Britain plans huge cuts in public spending
(Update, Oct. 22, 5:25 a.m.: Mea culpa. I believed the New York Times last night when it said that the British government has “unveiled the country’s steepest public spending cuts in more than 60 years, reducing costs in government departments by an average of 19 percent [emphasis added], sharply curtailing welfare benefits, raising the retirement age to 66 by 2020 and eliminating hundreds of thousands of public sector jobs.” I thought these words meant that Britain was massively reducing total government expenditures. I should have been more skeptical, especially given that this was coming from the government led by the most plastic politician in historical memory and his leftist sidekick. According to several commenters below, the revolutionary sounding announcement is in fact one of the oldest lies in the political book: the government are reducing planned increases in spending, and calling those reductions in planned increases a cut.)
asking myself for years, and no one has ever seemed to have an answer to my question or even to care much about the subject, where did the British get the money to put people on the dole for life, to keep them in those damnèd-sounding “council houses” for life, to maintain terrorist non-citizens on the dole and in million pound council houses for life? The issue was never discussed publicly. It just seemed to be assumed that Britain had infinite resources to support unproductive, undeserving, out-of-wedlock-children-producing, foreign, criminal, and jihadist people forever, no questions asked.
Well, now it’s finally turning out that Britain does not have infinite resources, and accordingly the government are initiating spending reductions unprececented in the country’s history since it went socialist in the late 1940s. But, as is always the case with liberals, the government did not come to this point and make this tough decision as the result of a rational thought process in which they identified the irrationality and inherent unworkability of their liberal policies. No. They made it because they were facing stark, overwhelming disaster and simply had no choice. It was, in short, a no-brainer, an instinctive impulse for survival that required no thought. And, as I have said many times, it is only by means of such a no-brainer, also known as an unprincipled exception, that liberals can bring themselves to take any non-liberal action.
The New York Times reports:
October 20, 2010
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Britain Plans Deepest Cuts to Spending in 60 Years
By SARAH LYALL and ALAN COWELL
LONDON—The British government on Wednesday unveiled the country’s steepest public spending cuts in more than 60 years, reducing costs in government departments by an average of 19 percent, sharply curtailing welfare benefits, raising the retirement age to 66 by 2020 and eliminating hundreds of thousands of public sector jobs in an effort to bring down the bloated budget deficit.
“Today is the day when Britain steps back from the brink,” a confident George Osborne, who as chancellor of the Exchequer is Britain’s top finance minister, told the House of Commons. “To back down now and abandon our plans would be the road to economic ruin.”
Wednesday’s announcement of £83 billion, about $130 billion, in cuts by 2015 represents a big political gamble for Britain’s fledgling Conservative-led coalition government.
Britain’s public deficit is one of the highest among developed economies, running at 11.5 percent of total economic output, compared with 10.7 percent for the United States and 5.4 percent for Germany. Though the Conservatives have so far made a persuasive case for the deep cuts, outmaneuvering a weakened Labour opposition, the country has yet to feel anything like the pain that is to come as the retrenchment begins to take hold.
“There’s a growing acceptance and public awareness that this is necessary, that these measures are needed,” Helen Cleary, deputy political director for the Ipsos Mori polltakers, said in an interview. “But I don’t think people will really understand what it all means until the cuts start to bite.”
The coalition government is also gambling that the reductions in public outlays will stimulate the private sector and restart growth, rather than send the economy back into a tailspin, as liberal economists have warned.
Britain has been bracing for the cuts for months, after Mr. Osborne announced in June the details of the so-called spending review, but Wednesday was the first time the government had set out its plans, department by department.
Mr. Osborne said that 490,000 public sector jobs would be lost over the next four years, some to attrition. At the same time, payments to the long-term unemployed who fail to seek jobs will be cut, he said, saving $11 billion a year. Additionally, he said, a new 12-month limit will be imposed on long-term jobless benefits, and measures will be taken to curb benefit fraud.
Mr. Osborne said an increase in the official retirement age to 66 from 65 would start in 2020—four years sooner than planned—saving $8 billion a year. Britain has already said it will stop paying child benefit payments to people earning more than around $70,000 a year.
But while the government has sought to rein in welfare costs, Mr. Osborne announced that several politically sacred benefits for the elderly, including free eye tests, prescription drugs and bus passes, would remain.
Britain has about six million public sector jobs, about one fifth of all jobs in the economy, according to the Office for National Statistics. But it was not clear what the impact of shedding 490,000 of them—about 8 percent of the total—would have on unemployment. Mr. Osborne has continually said that the private sector will take up the slack, employing more people as the economy emerges from the doldrums.
Mr. Osborne promised annual savings of 7.1 percent in the budgets of local government councils and said there would be a freeze followed by a 14 percent cut in tax money allocated to maintaining Queen Elizabeth II’s household. Public housing tenants, he said, will face higher rents closer to the market rates for private housing. Military spending will be cut by 8 percent by 2014, he said, but he promised not to reduce spending on British forces in the Afghanistan war.
But, he said, the National Health Service—one of the most politically delicate institutions in Britain—will be allocated more money, rather than less. He also said the “resource money” for schools would increase “in real terms” every year.
Spending on the police will be cut by 4 percent a year, he said, but spending on intelligence and security agencies will be strengthened to guard against terrorism and protect London during the 2012 Olympic Games. He also promised to spend about $1.4 billion on measures to curb tax fraud, which cost the tax service about $11 billion a year.
Mr. Osborne said Britain’s diplomatic corps—the Foreign Office—would lose 24 percent of its financing and cut the number of workers at the headquarters in London. Additionally, the BBC will take over financing the BBC World Service and several other responsibilities, saving the government about $539 million a year, while the BBC’s own mandatory license fee levied on owners of television sets will be frozen for six years.
People in the arts had been bracing themselves for deep cuts in government subsidies. But, while Mr. Osborne said that administrative costs in the Department of Culture, Media and Sport and in quasigovernmental arts organizations would be reduced by 41 percent, money for “core programs” like museums would be cut by just 15 percent.
“We have had to make choices, choices in the things we support,” Mr. Osborne said. “We have taken our country back from the brink of bankruptcy.”
The average cut in the budgets of government departments, he said, will be 19 percent, not the 25 percent he had initially threatened.
He said a temporary tax on bank balance sheets would be made permanent. Many Britons, like Americans, are angry with big banks for their role in the world financial crisis. Mr. Osborne said the government would seek to extract “the maximum sustainable taxes” from financial institutions.
In June, Mr. Osborne also said that the value-added tax—a tax paid on most consumer goods in Britain—would increase in January, to 20 percent from 17.5 percent.
[end of Times article]
Larry T. writes:
Regarding your post on the UK plan to cut social programs drastically, Dr. Richard North at EU Referendum states that there are no cuts—they are calling a reduction in the rate of increase a “cut.”
Dr. North cites the language in the actual treasury report:
“Even after these spending cuts, total public spending (Total Managed Expenditure) in 2014-15 will be higher in real terms than in 2008-09. At 41 per cent of GDP, this will be around the same level of public spending as in 2006-07. Spending on public services in 2014-15 will be higher than 2006-07 levels in real terms.”
Christopher B. writes from England:
According to EU Ref, there are NO cuts in the UK:
There are no cuts. I say again, there are no cuts. What the Cleggerons are talking about is a reduction in the rate of increase in public expenditure as compared with the June budget. This is helpfully summarised here (see left) and the source is here.
You will see that the current financial year expenditure is £696.8 billion. By 2014-15, the projected expenditure was to rise to £757.5 billion. Little George is now proposing that this increase is limited £739.8 billion. This now becomes a 17.7 percent “cut,” albeit that expenditure is still increasing.
Thus, the language of public expenditure has been redefined. A reduction in the rate of increase is deemed to be a “cut.” [LA replies: I don’t know about Britain, but U.S. politicians have used this verbal trick for many years.] In fact, by 2014-15, annual expenditure will have increased by £43 billion, up 6.2 percent (not nine, as originally stated). By such sophistry, “cuts” are not actual reductions. They are lower than projected rates of increase.
To prove this, straight from the horse’s mouth, page 17 of the full Treasury report (para 1.15) states:
Even after these spending cuts, total public spending (Total Managed Expenditure) in 2014-15 will be higher in real terms than in 2008-09. At 41 per cent of GDP, this will be around the same level of public spending as in 2006-07. Spending on public services in 2014-15 will be higher than 2006-07 levels in real terms.
Repeat after me: “total public spending (Total Managed Expenditure) in 2014-15 will be higher in real terms than in 2008-09.” How do they get away with this? “Even after these spending cuts, total public spending … will be higher .” By any real world definition, these cannot be cuts.
But now the spin machine goes into action. To disguise the fact that in most of the public sector (such as defence) spending is to increase (mainly to service debt and unfunded pensions), officials—elected and appointed—are now going through the elaborate charade of cutting back highly visible public services, including schools, libraries and police patrols.
With the connivance of the media and the unions, the public is thus gulled into believing that expenditure is being cut. By this means, they hope to divert complaints about the progressive deterioration in public services, as the unproductive “tail” gradually eats up a greater and greater share of the funds.
Nevertheless, as we are overwhelmed by the media gush of ill-informed laments about “cuts,” we need to hold onto reality and keep stating: “total public spending (Total Managed Expenditure) in 2014-15 will be higher in real terms than in 2008-09.” There are no “cuts.” They are an illusion.
Bill in Virginia writes:
I’ve been asking myself for years, and no one has ever seemed to have an answer to my question or even to care much about the subject, where did the British get the money to put people on the dole for life, to keep them in those damned-sounding “council houses” for life, to maintain terrorist non-citizens on the dole and in million pound council houses for life? The issue was never discussed publicly. It just seemed to be assumed that Britain had infinite resources to support unproductive, undeserving, out-of-wedlock-children-producing, foreign, criminal, and jihadist people forever, no questions asked.
I’m interested to know how your UK correspondents respond to this question; I imagine VAT, Value Added Tax, must be part of the answer:
Wikipedia: “A value added tax (VAT) is a form of consumption tax. It is a tax on the estimated market value added to a product or material at each stage of its manufacture or distribution, ultimately passed on to the consumer. It differs from a sales tax, which is levied only at the point of purchase.”
As the NYT article states: “In June, Mr. Osborne also said that the value-added tax—a tax paid on most consumer goods in Britain—would increase in January, to 20 percent from 17.5 percent. “
So in the UK they have what is effectively a sales tax of 17.5 percent, soon to be 20 percent. Enough to support a large dependent population, in good times, at least.
David P. writes from England:
I think it should be pointed out that not only is there no acknowledgement of the cause of the reversal of socialist spending, there are actually no cuts, in the proper understanding of that word. All the current coalition government has undertaken is a slowing down in the rate of growth of government expenditure.
Posted by Lawrence Auster at October 21, 2010 08:54 PM | Send
EU Referendum has the details here and here.
Horror of horrors—acknowledging the real cause of the debacle has never been the operating procedure of any government. If ever that became standard practice, governments would argue that it would impossible to run government. This may seem outrageous, but I have some sympathy for this argument. Even in a relatively small corporation, it is sometimes necessary that the left hand does not know what the right hand doeth.