A trillion hallucinations for the UK Coalition government

Downing Street moves on to 2012 surrounded by mirages, between the spectra of a Franco-German plot against the financial City of London, and the Olympics’ promise of wealth they may bring to the capital of the island. Some British economists, however, question both.

skjdljLONDON | Oh dear! More than a trillion sterling pound in public net debt… never mind. Here your are two servings of the real traditional humble pie, which the English proverb advises eating to stuff the excesses caused by pride: the struggling retail chain Marks & Spencer will from January use fruit packaging with a mixture of clay minerals that supposedly absorb ethylene, under the naive promise to its customers that the strawberries will remain –unlike those of the competition– fresh; and universities, which since the start of the credit crunch have resorted to the collection of library fines and have amassed nearly £50 million (€60.5 million) to ease their liquidity emergencies.

Both stories share a narrative, an anemic economy amid which the British see themselves pushed towards more creative tactics to reduce the waste of resources and increase revenue, while the government promises to impose austerity and domestic consumption is entrenched because of the uncertainty.

A comment aside regarding the issue of the higher education institutions: whereas students in an industrial city like Manchester have paid £1.6 million in penalties for delays in returning borrowed textbooks, those in the elitist Oxford have found themselves forced to pay hardly £25,400. Knowledge about personal finances is not fairly distributed, one suspects…

There is no shortage of reasons for humility, indeed. Here is the tumbling package of state capital injections in infrastructure proposed by the Coalition government –an admission that closing the public spending gap cannot be the sole solution,– those €40 million for the expansion of a high-speed railway from Birmingham and Manchester to London: fallen under suspicion of corruption.

This is a pie that has a sour taste to it, to be sure, that of democratic humiliation: the Kelly report says that all political parties, whether in government or in opposition, run supporters’ clubs through which they channel hundreds of thousands of pounds in donations that grease wealthy company directors (particularly those from the construction sector) private access to senior members of the House of Commons.

“The political system of Great Britain runs the risk of being easily corrupted by the wealthiest people of the country,” says the document, which adds that these maneuvers have sparked widespread distrust in the program of Downing Street against the recession.

Perhaps because of this, or because of the over £40 billion in losses that the two banks seized by the British Treasury Lloyds and Royal Bank of Scotland are expected to suffer over the next three years, the Conservative Party and its prime minister David Cameron have redirected the public attention to the well known country’s number one enemy… the European Union.


“One very senior French financier now based in London once came to me and asked why the British couldn’t see what was happening…”

Apparently, according to the version of Anthony Browne, who is the director of the economic policy team at the service of the current mayor of London, über-Tory Boris Johnson, France would seek to stifle the City, thereby forcing the transfer of its financial power to mainland Europe, to Paris, with other pieces of the loot awarded to Frankfurt. The plan, says Browne, even has a code-name, Project Spartacus.

The theory, rather worth of a Molière comedy, echoes in the columns of the mainstream press as The Daily Telegraph. In its pages, Damian Reece writes truly Homeric paragraphs:

“The eurozone hopes that the UK’s strength, financial services, will prove its weakness by regulating away its global advantage. David Cameron has no choice but to resist this and protect the City […] The future of our role in Europe will be fought over the future of the City. The country’s destiny is still tied to that of its bankers.”

If so, the truth is that the bad omens come from the City itself: Royal Bank of Scotland has announced an up to 5,000-job cut, while Lloyds TSB is concerned that 50% of its core capital reserves or €20 billion is going to evaporate a any time due to the deterioration of its loan portfolio.

Where then will liberals and conservatives seek refuge? What about among the Olympic Games’ mythic offerings? The Office for Budget Responsibility claims that the Games will increase the whole British GDP, not only that of London, but voices like Michael Saunders’ of Citigroup respond that

“the Games can not be taken as if it were a credible economic policy.”

Jeremy Cook, chief economist at World First, believes that

“the Games’ motto faster, higher, stronger will leave London dirtier, more crowded and bad tempered.”

And Douglas McWilliams of the Centre for Economic and Business Studies, says that

“the Games, in all likelihood, will trigger the decline in GDP in the capital as a sector of the tourists, who would have visited London, will avoid the city and the discomforts and prices spiked by the Olympic events.”

Another chimera that time will vanish? This is what happens when one becomes isolated, anyway; in the end, the only ones who keep you company are your own ghosts.

About the Author

Victor Jimenez
London contributor at thecorner.eu, reporting about the City and the Eurozone economies. He regularly writes for Spanish newspaper group Prensa Ibérica--some of his features include shared work with journalists of The Daily Telegraph and the BBC.

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