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Peter Oborne - This Painful Price For 13 Years Of Profligacy

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http://www.dailymail.co.uk/news/article-1281198/George-Osbornes-cuts-This-painful-price-13-years-profligacy.html

The response to yesterday’s announcement from Treasury chief secretary David Laws that he planned some £6billion in spending cuts couldn’t have been more predictable – or more pathetic. Liam Byrne, Labour’s discredited Treasury spokesman, claimed that the cuts package would plunge Britain back into what he called a ‘double dip’ recession. Meanwhile, a phalanx of trade unionists came forward to warn of economic devastation and a massive loss of public sector jobs.

But it is obvious that Mr Byrne does not know what he is talking about. Britain’s total economic product adds up to well over £1trillion. The idea that the loss of £6billion (scarcely 0.5 per cent of the whole economy) could make the slightest difference is economic illiteracy of a very high order. The horrific truth is that unless this country starts to make cuts now, international markets will lose confidence in our economy and plunge us into the same kind of financial crisis that Greece is enduring. Moreover, the main problem with the economic package from George Osborne and David Laws is not – as the Labour Party claims – that their cuts have come too soon. It is that – as a result of Labour’s delay and defeat – they have come much too late. The facts are simply terrifying.

This year the Government is set to spend approximately £170billion more than it will generate from taxation – that’s a phenomenal £500million a day. Our indebtedness is far, far higher than it has ever been before in peacetime – the direct result of Gordon Brown’s crass management of the economy. Indeed, the wretched Mr Byrne admitted as much when he left a cynical note behind to his successor after the election noting that ‘there’s no money left’.

However, that infamous letter actually understates the scale of the problem.

We actually ran out of our own money, thanks to Labour’s profligacy several years ago. Now we have run out of other people’s money as well. Thirteen years ago, when Labour took over from the Tories, the national debt stood at a comparatively modest £350billion. Over the past decade that has doubled to just over £700billion. Tragically, under Treasury projections, that sum is set to double again over the next five years to around £1.4trillion. Even these unimaginable sums of money hugely underestimate the scale of the problem.

It is now dawning on financial experts that Mr Brown hid much of our public debt (such as the giant liabilities incurred by our public sector pension funds) off the national balance sheet. Only urgent, hideous and painful surgery can tackle a problem like this. The £6billion which Mr Laws and Mr Osborne are planning to wipe from the national spending ledger this year represents only a fraction of the work that needs to be done. Indeed, the scale of what lies ahead can hardly be exaggerated. The cuts that await us over the next few years are far greater than the so-called ‘savage’ cuts imposed by Margaret Thatcher and her Chancellor Geoffrey Howe in the 1980s.

In all, at least £80billion – and very likely far more, depending on economic circumstances in the years ahead – need to be slashed from annual national expenditure. Therefore, there is huge pain in the pipeline. Yesterday’s axe was merely for starters. The true scale of cuts will only partly be apparent by the time of Mr Osborne’s emergency budget on June 22. And the complete picture will be clear only much later in the year, when he announces the results of his comprehensive spending review of all future departmental expenditure. Bear in mind that, thanks to the prolifically prudent but cowardly decision to protect spending on the NHS, some departments face cuts on a scale that calls their very existence into question.

Let’s take the Ministry of Defence. Currently, Britain is fighting a bloody and terrible war in Afghanistan and has military commitments all over the globe. Yet no less than £7billion – roughly one quarter of all defence expenditure – looks set for the chop. Major programmes, such as the Eurofighter, may have to go. So will plans to build new aircraft carriers. The idea of Britain as a nation with a defence capacity to police the globe will vanish.

In order to understand the monstrous amounts involved in this whole process, it is helpful to contemplate the measures already taken by near bankrupt European countries such as Spain, Greece and Ireland. Most public programmes have been stopped. Civil service pay has been cut by as much as 20 per cent while the age at which state workers can receive pensions has risen sharply. Unemployment benefits have been slashed, while taxation has risen sharply. Here, it can now be taken for granted that VAT will rise from the present 17.5 per cent to 20 per cent and quite possibly more. Punitively, the budget changes that are now inevitable over the next five years will change us forever as a nation. The truth is that Britain resembles a profligate and irresponsible family which has long been living way beyond its means.

We have enjoyed an exaggerated idea of our international standing, and a standard of living to which we are not entitled. Finally, the bank manager is now calling in his loans – and giving us the unpleasant choice between bankruptcy or a very painful drop in living standards. By the luxurious standards of the New Labour years, yesterday’s cuts – the slashing of several quangos, the loss of tens of thousands of student places and the ending of certain civil service perks – may have sounded very severe. But in comparison to what is to come, they were nothing. Sailors sometimes talk of seeing a ‘cloud no bigger than a man’s hands’ on the distant horizon. Now we lie in wait for the hurricane.

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Thought there was something odd abut the tone of this. He has a point and then botches it completely with silly inaccuracies...how strange, almost like he wasn't in possession of the facts needed to write the article he wanted to write. Why would a journalist get themselves into that position?

http://www.guardian....daily-telegraph

Ah, 30 pieces of silver in one hand and a briefing sheet from Osborne's office in the other, all makes sense now. Just following orders.

Edited by Cogs

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I don't know where he gets the £170bn deficit number from - we won't know the deficit until we see the emergency budget on June 22nd.

As for this...

Bear in mind that, thanks to the prolifically prudent but cowardly decision to protect spending on the NHS, some departments face cuts on a scale that calls their very existence into question.

Did he mean politically prudent, by any chance? :rolleyes:

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6 billion of cuts is peanuts. They need to cut 30 times that much to balance the books.

No, probably cut 60billion and increase tax for the rest. The biggest pot of wealth is stored in gain in property values - tax it to death. After all its free money to start with.

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No, probably cut 60billion and increase tax for the rest. The biggest pot of wealth is stored in gain in property values - tax it to death. After all its free money to start with.

All raising the critical question of the right balance of cuts and tax rises. There was a clear difference between the Tories who wanted them in the ratio 4:1 and the LDs, 2.5:1. I don't know if the coalition document presents an agreed settlement on this, or whether we'll have to wait as Osborne and Laws keep hammering away at the mountain?

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Mandelslime was on the news complaining, and all he could do was make the pathetic procedural point that the plans hadn’t been presented to "the house" before being released to the press.

Well, I'm really worried by that!

tim

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Mandelslime was on the news complaining, and all he could do was make the pathetic procedural point that the plans hadn’t been presented to "the house" before being released to the press.

Well, I'm really worried by that!

tim

By house he means that place in Bedlam.

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And of course the bankers gambling debts have nothing to do with the pi$$ poor state of the UKs finances?

That's the line that Gordon & Co span to try to deflect the blame but it isn't really true.

They haven't helped but Brown lost control of the public finances back in 2005 - 3 years before the SHTF, without that we'd have a manageable deficit.

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I'm going to ask a stupid question... is the 6 billion in cuts over the term of the government or is it an annual cut of 6 billion in which case over the 5 years it will actually be a saving of 30 billion?

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I'm going to ask a stupid question... is the 6 billion in cuts over the term of the government or is it an annual cut of 6 billion in which case over the 5 years it will actually be a saving of 30 billion?

£6 billion per annum so £30 bn over 5 years - against £160bn per annum or £800bn over 5 years.

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I'm going to ask a stupid question... is the 6 billion in cuts over the term of the government or is it an annual cut of 6 billion in which case over the 5 years it will actually be a saving of 30 billion?

The 6Bn is a sideshow before the real cuts start in 2011. That was agreed by everyone. GB had cuts planned for 2011 most of which are still in place. The current cuts are tokenism to show willing. The current government agree with the last one that too severe cuts too soon will crash the economy. The efforts to address the problems left by the bank bail out will start next year.

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No, probably cut 60billion and increase tax for the rest. The biggest pot of wealth is stored in gain in property values - tax it to death. After all its free money to start with.

You might call that wealth, I call it unrepayable debt :)

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Hi Wind !

Meet Piss.

Yes and no.

£6bn is a drop in the ocean - about the same as the interest on the £160bn that's being borrowed.

But it's a signal to the markets that the government is serious about tackling the deficit and that's important.

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Mandelslime was on the news complaining, and all he could do was make the pathetic procedural point that the plans hadn’t been presented to "the house" before being released to the press.

Well, I'm really worried by that!

tim

I can't believe he had the sheer nerve to try and cricisie others for that sort of thing.. it was his stock in trade for years... odious liitle man.

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  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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