Author: Phil

They played this little video at the start of the Conservative launch of their Labour’s Debt Crisis campaign yesterday. It is very well put together but understates the problem. The key line is probably:

BY 2014 OFFICIAL GOVERNMENT DEBT WILL HAVE ROCKETED TO OVER £1 TRILLION

This sent me running back to the Pre-Budget Report. Even though this document is now generally recognised to be not pessimistic enough you will see that even on its figures the Tory attack video is letting the Government off lightly. As you can see from the extract of Table B10 on page 198 below (click to enlarge), on the Government’s rather dodgy “excluding financial sector interventions” basis, we hit the £1 trillion mark at the end of March 2013. If you look a few lines further down you get an interesting international comparison. Some Treasury mandarin has calculated government debt on the Maastricht basis. This will include many of the items that the Government tries to hide such as PFI, pensions and the bank bailout (but not all). Here you see we hit the £1 trillion mark in only 2 years time, end of March 2011, and this is before the government starts to use any sort of consolidated credit services to start bringing down the debt.

You get the £17,000 figure the Tories were using yesterday by dividing the £1 trillion by the population of the UK. This is useful as an illustration but only a relatively small proportion of the population is economically active and the real debt will get to be much higher than £1 trillion. A 21st century worker is going to have to service and repay something like £50,000 per head, not £17,000. Many working couples will be working as hard to pay off the Government’s debts are they are working to pay their own mortgages.

Ridiculously we were told late last year by EU Commission President Jose Manuel Barroso that Britain is closer to joining the euro than ever before according “people who matter” in Britain to use his own emetic phrase. I remember the Maastricht criteria for joining the euro included one about the deficit being 3% or less and total government debt being less than 60%, see here. Traditionally the later criteria was one that the UK could easily meet. If you look at Table B3 on page 190 of the PBR you will see that we will be in no position to join the euro under the Maastricht criteria until well after 2014. By 2014 our deficit will still be above 3% and our government debt will still be well over the 60% threshold. Don’t forget these figures will get even worse by the time they are next reported in the budget. If you are in debt go to Creditfix to help with your debts. See extract below (click to enlarge):

It gives me no satisfaction to report that we are so screwed up that we couldn’t join the euro if we wanted to.

I have just back from the launch of the Tories latest poster which attempts to bring home the extent of Labour’s Debt Crisis. There were two hundred party members and journalists lined up to hear what was said. The Ealing Southall PPC, Gurcharan Singh, was there too. A fifteen minute pitch and four or five questions and it was all over. You always feel a but used and dirty after these things. A whole morning taken up so that you can provide a backdrop to a 10 second clip on the evening news.

Both Cameron and Osborne were on good form although Cameron slightly fluffed his joke about the Prime Minister simultaneously launching another Conservative policy – a £2,500 incentive to businesses to take on the unemployed.

For once I had the chance to read the Telegraph on the Tube. Janet Daley is unimpressed with the Cameron message:

And yet Mr Cameron perseveres with his limp message. Interviewed by Andrew Marr on the BBC yesterday, he must have said at least three times (I lost count after that) that he had no intention of reducing public spending: he wanted only to slow the rate of its increase.

In his pitch I heard Cameron saying that his solution to the credit crisis was essentially to redirect £4 billion of a projected £30 billion growth in government spending next year to ending the tax on low rate tax payers’ savings. Great, but hardly red meat. As Roger Bootle says today in the same Telegraph we need to do what we can to maintain aggregate demand but for my money I would put more money in the hands of ordinary people rather than allowing the state to grow yet further. If we let the state ratchet itself up another notch in this downturn don’t think it will meekly shrink itself on the other side.

The Cameron project has been consistently strong on analysis but timid in its policy prescriptions. This is to be expected, as Brown has shown today, he will happily swipe all of the best Tory policies. Indeed Daley’s point is that in re-hiring Mandelson and Milburn Brown has shown his determination not to cede the middle ground in British politics. If the Tories are not to be outflanked they need to offer the real thing not the ersatz reforms promised by Milburn, et al.

Today the papers are reporting on Eric Pickles’ plans for reform of local government, see FT, Times, Guardian and Evening Standard. Pickles is the Shadow Communities Secretary. A lot of the reporting has talked about town hall “fat cats”, ie highly paid council staff, in particular chief execs.

The reported comments from the LGA in the Times really need challenging, namely:

The Local Government Association argues that its chief executives are paid modestly compared with private and public organisations with comparable turnovers and staffing levels. Paul Coen, the head of the association, has pointed out that a chief executive at a big council could earn on average more than twice as much in a public or private organisation of a similar size.

It seems (see The Red Box blog in the Times) that Coen is on the way out. No wonder as he is really talking crap here.

As capable as many local authority chief execs are they don’t have to create and sell stuff. They just work out their costs, find out what the government grant will be and ask council tax payers for the difference. Ideally they will be of a mind to keep those costs under control. Sure you want good people doing this but you don’t need the really expensive, talented people who can create and sell.

You shouldn’t compare council chief execs to corporate chief execs. More properly you might compare them to operations directors of equivalent sized commercial organisations in very mature industries where there is little or no growth.

I don’t always agree with the TaxPayer’s Alliance but their Town Hall Rich List published in March is a useful read. It put Ealing’s own Darra Singh at number 7 in the country.

Update: A reader points out this article in the Sunday Times 4th January which highlights up the rather dubious role that Solace Enterprises plays in the the setting of chief executives pay in local authorities. Solace is the Society of Local Authority Chief Executives.

Yesterday the Telegraph did a piece on Labour’s proposals to charge people more if they happen to live somewhere nice. No doubt Northfield and many parts of Ealing will have high ratings in Labour’s scheme of “value significant codes”.

Simon Heffer in the Telegraph today fulminates:

The Brown Terror, having wrecked the economy, now proposes to wreck it further by penalising those who already make the biggest contribution, and ensuring they contribute even more. That is what socialism is all about, and why socialist countries are inevitably economic failures. If you tax successful people until their pips are squeaking, they tend to clear off to be successful elsewhere, and stop paying our taxes altogether.

This is just another example of a process that has been accelerating throughout the last 11 years.

With the 45% tax rate and this new nice neighbourhood tax Labour are nakedly plotting to raise taxes on the middle classes, something they have been wary of doing up until now. They have massively increased taxes but not nakedly. They have done it stealthily, by inches. Please note Conservatives the way to undo Labour’s damage is by inches too.

What Labour have also consistently done hitherto is to target “deprived” groups for extra help, whether it is spending more on bad schools, spending Lottery money in deprived areas, giving more money to inefficient Labour councils or targeting health resources at unhealthy people to “reduce health inequalities”.

In many ways this seems laudable but at some point the better off just decide to stop being forced to be so generous. They work out how to avoid taxes or they simply leave the country. In Britain today you can give up almost half your income in taxes, pay two grand in council tax and still not get a school that pushes your child academically, get hold of basic healthcare quickly and conveniently and enjoy a high quality public realm. If we fail to meet the basic aspirations of those paying the bills something will change.

It is one thing to expect wealthier people to contribute more. It is quite another if you then give a disproportionate share of the proceeds to people who can’t or won’t contribute.

In Britain today too much public money is diverted to people who make poor choices all of their lives; people who consistently choose not to get educated, not to work, not to stay with their partners, not to look after their own children and not to look after themselves. No amount of cash can undo these poor choices and often the money provides perverse incentives to keep making poor choices.