Fund Your Utopia Without Me.™

20 May 2012

In The UK, "Austerity" Means Spending More Than The Socialists In Labour Did...And, Those Bastards Bankrupted The Country



Music to read by:




Talkin' to herself, there's no one else who needs to know... 
She tells herself, oh...
Memories back when she was bold and strong 
And waiting for the world to come along...

 

 

 

 

Cuts? WHAT cuts? Ignore the BBC and the Left, public spending is HIGHER than under Labour.

 

By Stephen Glover

Another week and another slew of hair-raising stories about the devastating effects of draconian cuts. The Government is reported to be considering a further round of reductions in welfare payments. The elderly and disabled are said to face savage cutbacks in their support.

Everywhere the story is the same. The extreme severity of the Coalition’s supposed cuts is accepted as universally and uncritically as are the laws of gravity. Most of the media and almost all politicians regard them as a fact of life.

The Labour leader Ed Miliband claims that ‘cutting too fast and too far’ is responsible for the ‘double-dip’ recession while a permanently angry Ed Balls, the Shadow Chancellor, talks of ‘a recession made in Downing Street’.


Hair-raising: the rhetoric of the Left suggests the Government has made savage cuts to public spending
Hair-raising: the rhetoric of the Left suggests the Government has made savage cuts to public spending


Day after day the BBC produces supposed examples of the damaging effects of cuts — never described as ‘savings’ — and in the Left-wing press, columnists such as The Guardian’s Polly Toynbee regularly blow gaskets and fulminate as they denigrate the Tory-led Coalition for destroying Britain’s public services.

And it’s not just Labour politicians, the BBC and the Left-wing press that tell us the Government is bleeding the country to death. The Coalition itself insists that public expenditure is falling. Ministers inform us that we must accept this painful medicine because of the crippling debts left by Labour. We have no choice but to endure the inescapable horrors of deficit reduction.

Academics tell the same story. Paul Krugman, a winner of the Nobel Prize in Economics, recently agonised about the allegedly dire effects of the British Government’s decision to ‘slash expenditure’. David Blanchflower, a former member of the Bank of England’s Monetary Policy Committee, pops up all over  the place with his apocalyptic warnings. 






If we were to ask a hundred people in any High Street, 99 or them would say there have been significant cuts. How could it be otherwise when the whole world is telling them so? Some might say the cuts are painful, but necessary. Others would opine they are painful and destructive. Either way, there is virtual unanimity that the Government is slashing public expenditure.

The trouble is that it isn’t. Earlier this week, the City bond trading firm Tullett Prebon produced a report that confirmed what some of us have been saying for months. To all intents and purposes, there hasn’t been any overall cut in public expenditure in the two years since the Coalition came to power.

Spending rose 0.3 per cent in the first year and fell by 1.5 per cent in the second. That makes a tiny overall decrease of just more than 1 per cent over two years. To put it another way, the supposedly ‘savage cuts’ delivered by the Government amount to only fractionally more than £1 in every £100. Most household budgets  have suffered far more  dramatic cutbacks.





Meanwhile, our national debt — what we owe as a nation — continues to soar. According to International Monetary Fund projections, it will increase faster over the next two years than any other leading European country apart from Spain. Proportionate to the size of our economy, our debt is one of the two or three highest in the developed world. When the Coalition took over, it stood at a stonking £1,002 billion. By the time of the next election, it will have risen to an unbelievable £1,613 billion.

Using figures produced by the Office for Budget Responsibility, the Tullett Prebon report shows that Government expenditure in 2011-12 was still £22.6 billion, or 3.4 per cent, higher than it was in 2008-09 after nearly a decade of bingeing by the Labour government. 

That’s how far we have got!

And while it is true that the deficit has been reduced — from £140 billion in the first year of the Coalition to £120 billion in the second — this has been achieved almost entirely as a result of higher taxes rather than cuts.

Many people may find these figures impossible to believe, but they are a matter of fact. Fourteen months ago, I wrote an essay in these pages referring to a brilliant pamphlet written by the economist Dr Tim Morgan for the Centre for Policy Studies. He had pointed out that after nearly a year the Coalition had not made any inroads into the vast mountain of public expenditure bequeathed by Labour.

But now almost exactly two years have passed since the Coalition assumed power and, incredibly, the picture has barely changed. The same Dr Morgan is the author of this week’s Tullett Prebon report. He describes ‘the tale of big cuts in public spending’ as ‘a bare-faced deception’.

The facts support his thesis. Office for Budget Responsibility figures show how much public expenditure is predicted to rise in cash terms — i.e. taking inflation into account — over the life of this Parliament. In 2010-11, it stood at £696 billion. It is projected to be £744 billion in 2015-16.





Dr Morgan calculates that in the remaining three years of the Parliament, public spending is projected to fall by only a further 2.4 per cent in real terms — i.e. discounting inflation. There are good reasons for doubting whether the Government will achieve even this very modest reduction.

How can this be? How can the whole world believe that there have been swingeing cuts when, at most, there will be a relatively gentle overall reduction that has only just begun? It is as though we are caught up, like some misguided cult, in a collective fantasy.

The reality is that, though there have so far been only trivial overall cuts, there have been significant savings in some departments. To put it another way, while there are some areas in which government spending is rising, there are others in which it is falling. In fact, the Coalition is borrowing almost as much over five years as Labour did over 13. Expenditure on the NHS — about 18 per cent of total government spending — will increase slightly in real terms, though you wouldn’t know it if you believed what Labour says. The smaller international aid budget is projected to climb by a third in real terms over the life of this Parliament.





Meanwhile, there are rising interest charges on the ever-growing national debt. Despite planned reforms, pension costs are expected to go up by 12 per cent in real terms in the five years to 2015, while the costs of unemployment benefit  seem likely to increase by more than the Government’s optimistic projections.

The Coalition is also anxious to protect other significant areas of expenditure, for example education, which will suffer only a relatively small cut over the life of this Parliament, increasing in cash terms from £89 billion to a projected £93 billion in 2015.

The upshot of all this is that the effects of a relatively trivial overall cut are being felt in a comparatively small number of departments such as Welfare and the Home Office, where the police budget is being sharply reduced. In other words, so many areas of government spending are protected or sacrosanct that the cuts fall on a limited segment of public expenditure.





Our Armed Forces have visibly suffered, with some men and women serving Queen and country in Afghanistan being given their P45s in the most shaming way almost as soon as they set foot on British soil. Squadrons of aircraft have been scrapped, and for several years, Britain won’t have a single aircraft carrier.

All of us will have noticed some effects of ‘cutbacks’ or ‘savings’. Tens of thousands of jobs in the public sector have already gone, though often through natural wastage. Local libraries have been needlessly and stupidly closed. Councils are even more reluctant than usual to repair the potholes in our roads.

But evidence of particular cuts, and of individual hardship, do not amount to proof that overall expenditure has been savagely reduced. It hasn’t been.
 
The reason so many people readily believe the ‘cuts lie’ is almost certainly because there has been an unprecedentedly tight squeeze on living standards as a result of higher taxes and falling or stagnating incomes, and rising inflation. Labour politicians have planted the idea that this unhappy state of affairs has been caused by slashing spending. On BBC1’s Question Time on Thursday, the former Labour Cabinet Minister Peter Hain complained of ‘relentless cuts’.

The Coalition talks up the supposed cuts for different reasons. It needs tens of billions of pounds to cover its enormous levels of borrowing. Dr Morgan plausibly suggests in his report that ‘the Government seems to believe it can con the bond markets using the smoke and mirrors of largely illusory austerity’.

The all-powerful BBC has contributed mightily to the general perception that there have been savage cuts. When did any of us hear a BBC presenter or economist say there have hardly been any overall cuts in public spending, or that the minor ones already planned will be mild in comparison to the much sharper austerity programmes being visited on Italy, Ireland, Spain and Greece?

By contrast, we hear almost daily about the allegedly awful effect of particular cuts, and are never told the whole truth, which is that very few inroads have yet been made into  the enormous maw of  public spending.

All of which begs the question: what would happen if the Coalition were forced to introduce substantial reductions in public spending? That, I believe, would be a truly disturbing scenario. For consider this. The lion’s share of the deficit reduction over the next few years is predicated not on cuts, but on higher tax receipts. These assume high levels of economic growth that many economists think are impossible.

Despite having often got their forecasts badly wrong before, George Osborne and the Office for Budget Responsibility are suggesting the economy will grow by a scarcely believable 0.8 per cent this year, 2 per cent next, 2.7 per cent in 2014 and 3 per cent in 2015.


Expectation: George Osborne postponed the cuts anticipating growth
Expectation: George Osborne postponed the cuts anticipating growth


These staggering figures are much more bullish than the OBR’s forecast for eurozone countries, and it is not at all clear why it and the Chancellor think we will do so much better. Lesser growth, or no growth at all, and unemployment (together with welfare benefits) will rise and tax receipts fall — and the deficit won’t come down. And our burgeoning national debt will increase still faster.

In that event, with an election looming, George Osborne will rue the fact that, in what may turn out to be a fatal miscalculation, he did not introduce significant cuts to public spending back in 2010, combined with tax cuts designed to stimulate the economy. This is the appalling irony of the Government’s position, with electors believing the country is suffering swingeing cuts. It is being bitterly criticised for doing something it has not done, and is enduring an enormous amount of pain for no obvious gain.

If growth does not happen, the Chancellor will have no choice but to introduce the kind of severe expenditure cuts he is wrongly accused of having already applied.

The eurozone crisis is threatening to drag us down. Despite David Cameron’s lecture on Thursday, we can’t do anything about the self-inflicted economic problems of Europe. This weekend’s discussions among G8 leaders in America are almost certainly irrelevant to our fortunes.

Mr Cameron had better concentrate on what the Government can do. It is still not too late for it to find new targeted public expenditure cuts — Britain’s bloated quangos and huge international aid bill are prime candidates — while giving our lacklustre economy a kick-start by cutting business taxes now.

He and George Osborne must grab complacent senior civil servants by the scruff of their necks and rid them of all the disastrous assumptions of the Gordon Brown years that still hold sway at the Treasury.

Doing nothing will almost certainly mean no growth — and then we will end up with public expenditure cuts dwarfing anything we have yet experienced. Imagine the uproar if the Government is forced to slash spending in the way it is being cut in Greece and Spain. The BBC, Labour Party, the Left-wing press and distinguished economists would go into orbit. The Coalition could not survive. The social disruption would be worse than it was in the Thirties.

We are a country that has worked itself into a highly nervous state over phantom cuts that have barely happened. Fasten your seat-belts and start praying if the axe really begins to fall.


How can "draconian spending cuts" that have yet to take place be responsible for Britain's double dip recession, but the tax rises -- like those advocated by Barack Obama and François Hollande -- that have been in effect not be responsible at all?




Related Reading:

  


Better Man - Pearl Jam

Waitin', watchin' the clock, it's four o'clock, it's got to stop
Tell him, take no more, she practices her speech
As he opens the door, she rolls over...
Pretends to sleep as he looks her over

She lies and says she's in love with him, can't find a better man...
She dreams in color, she dreams in red, can't find a better man...
Can't find a better man
Can't find a better man
Can't find a better man
Ohh...

Talkin' to herself, there's no one else who needs to know...
She tells herself, oh...
Memories back when she was bold and strong
And waiting for the world to come along...
Swears she knew it, now she swears he's gone

She lies and says she's in love with him, can't find a better man...
She dreams in color, she dreams in red, can't find a better man...
She lies and says she still loves him, can't find a better man...
She dreams in color, she dreams in red, can't find a better man...
Can't find a better man
Can't find a better man
Can't find a better man

She loved him, yeah... she don't want to leave this way
She feeds him, yeah... that's why she'll be back again

Can't find a better man
Can't find a better man
Can't find a better man
Can't find a better... man...

No comments: