When Osborne stands up in the House of Commons today, three realities will be in play. The first is that although it is not working out as planned, the UK economy is under better control than most others laid low by the crisis. The second is the plan can never solve the underlying problem, although it will keep the economy from sinking. The third is no other plan presently being promulgated, based on the repair of the old system, will work either.
The economic model has been destroyed by a borrowing binge and asset inflation, especially property, to the point where gross deformity exists and correcting one part now causes issues in another. It is like being in a hut with a leaky roof with five holes and only three buckets to catch the drips. Always two holes will be dripping onto the occupants. Arguments abound as to who deserves to get wet.
At the heart of the problem of the UK economy are not issues of welfare benefits or tax avoidance, nor even unemployment and economic stagnation. These are all symptoms. The problems are too much debt, too little money and a Byzantine tax system which fails to deliver enough revenue to pay the bills. Add to this a currency historically over-valued, which compounds the difficulty by sucking in imports of consumer durables and inhibiting exports of all but luxury brands or cutting edge technology. Until radical ideas are put forward to deal with these things, nothing much is going to change.
Reform of eduction, health and welfare are worthy. Reform of the financial model is vital. The project is beyond the scope of this blog at this time, but a hint may be found in looking at QE and where it could go and buying back government debt and how that has helped. A read of the last post will fill in some gaps.