The Spending Review could have been far more radical

The Comprehensive Spending Review deserves a cheer and a half, but not much more than that. The Coalition has developed a welcome single mindedness in getting the public finances under control, but they could have been both more radical and more methodical. They seem to have tackled deficit reduction in a tactical, rather than a strategic fashion. The blue skies thinking, which was promised at the time of the emergency budget, has either not really taken place or has not been overly imaginative.

 

To consider the upsides first, the review does underscore the determination of George Osborne – and the Government more widely – to depart from the reckless spending largesse of recent years. If we were hurtling towards a Greek-style meltdown, this has most probably been averted.

 

Both the Conservatives and the Lib Dems have shown some courage in departing from their wildly optimistic manifesto pledges to face up to economic reality. This may raise issues about how – just six months ago – a wide-ranging discussion about public spending was essentially ducked in the General Election campaign, but at least we have a government that seems to be dealing with the world we actually live in, rather than the world as they would like it to be.

 

 

Read the rest of the article on the ConservativeHome website

Mark – you are correct in your analysis.Mr Osborne announced an eight point plan for the economy in February during the General Election run in. Details of other seven elements in this plan, beyond reducing the budget deficit are sketchy to date.Mssrs Cameron, Osborne & Fox have left themselves wide open to the criticism that the Defence Review was purely CSR cost orientated and not strategic.There is a gaping hole on where economic growth, leading to new jobs, from the private sector is going to come from. Exports are in retreat.Cutting the budget before having a clear growth strategy could be like invading Iraq or Afghanistan, without a post-invasion peace plan.

Ref ConHome: “Red tape” and “regulation”; ancient conkers, boiled in vinegar and kept to harden since since the last Conservative government.Those concerned by “red tape” are either paranoid, exceptionally bad managers, unable to follow rule changes; or all three. 1980s deregulation was followed by the FSA’s soft touch regulation in the financial services sector.Government is abolishing the discredited FSA, or is that just crowd-pleasing, faked anger; cover for an ideological, covert purpose of cost-cutting and “deregulation”?“Insanity: doing the same thing over and over again and expecting different results.” Albert Einstein. Could we have some new economic ideas, please?

@Jonathan Harris – it doesn’t actually matter if we end up in a ‘double dip’ recession as a result of the cuts. Tough. That’s merely a party political consideratino. It is not the role of government to manage the economy and attempt to provide ‘growth’ – this is a mistaken belief just as it is a mistaken belief that we can manage other countries like Iraq. It is the role of the government to uphold the laws. What keeps government as large as it now is are the vested interests in the taxpayer-funded largesse which such a large state provides. In the longer term we will all be better off if the size of the state is reduced hugely (which, of course it wasn’t) and prevented from growing again.

Mark – I agree in some senses. On the other hand, the government have generated a message that ‘we’re not doing this ideologically, we’re doing it as far as we need to’. Given that is their stated reason for doing so, they can only go as far as balancing the budget; if they had a degree of political courage (although given the Press attitude and the nature of coalition govt I understand why not) they would have stated that they were cutting the size of government and got on with it. This would have meant that whether we get a ‘double-dip’ or not is irrelevant, which in fact it is! Sadly, such a position is unlikely to win any voters in a recession any more than it does in a ‘boom’.

WhigSo government spending decisions are not part of the economy, then? Government makes its decisions in splendid isolation, without any reference to any impact on the wider economy?Taking your argument to its logical conclusion, government should just be completely privatised, police, justice, hospitals, schools, universities, refuse collection and disposal, etc. If we have no public services, then we may abolish all taxation, too. Let all UK companies be taken over by foreign owners and UK production closed.Let the market decide.So, the government decision to respond to business and cut corporation tax, announced in the June budget had nothing to do with the economy, then?

@JonathanHarris – you’re confusing what is with what should be. Government operates fiscal and monetary management of the economy now – but it ought not do so. Taking my argument to its logical conclusion, government’s role is to uphold the laws protecting property rights and provide genuine public goods (law and justice, defence). We can’t ‘abolish’ taxation – we can merely reduce it to its appropriate level, and use it to provide these services rather than attempt to manage the economy. Under such a low tax regime I should think the market would decide to move just about every aspect of production to the UK.

Most importantly, you omitted the denationalisation of money.
Moreover, even if government did provide, say, healthcare, any taxes raised to do so should not be used in an attempt to manage the economy and impact the trade cycle, but simply to provide that service.

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