Posted by: Pete | March 9, 2011

Project Merlin or Paul Daniels?

The Wizard Merlin Unless the Government has suddenly acquired magical powers, their answer to the nations liquidity is a cruel illusion.

Encouraging businesses to increase their bank borrowing at a time when the economic outlook has never been weaker demonstrates they have learned nothing from the global crisis that was yet again brought about by debt.

Whilst we’re told how vital it is for Government to reduce its debt, students and businesses are being driven to the money lenders with a pat on the back and reassuring words about how easy it will be to pay it back when things get straight.

A Government minister even had the audacity to announce on BBC Radio that students should think of their loans as a sort of income tax rather than a debt!

This slight of hands may seem innocuous but it’s precisely the sort of advice that results in a totally unwise attitude to borrowing. After all, if you already owe £30,000, a few thousand more really won’t make any difference will it?

When Labour borrowed massively to bail out the UK banking system, it did at least have an income stream that could underwrite the debt. Tax revenues may vary but nothing is surer than death and taxes! How many small businesses can be sure about their future revenues? Pubic spending has been slashed, unemployment is soaring and the fear of it will depress demand for UK goods and services. Is this really a time to borrow money?

Hopefully, our businesses will save to invest in their growth by improving intrinsic performance, innovation, strategy execution, and prudent management. Hopefully, they will have the sense to ignore Project Merlin and its illusions of easy money.

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