1. "You're a deficit-denying socialist" - No I'm not. I agree with the need to cut the deficit. I do not agree with the pace and scale of the cuts. Why? Because I don't believe the UK will be any worse if we cut the deficit in ten years rather than five. At least that way the private sector will be in a better position to re-employ some of the public sector workers who have lost their jobs. It was telling that despite vigorously urging the Government to pursue its cuts agenda, the 30 or so top businessmen who wrote to The Telegraph gave no promises to re-employ any of those made redundant.
2. "Labour created this problem so how can you oppose any cuts?" - I do not doubt that Labour spent a lot of money in Government. There were two principal reasons for this. Firstly, I don't know if you noticed but there was a huge GLOBAL (repeat: GLOBAL) financial crisis. The Tories have somehow managed to create this myth that the recession was a UK-only event. The financial crisis prompted a need to prop up our financial institutions. If the Government had done nothing - as advocated by the Tories - savers would have lost their money, more businesses would have been cut adrift, more people would have lost their homes, more workers would have lost their jobs, and a lot more damage would have been done to the British economy. If you don't believe me about this, ask economists in every G20 country who decided that bailing out banks and stimulating growth was the right thing to do. Secondly, in the period before 2007, Labour needed to spend money repairing and improving those public services that had been cruelly overlooked by 18 years of Conservative Government. This obviously cost money.
*Cool Stat* - did you know, before the financial crisis Britain had the second lowest debt in the G7?
OK so here are the cuts I agree with:
1. Ministry of Defence - the Coalition were right to make cuts to our air force and navy, while broadly protecting the army. In my view, foreign co-operation is absolutely essential in military matters these days. The idea of the UK going to war by itself is - as it should be - a thing of the past. See my last post on a European Defence Army for my thoughts about the future of defence.
2. Welfare - while the cut to child benefit was surprising given Cameron's previous views, it was the right thing to do. It's unfair to expect poorer people to subside the rich. While I can understand people questioning the mathematics (families on £44,000 will lose out while those on £80,000 will not), I do buy the Chancellor's argument that anything else will create administrative mayhem. It's not ideal but it's one way of saving £1 billion without hurting the very poorest. The steps to implement a universal credit, making welfare easier to understand, should also be embraced.
Having said this, here are the parts of the CSR I just cannot support:
1. Ministry of Justice - a £350 million cut to legal aid was announced with barely a whimper of protest in the House of Commons. While MPs may not be overly concerned with this cut, I am of the opinion that it is hugely unfair on the most vulnerable people in society. Disadvantaged people rely on legal aid as their only access to justice: the only way they can have their rights and entitlements protected. Without this, a two-tier system is likely to emerge where wealthy individuals have access to the top barristers and solicitors while the poor have to make do with the cheapest bidders in the new legal aid tendering system. It's not fair. It's not equal. The Government should think again.
2. Home Office - the Strategic Defence and Security Review (SDSR) earlier this week identified terrorism as the biggest threat to the security of the UK. Odd, then, that the Government decided to slash the counter-terrorism budget by 10%. David Cameron has frequently said it is the first duty of Government to protect the people. Given the huge success of the police in disrupting terror operations in the last five years, this cut to their budget represents a massive gamble with public safety. Shameful. More generally, Labour managed to cut crime by 40% by putting in place adequate funding structures. The Coalition will not be able to paper over the cracks by claiming they are cutting red tape.
3. Local Government - also a very surprising target for budget demolition given Cameron's love of the Big Society. My concern is the threat to social care departments by funding squeezes. This is one of the major reasons why the IFS branded the CSR unfair. The Coalition simply cannot claim they are protecting the interests of the poor when they are cutting the services available to disadvantaged individuals and families.
I hope that this critique will be seen as reasoned and balanced. Let me know what you think.
Firstly may I congratulate you on a fairly reasoned and balanced blog. I would however like to counter on a few things:
ReplyDelete1) The financial crisis wan not the cause of the recession, it was the final straw that tipped the established economies into recession. The recession in USA and UK was caused by too much debt both at national, corporate and personal levels which was unsustainable resulting in banks lending less, companies going bust and people loosing their jobs and then their homes particularly in USA. This pushed mortgage and commercial loan defaults through the roof causing bank bad debts and securitised debts to increase which caused wholesale lending between the banks to dry up.
2) Regarding our level of debt being the lowest in the G7 is hardly surprising when you consider that we also have the smallest population and one of the lowest GDPs. It is interesting to note that Canada embarked on its debt reduction in 2006 and was the first of the G7 countries out of recession. It did not "stimulate" its economy.It plans to reduce its debt from 40% of GDP to 25% in the next 7 years and as a result of its debt reduction programme its economy is growing.
3) Under Labour our debt levels went from GBP600bn in 1997 to over GBP1400bn in 2010. Less than GBP100bn was a result of bailing the banks out. Interest payments on GBP1400bn = GBP115068 per day. The sooner we cut the level of borrowing the sooner recovery will take hold.
4) The only way a government can borrow is by issuing bonds. If the bond market had felt that we were not cutting the deficit quickly enough borrowing costs would have risen - just ask Ireland, Greece, Spain, Italy and Portugal.
5) Local Government has long been another word for waste and inefficiency. The leader of Birmingham city council earns well over £200,000 a year and gets a guaranteed pension that is funded by the tax paying public. A lot of efficiency could be found by cutting senior posts and salaries and ending the guaranteed pension schemes, something that rarely exists in the private sector. The Chief Constable of Essex police force found over £2 million of annual savings without loosing a single job, in fact he increased numbers.
Finally regarding Legal Aid - if Lawyers and Barrister did not charge such over inflated extortionate fees their services would be accessible to all. A 2 tier legal system has existed for many years.
Thanks for the comment, follow the blog?
ReplyDeleteMy comments to all of your points:
1). Your view on this is sharply at odds with most economists. The conventional view is that the sub-prime crisis made banks reluctant to led to each other because they could never be sure whether the security was sound. As a consequence, they failed to lend to businesses and individuals, weakening growth.
2). Growth in Canada can be explained by reference to other economic factors, e.g. not being as exposed to financial markets as the other G7 economies. Also, the Canadian Government destroyed hospitals and slashed education budgets beyond recognitions. I don't want to see the same thing here.
3). "The sooner we cut the level of borrowing the sooner the recovery will take hold" - if that entails making 1 million people redundant, how will that help growth? Where in the CSR are the incentives for economic recovery?
4). Your example of Ireland demonstrates how wrong your argument is. The austerity programme there has been devastating for that country. Economists giving evidence this week at the Treasury Select Committee accepted that the risks in May and June were not as pressing as Osborne & co made out.
5). I'm not against cutting executive public sector pay. What I am against is cutting child protection services and voluntary grants. The sheer scale of cuts in this department means that all these areas are likely to take a whack. So unbelievably wrong.
A criminal barrister is likely to earn £10,000 per annum in the first years of practice. At the moment, everyone (regardless of wealth) has access to the best lawyers. Simply wont happen in the future.