(corrects typo and adds link)

Here is the unofficial motto of Tim Morgan, Tullett Prebon’s captive economist: Do not be so sad and glum, there’s bound to be far worse to come. Well, perhaps not quite, but his latest attempt to wake us up before we sleepwalk over the edge of the economic cliff might suitably bear this rubric as a subtitle. Morgan has form here. Last May his horribly clinical analysis of our position was entitled No Way Out?, or why the British economy is in very deep trouble.

He pointed out that prospects for six of the UK’s eight largest industries, accounting for 58% of output, were grim. When you list them, you can see why: Real estate, finance, health, education, construction and public administration. They hardly sound like a proper economy at all, more a collection of activities which leave others to do the real work of wealth generation. He reckoned this made “aggregate economic growth implausible”, a conclusion which most others have now reached.

He’s now getting rather cross. Those supposedly savage cuts in public spending are merely fiddling at the margin, and the failure to face economic facts is “an abdication of responsibility” by successive governments. Over six years the coalition plans to cut the number by a magnificent 4% – that’s not 4% a year, but a total of 4%. Even if the plan is met (they never have been in the past) it would shave just £20 billion off the £237 billion extra that the Brown disaster years piled on.

Getting into his stride, Morgan notes that “working people are now bearing the brunt of this abdication of leadership”, which is self-evidently true, even as those same working people say they want more spending on the NHS and other money sinks.

Given the dire diagnosis, his prescription is surprisingly mild:

–       Reducing the income tax and National Insurance (NI) burden on working people earning less than £37,000.

–       Cutting the rate of VAT to boost consumer spending.

–       Eliminating part of the tax burden on SMEs.

…all to be funded by meaningful cuts in public spending. There must be some we can make. As he points out, the state is spending 53% more than it did a decade ago: ” What are the ‘essentials’ that government somehow ‘must’ spend money on today, but managed fine without spending money on ten years ago?”

The autumn statement is less than a fortnight away, and it’s clear that the Chancellor’s hopes for growth are not going to be met. If he really needs his mind concentrating before he admits as much, Tim’s his man.

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