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January 26, 2007

Wheels Coming Off

The next couple of years are going to be both interesting and painful:

Gordon Brown has warned millions of public sector workers to show restraint and accept pay rises of around two per cent this year.

The Chancellor said that discipline over pay increases was crucial to deliver "stable and sustained growth" in the economy. But he faced criticism from the Conservatives who said that Government mismanagement meant inflation was now twice the level of that in most other developed countries.

We've had the splurge on the public services spending. Now to see whether restraint is possible.

How this all turns out is in a small way an example of my distrust of certain of the Keynesian arguments. I agree entirely with the idea that deficit spending can buy the economy out of a recession. Where I'm a great deal less convinced is that it is ever possible to reduce said spending later, in order to create the surplus needed to balance the books over the cycle. By having the extra spending, a constituency reliant upon that spending is created and they will always be more vocal in their support of the spending than the more general voices asking for restraint.

January 26, 2007 in Your Tax Money at Work | Permalink

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Comments

Sheesh ... Brown and Restraint in the same posting. The Public Sector has no such concept. Once the useless and pointless are in position it requires brutality (a la Thatcher) to get rid of them. Bonfire of the Quangos and Consultants required.

It's always been a mystery to me how The Gobblin' King is lauded as some kind of financial genius. Notwithstanding idiocies like the Gold sale, it seems to me that all these wondrous things are bought on "tick". Any fool can buy things on tick ; it's paying for them afterwards that's difficult.

All this "extra money" that NuLab is perpetually droning on about simply seems to have been thrown away.

Posted by: Paul | Jan 26, 2007 9:24:06 AM

The litmus test is: Would you want Gordon Brown as your accountant? Only if your name was Al Capone.

Isn't gerrymandering supposed to be illegal -buying votes and stuff? In which case GordEnron really is a barsteward (belongs behind bars).

Posted by: niconoclast | Jan 26, 2007 10:29:35 AM

Look at the problem from the point of view of the Labour Party.

Item 1: they're in debt. Seriously, deeply in debt.

Item 2: Flogging peerages and associated minor corruption is now completely out, thanks to Tony overdoing it. Pretty much all hope of getting donors to bail them out is dead; donors like to buy influence and bribing an electoral liability is foolish.

Item 3: They're unlikely to survive the next election in power, so any rectification must take place in this Parliament; they're unlikely to call an election any time soon, unless Tony pulls a fast one.

So, where does that leave them? Down at the bottom of a deep dirty hole and the only people who can possibly help them out are the Unions.

Guess who're the most unionised workers?

Got it in one: public sector workers. So the one thing Gordon won't do is implement any of the cuts on the public sector he has been promising; he needs to keep them sweet.

So, expect bribery of the bigger unions at the expense of less important unionised workers, combined with rampant corruption and "You scratch my back..." PFI schemes.

Posted by: Dr Dan H. | Jan 26, 2007 10:30:51 AM

"'You scratch my back...' PFI schemes"

And by several accounts, there has indeed been much scratching of backs. I can't believe that the public at large really appreciates the scale and nature of PFI deals in the NHS.

The NHS has signed up to PFI (Private Finance Initiative) deals worth a total of £53 billions, of which only £8 billions relate to the construction of new hospital buildings. Ministers seem to be a bit coy about what the other £45 billions relate to but, broadly speaking, that seems to be for building design, management and cleaning services.
http://news.bbc.co.uk/1/hi/health/6089122.stm

For comparison on how PFI in the NHS of £53 billions stands relatively to general government debt: "At the end of 2005/6 general government debt was £529.1 billion, equivalent to 42.1 per cent of GDP."
http://www.statistics.gov.uk/cci/nugget.asp?id=277

A non-partisan assessment of the PFI was researched and published by the House of Commons Library in 2003: www.parliament.uk/commons/lib/research/rp2003/rp03-079.pdf

An assessment by the National Audit Office last year of PFI refinancing opportunities is here:
http://www.nao.org.uk/pn/05-06/05061040.htm

Posted by: Bob B | Jan 26, 2007 12:26:08 PM

[continued]

More detail on the PFI in Scotland and the pitfalls of PFI is here:
http://news.bbc.co.uk/2/hi/uk_news/scotland/6194994.stm

"PFI contractors across the UK last night faced being hauled before MPs to explain their 'obscene' profits following the refinancing of many of their controversial deals. The threat has come from the influential House of Commons Public Accounts Committee (PAC), which is dissatisfied at the current level of disclosure. In April, the National Audit Office (NAO), Westminster's value-for-money watchdog, revealed how companies, which were already making significant profits from building roads, hospitals, schools and prisons, were making even larger ones, some as high as fourfold, after refinancing."
http://www.theherald.co.uk/politics/77630.html

MPs explicitly blamed the Department of Health for poor financial management of the NHS:

"In a stinging attack on government incompetence, a Labour-led committee of MPs said the Department of Health must share the blame for the poor management that has led to record deficits in the NHS.

"Some hospitals would be in debt for more than five years, the Health Select Committee warned. The MPs said the NHS, 'has veered from one priority to the next as the political focus has changed.' They added that the Government's estimated costs of its Agenda for Change reforms and the new GP and consultant contracts were 'hopelessly unrealistic'.

"The MPs say many of the biggest deficits, 'are associated with the extraordinary growth in staff costs arising from pay rises and the large increase in staff numbers. The pay rises have far exceeded the Department's estimates and the numbers of new staff are far higher even than the figures proposed in the NHS Plan.'"

"Their report says the growth in staff costs, 'points to serious underlying failures in the financial management of the NHS, which have occurred at all levels of the organisation, from the Department of Health to primary care.'"
http://news.independent.co.uk/uk/politics/article2070209.ece

Well done Patricia Hewitt.

Posted by: Bob B | Jan 26, 2007 12:27:39 PM

If Gordon Brown was my accountant, he'd be facing a jail sentence.

What he has done is the same is what Enron are doing : using accounting tricks to hide debt.

Posted by: Paul | Jan 27, 2007 9:53:05 AM