Far more worrying was the warning by an independent think-tank yesterday that the worst is yet to come in the UK government’s austerity programme, now well into its fourth year.
The warning plays to the fear in much of society, particularly the public sector, that much bigger future spending cuts by the government mean a “recovery” risks having an ironic feel for millions of people: jobless and with falling living standards.
The Institute for Fiscal Studies (IFS) – in a douche of cold water for any feelgood factor around the recovery – says only 40 per cent of Chancellor George Osborne’s cuts will have been delivered by the end of this year.
That leaves 60 per cent of cuts still in the pipeline, if Osborne is to meet his target of returning Britain’s finances to surplus by 2018-19.
Starkly, the IFS says that, even with the already announced £12 billion of extra cuts in social security spending, the spending firewall allowed by the government to education, health and international development means that other departments face cuts of more than 30 per cent to their budgets under Osborne’s plans compared to where they were in 2010.
That scale of cost-cutting cannot be done just by eliminating waste, removing duplication, shifting civil servants out of the south-east of England and more efficient working practices.
It is difficult to see how the government will not be cutting bone as well as flesh. The IFS says the challenge faced in getting a financial surplus by 2018 is aggravated by the £6bn of spending pledges already made by the government for after 2015 (the year of the general election) and an ageing population in Britain that will make more demands on the NHS.
Perhaps the best hope is that the economic recovery over the next couple of years or so proves much stronger than anybody thought, rendering some of the worst further public spending cuts and fiscal consolidation unnecessary.
That may be a long shot but – austerity-wise – it is the best we have.
Wolfson short-circuited on smartphone mania
THE hefty operating losses at Wolfson Microelectronics, and the scaling back by City analysts of expected revenue growth at the Edinburgh-based group in 2014, shows how tough the smartphone market remains.
The consensus seems to be that we are not likely to see any appreciable rebound in Wolfson’s fortunes until the second half of this year at best.
Wolfson admits it was wrong- footed last year by the stampede of consumers into the new 4G smartphones, which benefited one of its main audio-chip competitors, Qualcomm.
A second blow to Wolfson was a slump in orders from its second biggest customer, the embattled BlackBerry group. And, given BlackBerry’s problems, including its perception among the younger generation as “yesterday’s phone”, that pressure on the Scottish business is unlikely to go away.
In the short term, Wolfson is most likely to be a restructuring and margin protection story rather than one of buccaneering expansion.