Did you know the government aren't actually cutting spending?

[Bruce Wayne]

http://marginalrevolution.com/marginalrevolution/2012/10/the-nature-of-uk-austerity.html

When I looked at the data back in June, we saw that of the roughly £40 billion that was shaved from the deficit during the 2010–2011 budget cycle, for every £3 of new tax revenue, U.K. taxpayers got £1 in cuts — exactly the reverse of what was promised.

What’s more, the evidence indicates that U.K. has, at best, slowed down the growth of spending, but it has not engaged in actual spending cuts. I documented the trend in British spending earlier this year:

A look at the data in Her Majesty’s Fiscal Year 2012 Budget shows (see table 2.3) that total managed expenditures will increase from £696.4 billion in 2011–2012 to £733.5 billion in 2014–2015, and further to £756.3 billion in 2016–2017. Adjusted for population growth, this is slow growth, but not a savage cut. That table also shows a “projected†drop in Public Sector Gross Investment between 2012–2013, but if it ever materializes, it will be contained to that year alone.

Spending cuts in the UK can’t be blamed for the weak growth path the country is on. On the other hand, tax increases can. Here is a list:

• a VAT hike from 17.5 percent to 20 percent (probably the main culprit of the U.K.’s current problems)
• a new 50 percent tax bracket on incomes over £150,000, which will drop to 45 percent next year
• an increase in air-passenger duty to 8 percent
• “temporary†payroll tax of 50 percent on bonuses over £25,000
• a capital-gains tax hike
• a 0.088 percent levy on banks
• an increase to 7 percent in the stamp duty on the sale of properties worth more than £2 million and on properties bought through “non-natural persons.â€

(For more, go here.) The bottom line is that the U.K. is another case of private-sector austerity (i.e., tax hikes) without public-sector austerity (i.e., spending cuts).

​

Quite the opposite of what the rhetoric would have us believe.

 

[davek]

How is reducing spending not cutting spending?

Misleading thread title to say the least.

 

[Groucho]

I was unaware of this in all honesty, but I do feel, cuts or no cuts, their proposed organisational changes are about to bugger up the NHS. I believe that the changes are to be made for fiscal reasons, but it's quite misguided in my opinion.

 

[davek]

I was unaware of this in all honesty, but I do feel, cuts or no cuts, their proposed organisational changes are about to bugger up the NHS. I believe that the changes are to be made for fiscal reasons, but it's quite misguided in my opinion.

They'll soon be using this child abuse scandal to break up the BBC and turn it into many commercial organisations. It's in their DNA.

 

[Bruce Wayne]

How is reducing spending not cutting spending?

Misleading thread title to say the least.

If you look at the figures, spending is rising.

 

[Blue 1]

They'll soon be using this child abuse scandal to break up the BBC and turn it into many commercial organisations. It's in their DNA.

This^^.

 

[Mrk]

Spending in 2015 will be higher than it was in 2010.

The Tories want to make out that they're cutting spending to appease the right in the country, and Labour want to make out that they're cutting to appeal to the left in the country. It suits both left and right to spin this lie.

 

[Groucho]

They'll soon be using this child abuse scandal to break up the BBC and turn it into many commercial organisations. It's in their DNA.

You mean back to the bad old days of 'privatise everything'? There was mass redundancy in my family alone, never mind the rest of the nation.

I can't help feel that there's ways to actually cut spending, without punishing the least well off. Bankers bonuses rather than making people work until 95 for a start, but that's another argument.

 

[Blue 1]

They must be just hurting people for fun then, because they're certainly cutting what they spend on those less well off, and I don't just mean in benefits.

 

[davek]

If you look at the figures, spending is rising.

One of that blogger's respondees points out:

"As for spending continuing ever higher, this is also misleading. Strip out debt interest and the natural demographic effects, and you have an underlying hit to real spending of 15-20% over five years. What the UK calls DEL spending (departmental rather than demand-driven benefits etc) is steady in cash terms from 2010 to 2017, which if you look at real deflators (read Brian Reading’s A Blunt Axe) is a huge real terms hit. Capital spending is 20% down in nominal terms, an even larger hit.
The deficit cutting for which the UK takes credit is a. a big hit to capital spending and b. a rise in consumption taxes. I am amazed that you are linking to such a misleading piece of work."

 

[evilwebby]

The cuts talked about are just cuts to planned increases. It's like a overweight 300lb person who plans to go up to 350lb and maintaining his weight at that level.

The use of language matters a lot.

"Deficit" implies that you need to bring revenues up to fill in the gap.
"Overspending" implies that you need to cut your outgoing.

They are both the same thing, but guess which one the Government likes to use.


When people say that "austerity isn't working", I retort by saying that we haven't actually had any austerity.

 

[Mrk]

The cuts talked about are just cuts to planned increases. It's like a overweight 300lb person who plans to go up to 350lb and maintaining his weight at that level.

Exactly.

 

[davek]

The cuts talked about are just cuts to planned increases. It's like a overweight 300lb person who plans to go up to 350lb and maintaining his weight at that level.

The use of language matters a lot.

"Deficit" implies that you need to bring revenues up to fill in the gap.
"Overspending" implies that you need to cut your outgoing.

They are both the same thing, but guess which one the Government likes to use.


When people say that "austerity isn't working", I retort by saying that we haven't actually had any austerity.

That depends where you are, demographically speaking. Some people have taken a real hit.

The ONS produced figures yesterday showing net national income per head has fallen by over 13% since 2008. Cuts in public sector employment and capital spending projects will have contributed greatly to that fall in living standards.

 

[evilwebby]

That depends where you are, demographically speaking. Some people have taken a real hit.

The ONS produced figures yesterday showing net national income per head has fallen by over 13% since 2008. Cuts in public sector employment and capital spending projects will have contributed greatly to that fall in living standards.

Don't mistake GDP or national income for productivity or prosperity. "Output" was higher 5 years ago because much of the output in question was houses that were selling for 3 times as much as they should have been, so no wonder the numbers appeared so good.

I never understand people who say that public sector cuts lead to falling living standards or to unemployment. The public sector is funded by taxing the private sector. Falling living standards and higher unemployment would imply that the governments know how to spend our money better than we do.

No, living standards are falling, but not because of underinvestment in the public sector. They are falling because we have exhausted our credit line and can no longer use our homes as cash dispensers, and because our debts are starting to catch up with us.