Blogroll

Climate Change

Blog Archive

Counters




Google Hit Counter

An air of unreality

Posted by Richard Monday, March 28, 2005

Yes, all right, the central issue for the general election is public spending – and the battlefield is set over who can save more money from government "efficiencies" in order to pump more back into public services.

The Tories, on the basis of the James report, aim to "save" £35 billion, of which £22 billion will be pumped back into services delivery, while Labour, through its Gershon review, claims to have identified "auditable and transparent efficiency gains of over £20 billion in 2007-08 across the public sector".

Against projected public expenditure of £400 billion or so, the difference between the parties is actually very little and possibly even less than the headline figure. A significant quantum of the projected James report figures are, in fact, unrealisable, as they relate to spending on activities required by EU law. The result, in any event, is the difference between public expenditure at 42 percent of gross domestic product by 2011 under Labour and at 40 percent under the Tories.

Thus it was our old friend Peter Riddell who remarked recently in his Times column that Sigmund Freud would have found plenty of material in British politics at present to illustrate his adage about "the narcissism of small differences". Very similar types of people tend to exaggerate the small differences between themselves and build them up into life-and-death struggles. That, he wrote, is exactly how the parties are now behaving:

We have an outpouring of claim and counter-claim about taxes and public spending, implying ruin if the other party wins. There are legitimate questions about how much the waste/efficiency savings from the Tories' James review can be achieved, just as there are about the Government's. But Labour is specialising in hyped-up, almost mendacious assertions about alleged Tory "cuts", mass dismissals of teachers, nurses, and so on.

The reality is that the differences between the parties' spending plans are pretty small: around 2 percent of national income over the course of a full Parliament. This is less than half the rise since 1997, or during the early 1990s. Similarly, as Vince Cable of the Liberal Democrats acknowledged this week, the differences between the parties on "the tax take" are minimal. The £4 billion cut in taxes promised by the Tories is merely a seventh of the projected rise in tax receipts which will occur under the existing tax structure.
What price, therefore, the "personal view" from Patrick Minford in the business section of today's Daily Telegraph, under the title: "The EU's manufacturing policies are costing us a fortune".

In a long article, well worth reading, Minford argues that, in addition to the Common Agricultural Policy, which costs us between 0.3 and 1 percent of GDP in excess costs of UK production, payments to inefficient EU farmers, and the burden of high prices on our households, the EU's "common manufacturing policy" costs us about 3 percent of GDP in similar costs; a lot more than raw food because it is so much bigger both as an industry and as an element in our household budgets.

This is not chickenfeed, he writes: 3 percent of GDP is some £30 billion, almost half the cost of the NHS.

But that, as regular readers of this Blog will know, is only part of the equation. In November, we reported how the EU commission in its annual report on competitiveness, estimated that "red tape" was costing the EU economies some 12 percent of GDP, four times the amount of which Minford complains.

Translated into UK terms, that amounts to a loss to the economy in the order of £120 billion, of which a third to a half would be translatable into tax receipts and be available for public spending. At the lower figure of one third, equivalent to £40 billion, this still exceeds the James report figure by a substantial amount, without attracting the opprobrium of expenditure "cuts".

A genuine political debate, especially when the EU is seeking to implement a constitution which locks-in the continental "social model", would address issues such as this. But, of course, "Europe" is off the agenda for the duration of the election and we are only discussing domestic issues. Small wonder the Scotsman today headlines a story: "Honest electoral debate is the first casualty of MPs' war of words".

Between them, the major parties have managed to turn the news agenda away from matters of genuine importance on to manufactured hype, leaving the electorate bemused and indifferent. All we have left is an air of unreality.