Labour's Fiscal Fantasyland

Public sector efficiency experts on the job

As they keep reminding us, Labour's Big Fiscal Pledge is to halve the deficit by 2013-14. In Darling's own words:

"Backed by legislation... the Government will ensure public sector net borrowing, as a share of GDP, falls every year and is more than halved by 2013-14."

And according to their latest numbers that is precisely what they will achieve - Public Sector Net Borrowing (PSNB) falls from 12.6% of GDP this year, to 5.5% in 2013-14.

But even if the markets can live with that speed of retrenchment - and many think it's not fast enough to maintain confidence - there is still a serious problem. Because Darling's projections are based on a range of assumptions that bear virtually no resemblence to the real world - it is a fiscal fantasyland.

Part of the fantasy is their assertion that they can achieve their projected retrenchment without cutting so-called frontline services, and without increasing taxes beyond what they've already announced. As we've blogged many times, given their abysmal track record on public sector "efficiency" that's going to be impossible. Moreover, so far they have even failed to specify where their assumed "savings" are coming from - which specific spending programmes are going to face the budget axe?

But there is another even more dangerous strand of fantasy - their assumption that Britain's economic growth will soon bounce back to 3.25% pa:

So according to the Pre-Budget Report, over the five years from 2010-11, GDP growth is supposed to average 3% pa. But in a world of over-indebtedness, zombie banks, and tax increases, that is extremely unlikely. Consider:

1. The average of independent forecasts for more or less the same period (2010 to 2013) is just 2% pa - and that was collected and published by the Treasury itself (see here page 18).
2. Last time we had to tackle a fiscal crisis even remotely like the current one - in the 70s - GDP growth was pretty close to zero for the following five years: in fact between 1976 Q4, when the IMF arrived, and 1981 Q1, when Geoffrey Howe finally completed the necessary fiscal consolidation, UK growth averaged just 0.4% pa.
3. Japan's notorious Lost Decade of stagnation, following the collapse of its financial bubble in 1989, lasted... well... a good decade.

So what happens to Labour's halving of the deficit when their fantasy GDP growth doesn't materialise? Because as we all know, growth is the vital driver of fiscal health. Without growth, tax revenues remain depressed, welfare spending increases, and Darling's borrowing pledge won't be worth the legislative paper it's printed on.

The Institute for Fiscal Studies attempted to answer this vital question in their recent Green Budget. They are naturally too polite and circumspect to accuse the government of spinning a fantasy, but they did take a close look at the fiscal consequences of slower growth.

The model a range of possible GDP scenarios - all more pessimistic than Darling's growth assumption.

Their central case is that GDP growth will average 2% pa over the next five years rather than Darling's fantasy 3% pa - pretty much the consensus view among independent forecasters. And on that basis they project that the 2013-14 borrowing requirement will be about 1.7 percentage points of GDP bigger than Darling forecasts - ie 7.2% of GDP (see page 125). Which means Labour miss their solemn and binding pledge to halve the deficit.

Personally, Tyler reckons 2% pa GDP growth still sounds too optimistic, and is more convinced by the IFS's pessimistic case. That assumes average growth of just 1.3% pa over the period - more than we got following the 1976 IMF visit, and more than Japan got in the 90s, but closer to the likely outcome than the IFS central case.

And on that basis, the IFS project that borrowing in 2013-14 will be around 8.2% of GDP - way higher than Darling's 5.5%. Far from halving the deficit, Labour would only have cut it by one-third. We'd still be having to borrow £120 - 130 bn pa, and our official national debt would be well in excess of £1.5 trillion. We'd have long since ceased to be a AAA credit, and the likely level of gilt yields doesn't bear thinking about.

So is Darling going to correct his fantasy projections in the forthcoming budget?

No sorry, that's another stupid question.

The real question is WTF does anyone believe them? Why doesn't everyone just laugh at such preposterous nonsense?

Because if these clowns somehow get re-elected, I tell you, we won't have much to laugh about then.

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www.gudanggrosiran.com Categories: fiscal policy, politicos, spin

£8.6m Defra Blood-Boiler

Right, deep breaths...



As you will know, Labour have turned HMG into the UK's biggest advertiser - £540m in 2008-09 -  and these Defra ads are absolutely par for the course.

Meanwhile BOM reader Ian and Beverley D have been keeping a count of the HMG ads they've heard on Heart FM. They only listen for a few minutes when they first wake up, but in a recent two week period they heard ads for:
Metropolitan Police – Community Support Officers

Health and Safety Executive – Safe Loading of Vans

NHS – MMR vaccinations

Jobcentre Plus – Help with your job search

Directgov.co.uk – Visit our Graduate Talent Pool website

Department for Transport – Fasten your seatbelt

Revenue and Customs – Pay your tax online

Directgov.co.uk – Help with pensions

Directgov.co.uk – Eat less salt

Department for Transport? – Drive carefully

Home Office – Let’s keep crime down

Ian writes:

"Many of these have been on several times. This is in addition to the many adverts on TV too - for example suggesting that we mind our speed and start driving shorter distances.

It annoys me that my taxes are being used to lecture me about how I manage my life in general. But the radio ad that takes the biscuit is the Community Support Officer ad by the Met Police. It simply states what a great idea they are!"

So that's another £540m pa for the savings pot.

And we will be very upset indeed if these ads or similar stay on the air after May.

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www.gudanggrosiran.com Categories: spin

Thank God For Mandy

Even the horriblest truths can't touch Mandy

On a morning when unemployment soared to a 14 year high, we listened to Mandy being interviewed by Evan Davis on BBC R4 Today. It reminded Tyler precisely why he must bust his gut to get Dave and co elected next May.

Yes, we do want Dave et al to be far more radical on public sector reform. And yes, we do think they should be much more ambitious on rolling back Big Government, tougher on crime, more focused on controlling immigration, etc etc etc.

But compared to another five years under the slithery Commissar Mendacity, Dave is offering the way, the truth, and the light.

There's something deeply unsettling about a man who can be quite so brazenly deceitful as Mandy. I mean, they all lie - we understand that - but only Mandy seems to thrive on it. The very act of lying seems to nourish him - he positively grows as the slings and arrows of outrageous truth bounce off his reptilian scales.

This morning poor Evan did his best to confront him with The Facts - the huge black hole in the public finances, the obvious reality that any future government will need to cut savagely, etc etc. But The Facts just fuelled His Lordship's dark powers:

"My dear Evan, your puny weapons cannot harm me. Soon I will be more powerful than you can possibly imagine. I am the Master now."

One issue that came up was the oft repeated claim that Labour's reflationary policies have saved 500,000 jobs - jobs that would have been lost had the evil Tories been in power. Davis did immediately challenge the second half of that claim, and he also pointed out that much of the reflation is down to the Bank of England's monetary policy not fiscal action by the government, but Mandy just pressed on regardless.

As it happens, this claim is something I've been meaning to look into anyway. So I've done some digging.

As far as I can see, the claim first surfaced in Brown's interview with the Times on 26 June. He said:

“That means we will return to growth more quickly and we will probably have saved up to 500,000 jobs that would otherwise have been lost. People will see we have made a difference to the path of the recession.”

Later at a press conference on 22 July, he turned up the gas:

"If we had not intervened and acted decisively, at least another 500,000 jobs would have been lost in this recession."

Needless to say, in Mandy's hands the claim has become even more grandiose. He now claims there would have been:

“...far in excess of 500,000 more jobs lost in the recession had it not been for the government and the Bank of England’s intervention.”

So in six weeks we've slithered all the way from "up to", to "at least", to "far in excess of".

But where did the half-million figure come from in the first place?

According to Mandy, it was the Treasury.

Is that even slightly true? All we can find on the HMT website is the following sentence in the Budget Report:

"5.23 Action the Government has taken from the 2008 Pre-Budget Report onwards has already had a critical impact in supporting employment. In addition to the fiscal stimulus and support for Jobcentre Plus, the January Employment Summit announced a further £500 million package, offering support for up to 500,000 jobseekers."

Could that be the original source of the figure? A pie-in-the-sky aspiration tossed out at one of those famous "summits"?

In the absence of some proper chapter and verse, we reckon that is precisely where the figure came from. It is complete and utter vapourware.

But as we say, at least this has served to remind us all why these corrupt black-hearted people must be thrown out.

They must join the swelling ranks of the unemployed they have done so much to create.

PS One question that arises from today's dreadful unemployment numbers is why the increase in the number of registered Jobseekers is so much less than the increase in the number of unemployed? There are now an estimated 2.43m unemployed, compared to "only" 1.58m registered and claiming Jobseekers Allowance. The answer of course is that many of the newly unemployed know that the JobCentres cannot help them. The experience of our acqaintances who've lost jobs is that JobCentres can help you fill in your benefit claim, but are next to useless in terms of finding a new job. You are much better saving your time to do your own job search. All you will get at a Job Centre is depression.

Update 13.8.09 - The Telegraph reports that the Treasury has disowned Mandy's employment claim (see here).

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www.gudanggrosiran.com Categories: slump, spin, Unemployment

Tax-Funding On The Shopping Channel

Driving through England's green and pleasant the other day, Tyler once again found himself shouting at the car radio.

The object of his spluttering harangue was an interview with Will Day, the new head of the Sustainable Development Commission. Well, we say "interview" - it was actually more like a paid-for slot on the Shopping Channel, with Mr Day being given a warm and unchallenged opportunity to present his wares (listen again here).

When Tyler returned home he looked up the Commission's website. Founded in 2000, its first head was old Etonian the Hon Sir Jonathon Espie Porritt. He flounced out earlier this year after the government finally faced facts on the urgent need for new nuclear power stations.

His replacement is another member of the Prog Con ruling elite: Day is the son of a diplomat, with a career in international charities and - yes, you guessed it - the BBC.

Tyler also discovered that the Commission is fully funded by government and costs us £4m pa.

And its role?

To lobby government.

Yes, you heard that right. The government gives it £4m pa - of our friggin' money - so that it can get itself lobbied to tighten our eco screws even further.

Or as the Commission puts it:

"Through advocacy, advice and appraisal, we help put sustainable development at the heart of Government policy."

They are tax-funded government lobbyists.

And you know the really shocking thing?

The Sustainable Development Commission is not alone. Every year we taxpayers are shelling out millions so that the government can lobby itself for more stuff that many MANY of us do not want.

Now the TaxPayers' Alliance has added up the damage. And in a paper published this morning, they provide a detailed 54 page analysis of just who gets what.

On a very conservative estimate, the overall total in 2007-08 was £38m, including:

• £4.9m on hiring political consultancies
• £23m on trade associations (Local Government Association, Association of Police Authorities and NHS Confederation)
• £1.8m on health policy campaigns, including £515,000 paid to Alcohol Concern, £191,000 paid to Action on Smoking and Health (ASH) and £130,000 paid to the Family Planning Association.
• £6.7m on environmental policy campaigns, including our friends at the Sustainable Development Commission, Friends of the Earth, the Islamic Foundation for Ecology and Environmental Sciences and numerous other groups
• £1.6m on usual suspects Prog Con think tanks – Demos, the New Economics Foundation; the Institute for Public Policy Research and the New Local Government Network

Teeth grinding aside, TPA Research Director Matt Sinclair explains precisely why it is so wrong:

• It distorts decision making in favour of the interests and ideological preoccupations of a narrow political elite
• It slows adjustments in the direction of policy in reaction to new evidence or circumstances
• It increases political apathy among the public
• Taxpayers are forced to fund views they may seriously disagree with.

Spot on.

We need to remember it for the next time one of these tax-funded lobbyists lectures us on the tax-funded £3.5bn pa Prog Con Shopping Channel.

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www.gudanggrosiran.com Categories: BBC, cuts, progressive consensus, propaganda, quangos, spin