Chancellor of the Exchequer plays Santa Claus this Christmas with their tax cuts

Gordon praising Alistair for a great Mini-Budget. Photograph Courtesy of the Sun.co.uk

Global recession continues as Citi Bank announced it will be laying off 53,000 employees in the UK and the US. The Citi Bank is considered to be the biggest bank in the world and today the US Treasury has agreed to invest £13.4billion ($20bn) in return for preferred shares in the Citigroup in order to help the struggling bank. In the UK a highly respected retailer Woolworths is fighting off being put into administration under the UK bankruptcy procedures. The outcome of Woolworths losing will be possible 20,000 jobs losses along with more than 500 stores closing down. This would be disastrous for the UK high street.

Today, Alistair Darling the Chancellor of the Exchequer faces the government’s biggest economic test when he announces that he will try and stimulate the economy by borrowing around £100 billion in order to cut taxes. Both Alistair and his boss Gordon Brown believe that this will prevent a long-lasting recession. This additional borrowing will need to be paid back and we will see taxes start to rise in the future to pay for this borrowing. This additional borrowing will be partly funded by a 45p tax rate for anyone earning more than £150,000.

The biggest Government borrowing and tax-cuts ever! The Governor of the Bank of England, the Prime Minister, the Chancellor of the Exchequer and the taxpayer. Courtesy of Mortgage Strategy

Gordon and Alistair will play Santa Claus this Christmas with their tax cuts to stimulate the economy.  I am sure they feel that a side effect of their pre-budget tax hand-outs will be an increase in their popularity with the voters. With their anticipated lead in the polls in the New Year they will start plotting a general election for the spring as they will feel certain that they can win it. The Bank of England is certain to help them next month with a further base rate cut in interest rates to a possible 2% base rate

The real question is will this Work?

If Gordon Brown and Alistair Darling have misunderstood the problem then we will fall into the greatest depression ever. Remember our government has already bailed out the Banking system in the UK by borrowing £400 billion back in October and now they want to borrow billions of pounds more to finance these tax cuts. If they really do understand the extent of the financial problem both at home and around the world and they have the universal remedy then we could see a short recession.

Should governments really be interfering in their economies?

Gordon Brown promised us that he was a prudent Chancellor and that boom and bust would not happen on his watch. The law of the jungle says that the strong will survive and yet our government is playing god in the world of finance. Surely the finances of an economy should be allowed to falter from time to time naturally and without interference from governments. The cause of this recession is due to the lack of regulation in the Banking sector; mismanagement by the banks; finance being given to people that could not afford it and overspending.

These circumstances are totally unprecedented and have never been witnesed before. Our financial future now rests on the decisions made by the Chancellor of the Exchequer and the Pime Minister. They are both prepared to gamble with our future. If they lose we end up with a massive debt and in a deep recession.  Your thoughts, experiences and comments are welcome. Just CLICK on the green coloured COMMENT bar below and Leave your thoughts or experiences today!