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Stephen Archer is a speaker with great charisma. By using illustrations and personal experiences and not being afraid to share his own point of view of the current situation and who is to blame for it, he engages the whole audience, at the same time helping us all to understand the credit crunch a little better.

— Warwick Business School

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Cutting the State – a mistake?

There is a view that cutting state costs and jobs at this time will hinder recovery and even precipitate a second recessionary dip. I believe that we have to tackle the debt as a priority, indeed, I think the majority believe this, in which case the question should be posed – ‘when is the right time to tackle the debt? ‘ If the debt is left too long then the size and cost of servicing it become unsustainable. So an early attack is right.

In the recession of the early 1990s in the UK, 700,000 public sector workers lost their jobs. Yet this was followed by a long period of sustained growth. Of course, public sector expenditure will have some impact on private enterprise. But the reality is that much public sector activity will by a number of routes become private and the salck will be taken up – probably with more efficiency.

Currently, the state reperesents 45% of GDP (up from 39% in 2007) . This is unsustainable, it does not generate wealth and it does not help the balance of payments. A target of 35% should be the maximum. We can only do this by encouraging enterprise, generating greater sovereign income and reducing the size of the state. This has the added benefit of securing or credit rating and increasing our global competitiveness.

If you think this is a droconian view – take a look at what is happening not just in Greece , but also Spain, Portugal, Ireland and Italy!


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