The UK’s economic strategy – fifteen months on

 

           The Coalition government published a 60 month strategy in June 2010. The Chancellor increased spending and borrowing for the forecast 5 year  period by £34 billion in the March 2011 budget. How is it going now?

            Readers of this site will remember that the strategy is to increase total current spending by £93 billion a year in 2014-15 compared to 2009-10, and to increase tax revenues by £172 billion a year over the same period. This will bring the deficit under control by 2015. It entails borrowing an extra £485 billion over the five years.

           I have been looking at what could go wrong with the strategy.

          It is possible that spending will go up by more than planned. The last two years of the plan show relatively small increases, of 1.9% and 1.8% in spending, compared with the 5.3% last year. As these will be the years running up to the election, it is possible the governemnt will then want to spend more.

           If they allowed themselves 1% more in the last year that would be an extra £7 billion. If they allowed themselves an extra 1% in each of the last two years, that would be £20 billion extra.

           The tax forecasts assume rapid growth for the UK in the last three years of the strategy. If growth was 1% less in 2013, revenues would come in around £20 billion less over the full period. If growth was also 1% down in the penultimate year, revenues would then be around £30 billion down.

           Of course, things could work out better. Extra growth, on top of the 2.9% forecast for each of the end years, could add to revenues. If the government takes more cost out than planned in the second and third years, there will b e knock on benefits from that. Crucial to success is getting a more efficient and effective public sector as soon as possible.

               The danger is that if there are too many overruns swelling the deficit, the government will then face dearer borrowing costs for every pound borrowed on top of the hazard of the extra borrowing.

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71 Comments

  1. Posted July 17, 2011 at 7:05 am | Permalink

    This is a good analysis but I would like to see more sensitivity analysis for contextual factors, like raw material costs, sovereign debt crisis, military interventions etc.

    Most of all though, I am concerned with cuts in Public Sector spending & growth in the Private Sector.

    Dealing with Public Sector firstly, I increasingly question whether Public Sector Reform is likely to be effectively translated into strategy & implementation – I fear that Treasury cuts will largely precipitate lower levels of service.

    Moving to Private Sector growth, I fear that this needs major stimulation to get some confidence back, for example, VAT reduction, incentives for capital expenditure etc.

    • Posted July 17, 2011 at 12:27 pm | Permalink

      Yes. Imported inflation is critical to these projections, whether you are talking about public spending (how long can pay freezes last) or private sector growth, where lop-sided inflation is creating more risk and uncertainty about the future.

  2. Posted July 17, 2011 at 7:08 am | Permalink

    It is time to dismantle the Welfare State.
    How?
    First of all, use the Redwood Plan (natural wastage) to reduce the bureaucracy as an act of urgency.
    Second of all, encourage the Big Society. This is currently being bogged down by bureaucracy. I would love to go to our local Comprehensive and give some time there. I simply cannot go to our “Community College” though because of the necessary CRB checks and getting permission from so many different people. This doesn’t need money at all, actually.
    Thirdly encourage the Churches and other do gooders to do good. The vast Overseas Budget – fifty million yesterday for the Horn of Africa – shouldn’t have gone through the tax system at all. It should have been us that gave. We spend millions on the non negotiable overseas aid budget. Where does it all actually go I wonder.
    Fourthly, ….oh never mind.

    Governments have to be re elected after all and Labour is in the background offering to spend, spend in coded terms………..

    • Posted July 17, 2011 at 9:14 pm | Permalink

      So you plan to replaced paid, trained, and vetted people with volunteers. They tried this in the US and it didn’t work. It just changed a government service to no service because no one wanted to work for free.

      • Posted July 18, 2011 at 12:26 am | Permalink

        uanime5: “So you plan to replaced paid, trained, and vetted people with volunteers.”

        It speaks with the voice of the Blair collective, you will all be assimilated!

        Look, uanime5. Volunteers was the way British society functioned before the maniac Blair ruined the whole shooting match.

        Since you apparently cannot conceive of a society that functions because its citizens want it to, I guess you are one of Blair’s spawn. I am sorry for you, but we all have a cross of one sort or another to bear in this life. Your burden is greater than most.

        uanime5: ” .. no one wanted to work for free. .. ”

        Volunteers is the very definition of choosing to work for free.

        • Posted July 18, 2011 at 7:07 pm | Permalink

          APL you sound like an employer trying to reintroduce slavery to keep costs down.

          The problem with volunteering is that it only works when people want to volunteer. The massive decline in volunteers shows that ‘citizens’ no longer want to volunteer.

          “Volunteers is the very definition of choosing to work for free.”

          Pity so few people wants to work for free. Most want money.

    • Posted July 17, 2011 at 11:56 pm | Permalink

      Mr Stallard – sorry to hear you can’t help out at the Community College owing to CRB checks. Why not?

      • Posted July 19, 2011 at 1:50 pm | Permalink

        Maybe, for the same reason I will never volunteer for anything that now involves CRB. I helped run a kids football team for a number of years, but I will never do it again because it will drag up my minor conviction for getting involved in a fight when I was a teenager. I fear once its in the system, all kinds of State agencies will use it.

  3. Posted July 17, 2011 at 7:15 am | Permalink

    You say “Crucial to success is getting a more efficient and effective public sector as soon as possible.” Could it be much less efficient? So much of what is does is totally pointless and often actually negative for everyone (save the direct parasitic staff involved) in its effect. Much government propaganda expenditure, pointless bail outs and wars and the counter productive over regulation of virtually everything as good examples.

    Certainly they show every sign of failing on their absurdly weak plans to cut the state down to size.

    I see that Cameron’s inquiry into News Corporation has calmed things down well! Soon we will just have the drip, drip, drip of the big state socialist, green religion, pro EU, BBC to tax and indoctrinate the population for generations to come.

    Still a little good news (on top of part removed HIP packs) they seem finally to want to stop people breaking into your house and squatting there (until you pay lawyers/court fees to evict them and wait months.) Doubtless the BBC will, as usual, be against this.

    Not much – but better than nothing I suppose.

    • Posted July 17, 2011 at 1:36 pm | Permalink

      So what that the BBC is a little bias in the direction you think it is? Do you think most people cannot sort out the facts for themselves. Most of the Newspapers are right wing, yet the Conservatives did not get a large proportion of the vote. Would you complain if the BBC was bias to the right as FOX News is and would you write and complain about it as much? I think not. The licence fee is a non argument. A red herring. Few people have a problem volunteering much larger amounts to SKY which is virtually a monopoly and so makes it compulsory if you watch sport. The cost to pubs is a scandal and is adds to the price of drinks. The BBC content is cheaper and much better by comparison. Without the BBC what watchable TV would there be? If you watch TV that is?

      • Posted July 17, 2011 at 3:54 pm | Permalink

        Who has been on Labour List then?

        The Mail and Telegraph did not take Mr Blair’s hand-outs. The Times, the Sun, the Mirror, the Screws (rip), did. When Mr Blair was in power, the Murdoch press was firmly on side – as ever.

        The BBC is, of course, very left wing. The difference is that we are forced, by law, to pay for it whether or not we agree. This means that we are, in fact, being drip fed the bias of the BBC at our own very considerable expense. With a virtual monopoly of the news and views, the BBC can go its own merry way.

        If there was some means of hearing about tax reduction, encouragement of the private sector, reform of social services, how to repay the trillion pound debt, how to cut back the rapidly growing bureaucracy, the scandal of 800 children being adopted, often quite unjustly and by force, the growth of secret courts and jury-less trials, the EU being discussed sensibly, some investigation into why parliament simply is not working and so on, instead of the usual stuff about climate change, minor scandals, bleating about the NHS, and the usual salacious crime, then I for one would be really pleased.

        Dream on!

        • Posted July 17, 2011 at 7:43 pm | Permalink

          Exactly.

        • Posted July 17, 2011 at 9:16 pm | Permalink

          “The BBC is, of course, very left wing. The difference is that we are forced, by law, to pay for it whether or not we agree.”

          Unless you don’t have a TV, then you don’t need a TV license.

        • Posted July 18, 2011 at 9:56 am | Permalink

          Bazman , I have a lot of time for much of what you write but this latest post is not one of your better ones .

          Quote “Most of the Newspapers are right wing, yet the Conservatives did not get a large proportion of the vote.”

          This is revisionism and repeating it loses you credibility ; they got a larger proportion of the vote than any other party .

          If the Conservative had of stuck to their promises about referendums on Europe they may well have poled somewhat better .

          I am not a supporter of any major party though have voted for them all but doubt I will vote for any of them again unless one of the comes up with a true Churchilian leader . Probably UKIP for me now and that is cross spectrum and not beholden to big business like all the others .

          Journalists have an important part to play in a democracy by holding people in positions of authority to account .

          The BBC and all the other major player have completely derelicted this duty .

          It is our very own Pravda , spewing forth unchallenged EU bile .

          What passes as BBC news today has as high a propaganda content as the Lancaster Bomber Raid bombing reports they fabricated during WW2 for morale .

          Who would ever have thought that Al Jazeera would be closer to a serious news channel than the BBC ?

      • Posted July 17, 2011 at 5:31 pm | Permalink

        “volunteering much larger amounts” is one thing. Forcing people to pay a tax used to indoctrinate the whole population with pro EU, big state, ever more top down regulation, green bogus vastly exaggerated science and other propaganda is quite another. Are you suggesting people should not be allowed to pay for Sky if they want too?

        “Do you think most people cannot sort out the facts for themselves?” No they certainly cannot they are not engineers most have no idea what a Kilo Watt Hour is, very many think CO2 is a poisonous gas. Also thanks to the BBC propaganda many think, quite wrongly, that buses and walking are greener than efficient full cars and that small wind turbines on their houses are saving the world.

        Many more are hugely influenced by a sad picture of a polar bear on a bit of ice or a good pop song or what a soap actress has to say on the issue.

        Very many cannot even work out not to buy lottery tickets (as much encouraged by often dishonest TV encouragement on the BBC)

        • Posted July 17, 2011 at 9:20 pm | Permalink

          “Forcing people to pay a tax used to indoctrinate the whole population with pro EU, big state, ever more top down regulation, green bogus vastly exaggerated science and other propaganda is quite another.”

          Do you have any evidence that the BBC is any of these things? I suspect you don’t.

          “Also thanks to the BBC propaganda many think, quite wrongly, that buses and walking are greener than efficient full cars”

          Full cars are more green than walking? Are you serious? Also full buses are far more green than full cars.

          “Many more are hugely influenced by a sad picture of a polar bear on a bit of ice or a good pop song or what a soap actress has to say on the issue. ”

          So they believe the tabloids then.

          • Posted July 18, 2011 at 4:43 am | Permalink

            “Full cars are more green than walking? Are you serious?” Yes I am this is certainly very clear – walking is fuelled by extra food intake which has more warming effect in its production, packaging, distribution and cooking than the car fuel does.
            (If food is such an efficient fuel perhaps we need a car that runs on steak chips and red wine – I think not).

            Buses have average occupations depot to depot often as low as 9 they take indirect routes, big engines, cause congestions and use extra fuel by regular stop starts and need a professional driver and ticketing systems. Just do the sums include travel to depot and the driver’s energy use.

            “Do you have any evidence that the BBC is any of these things?” Just watch and listen to it – the evidence is there every single day. The fact that you ask me “are you serious” about something (that is very clear scientifically on walking and buses) above is perhaps due to this BBC drip of misleading information.

          • Posted July 18, 2011 at 6:36 pm | Permalink

            If you think that the average person needs more food because they take moderate exercise you are a fool.

          • Posted July 18, 2011 at 7:12 pm | Permalink

            @lifelogic
            “Yes I am this is certainly very clear – walking is fuelled by extra food intake which has more warming effect in its production, packaging, distribution and cooking than the car fuel does.”

            Food produces more CO2 than drilling, refining, and burning petrol? Either post the maths showing this or admit you’re deluded.

            “Just watch and listen to it – the evidence is there every single day.”

            No there isn’t. Either provide some related material from the BBC website or admit you made the whole thing up.

          • Posted July 18, 2011 at 10:56 pm | Permalink

            You say “full buses are far more green than full cars”. Not true firstly they cannot be full over a journey or they could not pick any one up or let anyone off (that would be more of an intercity coach which are efficient). Secondly they have big engines stop and start all the time, have to come to and from a depot, take indirect routes and need a driver with his personal output and journeys too, ticketing systems and admin staff as well.

            You have I suggest been misguided – perhaps by the BBC?

      • Posted July 17, 2011 at 6:02 pm | Permalink

        Bazman: “Few people have a problem volunteering much larger amounts to SKY ..”

        BINGO!

        Bazman: ” which is virtually a monopoly and so makes it compulsory ”

        Virtually a monopoly = not a monopoly at all.

        BBC (which if it is so good, should convert to a voluntary subscription )

        Independent Television

        SKY

        Only one of those compels you on pain of imprisonment by the state to pay a fee to the state. Fancy paying a license fee for your refrigerator?

        Because that is how stupid it is to have to pay a license for your television.

        • Posted July 17, 2011 at 9:21 pm | Permalink

          Actually you only have to pay a license for your TV if you want to receive TV programs. If you just use it for watching DVDs and playing games you don’t need a license.

          • Posted July 18, 2011 at 12:33 am | Permalink

            uanime5: “Actually you only have to pay a license .. ”

            But should you come to the attention of Capita, the BBC’s (enforcers-ed), you have to prove in court that you are not using the TV to recieve television signals.

            Short of putting your house inside a Faraday cage, it is almost impossible to prove a negative.

          • Posted July 18, 2011 at 4:47 am | Permalink

            I think it is just needed to watch live TV – so you can watch on the computer if it is not live without a licence I understand. But you do get a lot of threatening letters.

          • Posted July 18, 2011 at 9:43 am | Permalink

            lifelogic: ” .. so you can watch on the computer if it is not live without a licence I understand.”

            Do you not remember a while ago, when employeers were allowing people to watch streaming TV at work because it was the world cup – or some such?

            The BBC were out and about putting it in peoples minds that you’d still need a license if you watched the WC (or whatever it was) on your PC. Didn’t matter if you watched it on SKY or ITV streaming media.

            You will also notice that the text on the license [or its application] implies that you need a license for any device capable of receiving broadcast signals.

            Your PC has a media card, the BBC thinks it needs a license, streaming media, BBC thinks you need a license.

            Are they are working on licensing your PC, you betcha!

        • Posted July 18, 2011 at 9:09 pm | Permalink

          What about your car?

      • Posted July 17, 2011 at 8:31 pm | Permalink

        Bazman, people do not volunteer money to Sky, Virgin and the various media groups, of their own free will they choose to subscribe or buy.
        The BBC’s revenue is raised from a compulsory tax on every owner of a television, for which the ultimate penalty for not paying, is a jail sentence.

        I completely agree with your point about the ability of many of the public to spot the bias. However, only one media source, the one which has the biggest segment of the UK news market in radio, tv and the web, claims to be unbiased and that is the BBC. It is not unbiased. It adopts a Guardianista line on most issues and frequently copies and pastes from that news source. Left wing, foolishly green, pro EU, overly sympathetic to Islam, anti Christian and anti many of the values which have been the bedrock of this country. What is really dangerous is that it frequently edits (suppresses) important details of news stories or completely ignores them when it doesn’t fit their agenda. This happens every day and it’s very difficult to spot.

        I have come to really loathe the BBC’s not so hidden agenda and believe it has done great damage to Britain. I think the time has come for it to be dismantled and privatised. Mr Cameron’s response to its attacks on him and the coalition was to appoint the leftist arch liberal, Lord Patten. I would have begged Lord Tebbit to take it on!

        • Posted July 18, 2011 at 7:15 pm | Permalink

          “Left wing, foolishly green, pro EU, overly sympathetic to Islam, anti Christian and anti many of the values which have been the bedrock of this country.”

          Provide it. Either post some links from the BBC’s website showing this or admit you made the whole thing up.

          “This happens every day and it’s very difficult to spot.”

          How do you manage to spot it?

          • Posted July 19, 2011 at 2:57 pm | Permalink

            The signs. If you step out of your door and see a lorry with a ‘7’ on it for example this number will have great cantations. This together with the literal taking of music will help you to clearly learn what the impending future will be and hidden messages especially for you in BBC broadcasts, but be careful as birds are robotic spies of the government. Not true? Oh really! Have you seen how they beadly watch you and the strange way they move?

        • Posted July 18, 2011 at 9:04 pm | Permalink

          As I have pointed out the licence fee argument is a red herring. At least this tax goes on to TV broadcasting. If this where the main problem the critics would also be up in arms about car tax and they are not. The only bais many are on this site are concerned about is their own. I take it they think SKY is good and has watchable TV and all subscribe? SKY is not really fair as they bundle their services together forcing people too pay services they do not want or need Virgin media is guilty of this too. What is The BBC to be replaced with. Local TV like in Germany? Ever watched German TV? Again I refer you to the Astra 19.2 E satellite. This is what you will get without the BBC. Murdoch Junior said that profits come before standards who agrees?

        • Posted July 18, 2011 at 9:12 pm | Permalink

          If the newspapers and the media broadcasters sent out the right messages then there would be less divorce, crime, people would go to church etc? Fantasy.

  4. Posted July 17, 2011 at 7:27 am | Permalink

    The planning is already out of kilter with the Libyan costs and lower than forecast growth in the last two financial years.

  5. Posted July 17, 2011 at 9:16 am | Permalink

    The Coalition Five Year Plan – a more appropriate title – is Alice in Wonderland forecasting. As everyone agrees any growth has to come from the private sector but the dynamics are not there for growth. We are really being fronted, not led, by a bunch of manyana and misguided ministers. Serious growth needs big cuts in expenditure/green taxes to slash corporation and employment taxes, and the overriding issue of the EU bureaucratic dictatorship and its disastrous impact on business needs to be addressed with the referendum obviously much feared by our MPs.
    Peter Hitchens’ column in the MOS today is worth a read.

  6. Posted July 17, 2011 at 9:27 am | Permalink

    What about private sector debt? Public sector debt has ballooned in the last couple of years due to government Keynesian substitution; but, private sector debt was expanding by about 10% a year from 2002, mostly borrowed from foreigners, to fuel the “Brown Boom”.

    The private sector, particularly the household bit, is mired in mortgage and credit debts, it will have to pay this down from a declining income. About forty percent of our GDP is dependant on mortgage borrowing directly and indirectly, mortgage lending has collapsed and is not coming back anytime soon. Twenty percent of GDP is dependant directly on public spending which is set to decline. Our real terms industrial output is five percent lower than it was ten years ago.

    Please will someone tell me where all this growth is going to come from to reduce our deficit and debts, both in the public sector AND the private sector?

    • Posted July 17, 2011 at 11:38 am | Permalink

      I fear the usual way, Acorn: printing money. That way both public and private debts will be cancelled. Too many people have an interest in inflation, both in the public and private sectors, and not enough are Germans who were alive in 1922-3, or Rhodesians of any age.

      • Posted July 18, 2011 at 10:01 am | Permalink

        When UK authorities were offering Mugabe sanctuary in the UK I thought it was to persuade him to stand down .

        It’s starting to look like they wanted to get him over here as an economic advisor .

    • Posted July 17, 2011 at 1:17 pm | Permalink

      The 5 year plan says consumer debt, mortgage lending and house prices will all increase!

      They are not going to reduce the debts, they are going to start re-classifying the government debt as ‘green investment bank’ bonds.

      You know those energy performance certificates? You know they bit that tells you how much you will save per annum if you made home improvements? They are going to turn those ‘savings’ into loan repayments for said home improvements, to be secured on your meter and collected by your electricity company.

  7. Posted July 17, 2011 at 10:16 am | Permalink

    I do not believe that the strategy is working or will work. Four reasons:
    (1) The last budget was a missed opportunity to make necessary tax changes to incentivise work and investment;
    (2) Recent evidence in the form of now numerous u-turns show that the government lacks the bottle to see even its current inadequate spending programme through;
    (3) The government persists with unjustifiable spending, notably increases in foreign aid and an ill-conceived foreign military adventure in Libya;
    (4) Energy policy is in a mess and is a disincentive to any business contemplating new investment in the UK.

    It would not surprise me if, once they have given the economies of the PIGS a thorough going over, the markets do not turn their attention to the UK. Given the current political weakness of the PM arising from the News International fallout, a full scale political and economic crisis is a distinct possibility unless economic policy changes in a direction that actually promotes business and growth.

  8. Posted July 17, 2011 at 10:30 am | Permalink

    We will never reduce our debts whilst welfare costs are out of control. These costs could be cut considerably by doing what should have been done from the outset – every claim should be rigourously checked. It seems incredible that incapacity benefit seems to have been dispersed on only the say so of the claimant – an invitation to fraud and once given never followed up. Housing benefit – are checks made to see if the property really exists, to see who the owner is and check who actually lives there? These elementary checks against fraud do not seem to be made. Going back to paying the tenant and not the landlord was a huge mistake and should be reversed. There are reports of pregnant women flying in here from all over the world to have their babies free on the NHS. When presenting at hospitals are these patients asked for their NHS number and proof of residence where in doubt and if so is a credit card number ever asked for? The same goes for any other medical treatment. Again the most elementary checks for claims against the public purse do not seem to be made. The welfare bill is very high partly because of incompetence and no desire on those charged with handing out the money to see it goes only to those entitled to it. If we dish out money and services in such a slap dash way is it any surprise that we are a magnet for people from across the world determined to milk us; to the detriment of our own population who have paid for it. The bill for welfare will continue to grow unless we get a grip.

    • Posted July 17, 2011 at 9:30 pm | Permalink

      What you propose will achieve nothing. The vast majority of benefit claims aren’t fraudulent so very little money will be saved. It’s even possible that your proposals will cause the UK to lose money because the cost of investigating everything will be more than the amount lost to fraud.

      The best way to fix this is as follows:

      1) Reduce the cost of property. Housing benefit is high because the cost of housing is high.

      2) Raise minimum wage to £9 per hour so that those in full time employment won’t require additional benefits to supplement the low salaries companies pay them.

      • Posted July 18, 2011 at 10:18 am | Permalink

        Agree with you on 1) .

        The damage has however already been done hasn’t it by letting land prices get so out of kilter with incomes .

        None of the major parties will ever contemplate 1 .

        I’m not so sure about 2) . Would rather see all efforts put into tackling 1) – the cost of living in the UK being too high .

        Perhaps as an alternative to 2) we should be looking at encouraging other countries to provide what we take for granted in the UK ; welfare state , healthcare which is free at point of delivery , trial but jury etc so there business overheads are higher .

        Any UK companies which choose to outsource to /import from countries which do not have welfare systems , trial by jury , free at point of delivery health services could be subject to penalties .

        Imports from such countries should attract extra duties .

    • Posted July 17, 2011 at 10:45 pm | Permalink

      I think the biggest increase in the welfare bill is attributable to the ageing population. I don’t know how much that cohort consumes of the NHS budget (rather a lot I suspect) but pension expenditure has tripled in the last 15 years.
      http://www.ukpublicspending.co.uk/downchart_ukgs.php?year=1985_2015&state=UK&view=1&expand=&units=b&fy=2011&chart=00-total&bar=1&stack=1&size=1579_726&color=c&title=&show=

  9. Posted July 17, 2011 at 10:40 am | Permalink

    Your last paragraph represents possibly the biggest single danger. If the markets suddenly turn away from the Eurozone, either having got bored with it or else possible even having broken it, and then decide that its our turn to be tested, the government’s costs to service its outlandishly increasing stock of debt will balloon and – quite literally – break the bank. Possibly it won’t ever happen, but the Coalition’s whole strategy smacks to me of complacency. Why are we increasing taxes to an astonishing and unprecedented level instead of actually cutting public spending? The current strategy assumes that every pound spent by the government delivers more economic stimulus than a pound spent by a private consumer, and is clearly nonsensical. Personally I would take an axe to the whole budget, return it to, say, 2003 levels vis-a-vis the size of the economy, accept the large public sector job losses resulting (all of which would be non-jobs anyway, and quite probably delivering a negative overall benefit to the economy), cut taxes and watch the economy start to blossom. Very painful for the public sector, but within 5 years we would once again be an economically and financially healthy nation. Of course, it’s not the sort of plan that would appeal to the sort of Dear Leaders who will happily increase our borrowing so that they can give yet more lorryloads of money away to India, Africa, Brussels and the IMF.

    • Posted July 17, 2011 at 9:33 pm | Permalink

      How many “non-jobs” would be lost if we returned to 2003 levels? How will you ensure that only “non-jobs” are shed?

      Also how will cutting taxes magically make the economy better when most European countries have higher taxes and stronger economies?

      • Posted July 18, 2011 at 12:20 pm | Permalink

        You are simply wrong and being too simplistic!

  10. Posted July 17, 2011 at 12:40 pm | Permalink

    I cannot help believing that Mr Redwood has addressed this matter (again) because he has doubts as to whether government spending, growth, increasing tax take and Treasury forecasts will be accurate.

    I do not believe any of it. Surely the solution to the deficit is reduced spending and lower taxes to promote growth and employment.

  11. Posted July 17, 2011 at 1:07 pm | Permalink

    JR: “The Coalition government published a 60 month strategy in June 2010. ”

    Narrowly escaped the notorious ‘5 year’ plan there.

    ‘Tractor production will be up at the end of the 60 month period’.

    Those were the old days, with the modern 60 month plan we get:

    “Industrial activity will be strangled and production will be down thanks to Comrade Huhne’s visionary 60 month ‘Carbon reduction’ plan.”

    Comrade Huhne also said; At the end of the five year , sixty month plan, we will have more windmills than Holland. This will allow us to feed power to the windmills and thus make sure there is always a cool breeze blowing across our glorious proletariat as they toil in the fields, under the watchful eye of our EU International security force.

    Forward Comrades to the brave new world.

  12. Posted July 17, 2011 at 1:33 pm | Permalink

    As Nouriel Roubini said in his book ‘Crisis economics’ “Crises cannot be abolished; like hurricanes, they can only be managed and mitigated”

    The government has articulated a credible plan for this term. The markets and IMF have responded well so far. To build confidence in these plans they must be implemented and more importantly independently verified by the OBR.

    Simultaneously financial stability must be improved with the gradual implementation of the Basel rules. The bank stress tests are being analysed this weekend and we will have a clearer picture of the exposure of banks to sovereign debt of periphery countries. Confidence in the financial system is essential for investors.

    Off topic: The current scandal in hitting the newspaper industry shows the vulnerability to undue and inappropriate interference, the root of which I suspect is the financial pressures to maintain circulation numbers. Your blog fills a niche that the mainstream press cannot fill. The ability to have a rational discourse with your constituency without commercial pressures is a model for modern democracy.

    • Posted July 17, 2011 at 4:59 pm | Permalink

      According to Mr Redwood, the plan is to bring the deficit under control by 2015 by steadily increasing the national debt. Would anyone care to guess what the interest will be on the national debt by 2015?

      Reply: The June 2010 budget forecast was £63 bn a year of central government debt interest by 2015

      • Posted July 18, 2011 at 12:38 am | Permalink

        JR: “The June 2010 budget forecast was £63 bn a year of central government debt interest by 2015”

        I think the point is, you should ask Greece how their interest payments are working out just now.

      • Posted July 18, 2011 at 9:30 am | Permalink

        This implies that the government has a view on interest rates in 2015. That £63 bn you mention should be a range not a single figure.

  13. Posted July 17, 2011 at 2:39 pm | Permalink

    So getting solvent requires achieving average UK growth rates during a boom while the Climate Change Act requires about a 7% annual reduction in electricity and/or a massive rise in price. Growth has historically always been closely correlated with electicity growth.

    Meanwhile China’s electricity and GNP continue marching in lock-step at 10% annually and by the end of the Parliament they will be 61% better off than they were at the start.

    • Posted July 17, 2011 at 9:30 pm | Permalink

      Yes indeed – the UK approach is just insane.

  14. Posted July 17, 2011 at 3:11 pm | Permalink

    EU greed is absolutely the fly in the ointment of all the govt plans, isn’t it? Billions for bail outs, billions more for increased EU budgets, billions more in implementation costs for EU legislation…

    Then there are the billions for Cameron’s overseas adventures…

    Not looking very promising for Osbourne’s targets, I have to say…

  15. Posted July 17, 2011 at 4:51 pm | Permalink

    The electorate is not completely stupid – though Labour voters are often totally tribal. Rather than bribe them with spend, spend, spend (and spend again if Balls is chancellor.) The case should be made – the latest OBR report makes harsh reading – for reforms – most people have no idea how badly indebted we are and how untenable Labour’s spend policy is…a good half still blame the bankers. That will require PR at which this government is very poor – maybe because it is coalition and the Lib Dems include the numerate (the orange bookers) and their innumerate majority who should be in the Labour Party. The Balls and Hughes etc. all continue to speak as though nothing is wrong except that the heartless Tories are at the wheel and I expect Balls to convince at least hald the population via the BBC that the problems with the economy can be attributed to the kootz. As you point out things may go wrong in which case game over.

    Talking of spend, spend, spend… I am trying to think what government expenditure or policy has helped me in the last decade. There must be something surely – anyone?

    • Posted July 17, 2011 at 9:38 pm | Permalink

      So everyone is to blame except the Conservative. Great double standards you have there.

      The global recession was caused by the bankers; not Brown, Balls, or Hughes. This is why it affected countries outside the UK.

      The failure of Government’s PR also the Conservative’s failure, especially since they’re the larger partner in the Coalition.

      • Posted July 18, 2011 at 12:41 am | Permalink

        uanime5: “So everyone is to blame except the Conservative.”

        We are one and a bit years into this pseudo Conservative government after fourteen years of Labour, I admit Cameron and his rabble are bad but it takes skill to **** up like Blair and Brown did.

        • Posted July 18, 2011 at 7:16 pm | Permalink

          So it was the skill of Blair and Brown that caused a global financial crisis?

      • Posted July 18, 2011 at 7:49 pm | Permalink

        The crash hurt us more because as a country and individuals we massively overborrowed. The signs of the bubble were there – Balls/Brown did nothing except spend more to get re-elected, regulators in the system designed by Brown were asleep at the wheel – I was told about the crash 18 months before. Bankers do have some culpability bt that is why we have regulators – no just to provide wages and pensions to civl servants and retired bankers.
        Help me with anything good Brown/Blair achieved? Iraq war?

    • Posted July 17, 2011 at 10:03 pm | Permalink

      I think most Tory voters are equally tribal – and therein lies the problem.

      Call me Dave prefers to think that his only way to win a majority next time is by cosying up to Lib Dem voters and dissaffected labour voters by moving ever more to the left (or the ‘centre’ as the BBC would call it). That’s what his team of advisers tell him, with their endless polls of floating voters in the handful of marginals that will supposedly clinch victory, and that’s what he feels happy doing. A flawed strategy, but shows where his true feelings lie and/or shows he is not a conservative.

      But Tory voters will still vote for him. We can already see what is going to happen – ‘real’ conservative voters get patronised and ignored in office, but will be cossetted and charmed as we get nearer the next election; they’ll choose to forget that Dave kicked them all in the collective gonads with his cast iron guarantee, airy claims about restricting ‘uman rights & immigration that came to nothing and proved he truly is the heir to Blair by having a war all of his own.

      Now I would rather the rump of the Tory right tell him where to go and leave the party, but they are too timid to do that. I really think this is the only way to create a new right wing party, but what do I know. They’re the experts.

      Unfortunately, not enough conservatives will stop voting for Dave, because they always vote Tory, even though he is not really a Tory and they know it! What he really deserves is the lowest vote in history next time round, but much though I’d like it, I think it just won’t happen.

      Reply: Conservative MPs were elected as Conservatives and intend to serve as Conservatives. Many of them also rebel on issues and votes in line with the Conservative views they put to their electors to get elected. They are not about to form a new party or join UKIP, as they are Conservatives and were elected to serve on promises to serve as Conservatives. It’s not a question of being “timid” but of sticking to their views and pledges.

      • Posted July 18, 2011 at 10:45 am | Permalink

        “What he really deserves is the lowest vote in history next time round, but much though I’d like it, I think it just won’t happen.”

        He may well get the lowest vote in history but if that is the lowest turnout in history he could still win .

        Stranger things have happened .

        Agree with you about the tribality of it all .

      • Posted July 18, 2011 at 7:50 pm | Permalink

        I only vote Tory because I have watched labour spend us into oblivion since I was a child.

        • Posted July 20, 2011 at 10:19 pm | Permalink

          Well, at least now you can see the Tories doing much the same.

      • Posted July 18, 2011 at 10:14 pm | Permalink

        I’ve don’t doubt that most Tory voters (and most Labour & Lib Dem voters for that matter) still generally assume that conservative MPs are right wing, supporters of small governement, low taxation, capitalism, stout defenders of law & order and fiercely anti EU.

        But most of the time they are mistaken.

        As you rightly keep pointing out, Tory voters are not getting what they thought they would get from a Cameron led coalition and this is because the Cameroons have undoubtedly moved the Tories to the left, or do you disagree? Was it Nick or Dave that said they can’t find much to disagree about? Can you imagine Norman Tebbit and David Steele having that conversation?

        So I would argue that people still vote conservative, in the hope they get conservative policies – they won’t have read your manifesto any more than Labour voters read theirs. But as we can see, they don’t get conservative policies from the Tories anymore.

        Your party has moved on from those positions that once won them outright victories and it now dances with David Milliband on the head of a pin over the fraction less they want to increase spending by over the next 5 years compared to Labour. They guarantee to keep funding the NHS at Labours inflated levels. They cut defence spending. They no longer support grammar schools. They want us to remain in the EU.

        You don’t agree with any of this and nor do I. But your party does. They’ve moved away from you on a fundamental level, so a vote for you is lost because your party does not agree with you and many more of them vote against you than with you.

        That is why I think you are better off without them and should seek to build a truly conservative movement away from the shackles of the Tory party.

        But as I said earlier, you’re the expert. But please explain to me, how else does a vote for you get me any closer to the things you and I both want?

        for you because of your views on the EU and the economy (and I agree with your position on these issues). I don’t know your views on education, but I would guess that you support the reintroduction of selection in education as well.

        • Posted July 20, 2011 at 10:18 pm | Permalink

          Whoops – please ignore that last paragraph, but I would really like to see an answer to the question I pose:

          ‘please explain to me, how else does a vote for you get me any closer to the things you and I both want?’

  16. Posted July 17, 2011 at 9:44 pm | Permalink

    If the Government is planning to increase total current spending by £93 billion a year in 2014-15 compared to 2009-10, and to increase tax revenues by £172 billion a year over the same period then by my calculations after 1 year spending should have increased by £18.6 billion and tax revenues should have increased by £34.4 billion. Have these targets been met?

    If not then might I propose a 60% tax rate for 22,000 people who earn over £500,000 per year to raise additional tax revenues.

  17. Posted July 17, 2011 at 11:08 pm | Permalink

    Any party that promises a real in/out EU referendum will get a certain election win.
    Ed any chance mate?

  18. Posted July 18, 2011 at 12:14 am | Permalink

    OT – but just wondering what you think David Cameron’s biggest mistake has been so far? The daily telegraph lists ten, of which the top ones are:

    1. Making a commitment to hold a referendum on the Lisbon Treaty and then abandoning the pledge: 48 per cent

    2. Supporting climate change policies that will increase energy bills: 40 per cent

    3. U-turn on NHS reforms: 32 per cent

    4. Making the creation of a Big Society central to Tory policy: 25 per cent

    5. Flirting with softer prisons and sentencing policies before U-turning: 24 per cent

    6. Opposing grammar schools: 23 per cent

    7. Agreement to Nick Clegg’s participation in the election debates: 22 per cent

    8. Not making defence spending a priority: 21 per cent

    9. Not campaigning on immigration: 20 per cent

    10. Lack of economic policy before recession, including decision to match Labour’s spending plans: 18 per cent

    http://www.telegraph.co.uk/news/politics/david-cameron/8642577/Top-10-mistakes-of-David-Cameron.html

    Some of them are too late to do anything about.

    He has already U-turned on nos. 3 and 5.

    4 is too wishy-washy to comand much attention when it is competing against two wars, the euro crisis, telephone hacking and all the rest. Best just to drop it quetly.

    May as well U-turn on 1 and 2 and at least salvage something!

  19. Posted July 18, 2011 at 12:59 am | Permalink

    The proposer of the 60% tax rate and others of his ilk are financial ingrates,when last we had rates like these almost our entire showbiz establishment left for LA including Tom jones ,Rod
    Stewart,Engelbert Humperdink etc,Tom actually said to me when I met him in Australia in 1975, that he left because he was buggered if he was going to sing 9 songs for the government
    and 1 for himself.The same applies for businessmen and many others.I would love to know how much tax was lost [at acceptable not punitive rates] when all these people and businesses/men to our exchequer left our shores,at todays rates it runs into billions I am sure,
    even in an interview in today’s mail Rory Macilroy is considering moving to Monaco as has Lewis Hamilton to Switzerland already,to cut their taxes at the current rate not even this stupid 60% suggestion,all this does is CUT OFF YOUR NOSE TO SPITE YOUR FACE
    and BOY DO YOU BLEED,in other words the country loses the tax revenue and another GAINS IT.Let me also give a very simple example of public sector savings that are now WASTE. I live in a block of flats that you have to be over 55 to live in, I am 66 and still fit and able BUT most of my lovely neighbours are more than 80 years old,we have hair trigger sensitive smoke alarms in our flats [yes probably necessary given some are not very mobile] these go off quite often,if the block chairman doesn’t get to the control board to check the flat number which has triggered the alarm and then goes to check WHY and then gets back to the board to key in a code,the Fire Brigade sends an Engine come what may,on friday at 3pm we had an occurance, 15 minutes later came one fire engine Fully staffed,stayed precisely 1 minute [ it was an accident as they all are,even burnt toast sets it off like a wailing banshee] then left. 15 minutes later another fully staffed engine came from another fire station stayed 1 minute and left.What was the cost ?????.What should happen is this, firstly the time lapse should be a little longer to STOP unnecessary
    fire brigade time and money and secondly ONLY one engine to be despatched,as the likeley
    event of a major fire occurring needing two given the Hair Triggger nature of the smoke alarms is negligable.We unfortunately have at least half a dozen of these a month BUT
    multiply that by the number of these type of blocks of flats in the UK and my guess is thousands of times a year,NOW multiply this by the Thousands of other similar types of issues.It is because of this that I think all of the public sector would run a brewery and get
    LEMONADE OUT ,and I actually believe the public sector is a PARASITE that should have a huge dose of DDT.Why do we need as our housing association has, at a cost of £37500
    per annum a “Diversty and equality OFFICER” for each area and there are 12 areas.

    • Posted July 18, 2011 at 10:56 am | Permalink

      Does the £37,500 include pensions contributions , free child care and all the other benefits ?

      You are likely talking over £50k maybe even £60k total package if they have children do any overtime .

      Potential saving £720k/annum .

    • Posted July 18, 2011 at 7:26 pm | Permalink

      “Tom actually said to me when I met him in Australia in 1975, that he left because he was buggered if he was going to sing 9 songs for the government
      and 1 for himself.”

      Wouldn’t that be a 90% tax rate, rather than a 60% one?

      “The same applies for businessmen and many others.I would love to know how much tax was lost [at acceptable not punitive rates] when all these people and businesses/men to our exchequer left our shores”

      Given how few businesses left I’d have to say very little. The service industry cannot be outsourced so Tesco, Asda, McDonalds, KFC, IKEA, and Shell have to accept the higher taxes. As Denmark has a 62% tax rate any company currently in Denmark won’t leave if a 60% tax rate is introduced.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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