UK Government’s austerity plan: still not working
The UK Institute for Fiscal Studies said today that chancellor George Osborne may have to find another £11bn from tax rises or spending cuts if the economy does not pick up.
In other words: this austerity is not working, let’s try more!
One of the justifications for George Osbourne’s austerity measures is to protect the UK’s ability to borrow money at low rates.
But countries that borrow in their own currencies and can “print” at will don’t have default risk, so their borrowing costs are actually an expression of expectations of future interest rates and growth. The US has been notably profligate since the crisis. The UK (under Cameron) has been prematurely austere.
The upshot: it hasn’t affected their borrowing costs at all, as this chart from Paul Krugman shows.
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