Greek tragedy

This week the Sunday Times’s economics editor, David Smith, recorded a fascinating piece for BBC Radio 4’s Broadcasting House. It is called “If Britain were Greece …”, and imagines the UK under the same financial, economic and social strains currently affecting Greece. The resulting piece is an economic “It Happened Here”, and it paints a bleak and sobering picture.

In this nightmarish alternative Britain, unemployment has topped 7 million, leaving more than 20% of the British workforce out of work. This is more than double the numbers reached in the recession of the early 1980s, and would come close to equalling the percentage of the workforce unemployed in the grim depths of the Great Depression of the 1930s.

The social fabric of the nation would be wrenched as unemployment concentrates on the young. Fully half of the country’s 16 – 24 year olds are out of work, bringing to life the concerns of a lost generation.

The gradual increase in minimum wage rates that has been seen from their introduction in 1999 is stopped and drastically reversed with immediate effect. The current ‘full rate’ of £6.08 per hour is slashed to £4.98 per hour, whilst the youth rate is reduced to £3.39 per hour.

Old age provides no safe haven from the raging economic storm. The state retirement age will be raised with immediate effect to 70 or even beyond. State pensions are reduced by at least 20%, and those pensioners who took early benefits see their benefits reduced by up to 40%. The elderly are now intensely vulnerable, at greatest risk of as cuts to social care and health budgets bite and many assistance programmes are withdrawn.

Correcting the budget deficit now requires extremely bitter medicine in the form of tax rises and new levies. The rate of VAT is increased to 24% and everyone is required to pay a solidarity levy of 5% on all their income. Additional property taxes and punitive taxes on luxury goods are introduced to try and balance the books. As the economy plunges deeper in recession, the burden on the government’s finances worsens requiring ever more drastic measures.

The result is swinging spending cuts – an immediate 20% cut to the defence budget, cuts of up to 18% on the NHS and cuts across the rest of government spending. Over a million extra public sector workers are made redundant, and those that remain in jobs see their pay not only frozen but cut with immediate and savage effect.

It is likely that the streets will erupt with violent protests on a scale not seen in the UK for generations. How will the country cope with this economic and social dislocation?

Fortunately, it is not happening in the UK. The UK is not Greece. I just hope that we don’t find out what happens if the UK ever faces a similar economic collapse.