Economic crisis (From The Northern Echo)

Economic crisis

9:16am Tuesday 20th January 2009 in

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IN the full knowledge and understanding that politicians never answer questions – especially really simple ones that require a yes or no – I would still like to pose two.

Government borrowing is at its highest ever and we, as the mere minions, are asked to stop living on credit. Personal debt is at the highest ever, personal credit must be reduced, etc, etc.

Now, the Government is to borrow still more. So much so, that comment has been heard in Europe that even if we wanted to adopt the euro currency, we would not be accepted as our country’s debt level is too high.

So what makes it right for the Government, but not right for us? And just how responsible are the gods in Westminster for our present financial predicament?

The next question is a little easier to answer for anyone not trying to duck the issue.

Why are the banks, which appear to have the primary responsibility for the current crisis, getting hand-outs from public funds, yet industry (Nissan, Jaguar, JCB, countless small businesses, etc) is left to suffer, despite holding the best key to recovery and prosperity?

Graham Wright, Shildon, Co Durham.

THE idea of a “fiscal stimulus”, where a government borrows money and spends it to boost the economy, is being used to justify a borrowing binge where all the normal rules are thrown out of the window. Fiscal stimulus can work, but it must be targeted extremely carefully.

When a government borrows money it does so by issuing bonds and other similar measures, all of which actually take money out of the system.

There is only a benefit if the spending that results is more effectively targeted than that money would have been were it left in the economy in the first place.

The signs are this will not be the case with Labour’s spending splurge, a good example being the failed 2.5 per cent VAT reduction. You would have to spend nearly £100 on VAT-rated goods to save £2, yet it will cost the Treasury more than £12bn.

All this extra borrowing will have to be repaid in the future and every child born today is already saddled with £17,000 of Gordon Brown’s debt. We need effective measures to help us through these difficult times, but mortgaging our children’s futures is not the right answer.

James Wharton, Conservative Parliamentary Candidate, Stockton South.