Thumbs-up for brave British budget

The British coalition government has produced its first budget, which is considered the country's toughest since World War II. It has immediately raised concerns in the United States - and that's intriguing.

What has British Chancellor George Osborne put in his medicine box for Britain's sluggish economy? Needless to say, it's all bitter pills. The most unpopular must be the increase in value- added tax, from 17.5 percent to 20 percent, affecting almost all consumer items except essentials like food and children's clothing and books.

A sum of 11 billion (HK$127.36 billion) will also be slashed from welfare spending, the budget of every government department will be cut by 25 percent, and there will be a hike in the cap of capital gains tax on property and assets.

There is also a new levy targeting banks which HSBC chief executive Michael Geoghegan said is unfair to HSBC since it survived the global financial crisis without using a single penny from the government. Treating HSBC just like the banks which were bailed out just does not add up, he added.

Like the United States, Europe, including Britain, has been printing banknotes to fund its economic rescue - albeit in a smaller scale. But this has helped spin off a new crisis - national debt - that has already forced the credit downgrading of some "PIIGS" countries.

Greece is in the mire. But it is too small to be a major concern. Britain is a lot bigger, and its failure could become a curse for others.

I cannot bring myself to agree with the view on the other side of the Atlantic - that Osborne's austerity may not be a solution and could instead push Britain into a double-dip recession - while Washington is still pursuing a policy of relaxing monetary supply to keep the domestic economy running. Perhaps the cynics should learn from their Asian friends, who are not inexperienced in this matters.

How they coped during the Asian financial crisis in 1997 provides a valid reference. The crisis started in Thailand with the collapse of the baht. At that time Thailand had acquired a burden of foreign debt that made the country effectively bankrupt.

As the crisis spread, most of Southeast Asia and Japan saw their currencies slump, their stocks lose value and their asset prices dip. Indonesia, South Korea and Thailand were the hardest hit. Others, like Hong Kong, were also badly affected.

But how did Hong Kong and its Asian neighbors get through the difficult time? Helped by their traditional cultures, Asians overcame the crisis by tightening their belts, allowing the region to emerge as the new world economic powerhouse, with China at the center.

At the time, economists in the West said it was those countries to blame, and the International Monetary Fund required them to adopt austere fiscal policies in order to win its assistance. There is no place for double standards in dealing with crises - now and then. The European debt crisis stemmed from borrowings. In order to overcome the national credit crises now gripping some European countries, they should accept the austerity measures.

And this is not only for Britons but for other European countries as well. By now the world should know there's no miracle cure.

英文虎報 Central Station | By Mary Ma