Thursday, 10 May 2012

Cut the Budget?

I read an article yesterday which suggests that our approach to many things is determined by which half of our brain we use to assess something and decide our response. They used people who have brain damage to one side or the other to make the assessments and found that people with a Left Brain tendency are more likely to respond to anything according to a laid down procedure or rules and are extremely resistant to change. Those with a Right Brain tendency are more likely to be risk takers, innovators and adventurers. So what does this tell us about the current state of the economy and the response to the deep and painful budget cuts every government in the west, if not the world, is having to make?

From the response of the Unions, particularly those representing the Civil Service, I'd say they must fall into the "Left Brain" syndrome category. Their constant cry is, "No change; no cuts; no rationalisation." Mind you, if the study is an accurate one, and I have no reason to suspect that it isn't, then the ideal civil servant is someone with a complete disconnect from their "Right Brain" so perhaps we shouldn't be surprised by their response.

What does strike me as disturbing in the wave of demonstrations and strikes against any reductions in any government budget is the apparent complete disconnect from the reality of economics. Surely most of those waving placards, marching on various parliaments or "block-u-ppying" bank premises, must be able to do a bit of figuring for themselves? They can't all be complete idiots unable to see that no government is able to simply "manufacture more money" at will? Prime Minister Harold Wilson and his successor, James Callaghan, tried it in the UK, and so have various other governments of similar socialistic persuasion. The result is always the same - a devalued and debased currency, massive business failure and an economic mess it takes years to repair.

The politicians, of course, point the finger of blame at the "bankers" for the present crisis, but I don't believe they are looking at the right scapegoat. Mind you, a politician accepting the blame for their own actions and decisions is even less likely than them accepting a pay cut or a re-jigging of their very generous salaries and pensions. The mess in the UK economy lies squarely with Gordon Brown, Labour ideology and the Treasury. The UK is heavily overtaxed, and Brown knew it, so he borrowed to cover the gap between his tax revenue (and 'National Insurance' is just another 'personal' tax levied on individuals and businesses) and the Treasury obligingly churned out "growth" figures that were as fictitious as the stories of Baron Munchausen's exploits. The worst part is that they knew it, but talked it up anyway.

What did Brown spend the money on? He claims "growth" but I don't think any real economist would agree that expanding the Civil and other "Public" Services by some 20% is really "growth" in economic terms. For one thing none of these "jobs" is actually "productive" in that they produce any "good" that can be sold to someone else in return for hard cash. All a civil service "job" does is recycle tax money. My economics lecturers taught us that supply rises to meet demand, not demand to meet supply, yet we live in a situation where there is a clear oversupply in some sectors - but any attempt to reduce it is met with resistance. After all, quite a few of the proposals will save money won't actually have a huge impact on individuals and will very likely help in the longer term. Like the proposed changes to the civil service pensions scheme.

The piece I read this morning of Civil Service Unions objecting to changes to their pensions, one spokesman claiming that if taxes have to rise to pay for it ... THAT is a part of the problem, the Unions see everyone else's income as being theirs to share. It was Gordon Brown's tax changes that destroyed just about every "private" pension in the UK and is still bleeding them dry, why should the Civil Servants be immune? A major part of that problem is that Whitehall is riddled with Departments duplicating the work and remits of others - but again, that is not something anyone seems to be addressing. Certainly, what would defuse the arguments over changes to the pensions, would be if the MPs addressed some amendments to their extremely generous benefits - where else can 10 years work get you a full pension? - others might be willing to accept their lead. But then, turkeys are hardly likely to volunteer for slaughter.

Where it does get more difficult is when it comes to tackling the real "elephant in the room" - the whole "benefit" culture. This now seems to embrace almost everything, from Student Loans through to Housing and Incomes. What is, I have often asked, "fair" about someone drawing "benefit" and being housed at the taxpayers expense, being able to demand an ever increasing amount of "support" by breeding additional children and being rehoused to accommodate an ever larger family - while those ultimately paying for it are forced to go "private" and pay massive rents, or buy at inflated prices, because the demand for housing far exceeds the supply of it?

I have often commented that it is always remarkable to me, that Whitehall can claim they have made "cuts" of XX% to their budgets, yet the actual expenditure goes UP by that or a greater amount year on year. It often sounds like a remarkably creative accounting system in use in Whitehall.

What is really needed is a real overhaul of Whitehall. A clearing out of all duplication, a stripping down of bloated Departments and a cleaning out of the deadwood. That, in itself, would save Billions.

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