Friday, December 28, 2012

The UK needs a 'fiscal cliff'

There is much talk about the 'fiscal cliff' that is facing the USA.  This refers to the tax increases and spending cuts which come into effect on January 1, 2013 unless some action is taken to repeal or amend the relevant legislation.  The aim of the original legislation was to require the US Congress and Administration to address the ever increasing budget deficit and US debt.

As one would expect, politics has intervened and a game of fiscal chicken is now underway.   The Democrats, buoyed by the results of the presidential election think they have a mandate to tax more and not cut expenditure.  The Republicans seem to be trying to reach a compromise which reduces the level of tax increases but still has some expenditure cuts.  As so often with Obama, though, there is a lot of talk and no real action.

However, I was thinking that the UK needs its own 'fiscal cliff'.  So, for that matter does Europe but let's stay with the UK.

As a nation, we need to face-up to our situation.  Forget all the rhetoric about 'responsibly' cutting public expenditure from the Tories or 'swingeing' cuts from Labour.  The reality is that public expenditure is not being reduced by any meaningful level.  There will be all the usual suspects lining-up to defend the 'steady as she goes' approach and saying too much has already been cut etc., but the plain and simple truth is that the UK, as a nation continues to live way beyond its means.

It won't happen, but here is what I think we need.

First, a Chancellor that is focused on the UK economy not one who always has his eye on the electoral impact.  I hesitate to say this but someone like Ken Clarke was, after 1992.  Someone that builds the economy for the economy's sake and damn the electoral consequences - hence the Labour landslide of  1997!!  My belief is that Clarke's insistence on something approaching fiscal rectitude, gave Labour a 'golden legacy' and the Tories defeat!

Second, honesty as to the course of action that is to be undertaken.  Tell it like it is.  I know that sounds incredibly naive but some Britons are actually grown-ups.  They are having to deal with their own fiscal cliff and managing and struggling to do so.

Third, demonstrable cuts across the board.  Yes that includes the 'sacred NHS' .  Demonstrable?  How about a 15% cut in expenditure for ALL departments.  Zero based budgeting.  What did we spend in the last 12 months?  That number less 15% is what we spend in the next 12 months.

Fourth, cease payments, within 60 days, to the EU.  Simply stop.  Make no further payments until, CAP is abolished, until the books are audited and approved, until the EU bureaucracy is reduced by at least 50%.  Until.............  the whole damn place is under control and that means democratic control - not political appointees.  No more money until all of the above is achieved.

Fifth, cut overseas aid.  Make all overseas aid actually only 'in kind' and only is UK manufactured products.  Any 'on the ground' costs must be met by the recipient nation.  End all overseas aid to India, China and Brazil, immediately.  I read today that the average age of retirement, in Brazil, for private sector workers, is 53 years of age.  Makes Greece look miserly!

Sixth, instruct the NHS and other public institutions to initiate immediate discussions with their Private Finance Initiative  (PFI) providers and the starting point is a dramatic reduction in the payments that are to be made under these agreements.    If not, the NHS Trusts to declare bankruptcy.  Who exactly do we think holds the whip hand?  The NHS, who can make use (or sometimes misuse) of the relevant facilities or the financing companies?  What will the latter do with bankrupt hospitals?

Seventh, and we are back to # 3 make the cuts even more demonstrable - abolish a complete government department.  The Department for Energy and Climate Change would get my vote for abolition, along with the Welsh Office and the Scottish Office - I know that's three and I am in danger of fuzzy maths but.....   All of the displaced personnel to receive redundancy pay in line with the statutory limits - so not the usual 'golden parachutes'.

Eighth, Cut support for local government by 25%  - This will lead to a decline in employment opportunities for 'diversity officers' and LGBT empowerment posts but we will just have to get by.

Nine, 'means test'all benefits,  Welfare should be a 'safety net' not the lap of luxury.  And yes, 'means test' including those for pensioners.  Why should a pensioner get free bus pass?  Or a winter fuel allowance, if they don't really need it? 

Ten, abolish the so called 'green taxes' that have been imposed upon all energy users and go 'hell for leather' to promote shale gas exploitation.  This will require ignoring the lies from the BBC and Greenpeace but at least, if # 7 is followed, there won't be anyone at the Cabinet table pushing these lies and distortions.

As I said at the outset, it won't happen but it was nice to get this off of my chest.  Instead the UK will slide towards IMF bailouts and austerity much like the above but it will be administered by 'foreigners'.  And we will have the usual bogeyman of bankers to blame, so that's all right then!!

The USA has a chance to turn back from the financial abyss but politicians being what they are, the problems are as likely to be kicked down the road over there, as they are in the UK.




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