Spineless politicians still refuse to explain how they would tackle the deficit
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My expectations of politicians, those “insidious and crafty animals”, are low. (Like Hayek, I find that over the course of a long life they have steadily gone down.) But in this general election campaign the performance of all three main parties has still managed to disappoint. They have refused to spell out in any detail how they propose to eliminate the huge government deficit, which is unprecedented in peacetime.
The British government’s deficit this year is expected to be about 12 per cent of GDP, nearly as high as Greece’s. Assuming that about half has been caused by the recession, we need to find another 6 per cent of GDP (around £90 billion a year). I accept George Osborne’s line that about 80 per cent should come from cutting government spending and 20 per cent from tax increases.
Where could the government raise an extra £18 billion in tax? Raising Value Added Tax by 2½ per cent to 20 per cent would raise about £12 billion. And adding 1 penny to the basic rate of income tax, I think, would raise about £6 billion.
That would leave a need to cut about £72 billion from government spending, around 10 per cent. In my view, there can be no sacred cows: I wouldn’t “ring-fence” anything.
The government has been grossly irresponsible in failing to undertake the three-year Comprehensive Spending review when it was due, last year. The Chancellor pretended there was too much uncertainty, but that is a pathetic excuse.
I’m sceptical about “cutting out waste”, though I dare say there’s plenty of it. The trouble is it’s not always easy to identify “waste”, to cut it out, or to stop it creeping back in again. So most of the reduction would have to come from the government stopping doing some things it is doing now. What Keynes called the “non-agenda” of government.
As I haven’t got the details, I can’t say precisely what government spending I would to cut. But it’s scandalous that none of our leading politicians, seeking election, has spelt out the details either. Their attempt to deceive the British people fools nobody, but it is a disgrace. No wonder so many people choose to vote, in effect, for “none of the above”.
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I know that the Cable brand has somewhat tarnished recently, and he never was really going to tackle things in quite the way people like us would have wanted, but fair play to him and Frank Field, whilst I cannot find the exact reference, I remember them joining up – it may even have been through an early day motion, about this time last year, to demand an all-party group to come to some agreement as to the extent of the public finances problem and some broad options for tackling it over different periods which could then be an agreed basis from which parties could offer policy to do so. They said it was essential before an election else that election would be a fraud. And so it is!
Last night’s debate was certainly marked by a lack of candour. Much of the bickering (largely instigated by Brown) centred on relatively minor fiscal issues such as cutting child tax credits for higher-income households, inheritance tax and so on. The debate focused on policy changes of a few hundred million rather than the needed cuts of tens of billions.
You are wrong to be sceptical about cutting waste. Given that essentially all that Governments do is wasteful, nothing could be easier!
One could argue that the Conservatives did start talking about ‘austerity’ at the beginning of the campaign; but they dropped it very quickly when they found people didn’t like the sound of it.
At the root of the scandal, I believe, is the politicians’ obsession about getting re-elected (or elected) ‘at all costs’. They seem to attach very little weight to doing what is right. But I wonder whether in the long run that would be more rewarding, for themselves as well as for the country.
Of course it’s very easy for an outsider to talk like this. But all the same, maybe it is true.
Surely the crucial thing is that the parties have to be prepared to reassess the key functions of government with the intention of radically pruning those functions back. Only then can you make the required serious, robust and sustained cut in the UK Govt’s spending figures that is needed.
I don’t think that the will is there to do this – either on the part of the politicians or, more crucially, the electorate. If the electorate still expect the state to molly-coddle them from cradle to grave then politicans would be suicidal to put the necessary proposals before the electorate.
However, a failed Lib-Dem pact for 5 years may push the electorate in the right direction …
Also not an economist, but a trainee Austrian
My contention is that the state costs us too much often because it creates many of the problems that it then tries to fix by throwing more money at. This can be in the form of unjust privilege or protection of interests that keep costs too high so the state then tries to subsidise these for poorer users – the big ticket items of health, education and housing being obvious ones.
e.g Housing Benefit is a subsidy to landowners, not to poor tenants. And it props up housing costs for everyone else whilst preventing its recipients going out to work for fear of losing the benefit – that’s £20bn saved right there – http://bit.ly/9s24GM