Friday 18 September 2009

UK Spending cuts: The fun fest begins

I am beginning to gain some little respect for Alistair 'The badger' Darling, having grown a pair and both stuck as Chancellor and then forced Gordon Brown to partially roll back the Scorched Earth policy, he is now in the news again.

Today he is asking cabinet ministers for help in identifying spending cuts. Well, this should be fun. i seem to remember a labour cabinet minister picketing the NHS a few years ago when cuts were forced on her department. I don't think the current jelly-like formations that are excuses for Ministers are going to give very much.

Not only that, but it is hard decisions that have to be made. Aligning public sector pension provision with that of the private sector would make a huge dent in the structural deficit. As would giving up much defence spending and our habit of constantly staying at war under Labour Governments. A swift trip into privatising the BBC would raise a few billion too and lower taxes.

All these things are near impossible for a Government, which is why Vince Cable says them all the time; nice sticks to beat Ministers with who don't have the ability or authority to enact any serious change.

We have many years of this discussion to come, I guess in no time it will turn from fun fest to bore fest.


Nick Drew said...

It is quite striking how a handfull of NuLab Cabinet barons can do pretty much whatever they like these days - Badger, Harman, the Milliband Boyz, Johnson, Balls ... not to mention Mandlebum

Brown must know what it felt like to be Bad King John

roym said...

trident would be a good place to start.

Budgie said...

There are so many savings that can be made it is difficult to know where to start. But here are just eight:

1. Simplify the tax system (eg combine i/t with NI).

2. Cut the various databases - ID; NHS; etc.

3. Get out of the EU (£50 bn cost on its own).

4. Sell the BBC, to be operated on the subscription model. Hence no TV licence.

5. Have a hard look at defence projects - less grandstanding and more realism needed (eg new Harrier/Carrier, rather than big Carrier/JSF) And of course, no EU projects.

6. Scrap all discrimination departments.

7. Scrap all quangos - any work that really needed can be done at local government level.

8. Scrap VAT, use local sales tax.

Mark Wadsworth said...

Budgie's list is a good list, esp. points 3, 6 and 7, which makes up about at least a quarter of government spending, those are the big ones.

Point 8 is way off piste though. We should scrap VAT, full stop. Sales taxes are the sneakiest and stealthiest and yet most economically damaging taxes (unless specifically earmarked to cover external costs of what's being sold, i.e. fuel duties -> road maintenance).

As to Darling, he's brighter than he looks, don't forget he called the tops of the house price and credit bubbles shortly after becoming Ch of Exch, in September 2007.

not an economist said...

To my mind this sudden shift has less to do with a face off between Darling and Brown and more with crude electoral politics: a series of opinion polls seeming to show support for the Tories' and their spending cutting agenda prompting Labour strategists (esp. Mandy) to adopt a similar line so as to win votes back.

To my mind Labour will abandon spending cuts once it is electorally convenient to do so. I accept that there is no guarantee that the Tories would not do the same but I just trust Cameraon et al more to follow thru.

CityUnslicker said...

Budgie - Yup, most quangos can go. I am fairly certain the Tories are going to do this, I posted on Cameron's speech a couple of months ago.

MW - tax cuts are going to be so off the agenda for political reasons, which is a crying shame!

NAE - It would be interesting if Brown and Darling are faking it to enable a policy change. This would be clever; however we were often told Blair and brown were faking their hostility - how true was that spin line?!

Budgie said...

I remain convinced that Labour is talking cuts because someone has had a word in their ear, possibly the IMF. Mandleson and Darling know that the UK would lose the triple A rating if they did not talk cuts. This would be a disaster, preventing us from borrowing what is necessary to pay for Brown's incompetence. So Brown has become an irrelevance, bypassed by reality.

CityUnslicker said...

Could well be right Budgie - although likely they have realised that QE is an fraud and if they don't cut the budget and stop it then the downgrades and currency collapse will be swift and occur BEFORE an election - then they really would face meltdown.

roym said...

"QE is a fraud"?

i first heard the idea floated here! ;-)

CityUnslicker said...

ROYM - true, gulp. But I did not want the scale that we have, it is a short term solution to reverse credit destruction; alas the danger was always it would become a drug, the signs are we have a drug addiction. QE forever is very destabilising - have you noticed what is happenind to share and house prices; and also bank lending. I am less sure the medicine is working and perhaps a period of abstinence would be good.
When QE started matching Government borrowing exactly; rather than using it to compare with M2 or M4, a bridge was crossed.

James Higham said...

Do you think Cameron will come in with the axe?

Budgie said...

James Higham said: "Do you think Cameron will come in with the axe?"

Not me. Cameron is Heath mark two, he is no Thatcher.

Saturn V said...

CU is right. If you think you feel better, stop taking the medicine.
if the symptoms return just start taking it again. No need to become addicted.

Demetrius said...

Back in the Age of Callaghan and the following years, I had lots and lots of fun identifying cuts. There was a simple thesis. The more chaotic and lunatic it was at the central government end, the greater it would at local level by a factor of 12. We are about to find out if the thesis still holds.

CityUnslicker said...

There are plenty of cuts the Tories can make. Having said that, I don't want them to cause a double dip - we need plans to cut for 2010/11 with real cuts in 2011/12.

Until then Labour have made our bed and we are just going to have to lay in it. With some luck, perhaps they will have destroyed themselves forever this time.

Old BE said...

I agree that Darling has started to look at bit better. If he actually comes up with a credible plan in the PBR then Labour might stop its freefall.

I have a strong suspicion that we will have an election in good time *before* the next real budget though.

hovis said...

Budgie said "Cameron is Heath mark two, he is no Thatcher."

You took the words out of my mouth Budgie - I've been mumbling this to anyone who would liste for a good year now. We are tuly back to the 1970's unfortunately its circa 1973/4 at the moment rather than 1979 IMHO

Steven_L said...

What's the pesimism all about CU? Anything to do with those leaked figures showing only 9% cuts over 4 years rather than an immediate post election slash?

Looks to me like that Japan experience you dread is headed closer and closer, 200% debt/GDP here we come?

I'm still not convinced that Trident/Aircraft carriers/Typoon/F35 have to go. I When I see people living the life of riley on benefits costing the taxpayer as much per years and replacing all the above probably would I know which one I'd rather 'invest' in.

What percentage cuts in the real term benefits bill would it take to modernise our defence capability with the above projects over say 25 years? A couple of per cent?

David Vance said...

Good suggestions Budgie.

How about we also scrap the devolved monstrosities?

How about we scrap welfare?

CityUnslicker said...

Wlefare - Really, any attempt to cut this will mean the Government that does it loses - there are too many votes and also potential for riot. It is a terrible situation we have got ourselves into. Only IDS has the right ideas and his will cost MORE in the short-term.

SL- Japan here we come, yikes.