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19 October 2010
Graeme Leach, IoD Chief Economist gave an enlivening talk about The UK Economy at the IoD breakfast meeting today.
With the Comprehensive Spending Review report due out later this week the underlying theme of the talk was most relevant.
Leach set the scene in the early 1980s Geoffrey Howe, the then Chancellor, announced huge public sector cut backs. Despite 345 economists writing to The Times to the effect that the impact would be a disaster for the UK it is widely acknowledged that the 1980s boom had its roots one month after Howes speech.
In 1992 the Tory government introduced cut backs which led to 600,000 jobs being lost in the public sector. There then followed the biggest post war boom.
Currently the state consumes 48% of GDP. According to Leach, to have 3% sustainable growth in the UK economy, the state has to live off 35% of our GDP.
For Leach, the 2010 budget was good with incentives and tax breaks for SME owners, bad in so far that it ducked deficit issues and ugly with huge income tax rises for top earners and an increased NI burden.
Looking forward to the outcome of the CSR Leach said we have to reduce public sector expenditure. Recent evidence shows that this can act as a stimulus in the UK economy.
In this modern world of gurus, mentors and coaches maybe once again, we come back to something we know at heart - no pain no gain.