With unprecedented levels of public sector debt (c.£4 trillion) and the prospect of an energy crunch likely to further undermine our economy within this Parliament, there is a high probability that we will experience a double-dip recession that could reduce our Government’s ability to pay down debt and meet future public sector liabilities, even with drastic public spending cuts. Moreover, there isn't very much more the government can do to further stimulate the economy as interest rates are already at record low levels and taxation must increase in order to reduce the deficit.
In these circumstances, the economy could easily slip into a depression likely to be worse than the Great Depression as the global financial markets and our external creditors lose confidence in our ability to service our debts and another even worse credit crunch ensues. Events in Portugal, Ireland, Italy, Greece and Spain have already rattled global investment communities and interest rates in these countries are likely to soar reflecting the perceived level of risk associated with their economic growth potential and thus their ability to repay debt. Governments in these countries have had strict austerity measures imposed on them by their external creditors to ensure that they are able to service their debts.
As a centre of international finance, UK has accumulated the second largest external debt in the world (after US) of almost five times GDP that could easily result in it being next in line for austerity measures being imposed by external creditors. Accordingly, the new coalition government is entirely focused on paying down debt as allowing public sector debt to continue rising in a shrinking economy is a recipe for disaster. Moreover, to allow foreign creditors to dictate terms for repayment would mean a loss of control over our sovereignty and independence.
It is time for a “reality check” and for us all to confront these issues through urgent and radical change in our consumer orientated ways of life by transitioning towards local low-carbon economies with resilient communities as self-sufficient as possible. Energy and food security are likely to become issues of paramount importance.
Consequently, I have created this discussion paper that aims to distil the assumptions that will influence outcomes in the near to medium term, outline a mitigation strategy and determine a road map to implement the strategy. This document is a work in progress that will evolve as the detail emerges and constructive comments are received from those of you that would like to contribute to its ongoing development.
In an effort to reduce bureaucracy and costs, the new coalition government has introduced policies of decentralization and devolution of powers to Local Government with decision making at the community level which will depend on motivating the general public, that have hitherto been essentially apathetic to change and cynical of Local Government initiatives, to step forward and become sustainable community activists.
The Government has also recognized the urgent need to stimulate reform and empower society in its recent launch of “The Big Society” that aims to deliver cultural change and inspire social enterprise.
We are all in this together and must start a collective process of change in a spirit of collaboration and cooperation rather than the traditional adversarial approach to change favoured by older politics and conventional Capitalism that culminated in a dysfunctional Labour government and the economic mess we are now in.