Bill Gleeson: A crisis that really should have been Budgeted for

Nov 26 2008 by Bill Gleeson, Liverpool Daily Post

WHEN comparing Mervyn King’s performance in front of the Treasury Select Committee yesterday with Alistair Darling’s emergency Budget speech the day before, it’s hard not to conclude that the former has grasped the scale and true nature of the problem and the latter hasn’t.

The Bank of England has slashed interest rates, pumped hundreds of billions of pounds of liquidity into the money markets and tens of billions of pounds of capital into the UK’s banks while the Government has cut 11p off a DVD.

The principal reason that the public sector deficit will reach £118bn next year is not the bank bail-out, but the fall in tax revenues as the economy slows and more people lose their jobs.

The Chancellor cannot seriously claim that falling tax revenues were unforeseeable. Falling tax revenues are an inevitable function of a recession. Nor can he argue that the predicted fall in output is unprecedented as, if anything, a 1.25% reduction amounts to getting away with it lightly.

Recessions follow booms almost like night follows day. That’s been the case all over the world since the Industrial Revolution. So where’s the surprise?

The fact is, the Government did not take the opportunity presented by the recent years of economic growth to build reserves for a rainy day.

Cutting 2.5% from VAT will do nothing to stimulate economic growth. The pre-Budget Statement was a hollow gesture designed to make it look as if the Government is acting decisively and cover up the fact it is powerless to make a jot of difference.

We will be paying for the Government’s imprudent failure to plan for the rainy days for years to come. The national debt is due to rise to a cumulative £1trillion. By the Government’s own estimates, it will take seven years before the country’s finances are restored to balance. Only at that point will we be able to start making a dent in that trillion quid. It will take decades to bring the figure back under control.

When Tony Blair took over at Number 10 in 1997, the outgoing Prime Minister, John Major, insisted that New Labour had inherited the most benign economic conditions ever in the UK and warned against the new government doing anything to derail things. Whoever is in government after the next election is likely to inherit the most malign set of conditions in a long time.

Well done, Labour.

WHAT will become of Kings Dock?

For years, the idle waterfront land to the south of Albert Dock has appeared like a huge gaping gap in an otherwise sparkling set of dentures. Its continuing idleness acts as a reminder of the relatively low levels of economic activity that still blight our city.

Some of the dock has been redeveloped with the new Echo Arena and BT Convention Centre, but the majority of the land remains unused.

Before it went bust, housebuilder David McLean was planning to construct 1,300 homes on the site, but obviously that’s not going to happen now. Nor, given the state of the property market, will any other developer want to step into the breach.

So what to do instead? Liverpool has enough shops now, the city’s office development is earmarked for Old Hall Street and environs, and the leisure industry, including bars and pubs, are hardly booming at present.

Perhaps we’ll just have to get used to our gappy-toothed friend.