Where are the cuts?

Sally Chatterjee

Good information and useful for debating the matter.

The problem for me is that capital spending is being cut harder than other items like the wage bill. We need better infrastructure and other capital projects more than we need bureaucrats and low-grade paper-shufflers.

Adam

John Redwood's a bright guy, who knows his economics. But really, using nominal figures for anything but making a cheap point against second-rate journalists is nonsense. Thatcher didn't manage real let alone nominal cuts; so let's not pretend they're insignificant.

Fatbloke on tour

Redwood is a complete muppet, he really shouldn't be allowed on his own.

At least he is a true believer, he actually believes in what he says unlike Dave the Rave who has made a career of telling the audience what it wants to hear even if it is at odds with reality.

Richard of York

I wouldn't trust Redwood with a packet of Jaffa cakes let alone anything complicated like the economy.
His former boss named him right...what was it John Major called him?
begins with a "B" I think someone on here will know.

Dave B

@Sally Chatterjee
Excellent point. There was an article recently about the economic decline of California, that identified the shift in gov't spending from infrastructure to wages as a contributory factor.

http://www.city-journal.org/2010/20_3_california-economy.html

AlexK

@Adam

You may chide Redwood for using nominal figures to prove a point however the rise in total expenditure from £670bn to £738bn over five years equates to a yearly growth rate of about 2%. Surprising considering the apocalyptic headlines. Furthermore if the BOE can actually get the inflation rate back within its target of 2% then there will not be any real cut in expenditure. I appreciate that expenditure does not equate to services but that cuts both ways.

Bickers

Fatbloke:

Any why is Redwood a muppet? For bringing some sanity to the wild rantings of the Labour Party, media (especially the Bias Broadcasting Corporation)& the unions that claim we shouldn't have to tighten our belts because of the years of profligacy by Nulabour.

The left and the luvvy media in general have never lived in the real world; always willing to spend other peoples money till it runs out. Surely, it can't be a coincidence that everytime Labour's term of being in power comes to an end the country's finances are screwed. Most politicians (especially Labour ones & BBC employees) have never had to work for a company that has to makes ends meet.

What amazes me is the stupidity of some many of the electorate to still want them in power (but then they'll mainly be featherbedded public sector workers)

Scary Biscuits

Adam, before you start flinging insults around, be sure of your facts. During the crisis years of 1979/80 Thatcher and Howe did indeed achieve nominal cuts. It was only after the economic growth had returned did they allow real increases.

After the 79 election Treasury officials tried exactly the same trick as they are now, claiming that a 3% increase wasn't really an increase. It was nonsence then and is now. If an individual or a company is in financial trouble and a supplier puts prices up they don't just accept it, they search around for an alternative. Exactly the same discipline should apply to Govt.

What is for certain is that, as that most taxpayers won't be getting index linked pay rises for the forseeable future, both real and nominal taxes will be rising to pay for these "cuts". Cameron and Osborne are doing the opposite of what Reagan and Thatcher did, cutting taxes to stimulate growth.

20% VAT anyone?

Will J

Redwood's main point is that the way the coming spending cuts are being described - even by the government itself - gives people the idea that public sector departments are suddenly going to have 25% less money to spend - since that's what it would mean to a person if they received a 25% pay cut.

But of course it means no such thing. In fact public sector budgets will increase every year for the next 5 years, it's just that this will have 5% less buying power each year. The point is not that there aren't real terms cuts, but that the language being used to describe them makes them sound far worse than they are.

Dan

Redwood is brighter than the whole of the Labour Party put together - not difficult I grant you.

yank

Now you're catching on. There'll be no cuts. There never are.

Over here, "cuts" are defined as any failure to adopt large budget increases. And it seems a proper English usage has disappeared, even, sadly, there on the pile of rocks.

However the VAT increase, capital gains tax increases and global warming tax increases will be real, and will most definitely cut cash out of your pockets.

A real cut, not a fake.

Gary Williams

As usual, a bunch of nonsense is being spouted by the people who post here for no discernible reason.

If your salary in 2006 were £20,000 p.a., and your salary in 2010 were £20,000 p.a., would you say that your salary had been "cut"? Of course not, or, rather, you might say that, but you would be talking more nonsense.
IF there had been inflation over that period, your purchasing power would have been cut, but not your salary.

Jonathan Hall

I think many of you are missing the point; Redwood is being disingenuous because his calculations relate to the overall public spending envelope and not to individual departmental spending. Remember because of Brown’s profligacy the UK has a greatly enhanced National Debt to service –so how much of our increased public spending will simply go on future interest payments to our international creditors? Similarly, as we cut the public sector, how much will the UK GVN be forced to spend in redundancy pay, increased unemployment/welfare benefits, etc…? Don’t forget, it will take time for the private sector to grow sufficiently to absorb this necessary contraction in the bloated public sector. Then there is PFI. In an attempt to keep capital expenditure off the national debt and thus maintain the illusion of prudence, Brown racked up huge PFI debts – many with repayment schedules that are only just beginning to kick in. These ‘fixed’ payments will also have to come out of existing budgets – thus reducing the discretionary spend available to important departments like health, education, defence and transport. In summation, real cuts are coming to the public services that we use on a daily basis, i.e. schools and hospitals, these will be hugely unpopular, but necessary because of Labour financial illiteracy – that is the message that the GVN must get across. As a Conservative MP, Redwood should get with the team and stop undermining the GVN’s narrative by producing public spending figures shorn of their proper context.

Cuffleyburgers

I am concerned that the coalition has lost the plot.

The deep defence cuts are real enough, and will leave our armed forces, about the only thing left that is noble about this country, eviscerated.

They have been unforgiveably wobbly on europe, and the eu arrest warrant, Huhne is talking absolute shite about energy supplies, and Cameron is making it up on the hoof (milk anybody?)

There is speculation that IDS' intelligent proposals on welfare will be watered down - personally I would say that if to implement IDS we have to spend in the short term 4bn more, let's take it form the DFID budget for example.

And in order to maintain defence capabilities at a correct level, lets withdraw forces from Germany, and stop paying in to Brussels. If they want the money they can try and come and get it.

And the sooner that useless f**ker Cable is out of governemt the better.

PayDirt

Ah, the modern state recalls bad King John, taxing his loyal subjects to death. If only Robin Redwood could take some back from the greedy autocrat and depose the monster with a few well-chosen darts.

Adam

@ Scary Biscuits - eh? Firstly, calling an argument 'nonsense' isn't throwing around an insult. Secondly, not true: as Redwood himself says in a blog post: "Throughout the Thatcher era Labour claimed public spending was being cut. Each year it rose. In 1978-9, the last Labour year, total public spending was £75 billion. By 1989-90, the last Thatcher year, public spending was £200 billion. This was up every year and up after allowing for general inflation."

TomTom

Redwood is probably correct. Using a GDP Deflator to create "real" spending as opposed to monetary "nominal" amounts is fatuous because the Price Inflation inside the public sector is far higher than in the economy as a whole.

In fact the Relative Price Inflation in the public sector probably requires huge private sector DEFLATION to keep inflation low.

Rising Council Taxes, NIC, Stealth Taxes, VAT, Customs Duties, Petrol Duties, Fines, Licence Fees, etc all require the private sector to cut back on wage costs, as they are faced with increased Overheads.

The public sector simply makes its variable costs fixed, builds them into overhead and passes the cost onto the taxpayer. Whether these increases end up being 2% real or 6% real they are re-shaping the economy towards a Socialist one with smaller traded sector.

Redwood makes a valuable point. It is highly unlikely that Britain will ever have a strong private sector exporting goods, there is simply no reason to invest here. The huge public blowout has not given us fantastic infrastructure, rail, road, airline connections - it has given us bloated bureaucracy and a population on 'early retirement' in mass-redundancy.

It is probably Britain's fate to end up like Greece with a bloated state sector and miniscule private sector exporting very little.

Catesby

Any chance you could update with a graph showing theyears before 2010/11 in real terms. It would be enormously instructive to know, for instance, whether current or total managed expenditure in 2015 was in real times higher, lower or much the same as in 2002,2003, 2004,2005 etc.

The 'fight the cuts' brigade's claims that trimming public expenditure is 'devastating', 'heartless' and so on would be put somehwat in context if it were shown that even after the 25% reductions in some departments, the government was still spending roughly what Tony Blair's government used to spend on public services.

Simon Stephenson

Bickers : 8.37pm

The reason the modern left is so willing to trade in certainties and outrageous recommendations is that it has embraced the philosophy of never having to look back - and, therefore, never having to accept responsibility for past mistakes.

This is why Fatbloke, RoY and the mini-Browns vying for the Labour leadership are able to continue to argue for unchecked public expenditure - because they have unilaterally absolved themselves from having to account for any of the downsides that might result from such a policy.

It really is an adolescent thought-pattern, but then that's what the modern left is built on. How we miss in this country a pool of thinking that combines a skepticism of market capitalism with grown-up reality.

red bandits

The deep defence cuts are real enough, and "will leave our armed forces, about the only thing left that is noble about this country, eviscerated"

You will need whats left of your noble army, funny how the underclass atains nobility through bayonet practise, to defend your looted wealth once your cuts come home and unemployment rises

as for the nobility of the British Army tell that to the murdered,tortured and shot in the back women, kids and men civilians ALL, of Ireland, Iraq and Afghanistan. BallyMurphy anyone?

you will rue the day you pushed your pals to intensify your class war.

Dave B

@Jonathan Hall
Very good point. It would be interesting to see HMG debt servicing costs as a percentage of the budget.