Tory cuts could be mighty unpleasant

Spiv_2

Tory cuts could be mighty unpleasant

And what is particularly illuminating is the interest which George Osborne, shadow Chancellor of the Exchequer, is showing in the 1981 Budget of the then Tory Chancellor Sir Geoffrey Howe — a budget which even almost 30 years later, remains the most controversial of modern times.
This was because it sought savagely to cut the fiscal deficit at a time when the economy was already in recession — by for example doubling the rate of value added tax from 7.5% to 15% — while at the same time running a relatively loose monetary policy.
This move flew directly in the face of economic orthodoxy which holds that during a recession governments should support spending (to avoid making the downturn and unemployment even worse), and then, as the economy recovers, claw the money back.
The Thatcher government went quite the opposite way.
One immediate result was the famous letter to the Times from 365 economists, condemning the policy. The debate still rages today about whether or not they were right.
However, it was politics not economics which drove Lady Thatcher's government. The belief behind the strategy was that high levels of public spending sapped the British economy of its entrepreneurial spirit and therefore, painful though it might be, there was no choice but to wield the axe.
The result was as predicted by the economists — this was the recession which finally did for vast swathes of British manufacturing capacity. Firms went bankrupt across the land and unemployment rose to levels not seen since the Thirties. Out of this wreckage rose an economy driven by financial services. It was this which led many to believe the policy was a success — though they are perhaps less convinced and convincing now.
What is interesting about the Tory party led by David Cameron is not that it shares a similar belief in the need to unshackle the private sector, but that this is combined with a deep-seated antipathy towards the activities of large swathes of public sector employees. There is a venom in the way many talk about it and an ill concealed relish in the idea that it will soon be put to the sword. The NHS is of course off limits, as to a lesser extent is education. But there is nothing short of contempt for almost everything else. It is now seen as a Tory mission to wipe out huge tracts of it. Because they believe that all the money is wasted, most of the employees don't really have proper jobs and very little of value is achieved, the view is taking shape that a Tory government should slash public expenditure by far more than anyone has yet imagined and do so within days of taking office so that the need to do so can be blamed on the mess inherited from Labour.
Whether or not one agrees with the Tory view of the public sector, what no one should be in any doubt about is that should a Cameron government follow in the footsteps of Geoffrey Howe by making a major effort quickly to eliminate the fiscal deficit, the short-term effect would be to make the recession worse.
Readers should also know that it is a gamble because no one can know whether it will work — whether the shock treatment and shrinking of the public sector will in fact re-invigorate the economy.
Another thing readers should remember before they fall too easily into line behind such a strategy is that Margaret Thatcher had two other things going for her which we don't have now. The first and most important of these was North Sea oil, which in the Eighties was just beginning to flow in earnest. It was the tax revenues from this windfall which allowed her to finance so many unemployed. Other oil-rich nations have sovereign wealth funds which they now use to buy assets across the world. We spent ours paying dole money.
The second benefit Thatcher had was a treasure trove of state-owned businesses which could be privatised — British Telecom, Cable and Wireless, British Airways, British Gas — which between them added billions to the Exchequer and again helped pay for the great experiment.
Today there is no family silver left. If the Tories do cut in the depths of recession it could be very unpleasant indeed.

Anthony Hilton

http://www.thisislondon.co.uk/standard-business/article-23752255-tory-cuts-could-be-mighty-unpleasant.do

Interesting.

carolt

Interesting article.

Zazen999

Sends shivers down the spine; scary times are ahead.

ninky_2

it's obvious they are going to get in i fear. is everyone looking forward to the next few years under the tories?

i'm going to vote green party it think. don't think they've got a hope in hell of winning any seats but i like their policies best overall.

inspector_monkfish

i'm going to vote for that French Bank
they seem to have some good policies

Afriend_2

ninky wrote: »

it's obvious they are going to get in i fear. is everyone looking forward to the next few years under the tories?

i'm going to vote green party it think. don't think they've got a hope in hell of winning any seats but i like their policies best overall.

My tactic is to keep voting LibDem. They could potentially (one day) get into power.
Once the electoral system has been changed, I can switch to voting green.

Thrugelmir

....... and who remembers the unionised unproductive companies such as British Leyland back then. There was the flexibility to become more efficent better working practices etc. The PC was only just beginning to become a workplace feature. I used a mainframe back then that only updated overnight! No real time access.

Times have moved on. Companies are leaner and more efficent. The pain will be more unpleasant I'm sure.

Though at the moment Labour is talking about investing. Investing in what though? Thats the question I would like answered.

edgex

ninky wrote: »

it's obvious they are going to get in i fear. is everyone looking forward to the next few years under the tories?

i'm going to vote green party it think. don't think they've got a hope in hell of winning any seats but i like their policies best overall.

the predictions are that there will be a Tory government after the next election, but, they wont have a very big margin over Labour

also, the expenses stuff could well be bought up again, that could unseat some long term Tory MP's, with swings to other parties, like the Lib Dems & the Greens

Dave101t

cuts in what exactly? i claim no benefits, and rarely use any public services, i will see no cuts so roll on in tories, or Bank Nationale d'Paris as someone mentioned.

The_White_Horse

Afriend wrote: »

My tactic is to keep voting LibDem. They could potentially (one day) get into power.
Once the electoral system has been changed, I can switch to voting green.

you might as well take your voting card anduse it as bog roll.

edgex

Thrugelmir wrote: »

....... and who remembers the unionised unproductive companies such as British Leyland back then. There was the flexibility to become more efficent better working practices etc. The PC was only just beginning to become a workplace feature. I used a mainframe back then that only updated overnight! No real time access.

Times have moved on. Companies are leaner and more efficent. The pain will be more unpleasant I'm sure.

Though at the moment Labour is talking about investing. Investing in what though? Thats the question I would like answered.

it dosnt matter how lean & efficient a company is
if they lose a government contract, or one of their customers does, it reduces their revenues
they would then have to cut their own costs, & much of that is now staffing costs


if the Tories make 100,000 public sector workers redundant, where do they then work?
what happens to their spending levels? they dont have any money, so they will spend less. that will impact companies, reducing their revenues.
does it save the tax payer any money? no


as for what to invest in:
the usual, rebuilding schools, hospitals, national infrastructure ie; rail, road

then theres newer stuff, they could make the HA's & other public bodies build-in 'green' technology in new builds