Per DM

Per DM

October 22, 2010 12:18 ET

Per DM Like Many Businesses Consider the UK May Be in Danger of Killing Off Short-Term Recovery Whilst Weakening the British Economy in the Long Run Due to the Coalition's Spending Cuts

LONDON, UNITED KINGDOM--(Marketwire - Oct. 22, 2010) - The current state of play in UK politics has seen much debate around the new coalition's spending cuts of late. A Per DM representative considers that not only is the nation potentially at risk of killing off short-term recovery, but it may also see a weakening of the British economy in the long run.

We as a nation are perhaps in a catch 22 situation with the opposition parties calling for "smaller and slower cuts" while really not knowing what is the best measure to take. The British public has become more informed with political decision making after the new shift in government. As a nation we have taken an avid interest in the debate on the progress of the new spending cut plans. As a result, one continual response is that we must consider the long-term growth strategy of the economy and the redefinition of the welfare state.

Many of us here in the UK, including Per DM, are praising George Osborne for his political courage. The courage he is showing by sticking to his original plan. Understandably this encourages us, considering the history of UK politics' politicians 'sticking to their word' or to a respected political plan is rare! Sadly it has been far more common to see politicians abandon or modify their 'plans' further down the road when it is too late. We can all agree that misguided courage can only magnify a disaster… we only need to look at the First World War as testimony to this thought.

The first problem with the current spending cut debate is the assumption that cuts should be made according to a clear timetable when in fact, very different timetables are being proposed. It appears that the government wants to virtually eliminate the deficit by 2015 while Labour wants it only to be halved by 2014, yet both the government and the opposition are the same in defining their plans in terms of calendar dates. Considering this, it appears that the bulk of the deficit is due to the fall through increased tax revenues and the cut in automatic welfare payments, such as unemployment benefit, due to economic downturn, rather than structural over-spending. Given this, in the long run the most effective way to reduce the deficit is to revive growth, which will increase tax revenue and reduce welfare payments, rather than cutting welfare entitlements.

The government position is that the spending cuts will generate growth by reviving private sector investments, especially if combined with deregulation and an elbow nudge to the banks to lend to small businesses. But that is more wishful thinking than a credible plan to regenerate growth. When weak private sector activities are the very cause, not the result, of the deficit, cutting the deficit is not going to revive those activities. One thing is for sure, discussions of a longer-term growth strategy have a particular urgency. We must prepare if we are looking to see global tightening of financial regulation in the near future. We should not overlook that parts of the UK that have relied on government jobs funded by City taxes such as Scotland, Wales, Northern Ireland and certain northern English regions, require alternative sources of growth and jobs urgently, as many of those job opportunities are going to evaporate very soon.

There needs to be a more intelligent debate on the reform of the welfare state. The question could be asked, is the new coalition embarking on a radical restructuring of the welfare state on the sly? Regardless of whether the welfare state should be completely restructured or not, the conclusion should be reached on the basis of a thorough deliberation on underlying principles, rather than as one element of a macro economic adjustment.

Per DM Contact Marketing Limited was established in August 2005 in response to the UK markets' need for a field sales organisation capable of delivering high quality results with consistency and reliability.

The company was formed by a group of former UK financial services executives and senior executives from the leading North American field sales agency and since 2005 we have continually recruited leading figures from the B2C and B2B business arena.

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