Thursday Mar 29, 201212:09 PM GMT
'Britain needs to fix shattering economy'
Thu Mar 29, 2012 12:5PM
Interview with Sean O’Grady, Economics Editor with The Independent
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Well, the public reaction has been rather unfavorable. The British people don’t like the austerity measures; they don’t like the fact that their living standards are falling. Many of them feel as though the government has an unfair approach and that it favors the rich rather than the poor- it’s been said on this show.

But on the other hand, they also know that the British economy is needed to be fixed; they know that the public finance is needed to be fixed and they know that the economy needs to rebalance and become more competitive in an incredibly challenging world environment, when you have China and India, not anymore France and Germany that the British industries have to compete with, upcoming nations like that."

The British government has alerted citizens about possible fuel shortages as the country prepares for a strike action by tanker drivers.


Prime Minister David Cameron has told motorists to stockpile gas and fill up their cars. Another senior minister, Francis Maude has advised them to store petrol in jerry-cans and pile them up in their garages.

Firefighters have warned the advice is dangerous while motoring groups say it could cause a fuel shortage. Workers in five oil companies have already voted in favor of industrial action over terms, conditions and safety standards but no strike dates have been set yet.

Press TV talked with Sean O’Grady, Economics Editor with The Independent to discuss the issue further.

The video also offers the opinions of two additional guests, Ian Williams, with Foreign Policy in Focus from New York, and Shabbir Razvi, London-based economic commentator.

What follows is a transcription of the interview:

Press TV: Sean O’Grady, the office for national statistics says that GDP drop last year was due to decline in the services sector in household spending but will production remain poor and lead the UK into recession this year.

At the same time, some reports are already saying it looks like GDP has returned to positive growth in 2012. So will the UK not fall into recession in 2012 or will it?

O’Grady: Well, it’s about 50, 50. The British economy has been zigzagging all around, getting a little bit bigger one quarter, a little shrinkage the next quarter, growing a little bit the next quarter, shrinking a little a quarter after that.

So it maybe that we have two quarters where it declines but overall this year, the economy will be in growth. I think most economists do agree on that, providing there is not a much bigger disaster in the Eurozone which is a big export market for Britain and very important source of investments in the other funds.

Provided that doesn’t happen and provided world economy doesn’t go too badly wrong, the chancellor’s plans will probably come to fruition and the British state is in a better condition than the European countries, many of which are either in recession or going into recession and which are still borrowing far too much.

The British people have had to face up to the fact that during the boom years, we consumed too much; we had a party and the country, the public sector and the private sector could not continue like that. We had to rein in.

We had to reduce our consumption and this year, people will see the biggest fall in living standards in 35 years but that was inevitable when we were living so far beyond our means.

We had to readjust the economy and it is very painful. There is no doubt about it, but the alternative which is just to carry on borrowing and trying to keep the party going that really is not on .

Press TV: Mr. O’Grady, let’s bring in George Osborne’s 2012 budget in this. It’s being criticized of course for not considering the small and medium-sized businesses and it’s been called the millionaire budget. So basically what’s your view on these kinds of arguments?

O’Grady: Well, I think that some of it is rather unfair, actually. I mean, there is a signal that the cut in the top rate of income tax sends out and it is not just an internal political symbol or message- it’s one to the rest of the world.

Britain had, after many years of change, been left with an uncompetitive taxation regime. That was basically the problem that we had.

We had to raise taxes in the crisis of our 08, 09, 10 and this is one of the taxes that was raised in order to raise some money.

But the problem was that it really did not raise that much money and it sent the wrong signal out to international investors and people of talent who might wish to come and work and live in Britain and that was an important thing to consider.

Our taxation system is becoming uncompetitive, so it had to be fixed. On the issue of small or medium-sized businesses, I think the main problem with them has been the flow of credit and there have been some reforms there and there have been some projects to increase that.

On the other hand, for those businesses the reduction corporation tax, I mean, for businesses in general, has been very helpful, I think, and again is making Britain more competitive internationally on taxation rates.

And I suppose the last thing is that all of the companies that we’re talking about and the UK citizens benefit from having a country that has still managed to retain its triple A status when all around the world even in America, in western Europe and so forth, the countries that hold these things are crumbling almost every week.

And that’s been a very, very important thing that the British economy has managed to resolve. And lastly on the poor people, the poor people in this country in Britain, the coalition government has made a huge amount of progress in taking many millions of people out of income tax altogether.

They don’t pay income tax at all if they earn up to 9000 pounds; I suppose about 13,000 dollars a year, not very much money. But they will not pay income tax as well on that sort of money.

Press TV: Mr. O’Grady, we had the BoE (Bank of England) governor Mervin King saying that an extra day’s public holiday later this year to mark Queen Elizabeth’s diamond jubilee or 60 years on the thrown could in fact hinder economic growth.

These kinds of issues are also being put forward now. Tell us your view basically on the public reactions in the UK?

O’Grady: Well, the public reaction has been rather unfavorable. The British people don’t like the austerity measures; they don’t like the fact that their living standards are falling. Many of them feel as though the government has an unfair approach and that it favors the rich rather than the poor- it’s been said on this show.

But on the other hand, they also know that the British economy is needed to be fixed; they know that the public finance is needed to be fixed and they know that the economy needs to rebalance and become more competitive in an incredibly challenging world environment, when you have China and India, not anymore France and Germany that the British industries have to compete with, upcoming nations like that.

You know, the British people are realistic enough to know what’s necessary and also I’m afraid that they don’t have an enormous amount of faith in the Labour Party, the opposition party, to fix things because most of them think that they got us into this mess in the first place, rightly or wrongly.

VG/MSK/JR
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