Wednesday 14 March 2018

Austerity! Austerity! Austerity!

We have finally reached and inflection point in our economy. After the horrific crash of 2007-8, it has taken exactly 10 years to get our national finance back into some kind of order. Predictions for the future are not worth much, but we can at least believe the Tory Government when it says it will stick to controlling spending until the election; look at the track record above.

Whilst there could be a big quibble about how fast we could have cut spending in 2009-10, it will remain academic forever. Unlike Labour's current incarnation of blaming the Government for all the ills of the world and hysterically shouting "Austerity! Murderers!" at anyone sober enough to see reality.

The sad irony to all this is that, as it often the case in the UK, now that Government has control over its finances, the keys will be handed over in a couple of years to reckless Labour to start all the cycle all over again.

Also though Government is struggling with what to do now. It's whole mantra has been controlling costs, how can it slowly turn the taps on and if so where. Certainly many of the bloated public services we had in 2008/9 are now reduced to a level which delivers poor returns. The Government will be hounded to spend money on the NHS above all - but politically this is a mistake, Tory Governments never get any credit for health spending. Better would be to localise some of the gains and re-invigorate local government which felt the worst of the cuts of the past decade, people seeing improvements in their local areas across the country would surely be best. Or, if they were braver than they are, cutting some headline taxes like VAT. It is about time people were reminded of what it is like to keep more of your money to counter the socialist noise currently being made about handing over more and more to the'benevolent' state.

What would you do with a limited budget  for change in the next 4 years?


Charlie said...

Removing VAT on household fuel bills would be an obvious one, and for reasons other than simply letting people keep more of their own money:

- Everyone in the country, no matter what their income, benefits.
- Gives heartless Tory government a good riposte to the standard leftie whinging about energy bills.
- Can only be done when we leave the EU, reminding everyone that yes, the EU do have too much control over our domestic policy.

Would it be too much to ask for a cut in the basic rate of income tax, or in increase in the higher rate threshold?

Roderick said...

End QE and introduce subtle measures to get the housing market back into some sort of order, such as limiting borrowing for a house to 4x joint incomes and gradually raising interest rates to discourage excessive amounts of borrowing and reward savers. House prices would soon start to fall to more affordable levels, and think of the potential for IHT savings on estates ;-)

DryLion said...

Move social care budget into the NHS budget so that there is more of an incentive for preventative medical care.

Anonymous said...

The word "austerity" is always associated in my mind with Sir Stafford Cripps.

His was real austerity.

Don Cox

dearieme said...

Move the 'defence" budget into the foreign aid budget, since apparently that's what our servicemen are for anyway.

andrew said...

Don't spend it
Run a small surplus
Pay the debt down a bit
(To the Keynesians,well,if this is not the time then when?)
Come the next recession we will need some deficit spending.

CityUnslicker said...

Roderick - Welcome. I will say though, have you tried to get a mortgage recently, no way will you get 4x now! The banks are very strict now due to guidelines. So this part of your suggestion is well under way which is why house price growth has dropped so much -especially in London where 3.5x wont by the average couple anything at all.

Dick the Prick said...

Ken Clarke, as Father of the House, got to go after Corbyn on Hammond's statement and his advice was to consider reimposing NI to those workers over pensionable age (is it 65 now for both genders?) in order to give rise to generational fairness. As has long been expressed in this Parish, there's absolutely no desire or, in fairness, incentive for government to reduce spending. It'll just shift fiscal policy around whilst continuing to splurge on vanity and virtue signalling projects. Perhaps the most depressing forecasts were that growth will likely remain -ve in real terms for the foreseeable.

Charlie said...

DTP - quite. I like the idea of doing away with PAYE entirely. Send everyone a single tax bill at the end of the year. Then let's see how many people are in favour of increased government spending.

An anecdote - gushing praise of the NHS is universal in my NCT group, despite the fact that The common theme was "isn't it brilliant, and it's free!". I pointed out that it's not free - spending on health costs them about 10% of their income, give or take. "Oh yeah, I've never thought about it like that!" said one girl. This is the Tories' problem. Even educated people seem to be under the impression that government spending is free. So why wouldn't they vote for the party that provides more free stuff?

Charlie said...

^An anecdote - gushing praise of the NHS is universal in my NCT group, despite the fact everyone seems to spend most of their time chasing up missing referrals and re-arranging post-natal appointments cancelled at an hour's notice.

DJK said...

DtP: A few people I know at work have carried on past normal retirement age. I was quite shocked to find the other day that they don't pay NI (don't know if employer's NI is paid on their salaries). But getting an extra 12% of gross salary to take home must be sweet.

I don't think asking rich, working pensioners to pay NI is so very unreasonable.

E-K said...

Training courses for REAL trades.

andrew said...

I think NI stops when you are over pension age because ni in theory goes towards paying for that pension.

Sort of outlines some of the contradictions of what ni is.

Anonymous said...

NI started as a government-run insurance scheme, but the Treasury managed to capture it and merge it into Income Tax. It would be interesting to find out how they did this.

At least none of the money is siphoned off as profit for big companies, as it is in the USA. Health insurance is a major burden on the cost of employment there.

Don Cox

Anonymous said...

"I don't think asking rich, working pensioners to pay NI is so very unreasonable."

How about poor working pensioners ?

Charlie said...

Anon, they'd have to earn another £681 a month on top of their pension to pay NI. Hardly poor.

Anonymous said...

I'd introduce an annual tax (at a level between 'irritant' and 'painful') on all residential property owned by either

1) non-EU nationals
2) non-EU corporations incl Jersey/Guernsey/IOM. Have to check the beneficial ownership, no dice if that's not in the EU.

This could be done via additional rates or by HMRC. Too many wealthy Chinese buying flats in Manchester, too many oligarchs buying mansions averywhere

I'd also abolish dual citizenship as far as the UK goes. No man can serve two masters.

If this means some high-end establishments in London go phut, I'm prepared to suffer;-)

Talking of oligarchs, this. The journalist who wrote it was murdered, which to me implies it's probably true. Makes your blood boil even if you're not Russian.

What's so awful is that one of the two villains of the piece has just died in New Malden, and a Luke Harding in the Guardian is painting him as a noble dissident rather than rather than the worthless, thieving scrote he seems to have been.

Anonymous said...

I think NI stops when you are over pension age because ni in theory goes towards paying for that pension.

Sort of outlines some of the contradictions of what ni is.

NI stops when you get a pension. You don't need to be over the pension age to get a pension.

Ken Clarke is pointing out a discrepancy of a working people being discriminated because of age. Tax and NI is such a mish-mash you sometimes wonder if flat tax may be of more use.

Anonymous said...

Just an aside: what "austerity"? I hadn't noticed this being practiced by any UK government in recent decades. Our political classes seem wedded to the sort of spendthrift mania that would have invited contempt and severe disapproval from my granny. Politicians spend money like water, as do the benefits-reliant classes one sees thronging major shopping centres. But perhaps there's been a teensy bit of austerity - aka financial prudence - I hadn't noticed? I'd love to hear about it.

Electro-Kevin said...

10 years. Where did the time go ?

The last thing I thought then was that I'd be borrowing and investing more money in property.

I'm so glad I didn't listen to my instincts but to the mad advice of my mate who said "Now's the time, Kevin."

So it could go tits up still. But I've had a great ten years and that can't be taken away from me.

Anonymous said...

re anon 10.15 - the journalist was assassinated after he wrote a book extremely critical of Berezovsky - "Godfather of the Kremlin: The Decline of Russia in the Age of Gangster Capitalism".