More reasons not to cut

by Ed Bowsher on 09 June 2010  |  0 comments
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Here are some more reasons why now is not the time to launch major cutbacks in public spending.

Check out this excellent article in the Guardian: Greece myth is an excuse for UK cuts. It's written by a new Labour MP called Rachel Reeves. She makes several excellent points about why the government shouldn't start cutting the deficit just yet. Here's a couple of paragraphs I particularly liked:

"It is important to remember two characteristics of the debt that are in stark contrast to the UK. The problem of debt in Greece is long-standing. Unlike in other countries, including the UK, the credit crisis may have been the final straw, but it was certainly not the cause of the problem, it would be naive to assume that the treatment - or outcome - should be the same. As if this is not enough, the UK has not once defaulted on its debt - unlike Greece who has defaulted five times over the last 200 years.

"It's for these reasons that the cost of borrowing in the UK is cheaper than in Greece. The UK can borrow at around 3.5%; Greece is facing commercial borrowing rates of 9%."

I also really like this blog post from economist Paul Krugman. He's looking at the psychology of people who call for immediate spending cuts. The post is primarily about the US scene but applies to the UK as well.