Britannia Radio

There's no doubt that most serious commentators expect Darling's 
proposals coming on Monday to be a short term failure and, long term, 
a further plunge into chaos.   Confidence is evaporating by the day 
and Monday is likely to finish it off.

Unemployment is rising and over the last six months of this year the 
Centre for Economic and Business Research (CEBR) estimates : (a) that 
300,000 workers in the private sector will have lost their jobs; and 
(b) in the same period an extra 50,000 public officials will have 
been recruited.   [THIS NOT ON TELEGRAPH WEBSITE!]

This means that 300,000 people creating things which contribute to 
taxation will instead claim from the state and 50,000 who are a 
charge on the earnings of workers in the private sector will add to 
the  government's borrowing.

The bank refinancing looks very much as if it is turning into a 
grossly extravagant failure.    Revenues are falling even faster than 
the rise in unemployment.

This cannot go on - BUT IT WILL.  By next Easter we shall see if we 
can escape meltdown this time

xxxxxxxxxxxxx cs
===========================
TELEGRAPH   21.11.08
When money is tight, people spend less. Are you listening, Mr Darling?
Jeff Randall argues that the root cause of this economic misery is 
debt, and no recovery will be lasting until the Government starts to 
redeem its IOUs.

Christmas, even in difficult times, is when children tell Father 
Christmas what they want - and then adults pay for it. By contrast, 
budget deficits are when adults tell the Government what they want - 
and then their children pay for it.

For too long, Gordon Brown handed out "presents" while racking up 
bills on the nation's credit card. In building today's unattractive 
constituency of entitlement junkies (his employment boom was a 
mirage), the Prime Minister has created a crippling burden for 
tomorrow's taxpayers, our offspring.

Ballot-box bribery is an expensive business. Productivity gains in 
the state sector, where they occurred at all, have been scandalously 
low. Education and health resources in particular have been squandered.

Under Labour, the education budget has more than doubled to £82 
billion. Yet only this week, we learnt from Ofsted, the watchdog, 
that four in 10 secondary schools are under-performing, with more 
than half of all state pupils leaving school without five decent 
GCSEs, including English and maths. No wonder many families on 
relatively low incomes are scrimping to pay for private education.

The problem, according to Tom Burkard, visiting fellow at the 
University of Buckingham, is that the current schooling system is 
hopelessly corrupt: "Grade inflation has reduced the annual release 
of exam results to a farce." Examinations have been perverted to 
measure process, rather than content. Political correctness warps the 
curriculum.

"Pupils are taught to 'evaluate' gobbets selected for the specific 
purpose of illustrating themes, such as the oppression of blacks by 
whites, women and homosexuals by men," says Mr Burkard. "Without 
political will, there is very little chance of breaking through the 
web of progressive educational mythology and stepping outside the 
long shadow of Thomas Gradgrind."

Over at health, there is a similar sickness. The annual NHS budget, 
which in Mr Brown's binge years was growing at more than twice the 
pace of the economy, is now £111 billion. Much of it has been blown 
on flawed technology, blood-sucking consultants and administration 
costs.
For a taste of where the cash is spent, my local newspaper this week 
carries an NHS advertisement for a Specialist Stop Smoking Support 
Adviser in Pregnancy, salary up to £26,123. The job is aimed at 
"providing support in specific areas of deprivation in order to 
reduce health inequalities".

Can there be a woman in Britain, even on the worst sink estate, who 
does not know that cigarettes are deleterious to health, especially 
to an unborn baby's? It says on the packet, for goodness sake, 
"Smoking Kills". And if these "clients" are mired in poverty, from 
where do they find £6 for 20?
How does the NHS justify depriving some seriously ill people of life-
saving drugs on account of cost, while spending many thousands to 
counsel women who are clever enough to become pregnant but too stupid 
to give up fags?

Health expert Professor Nick Bosanquet of Imperial College explains: 
"Poor financial management is endemic in the NHS and a major barrier 
to future productivity and dealing effectively with new challenge. 
The tools of basic financial management remain absent from most of 
the NHS and the service does not know what it is spending money on."

Without an overhaul of financial controls, "no matter how much money 
is spent on the NHS, it will not lead to any kind of value for 
money," he says.

Which makes all the more impressive Treasury Secretary Yvette 
Cooper's ability to claim with a straight face: "By delivering more 
efficiency savings and cutting back further on waste, we can keep 
improving and investing in our public services." Miss Cooper gained 
an MSc from the London School of Economics. One must assume that she 
skipped accountancy classes for a few sessions at the Comedy Club.

On Monday, Alistair Darling delivers his second pre-Budget report. 
The Chancellor's unenviable task will be to explain why the gap 
between next year's state spending and income will be about £100 
billion (7 per cent of GDP), by far the worst the deficit has ever 
been, and what he intends to do about it.


Unlike his predecessor, Mr Darling inherited no pot of gold. In every 
drawer, desk and cupboard at Number 11 there are bundles of IOUs left 
by Mr Brown. Just as the bills are pouring in, revenues are drying 
up. Until credit was crunched, about 25 per cent of corporation tax 
was provided by Britain's banks. Much of that has vanished, costing 
the Treasury up to £10 billion a year.

As commerce contracts, so too do VAT receipts, National Insurance 
contributions and payments for business rates. Income tax will also 
decline, but rising unemployment will bring higher welfare payments.

Last year's euphemistically labelled social protection budget 
(nothing to do with defence or police) totalled £169 billion. Yes, we 
spend about five times more on supporting the unemployed and 
incapacity-benefit claimants than we set aside for our Armed Forces, 
too many of whom have lost their lives in Iraq and Afghanistan 
through lack of proper kit.

Mr Darling knows that to establish credibility as an independent 
Chancellor, he will have to resist signing some of the Prime 
Minister's blank cheques. He must set out how, having let spending 
rip to shore up a wobbling economy, the Treasury intends to restore 
sanity to public finances. If there are to be tax cuts, here's an 
opportunity to fund them responsibly, through reductions in a Budget 
that became grotesquely bloated under the bloke next door.

It's inconceivable that a half-decent finance director could not 
slice 5 per cent off government spending without resorting to a cull 
of essential services. From a Budget of £650 billion, that would 
amount to more than £30 billion - a good start. At the last election, 
Labour's spin machine convinced the electorate that Michael Howard's 
proposed cuts of £4 billion would lead to widespread closures of 
schools and hospitals. Nonsense, of course, but the trick worked a 
treat.

Debt is at the root of our crisis. We did not arrive at this bad 
place because consumers and government were saving too much and 
spending too little. We will not escape it by carrying on as we did 
before. There will be no foundation for a lasting recovery until 
Britain rediscovers the virtue of living within its means.

I despair when retailers, such as John Lewis's managing director, 
Andy Street, say that "the downturn in spending is irrational". No, 
it's not.

People are steering away from the road to ruin. Shopkeepers can no 
longer expect customers to sacrifice themselves to rescue corporate 
profits.

Encouraging another burst of mindless consumption, without 
significant increases in productivity, can, perhaps, palliate short-
term financial stress.

But in the end, when the drug of excess runs out, the patient is 
wrecked. One hopes, though does not expect, that Mr Darling has the 
moral courage to make that clear.
==========================
CONSERVATIVE HOME Blog   21.11.08
Fiscal stimulus will prolong the recession
Andrew Haldenby:

Andrew Haldenby is director of the think-tank Reform, which today 
publishes a report, The hole we are in and how to get out of it, 
presenting new evidence that a fiscal stimulus - whether tax 
reductions or spending increases - will prolong the recession. This, 
he says, is worrying since the Government is expected to announce 
just such a package in the Pre-Budget Report next week.

The Chancellor wants to introduce a stimulus to give the electorate 
the confidence to increase consumption.  But the overwhelming 
academic evidence is that what actually restores confidence is a 
sense that governments have regained control of their finances.  This 
is why many economies - including the UK in the early 1980s - had the 
paradoxical experience of a return to growth after tax increases.

This is also why fiscal stimuli in the form of crisis tax cuts don't 
work.  Either the electorate will discount them because they know the 
money has to be paid back in higher taxes.  Or - this is the view of 
the academic authority, Stephen Ceccheti - governments will avoid the 
higher taxes and the public finances will get even further out of 
balance.

Reform's Consultant Director, Nick Bosanquet, points out that the 
Government has misread Keynes.  Keynes actually focused on 
confidence; a true Keynesian position would be about measures to 
raise confidence and demand in the private sector.  Instead we have 
what he calls "Toxic Keynesianism" - the view that what we need is 
big government spending programmes which will beat unemployment and 
further increase the role of the state.

Our report is also about honesty.  The Prime Minister and the 
Chancellor have said that the public finances can withstand a burst 
of extra borrowing.  In fact the UK has the fourth highest structural 
budget deficit in the OECD.  Including the Government's long term 
spending commitments on pensions and education, the deficit stands at 
6.6 per cent of GDP.  Without changes in spending, that means 
eventual tax rises of £100 billion, or £4,000 per household, which 
would wipe out over a quarter of families' disposable income.

Please don't believe the Treasury's estimates on borrowing in 
Monday's report.  In the last five years, it has underestimated the 
true level of borrowing by a total of £121 billion.

And it's about culture.  In retrospect the UK has endured a long 
period of living beyond its means, supported by interest rates held 
far too low.  We have become used to unsustainable levels of debt and 
consumption (we use the graphic image of the "obese economy").  We 
now need to find a new path based amongst other things on saving 
(remember that?).  A fiscal stimulus would be the last hurrah of the 
debt-binge era.  It's time to move on.

Instead the Chancellor should get a grip of public spending.  That 
does not mean crisis cuts in public spending, which would increase 
inefficiency and - by creating a perception of under-funding - lead 
to demands for higher spending later on.  This, by the way, was the 
story of the 1990s.  Crisis (Conservative) spending cuts led to a 
popular demand for (Labour) spending increases.  The UK public sector 
needs to leave behind this cycle of boom and bust.

Instead it means the programme of public service reform that the 
Government should have introduced years ago.  The recession should 
give the Government the courage to tackle the root causes of 
inefficiency. Above all that means the workforce agreements with 
public sector workers and the political direction from Whitehall.

Much of the programme will save money immediately.  We can't 
underestimate how much of the inefficiency of public spending is due 
to the targetry and tinkering to which most Ministers and senior 
officials remain addicted.  A typical finding of our research is that 
the leaders of public services have the tools to change the way their 
services are run but are continually distracted by political 
priorities, from hospital cleanliness to changes to school curricula 
to ever-changing rules on use of police resources. The only cost of 
putting targets on a bonfire would be a certain amount of Ministerial 
embarrassment.  The gains would be immediate and large - even if for 
example the NHS became only 5 per cent more efficient (and it would 
be much more), that would save over £25 billion during a Parliament.

The Chancellor can also set out a productivity agenda for the private 
sector and individuals.  We suggest greater competition between 
businesses - the Lloyds / HBOS merger is ill-omened - and 
deregulation.  We should also enable individuals to make better use 
of their own money.  Public sector reform should open up the room for 
sustainable reductions in marginal tax rates, improving productivity.

In the short term, the automatic stabilisers have to be allowed to 
work and overall public spending will rise due to higher benefit 
payments. At the same time, the Government must reform the rest of 
public spending.  We suggest that the Chancellor should revise his 
Comprehensive Spending Review and republish it with the March Budget. 
When the Chancellor drew up his last spending forecast, he expected 
growth of 2.75 per cent in 2009.  It will actually be less than minus 
1 per cent.  His proposals for spending (excepting the automatic 
stabilisers) need to be revised downwards.
The Conservative Party's new policy on public spending therefore 
looks well-judged and well supported by the evidence.  The danger of 
excessive borrowing is real.

The remaining challenge is over public service reform.  We read that 
the Conservative Party is looking for "waste" to justify reductions 
in public spending (rather like the James Review in the last 
Parliament). That isn't good enough - the problem isn't "waste" but 
the structures that lead to the waste.  There is no avoiding the need 
to tackle head-on factors like the terms and conditions of public 
sector workers.  There is also no avoiding the NHS - it's the biggest 
budget (£100 billion) and can't just be appeased.

The Conservatives faced down union opposition in the early 1980s 
recession, to the great benefit of the economy.  Will they find the 
courage to repeat their achievement in today's recession, in the 
public sector?

Next year the recession will bite hard.  Policy makers will be 
confronted with unemployment and public finance figures that keep on 
getting worse and worse.  Further damage to the public finances will 
be recognised to be highly irresponsible.  I hope Alistair Darling 
will reconsider.