Saturday, October 23, 2010

 

The Gambles Osborne Needs to Come Off to Succeed

So much has been written about Osborne's cuts but none more acute than Anatole Kalensky's piece in The Times 220th October. As you have to pay to go online these days I've summarised his argument myself. He argues the Chancellor has embarked on a series of major gambles which depend for their success on:

i) The hope that UK economic recovery can avoid any slowdown in the four years ahead, despite almost unprecedented reduction in family incomes resulting from higher taxes and cutbacks in public spending.

ii) Public sector managers must achieve a breakthrough in productivity and administrative efficiency of a kind that has always eluded previous governments.

iii) Government can win debates about political priorities that have not even started and will prove increasingly controversial as the abstract sounding figures announced yesterday are manifested in visible changes in British society.

iv) The coalition can maintain its unity and its support from voters who will be suffering big material losses not only in the first half of the Parliament …but right up to the next general election.

Each year 2% of GDP will be withdrawn from the economy as a result of the cuts: 8% by 2014-5; yet Treasury predicts growth of some 2.3% by 2011 and 3% thereafter. If this does not happen revenue will falter and downward spiral initiated.

If any one of these gambles go down- and it's a big ask to assume they'll all come good- then we might end up in greater trouble than we are now. Meanwhile the polls do not look so good for the Coalition: 59% of respondents in the Independent thought the cuts unfair as they hit the poor rather than the well off. Only 30% thought them fair. Of Lib Dem voters at the last election 59% took the former view compared with 34% who voted Conservative. However 51-34% thought the Lib Dems should stay in the coalition. Polly Toynbee's piece on the NHS will also make worrying reading for the government.

‘In short Mr Osborne is taking a huge bet on the underlying strength of the British economy-just like Gordon Brown.’

Comments:
I think once Newer labour and the coalition finishes with welfare the deficit will be ended the world will be happy, labour can then come back in and tell the middle class your child benefit has been given back and no children will starve or die of malnutrition.

the world is changing and so are the politics within the UK.
 
Polly Toynbee's pieces have long since stopped worrying the Conservative Party.

As for the rest. It will be unpopular(I'm not loving it myself - interest rates on my savings forced me to transfer my money into the equity market), but the people won't get a vote for another four and a half years. By that time, this dose of reality will have benefitted the country, and renewed our strength. If the people can't see that the days of debt are over, then they ignore reality. And should thus themselves be ignored. It has to be done.

And of course the cuts hurt 'poor' people the most. Good thing too. By defition, 'poor' people receive the most from the state. Any rationalisation inevitably affects them most. The problem for the left being that some of them aren't that poor in this day and age. Many of the families most affected by the new measures are banking several times the average salary(tax free!). Will be hard to mobilise any kind of proletarian resent against these welfare fat cats I fancy (am sure our friends in the press will keep these families in the public eye!).
 
Skip :

Re Osbornes' "Cuts".

What cuts ?

As any fule no, (*)fully one half of public spending, departmental expenditure limits, will go up by 10 percent over the next five years, while the other half, annually managed expenditure, will rise by 23 percent.

Hence any deviation from the growth is called a cut.

(*any fule not strictly adhering to the Guardianista & Labour Party Broadcasting
Corporation misinformation line)

kind regards
 
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