Debt, Deficit, and the Catastrophic mess Labour left us

There was a literally incredible letter from Paul Holmes in yesterday's CEN. It starts:

"Edward Turnham in recent letters continues to try to blame the last Labour administration for the UK's economic situation"

You don't say... He continues: "Labour wasn't to blame for the deficit" - and then finishes questioning Mr Turnham's credibility! You couldn't make this stuff up.

My understanding is that Paul Holmes is the brains behind the brawn in the Cherry Hinton Labour party, so CEN letter spats between Paul Holmes and Conservative Cherry Hinton candidate Ed Turnham are the initial skirmishes of the local election campaign.

I have watched with increasing incredulity Labour's position on public spending - I even got invited to Labour's 'new politics, fresh ideas' event in Cambridge with shadow chancellor Ed Balls MP. Would have loved to have gone to give him a piece of my mind, but unfortunately I was tied up at work all day...

Labour should apologise for the state they left the country, and stop treating people like fools with their suggestion that we can just carry on spending and borrowing without risk. So for Paul Holmes, and all those struggling to see through Labour's plans, a primer on Labour's economic mess.

First, don't confuse the debt and the deficit.

The debt - that is governments total accumulated outstanding borrowings - is now over £900,000,000,000 and in 2010 cost taxpayers £42,900,000,000 a year in interest costs - over £2,000 for every household in the country. If we followed Labour's plans, then that interest cost would rocket, as there would be even more debt to service, and the money markets that lend to government would demand higher rates, to reflect the increased risk of a Labour economy following the path of Ireland, Greece or Portugal into fiscal oblivion.

A point worth mentioning about this national debt, including in 2007, when Paul Holmes claims everything was fine and dandy with Labour's management of the economy, was the actual debt was far worse than his 'official' figure suggests. With dodgy Enron style accounting, a lot of government debt is now hidden from the official figures in expensive private finance initiative (PFI) deals (the main purpose of which seems to be to hide some of Labour's massive borrowing, with taxpayers picking up higher bills for hospitals, schools and the like for years to come), and in the hidden but ballooning liabilities involved in pension promises made to public sector workers - promises made on the never never, and unlike in private sector pension schemes, promises that have not been significantly changed even though people are now living a lot longer.

But the key point about the debt in 2007 is which direction it was going - this being the much talked about [annual] deficit (or in more sensible times, the deficit was sometimes actually a suplus). The deficit is the difference between what government spends and the amount it collects in tax over a fiscal year - each year this deficit adds to the total debt.

Total debt as a proportion of the economy may have been higher in the past than it was in 2007 - but only after temporary events like a major war, or whilst recovering from a recession and the relative debt level returned to normal over a period of time afterwards. What was incredible about the national debt in 2007 was not necessarily its relative size, or even is large absolute size, but the fact that even after years of uninterrupted economic growth, Government was still running a deficit, so the debt was still growing. What that means is that when the boom turns to bust, a modest deficit immediately turns into a large and unmanageable deficit. If you can't run a surplus after years of economic growth, (which is what people mean when they say there is a large structural deficit) you are in real trouble in a downturn - such was the frankly moronic way in which Gordon Brown destroyed the UK Government finances, who governed as if he really believed his delusional claim to have 'abolished boom and bust'.

Here is the predicted graph of the predicted national debt (from OECD predictions via here) :

Yes, despite the cuts, the total debt will keep rising rapidly, because we are still running a huge annual deficit, and under coalition plans we will have a deficit in every year of this parliament. Under Labour's plan for the economy, such as they have a plan, all cuts are opposed, and the debt would be allowed to grow at an ever faster rate, until the money markets call time and we join the ranks of basket case countries like Ireland, Greece and Portugal, being bailed out, and forced to slash spending. How anyone can march through the streets of London demanding government goes down this path is beyond me.

How did Labour get us into this mess?

The economy had been doing well and growing since the Conservatives left the exchange rate mechanism in 1992, through into Labour's boom in the mid-2000s, until it ended spectacularly in the inevitable debt-fuelled crash in 2008. Labour kept to Conservative spending plans for the first couple of years when it came into power in 1997, but then under Gordon Brown, prudence went out the window, and government spending increased massively. Unreformed public services were showered with cash. Much of this extra cash did not result in commensurate improvements in performance - often, for example in schools - our performance on the international stage actually got worse, despite the extra cash.

Labour increased taxes massively, with dozens of new stealth taxes. But between 2000 and 2008, whilst the economy grew, government spending grew even more rapidly - with government spending as a % of the Countrys entire production increasing from 34.75% in 2000 to 39.75% in 2008. This meant that when the bust came, and the economy fell back, government spending rocketed to 45% of the country's income. This level is totally unsustainable - it either requires massive borrowing, or taxation on people working in the private sector to rocket. Neither of these scenarios will work, as we are already at the point where we are borrowing at the limits of what the money markets will lend without charging large risk premiums, and beyond the point, particularly for high earners and companies, where increasing tax rates will start to lower revenues as people rearrange their lives to avoid the high tax burden. Already many working people, in one cycle between their employers paying them, and them spending the money will see the vast majority of their income being confiscated by the government to pay for its reckless spending, when you consider employers and employees national insurance, income tax, council tax, VAT, fuel duty and all the other taxes used by government to part working people from the money they have earned. We can't go on like this.

One of Labour's more ludicrous suggestions is that if government keeps spending and borrowing ever greater amounts, the economy will grow and the deficit will mysteriously disappear in the rush of new tax revenue. That such an obviously absurd argument has such a lot of support amongst Labour supporters in the unions has more to do with their own self interest than any grounding in economic reality on planet earth. If there was any truth in this suggestion, then by 2008, when public spending had rocketed for several years, Government should have been running the largest budget surpluses in history. But as noted above, it wasn't running a surplus at all. The lesson from these times is that growth built on public sector expansion, funded by borrowing is illusory - and can only end in very painful collapse that would make current cutbacks in public spending look trivial.

Another ludicrous suggestion from Labour is that the cuts are all the Coalitions fault, nothing to do with them, and they wouldn't have had to make them. I have to question whether the likes of Paul Holmes and Ed Balls even slightly believe their own propaganda on this, or whether this is just shameless and cynical dishonesty on Labour's part.

The Conservatives could have done more in opposition to stop the current mess. At the time, I didn't think it was wise for the Conservatives view on spending to be 'share the proceeds of growth' - make no mistake, this was a plan to reduce government spending as a % of gdp, but this approach failed to argue strongly enough at the time that government spending was unsustainably high, and failed if there was no growth proceeds to share. We needed more people arguing that unless public spending was kept within reasonable levels, the long term tax burden on private enterprise would bring down the economy.

Now, I would query whether the coallition is always cutting the right areas - for example, I would support cutting our contribution to the EU to zero, rather than asking local governments, who run key local services like libraries and local transport to make a lot of the cuts. But getting the public finances back in order is vital, and that means cutting back on government spending - there is no other way.

Current savings planned by the Coalition will mean the Government is still adding to its mountain of debt each and every year of this parliament, and will take spending only back to the levels seen in 2007. If anything, the cuts don't go far enough to avoid the worst of the terrible legacy the next generation will face in repaying debt for years to come. Labour had a golden economic inheritance in 1997 - a sustainably growing economy, and public finances rapidly improving. They left a catastrophic mess, built on years of overspending - their only solution now being even more of the same failed policy.

Time for a rethink on alcohol related crime

There was a particularly horrible crime reported in the CEN on 4th March.

If you can take this report of court proceedings at face value, a drunken thug standing outside a pub on Histon Road decided to pick on a passing Bangladeshi man. He shouted racist abuse, followed the victim home, punched him, smashed his front door with a brick and kicked in him the head, whilst the victim's terrified pregnant wife cowered nearby.

Parliament has passed laws to increase the severity of offences with a racial motivation, and this was already an incident of the utmost seriousness. How many years prison should such an assault merit. 5? 3? 1? 6 months?

The answer appears to be zero. The punishment for this offence was reported as just a fine, probation and a 'thinking skills' course. The perpetrator of this crime doubtless has his problems - and we need prisons resourced well enough to genuinely rehabilitate people with alcohol problems (not turn them into people with both drug and alcohol problems), but I cannot believe the laxity of the sentencing in this case - what must the poor victims think.

There have been other cases. Last April, a 16-year old on a stolen bicycle ploughed into an innocent pedestrian on Jesus Green, causing life-threatening and life changing injuries. Whilst the collision wasn't deemed to be deliberate, this was clearly no accident - it was the culmination of an evening of alcohol fuelled mayhem. The 16-year old had previously that evening assaulted another victim, leaving him unconscious, before getting on a stolen bike, riding it recklessly into the innocent victim, and then dumping the bike in the river and running off. He was already on bail for public order offences. In 'mitigation', his lawyer said his actions were  “influenced by alcohol” - and again despite the seriousness of the offences and the outcome, there was no prison sentence. What do you have to do to get sent to prison these days?

In both these cases, a common link is alcohol. It is if as soon as someone has been drinking, the courts treat them as if their personal responsibility for their actions is so severely diminished, no matter how serious the consequences of the crimes, the punishment will be negligible. This approach is utterly crazy - its no wonder we have such problems.

The police spend vast taxpayers money dealing with alcohol related anti-social behaviour. Beyond just managing consequences as they occur, with expensive overtime and disproportionate use of police time on Friday and Saturday nights, the authorities prevention approach appears to consist entirely of measures affecting all licensed premises and all drinkers the same. There are blanket bans on new licenses in some parts of the city - which the police will support by sending high ranking police and even barristers to licensing committees and licensing appeals. They support higher taxes and levies on licensed premises. This approach is unjust for responsible drinkers, and is manifestly failing to tackle the problems - a change of tack is overdue.

Lots more could be done. We need better education around alcohol for young people - how to drink responsibly, how to think through all the consequences of drinking, and how to protect both yourself and other people whilst drinking. We need better rehabilitation for people who find alcohol a problem. But it is pointless adding extra tariffs for the on-trade where the problems manifest themselves, when Supermarkets sell alcohol below cost, so people can get tanked up for pennies before hitting the town.

Unlike smoking, there is a 'safe dose' of alcohol. People who drink occasionally in moderation have lower mortality than teetotallers. It is not inevitable that someone drinking will lead to trouble - the opposite is true for most people. The authorities need to focus on those causing the trouble, and get across loud and clear that if you do get recklessly drunk and then commit offences, you are fully responsible for your actions, and will be fully held to account. The 16 year-old above who wrecked the life of an innocent cyclist shouldn't even have been drinking - how can being under the influence of alcohol in any way mitigate his offences?

Everyone should know their limits, and everyone has the choice of whether or not to get into that state. Until the authorities recognise this is a matter of personal responsibility and act accordingly, the mayhem will continue.

Read it and Weep

Cambridgeshire police have been publicising a new feature on their website, allowing members of the public to help them to decide how to respond to impending budget cuts - you can find it at http://www.cambs.police.uk/yourpolicebudget/calculator.asp

Remarkably every single spending choice implies a cut in funding means a cut to frontline services.

Where on earth are all the options to cut the indirect costs of running the police service?

Scrap generous early retirement settlements, and change the rules of the final salary pension scheme so it is more in line with the majority of schemes available to private sector employees - nope, missed that option.

Don't fill in millions of forms everytime anything happens.

Scrap most of the budget for diversity officers and the press and communications team.

Look at what the really important outcomes are of having a police service, and stop doing all the things that don't help towards these.

When you read the 'options' they do offer, despair only increases. Under the heading 'Local officers patrolling your neighbourhood', there is:

'A dedicated policing team for each neighbourhood but their resources are limited'

As a result of the budget settlement, I would like to welcome Cambridgeshire police to reality - resources are _always_ limited - the fact that central government has acted as if they aren't for years doesn't make it so - as today's and tomorrow's taxpayers are finding out. The suggestion is that having no officers patrolling the streets might be an option - or that if we just spend another £4m (presumably feasible if the government stopped its pesky fiscal responsibility and kept increasing budgets), we would be back up to a previously happy scenario of neighbourhood policing where resources were something other than limited.

Or how about this one in the section 'Investigating 'volume crime' such as burglary, vehicle crime and violence':

'All crimes are recorded, but there is limited capacity to attend and investigate scenes of crime'

is this
a) the cheapest of the five options presented, costing tuppence happenny and a bag of nuts on the grounds it appears to promise to do pretty much nothing of consequence to the victims or perpetrators of crime?
b) the middle option of 5 at a cost of a mere £20m per annum?

You guessed it!

How much do we have to spend on the criminal justice system to have a police force that sees its job as identifying the bad guys and handing them over to the courts, the courts see their job as protecting the generally law abiding, and the prison system sees its job as deterring others from crime, reducing people's dependency on drugs and alcohol, and generally turning people away from crime? The whole thing just seems very broken.

Every private sector organisation on the planet regularly has years in which its absolute income in cash terms decreases - they cope - in fact they frequently manage to increase productivity such that their useful outputs increase.

I don't want to know that someone has spent part of the police budget putting together a survey designed to make fatuous points about the effects of budget cuts, and reinforcing the point that they appear to have absolutely no imagination when it comes to changing how they do things to meet the same policing objectives at lower cost.

As a Councillor, I once spent a two hour meeting trying to get the police to actually do some policing around speeding enforcement on residential roads, and it seemed like most of the meeting was spent listening to bleating about how little time, resources or enthusiasm they had for doing this, despite Councillors making it a neighbourhood policing priority.

My response was - why don't you tell us what resources are available, and we can discuss how best to use them to meet the objectives that my constituents are concerned about. I might as well have been speaking Chinese.

Roll on directly elected police chiefs - meanwhile I think I need to lie down with a cold towel over my head for a while.

Labour Councillor describes Royals as 'inbred aristos who've never done a days work in their life'

To be fair, I have never been the most ardent royalist, but I was delighted to hear the news that Prince William and Kate Middleton are to marry. The royal family have an important constitutional and ceremonial role, they have been a key part of the history of this country, and continue to live lives involving huge public service, greatly benefiting the United Kingdom. At a personal level, I wish them all the best for their future together.

Not so my replacement as Coleridge ward Councillor, Labour's George Owers. He tweeted the following:

Where to start - well first off it is pretty offensive to the royal family. Its bigoted. But I can't help wondering if the irony of an Oxbridge educated 21-year-old student describing a trained RAF pilot, whose job is to undertake dangerous and life saving rescue missions as 'an aristo who [has] never done a day's work in their life' has been completely lost on Cllr Owers.

Its not like he doesn't have form for this type of behaviour - some previous pronouncements on Conservative Party Chairman Baroness Warsi:

So if someone from an ethnic minority becomes a Conservative politician they are a traitor to their ethnic background - what are you suggesting George? Charming!

Coleridge Conservatives campaigned at the recent by-election that the election of firebrand student politician from the middle of Cambridge might not be the best person to represent all sections of the community in Coleridge ward. I hope some of his Labour colleagues on the Council can have a quiet word, and suggest he tones down his disgusting rants (or better still retracts his comments and apologises to the people concerned), before it becomes obvious to rather more of the electorate that the Conservatives may have had a point.

If this had been a Tory MP...

"An MP's wife has been charged with burgling her husband's lover's house and stealing a £20 tabby kitten."


Apparently the MP in question is still looking for said cat, and has encouraged people to distribute photos - happy to oblige in case anyone is wondering around Birmingham:

Now if this story had involved a Tory MP, how much of a field day to you think the press would have had? Answers on a postcard, but do please look out for Beauty - "Her brother Twinkle is pining for her."

Which way will Huppert Go?

For a time last year, the Conservatives in Cambridge were suffering one of their periodic bouts of collective lunacy, and found themselves without a parliamentary candidate. As a result, I was asked to step in to represent City Conservatives at a debate organised by the National Union of Students on the subject of student finance. I had the good fortune to be well briefed by Nick Hillman, who was working at the time for the Conservative shadow minister responsible for universities, David Willetts, and who went on to become the Conservative parliamentary candidate in Cambridge at the general election.

At the time, the Conservative policy was to wait for the outcome of the Browne report, ruling nothing in or out. Who knows if the party had already resigned themselves to increasing tuition fees - what was clear at the time to anyone listening is that the Conservatives weren't ruling out this eventuality. I argued strongly to Nick Hillman at the time that electorally this was unhelpful - suicidal perhaps a better word in a seat like Cambridge with maybe 10,000 or more student voters on the electoral role. It was however honest - the Conservatives knew they might be in power, and knew that whilst in power, they might reach the conclusion that supporting increases in tuition fees was the right thing to do.

There are actually some really good arguments why universities should be allowed to increase tuition fees - particularly for an absolutely top tier in global terms university like Cambridge University. Higher education is expensive - without additional funding from fees, Cambridge could lose that position, to the whole country's detriment. Without more funding generally, the expansion in higher education would grind to a halt - the budget deficit amplifies this problem, its not the ultimate cause of it - just because something like higher education is a good thing, does not make it sensible for governments to fund it with a blank cheque at no cost to those benefiting. People tend to value things more when they have to pay for them - they will look at the costs of attending university and the benefits to them personally. They may then decide university isn't for them, which may be a much better mechanism for determining how far to expand higher education takeup than some arbitrary target like 50% of school leavers. Students paying more for a course may work harder and try to get more out of it, and demand higher standards from their university - all good things. Finally - is it fair that some people should get a free University education that will benefit them personally to a great extent later. But there is also some very good reasons why high fees might be a bad thing - like if it disproportionately dissauded talented students from poor backgrounds from going to University. I don't know the right answer to the fees question - I just hope that any decision to support unlimited fees is backed by support for students from less well off families, and robust evidence that they won't put off such people to a great extent.

There had been a debate going on last year in the Lib Dems between the realists who at least didn't rule out tuition fees at the present level, and the fantasists who thought fees could just be abolished without consequence - perhaps under the misapprehension that they would never be called on to test such a policy.

At the time of the NUS debate, the fantasists in the Lib Dems were firmly in control. They too were selecting a parliamentary candidate - so a student Lib Dem defended their corner - and told the assembled audience in no uncertain terms that the Lib Dems would abolish tuition fees, and they had a plan for how they would do this. This is pretty much the manifesto that Julian Huppert went to the student population of Cambridge with last May.

The Browne report is now out - and recommending Universities should be able to charge much higher fees. This has put the Lib Dems into a bit of a dilemma - should they support the Coallition they are part of, should they abstain and allow the plans to pass, or vote against, potentially risking the downfall of the whole government.

Some commentators have claimed that this isn't such a big deal politically, and students don't really affect the outcome of elections. That is clearly nonsense in Cambridge - promises on tuition fees before an election are a big deal. By exquisite irony, the election of Cambridge's first Lib Dem MP was certainly on the back of Anne Campbell, our last Labour MP, and her decision to support the introduction of tuition fees only weeks after solemnly promising the student electorate in Cambridge she would oppose them. The Cambridge student vote has still not forgiven Labour. I don't know what the right answer to the tuition fees question is - but I do know that for Julian Huppert abstention would be as bad as supporting tuition fee rises. He made a clear promise to the electorate and was elected on the back of that promise. If the Conservatives had an overall majority in parliament now, I have no doubt Lib Dems like our MP would vote against any planned rises to fees (without any thought to the consequences), and delight in telling Cambridge how opposed they were, and how wicked the Tories are for wanting to raise fees. If he doesn't now actively oppose any planned rises in fees, he will have been elected on a fraudulently false premise. I wonder what will happen...

Hello

Hello and welcome to my new blog. I plan to make (very) occasional posts on topics that interest me, likely to be some combination of Cambridge, local news and politics, housing, transport, IT, running or accountancy. I can tell you are excited already!