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Chris Dillow: The Left And Cuts.

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'The Left and Cuts':


Medium-term forecasts for the public finances aren’t worth the paper they’re written on. It’s quite possible that if the banking crisis does dissipate, government borrowing will fall faster than expected; this is because government borrowing is the counterpart of household and corporate lending, and this is high now because banks’ reluctance to lend is causing some people to be forced savers, so if the private sector does start borrowing again, government borrowing will fall.

But what if cuts are needed? Then we have a problem, because it’s insufficiently appreciated just how hard it is to cut spending intelligently...


Public spending generally gets relatively expensive over time. This is Baumol’s cost disease; it happens because wages, a big part of public spending, tend to rise faster than prices.


Spending cuts, then, are hard to achieve. So what can be done? One possibility is to decentralize the provision of public services; workers on the ground know better than ministers where waste lies, so they should be empowered to cut it; it is to New Labour‘s shame that David Cameron seems to grasp this point better than them. Another possibility is to cut some government functions. The Department for Business Innovation and Skills, to use this week’s name, is one candidate here, as are PFI and IT projects that are just transfers of cash from taxpayer to companies. More generally, governments will have to get used to using the phrase: “this isn’t government business.â€

A third possibility is to think of cutting the middleman - asking how services can be delivered at minimal cost. It’s in this context that universal welfare benefits - which include a citizens basic income - are attractive: they are much cheaper to administer than means-tested ones.

Edited to change title from S & M: (Stumbling and Mumbling blog) to Chris Dillow: (the author).

Edited by Crash Connoisseur

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The problem is that Welfare benefits are not Socialism intended to help the unfotunate, they are a Labour Party mechanism for buying votes.

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The Tories will NEVER decentralise. It was Major who introduced many of the Quangos we know and love today. Thatcher destroyed the independence of many public sector institutions which are now beholden to targets and enormous red tape from gobbermint.

For the Tories beloved 'choice' read: 'unworkable bureaucracy foisted on front-line public sector workers for zero improvement in efficiency or cost-savings.'

Edited by bearwithasorehead

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  • 406 Brexit, House prices and Summer 2020

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      • down 5% +
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