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The spending challenge

This blogger makes the sort of point that ought to be on the lips of any member of the UK government right now. On the BBC Breakfast TV show this morning, one of the presenters tried to make out that the UK government’s planned £6 billion cut in the current financial year would be painful (cut to photos of concerned civil servants, etc). But in the context of the gigantic sums the UK government spends every year, £6 billion is chickenfeed. It is practically a rounding error. Even the tiniest adjustment in spending and revenues renders such a number utterly nugatory.

So what gets me is why this fact is not made clear by the government. And in addition, when asked: “So Minister, are you planning to make public sector staff redundant?” the answer must be, “Yes, there will be cutbacks. The state has taken on hundreds of thousands of folk, not in front-line services, but in the long tail of administration. Some of that has to go, hopefully by voluntary redundancies and the like but there will also have to be compulsory cuts. It will unpleasant, but the idea is to shrink the state, non-wealth creating bit of the economy and expand the wealth creating bit. There has to be a significant adjustment. Thank you very much and enjoy the Chelsea Flower Show”.

That’s what I’d say, anyway. Guess that’s why I am not an MP.

23 comments to The spending challenge

  • We need to cut 25x £6bln before things can (only) get better.

    If anyone in Government is using the term “painful” to describe £6bln then it leads me to believe they will not have the stomach to perform the necessary cuts to turn the economy around.

    I see no sign the government are attempting to educate the population that the Social Democratic Welfarist experiment as we know it was, is and will be unaffordable.

  • Six billion is trivial. Absurd in fact. Until the government is talking in terms of cutting 2 million public sector jobs, they are just rearranging the deckchairs on the Titanic.

  • Brian, follower of Deornoth

    Quite, Perry. And that means actually sacking the employees. Not transferring them to other jobs, not allowing them to take early retirement, not allowing them to work part-time, not paying them off with large sums to accept voluntary redundancy, but actually sacking them.

  • Aetius

    No answers, I’m afraid, only questions:-

    Why is the government not explaining to the public: the real scale of our national debt, the significance of the deficit of around 11% of GDP and what steps are necessary to retrieve the situation?

    Does this mean that they have no intention of remedying the situation?

    If, as appears highly probable, they are not intending to make the necessary scale of cuts then what is their political / economic game plan?

  • MarkyMark

    One of the stranger beliefs that I see repeated again and again by the political and economic pundits is that what is important is that the Government has a “credible plan” to bring the deficit under control.

    - i.e. it is not actual cuts and tax increases in the present which are important but that the markets have confidence that the Government will tackle the deficit in the future.

    I think that this could be the trick that Cameron is trying to pull off. He hopes that by continuing to deficit spend the Govt can continue to stimulate the economy is a Keynesian fashion, King can continue to print money and hopefully stoke inflation reducing the real value of everyone’s debts all whilst somehow convincing the markets that the coalition is deadly serious about taking the knife to spending in the future.

    The markets won’t be fooled and Cameron won’t get away with it. He either slashes spending now at the risk of a double dip recession or Mr Market makes UK PLC pay via increased interest rates and/or inflation/pound crash.

  • MarkE

    At the risk of further exposing my ignorance, is this announcement about proper cuts (ie, Osborne will spend less in 2010/11 than Darling spent in 2009/10) or are they traditional government “cuts” (Osborne will increase spending in 2010/11 slightly less than Darling said he would, either in the budget or in the PBR)?

    If it is the former, I shall raise my glass to Osborne and raise him up a notch in my estimation, but I strongly suspect it is the latter, which is simply inadequate for a country in the hole the UK is in.

  • How many total public-sector jobs are there in the UK (including/not including NGOs)?

  • murph

    What is the total public expenditure in the UK? £700b? Promising to cut expenditure by cutting £6b is like going on a diet by ordering a Diet Coke with the Double Whopper with Cheese, large fries, onion rings and a chocolate sundae.

  • BFFB

    It’s the latter.

    So you can feel free to facepalm Mark…

  • MarkE

    BFFB

    I think I’ll reserve my palm for Osborne’s face. Actually, I think my shoe’s toecap may be more suitable.

    I will however happily wager a bottle of vintage Krug against a pint of warm piss that we’ll be hearing very soon from the parasitic sector unions about how much their members and the public are going to suffer as a result of these typically Tory draconian cuts and how they must inevitably bring about the end of civilisation.

  • murph – Yes, but you omit the critical and painful calorie reduction strategy of picking all the sesame seeds off the bun!

  • Paul Marks

    MarkE:

    Welfare state spending will indeed be HIGHER next year than this. Also government spending will also be HIGHER next year than this as (if remember correctly – which I may not) much of the bank bailout cost came last year, not this year (with financial years versus calender years the issue can get confused).

    Aetius:

    For the same reason the person after whom I think you have named yourself never went to the Emperor Valentian III and said “you are totally unfitted for the office you hold”.

    After all Valentian murdered Aetius (“with your left hand you have cut off your right” – for Valentian was left handed and he killed Aetius by stabbing him during a meeting) because the FEELING growing in his mind that Aetius thought him useless (a feeling fed by flatterers who convinced the Empreror that his chief minister despised him and was plotting against him).

    If Aetius had actually gone about saying this he would have died long before he did (unless he had raised a successful revolt and made himself Emperor of course).

    Cameron and co think the people would rise up an tear them to bits if they made the case for REAL cuts – for (in reply to Alisa) MOST people in Britain either work for the state or depend on government benefits.

    For example, the private pension system was undermined by the taxes on pension funds (and the various regulations) that Chancellor Brown introduced in 1997.

    I think Cameron and co are mistaken – that state employees and benefit dependence are actually rational human beings who know (in their hearts) that this All Fools Festival CAN NOT GO ON and actually would respond well to someone who told them the truth.

    But I may be wrong.

    Markymark is correct in saying that Cameron and Clegg are basically Keynesians (one does not get a First in PPE from Oxford without being an establishment t man) who think (as much as Brown did) that real cuts would undermine the economy anyway (“stimulus was needed” has been the repeated defence of the Economist magazine, the house mag of the establishment, for the mountain of corruption that was the Obama near trillion Dollar “stimulus” effort).

    So instead of real cuts we get this rounding error stuff.

    “all sound and fury – signifying nothing”.

    Indeed that may be too POSITIVE an interpretation.

    Remember we are going to get an economic crash (a “double dip recession” as people are calling it) and it may turn out that the academics (such as the “Nobels” Krugman and Stiglitz) and the “mainstream” media blame it all on the “Cameron cuts”.

    The fact that this “cuts” story is mythical (i.e. that government spending is going up) well not stop academia and the media.

    After all government spending went UP (vastly UP) in 1979 – yet the media and education system pumped out “the cuts are destroying the economy” message every day (to the back drop of the terrible economic decline of 1979 – 1982).

    I lived through all this – I heard the media lie every day (every BBC news or current affairs broadcast – and many entertainment shows also) I experienced the lies at school and at university.

    Do people think I hate the education system and msm for entirely reasons of libertarian theory?

    No – I hate them because of the experiences of my whole life.

    And they have not changed – and will lie (and lie shamelessly) again.

  • Paul Marks

    The left really will do this – they will blame Britain’s economic troubles on the (mythical) “cuts”.

    Hard to see what the left will do to explain away American economic decline (after all yet another 200 BILLION in government spending has just been announced on top of the TRILLIONS of Dollars of extra government spending under first Bush and then Obama).

    But, to judge by the level of American left propaganda broadcasts such as “Capitalism a love story” (so beloved by the British media – and not just the electronic media, the newspapers also contain people edcuated to feel sympathy with such broadcasts) they need neither objective evidence or rational arugment.

    “Look at nasty things – they are the fault of capitalism” is the level of both academia and the media.

  • Richard Thomas

    Why is the government not explaining to the public: the real scale of our national debt, the significance of the deficit of around 11% of GDP and what steps are necessary to retrieve the situation?

    Good point, Aetus. If there’s any chance to get this point home, it’s in the early days of a new administration when you can sincerely claim “It’s not our mess, we’re just dealing with it”. By not starting things now, they’re just storing up problems for themselves later.

  • Jerry

    Basically, the problem seems to be ‘habitual gov’t postponing’.
    Every regime either blames the problems on the previous ‘administration’ or finds another new and imaginative ‘trick’ to postpone the ‘day of reckoning’ so that when ‘the bill comes due’ they are long gone, retired comfortably and ‘safe’ from criticism !!!
    Greece has run out of new and imaginative tricks and the bill is due !!
    Everyone else is still standing in line waiting their turn because no one has the balls to step out of line and tell the ‘masses’ – ‘Look, unfortunately this has been a long time coming and this is what MUST be done of we are to avoid TOTAL economic collapse…………………..
    On my side of the pond, this really started with FDR
    ( bless that incompetent twit – read his bio !! ) who essentially sold the idea that ‘if we have enough gov’t then gov’t can solve ALL problems and you won’t have to worry about anything ( including retirement – remember Social Security ?? ).
    Very few at that time or now, for that matter, brought up the point that – well, maybe, BUT, because gov’t is so inefficient ( because there is no motivation for efficiency – ie -profit )
    WE CAN”T AFFORD THAT MUCH GOV’T
    And that basically is the problem.
    Masses far too used to ‘FREEEEE stuff from the magic horn of plenty gov’t’ that they can’t be weaned without possible revolt and so called leaders to afraid to try and stop the gravy train and hoping to hang on just long enough to get their ‘piece of the pie’ and escape into oblivion.
    Eventual correction is going to be unpleasant to say the least and is one of the reasons ( I NEVER thought I would say this !! ) that I really am grateful to be the age that I am and may not live to see the carnage.

  • Sam Duncan

    Welfare state spending will indeed be HIGHER next year than this.

    Of course, Paul. But will the government ever actually say that? As Johnathan said, it seems (as did the last Tory one) scared to state its own case and defend itself. So unlike Labour, who would defend the indefensible to the death. This lot just roll over under questioning and offer muttered apologies for something they aren’t doing.

    I think … that state employees and benefit dependence are actually rational human beings who know (in their hearts) that this All Fools Festival CAN NOT GO ON …

    But I may be wrong.

    It’s not often one can say this, but I think you are. Soak the rich; print some money; carry on regardless. That’s the thinking. It’s become too entrenched in people’s way of life; for far too many of them it’s Just the Way Things Are (touching on Perry’s concept of “metacontext”). They’re simply unaware of the sheer scale of the problem (and it’s someone else’s anyway), let alone that the system itself is inherently broken.

    The left really will do this – they will blame Britain’s economic troubles on the (mythical) “cuts”.

    They’d already started before they left office, during the election campaign. And why not? It worked for them before. Ask random people on the street by how much public spending was cut in the 1980s, and I’m willing to bet you won’t get more than one in ten (if even that) who’ll tell you, correctly, that it wasn’t.

  • Tedd

    I think that this could be the trick that Cameron is trying to pull off. He hopes that by continuing to deficit spend the Govt can continue to stimulate the economy is a Keynesian fashion, King can continue to print money and hopefully stoke inflation reducing the real value of everyone’s debts all whilst somehow convincing the markets that the coalition is deadly serious about taking the knife to spending in the future.

    There was a similar situation in Canada in the 90s. The Progressive Conservative government of the late 80s and early 90s expanded spending, had huge deficits, and ran up the debt. Then the PCs ran an election campaign based on the importance of getting the debt and deficit under control (perhaps not realizing how much credibility they’d lost in that arena). The Liberals, meanwhile, campaigned on the standard leftish platform (of the time) that deficits and debt were okay, nothing to worry about. The Liberals won, but then something very interesting happened. They reduced spending (or, at least, stemmed the rising tide) — albeit mostly by fobbing off costs onto the provinces. And they followed a low interest rate policy that caused the currency to lose value (dropping as low as 65 cents U.S., for a while) but, rather than use that as an opportunity to take on more debt, they took advantage of the opportunity to move from deficit to surplus, and make some headway on the debt. Although I disagree with the dishonesty of this approach, I have to admit that it worked better than anything else I’ve seen done.

    This got me to thinking: What would happen if all governments pursued a policy of of devaluing their currency to make debt repayment easier? I suppose if they all devalued equally the devaluations would cancel each other out. Or is that essentially the same thing as inflation?

  • Kim du Toit

    “Why is the government not explaining to the public: the real scale of our national debt, the significance of the deficit of around 11% of GDP and what steps are necessary to retrieve the situation?” — Aetius

    Because if they did, there’s a good chance that The Glorious Day would come sooner, and they would all be hanged en masse?

    Excuse me: I have to go off to that warm and wonderful place for a couple of minutes…

  • llamas

    Aetius wrote:

    “Why is the government not explaining to the public: the real scale of our national debt, the significance of the deficit of around 11% of GDP and what steps are necessary to retrieve the situation?”

    Because they have a) no incentive whatever to do so and b) every incentive not to. Doesn’t matter of which party ‘the government’ is – none of the parties presently effective in the UK have any such incentives. Any of the steps which might tend to ‘remedy the situation’, in the present arena of UK politics, are stone-cold vote-losers that may well place the party that suggests them into the political wilderness for a generation or more. Only the tracks at Clapham Junction have more third-rails.

    “Does this mean that they have no intention of remedying the situation?”

    Yes, it does. By their actions, shall ye know them. None have demonstrated the slightest intention to do anything that might even remotely have the effect of ‘remedying the situation’. So until they do, the answer must be that they have no such intention.

    “If, as appears highly probable, they are not intending to make the necessary scale of cuts then what is their political / economic game plan?”

    To get (re)-elected. They have no other plan. To hang on to the largest lifeboat and hope that the Carpathia comes along.

    llater,

    llamas

  • James Waterton

    “that state employees and benefit dependence are actually rational human beings who know (in their hearts) that this All Fools Festival CAN NOT GO ON and actually would respond well to someone who told them the truth.”

    It would be nice to think so, but I too am skeptical. Is it reasonable to assume that these people in the UK are really so different to those rioting in Athens because they are steadfastly unwilling to let up on the public teat even slightly?

  • Paul Marks

    My guess is that the government will spend more money next year than it is this year.

    In money terms and in “real” (price rise adjusted) terms.

    This is all a farce. The “public services” doctrine in not being challenged – and till it is, real cuts are not possible.

  • david stovin

    I defend the right of anyone to have whatever size family they wish, but bigining the new financial year all new families will recieve child allounce for the first and second bourn, however if they wish to have more children, THEY must finance further siblings in total.
    The country cannot afford the current child allounce budjet,THe world cannot aford .

  • I defend the right of anyone to have whatever size family they wish, but bigining the new financial year all new families will recieve child allounce for the first and second bourn, however if they wish to have more children, THEY must finance further siblings in total.
    The country cannot afford the current child allounce budjet,THe world cannot aford .