There is an alternative - anyone who says there is not is fooling themselves and you.
There is a price to pay both for the current path and for the alternative path - anyone who says there isn't is deluding themselves.
The question is, what price are we willing to pay and for what alternatives?
Having just had an operation, I spoke with a nurse who said to me, 'Your operation has resolved the problem but it is causing you short term pain, your physio will help you get back on your feet and stop the problem in the future'. I think this is a good way of looking at the economy.
I had a series of options to resolve my pain (in my back) which would then have different types and different lengths of pain associated with it, but unless I change what I do, that problem may come back in the future.
We are in a sticky situation as a national economy, yes we have a bigger debt than Portugal and Greece but we also have a much bigger economy and therefore a much better ability to repay that debt.
The case for a slower rate of cuts to allow the economy to recover more has been well made and the current 'Financial extremism' is only benefiting the extremists in the city and is having very little positive effect on the rest of the economy.
But where is the physio? Where is the plan that says this is how we will stop this happening again? Is there a better way of repaying the debt and ensuring we don't fall into the trap again?
Here is mine.
Firstly, We should have a written constitution that protects the people of the country from political whims and short term moves (please see my previous blog regarding this). What is the price to pay? It may be costly to set up but it needs setting up once and once only.
Secondly, It is the banks that should be repaying this debt. The government is aiming to take debt back to the levels of 2007, prior to the crisis. From this we can surmise that the extra spending has been made to protect the people from the worst effects of the recession and the banking balls up. Therefore we should offer banks an option of repaying our national debt for us. In exchange we reduce the level of tax on banks for a period of time after the debt has been repaid. The amount of tax and the length that it is reduced for will vary depending on how much of the debt they repay. This then allows the economy some breathing space to grow (which will in turn be good for the banks) and allow for job creation to grow. If you know that you will be losing an amount of tax in five years time, you can plan ahead and take account of it. This is a much more balanced approach rather than the slash and burn approach. The flip side of the coin is that if banks decide not to assist the economy then they will be penalised with extra tax now. What is the cost? There will be a cost to the city of London traders in the form of more difficult trading conditions. They would have to invest in less risky and more assured accounts which would result in less profits for them. There would be a short term complaint of 'We are not being competitive' and 'We will lose talent' etc, but these will disappear quite quickly (They are not talent - they are the problem and the rest of the country becomes more competitive).
There would be a loss of face for the government and political leaders but they would also benefit from a smoother repayment of the debt.
Third, the banks need to be split. If I want to invest money I need to have all of the risks and benefits explained and I need to sign a piece of paper to say I understand what will happen. Why then is the money in my current account taken and used for investments by the bank that I will receive no benefit from at all. it is simply wrong - they are playing roulette with other peoples money. If that then goes wrong, it is you and me that suffer the consequences, while we bail out the failing 'Talent' and make sure they don't leave to cock up someone else's economy.
Separate the banks and ensure that Retail banks and Investment banks are not owned by the same company and that they act in the interests of their own customers. I would also ensure that no institution has more than a 25% exposure to the stock market. This includes insurance companies and Pension funds.
The price to pay would be less profit and less risk. Some banks might become open to international takeover, but these would also be subject to the trading conditions within the UK. There may be a short term increase in interest rates but if you look at where we are now, that will not be a big change.
We have another choice, we have a different way of achieving the same target, we need to decide what we want and how much we are willing to pay for it.