Controlling public spending


The last time a government had to control the excess spending and borrowing inherited from its Labour predecessor was 1979.

I have been reading Mr Moore’s new official biography of Margaret Thatcher. He guides us through the received wisdom and the well known press cuttings and literature. In the case of her private life he does shine new light with access to the fascinating family letters, especially to her sister.

When it comes to the first couple of years fighting the deficit and excess spending he is less sure of foot. The fascinating thing was that despite all the preparation in opposition to come in and control spending from Day one, the first two years saw a huge increase in public spending. This “fiscal stimulus” did not rush us out of recession, nor did it make the government popular.

I had been one of the two external advisers to the extensive Policy Group work done on public spending under Keith Joseph’s chairmanship in opposition. We had been through the published “books” with a fine toothcomb, and knew how the incoming  government should get to grips with runaway spending. Margaret had taken a strong personal interest in our work, as we  were regularly told. Our papers were often called in for pulping, as she was understandably afraid  that the detailed plans woud leak, even though they were in line with the regular public statements about the need to curb spending.

Yet in the first year the government took cash spending up from £75 bn (General Government expenditure) to  £90 bn, an increase of 20%, and in the second year up to £108.6bn, a further increase of  20.6%. The total increase over the two years was 44.8%   (Red Book p 120  1997-8 ). Public sector inflation was rapid, and a  lot of the increase went on higher wages. It was nonetheless a  real increase of 5.2% as scored in an understated way by the Treasury at a time of stories of massive public sector cuts. Actual inflation was 29.8%, so public spending went up by 15% more than the GDP deflator measure of inflation.(Red Book p 120).

So why did this happen? I think the main  reason was the official civil service presented eveything to Ministers in so called real terms. These figures concealed the huge cash increases in spending going on. I called John Hoskyns (Policy Adviser) at No 10 as soon as I saw some cash figures that revealed what was really going on. When I showed them to him he expressed surprise at the scale of the increases, as all the government debate was couched in terms of cuts and how many cuts the system could take. It was only  when Ministers and their advisers started to demand and to use  cash figures that the true scope of the spending control problem became clear to them.

The Coalition has put up spending by much less than the Thatcher government did in its first two years. They too, however, have tended to look at so called real figures instead of cash figures.  Where the Thatcher government increased spending by 44%, the Coalition increased current public spending  by just 7.8% in cash terms, and continued with most of Labour’s capital cuts. The Coalition has said it is cutting spending in real terms, yet overall current spending rose a little according to official figures. The rest of us have to budget in  cash. Our pay does not go up to allow for full inflation. The best way to budget in government if you want to bring the deficit down its to ask how many twenty pound notes each item costs.

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  1. Nina Andreeva
    Posted May 9, 2013 at 5:38 am | Permalink

    It might actually be more effective for the government to ask should we be involved here to begin with? There is nothing written in tablets of stone to say that governments must be involved in the charity game. Its something that only became a burden on those that work for a living after 1945. Welfare is something that virtually does not exist in countries like Singapore or occurs in a much reduced version in places that share a common Anglo Saxon heritage and do not have the Chinese values of shame and self reliance, like Oz and NZ. If you really want to spend less you have got to disengage from where the state spends the most of our money. Other than that the false way to prosperity lies yet again in cutting the budget of the BBC World Service for example.

    • Bob
      Posted May 9, 2013 at 8:11 am | Permalink

      @Nina Andreeva
      “Other than that the false way to prosperity lies yet again in cutting the budget of the BBC World Service for example.”

      With the BBC’s legendary reputation for wasting License Fee payers money it shouldn’t be difficult for them to reorganise their budget to cover the World Service. For one thing they could stop paying eye watering amounts of severance pay to employees who resign of their own accord.

      The TVLA draw over half a billion pounds from the National Welfare budget just to cover TV Licenses for the over seventy fives. This should be stopped. People over 75 should simply be exempted from the need of a TV License.

      • Jerry
        Posted May 9, 2013 at 7:55 pm | Permalink

        @Bob: “The TVLA draw over half a billion pounds from the National Welfare budget just to cover TV Licenses for the over seventy fives. This should be stopped. People over 75 should simply be exempted from the need of a TV License.”

        Perhaps they should also then be exempt from funding TV adverts when they spend their pensions in the big brand shops or on branded goods elsewhere (more often than not simply buying essential goods, not luxury items), perhaps they should be exempt from paying BSkyB for what used to be available for free before TV was over commercialised. Or perhaps state pensioner benefits should be means tested, some on the Tory front bench even think so in effect, considering that at least one grandee has suggested that those wealth recipients who are receiving universal benefits such as TVL and heating should consider sending the payments back…

        • Bob
          Posted May 11, 2013 at 12:06 pm | Permalink

          ” some on the Tory front bench even think so in effect, considering that at least one grandee has suggested that those wealth recipients who are receiving universal benefits such as TVL and heating should consider sending the payments back…”

          Danny Alexander could set up a voluntary tax account making it easy to pay more than their actual liability if they so wish.

          People would also be able to return unwanted benefits. The money raided might even be enough to cover the subsidised bars and restaurants in the Houses of Parliament.

          • Bob
            Posted May 11, 2013 at 12:10 pm | Permalink

            ‪‪ “the money raided”
            ‪‪ should read:
            ‪‪ ”the money raised”.

      • Nina Andreeva
        Posted May 9, 2013 at 8:08 pm | Permalink

        Sorry but the World Service is funded by the FCO not with licence money

        • Bob
          Posted May 11, 2013 at 11:32 am | Permalink

          Foreign Office funding for the service will stop in April 2014 when it will be paid for out of the licence fee.

    • Disaffected
      Posted May 9, 2013 at 8:17 am | Permalink

      The Lib Dems think well off pensioners should have cut backs like pay for their TV licence. What they have failed to work out is that no one thinks they should pay a TV tax for a bias propaganda unit. The BBC has grown way beyond its remit and serves no useful purpose to the public. It is either small impartial state broadcaster or if it wants a political view it becomes independent and self-sufficient. A bit like you say self-reliance. There is no need for a state broadcaster in todays age.

      • Jerry
        Posted May 9, 2013 at 8:05 pm | Permalink

        @Disaffected: “What they have failed to work out is that no one thinks they should pay a TV tax for a bias propaganda unit

        The SLP would agree with you there ‘Disaffected’, funny how both the hard right and the hard left can end up complaining of biased from the same broadcaster and often the same content – Duh!…

        Such rants reminds me of the lyrics by Stealers Wheel to that song from Reservoir Dogs; Clowns to the left of me, Jokers to the right, here I am, Stuck in the middle with you…. 🙁

        • Edward2
          Posted May 11, 2013 at 8:47 am | Permalink

          If you think your regular rants like thos one, are in the middle of the political spectrum Jerry, then you are very deluded.

          • Jerry
            Posted May 11, 2013 at 12:17 pm | Permalink

            @Edward2: Oh right, so being unbiased is actually being deluded now is it Edward, sorry but you really do not have the first clue. I suggest that you broaden your horizons, perhaps then you might care to argue an informed point about what (for example) the SLP are -also- complaining about rather than just dishing out rather cheap, second-hand, personal abuse!

          • Edward2
            Posted May 11, 2013 at 4:56 pm | Permalink

            You like to hand it out to anyone you take exception to, but get very cross as soon as anyone comments back or makes a challenge to your opinions.
            You were giving yourself a big pat on the back with your quote from an old pop song about clowns to the left, jokers to the right, trying to say you stand high and mighty on the centre ground with your views.
            When someone like me points out that your views are nowhere near the centre you get all stroppy.

          • Jerry
            Posted May 12, 2013 at 9:54 am | Permalink

            @Edward2: The problem there is that I try and argue my point from a base of fact -if I’m proved wrong then I will happily both admit to being wrong and even change my opinion, or at least stop arguing- on the other hand to many on both the right and left wing prefer to argue the point on a rant rather than a fact. If John would allow I could post proof that the SLP are complaining about (perceived) right wing bias from the BBC, in fact the SLP have been complaining bitterly that they do not get invited onto programmes such as QT but UKIP does, considering that neither party have any UK MP”s.

            This is what I mean when I suggest you need to
            broaden your horizons, for example reading the Morning Star doesn’t make you a Communist, reading the Financial Times doesn’t make you a Capitalist, it just you better informed…

            Oh and before anyone tries to suggest otherwise, I have no party affiliations of any direction or non.

        • Edward2
          Posted May 12, 2013 at 5:56 pm | Permalink

          Fair enough, I am not going to refuse to believe what you say.
          You have your strong opinions I have mine. We can both bring forward facts and statistics that support our case. Such is the nature of debate and politics.
          But my original simple point is, that having read your many posts on here, it is plain that your political beliefs are not “of the centre ground”

      • Nina Andreeva
        Posted May 9, 2013 at 8:16 pm | Permalink

        As I have said here before the BBC should be forced to sink or swim as NPR/PBS does in America by getting people to donate voluntarily to it. Personally I think the output is mostly rubbish and anything political comes with an obvious left liberal bias. I begrudge having to pay for a licence for something that I do not use. Being that the multi cultural Andreeva family watches overseas ethnic broadcasters via satellite. If I do not have the licence some (official-ed) will be around threatening me with a fine/jail time as soon as he sees the dish

    • Jerry
      Posted May 9, 2013 at 8:27 am | Permalink

      @Nina Andreeva: What you seem to be suggesting is one sure way of getting the majority in the UK to vote for a Labour (if not truly Socialist) government in 2015, next you’ll be suggesting we bring back the work houses and Rotten Boroughs…

      Sorry but the politics of spite or envy is unwelcome regardless from where it comes, left or right.

      • Nina Andreeva
        Posted May 9, 2013 at 4:00 pm | Permalink

        Jerry you have got to be kidding that the best way to elect a Labour government is to promise to cut income tax and abolish NICs, on the basis that you will no longer be forced by the state to hand over your money to other people. Why has there not been any mass demonstrations about the “bedroom tax” if the welfare state in its current form so popular?

        The best bit of evidence that I can give you that shows benefits are far too high was a piece on the “Today” program last Saturday morning concerning the rise of UKIP in Lincolnshire. A farmer was interviewed and he said he has to resort to the gang masters and their East Europeans, because the locals will not touch that sort of work because it does not pay enough. Closer to home all of the security guards and cleaners in my office are all Somali, no need for a welfare lifer to consider such ……work with its anti-social hours.

        I will presume that you are not living on benefits and that the only thing you can look forward to is the basic state pension (which is the biggest item of state expenditure). I cannot see why you are supportive of something that is essentially a rip off. Any insurance company that offered such a “pension” would be closed down over night as its liabilities massively outweigh its assets (around 320% of GDP as of what was owed by 2011). The contract terms are also unfair in that the government keeps pushing back the age when you will get anything and as of 2016 you will get nothing (without a refund) if you have not paid into it for at least 10 years.

        Help for the genuinely disabled “yes” but all the others can get of my back!

        • Jerry
          Posted May 9, 2013 at 8:47 pm | Permalink

          @Nina Andreeva: Sorry but tax and NI is mostly irrelevant to those in receipt of benefits, those on in-work tax credits will either not reach the personal allowance threshold or if they do they are unlikely to be on anything other than the lowest tax band and as all parties are promising a (return to a) 10p lower rate there is little to gain from electioneering on this.

          Those claiming JSA type out of work benefits, other than for VAT and perhaps fuel duty, tax rates are largely irrelevant to them, as is NI.

          As for pensioners, yes a (relatively, to the total) some will have a taxable income but I bet the majority will not or if they do it is taken as source and will likely be at the lower level, thus for many tax is simply off the radar but any welfare benefits will most certainly -especially if they are being cut/frozen.

          Regarding the “Bedroom Tax” and protests, what do you regard a mass protest, do people have to riot like they did during the Poll Tax protests, take your your tinted sun glasses off!

          Oh and Nina, I know a couple of people who have lost all but their NI state pension due to duff pension advice, never mind the fact that some people have never saved, either because they didn’t have the spear income to put-by or because they were ignorant (as in not being informed) of the need. Don’t get me wrong, most people know not to expect being able to afford world cruises on the state pension but they do expect them (and other entitlements) to keep up with inflation and allow a basic quality of life – after all they have paid in for it… 35+ years ago only those who had reached the giddy highs of at least a Blue Collar job would have given any thought to a private pension, any government is going to have to tread on egg shells for some time yet…

          Reply The last time people rioted the offenders went to prison. It is not a good idea.

          • Jerry
            Posted May 11, 2013 at 12:29 pm | Permalink

            @JR reply: Totally agree, I wasn’t advocating such action!

            It just seems that some (on all extremes) tend to think that unless people are rioting no one is protesting – there has been plenty of peaceful protest and demonstration about the “Bedroom Tax”.

        • uanime5
          Posted May 10, 2013 at 2:44 pm | Permalink

          So your evidence that people in the UK can survive on minimum wage is that foreigners can survive on it. Did it not occur to you that foreigners can survive on minimum wage because they are earning a small fortune by their home country’s standards? Did you forget the the foreigners will leave the UK once they have earned enough to retire on, unlike the native of the UK?

          The fact that you don’t like people on benefits doesn’t mean that bullying them will magically make them employable.

      • Edward2
        Posted May 9, 2013 at 4:18 pm | Permalink

        The usual “nothing must change, just spend more money” attitude from you Jerry.
        We need some radical thinking and action so to respond with wild talk of “workhouse” “spite” and “envy” is ridiculous.
        We are spending £150 billion more than we can afford each year adding to a national debt of over a trillion. The welfare budget is the largest budget and is fast growing, it can’t go on for ever as it is.
        Many decent nations like Canada, Australia, Singapore and New Zealand have excellent welfare system, but they are not as expensive as the UK’s

        • Nina Andreeva
          Posted May 9, 2013 at 8:31 pm | Permalink

          The pro welfare state brigade that post hear are essentially mugs. They are paying for something that they will never use because most of the benefits are means tested. So as to be able to make a successful claim you must have immiserated yourself to such a level that you have fallen through the trap door and joined the underclass never to be able to get out again.

          I hope none of them ever need long term care and have to sell their home to be placed in a nursing home full of welfare lifers who get it for free

        • Jerry
          Posted May 9, 2013 at 9:12 pm | Permalink

          @Edward2: I didn’t say anything of the sort, yes things have got to change but we do not need to return to Victorian era style reactionary ‘solutions’ and unintended consequent.

          Tell me, if welfare is taken away and there are few or no jobs for these people, how do you expect them to live/work, one of three things will happen, people will curl up in their homes and quietly starve, people will cash in what ever value they have in either bricks or chattel and then live in a cardboard city (which is what caused the work/poor house solution in the 1800s), or they will resort to crime in the hope of getting caught and banged up as a prison cell and one to three meals a day will be a lot better than the alternative on the outside – it is very easy to shout “Cut! Cut! Cut!” without actually engaging any thought process to the end results beyond immediate monetary savings. 🙁

          The ‘Work House’ wasn’t a solution to a problem but a reaction to a problem (caused) due to not bothering thinking the original issues out…

          • Edward2
            Posted May 10, 2013 at 6:35 pm | Permalink

            Back onto your usual extreme fantasy version of what anyone says Jerry
            No one is talking about “no welfare”.
            You say “when welfare is taken away” who is actually proposing this?!
            Who is proposing a return to Victorian workhouses of the 1800’s?
            Could we try to have a sensible debate without the waving of bleeding stumps?
            Other decent nations on this planet manage to provide a good welfare system for much less cost without the nonsense fantasies you envisage.
            Why can’t we do the same in the UK?

          • Nina Andreeva
            Posted May 10, 2013 at 7:21 pm | Permalink

            Jerry the jobs are there. The foreigners take them because they are left vacant by the welfare class, who consider that sort of work to be demeaning and/or their state handouts are pay more. It is as simple as that!

          • Jerry
            Posted May 11, 2013 at 8:22 am | Permalink

            @Nina Andreeva: “the jobs are there.

            That would be why eastern Europeans, at least in my area, are actually returning home, because of all these jobs that are for the taking!…

            The clues are in the figures (assuming one bothered to look beyond the headlines in the right-wing press…), something like 5 million unemployed or under-employed (meaning that the welfare system ends up paying tax credits or some other in-work benefit [1] but there are only around 3 million -often duplicate, or very low hours- job vacancies.

            Tell me Nina, could you (discounting hubbies salary) survive on the NMW and only working for 16 hours? Fine you say, take two jobs – but what if those two jobs clash in some way, for example if your shift is changed how can you be in two places at the same time?

            [1] the DWP and IDS even accept this, it is at the core of the new Universal Credit system

          • Jerry
            Posted May 11, 2013 at 9:15 am | Permalink

            @Edward2: I do wish you would bother to read what others say, you have replied to both myself and U5 without obviously bothering to read/understand what you are replying to.

            Let me spell it out, the “Work House” is a metaphor, in other words people need to be careful of unintended consequences, (as I pointed out) in Victorian times the Work/Poor houses were not built as a solution to a problem but as a reaction to the chosen solution to that previous problem.

            You say “when welfare is taken away” who is actually proposing this?!

            Those who wish to see cuts in the welfare budget, were do you think any significant savings will be made, it won’t be by stopping free TVL or heating benefits payments to the wealthy, I doubt much of a hole would be made if they stopped both those benefits entity and for for all, although it might save more than the 0.7% lost through fraud even if every single incident of -claimant originated- fraud (or even if simple error) was eradicated – another area were the right-wing media likes to hype as if everyone is on the make, never mind the hype they create when suggesting that people actually choose to live on benefits – would you choose to live on £70/£110 (plus housing benefits/CT benefits as applicable) odd a week unless it was simply to stop you/your family from starving?

            No the only way to reduce the welfare budget is to limit or stop things like JSA, disability or in-work benefits. The DWP has already started doing this, first they raised the working tax-credit threshold from 16 hrs to 30 hrs before eligibility and then made changes to eligibility for disability benefits, now they are starting to make changes to the JSA.

            I’m not saying that there are no lazy “shirkers” around who live only to watch day-time TV etc, just that they are not the norm and far to many are being tared with the same brush, politicains and the press even managed to tar the hard working evening/night-shift worker with that crass comment about 7.30am and bedroom curtains! Talk about a gift to the Left…

          • Edward2
            Posted May 11, 2013 at 5:04 pm | Permalink

            I’m just bored with the way people like you Jerry, and your two mates on here resort to shouting socialist slogans and abuse whenever there is any debate on “cuts”
            You use words like, return to Victorian times and tell us of people starving and of the Workhouse and then when challenged say it was all just a metaphor.
            No response to the decent, thriving nations mentioned by me that manage to have less costly yet still very caring welfare arrangements I notice.

          • Jerry
            Posted May 12, 2013 at 10:02 am | Permalink

            @Edward2: No you are not board, you just don’t like an opposite opinion. even more so if it is based on facts or a rational that fits the known facts, especially if it is in danger of picking your party balloon.

        • Bob
          Posted May 10, 2013 at 10:05 am | Permalink

          “Canada, Australia, Singapore and New Zealand have excellent welfare systems, but they are not as expensive as the UK’s”

          Singapore have a compulsory provident fund which seems to work rather well for strivers, but not so well for skivers.

        • uanime5
          Posted May 10, 2013 at 2:46 pm | Permalink

          Well if we introduced rent controls that would stop the housing benefit from rising. But since the wealthy are making money out of rising house prices don’t expect this to ever be implemented.

          • Edward2
            Posted May 10, 2013 at 6:36 pm | Permalink

            Borrow some money buy some land and build some houses then Uni, if you feel there is a need to be satisfied.

      • waramess
        Posted May 9, 2013 at 7:19 pm | Permalink

        What a stupid response to a sensible comment.

        Do you really believe that less government spending on welfare and more charity spending will lead to workhouses?

        I believe that when the left comment on such matters they comment from such a bigoted stance that they are not willing to listen to the alternatives.

        Charity is no more than a voluntary redistribution of income and recent history has shown that the public are more than willing to support deserving causes but far less gullible than governments to malingering.

        • Jerry
          Posted May 9, 2013 at 9:15 pm | Permalink

          @waramess: See my reply to Edward2 above, but if attempting to actually think a problem though than just reach for the first and easiest ‘solution’ is “stupid” then I am guilty as charged and proud…

        • uanime5
          Posted May 10, 2013 at 2:48 pm | Permalink

          All evidence has shown that charity is a poor substitute for the Government actually trying to fix the problem. After all people only complain about welfare and demand that charity be used instead because they believe it will be cheaper for them.

          • Nina Andreeva
            Posted May 10, 2013 at 7:48 pm | Permalink

            U5 I usually ignore your comments, but this one is a classic and is worthy of reply, despite the usual lack of supporting evidence. So the state trumps charity eh? Have a look at the UKs OECD beating levels teenage pregnancy, number of households were no one has worked for couple of generations (though the foreigners next door do), functionally illiterate school leavers etc . The taxpayers have really had a great return for the money that has been forcibly taken off them for the betterment of others.

            It does not matter what you or I think, the benefits system is on the way out. The maths do not support it (see the comment on state pension liabilities in relation to GDP as an example) unless you think Carney has a machine that magically spits out an endless supply of banknotes. In which case the only handout from the government will be an alternative to Andrex

      • David Price
        Posted May 10, 2013 at 8:27 am | Permalink

        It is not spite Jerry. The sad truth is the government is spending way beyond our means, so anything that looks like waste or needless expenditure is highlighted.

        What is spiteful is when politicians and civil servants claim the vulnerable will be badly hit if budgets are cut whereas they could quite easily cut non-essentials instead.

        For example, my local council is proudly spending around £750k adding a cycle way to a bypass. This is not an essential expenditure at this time yet they plan on going ahead with it. A couple of years ago a neighbouring council spent about the same amount on traffic lights that have blighted rather than assisted traffic flow.

        Why, for example, must the HS2 be built now, let alone at all? The priorities of the public sector are staggeringly awful!

        If you want the needy to be protected in this time of necessary cuts you must identify the alternative items that can be dropped not just claim all who disagree with the overspend are heartless.

        • Jerry
          Posted May 10, 2013 at 5:55 pm | Permalink

          @David Price: “It is not spite Jerry. The sad truth is the government is spending way beyond our means, so anything that looks like waste or needless expenditure is highlighted.

          Sorry but it is spite because it is picking on the least able to defend themselves when there are far better targets for cost cutting within Westminster, Whitehall and the Civil Service just for starters, except that such targets are either well unionised or have other vested interest that have the clout to fight back.

        • Edward2
          Posted May 10, 2013 at 6:41 pm | Permalink

          Indeed David I totally agree.
          I’ve never heard our regular detractors criticise the several hundred thousand pounds per year our local Government leaders pay themselves, whilst deliberately cutting disabled carers jobs and school crossing patrol staff saying not a penny can be saved elsewhere.

          • Jerry
            Posted May 11, 2013 at 9:19 am | Permalink

            @Edward2: Well I did just that about an hour before your own comment was posted and there is a server time stamp to prove it! 😛

    • Alte Fritz
      Posted May 9, 2013 at 10:48 am | Permalink

      I agree. It is the scope of the state which is the killer. At the moment this country is engaged in a pretty disgraceful frenzy of xenophobia about Eastern Europeans workers when the exisitng population and estabisihed migrants have an alarming tendency to rely on welfare

      • Jerry
        Posted May 9, 2013 at 9:16 pm | Permalink

        @Alte Fritz: Have you ever bothered to stop and ask/think why?

    • uanime5
      Posted May 9, 2013 at 12:39 pm | Permalink

      Welfare became a greater burden because of higher levels of unemployment meaning that fewer people had to support more unemployed people. Allowing people who were working in low paid jobs to claim welfare also increased the cost of welfare.

      So unless the Government can magically create enough jobs for the 2.5 million unemployed people and higher paying jobs for all the people on low incomes, so that no one needs to claim welfare any more, it’s simply impossible to cut welfare without inflicting major hardship on the most vulnerable.

      • Anthem
        Posted May 9, 2013 at 7:58 pm | Permalink

        You’re looking at the wrong way round. Government can’t create jobs and I do wish that people would stop suggesting that they can.

        All they can do is take tax from companies and then create a public sector job.

        This is what Labour did to extremes during the Blair years and now we have a bloated public sector and a pension commitment that looms large over future generations.

        What government can do is lower regulatory and taxation burdens on business in order to allow them to employ more people.

        At the moment, we have people on welfare who could work but that means “signing off” which is a fearful proposition for some.

        We have some people who get as much or nearly as much for staying at home as they would working (how many times have you heard the phrase “it’s not worth me working”?

        Even if going to work means, say, £40 per week more, some can’t be bothered because that means, in effect, they are working for around £1 per hour (seriously, that is how some people see it).

        If government stopped paying welfare tomorrow, believe you me, most of the people on it would get a job or start their own business doing something – it might not be a great job and the business might be something as unglamorous as clearing debris from people’s gutters but they would get something.

        With less regulation, the removal of the minimum wage, less paperwork required on the part of the business and more money left in the coffers of business in the form of reduced taxation, more would be willing to take them on, too.

        • Jerry
          Posted May 11, 2013 at 9:47 am | Permalink

          @Anthem: More monetarist nonsense. Sorry but governments can create jobs, they do so by creating the policies/environments (anything from tax breaks to wholesale public works) that allow companies to create such jobs, or the government might employ such companies to do work for them – did the Department for Transport and civil servants actually build the Motorways in the 1950s/’60s for example (did any Minister don their donkey jacket and boots, climb aboard a bull-dozer or concrete mixer…other than for press photos) or did private companies create employment out of such public works, many (both companies and employees) doing very well out of such contracts even if taxes were higher than had the government done nothing [1]…

          Oh and if welfare was withdrawn tomorrow there would be many more buggers than “striver’s”, if full employment can exist why hasn’t the venture capitalist done so, they would make millions filling such voids in the free market.

          [1] I sometimes think that “monetarist theory” is short-hand for doing nothing

          • Jerry
            Posted May 11, 2013 at 12:41 pm | Permalink

            Oops, sorry for the ‘typo’:(

            One really needs both a spiel chocker AND a context checker, in no way do I condone anyone living off immoral earnings – what ever the circumstance!…

          • Bob
            Posted May 11, 2013 at 4:31 pm | Permalink

            “governments can create jobs”

            If the government commissioned say a new airport in the Thames Estuary, would our welfare lifers go find some digs in Essex or Kent to be part of it, or would they just say it’s too far to travel while reclining back on their comfy welfare cushion?

            In the meantime, would immigrants come from all over the world for the chance of employment?

            I know someone who refused an offer to go from P/T to full time employment, because it would mean less spare time for her and loss of housing benefits (she has 3 bed semi with large garage and en-suite to master bedroom). She’s too comfortable on bennies, like too many today. I’m glad that IDS has made a start on addressing the problem.

          • Jerry
            Posted May 12, 2013 at 10:30 am | Permalink

            @Bob: [ignoring your rant about immigration whilst forgetting the issues of skill-sets and trade employment cards etc.] I’m sure that suitable construction workers from all over Kent, Essex, Hertfordshire and Sussex would be more than willing to work on any Thames Estuary airport -and specialist from much further afield- but if you really think that an unemployed ‘pen-pusher’ from Cumbria that has no construction/building trade experience would even be employed (they probably wouldn’t even get an interview…) as a pen-pusher never mind digging trenches by hand-shovel you really are out of touch with the modern world. 🙁

            I know someone who refused an offer to go from P/T to full time employment, because it would mean less spare time for her and loss of housing benefits (she has 3 bed semi with large garage and en-suite to master bedroom). She’s too comfortable on bennies, like too many today. I’m glad that IDS has made a start on addressing the problem.

            Well yes perhaps, but then there are some wealthy people who are far to comfortable on having their tax allowances, tax cuts, avoidance loop-holes (or worse) – perhaps such wealth should have their tax benefits linked to job creation investments…

          • Bob
            Posted May 13, 2013 at 8:54 am | Permalink

            1. “ignoring your rant about immigration “
            What “rant” are you ranting about?

            2. ” you really are out of touch with the modern world”
            Are you suggesting that:
                a) A new airport project does not require pen pushers?
                b) A pen pusher cannot do anything else?
                c) Cumbria’s unemployed are all pen pushers?
            Why do you think that in a modern world people are restricted to single skill, push a pen, make the tea, dig a hole, paint a wall, saw some wood, lay some tiles, drive a van?
            Is this by government decree? an educational deficiency? or are you just making it up?

            3. ” perhaps such wealth should have their tax benefits linked to job creation investments…”
            Sounds like a socialist’s dream ! Dictating to people how they may invest their hard earned money.

      • Edward2
        Posted May 9, 2013 at 11:05 pm | Permalink

        This is a circular argument Uni, and you come at it from the wrong way round.
        If you tax half of the productive part of an economy, to pay for the other less fortunate half, you will end up with not enough money in the end to pay for them all.
        Which is what you are seeing happening all over Europe today.
        You drive away those who could employ others and reduce the unemployment that you complain about.
        Your solution is more of the same, ie tax the rich even more and give the money to the poorer citizens.
        My solution is to encourage those that can provide employment to do so and reduce employment and then the need for and the cost of welfare.
        Then (and only then) you can use the proceeds for your long shopping list of spending plans.

      • sjb
        Posted May 9, 2013 at 11:12 pm | Permalink

        The £10billion spent on unemployment[1] is small potatoes compared to the two big ticket items of social welfare: pensions, £144.6 billion;[2] and health, £130.2 billion.[3]

        Perhaps the Conservative Party (or UKIP?) could research how much would be raised if these “deserving causes”[4] were funded solely on a voluntary basis.

        [3] Ibid.
        [4] perwaramess

        • Nina Andreeva
          Posted May 10, 2013 at 8:04 pm | Permalink

          As I have written earlier the state pension is a rip off and anyone depending on it is in for a big shock. So I for one would like to see its demise. The NHS is different kettle of fish. I quite like the idea of pooling contributions together to avoid be ripped off by insurance companies as in America, while being a hardline capitalist I recognise the value of keeping the work force fit and healthy so that they can be exploited to the maximum

          • Jerry
            Posted May 11, 2013 at 10:06 am | Permalink

            Nina Andreeva: “As I have written earlier the state pension is a rip off and anyone depending on it is in for a big shock. So I for one would like to see its demise.

            Perhaps, but it will be a safety-net, which is all one can really ask for from the state – but then those who have little spare income (to put aside in to a private pension) are unlikely to have very high lifestyle expectations, those in for a shock are the high (often self-employed) earners who have simply not bothered to make provision for a pension that will keep them in the lifestyle they have become accustomed to.

            The NHS is different kettle of fish. [..//..]

            Err, do you have anything in the registrar of ‘members interests’ to declare Nina, I would hate anyone to get the wrong end of your rational for preserving the NHS and those who work within its myriad of pyramids?…

            I will just add, I don’t care how public national health care is provided just so long as (payment for basic cover) is taken at source, some people really do not have a clue about money management and do need to be ‘hand-feed’, that treatment is based on need and that such treatment/care is free at the point of use.

      • Hope
        Posted May 10, 2013 at 8:41 am | Permalink

        Drivel, there will always be unemployment because some do not want to work and others are not employable.

        • Jerry
          Posted May 10, 2013 at 6:08 pm | Permalink

          @Hope: ….or there are simply not enough jobs. Even when people do take the available jobs they are often jobs that don’t pay enough to live on that then need to be topped-up, and of course these in-work benefits are one of the largest segments of the welfare bill, unemployment (JSA etc.) accounts for a mere Three Percent

    • Bazman
      Posted May 9, 2013 at 7:33 pm | Permalink

      Easy to blame the poor for being poor when you are on 2k a week Nina. You think Singapore is good model for government too? Where are all the jobs going to come from to support the populations living standards to British levels when all the welfare is cut? They should just sink or swim?

      • Edward2
        Posted May 9, 2013 at 10:49 pm | Permalink

        Baz, you say..”do you think Singapore is a good model for Government”
        Have you ever been there? I doubt it.
        One of the worlds fastest gro?wing economies. A nation with one of the worlds lowest unemployment levels, one of the countries with the best health and education standards.
        A nation with good levels of economic growth.
        What was is it I heard today ?… Spain over 60% youth unemployment Portugal and Greece with similar horrendous figures.
        A price worth paying I suppose, to retain your socialist fantasy of equality under a one nation, no nation Europe.

        • Bazman
          Posted May 10, 2013 at 6:07 pm | Permalink

          Show how much you know about the Singapore government and if you do. What else would you sell?

          • Edward2
            Posted May 11, 2013 at 5:07 pm | Permalink

            I don’t understand this sentence.

        • Nina Andreeva
          Posted May 10, 2013 at 8:06 pm | Permalink

          Yeah and bent politicians and bankers tend to end up in Changi jail very quickly as well

          • Bazman
            Posted May 11, 2013 at 12:50 pm | Permalink

            And the not so bent and those bending in the wrong direction too.

  2. alan jutson
    Posted May 9, 2013 at 6:03 am | Permalink

    Interesting to hear about the behind the scenes of politics and government.

    I suspect that in todays world the same public sector/civil service way of looking at things is promoted were possible, in order to maintain the status as is, in order to protect what they have and are given.

    The solution apart from looking at things in cash terms, is to ask them to budget from a zero base each year, and force them to recognise that nothing should be taken for granted year on year, and that each item of expenditure will be challenged.

    If Ministers do not recognise that public spending is out of control, then sure as eggs are eggs the people responsible for the spending will not stop.
    I guarantee that if an experienced commercial manager looked at the books, then massive savings would follow.

    Ref Sir Philip Green, how much of his simple plan has been put to work yet ?


    Until Politicians learn not to bribe the public for ever more with a growing list of more complicated and expensive so called support services, we will really not get anywhere.
    The government simply needs to understand that they need to do less, not more.

  3. lifelogic
    Posted May 9, 2013 at 6:03 am | Permalink

    Cutting the budget is easy first establish easy hire/fire/redundancy then make the vast number of pointless or destructive jobs in the state sector go about 50%. Sell of the empty pointless buildings and cut the pay/pensions of the rest by about 30% to take it down to private sector levels. Get out of the EU.

    Alas the government has done none of this and has no intention of doing so.

    • lifelogic
      Posted May 9, 2013 at 12:01 pm | Permalink

      I just listened to a lot of virtually nothing from Sarah Newton MP on the daily politics. What on earth is she doing as Deputy Chairman of the Conservative Party? She is so bland and talks as if she is aiming her comments at rather dim 5 year old’s. I know it is hard defending the absurd Tory policies but even so. She almost makes even that northern, female, Muslim woman Baroness Warsi look good.

      Were they Cameron’s choices? I cannot help that all this “media training” (learning to avoiding the questions and not say anything at all) is entirely counter productive. They just sound bland, dim, dishonest, patronising and evasive.

      Norman Tebbitt at 82 would be a far better choice.

      • A.Sedgwick
        Posted May 9, 2013 at 7:49 pm | Permalink

        She was interviewed by Jeff Randall last night. I lasted about three minutes before I could stand her puerile comments no more.

        • Jerry
          Posted May 11, 2013 at 10:18 am | Permalink

          @A.Sedgwick: About three minutes is how long I can stand Jeff Randall before wondering when he will actually stop being a biased capitalist and start being an unbiased journalist!…

      • Jerry
        Posted May 11, 2013 at 10:16 am | Permalink

        @Lifelogic: Sorry but I find your comment so full of nothing but pure spite and hate I am surprised that our host didn’t just delete your post completely, what ever has someone’s location or religion got to do with their competence to do their job – play the ball Mr Life, stop kicking the players shins.

    • Hope
      Posted May 9, 2013 at 2:18 pm | Permalink

      Lifelogic, where those bonfire of quangos? Last year in the Queen’s speech Cameron introduced another six. How about the additional advisers to Clegg’s office? Reportedly £1million in staffing costs. How about Prof Ebdon? Look at the cost of Baroness Ashton leaving EU post after five years and her £60,000 pension p.a..

      With all the additional staff we still do not know who paid for the water, electric and food when Cameron hosted dinner parties at NO. 10 for Tory party donors, was the taxpayer, Tory party or Mr Cameron?

    • Bazman
      Posted May 9, 2013 at 7:43 pm | Permalink

      We have easy hire and fire already as I have told you many times. Short term contracts, umbrella companies, self employed etc. There is hardly any right for the first three months and little before two years of employment. Legal minimum redundancy payments are already low and if you think there should be no payments you are wrong. Tell us what you mean by ‘easy hire and fire’. You cannot, so why do you write this right wing ‘think’ then A 50% cut in the state who would pay for the unemployment and where would the money come from? A 30 % Pay cut for those in the state still with a job? Can you imagine the knock on effect to business and business employed by the state.
      Not really worth going into your childish right wing fantasy, but you continue to write it. You presume to tell us this is ‘sensible’ and not ‘absurd’? Pure ‘think’ of the most brainwashed right wing type.

      • Jerry
        Posted May 11, 2013 at 12:54 pm | Permalink

        @Bazman: “Legal minimum redundancy payments are already low and if you think there should be no payments you are wrong.

        OK Baz me-old mate, I’ll bite, (genuine question) why is he [Lifelogic] wrong?

        • Bazman
          Posted May 11, 2013 at 5:33 pm | Permalink

          The idea that a worker of a company who has been there for a number of years and now find themselves surplus to requirements for no fault of their own and does not deserve any compensation for loosing this job is wrong and here is the governments own calculator for this. You argue against this and be wrong.

          • Jerry
            Posted May 12, 2013 at 10:34 am | Permalink

            Sorry Bazman but that didn’t even come close to an rational answer, and if I think that, as someone who is likely to be more sympathetic to such issues….

      • Edward2
        Posted May 11, 2013 at 6:10 pm | Permalink

        What you need to try Baz, is employing someone or even a few others, because then you would soon realise just how really complex and difficult it is and what Lifelogic is on about when he wants “easy/easier hire and fire”
        Just placing an advert for a job has to be done with great care so as to remain legally compliant.
        Then draw up your job descriptions, roles and responsibilities, draw up your interview procedures ensuring these are legally compliant and keep notes of all candidates interview responses, then have a robust criteria for your final choice of person.
        Then start them as a employee, draw up legally binding contracts of employment for them and induct and train the new person you’ve taken on.
        Register for PAYE and NI with the Government and do all that long winded paperwork, get it wrong and you will be fined or taken to court,. then develop risk assessments for your workplace, introduce training and develop your company towards compliance with Fire Safety Regs and Health and Safety Regs.
        Understand all about Safety Data Sheets, COSHH and REACH and EA Regs and what applies to your company and therefore your staff in it and do any neccessary training on these topics.
        Get your premises insured for public and employee liability (a separate onerous task to get insurance company agreement )
        And that’s just a few of the starting items.
        If work drops off and you need to “let some people go” the problems in doing this are a legal minefield.
        If any staff become ill or are becoming a father or mother you have another legal minefield to learn about and consider how to proceed.
        You can be taken to tribunals at any time by disgruntled staff or ex staff who will probably get free legal support whereas you will have to pay for your legal advice.
        Its fun being a boss Baz, you should try it!

        • Jerry
          Posted May 12, 2013 at 10:43 am | Permalink

          @Edward2: On that I am in total agreement. Employment law is far to bloated and lopsided – its even a legal, tax and H&S minefield just to be self employed these days…

          Of course though, if jobs were plentiful many of those issues (bar perhaps the over burdensome H&S) would probably not exist, no one needs employment protection laws if one can walk off one job and into another, the HMRC would not need to clamp down on tax issues if tax revenue was naturally higher.

        • Bazman
          Posted May 12, 2013 at 10:45 am | Permalink

          Or you could just pay agency or take on self employed. No one is saying it is not complex and difficult to run a business though.

          • Jerry
            Posted May 12, 2013 at 5:58 pm | Permalink

            @Bazman: Do make your mind up, first you say that you think workers should have employment protection but then say that insecure work via employment agencies should be encouraged!

            As for employing self-employed, especially long term, this has its own problems and issues.

          • Edward2
            Posted May 12, 2013 at 6:05 pm | Permalink

            I’m well aware of the ruses less decent employers take to get round the complexities of the various employment laws.
            I’m not happy about them either, as it enables these businesses to undercut their competitors unfairly.
            The other point that is missed is that over 80% of people are employed in businesses that employ less than 40 people yet the Government and the EU are obsessed with the big multi nationals and the PLC’s.
            If small companies could take on just one or two extra staff each, unemployment would plummet

          • Bazman
            Posted May 13, 2013 at 6:09 pm | Permalink

            The point is that you say there should be less employment laws but they are some of the most lax in the industrialised world for the reasons I gave. Which laws would you like to be relaxed or repealed? You think that it is OK not to pay redundancy money. Is that what you mean be rational?

  4. margaret brandreth-j
    Posted May 9, 2013 at 6:15 am | Permalink

    The problem is as the population expands then a concomitant public spending is required to meet those needs. Take it to a family level :- for every child born in a single family more spending is needed , if there are many more children ,then they need to be rehoused and it grows from thence on. The older population are not dying as young, so therefore the need for public spending is even more in need of an increase. We have been aware of these problems for such a long time , but have not addressed the causes. There are too many people on our island.

  5. lifelogic
    Posted May 9, 2013 at 6:34 am | Permalink

    Listening to the Queen’s speech one is stuck by the blatant dishonesty of it all:-


    My government’s first priority is to strengthen Britain’s economic competitiveness. To this end, it will support the growth of the private sector and the creation of more jobs and opportunities.

    How with this happen with government waste at nearly 50% of GDP?

    My ministers will continue to prioritise measures that reduce the deficit – ensuring interest rates are kept low for homeowners and businesses.

    Reduce the deficit by building the high speed rail nonsense and renewable expensive energy one assumes?

    A bill will be introduced to reduce the burden of excessive regulation on businesses.

    But they have introduced far more regulation all over the place.

    My government will continue to invest in infrastructure to deliver jobs and growth for the economy. Mainly the wrong infrastructure like green tosh, wind and HS rail.

    My government will continue with legislation to update energy infrastructure and to improve the water industry.

    According to the new daft energy religion one assumes – any new reservoirs and proper power stations?

    My government is committed to a fairer society where aspiration and responsibility are rewarded.


    Legislation will be introduced to reform the way long-term care is paid for, to ensure the elderly do not have to sell their homes to meet their care bills.

    It will do no such thing as currently structured and will not come in until they are about to be votes out.

    My government will bring forward legislation to create a simpler state pension system that encourages saving and provides more help to those who have spent years caring for children.

    “Encourages saving” by paying .5% then taxing it at up to 45% with inflation at circa 4% sure.

    My government will bring forward a bill that further reforms Britain’s immigration system. The bill will ensure that this country attracts people who will contribute and deters those who will not.

    Sure actually any from the EU are fine regardless of any contribution and the rest can get it fairly easily anyway.

    My government will work to prevent conflict and reduce terrorism.

    By incubating it with pointless wars one assumes.

    Continuing to make progress in tackling climate change.
    Sure they think they are God it seems.

    No mention of the ratting on IHT or the EU referendum either.

    Say one thing do the opposite yet again. Perhaps the best lie of all:

    My government is committed to supporting (mugging surely they mean) people who have saved for retirement. One wonders how the Queen is able to deliver it all with a straight face, I suppose it is lots of practice.

    • Hope
      Posted May 9, 2013 at 2:10 pm | Permalink

      299 tax increases, more laws and regulation from the EU by QMV which the UK cannot do anything about. 5.2 percent pay increase for welfare lifers last year. £26,000 cap without tax or NI. Clegg and Cameron think this is an achievement to pay people on welfare much more than millions of people can earn at work! How many working people would like to earn £26,000 for doing nothing? How many pensioners would like this as an income? How many savers would like proper interest on their hard earned savings which they already paid tax on and then get it taxed again?

      Today Mr Cameron has become delusional making derogatory remarks to those who wish to come out of the EU soviet system. Laws on and Portillo are right any renegotiation will be inconsequential. However, it doe show Cameron’s true Europhile colours, even he will not be able to claim he is anything but.

      Let us hope JR and colleagues are successful with their Queen’s speech amendment.

      • Mark W
        Posted May 10, 2013 at 5:20 am | Permalink

        It’s funny that you mention proper interest on savings. Shortly folks who are due to renew saving accounts as a result of the criminal bonus interest rates may have a shock at just how low renewal rates are now.

        Of course what is really happening is the most underhand and deceptive wealth tax. Inflation. It pays off the debt of government and borrowers and confiscates the savings of the thrifty. Real inflation is far higher in this country than people realise of you only look at everyday items. I’d dare anyone here to state the price of a lb of cheese now compared to 3 years ago, without using google.

        • lifelogic
          Posted May 10, 2013 at 6:20 am | Permalink

          Indeed you have to cut out the middle man, the high margin banks and lend directly at bank lending rates, take good security too if would want you money to hold its value at all.

    • James
      Posted May 9, 2013 at 2:29 pm | Permalink

      Wouldn’t it be great to see the Queen delivering benchmark assessments?

      you agreed to cut real spending by 5%, Mr Cameron, and you’ve actually increased it by 12% FAIL!
      you promised to increase the IHT threshold to £1 million and you haven’t, have you, Mr Cameron? FAIL!
      you agreed to give my people a referendum on the Lisbon Treaty Mr Cameron, what happened? FAIL!

      Would you like to tender your resignation, Mr Cameron, or perhaps a spell in the Tower might be to your taste?

      • Bob
        Posted May 10, 2013 at 10:09 am | Permalink

        “you promised to increase the IHT threshold to £1 million and you haven’t, have you, Mr Cameron? FAIL!”

        He hasn’t even raised it in line with inflation.

        Foreign aid was raised by 50%
        Welfare was raised by 5.2%

        • Jerry
          Posted May 11, 2013 at 10:24 am | Permalink

          @Bob: JSA (etc.) has been frozen to 1% for the next three years, thus inflation/prices will raise faster than the increased JSA payment, this in real terms is a cut.

          • Bob
            Posted May 11, 2013 at 5:50 pm | Permalink

            “this in real terms is a cut.”

            The government are debasing the currency which is stoking inflation.

            Savers are suffering real terms cuts, as are lots of private sector workers, and in some cases absolute cuts.

            The slump will be continue until the government get out of the way and allow an asset price correction.

          • Jerry
            Posted May 12, 2013 at 10:54 am | Permalink

            @Bob: Savers have, by definition, savings, the unemployed are legally prevented from having more than a set amount of savings, if they do then they are expected to live off those savings rather than welfare benefits – your point was what exactly?

            For a saver with £1,000 in savings even a 0.25% interest rate will return fare more than a 1% increase on the £75 JSA – a 100% increase on zero will still be zero – and inflation is the same for both saver and JSA claimant…

          • Bob
            Posted May 13, 2013 at 9:10 am | Permalink

            ” the unemployed are legally prevented from having more than a set amount of savings”
            Not true.

            “For a saver with £1,000 in savings even a 0.25% interest rate will return fare more than a 1% increase on the £75 JSA “

            Do the maths Jerry

            a) Savings £1000 @ .25% = £2.50 p.a.
            b) JSA £75 p/w * 52 = £3900 so 1% = £39 p.a.

            £39 is more than £2.50. Duh!

          • Jerry
            Posted May 13, 2013 at 6:37 pm | Permalink

            @Bob: Sorry Bob, you are wrong about JSA and savings, there are limits – in effect; Firstly JSA(C) [1] can only be claimed for 26 weeks in any benefit year, there are also other ‘savings’ that give a income (such as occupational pensions) that can cause the amount of JSA(C) to be reduced. Then we come to JSA(B) [2], this has a hard £16,000 limit to saving, after which all benefit is lost, and benefit is reduced if the claimant has more that £6,000 but less than £16k.


            I will be more than happy to be put right on any of the above but please do back your comment up with evidence…

            [1] NI class 1 Contribution based (thus can’t be claimed by the self-employed)
            [2] income based and means tested

            Now to the savers interest compared to JSA increase; By all means make fun of my mistake Bob, but the laughter (and tears) are actually on you because you didn’t bother to actually stop to think the principle through. Now, do the same maths but employ more usual amounts to a “savers” account, something like £5k or perhaps £10K, then do it for £100k…

      • Lifelogic
        Posted May 10, 2013 at 12:22 pm | Permalink

        Indeed say one thing do the opposite Cameron style as usual.

    • zorro
      Posted May 9, 2013 at 5:07 pm | Permalink

      It’s frankly an exercise in cognitive dissonance and delusion…..


    • stred
      Posted May 9, 2013 at 7:14 pm | Permalink

      Exactly. I just don’t listen. It’s almost as bad a listening to modern left wing comedy. Presumably Liz and Phil know it’s all bollocks. No wonder she has started to hand this sort of stuff to his Treehugginess.

      • lifelogic
        Posted May 10, 2013 at 6:24 am | Permalink

        Phil – (Prince Philip, Duke of Edinburgh
        Prince Philip, Duke of Edinburgh KG KT PC OM GBE AC ONZ QSO GCL CC CMM PC AdC) certainly seems sound on the global warming issue and the nonsense wind farms we hear. Must be all those letters after his name perhaps?

  6. Andyvan
    Posted May 9, 2013 at 6:45 am | Permalink

    The Thatcher government could afford to put up spending because of North Sea revenues coming in larger amounts each year. Now we have a vast deficit and debt to start with and decreasing oil revenue every year. Government is fundamentally unable to cut spending or size. There are just too many vested interests fighting to keep their share of the loot. Only one thing will cut government down to size and that is economic collapse so, given George’s current policies, that must be what he is working towards.

    • Peter Davies
      Posted May 9, 2013 at 1:39 pm | Permalink

      If they pulled their finger out and got fracking surely that would be a valuable commodity for cheap gas and something to export instead of importing

      • sjb
        Posted May 9, 2013 at 11:25 pm | Permalink

        Work is starting shortly at a site about 30 miles south of London. It will be interesting to see to what extent this activity affects property values and perhaps Francis Maude’s 11,460 majority at the next GE.

  7. Ralph Musgrave
    Posted May 9, 2013 at 6:48 am | Permalink

    Interesting article by JR, but I don’t agree with his claim that “The rest of us have to budget in cash. Our pay does not go up to allow for full inflation.” That basically just doesn’t add up.

    Pay absolutely must “go up to allow for inflation” because there is only one ultimate cost: the cost of labour required to make things.

    Of course you can split the cost of anything into the cost of materials, capital equipment, and labour etc needed to make things, but the cost of those materials and capital equipment can itself be similarly split. With the ultimate result being that the labour of the employee and employer accounts for 100% of the cost of everything.

    There are a few ifs, buts and reservations that any economist could make to the above “100%” point, but basically it’s correct.

    • behindthefrogsis aim
      Posted May 9, 2013 at 1:48 pm | Permalink

      This 100% argument can similarly be extended to show that the 100% is also ultimately either spent on imports or paid to the government in tax.

      The critical thing is to ensure that the cash is cycled a maximum number of times before it reaches the government coffers, and as little as possible of it finishes up in the coffers of foriegn governments. We critically need a tax system that is aimed at these objectives.

      Some simple principles can be derived. Firstly pay tax as late as possible in the business cycle. Thus companies should pay corporation tax rather than company NI. Individuals should pay VAT rather than NI and income tax. Many of the tax changes made by the government do just the reverse leading to a slowing down in the movement of cash and in turn a worsening of the economic situation.

      Looking at imports. There are very few tax changes aimed at reducing imports that can be made without upsetting our trading partners. What we need to do is concentrate on import replacement. Reducing the cost of labour by reducing employers NI contributions is the one obvious target that the government continues to ignore. This not only encourages import replacement but also increases the competitiveness of our exports.

      • david
        Posted May 10, 2013 at 12:57 pm | Permalink

        The first accurate assessment of the problem I have seen in print. I have tried to promulgate this view for years but no one is interested. They have not even started to apply austerity measures in their own lives. They still do things which leak money out through the borders of this country. I am not talking here of the poor but of those who still take to overseas, who eat in ethnic restaurants from which much of the wages are remitted to home countries. A myriad of small things like this, done by individuals, with no regard to Government would go a long way towards putting things right. Dig for victory yes, but currently be austere for the UK as a whole.

    • waramess
      Posted May 9, 2013 at 7:23 pm | Permalink

      You are absolutely right and all investment is no more or less than time expended.

      That said it is hard to understand why you should hold such left wing views

  8. Steve Cox
    Posted May 9, 2013 at 7:05 am | Permalink

    The corollary to this is, of course, that the vast majority of people have to look at their own spending and savings in cash terms rather than in real terms. That’s why the government can get away with such high inflation, people see that their nest egg in the bank hasn’t gone down in value at all in cash terms, indeed even with today’s paltry interest rates it is likely to have gone up a little, and so they don’t feel too bad. In reality, of course, pretty much every savings account in the land is decreasing in value in real terms, but nobody ever highlights that fact to savers. Perhaps banks and other financial institutions should be forced to print the real value of the balance in every account alongside its current cash value? Then people might finally cotton on to the huge con trick that this government is pulling on them. To make the point, this is from a recent article in The Economist about financial repression:

    “In the developed world total debt (including that of the financial sector, consumers and companies, as well as governments) is so high that it is implausible that it can be repaid via the fruits of economic growth. The debt must either be written off (defaulted on) or slowly inflated away.”

  9. Acorn
    Posted May 9, 2013 at 7:44 am | Permalink

    Using “real terms” is always the governments way of giving us a smaller number. It tells you nothing and hides everything in times of high inflation. Thatchers problem was she was spending into an economy that could not increase its output volume from spare or new capacity, hence prices went up. The parallel government at the time, in the form of public sector trade unions, was adding wage push inflation.

    Anyway, if you want to understand the difference between, nominal, cash, real, current, constant, chained volume, indexed, basic, factor cost, market, etc, prices; you have to read the ONS bible. “United Kingdom National Accounts concepts, sources and methods”.

  10. Tad Davison
    Posted May 9, 2013 at 7:47 am | Permalink

    Interesting how the words ‘Tory’ and ‘cuts’ are synonymous, and yet, this tells a different picture. So come on you lop-sided lefties – explain why you need to distort the facts to have any resonance with the public!


    • Edward2
      Posted May 9, 2013 at 6:55 pm | Permalink

      You are right as usual Tad, there must be a very strange method of accountancy in local Government funding where they can claim a reduction from their initial demand for the following year can be presented to the public as a “cut”
      For example, if you received £100 million in year one and asked for £150 million in year two but only got £125 million then this presented as a 25% cut” rather than a 25% increase.

    • Jerry
      Posted May 11, 2013 at 1:00 pm | Permalink

      @Tad Davison: “So come on you lop-sided lefties

      Insults just weaken your argument Tad, even more so when you have obviously not bothered to read beyond the first paragraph of John’s blog 🙁

  11. Mike Wilson
    Posted May 9, 2013 at 7:58 am | Permalink

    Mr. Redwood – why don’t you do something specific, and useful, and oversee a review of your local government spending. Wokingham Borough Council employ FIVE THOUSAND people!

    Ask the chief executive to provide a spreadsheet with these columns:

    Department | Job Description | Salary | Cost to Employ | Necessity of role (from 1 to 10)

    Then, go through the spreadsheet and tell the chief executive to reduce head count by 20% over 2 years with, obviously, the jobs where ‘necessity of role’ is 1 (not necessary – a sheer luxury like jobs such as ‘Arts and Communities Officer’) being first.

    Also, instruct the chief executive to stop offering final salary pension schemes as these are not affordable.

    You could – government could – if you had the nous to get up and actually do it – reduce public spending considerably without affecting ‘front line’ services. But, you don’t.

    • Wokingham Mums
      Posted May 9, 2013 at 9:02 pm | Permalink

      Here, here, well said.

    • Wokingham Mums
      Posted May 10, 2013 at 6:59 am | Permalink

      Here, here Well said

  12. Jerry
    Posted May 9, 2013 at 8:09 am | Permalink

    John, in your fifth paragraph are all the dates correct, is 1997-8 a typo?

    Reply No, they are correct. I took the historic figures from a later publication.

  13. Brian Tomkinson
    Posted May 9, 2013 at 8:23 am | Permalink

    The problem is that too many politicians like to think that they know how to spend our money better than we do. Ringfencing overseas aid instead of cutting it whilst running a massive budget deficit highlights the point I think. They also like to bribe us to vote for them with our own money or, worse still, with borrowed money which we and our children and grandchildren will have to pay with interest sometime in the future. They try and mislead the public by selective statistics or in some cases just blatant lies as when Shapps said in an e-mail to me and others ” We’ve helped freeze council tax for the third year in a row. Under this government, council tax has fallen in real terms by 9.7%.” My council tax has increased by 3.4% this year and I read that 30% of Conservative councils have increased their council tax including the area in Oxfordshire where Cameron lives. Put bluntly, I believe very little that politicians say and I don’t think I am alone in holding that view.

  14. Mike Stallard
    Posted May 9, 2013 at 8:32 am | Permalink

    I have been looking up the details for a lesson recently. Oddly enough the very best results viz a viz the national debt were when the Labour government took over in 1997.
    Now the debt is rising disastrously and the deficit is going down by just about a quarter. Something must be done and it is no good fiddling the figures no matter who you are or whatever sop in you put onto it.

    • zorro
      Posted May 9, 2013 at 5:09 pm | Permalink

      Debt was going the right way then, and Labour kept with the Tory spending plans for two years. If they had kept a grip, there would have been an excellent opportunity to reduce taxes, reform public services, and people more accountable for their own behaviour and health.


  15. Peter Davies
    Posted May 9, 2013 at 8:54 am | Permalink

    Interesting – I’ll keep this article for future reference when anyone mentions Thatchers’ “cuts”, I was in school then so only have vague information…

    30% inflation goes to highlight the scale of the problem the then govt inherited in 79 which makes their achievements in the next decade nothing short of remarkable.

    People who throw stones would do well to read a few books on macro economics and blogs like this before they make ill informed statements.

    • Jerry
      Posted May 9, 2013 at 11:36 am | Permalink

      @Peter Davies: JR was talking about decreases or increases in expenditure, that is not the same as there being or there hasn’t been any “cuts”, there were cuts in services or funding arrangements from the first Thatcher era budget just as there has been cuts since the first Cameron/Clegg era budget – but in both expenditure (has) carried on to increase despite such cuts.

  16. Denis Cooper
    Posted May 9, 2013 at 8:56 am | Permalink

    Off-topic, given that thanks to EU interference people now have to overcome an obstacle course to open an account with a bank in their local High Street, isn’t it marvellous news that the EU is now going to act further to help us open bank accounts anywhere in the EU?

    “Free banking at risk as EU wants us to bank anywhere in Europe”

    Will there never be any end to this nonsense?

    No, of course not, while we remain committed to the unremitting, unlimited and largely incontrollable process of “ever closer union” prescribed by the EU treaties.

    • Jerry
      Posted May 9, 2013 at 9:52 pm | Permalink

      @Denis Cooper: But is there actually any free banking in the UK or just no direct charges applied – in other words, good old smoke and mirrors, a lower interest % being applied to balances instead for example. Those once, genuinely, free lunches were stopped a very long time ago now, just as proper customer service did…

      • Denis Cooper
        Posted May 10, 2013 at 5:14 pm | Permalink

        Well, I remember when there was not only a fixed quarterly charge on our current account but we were also charged for every cheque that we wrote; so, yes, in comparison with that we do now have “free banking”.

  17. Richard1
    Posted May 9, 2013 at 8:57 am | Permalink

    That is interesting. What it shows is how deeply imbued was the assumption of high inflation at the time. And it shows how once inflation takes hold it grows on itself like a cancer. It was a great achievement of the Thatcher Govt to get on top of this problem. My God Labour governments leave a terrible mess behind them! The only good thing is that each time they get kicked out they seem to be out of power for longer. 13 years after 1951, 18 years after 1979 (counting Heath as effectively Labour), hopefully at least 23 years this time, taking us to 2033 & assuming an arithmetic progression.

    • Jerry
      Posted May 9, 2013 at 11:53 am | Permalink

      @Richard1: “My God Labour governments leave a terrible mess behind them!

      As do some Tory Governments (and heath’s government was a Tory administration), even more so if one takes both the pre WW2 period and non purely economic ‘mess’, although I will agree that not as often as Labour!

      • Richard1
        Posted May 9, 2013 at 7:34 pm | Permalink

        The pre WW2 Tory govt failed to prepare for WW2, but contrary to popular belief (& especially to Labour / Keynesian propaganda) it was economically very successful. There was good steady growth from 1933 following tough cuts in public spending.

    • Peter Davies
      Posted May 9, 2013 at 1:37 pm | Permalink

      Its in their DNA to screw things up – you can tell just by listening to the MPs that are not bright enough to keep their thoughts to themselves what a bunch they are – some Labour MPs are sensible, others are marxist to the core – why people vote for them I’ll never understand

      • Jerry
        Posted May 9, 2013 at 10:13 pm | Permalink

        @Peter Davies: Nonsense, well not since Kinnock showed the door to “Militant”, any Labour party member openly showing such Marxist support would be off to an early bath and the first bus home, and in any case the left say much the same about the right (Tories and UKIP), simply swapping out the required words – a political rant is a political rant regardless who makes it.

        But once again I suspect that you don’t actually mean “Marxist”, just left-wing, but chose to use the term to add insult. Peter, would you be happy for someone of the left to call you a ‘Fascist’ simply because you support either the UKIP or Tory party, if not why do you call others Marxist’s?

    • zorro
      Posted May 9, 2013 at 5:15 pm | Permalink

      Indeed, it is a lot easier to control spending in theory now with the lack of comparative inflationary pressures. It was a different ball game then, with a lot more inflationary pressures in the economy. There was no mass production of goods from China, flexibility of labour, or options to keep costs down which exist now….


  18. Georgina Dean
    Posted May 9, 2013 at 9:00 am | Permalink

    How have we got in to this mess of giving so many benefits even to giving money to people working. When I had children if I wanted to carry on working I found the money for child care not the state. We are walking into a big problem. It is time for the government to come clean about the deficit. Real time cuts should come in to effect know.

    • Anthem
      Posted May 9, 2013 at 1:15 pm | Permalink

      This is indeed a ridiculous situation (people being benefit recipients AND tax-payers simultaneously) and if ever there was something screaming out for attention, this is it.

      However, it does appear to be a crude psychological “trick” at work. If people are constantly paying out in tax but see nothing tangible in return then they’re likely to get a bit fed up.

      By giving them something back, they feel happier…. I suppose.

      Sounds like a pile of tosh to me and it fools nobody.

    • Martyn G
      Posted May 9, 2013 at 5:08 pm | Permalink

      Yes, Georgina, me too, though I suspect perhaps a little earlier than you. In my day there was no child allowance for the first child so everything to do with my son was, naturally, up to me to fund and I saw nothing wrong with that. When daughter was born, my wife received a small child allowance that would, for example, fund the purchase of a pair of child’s shoes (they grow so fast, as I am certain you know!) and that was that.
      So where has it all gone so wrong that we are taxed to the point of penury in some cases to pay people to have children and fund for their care? What ever happened to the concept that one is personally responsibility for one’s children, their care and education? As an old ex-military warhorse, I find it all sort of depressing.

  19. Anthem
    Posted May 9, 2013 at 9:00 am | Permalink

    I would echo Nina Andreeva’s view in that government seriously needs to look at what it is spending tax payer money on. Is it truly a governmental role? Does it have a moral right to be using Peter’s funds to pay Paul or does it do it because it wins votes or has simply become the accepted norm?

    When all is hunky dory and we’re all living like millionaires, perhaps the government could be justified in doing a little more than its basic, valid functions (providing courts, police and armed forces) but when we’re on our uppers as we are now, it is ridiculous.

    It is like a private individual being hundreds of thousands of pounds in debt but paying to have a butler and private chauffeur.

    In any case, I think the actual amount of expenditure is only meaningful when viewed as a percentage of the GDP and that figure needs to be low: the lower the better. Money left in the hands of private individuals and businesses is always the best place for it because they will spend it far more effectively than any government will.

    With ex-Chancellor Nigel Lawson coming into the news again over the last few days, I did a bit of reading up on his time in Government and found my eyebrows raising at reading that in 1989 (the year of his resignation) the government was running at a £4.1billion surplus (the figures steadily rose year on year from a deficit of around £10billion in 1983).

    So how, less than 25 years later do we end up with a budget deficit of around £120billion?

    Does it have anything to do with the financial genius that was Gordon Brown, I wonder? Do we have a few too many butlers and chauffeurs? Perhaps we need to lose a few.

    • Bazman
      Posted May 9, 2013 at 7:56 pm | Permalink

      The problem is that often unskilled work does not pay enough to live on hence tax credits as an incentive to work. This would still be needed even if they paid no tax to maintain living standards to British levels. What would be the state of the country with no tax credits or benefits for the working poor and no minimum wage? Hard working East Europeans are a Myth. They work no harder than the British person. Just not the average East European that comes here.

      • Bob
        Posted May 11, 2013 at 6:11 pm | Permalink

        It’s time that people accepted that their standard of living should reflect their own efforts, and not the efforts of other people.

        “No bird soars too high, if it soars with it’s own wings.”

        • Bazman
          Posted May 12, 2013 at 10:48 am | Permalink

          Can’t disagree with that,but you assume we all have control of all our circumstances and those that do not should sink and drag the rest of us down with them. What you wrote could equally apply the the wealthy too who are dragging us down to push themselves up in many cases.

  20. oldtimer
    Posted May 9, 2013 at 9:10 am | Permalink

    You make a revealing point about the difference between the actual numbers and the inflation adjusted numbers. Much will depend on who makes the adjustments, on what basis and with what end in view. Once upon a time my job was to undertake the financial analysis of the Europe wide operations of a large US company, seeking to track the reasons for the changes in profitability from one year to another and, within each year, the actual result compared with the budget for the the year. Inflation and fx rate changes were significant components (along with changes in the size of the market and the company`s share of the market) which needed to be understood because of their impact on profit margins and what pricing response was needed. For that, and any other, business it is incomprehensible how they could manage its affairs sensibly without understanding the significance of these important elements in the cost and profit mix. Surely the same goes for governments. Instead of inflation adjusting and presenting “real terms” data, government should revert to using the actual data and identify what the changes from one year to another really amount to instead of burying the evidence.

  21. Terry
    Posted May 9, 2013 at 10:25 am | Permalink

    John, can you explain the difference between “Real Figures” and “Cash”? In my household they are the same.

    • uanime5
      Posted May 9, 2013 at 12:49 pm | Permalink

      Basically “cash” is the cost of an increase and “real figures” are the cost of an increase minus any increase caused by inflation.

      Here is an example of how this works. Let’s say that a book costs £20 and that inflation is 10%. If the price of the book increases with inflation it will cost £22 next year. So while in cash terms the book is £2 more expensive in real terms the price is the same as the price has risen solely due to inflation.

      • Edward2
        Posted May 9, 2013 at 11:14 pm | Permalink

        Uni of course, isn’t giving you the full shilling.
        This relates to the bizarre world of Council and Government accounting where they claim an increase from £100 million in year one to £125 million in year two is a cut because they asked for £150 million.

        • Jerry
          Posted May 10, 2013 at 6:54 pm | Permalink

          @Edward2: “Uni of course, isn’t giving you the full shilling.
          This relates to the bizarre world of Council and Government accounting

          Well considering that John’s blog was about just such accounting…

        • Terry
          Posted May 11, 2013 at 10:00 am | Permalink

          Thank you for your responses. However, one phrase (real figures) to the Government means nothing to my household. The price an item is sold at, is the price we have to pay. Or we go without.
          Inflation is now a Government instrument to be manipulated as required. Excusing a particular price rise on the basis of general inflation is vacuous. When the Government wishes to hide higher expenditure figures they blame ‘inflation’ when it is convenient for them to do so. When it comes to paying out pensions and PS wages geared to inflation, miraculously, inflation is usually down at the reference date. Inflation like GDP are but marketing tools for the Government to utilise as they see appropriate.

  22. stred
    Posted May 9, 2013 at 10:49 am | Permalink

    Presumably, Ministers then and today prefer not to know about expenditure rising in cash terms. It all goes along with the inflating away debt and the undeclared tax on savings. They must know what hey are up to surely.

    Another similar policy then and today is to simply reduce the total figure that a ministry or local authority has to spend and not to identify wastage and tell them where to make cuts. The bleeding stumps always appear first. Even when excessive rgulatory costs are identified, an army of compassionate warriors with vested interests will appear, as with the attempt to reduce childcare costs to european levels.

    One of the measures Mrs T attemped was to simplify the Building Regulations. At the time they were about half an inch thick. They were reduced to a few lines. Then the Humpreys produced a new documents to explain what words like ‘reasonable provision’ meant and this was an inch and a half thick. She did , however, manage to make the construction of rooms in the roof much easier, by discarding all the over the top fire escape, protection and access requirements. An escape window allowed the use of rising butt hinges or simple door closers. And a paddle stair allowed access with minimum loss of space. Since she left, the nannies have reinstated all the fire doors and added mains alarm systems. These are even required in small two storey extensions now, and period panelled doors and frames have to be replaced.

  23. Christopher White
    Posted May 9, 2013 at 12:17 pm | Permalink

    It may be of only historical interest but Denis Healey introduced a ‘cash limit’ system ? 1.4.1976

  24. Christopher White
    Posted May 9, 2013 at 12:27 pm | Permalink

    I wrote to David Davis when he was Shadow Home Secretary & suggested firms pay contribution for healthcare if bring non-EU workers in – say £50000 . Clearly the only thing that hits firms’ ‘bottom lines’ is wages & taxpayer picks up other costs eg extra primary school classrooms.

  25. Michael Cawood
    Posted May 9, 2013 at 12:59 pm | Permalink

    A real problem for Britain is inflation. Inflation is caused by the government printing too much money. A real method of reducing inflation would be to have a law that said that quantitative easing is prohibited. The government has a duty to protect peoples’ money by keeping inflation down, something that it has failed to do. The Bank of England may well decide what interest rates we have, but the government is still responsible and cannot hide behind the Bank of England. I am a Conservative but I still have the right to be critical of this government.

  26. Mike Wilson
    Posted May 9, 2013 at 1:51 pm | Permalink

    I posted a comment on this thread this morning – when, at the time, there was only one comment. It appeared but awaiting moderation.

    I see now there are 13 comments but mine is not here. Has it been moderated to the point of being deleted? I’d be curious to know why.

    • Mike Wilson
      Posted May 9, 2013 at 1:53 pm | Permalink

      Ahh, when you post a second comment, your previous – still unmoderated – comment appears.

      Have you never heard of cookies? I am quite happy with not having to register etc. – but surely it would be sensible to stick a cookie on my PC and remember my name and email address and pre-fill those fields in when one returns to the site.

      • Bob
        Posted May 10, 2013 at 10:40 am | Permalink

        @Mike Wilson

        I think there is a cookie, but it expires as soon as it’s created thus rendering it useless.

        If you have a cookie editor you can change the expiry date and all your unpublished comments become visible again.

  27. forthurst
    Posted May 9, 2013 at 2:01 pm | Permalink

    “When it comes to the first couple of years fighting the deficit and excess spending he is less sure of foot.”

    Did he interview you, John?

  28. James
    Posted May 9, 2013 at 2:33 pm | Permalink

    Real Figures can be manipulated by the government, and paradoxically mean nothing.

  29. Grindelow
    Posted May 9, 2013 at 2:35 pm | Permalink

    Where you borrow money you borrow in cash terms and not in fictional real money invented purely to hide the truth. Until and unless UK lenders will agree to work in “real” money then UK accounting practices should follow the same standards as there are in the private sector , otherwise the accounts are a meaningless mockery.

    If as I suspect UK and EU growth never returns to the old levels then cuts will have to be made including to the NHS and pensions simply because the UK will not be able to continually fund overspending from ever-rising debt. The pretense is that by mid term during the next parliament growth will have returned to old levels and the debt will decline.

    The chief of the Bundesbank reckons the crisis will last for another 10 years which means the EU economy flat-lining. Even though UK trade to the rest of the world is rising it will take many years to compensate for a failing and flat-lining EU.

    As far as I can see nothing effective is being done by government to aid companies including SMEs to boost exports to the developing world. Instead government is moaning that Banks are not lending to SMEs.

    Who has ever heard of a bank that wants to make loans to companies during recession? Dream on.
    The role of banks is to increase the magnitude of any upturns and downturns in the economy by lending to any casual passer-by with no credit rating in upturns and refusing to lend to virtually everyone in downturns. You will wait forever for banks to change their habits. Banks are going to be attempting to reduce their books to only the very lowest risk borrowers.

  30. Vanessa
    Posted May 9, 2013 at 2:53 pm | Permalink

    If you watched the Channel 4 film “Death of a Revolutionary” they said that Margaret Thatcher managed to cut spending and turn the economy around in the first 4 years but from what you say, Mr Redwood, this must have been impossible. Lady Thatcher certainly managed to pull this country out of a very deep hole and pretty quickly with radical legislation (not from Brussels). How did she do it and how long did it really take? I can’t remember ! Why doesn’t this “heir to Blair” learn a thing or two.

  31. Christopher Ekstrom
    Posted May 9, 2013 at 5:17 pm | Permalink

    There will be cuts in spending. If UKIP replaces the former “conservative” party the necessary cuts will come in time to avoid deeply painful & divise across the board cuts. If not in ten years time a rollicking crisis the likes of which Weimar Germany never saw will tear the UK (if it exists, & that’s very doubtful) apart. Facts, not opinion.

  32. Jon
    Posted May 9, 2013 at 7:23 pm | Permalink

    The civil service is on a long program of strikes yet just last year their salaries went up 3 x that of the private sector and already earning more. Not much of that is made in the media or by politicians on air.

    To if a senior mandarin tried to deceive the PM and the millions of taxpayers he represents by submitting real term figures under a different guise then sack them for
    trying to con the PM and millions of taxpayers. Too soft.

  33. wab
    Posted May 9, 2013 at 9:45 pm | Permalink

    “I think the main reason was the official civil service presented eveything to Ministers in so called real terms. These figures concealed the huge cash increases in spending going on.”

    This is staggering. Of course inflation must be accounted for and anyone who suggests otherwise is economically illiterate. Mr. Redwood’s analysis is right up there with the classic Harold Wilson claim, when talking about devaluation: “It does not mean that the pound here in Britain, in your pocket or purse or in your bank, has been devalued.”

    It would be interesting to have Mr. Redwood visit his local supermarket and tell people there that inflation of x% the last N years does not matter because if they take that 20 pound note out of their pocket, it still says “20” on it.

    One of the reasons that people feel worse off under this government is that although wages have been going up slightly, they have not kept up with inflation (at least in the private sector) so people are in fact worse off, not better off. But hey, in “cash terms” (Mr. Redwood’s preferred view of the world) we are all better off. What a great election slogan that will be in 2015: “Vote Tory because you are all better off if only you ignore reality.”

    That Mr. Redwood and his colleagues apparently had a revelation that inflation should be ignored when discussing budget increases is the real revelation. I used to think that at least the Thatcher government had some understanding of Economics 101. Apparently not.

    Reply Once they looked seriously at cash budget they started to get inflation under control and get more value for money.

  34. Lindsay McDougall
    Posted May 10, 2013 at 1:05 pm | Permalink

    A lot of the problem was – and is – with the much vaunted ‘automatic stabilizers’, the increase in benefits and redundancy payments resulting from unemployment and early retirement. In Mrs Thatcher’s time, the UK’s emergent status as a petrocurrency, together with introduction of the micro-chip took a terrible toll. Also, the Howe budget of 1980 contained a major fiscal consolidation and the abolition of exchange controls. Unemployment, a lagging indicator, peaked at over 3 million as late as 1986. Since the work force was smaller then than it is now, that was an unemployment rate of 9%. Also, some unemployment was hidden as early retirement. A GP famously said “If a 58 year old man, unemployed, in poor health and living in Merthyr Tydfil, presents himself in your surgery, what do you do?”

    I’m not too keen on ‘automatic stabilizers’ because they undermine actions to curb public expenditure and the public sector deficit. However difficult it is, the Chancellor must ensure that he hits his deficit reduction target, whether or not there is economic growth. Too many expenditure budgets are ring fenced, NHS expenditure is not delivering value for money because it is not market driven, the Government has been lukewarm about benefits rising faster than remuneration and downward pressure on the cost to taxpayers of the retired elderly has been non-existent. We need to wake up. It is estimated that by 2030 the number of over 65s will have risen by a third.

  35. Gordon Lewis
    Posted May 15, 2013 at 12:56 pm | Permalink

    I take no delight in the news that France has gone in Recession. It is bad news all round.

    However surely the Eds of Labour now need to sing a new tune on the Economy, especially now that not only did the UK avoided a triple dip, but didn’t really suffer the double dip. The next thing you know the UK will be triple A rated and David and George will start to wonder if they are dreaming.

    Unfortunately there is still a long hard battle ahead for the UK economy and Eurozone economy is not going to help.

  • 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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