The Spending Cuts In Context And The North/South Divide

A report by the Centre for Economics and Business Research (CEBR) tomorrow will expose the true extent of the Coalition's cuts.

It will point out that analysis of figures from the OECD reveal that the UK is cutting public spending LESS than the European average over the next 2 years. And this despite the fact that public spending increased far more sharply in this country than other major economies during the recession years.


This report is just further evidence of the myth being propagated that this country is being put through some kind of especially draconian state spending squeeze. Fraser Nelson's Coffee House blog analysis further proves the point. Fraser demonstrates with the graph below how Osborne isn't even cutting as hard or as quickly as Labour did the time they bankrupted the economy before last.


Indeed, projected spending in most departments is expected to increase by 2014/15 compared with 2009/10.


Worryingly, the CEBR report highlights that the economy in regions like the northwest, northeast, Wales and Northern Ireland will still be dominated by the public sector where it will still account for over 50% in 2015, after the spending cuts have been implemented. So we will still have large parts of our country where the sector of the economy that contributes tax income is smaller than the part that consumes it.


Of course, Ed Balls, seeing a report that undermines his economic "master plan", has already begun to spin it in his favour. It is obvious that public spending cuts will affect areas with the highest public spending the most. But rather than address the questions this report raises about his economic strategy, he prefers to point to the obvious fact that proportionately, northern areas dominated by the public sector will see bigger affects of the cuts. He ignores the government's plans to assist private enterprise in these areas so they can take up the slack and instead claims the government is attempting to exacerbate the north/south divide.

Expect a lot more of this kind of spin from Labour and the left generally. Attempts to revitalise regions of the UK to make them less dependent on the dead hand of the state will be portrayed as typical Tory attacks on traditional Labour voting areas. Labour's fear being that once freed from the employ of and dependancy on the state people there will take a more independent view when they vote. God forbid.

The Great Fairness Debate

The reaction to the Comprehensive Spending Review (CSR) has been nothing if not wholly predictable. Leftists popping up all over the shop to denounce the cuts as savage, regressive and unfair. But what does constitute fairness?

Matthew Parris writes on the subject in The Times yesterday (behind a pay wall). He makes the point that fairness is more than some arithmetic calculation of who loses most or whether the cuts are "progressive" or not...

"The essential point about the word “fair” is that it doesn’t add anything to words like “right”, “just”, “reasonable” or “ought”. “Fair” doesn’t (contrary to what the IFS assumes) imply a number, a quantity, a mathematical relationship between two different portions. It doesn’t (contrary to what the Labour Party thinks) imply equality: of outcome, opportunity, pain, gain, or anything else. When a speaker says “fair” he appeals to his hearer’s sense of what people do or don’t deserve.
Without this sense of deserving, any analysis of mere numbers is sterile. The raw, unprocessed arithmetic of financial gain or loss makes no impact on the moral imagination of the public unless illustrated by real cases of real groups about whom we may have an opinion — I stress: opinion — on each group’s moral claim on welfare. Accountants’ formulae for deeming cuts “progressive” or “regressive” are counterfeit, unless weighted by moral judgment.

A crude example: many people would think that, in a queue for an expensive lung operation, it would be “unfair” to put a penniless, jobless and incorrigible chain-smoker ahead of a hard-working young mother who had never smoked — although on the IFS calculation the decision would be “progressive” because it redistributes income from a richer citizen to a poorer one."

This is an important point and, as Parris suggests in his article, not one the coalition is making very effectively. The debate needs to move on from the "progressive" / "reactive" terms, that the left have managed to keep the focus on for decades, and start thinking about what truly is "fair".

The coalition has made a rod for its back by insisting on referring to its plans to reign in Labour's budget overspend as being "progressive". This term means, to most people, that the rich pay more (not just in absolute terms but proportionately) than the poor. Surely, that is fair?

Redistribution of wealth is not, in of itself, fair. Taking from the "haves" and giving to the "have nots" may have a Robin Hoodesque romantic appeal but it doesn't follow that it is fair in all circumstances. When choosing what to cut and what to spare the Chancellor had to made many individual decisions on what was fair and what wasn't.

This is where we see the fundamental difference between the Tory and Labour approach to fairness. Leftists think the main objective should be to redistribute wealth from the better off to the poor. Thus they hope to alleviate poverty and create a more equal society. This, they tell us, is "progressive". For them it would be enough to be able to prove statistically that they were taking more from the better off than the worse off. That's fairness in their book.

Osborne's starting point was more specific; that it wasn't fair to run up unsustainable debt levels for our children's generation to pay off at great expense. In truth Labour already had, but his point is still valid. We should not continue to grow that debt level by continuing to spend more than we can afford for years and years to come. Remember, all the government is proposing is to stop adding to the national debt, they're not planning on paying any of it back before the end of this Parliament at least.

From there the Chancellor had to make a number of fairness judgements. Inevitably these judgements are influenced by the values of the people making them (which, these being politicians who want to be reelected, in turn are influenced by the broad consensus in the country). Matthew Parris describes the kind of judgements he would make and they clearly tally with the Chancellors'...

"Here are mine; and I wouldn’t trouble you with them if I wasn’t convinced they are shared by tens of millions in our country.
I say it isn’t “fair”, if you’re only on an average wage, to have something approaching half your earnings confiscated through income, council, excise, fuel and spending taxes, and redistributed, even though it was your efforts that earned the money.

It isn’t “fair” that people housed by the State at your expense should be given homes for life, rather than only for so long as they cannot afford to pay market rates.

It isn’t “fair” — from the viewpoint of those who would expect their own grown-up children to rent a room if they lacked the funds to buy a house — that a person assessed as being in housing need, once he passes the age of 25, gets a right to a home of his own rather than just a place in shared accommodation.

It isn’t “fair” that the benefits system provides an incentive to jobless people with a medical condition to claim, and stay on, incapacity living allowance, even if they have a partner in work who can support them; and it isn’t “fair” that the costs and numbers of such claimants have swelled so enormously in recent years, without any evidence that the nation has become more ill or disabled.

It isn’t “fair” that workers in the public sector — whose jobs have been safer and whose salaries have risen faster than those in the private sector — should enjoy pension provisions so much more generous than what the rest of the country gets, paid for partly from the taxes of people in less secure jobs with inferior pension rights.

In every one of the five examples I’ve just cited, I’d bet that a shift in resources away from the recipients of state welfare would be seen by a majority in Britain as “fair”. But any fiscal calculation of the “progressive” versus “regressive” effect of the shift would conclude that the cut was “regressive”."

So, fairness is in the eyes of the beholder. To my eyes the CSR has got it about right. There will be a lot more controversy to come as the details pan out over time. Hopefully the coalition can get their fairness narrative sorted before long, otherwise they'll struggle to convince people to accept the pain being inflicted.

And when you hear those leftist politicians, celebrities and journalists berating the government for their actions it would be worth remembering the glee with which many of them welcomed the recession The First Post reminds us. Follow the link and have read if you time. They were happy to accept hard times for the poor, as long as it was framed in anti-consumption, environmentalist terms.

Further to the progressive/fairness debate, I see Guido has an excellent post on the same subject that is worth a read.

Ed's First Blow

The IMF has issued a report praising the coalition government's economic strategy to reduce the deficit, calling it "strong and credible" and "essential to ensure debt sustainability".

“The plan greatly reduces the risk of a costly loss of confidence in public finances and supports a balanced recovery. Fiscal tightening will dampen short-term growth but not stop it as other sectors of the economy emerge as drivers of recovery, supported by continued monetary stimulus.”

This really couldn't have come at a worse time for new Labour leader, Ed "better than my brother" Miliband. Deficit denial may have been a position that got him the backing of the Unions and therefore the leadership, but it's looking increasingly delusional and he must now be able to see that it's an untenable position to maintain any longer.

Look out for a humiliating climb down over the next few weeks/months. If he gifts the Shadow Chancellorship to his brother he can at least make it look like a concession to his defeated sibling, in the name of party unity. But it's by no means certain brother David will accept the offer.

Surely now, Ed Balls has no chance of replacing poor old Alistair Darling. Darling's plans were woefully inadequate, leaving the government spending at a level that continued to add to the already enormous mountain of debt wracked up by Labour, even after a whole parliament. But the Eds (Balls & Miliband) seem to think even Darling was too prudent. Why not draw down a few more £100 millions on the old over-draught, if it means a few extra votes?

But Ed is not stupid. He did what he had to do to beat his brother and get elected, now he has to face up to the real world. It's difficult to see how he can change course without looking chameleonesque - saying one the to Labour and the Unions and another the the general public, but not changing his mind is worse in the long run. Unless, that is, the global downturn we've seen evidence of recently in the US and Ireland, leads the UK into another recession (no matter how short). Even though such an event would have happened regardless of government, Labour will portray it as the result of cutting public expenditure. Because for them public spending = the economy.

The IMF believe a double dip recession is very unlikely but point out that the global economy can be unpredictable.

Unless he changes course on the economy, Ed Miliband must hope the unlikely double dip comes to pass and that the British electorate will be gullible enough to believe his diagnosis of the cause. Otherwise, at the next election, he'll continue to look as irrelevant as he and his party does today.

Silly Dunt... Deficit Deniers, The Holocaust & PR

Ian Dunt writes on politics.co.uk that the use of the phrase "deficit denier" is unacceptable. Of course, we're used to being told what words we can and can't use by those on the left. But it's worth looking at this argument as there is, at least partial, truth in what he says.

Dunt gives two main reasons for not using the "deficit deniers" phrase, the first of which we can dismiss out of hand. He refers to it having "overtones of the Holocaust", because it is a derivation from the phrase "Holocaust denier". Again, a typically silly over appliance of political correctness to address some perceived offence that could be causes by a phrase used by political opponents that you'd expect from the mind of someone on the left.

Now, as it happens, I've not been using the phrase a lot myself but there is nothing offensive about it. To my mind, and others who share the view that there are those in the Labour party who want to continue the reckless and unsustainable spending of the previous government, the phrase sums up their delusional view of the world. The deficit exists, fact. The Holocaust happened, fact. As such the phrases are comparable. Using the phrase "deficit denier" doesn't suggest they are comparable to Nazis, as Dunt seems to think it does. Merely, that they are as deluded as those that deny the truth of the Holocaust. Indeed, not all Holocaust deniers are Nazis, necessarily. Some are just hopeless conspiracy theorists. Use of the phrase does not imply an equality of seriousness either. No one is suggesting the deficit run up by Labour is as horrific as the systematic murder of millions of people, that is, surely, obvious. But, this is not his main point. His second argument has (slightly) more substance to it, in my opinion.

He points out that Coalition politicians are using the phrase to discredit and suppress any alternative argument on how to manage the economy through the next few years.

Of course his main concern is that the phrase accurately and effectively sums up some left wingers' position of public spending and is being picked up by the media and public as it chimes with their own views on the subject. In reality this makes the Coalition's opponents feel uncomfortable as the arguments they'd like to see winning the debate are not gaining traction partly because this phrase so concisely sums up the alternative's argument as delusional and allows the idea to be transmitted easily. He knows the phrase effectively undermines the left's position and he'd prefer it be struck off the list of acceptable phrases.

Well, actually, he has a point. Not the politically correct one, obviously, but the point about attempting to suppress another argument through clever phraseology and PR. There is a legitimate alternative position to the Coalition's approach to tackling the deficit. To be fair, under Alistair Darling, Labour took it up during the election campaign. That was: Yes, deep cuts are necessary, but with slightly different timing and not quite as much, at first anyway. For those on the Left making that point, the phrase deficit denier is inaccurate and unfair. It doesn't fit well into the "new politics" approach if anyone is trying to portray all opposition politicians in that light. That kind of tactic is too reminiscent of the ruthless and sinister Labour propaganda machine that we all came to hate. The Coalition would do well not to emulate, or be seen to emulate, it.

However, since the election, that more realistic view of the deficit has all but disappeared from our TV screens when we hear Labour spokespersons oppose each and every Government action to reduce the deficit. There has been no mention of it during the Labour leadership campaign and in this respect, there really does seem to be a sense of delusional deficit denial running deeply through Labour at the highest level.



But Coalition politicians do need to be careful not to generalise all Labour people as deficit deniers. Certainly, the likes of Ed Balls should be exposed as an arch denier. He has said himself and it's been confirmed in the auto-biographies, that he opposed Labour's deficit reduction plans before the election. But, Alistair Darling may have planned a woefully inadequate reduction in the deficit, meaning we'd still be adding to our £1 Trillion++ in 4 years time, but at least he understood the deficit needed reducing. In that respect, he and others like him in Labour are not deficit deniers. The Coalition will be better advised to argue their case against these "deficit inadequates" if they are to continue the "new politics" approach that so sharply distinguishes them from their Labour predecessors.

Darling Loses Balls

I see the Labour leadership candidates have started to turn on each other already. It should be no surprise that it's the pugnacious Ed Balls that breaks ranks and starts blaming others for Labour's disastrous defeat at the election. How typical of anyone who models themselves on Gordon Brown to look for others to blame. Now the toady faced dissembler is calling for his party to be more robust in its opposition to the attempts by the Government to tackle Labour's debt mountain.

In his latest blog post, Ed "mini-Brown" Balls states...

Over 13 years, Labour made many big decisions on tax and spending: how to reduce the national debt in 1997, how to fund extra NHS investment in 2001, and last year how to reduce the deficit once the recovery was secured.

Let's quickly challenge the misleading suggestion that Labour made any positive contribution to how Britain reduced the national debt from 1997. They didn't, they stuck to Conservative taxation and spending plans for most of their first parliament in power and rode the wave of economic recovery that started when we regained control of our own interest rates following our exit from the disastrous Exchange Rate Mechanism and that was maintained subsequently by Ken Clarke's chancellorship. It was after that period of sensible economic management, that Labour started putting its own stamp on taxation and spending, by increasing both, a lot. But spending even more than tax, hence our current predicament.

Following this fallacious claim, his blog post goes on to make the point that at no point in Labour's 13 years did they raise VAT and that they should oppose any such move by the Government as well as opposing changes to the Child Trust Fund and tax credits to reduce their availability to better off people (or lower and middle income earners as he, again, lies about the policy). It is this approach to opposition that is the becoming a trend amongst the shadow cabinet. They have chosen to oppose the measures necessary to address the debt crisis they got this country into, but at the same time, refuse to spell out how they would clear up the mess.

Alistair Darling, one of the idiots that wouldn't listen to him and therefore lost Labour the election, according to Balls, recently claimed that Cameron would owe him a "very big apology" if the state of the public finances wasn't as bad as had been predicted. This is another line they are deploying. They point to recent figures that show that the Government didn't borrow as much as expected last year and that growth was slightly higher than expected. Let's be clear exactly what the proportions are of these "improvements" - £7bn less borrowing last year. Well, whoopy shit! That still left us having to borrow £156bn in 2009. With the IFS predicting that, of all the advanced and emerging economies, only Ireland and Latvia will borrow more than the UK, you get some idea of the mess we're in. They also predict, that once the new, independent Office for Budget Responsibility reports, we could be looking at a more honest total accumulated national indebtedness of £1.8 Trillion, taking into account PFI and pension liabilities.That's one hell of an overdraft!

Until we eliminate our yearly national overspend we will only be adding to that astronomical overdraft figure. This year's £6bn spending reduction seems pathetically small, put into context. And, of course, the larger that total amount of debt gets, the more debt interest we have to pay and therefore even less money is available for public services.

So, the next time you hear a Labour spokesman asking for an apology because one economic figure is slightly less eye wateringly disastrous than expected, you know what the answer should be from the Government on behalf of the tax payer, it starts with an "F" and ends in "uck off". And the next time you hear a Labour shadow minister or supporter criticising a specific spending cut proposal, don't take them seriously unless they explain how they would make the same saving in a different area of public spending.

UPDATE: following OBR Report

The Office for Budget Responsibility has reported and, as expected, Alistair Darling's growth forecasts are found wanting. The OBR say 2011 will see 2.6% against Darling's 3.25%.

The OBR have decided to avoid using a conservative (note the small 'c'!) central growth forecast to base their figures on. This wa the norm previously and is partly responsible for a slight drop in the overall borrowing prediction. But the most worrying aspect of today's report is the estimated growth of the structural deficit.

Read Stephanie Flanders' blog for a more knowledgable view on the figures! I love some of the delusional comment left by Labour supporters - 'This is now the coalition's mess, they cannot blame the "previous government" anymore' (Disnaymatter at 11:12am). They are so desparate for their party to be exonerated from responsibility for the debt crisis they will say and believe anything.

Here's a telling graph (lifted from the Telegraph):

Labour's Forever Blowing Bubbles

Following The Independent's front page that so effectively illustrated the scale of the task facing the new Government in tackling Labour's debt mountain, The Guardian has now come up with an interesting analysis of where our hard earned tax money gets spent.

After years of profligate Labour spending the Coalition has to decide where the axe must fall. The initial £6bn of savings this year is a very small step on the journey to balance the nations books.

Which bubbles would you burst..?

Click on the image to enlarge or follow this link for the online article.

We now have to put up with Labourites, like Alastair Campbell and Piers Morgan on BBC Question Time last night, acting as if there wasn't a problem and the evil Tory/LibDems are just hell bent on making cuts for cuts sake. Some say they are "debt deniers" in the same deluded mould as the holocaust kind. But they aren't. They know full well their party would have been forced to make similar cuts to save the economy from drowning in debt repayments and Greece style crisis (only they'd have done it later for party political expediency).

They are not deniers, they are liars. I hope voters for many years to come remember what Labour did to our economy and how they attempted to cover it up with dissembling spin, continuing even today to be utterly disingenuous in their response to the governments attempts to fix their mess.