A man passes a clothing shop in London on Wednesday. British retail sales unexpectedly fell for a second month in a row in September, driven lower by weak clothing and fuel sales, official data showed on Thursday, in a further sign that consumer spending is slowing.CHRIS HELGREN
If you shout that the sky is falling, don't be surprised if people stay indoors. The British government has been assiduously managing voter expectations with tales of woe. Dreary speeches from the prime minister and the chancellor about the need for austerity and leaks about how tough will be the spending cuts, in such a dire state are the public finances.
From the blinkered perspective of Westminster's political class it has worked because there were no riots in the streets on Wednesday when George Osborne announced his £81-billion ($130-billion) of cuts including £7-billion from the welfare budget. The long-term disabled will be forced back into work, public housing subsidies will be cut and the middle classes will lose child benefit. Almost half a million public employees will lose their jobs. If the French government had attempted such a pruning of the state, the Elysee palace would be under seige by a mob of angry public sector Jacobins.
The response is muted and the markets were unmoved but we learned on Thursday that there is danger in silence. The British are sulking at home and the economy is suffering. According to government figures, retail sales fell in September, the second month of unexpected decline. Economists had factored in an Autumn back-to-work lift but fuel sales were down month-on month and clothing too.
Readers of this blog will recall that retailers were jacking up sticker prices on clothing, trying to keep hold of their margins in response to rising costs passed on by their Asian suppliers. What has happened? The consumer is not buying. Everyone is worried about their jobs and those living off state handouts are bracing themselves for a leaner lifestyle.
If the bond markets needed any further proof that another round of money printing was on the way, then it was in the retail sales figures. The Bank of England will pump more liquidity into the system with quantitative easing, buying gilts and other bonds with manufactured funds. But it's the longer term impact of these cuts that is worrying.
Who is worst off? Those on long-term welfare benefits are getting a kicking, people living in affluent neighbourhoods with the help of housing rental subsidies and those in unessential government jobs. But the real long-term losers are the young professional or would-be professional class.
The elderly are largely protected as are the sick as the National Health Service is preserved. It is the so-called iPod generation, a term coined by Reform, a British think tank, to denote the insecure, pressured, over-taxed and debt-ridden class of people under 35. These spending cuts will hit them hard. If they are students or wish to study, they face a future of worse indebtedness as higher education faces cuts of almost £3-billion. The universities have been told they must fill the gap with big fee increases. They will struggle to find a job, to afford a home as housing prices are stubbornly high and to afford children, as the state will no longer provide help. Many will think about leaving Britain.
A graduate brain drain to follow the trickle of wealthy hedge fund managers who are fleeing the new 50 per cent tax rate, but these more modest tax and debt exiles won't have the option of a chalet in Switzerland.