Wednesday 22 August 2018

Post Austerity - what are the priorities?

Borrowing graphic

So, great news, the UK public borrowing has finally reached the point where, though still in deficit, public borrowing is growing at less than the rate of inflation times GDP growth - i.e. the share of debt is finally falling. As an aside, it is so good to see that much of this benefit is from big jumps in corporate tax, paying far more as rates have been reduced in a real life laffer curve example.

So, building on Mr. Drew's post of yesterday, what should the Government increase spending on? The NHS, already eating a huge amount of government spending, has already been promised more money. There will be a contingency for Brexit too no doubt, given the Chancellor is a complete eyeore on the subject.

But, for the few pennies left over what is in most urgent need of more central funding. If Labour come to power, the splashing of loot all over the place will mean no priorities at all and the rather pleasing graph above will head back northwards once more. But, for the next 4 years, what should the focus be?

Home Office - crime fighting, law and immigration
Education - more schools and teachers or early learning (even to restore the EMA), student loan reductions
Trade and Industry - an industrial policy, or space
Infrastructure - renewal or roads and large water/power projects or social housing projects
Local Government - starved of revenues the most due to austerity
Defence - especially against cyber and counter-terrorism

So many choices and so little extra money, it needs to be spent wisely and with a view to helping those who may choose to vote Tory at some point. To me this means perhaps something on student loans and also law and order. Student loans have proved fatal for the Lib Dems and if the Tories ignore it perhaps they will catch a cold too. Law and Order is crucial to an advanced civilisation, failure to both control crime, administer justice and control the borders is on a par with failing to have an army to defend the realm. For me these would be the most propitious, but what do I know - far more interested in what you think in the comments


hovis said...

Not even touching on the value (or not) of degrees, Student Loans are toxic as the Student Loans Company has acted as no other commercial lender would be able to. Commercial Lenders are shits enough. The arbitrary rising of interest rates in contradiction of what was stated at the beginnng of loan is appalling. No wonder they have been politcal death.

K said...

I dunno if student loans is as big an issue as some say it is.

I never went to uni but most of my friends paid off their loans in the late 20s or 30s. It's not like the US where people have no chance of paying them off.

I had to help with my brother's loans and I just don't see how the average student debt can possibly be £50k. I'd say £5-10k in Scotland and £10-£30k in England is more realistic.

No way can you get to £50k unless you go to an expensive uni, don't work, and spend all your loans on partying.

Perhaps they include 40 year old ex-students who have passed the payback threshold and are not paying it back so the interest is racking up fast. However this hardly seems to be a demographic worth feeling pity for.

DJK said...

Certainly not more subsidies for old people (I include the NHS in that). How about the "party of law and order" spend a bit more on the police. After all, it's mostly young people that are victims of crime.

Sebastian Weetabix said...

Cut taxes. The state is much too big. Let us keep more of our own money.

Electro-Kevin said...

Build prisons and start banging up criminals.

This country is now in peril. There is NOTHING that is going to stop this slide into criminality and disorder.

Nick Drew said...

Spending against the contingency of a H**d B****t ought to be considered capital expenditure in my book

And they shouldn't stint: it's a genuine investment. As commented in the previous thread, if it turns out *disorderly* the collateral damage (not least in unabated criminality lasting for months or more) will be significant

(Hammond should have seen it as his duty to finance it right from the start. Not least, because every penny spent on (e.g.) appropriate and credbile HMRC resources would have more than payed for itself in better terms on offer from the EU. It may, however, be too late for our sluggish civil service to deliver. Makes you spit when you consider the wasted two years, and the pace at which serious, large-scale measures were taken during WW2 under Churchill's slogan of Action This Day)

Turnbull2000 said...

The housing market is starting to struggle, so there may be an opportunity there. It wouldn't surprise me if we see help for second steppers, further confirmation that Help to Buy is permanent, and perhaps incentives through the tax system such as a new MIRAS or access to pension pots.

If the housing market falls, the tax take will fall with it. So it's bound to be priority once again!

Charlie said...

The last thing the housing market needs is another wheeze to keep prices out of reach of the ordinary working man.

Stamp duty take might fall if the housing market falls, but then the money currently tied up in housing can be put to a more productive use.

Electro-Kevin said...

Charlie - If housing falls the UK economy goes with it. The whole policy is to keep prices out of reach of the ordinary working man.

You need £100k salary to buy an average home in the capital these days according to reports. That's some fall before OWM gets a look in.

The money currently tied up in housing IS the money. The credit printed money underwritten by slow release of capital.

Anonymous said...

Interesting comments all round. I'm surprised though no one has suggested more cuts? Unless i'm being thick, which is highly likely (i.e not understanding the bit about the impact of inflation), if these were your own finances, why stop just short of going from a continual monthly/yearly deficit to not overspending - or god forbid a surplus?

on the subject of the - what to spend more money on list:
I think investment in schools and teachers would be great - think we also need to boost the salary of teachers so that it doesn't just attract lefties who were an ideological straight jacket. Pretty sure that if the starting salary of a teacher was closer to £35k you'd have more kids (who studied real subjects like engineering) taking up the profession.

Like wise I'd argue that there is serious merit in diverting some of the grotesque expenditure on both the "Health" and "Social Protection" into education if you can teach kids how to look after themselves - surely there is a future saving in a reduced NHS spend?

Trade and Industry - is surely the last place a capitalist wants government getting its grubby paws all over? Some one can help me with origin of the quote "the words I fear most are: i'm from the government, hear to help"

Infrastructure - how about free up the planning regs and let the free-market do it's thing? I'm pretty sure private industry can do a better job than highways england taking forever and a day to complete the M1 barrier replacement project (which incidentally I understand was a directive from our chums in the EU?) if there were less barriers to entry in the market - surely the market would suggest a competing motor way? ditto rail lines.

Defence - Strong call get the feeling we are lagging behind on this on.

If it were me - I'd want to strip government right back to the essentials. Education. Defence. Justice System, Emergency Services. I'd also slash the number of squabbling idiots in Westminster and in local governments/councils right across the country. I really don't feel these people deliver value for tax payer money.

Sorry if that turned into a bit of a rant.


personalmusing said...

The only reason it looks like the debt:gdp is no longer increasing is because we don't correctly account for civil service pension liabilities that are being accumulated. Why not take this point of peak employment to get the accounting straight - which will also limit any future labour government.

As for more spending. Give me a red pen and a stack of P45s. I'll come back to you in a month with a big pile of money you can spend. We are paying for one set of civil servants to negotiate with cereal companies on how much sugar is in their recipes. Policing hate crimes on the web rather than stabbings. I think I can free up some resources for you.

Anonymous said...

Further to my rant above - how about we stop faffing around International Aid? why not use this to actually project real hard power? i.e you can have the aid money on condition of serving British interests? why do we just hand money over to the corrupt leaders of poor nations? meanwhile funding an entire aid cottage industry in the process?

Back on the defence subject - what on earth were we thinking with our latest carrier project? why was this not a nuclear powered vessel? The Americans have set the precedent our current 3 acres of aircraft-less carrier hardly smacks of being able to project power globally in the way that i can only presume is intended.

CityUnslicker said...

Great comments all.

To one point as to why no more cuts. The easy stuff has mainly been done, the hard stuff has been tried. Government spending has heavily fallen. How can we tell that this has affected many people - well 40% of the populace is willing to look past the Magic Grandpa' support for Russia, the IRA and Palestinian terrorism because he is promising to help those who are struggling. 40%, this tells me there is a problem Houston, plus running a surplus is needless as long as overall debt comes down - hopefully to something nearer 60% by the end of the next election cycle.

The only cuts I would make are tax subsidies to work. With near full employment it is a joke that the country continues to finance low level labour employment by large companies. Tax credits need to be reduced in real terms to encourage companies to pay people the wages they need and this would have a huge benefit for Government spending. Perhaps a post on this will be forthcoming.

jim said...

We have been in trouble paying our way since the 1950s largely because the rest of the world has been catching up and we have been unable to move ahead quickly enough. Always we have been very slow to improve infrastructure and education and terrified of building enough housing. Add in a failure to train skilled workers as well being unable and unwilling to control migration and Brexit was presented as a 'solution'. Well it isn't, nothing but a distraction from the real problems.

Post Brexit we will probably have to become a low wage do anything economy. A race to the bottom. This is a feature not a bug. There will be much talk of better education and moving up the value chain, but I doubt this is credible as a way out. If we chose this route we would have to import the brains, we don't breed/raise enough home grown and probably never could.

To make that work, on the STEM front we would have to think of teaching tensor calculus and chip design to 14 year olds and on the arts side be teaching film direction and acting and screenplay to Hollywood/Bollywood standards also to 14 year olds. To make this stand any chance we would need to raise social standards and expectations such that we raze sink estates to the ground and build anew moving away from a London centric model.

Realistically non of the above will happen. We will never solve the social problems or prisons that go with it, so more police and cheaper less indulgent 'justice' will be needed. We may manage to build some social housing on the 'build it in lousy places as cheap as possible' principle. More work for social workers to do. We may get into streaming schools with the upper streams moving into the few decent jobs and a large number left as zero hours fodder.

We might spend a bit more on trains as a make-work and perhaps a bit of defence to shut the brass hats up. Health won't go away but good work can be done restricting access. Not much to laugh at at all and the chambermaids and butlers will all be imports.

andrew said...

Not very viable in the electoral sense but

1 Spend it all (nearly*) on pre-school and primary school support.

It will take decades for the benefits to come through but civilised and happy babies are more likely to turn into civilised and happy children and civilised and happy children are more likely to turn into civilised and happy adults.

Concentrate on the 'troubled families'. It is to late for the parents, but the children deserve a chance.

2 Do less

Outsource the MOD to Israel, they can probably do as much with 50% of the budget.

Send less people to prison, it does not stop them committing more crimes.

Stop inventing new laws and crimes

3 Stick it to the foreigners and the rich

Start with a land value tax on any home worth over £1m

4 (*) Reform universal benefit

When you are 1 week from needing a food bank, taking 6 weeks to assess benefits is not much use.
Make the cycle weekly, MPs are paid monthly but the most of the rest of the population that live on state handouts are not.
This thing is supposed to be technology based, so there should not be much to change.
Make it simpler
About 1.5m people have learning difficulties, filling in a long form will fill these people with horror.

hovis said...

Interesting comments - I am unsure, without reform I see no improvement in many areas as so much is broken, reform is not costless.

- the NHS as quasi secular religion should get no more it is a corrupt sink hole captured by producer interests (doctors/pharma and the like)

- Transport - a good case for re-org of rail - also scrap the EU inspired HS2. O/T How come roads are som shittily repaired these days? and wtf is all the no hard shoulder "Smart motorways" bollocks- complete bullshit.

- Justice - as per the previous threads comment - reform and spending required - the need for real transparency is needed, not just some Daily Mail sloganeering.

- Regions -whet can we do to spread the walth from the SE bubble.

- Defense - cuts have been made but we still have Trident wich we can't use independently of the US, wtf? And why have we been intervening with our one airplane airforce in Syria? Thats before we get ont the rowing boat Navy.

Benefits - agree the Tax Credit system is totally crap and inefficient employer subsidy. Other benefits need reform as above.

K: on student Loans - they have been politically toxic, should they be priority - unikely but as ever politics is the art of the possible, mood music and causes. As to near 50k debt for a 3 year course - easy 9k year fees + assume an unrealistically low 5k year living costs you are up to 45k no problem as 6% interest accrues from day 1 of the loan.

AndyM said...

Given that post Brexit we are doomed never to venture abroad again, and everyone will holiday in the West Country, upgrading the A303 would be near the top of my list

dearieme said...

Home Office - crime fighting, law and immigration

Until the uber-arseholes of political correctness have been sacked from the police and the CPS it's hard to see that spending another penny on this would do any good.

Education - more schools and teachers or early learning (even to restore the EMA), student loan reductions.

Spending more on schools does no good - there's huge amounts of evidence from the USA. As for student loans, it would have to be combined with reductions in student numbers. Although most of the weight of that would fall on bottom-of-the-heap universities, I think Cambridge should take the lead by closing its Faculty of English

Trade and Industry - an industrial policy, or space

God, no.

Infrastructure - renewal or roads


Local Government - starved of revenues the most due to austerity

Probably continue to starve it.

Defence - especially against cyber and counter-terrorism

And sell those useless bloody aircraft carriers.

Anonymous said...

jim - dominic cummings had that same post-Brexit vision of a hi-tech economy, think he's more pessimistic now.

But what makes for a high-tech economy in the end is intelligent people. And what makes a country good or a crap-hole is good, altruistic people. Ever sinve the early 70s the UK has been on a dysgenic path.

a) benefit system encouraging single motherhood amomng lower-iq girls and enabling larger families among non-working people than working folk.

b) immigration of large numbers of non-altruistic, clannish, low-IQ people who also (thanks to a benfits system designed for poor Brits) reproduce exponentially.

c) encouragement of the brightest girls to get that second degree and full-time job - the number of children a woman has is inversely proportional to the number of years spent in education.

So the UK population isn't as clever or as honest/altruistic as it was 60 years back - not good for a hitech future.

Only one gleam of hope - the two-child benefit limit, best if not only good thing Osborne ever did, upheld by the courts (amazingly) - which should mean that going forward the people having the most babies whould either be those who can afford to go beyond two (hopefully the brighter souls) or who are prepared to take the living standard hit. Inshallah the first group will outbreed the second, though that might be a forlorn hope.

I don't know why this hasn't got more attention - perhaps the most important welfare reform for decades. A Corbyn admin would probably reverse it.

hovis - the NHS is better than any alternative, unless you have a new idea. And the 2 NHS staff in my family have had 1% pay rises since 2010 - I think the money's going on caring for old people. Yes, there are doctors and dentists ripping off the NHS, but they're mostly from the low-trust, high-corruption tribes "without whom the NHS wouldn't survive".

On defence spending, what exactly is the point of our armed forces? I thought in the last analysis they existed to prevent foreign invasion, but a walk down my high street tells me otherwise. Our Navy (what's left of it) acts as a Mediterranean taxi service for more invaders, our Air Force bombs Syrians and hassles Russian planes over the bloody Black Sea, aggression if ever I saw it, and our Army trains terrorists in Syria who will later be bombed by our Air Force. In what sense are any of these crimes in British interests?