British citizens express concerns about U.K. budget cuts

Marketplace Staff Oct 21, 2010
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British citizens express concerns about U.K. budget cuts

Marketplace Staff Oct 21, 2010
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TEXT OF INTERVIEW

JEREMY HOBSON: The credit markets are reacting to news of big budget cuts in the U.K. The rating agency Fitch says it will maintain a triple-A credit rating for British debt. That’s the highest possible rating. But not everyone is cheering these cuts as you might imagine. And to get an on-the-ground view we turn to Jonathan Freedland, an editorial columnist for the Guardian Newspaper. He joins us live from London, good morning.

JONATHAN FREEDLAND: Good morning to you.

HOBSON: First of all — Fitch is happy about this. Obviously there are about half-a-million public sector employees there in the U.K. who will not be happy when they lose their jobs. What are economists over there saying about this move?

FREEDLAND: Well economists are, predictably perhaps, divided. There is a very raucous debate going on here between those who say if you have a deficit you have to bring it down, that the government and the economy is like a personal household and you have to only spend what you have. And then there’s the other side, actually represented partly by a couple of American economists, Nobel Prize winners Joseph Stiglitz or Paul Krugman, they’re often invoked here, who say actually the one time not to cut spending is in the teeth of a recession or a downturn because it can turn that downturn, tip it over, recession into a depression, cause a spiraling contraction. They’re saying this is exactly not the time to be doing that. And they have their anchors usually on the left of politics and particularly in the Opposition Labor Party.

HOBSON: Jonathan Freedland, there’s been a similar debate going on over here about cutting during a recession or spending more during a recession. I wonder has the debate on the U.S. side of the Atlantic played had any impact in the debate over there?

FREEDLAND: It has in a couple of ways. Firstly, those two big name economists Stiglitz and Krugman are often invoked, but secondly the American example. It’s been very helpful for the labor side, the opposition side, to say “All we’re suggesting is what the Americans and the Obama administration were already doing.” And Obama is still a very good brand in British politics. You hear a bit less of that now, now that the stimulus itself is a more mixed blessing if you like in the United States and less popular and because people are aware that the midterm elections seem to be going the other way. So you hear less of that, but until pretty recently it was used as an example to oppose the government here, to say why is Britain doing this when the biggest economic power in the world, the United States, is going apparently in the opposite direction.

HOBSON: Jonathan Freedland, thanks for joining us.

FREEDLAND: My pleasure.

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