Economic prospects for 2012: How long will the age of austerity last?

Hatsuhana doing penance under the Tonosawa waterfallThe UK is firmly locked in to the age of austerity.

The question now is how long it might be expected to last.

Chancellor George Osborne’s Autumn Statement saw the crucial admission that the UK budget deficit is not now expected to be eliminated until 2017, missing the previously stated target of the end of the current Parliament in 2015.

So how long might the UK’s age of austerity be expected to last?

We could be looking at a period of long-haul austerity for the UK economy, or even permanent austerity in our lifetimes.

Has ‘no alternative’ become a self-fulfilling prophecy?

The FT’s Martin Wolf takes a particularly sombre view:

The big facts are that the UK is set for a lost decade and a longer period of stringency than expected. The Government’s position is that there is no alternative. That has now become a self-fulfilling prophecy.

Public sector austerity: The ‘new normal’ for the next 20 years?

Public sector austerity will be “the new normal for the next 20 years,” argues consultant Steven Toft. Toft says:

Further severe spending cuts [...] look unavoidable unless taxes rise significantly or we get a near-miraculous growth spurt in the next five years. Whoever is in office during the next decade will have to deal with this problem eventually.

Further public spending cuts more probable than tax rises

Tax rises are an ever less palatable option for the Coalition Government. Public support for tax rises to prop up public spending is in sharp decline, according to new data from the National Centre for Social Research. It finds:

[S]upport for government increasing taxes and spending more on health, education and social benefits has halved from a peak of 63% [in 2002], to just 31% [in 2011]. It’s striking that support for ‘tax and spend’ policies has reduced to a level last seen in 1983 in the aftermath of recession and continuing ‘stagflation’ in the economy.

Further public spending cuts consequently appear a much more likely option.

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