Wednesday, 11 September 2013

Cutting Corners With The Budget

Among the many and various political commentators, one Douglas Carswell, is said to be of the Right.  A while back I challenged him with the allegation that his economics seemed more redolent of Gladstonian Liberalism to which he replied, more or less "banged to rights, Guv."

He has made another foray into Economic History telling us to look out for the future in the past with reference to  Beware the Barber Boom reminding us of past errors.  This takes us back forty years, ancient history to many but not to some.

This is a time that I recall vividly, just having done yet another job move to try to keep ahead of all the manic reorganisations that were going on in which many of the unwary found out they were superfluous to requirements.

The upshot of this was that we moved into a four bed, fair sized well equipped detached house with a decent garden, overlooking fields yet with bus, rail and motorway services. 

All for £6,750 and we could run a car, feed three children etc. and have decent holidays on around £2,500 a year and without much if any use of credit cards.

It was after Anthony Barber, Chancellor to Edward Heath one of the big spender Prime Ministers had given the economy a badly timed and ill considered boost that kicked off near hyper inflation.

It was also the time that the Bretton Woods international agreements on international capital and money ended and some economists were cheerfully recommending a spending free for all to do wonders and to help politicians be re-elected.

In some ways we are still living with the consequences in that the government now controls more of our money and yet inflation continues unabated.  We are told that higher prices means that we are more prosperous when this does not seem to be the case.

The trouble is that we still buy into the fiction.  One of the nastier consequences of past improvidence is that some of schemes of the past have caught up with us, notably the Ponzi deal of state pensions.

Politicians of the past used to giggle in private when they admitted that National Insurance was not insurance and the pensions were unfunded. 

Now the laughing has to stop as the ageing population wants what was promised believing that because it paid in the money should be there when it isn't.  It has to come either from current taxation or borrowing and we are already over borrowed.

It was around then that we also bought into the fiction that any spending that allegedly created jobs was good.  So any big project that would never ever yield a real return on investment was good especially if big enough to get the media excited.

Some of these schemes would never even yield eventually any return on revenue costs all of which loaded future obligations onto tax payers in immense sums. 

Add to that in recent years the amounts taken out by financial firms handling the money side and contractors guaranteed profits or protected from cost over runs it has all added to the burdens.

If Carswell is correct and Cameron and Osborne have done another Barber, we will all get a short back and sides if not a head shave.  

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