PBR shows Labour think they will soon be out of power
I have been in a meeting for most of the day and so am only just catching up with the PBR now. However my first impression rattling through the headlines on the BBC News website and reading initial reaction from blogs and commentators is that there is a lot less here than I was expecting.
All the measures announced will make a smallish difference in each case and they do not seem to add up to anything substantial. It certainly does not feel like a government getting a firm grip on public spending and revenue raising/budget reduction to try and get us out of the worst financial crisis in working people's living memory.
What it actually seems like to me is doing the bare minimum in order to try and shore up their political position and leave whoever is in government after the next election to pick up the pieces.
If I appear to be unfair here, ask yourself this. Given the state of the finances, would this PBR have been the same if the government still had say 3 or 4 years to run? I suspect not and that they would have been trying much harder to get a grip now. Therefore I think it is only fair to conclude that they do not expect it to be them doing that picking up after June 2010.
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3 comments:
"It certainly does not feel like a government getting a firm grip on public spending and revenue raising/budget reduction to try and get us out of the worst financial crisis in working people's living memory."
For it to be the worst financial crisis in living memory, we'd have to be facing our serious problems from the deficit. At the moment, the recession dwarfs the problem of the deficit, and confidence in government borrowing, scaremongering aside, isn't bad, particularly given the decline in confidence in other areas.
The deficit will badly need managing when the economy is starting to recover strongly -- in other words, around 2011. Labour announced tax rises that come into effect then. I must say that something I haven't got a good idea of is how the Lib Dems plan to cut the deficit without ditching their Tuition fees and fair taxation policies.
@Dingdongalistic: the reason we are not facing down the barrel of a massive retrenchment of govt spending right now is because the govt is printing the money it needs to spend!
The markets are giving us enough rope to get to the next election. If who ever wins doesn't do something there and then about the deficit, the markets will do it for them. Gilt buyers strike, sterling collapse. Only thing a govt can do in a crisis of confidence is take emergency action - raise taxes with immediate effect, cut spending immediately too. And raise interest rates to defend the pound. What do you think that will do to the recession? Turn it into a depression perhaps?
Thats where we're headed unless someone take the 'hard decisions' that Gordo keeps banging on about, but never seems to make.
This PBR says nothing. No detailed spending cuts, no big tax rises. It basically works on the premise 'something will turn up'. I think something will turn up, but it won't be what you and Labour are expecting.
"the reason we are not facing down the barrel of a massive retrenchment of govt spending right now is because the govt is printing the money it needs to spend!"
This is nonsense. The government is borrowing money for public spending -- Quantitive easing is carried out by the Independent Bank of England, and is an anti-deflationary measure.
"The markets are giving us enough rope to get to the next election. If who ever wins doesn't do something there and then about the deficit, the markets will do it for them. Gilt buyers strike, sterling collapse."
This will happen either when government borrowing reaches a level where it crowds out private borrowing, which isn't going to happen until the economy is recovering strongly. Hence the suggestion of most economics commentators, including that dogged defender of the government, Anatole Kaletsky, that cutting the deficit will be a serious issue for 2011.
"This PBR says nothing. No detailed spending cuts, no big tax rises. It basically works on the premise 'something will turn up'. I think something will turn up, but it won't be what you and Labour are expecting."
I don't support Labour. Neither do I look very favourable upon a Conservative government. I think soon after the election there will need to be spending cuts and tax rises -- I just don't think the time for those is *now*.
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