Category Archives: Public Expenditue

LABOUR AND THE ECONOMY – IT’S A WORRY

“We used to think you could spend your way out of recession and increase employment by boosting government spending. I can tell you that option no longer exists. And so far as it ever did exist, it only worked on each occasion by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step.”  Jim Callaghan – Labour Prime Minister 1976-1979

Yes, these are the words of a Labour Prime Minister but the party and a large section of the media don’t seem to rate Jim Callaghan’s words of wisdom. In fact if the recent track record of the Labour Party is taken as a benchmark, it doesn’t bode well for a future Miliband/Balls government’s impact on the British economy, living standards and mandatory austerity.

1964-1970 Harold Wilson’s Labour government – Sterling collapses, International Monetary Fund called in – pre-election promises jettisoned and emergency austerity measures inflicted on the electorate.

1974-1979 Wilson then Jim Callaghan’s Labour government – Treasury predicts black hole in public finances, International Monetary Fund called in – pre-election promises jettisoned and emergency austerity measures inflicted on the electorate.

1997-2010 Blair and Brown Labour government – after announcing “no more boom and bust”, the government went on to cripple the country’s finances and to create a record breaking budget deficit (comment from the departing Treasury Secretary after Labour lost the election – “I’m afraid to tell you there’s no money left”), followed by, you guessed it, more austerity measures.

On recent form, it looks like a general election win by labour would be a vote winner for austerity.

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FOREIGN AID – GIVE NOW…PAY LATER

“There’s still a long way to go. We’re borrowing £100 billion a year – and paying half that money a year in interest just to service our debts. We’ve got to make more cuts” George Osborne, Chancellor of the Exchequer.

The government is adamant that its intention to continue spending around £12 billion a year on foreign aid is justified. David Cameron says “to those who are sceptical, I would say it is not only a moral obligation that the better-off countries have to tackle poverty in our world … but it’s also in our interests that we build a more prosperous world”. John Howell, Tory MP for Henley reckons in a newsletter, “international development is in our national interest and is both the right thing and the smart thing to do … by investing in jobs, opportunities and peace we have moved one step closer to ending aid dependency and creating the world we strive for”.

All highly laudable but hard to reconcile with the experience to-date. Over the last fifty years, the west has “invested” well over a thousand billion dollars in Africa for example, but from various accounts the bulk of its nations are now in a worse financial state (measured in terms of GDP per capita). In fact the counter view is that far from fulfilling its objectives, “aid is more likely to subvert good government, enrich corrupt tyrants and subsidise warlords” (Civitas reporting on Jonathan Foreman’s book: Aiding and Abetting).

However, the real issue is: should the UK be borrowing £12 billion plus a year for such largesse when the country’s structural deficit is so high? Does an ever mounting national debt make us “better-off” ? As recently announced by George Osborne, further public savings in the order of £25 billion need to be achieved by 2017/2018 with the bulk of this coming from further cuts to government departments and welfare. Well here is a good starting point for making those savings. And at a time of increasing geopolitical tension with the consequent serious threat to British security, some of this money would be much better employed in bolstering the armed forces and  security services.

“Those who support the increase of taxpayer-supported UK aid need to ask themselves how much of the well-being of the weakest and the most vulnerable people in the UK they are willing to sacrifice for that end.” Jonathan Foreman

The British people are amongst the most generous voluntary donors to charity in the world. Making compulsory donations from borrowed money to finance overseas projects of uncertain benefit to either the intended beneficiaries or UK interests is definitely not a vote winner.

EUROPEAN UNION – A JEAN-CLAUDE JUNCKET

“Sir – We are often told by Europhiles that the reason Britain must stay in the European Union is that, if we left, we would have no influence; the naming of Jean-Claude Juncker as president of the European Commission shows we have none anyway. We might just as well leave at the earliest opportunity and pocket the £50 million-plus-per-day it costs us to be ignored.”  Ian Goddard, Letters to the Daily Telegraph Editor, June 2014.

After Junker’s appointment as the new president of the EU, Ed Miliband said David Cameron had suffered a “humiliation” – a word of which he seems to have had no comprehension when in government. So, the Brussels circus has chosen a new ringmaster. None of the main performers wanted him but allegedly, the main German press (with whom Juncker has co-operated in the recent past) decided he was the man for the job, so common sense didn’t prevail. Bad news for the countries in the southern Eurozone – good news for the bars of Brussels, according to some reports.

Also, good news for Britain. Apparently, there’s an EFTA style deal on the table and we should start negotiations with the EU immediately and seek to exit before the UK’s interests are further marginalised. The British people are totally over taking instructions (EU directives) from a disparate group of overseas based career politicians – Juncker in charge of Europe conjures up thoughts of putting a sommelier on the bridge of the Titanic. The reality is that the people of Germany, Scandinavia and Holland know and accept the economic facts of life but from France down and elsewhere, national finances are a disaster and a break-up of the currency union is the only sensible answer.

The UK does not need to be involved in this impending gravy-train crash. An uncomplicated trade deal instead of full EU membership would change nothing in terms of our relations with the EU, other then returning government accountability to Westminster and driving a major lift to our economy by giving us greater flexibility to trade freely throughout the world. Exit from the EU linked to a trade deal would be a vote and election winner.

EUROPEAN ELECTIONS – VOTE UKIP FOR FREE TRADE

“The UK is still the sixth biggest economy in the world, larger than Russia or India.” Roger Bootle, Managing Director,Capital Economics

So, the political class and mainstream media started by ignoring public opinion as reflected in UKIP’s stance on Europe. When that didn’t work and safe constituency voters started jumping ship, the next step was to adopt the never-fail ridicule and smear tactic. And still UKIP is gaining support.

Why? Because the escalating power grab by Brussels is unacceptable to the British people. The Europe Britain joined was a free trade association made up of nations with similar income per capita – the electorate was never asked to agree to becoming part of the United States of Europe incorporating a growing number of low income countries and a bloated expensive administration. It costs Britain billions to be a member of this disparate Eurozone driven club which increasingly controls our lives.

Why not just trade with it like the rest of the world does? A landslide victory for UKIP in the European Parliament elections would give traction to the prospect of an orderly and planned exit from the European Union. Britain as an unencumbered global free trade country would be able to accelerate growth in GDP and despite illogical scaremongering to the contrary, would be in a position  to increase employment significantly – definitely a vote winner.

CLIMATE CHANGE – THE MISSING LINK

“Warming of the climate system is unequivocal and since the 1950s, many of the observed changes are unprecedented…the atmosphere and the ocean have warmed…snow and ice have diminished, sea level has risen and the concentrations of greenhouse gas have increased… Human influence on the climate system is clear…” Climate Change 2013 published by The Intergovernmental Panel on Climate Change (IPCC).

So what is the link between between the proportion of total CO2 emissions that is man-made and global/ocean warming? The IPCC scientists say it is “evident” from the increasing greenhouse gas concentration in the atmosphere. Other scientists (variously described as realists or deniers) say the human contribution to the overall amount of emissions is minimal. But even if there is a direct link, however tenuous, what can be done without causing disproportionate hardship in a society that is now totally dependent on mobility and the availability of affordable energy?

First of all, it’s important not to confuse the undisputed need to reduce pollution with the ramifications of changing weather patterns. Pollution reduction as an urgent objective is beyond debate but what seriously irks open-minded people is the Global Warming Industry’s habit of claiming every weather event as evidence of the need to reduce living standards and raise taxes.

Apart from a vastly improved strategy for waste reduction and pollution control, what’s needed is a realistic transition from the out-dated creators of energy to a new generation of efficient low pollution technology (unsightly and inefficient wind generators and solar panels are clearly not the answer). The majority of people will support a move to alternatively powered vehicles or the replacement of old coal-fired power stations with state-of-the-art low emission electricity generators – provided they are not confronted with punitive cost hikes in essential commodities or the impact of levies geared to arbitrary, unachievable targets.

Massive increases in the cost of energy and the prospect of power cuts caused by the seemingly shambolic management and communication of this issue (combined with deliberately alarmist predictions) have inclined open-minded people to view the link between climate change and their everyday lives as nebulous at best and probably a political sham – definitely not a vote winner.

MPs’ PAY REVIEW – GOOD IDEA

IPSA is independent and in everything we do, we focus on our main duty: to serve the interests of the public. (IPSA website home page)

The Independent Parliamentary Standards Authority (IPSA) is said to be advocating an 11% increase in [non-executive] MPs’ basic salary to £74000 a year. This can be compared to the average pay of £64000 which non-executive directors of FTSE 100 companies receive (thereby accepting collective responsibility for the actions of their boards).

Apparently, IPSA hopes that by increasing their package by such a large sum, MPs will be less inclined to abuse their generous expenses system. What an interesting message to send to the electorate. “If you’re not happy with your pay, follow the Westminster precedent and fiddle your expenses!” A further argument put forward in support of higher pay for MPs is “if you pay peanuts, you get monkeys”. Well, given the woeful performance of the last administration and the failure of the Coalition to respond to so many concerns of the electorate, monkeys could well be an improvement.

If anything, there’s mounting justification for a reduction in MPs’ pay. A large amount of legislation now emanates from the European Commission and the government just goes through a rubber stamping exercise. Also, MPs with constituencies in Scotland and Wales have a large amount of their representational functions duplicated or directly undertaken by members of the national legislatures. Shouldn’t less work and less responsibility mean less pay?

These issues and others raise a number of questions including do we really need 650 MPs? With modern communications and reduced empowerment of MPs , the rules of the Boundary Commissions should be changed to limit the number to say, 500. A reduction in the number of MPs as part of a pay and fixed expenses review might just be a vote winner.

HS2 Fastrack Fantasy

And to drastically increase the national overdraft.

The country’s finances are in a mess. The UK is borrowing the equivalent of over £300 million a day to finance its excess spending and incurring the equivalent of over £100 million a day in interest on the escalating national debt. The government’s stated policy is to reduce the deficit but how does that square with its support for HS2? Cost estimates for the project range from £40 billion to £80 billion and the main justification for this outlay seems to be ” it’s about changing the economic geography of this country…”

If it goes ahead, the outcome of this fantasy is beyond debate. Colossal cost overruns, massive disruption to the countryside and people directly affected by the route and eventually, a rail link requiring huge public money subsidies to remain in service.

“HS2 is about far more than a cost/benefit ratio … the wider benefits of HS2 are complex to quantify…” (Douglas Oakervee, HS2 Ltd)

“It has not been demonstrated that this is the best way to spend £50 billion on rail investment in these constrained times…” (Margaret Hodge MP, Chair, Committee for Public Accounts)

“A more convincing economic case for the project is needed. We need reassurance that it can deliver benefits … greater than those of other transport schemes.” (Andrew Tyrie, Chair, Treasury Select Committee)

There you have it. The country can’t afford HS2. The company behind it finds it too complex to justify. The chair of the public expenditure watchdog is decidedly unconvinced. And, the Treasury Select Committee sees no logic in it.

HS2 should be jettisoned now – tell your MP.