Thoughts on politics and life from a liberal perspective

Monday, 24 May 2010

These cuts had to happen now

George Osborne and David Laws today have announced £6.24 billion in spending cuts to be implemented imminently. The cuts cover:

• £1.15bn in "discretionary" areas such as consultancy and travel costs
• £95m through savings in IT spending
• £1.7bn will be saved in delaying or stopping government contracts and projects
• Reductions in property costs will save £170m
• More than £120m expected to be found through a freeze in civil service recruitment
• £600m by cutting the cost of quangos
• £520m will be saved through other low-value spending

Our deficit this year is £167 billion or around a quarter of government spending so these cuts comprise around 1% of all spending. I run my own business and I am sure that if we approached the bank for an overdraft to cover a quarter of our turnover the bank would expect us to make cost reductions as part of the deal. In fact I am sure they would expect us to make much more than 1% savings.

I know that the national economy cannot be directly compared with a business due to its scale and various knock-on effects at a macro level but even so with such a huge deficit and with the problems in Greece and other European countries potentially spreading the problem is acute. We need to start tackling it now.

I am glad to see the new government doing so. It bodes well for the reductions that will need to be made in future years to get our economy back on track.

1 comment:

HeavyLight said...

Let's all show solidarity (it's in the national interest, dontcha know) and repay all remaining mortgages within the next five years?

It'll mean flogging any assets, cashing in the pension (at a loss) and cutting back on even the essentials, like food, but we'll be so much fitter in a few years.

Supposing of course that we're part of the lucky bunch that actually survive...