Monday, 13 September 2010

The conference season is under way

The pace of politics is quickening in the run up to the vitally important Comprehensive Spending Review. This week we have the TUC Congress and this will be followed by the Liberal Democrats, suddenly a more significant event on the political calendar.

On the radio this morning one public sector trade union leader said that not one public sector job should go. This shows a complete disconnect with reality. Even under a Labour Government there would have been public sector job cuts.

According to the June budget, we are already spending £44 billion on debt interest. This is more than we spend on defence (£40bn) or public order (£35bn). It represents a substantial opportunity cost. If the deficit was not cut, interest rates would go up, the UK's credit rating would decline and we would be spending even more on interest.

The BBC's Nick Robinson made a journey down the A1 last week in which he talked to members of the public about spending cuts. People found it far easier to say what they wouldn't cut than what they would. Overseas aid was mentioned, but this is a small proportion of the total budget.

Another popular candidate was 'welfare' and this is certainly a big ticket item. Child benefit may be stopped at 16 and the age at which people become eligible for the winter fuel allowance may be raised. In this way some dent may be made in the £194bn spent on 'social protection'.


Anonymous said...


What is your view on Paul Krugman. There is the possibility that we may go back into recession and as a result we have not seen enough government spending to ride it out - both in the U.S. and the U.K.

What do you think will happen to interest rates in the over the next 12 months?

Wyn Grant said...

I am very sceptical about the double dip recession arguments. I think that growth both in the US and UK will be relatively slow for some time. I think that interest rates will remain very low for the next 12 months, leaving aside countries like Australia and Canada.

Shankar Jayaram said...

Dear Wyn,
What role do you think unions could and ought to play in effors to rebalance the economy towards manufacturing and services. Appaling industrial relations played a major part in the decline of british manufacturing but can more moderate trade union leaders and a more pragmatic Conservative-led government establish a working relationship? Unions could play a crucial role in supporting training, apprenticeships while also raising median wages, therby reducing income inequality (union workers contiune to earn a wage perium)

Wyn Grant said...

The Conservatives have said they would like to have a partnership relationship with the unions, but this may be very difficult to forge in the context of public expenditure cuts. Remember that most union members are in the public sector and therefore their capacity to contribute to the revival of manufacturing in the way you suggest may be limited.