Brexit Bear wonders where money comes from: elections perhaps?

14 Jun 2017

The Times reports that Theresa May is planning to abandon the government’s austerity programme after Conservative MPs warned that they would refuse to vote for further cuts. Sources said the PM accepted that voters' patience with austerity was at an end after a series of Tory MPs told her that she had misjudged the public mood. The public does not want to pay for all of the things it wants, much less run down the credit that Tony Blair ran up giving the public all the things it wanted, or so it would seem.

There is a lot of difference in abandoning less debt and embracing more debt, and UK PLC is pretty much “maxed out”. Moody’s has warned that Britain’s credit rating could be downgraded following the general election. The ratings agency said the lack of a decisive majority party could stall negotiations on Britain leaving the EU, which would have a negative impact on the UK’s credit rating. Less debt would have a positive impact, but somehow a large chunk of the public believes in the free lunch. Labour has some great ideas on how to spend, and they have a lot of support as a result; that’s a lot easier in opposition, but as the Conservatives have cut or talked about cutting the wrong things, this bruin is bearish about the short term economic future.