Will public sector cuts lead to a double-dip recession?
George Osborne has been left with a scorched earth economy and has little choice but to demonstrate to the world that Britain is serious about cutting its near bankruptcy level deficit. The gamble the Government is taking is that the slump in the public sector will be outweighed by the upturn in the private sector.
The British Chamber of Commerce think the cuts won’t lead to a double dip recession and, unsurprisingly, the public sector unions predict it will. What has been proven is that the talk of dealing with the country’s deficit has restored confidence in the financial markets.
The World Bank has just announced that economies face a double dip recession if they do not deal with soaring debt levels, so on balance the only responsible solution is that we have to restore fiscal spending to a sustainable level. Failure to do so will ensure that the country becomes bankrupt which certainly outweighs the threat of a double dip recession, as painful as that may be.