they want. If this happens London would risk losing its status as a major financial capital. Against this we should ask for proof of who these 'star performers' are and what roles they played in the banking crisis? If challenged we might find there is less talent in the City than they want us to believe.
Despite of all that has transpired, the bankers still have no shame and RBS will be paying its chief executive, Stephen Hester, a bonus of £2.5m even though they were bailed out using taxpayers' money. This cannot be justified since RBS was fined £2.8m for gross shortcomings in customer service. The magnitude of this payout would be morally wrong at any time, but it makes people feel sick to the pit of their stomachs for bonuses to be paid when the rest of the country are forced to tighten its belts. It adds further salt to the public's wounds when the unrepentant head of Barclays, Bob Diamond, refused to apologise for dragging Britain into the worst recession since 1929 and then having the nerve to say the "period of remorse needs to be over" during questioning by the Treasury Select Committee. Diamond is expected to receive an £8.5m bonus this year but when challenged over whether he would be taking this he smugly replied: "That decision is out of my hands. I would discuss it with my family" before pompously telling MPs that he "resented" some of their questions. Diamond's attitude reflects the banking industry's outrageous contempt of the public and towards authority but it is indicative of the total greed demonstrated by the highest paid bankers.
Bankers are of course far removed from the realities of normal life, but so too are many MPs. The veteran TV presenter and journalist Andrew Neil recently presented a provocative documentary Posh and Posher - Why Public School Boys Run Britain that showed how so many politicians are drawn from privileged backgrounds. This has created a lack of social mobility that is denying bright, talented working class people from reaching the higher echelons of politics. Neil argued that Britain has returned to the type of grouse moor leadership that permeated during the premierships of people like Harold MacMillan and Alec Douglas-Home who had both been educated at Eton and Oxford. Cameron and Clegg similarly were private school and Oxbridge educated, three quarters of the coalition cabinet are millionaires and a third of Labour front benchers went through Oxbridge. In all, a third of all MPs attended fee paying schools along with 50% of the cabinet. Considering that only 7% of the general public attend private schools this indicates how the moneyed classes are dominating politics. Many MPs are career politicians that have been groomed in the right circles in preparation for their entry into politics. After graduating from top universities others have become lawyers or journalists but few have worked their way into politics from ordinary backgrounds. The union movement once channelled prominent officials into the Labour party but unless the system changes there will no longer be an opportunity for grassroots politicians such as John Prescott and Alan Johnson to be accepted. The class differences means that MPs can make tough policies without having to experience the hardships they create. David Davis, a Conservative MP from a lowly background said of Cameron and Osborne: "They are who they are; they come from their own background; they don't have to scrape for their last penny at the end of the week." His comment speaks volumes about the privileged lives MPs lead. Most are immune and therefore unable to equate with those who cannot escape the misery of a rundown inner city council estate. They have no experience of being raised on benefits in a household where nobody has ever worked or where a father is permanently absent. This is the stark reality of our country today and is indicative of how far detached politicians are from their voters.
But the situation is no longer the reserve of the poor. The elite similarly has no grasp of the realities of those that have worked all their lives, perhaps rising to a management position and are now being made redundant with no prospect of finding work. They cannot equate with business owners who have toiled for years, perhaps employing others, who have lost everything due to the bank's refusal to support them. Public sector cuts will target the lowest paid the hardest. Most that lose their livelihoods will never recover and if Osborne's recovery plans fail so will they and there will be no confidence left businesses will not employ new staff. Ed Miliband accused Cameron of being the 'defender of the banks'. Cameron has said "What we all want to see is the banks paying more in tax , and we will see that. We want the banks doing more lending, and we will see that, and we want to see bonuses cut, and we will see that." But does anyone really believe what the politicians are saying any more?
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