The roller-coaster of government debt - here we go again
Time to catch up after our staycation in the grey sunless Westcountry (hope Mr Dale has better luck this week). Except there's nothing much to catch up on: it's just more of the same old grey sunless same:
1. NHS sick leave
As we've blogged many times (eg here), sick leave in the NHS is higher than in any other organisation known to man. Updated stats were released last week:
"The average NHS worker takes 10.7 days off sick a year, compared with 9.7 days for the public sector as a whole and 6.4 days in the private sector. The service loses 10.3 million working days annually... costing £1.7 billion per year."
Why are they so sick?
"The first national audit of staff habits has found high rates of obesity, smoking, absenteeism and poor mental health."
This will come as no surprise to anyone who has ever dined in an NHS hospital canteen, as we did here. Amidst the vast steaming piles of chips and Ginsters, you're hard pressed to find anything even vaguely healthy on the menu. And by far the fattest diners are members of staff.
Worse, it now transpires that NHS staff can continue to claim overtime and anti-social hours allowances while they are actually off work.
Now what kind of dope would negotiate a pay deal like that?
Apart from our swaggering clothead rulers, that is.
The simple fact is that the monstrously obese NHS is unmanageable. Nobody - not Sir Terry, not Sir Stuart, and certainly not Shaky - has a prayer of mastering it. It needs to be broken up into much smaller and competing social insurance providers.
2. MoD incompetence
The latest cover-up over MoD procurement incompetence is still making headlines:
"The British military operation in Afghanistan is being compromised by an “incompetent” Ministry of Defence equipment programme that is £35 billion over budget and five years behind schedule, a leaked confidential report has revealed.The highly critical internal MoD report, written by a former defence special adviser, says that the department is running a “substantially overheated equipment programme, with too many types of equipment being ordered for too large a range of tasks at too high a specification”.
We already blogged this leaked report here. But equally astonishing is last week's news that MoD underestimated the likely cost of the Iraq War by factor of three:
"British officials failed to predict both the length of the UK engagement in Iraq and the financial drain. Treasury documents from September 2002 show it greatly underestimated the costs, believing British troops would need to remain “fully engaged” in Iraq for just six months.
In a document drawn up for Ed Balls, special adviser to Gordon Brown, the then chancellor, officials said the “central estimate” for the cost of “preparation, deployment and return” of UK troops from Iraq was £2.5bn."
The latest cost estimate is £8.4bn - itself almost certainly too low.
As we've said before, you wouldn't trust the MoD to buy your weekly shopping, let alone put them in charge of our £48bn pa defence budget.
But we can't privatise defence. Which is a real problem.
(While in the Westcountry, Tyler met a man in a pub. This particular man's firm supplies the MoD with top-secret "if I told you I really would have to kill you" IT kit. He reckons they've now supplied three generations of said kit, but as far as he knows, none of it has ever been used. Insurmountable "source code" conflicts with other kit MoD has bought separately from the US means that the vital components can't talk to each other. So it's all "lying in a cupboard somewhere". Not that he's complaining - the exercise has earned him a rather nice second home.)
3. Deeper in Debt
The monthly public sector borrowing figures were the usual horrorshow. Borrowing in July was £13bn higher than last year, and net debt has already reached £800bn. At this rate we will rack up the trillion sometime next summer.
As it happens, Tyler spent last week
To be honest, Tyler was a little disappointed. While the book is stuffed full of government financial fiascos, bungling politicos, and greedy bankers, somehow it never quite takes flight: it's less than the sum of the parts.
Still, Ferguson does remind us just how often heavily indebted governments inflate their way back to solvency. The Nineteeth Century British example of a government actually redeeming its huge debts (see Ferguson's handy chart above) is very much the exception. Throughout history, most governments have simply defaulted via inflation.
It is a salutary warning to all savers, especially pensioners. It says that in terms of the political calculus, they don't count. They are outvoted by debtors, and those who can more easily protect themselves against rising inflation, including of course, bolshie unionised labour (as happened in Weimar Germany).
Which naturally brings us to...
4. Inflation
Last month's inflation numbers underlined the stark reality that the deflation scare is a con: it simply ain't gonna happen.
The CPI came in at 1.8% (year-on-year), unchanged from last month. And that despite the fact that most mainstream forecasters had told us there'd be a dip.
All the more reason then, to worry about the Bank of England's roaring printing presses (eg see this post).
And even more reason to wonder WTF the Bank Governor actually wanted to crank them up even further. Has he lost the plot? Or is this by some chance the very same Mervyn King who signed that notorious 364 economists letter opposing fiscal discipline in 1981?
He's going to have to steady himself: with Bernanke calling the end of the US recession, those presses will need shutting down any time now.
Can't say we're optimistic. Maybe we need a holiday.
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