Unreality bites
Jul. 20th, 2010 02:29 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
peterbirksThere was a news item this morning at about 5.15am, when I was, despite having to get up, still half-asleep. It referred to a study which showed how many of the "savings" achieved by various ministries in the dying days of the last Labour administration were not savings at all, but accounting tricks. In particular the item referred to double counting by the Ministry of Defence and the change in baselines at the Department of Transport.
I've been looking for this story online, but haven't been able to find it. However, I shall assume that I was not hallucinating and that Radio 5 Live really did broadcast it.
What we did get today was a story from the Office of National Statistics, presumably concerned that it might carry on being seen as the "Office of Government Statistics" and therefore keen to establish some facade of independence. ONS said that public sector borrowing in June was £14.5bn, a stonking £1.4bn worse than had been anticipated. Whoops.
It would be nice to blame the perniciousness of government departments for this. Nice because I always enjoy blaming government departments for bad stuff, and also nice because then there might be a solution.
Sadly, the real cause was
Not sure why this should be such a surprise. And it indicates how difficult it is for this government or, indeed, any government, to square the circle. As I wrote recently, the sole answer that emerges from the recent budget is for us to export our way out of trouble. If we just cut back on the spending, a large proportion of the "savings" will disappear through lower revenues. After all, the multiplier effect works in both directions.
As for the creative accounting used by the government departments -- well, what did the government expect? Many staff are fighting for their jobs and will quite happily fight dirty in the process. And if there was a championship for wasteful spending and fighting dirty, I think the Ministry of Defence (£37m of "cuts" were non-existent) would have won it hands down every year for the past two decades. I would imagine that the Treasury must tear its hair out every year at the latest MoD spending catastrophe -- new tanks that won't work in the desert, new weapons that won't fire in the desert, or a block buy of uniforms that are all small or extra small, so can we please recruit smaller people for the army?
Cutting government spending is always going to be a struggle because the "enemy" has years of practice, and any attempt to be "reasonable" and "fair" will be exploited with utmost prejudice. The worst strategy, indeed, is the "immediate cuts" route, because this nearly always entails massively generous redundancy deals for the more competent staff (the incompetent ones know that they are unemployable elsewhere, and so stay put) and, quite often, over-generous pension agreements because, of course, they don't appear on this year's figures.
On the plus side, the distortions by the public sector here are as nothing compared with those in southern Europe, where the residents are going to wake up one morning to a hell of a shock. In that sense, the UK's debt is, paradoxically, probably far more reliable than virtually any other EU country bar Germany.
For the majority of the EU, one wonders whether the attitude is still the massive self-deception of "Brussels will help us out". After all, they've had 20 years or more of largesse, road-building, cultural projects, etc. Is that long enough to cultivate the famous "dependency culture"? I think perhaps that it might be. How will these areas that have been receiving EU grants for a couple of decades cope with the realization that the tap has been turned off?
Well, one only has to look at Greece, I suppose.
+++++++++++++
(Later) Ahh, found it !
http://www.bbc.co.uk/news/business-10691992
The National Audit Office "said it had reviewed about £2.8bn of those claimed savings £10.8bn of reported "cuts"), and found that only 38% of them "fairly represented sustainable savings"".
I've been looking for this story online, but haven't been able to find it. However, I shall assume that I was not hallucinating and that Radio 5 Live really did broadcast it.
What we did get today was a story from the Office of National Statistics, presumably concerned that it might carry on being seen as the "Office of Government Statistics" and therefore keen to establish some facade of independence. ONS said that public sector borrowing in June was £14.5bn, a stonking £1.4bn worse than had been anticipated. Whoops.
It would be nice to blame the perniciousness of government departments for this. Nice because I always enjoy blaming government departments for bad stuff, and also nice because then there might be a solution.
Sadly, the real cause was
"a surprise 1.8% fall versus June 2009 in the combined cash revenues from income tax, capital gains tax and national insurance".
Not sure why this should be such a surprise. And it indicates how difficult it is for this government or, indeed, any government, to square the circle. As I wrote recently, the sole answer that emerges from the recent budget is for us to export our way out of trouble. If we just cut back on the spending, a large proportion of the "savings" will disappear through lower revenues. After all, the multiplier effect works in both directions.
As for the creative accounting used by the government departments -- well, what did the government expect? Many staff are fighting for their jobs and will quite happily fight dirty in the process. And if there was a championship for wasteful spending and fighting dirty, I think the Ministry of Defence (£37m of "cuts" were non-existent) would have won it hands down every year for the past two decades. I would imagine that the Treasury must tear its hair out every year at the latest MoD spending catastrophe -- new tanks that won't work in the desert, new weapons that won't fire in the desert, or a block buy of uniforms that are all small or extra small, so can we please recruit smaller people for the army?
Cutting government spending is always going to be a struggle because the "enemy" has years of practice, and any attempt to be "reasonable" and "fair" will be exploited with utmost prejudice. The worst strategy, indeed, is the "immediate cuts" route, because this nearly always entails massively generous redundancy deals for the more competent staff (the incompetent ones know that they are unemployable elsewhere, and so stay put) and, quite often, over-generous pension agreements because, of course, they don't appear on this year's figures.
On the plus side, the distortions by the public sector here are as nothing compared with those in southern Europe, where the residents are going to wake up one morning to a hell of a shock. In that sense, the UK's debt is, paradoxically, probably far more reliable than virtually any other EU country bar Germany.
For the majority of the EU, one wonders whether the attitude is still the massive self-deception of "Brussels will help us out". After all, they've had 20 years or more of largesse, road-building, cultural projects, etc. Is that long enough to cultivate the famous "dependency culture"? I think perhaps that it might be. How will these areas that have been receiving EU grants for a couple of decades cope with the realization that the tap has been turned off?
Well, one only has to look at Greece, I suppose.
+++++++++++++
(Later) Ahh, found it !
http://www.bbc.co.uk/news/business-10691992
The National Audit Office "said it had reviewed about £2.8bn of those claimed savings £10.8bn of reported "cuts"), and found that only 38% of them "fairly represented sustainable savings"".
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no subject
Date: 2010-07-20 01:41 pm (UTC)Many claimed savings ''were not genuine''
http://www.publicservice.co.uk/news_story.asp?id=13542
Doubt cast on Labour government’s efficiencies plan
http://www.telegraph.co.uk/news/7898971/Doubt-cast-on-Labour-governments-efficiencies-plan.html
And from the NAO itself:
http://www.nao.org.uk/publications/1011/vfm_savings_compendium.aspx
Tax Take
Date: 2010-07-20 04:22 pm (UTC)But now they are actually quite reasonable and their interest rate (3.5%) is pretty damned friendly. Increased overdraft at 10% or string the taxman along at 3.5%? Not hard to see why people are spinning things out. They will get their money (well most of it anyway), but just on a deferred basis. Look for an even worse decline in tax take in July and August when instalment payments are due and people fail to pay or make fresh arrangements.
no subject
Date: 2010-07-20 06:07 pm (UTC)Keith S
Unreality Bites
Date: 2010-07-21 12:45 pm (UTC)Having said that there's undoubtedly a lot of waste and the MOD is a good place to start. But it needs a far more forensic and targeted examination than the sort of knee jerk, headline seeking reaction we're used to.
Re: Unreality Bites
Date: 2010-07-21 01:06 pm (UTC)PJ
Re: Unreality Bites
Date: 2010-07-21 02:34 pm (UTC)no subject
Date: 2010-07-22 08:40 pm (UTC)The Bishop^W OBR wuz ... too late.
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