George Osborne : villain or hero ?

Recently, British Chancellor of Exchequers, George Osborne announced many measures to pull the British economy out of depression. Among others, these measures included :

Ø Starting 2013,  1 % cap on Public Sector pay for 2 years, once the current two-year pay freeze ends

Ø Plans to raise the state pension age from 66 to 67 would be brought forward by 8 years to 2026

Ø 1 billion pound scheme to subsidize work placements for the young unemployed

Despite these measures, unemployment is expected to rise from 8.2 % this year to 8.7 % next year

Job losses in public sector would nearly double to 710,000 , compared to earlier estimate of 400,000

Questions to be debated :

Ø If British Govt can impose a pay freeze for 4 years in Public sector, should British private sector follow suit ?

Ø To keep wage-costs under control, should employers be allowed to hire temporary / contractual staff on a fixed salary for , say , 2 years ?

Ø Will that encourage employers to hire more people ?

Ø Can inflation be better controlled thru a pay freeze ( less money in people’s pockets ), rather than thru hikes in interest rates ?

Ø Since salaries / wages are a major input-cost, can such freeze hold the production costs constant ?

Ø Will pay freeze lead to a “ low cost “ economy , making British products much more competitive internationally ?

Ø If this “experiment “ is successful, can it possibly lay the foundation of a National Wage Policy which pegs maximum annual wage-increase percentages  to 90 % of the rise in the Consumer Price Index of the preceding year, for both, the private and the public sector employees ? Can such mechanism , set in motion , a “ Virtuous Circle “ ?

Ø Can such a policy automatically control inflation without haphazard / half-cooked external interventions by Central Banks ?

Only history will decide whether George Osborne was a villain or a hero !

With regards

hemen  parekh