Jump to content
House Price Crash Forum
Sancho Panza

'colossal Cuts' Needed After General Election, Warns Ifs

Recommended Posts

Telegraph 4/12/14

'Britain faces public spending cuts on a "colossal scale" after the General Election which will lead to a "fundamental reimagining" of the role of the state, the Institute for Fiscal Studies has warned.

The respected economic thinktank said that just £35bn of the cuts in spending by government departments have been completed, with £55bn still to come by 2020.

It said that if cuts in departmental spending continue at the same pace, £21billion worth of cuts to welfare or tax rises will be needed by 2019/20.

Paul Johnson, the head of the IFS, admitted that the precise nature of planned cuts had not yet been spelt out, and stressed that it would be wrong to describe them as "unachievable".

But he said voters would be justified in asking whether the Chancellor was planning "a fundamental reimagining of the role of the state".

And he added: "One thing is for sure. If we move in anything like this direction, whilst continuing to protect health and pensions, the role and shape of the state will have changed beyond recognition."

The plans set out in the Autumn Statement imply "a slight increase in the speed of proposed spending cuts after 2015/16", extending the expected period of reductions in state spending for a further year beyond 2017/18, said Mr Johnson.

To achieve the Office for Budget Responsibility's forecast of a budget surplus of £23bn by 2019/20 would require "spending cuts on a colossal scale ... taking total government spending to its lowest level as a proportion of national income since before the last war", he said.

On the measure of total government spending minus spending on debt interest, public expenditure is down by £11bn over the four years to 2014/15, but is set to fall by a further £38bn in the five years to 2019/20.

"There is no spending dividend on the horizon, far from it," said Mr Johnson. "There are huge cuts to come. On these plans,whatever way you look at it, we are considerably less than halfway through the cuts."

If healthcare and state pensions are protected from cuts after the election in the same way they have been by the coalition Government so far, then they can be expected to swallow up a third of all state spending by 2019/20 - up from a quarter before the crisis - before any additional spending on the NHS is factored in, said Mr Johnson.

Mr Osborne's failure to meet his initial target of eliminating the deficit by the end of the Parliament was "emphatically not" a result of the Government holding back on spending cuts, said the IFS.

The "disappointing" outcome on the deficit - which fell just £6bn to more than £90bn this year - was "because the economy performed so poorly in the first half of the Parliament, hitting revenues very hard", said Mr Johnson.

The OBR has produced a "really substantial downgrade" of £8bn to expected tax revenues this year, and this shortfall rises to £21bn by 2017/18, making it even more difficult for Mr Osborne to pay down the national debt.

"This lack of buoyancy in tax revenues, associated with poor earnings growth, looks like being a continued cause for concern," said Mr Johnson.

The fall in tax receipts was offset by an expected reduction in the burden of debt interest, expected to be £16bn lower in 2017/18 than was predicted in March this year, because of the rock-bottom rates currently being charged on the international market.

Mr Johnson described the Autumn Statement's headline reform to stamp duty on residential property as "welcome but really rather modest".

Despite the reforms making house purchases cheaper for 98pc of home-buyers who pay the levy, revenues from residential stamp duty are still forecast to increase from £7bn in 2013/14 to £16bn in 2019/20, he noted.

While removing the "absurd" slab structure of the levy, Mr Osborne's reforms left the "highly inefficient" system largely intact and failed to address similar absurdities relating to non-residential property, said Mr Johnson, adding: "This is certainly not the substantial overhaul of the taxation of housing we need."

IFS analyst Gemma Tetlow rebuked the Chancellor for announcing permanent tax breaks funded by temporary sources of revenue.

She said: "We saw some repeat of rather bad behaviour that the Chancellor has been engaging in over the last few years, which is that some of the permanent giveaways were funded by temporary takeaways."

The increased personal allowance, the stamp duty changes and the reduction in employer National Insurance contributions will be paid for by the cap on banks offsetting their losses.

"This really just brings revenue forwards, so it does look like it pays for it over the next five years, but that comes at the cost of lower revenues later on, so it is not a permanent tax increase," she said.

"Yesterday's statement announced that certain public sector employers, notably the armed forces and the judiciary, are going to be required to make £400m of extra employer pension contributions. They are not being given any extra money in their budgets to pay for that, which obviously increases the pressure on things that they otherwise might have spent that money on."'

I'm sure I saw someone post this on a thread earlier from another source but the Telegraph cl;early prepping the ground for a Tory win.

Share this post


Link to post
Share on other sites

Telegraph 4/12/14

'Britain faces public spending cuts on a "colossal scale" after the General Election which will lead to a "fundamental reimagining" of the role of the state, the Institute for Fiscal Studies has warned.

The respected economic thinktank said that just £35bn of the cuts in spending by government departments have been completed, with £55bn still to come by 2020.

It said that if cuts in departmental spending continue at the same pace, £21billion worth of cuts to welfare or tax rises will be needed by 2019/20.

Paul Johnson, the head of the IFS, admitted that the precise nature of planned cuts had not yet been spelt out, and stressed that it would be wrong to describe them as "unachievable".

But he said voters would be justified in asking whether the Chancellor was planning "a fundamental reimagining of the role of the state".

And he added: "One thing is for sure. If we move in anything like this direction, whilst continuing to protect health and pensions, the role and shape of the state will have changed beyond recognition."

The plans set out in the Autumn Statement imply "a slight increase in the speed of proposed spending cuts after 2015/16", extending the expected period of reductions in state spending for a further year beyond 2017/18, said Mr Johnson.

To achieve the Office for Budget Responsibility's forecast of a budget surplus of £23bn by 2019/20 would require "spending cuts on a colossal scale ... taking total government spending to its lowest level as a proportion of national income since before the last war", he said.

On the measure of total government spending minus spending on debt interest, public expenditure is down by £11bn over the four years to 2014/15, but is set to fall by a further £38bn in the five years to 2019/20.

"There is no spending dividend on the horizon, far from it," said Mr Johnson. "There are huge cuts to come. On these plans,whatever way you look at it, we are considerably less than halfway through the cuts."

If healthcare and state pensions are protected from cuts after the election in the same way they have been by the coalition Government so far, then they can be expected to swallow up a third of all state spending by 2019/20 - up from a quarter before the crisis - before any additional spending on the NHS is factored in, said Mr Johnson.

Mr Osborne's failure to meet his initial target of eliminating the deficit by the end of the Parliament was "emphatically not" a result of the Government holding back on spending cuts, said the IFS.

The "disappointing" outcome on the deficit - which fell just £6bn to more than £90bn this year - was "because the economy performed so poorly in the first half of the Parliament, hitting revenues very hard", said Mr Johnson.

The OBR has produced a "really substantial downgrade" of £8bn to expected tax revenues this year, and this shortfall rises to £21bn by 2017/18, making it even more difficult for Mr Osborne to pay down the national debt.

"This lack of buoyancy in tax revenues, associated with poor earnings growth, looks like being a continued cause for concern," said Mr Johnson.

The fall in tax receipts was offset by an expected reduction in the burden of debt interest, expected to be £16bn lower in 2017/18 than was predicted in March this year, because of the rock-bottom rates currently being charged on the international market.

Mr Johnson described the Autumn Statement's headline reform to stamp duty on residential property as "welcome but really rather modest".

Despite the reforms making house purchases cheaper for 98pc of home-buyers who pay the levy, revenues from residential stamp duty are still forecast to increase from £7bn in 2013/14 to £16bn in 2019/20, he noted.

While removing the "absurd" slab structure of the levy, Mr Osborne's reforms left the "highly inefficient" system largely intact and failed to address similar absurdities relating to non-residential property, said Mr Johnson, adding: "This is certainly not the substantial overhaul of the taxation of housing we need."

IFS analyst Gemma Tetlow rebuked the Chancellor for announcing permanent tax breaks funded by temporary sources of revenue.

She said: "We saw some repeat of rather bad behaviour that the Chancellor has been engaging in over the last few years, which is that some of the permanent giveaways were funded by temporary takeaways."

The increased personal allowance, the stamp duty changes and the reduction in employer National Insurance contributions will be paid for by the cap on banks offsetting their losses.

"This really just brings revenue forwards, so it does look like it pays for it over the next five years, but that comes at the cost of lower revenues later on, so it is not a permanent tax increase," she said.

"Yesterday's statement announced that certain public sector employers, notably the armed forces and the judiciary, are going to be required to make £400m of extra employer pension contributions. They are not being given any extra money in their budgets to pay for that, which obviously increases the pressure on things that they otherwise might have spent that money on."'

I'm sure I saw someone post this on a thread earlier from another source but the Telegraph clearly prepping the ground for a Tory win.

Share this post


Link to post
Share on other sites

While removing the "absurd" slab structure of the levy, Mr Osborne's reforms left the "highly inefficient" system largely intact and failed to address similar absurdities relating to non-residential property, said Mr Johnson, adding: "This is certainly not the substantial ABOLITION of the taxation of housing we need."

Share this post


Link to post
Share on other sites

============================================================

Quote


Institute for Fiscal Studies: Autumn statement briefing, 2014
Introductory Remarks
http://
www.ifs.org.uk/uploads/publications/budgets/as2014/as2014_johnson.pdf
===============================================================================
It sounds as if growth isn't half as real as they keep on claiming.
Edited by billybong

Share this post


Link to post
Share on other sites

About half that number can be achived by crapping tax credits, only in existence since 2002ish.

A reduction of housing benefit to align with local incomes would knock another few billion off.

Share this post


Link to post
Share on other sites

Why are these cuts not needed before the next election ?

:rolleyes:

I do wonder if this is the Tories attempting to throw the election, they haven't made any serious in roads into reducing the debt accumulated, and you can only conclude that they don't want to be in charge as they know how fecked the situation is. This I can only assume is to ensure the next parliament is hung again.

Share this post


Link to post
Share on other sites

About half that number can be achived by crapping tax credits, only in existence since 2002ish.

My thoughts exactly :)

When I first read the op I thought its said 'Colossal C**ts Needed After General Election'

My immediate thought was that we had them already with Cameron, Clegg and Osborne

:)

Share this post


Link to post
Share on other sites

I would never have believed it but the Tories kind of won the last election and have basically spent all their time kicking various cans down the road. I think they have realized the road is running out though, maybe the next election is the one to use.

Or they haven't realized things cannot carry on as they are, they just want to win power.

Share this post


Link to post
Share on other sites

Telegraph 4/12/14

'Britain faces public spending cuts on a "colossal scale" after the General Election which will lead to a "fundamental reimagining" of the role of the state, the Institute for Fiscal Studies has warned.

The respected economic thinktank said that just £35bn of the cuts in spending by government departments have been completed, with £55bn still to come by 2020.

It said that if cuts in departmental spending continue at the same pace, £21billion worth of cuts to welfare or tax rises will be needed by 2019/20.

Would like Gov to go psycho with cuts on LHA for a start.

More than one third of the £25bn housing benefit bill for this tax year will find its way into private landlords' pockets, according to official figures just published.

The Department for Work and Pensions latest housing benefit costs predict the amount of housing benefit spent on privately rented accommodation - £9.5bn for 2014-15 - will rise to £10.8bn by 2018-19.

This is almost 40pc, a proportion expected to remain consistent, with the sum rising in line with the total housing benefit spend.

Lobby group Generation Rent - which represents tenants and would-be homeowners - argues this "subsidy" is encouraging the popularity of buy-to-let, propelling property prices higher and making homes less affordable for those renting. [more at link]

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/10787462/Landlords-9bn-housing-benefit-fuelling-bubble.html

Share this post


Link to post
Share on other sites

Would like Gov to go psycho with cuts on LHA for a start.

As you can pretty much tier their policy priorities according to how much it affects land and asset prices, I'd bet that will be one of the last things they meaningfully touch.

Share this post


Link to post
Share on other sites

As you can pretty much tier their policy priorities according to how much it affects land and asset prices, I'd bet that will be one of the last things they meaningfully touch.

Can understand your thinking, but things are so serious, that not taking action, risks testing UK solvency. I suggest for every political party who gains power, that will be made very clear. No matter if older voters want HPI... any Government from here will be forced to do what is best for the country/solvency/the banks. I know your point and fear it, but am open to the possibility they want hpc... after all bank stress tests are for 35% HPC and a rough rough economy... the results of which out this month I think.

Besides, the people who matter have cashed out (Osborne's parents), and younger participants who are smart have listened to Carney's warning about not overextending yourself to buy as you can't rely on HPI and smooth economy, and Deputy Gov Broadbent saying they are not interested in house prices - that BoE "won't intervene on house prices", but BoE only interested in boosting the number of transactions ("which are currently at a low level") ... renting, awaiting hpc.

Gov can't be that interested in continuing to flood some Wealth Coach with fortunes in housing benefit each month on hundreds of oldie basic houses in Wales.

05 Aug 2014

[..]Mark Harper, the welfare minister, said: “We inherited an out-of-control housing benefit system from Labour that created a culture of dependency.”

He added: “But Labour haven’t learnt their lesson. They voted against our housing benefit cap, they voted against our overall cap on benefits and they still plan to borrow and spend more by restoring the spare room subsidy – landing future generations with more debt than they can ever hope to repay.”

George Osborne, the Chancellor, has promised to cut benefits spending by a further £12 billion if the Conservatives win the next election. Labour have pledged to match the Tories’ deficit reduction plans.

http://www.telegraph.co.uk/news/politics/11012262/Labour-being-hypocritical-over-housing-benefit-bill.html

Only confusion of Autumn statement was Bad Cop Gov on cuts - vs - Good Cheerleader OBR claiming the colossal cuts position will be made up by loads of people wanting to pay new peak prices for houses.... to calm and make happy the VI (who haven't seemed to question the logic but 100% accept it as truth), whereas I have to believe hpc and volume fresh lending to younger smarter generations.

Edited by Venger

Share this post


Link to post
Share on other sites

Cameron has already "reimagined" the role of the state, as a property developers' and BTL cooperative. The state now exists to provide customer finance to potential home buyers, to subsidize deals, and maximize prices. This is the prime function of government. It is why they needed to nationalize the banking industry and fund mortgage lending directly from government accounts. Who could have predicted this outcome 10 years ago?

Share this post


Link to post
Share on other sites

Housing Benefit is a BTL subsidy. It won't be cut. Most "welfare" spending goes in various forms to support home owners, to maintain property prices and high rents. Same could be said of tax credits.

Share this post


Link to post
Share on other sites

Cameron has already "reimagined" the role of the state, as a property developers' and BTL cooperative. The state now exists to provide customer finance to potential home buyers, to subsidize deals, and maximize prices. This is the prime function of government. It is why they needed to nationalize the banking industry and fund mortgage lending directly from government accounts. Who could have predicted this outcome 10 years ago?

Didn't one of the pair say they wanted to cut the state back to 1930s size?

Looking foward then to abolition of agricultural subsidy, landlord benefit, and passport and immigration control.

Share this post


Link to post
Share on other sites

The FT stated that if we left the EU and suspended overseas giving until the finances had improved significantly, that would actually cut something like 25% off the deficit straight away - and without affecting demand in the economy as this is money that is going overseas anyway.

It is very frustrating watching all this tinkering when huge cuts can be made in one fell swoop. Getting rid of foreign aid is universally supported by the electorate too.

Only UKIP are prepared to put such "drastic" measures into practice. Make sure your vote counts next May and under no circumstances can anyone vote for Lib/Lab/Con and winge about the state of anything. Each of those three has had a chance at managing the country and only succeeded in making things worse.

Share this post


Link to post
Share on other sites

Didn't one of the pair say they wanted to cut the state back to 1930s size?

Looking foward then to abolition of agricultural subsidy, landlord benefit, and passport and immigration control.

And of course no NHS.

Share this post


Link to post
Share on other sites

And of course no NHS.

Most people are well aware that the National Health Service, far from being "the envy of the world", has become a second-rate healthcare system. Even now, when the Government is throwing money at it, new problems keep emerging. The latest is the growing exodus of nurses to America.

But if one argues that the creation of the NHS was a terrible mistake, then most people hesitate to agree. One reason for the uncertain response is that there is no folk-memory of what existed before the NHS. It is as though 1948 were zero-hour. People vaguely assume, perhaps, that not many people, certainly not the poor, were treated for their illnesses before then.

It is not surprising. Not many books were written, let alone films made, about healthcare before 1948. But there was one film. I know of it only because I happen to be a Cary Grant fan.

A few years ago, I came across The Amazing Adventure, a film made in 1936 starring Grant and Mary Brian. Grant plays Ernest Bliss, a stonkingly rich young man who wears smart clothes at fancy nightclubs and has an elegant, rich girlfriend. He complains, though, that he is bored. Someone tells him to go to see Sir James Aldroyd, an eminent Harley Street consultant.

Sir James is disgusted with him. Bliss turns up late for his appointment and, on examination, turns out to have nothing physical wrong with him. Sir James has had a long day and tells Bliss what he really thinks: that the only thing wrong with him is that he is too rich.

If he really wants a recommendation, he should go and live as an ordinary person for a year, without using any of his money or contacts. That would put him right. He refuses to shake Bliss's hand. He refers to how his East End clinic needs money.

Provoked, Bliss takes up the challenge. He goes and lives as a working man. One job he takes is as a taxi driver. By coincidence, he is called to take Sir James on a night trip from his East End clinic to a patient 20 miles away. The doctor does not recognise Bliss, who drives him there and waits outside. Later, Sir James emerges and tells the patient's husband that his wife's crisis has passed and she will be all right. The husband is relieved about his wife but worried about paying Sir James's fee.

"There is no fee," says Sir James.

At that moment, Bliss decides he will give £50,000 to Aldroyd's clinic.

The film throws light on to just one part of the pre-NHS healthcare system. At that time, it was normal for consultants to work for a large proportion of each day without charge. These days, we are used to the spectacle of consultants negotiating over the terms under which they will work for the NHS. It now seems almost inconceivable that they once worked for free. But they did.

Frederick Nattrass, for example, qualified in 1914 and, after the war, began working at the Royal Victoria Infirmary in Newcastle. He eventually became a consultant neurologist there.

His daughter, Anne Whittingham, recalls his routine: "He went to work at the hospital in the morning. All for free. It was a charity. Then, to get an income, he took private patients at our home between two and five in the afternoon. This wasn't unusual. All his friends did it. All consultants did."

I suppose that many people, hearing this, would think it quite impossible that a medical system worthy of the name could possibly be based to a significant degree on charitable donations and unpaid work. The pre-NHS system was not based just on that, but charity was indeed a major part of it.

Think of the major London teaching hospitals of today, such as Guys and St Bart's. Every one was set up prior to the NHS. Every one was a charitable - or "voluntary" - hospital, set up specifically to treat anyone, whether they could afford it or not.

Charitable giving came from all sorts of people, those of modest means as well as the rich. Celebrities such as Handel and Reynolds contributed to earlier hospitals. The Royal Family was instrumental in stimulating charity, notably through the King's Fund, which was established by Edward VII. There were Sunday collections in churches and Saturday collections in workplaces.

Increasingly, people contributed to regular hospital care plans. In 1938, 52 per cent of the income of the voluntary sector came from paying patients and the proportion was rising fast. There were also the municipal hospitals, in which local people took some pride.

But the voluntary hospitals were gaining in importance as the 20th century progressed. By 1936, the voluntary hospitals took 60 per cent of those requiring acute care. British medicine was widely admired around the world. It was a leader in medical innovation, its greatest triumph being the discovery and development of penicillin. This was just in time to save thousands of lives during the liberation of Europe and subsequently has saved millions of lives around the world.

Healthcare in Britain was very substantial and impressive prior to 1948. Even the Labour Party pamphlet, which recommended a "National Service for Health" in 1943, could find little to criticise. There is mention of only one waiting list, for "rheumatic diseases". That implies that there were no waiting lists for all the other specialties and no waiting lists to see consultants. There was no mention of any shortage of doctors (which is so chronic now) or, indeed, of nurses. There was no complaint either, about the quality of care.

Why, then, was this system thrown out, to be replaced by a socialist model? Because, said the pamphlet, a good medical service should be "planned as a whole".

It is certainly true that pre-NHS medical care was not "planned as a whole". On the other hand, it worked.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   222 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.