The Spending Review

Since I'm starting up a blog on issues regarding why Jesus was not a right winger (main premise - to show how baseless the assertions that Christians should only back right-wing policies rather than make Jesus out to have been a leftie), I should comment on yesterday's events in Parliament.

Those that know me know that I vote Labour at the last election (and the one before that, and the one before that. Before that I was too young to vote), but this doesn't mean that thus I support everything a Labour minister utters (in fact, I have issues with a lot of it), and nor does it mean I oppose Tory policies on principle.

As mentioned in previous posts, I want to have a stab at interpreting the Bible using economic theory to guide the policy implications that come out of it. Many other people, I believe, do not do this and thus arrive at assertions that all Christians should support right-wing policies (small government, etc).

The reason why I don't want to comment so much on the Spending Review is that it relates a lot to how things are done in the UK economy, which is not necessarily how they should be done - since I'm only just starting to write and think about exactly how they should be done I'm not about to start making such bold assertions.

But the small comment I will make is this - and this is consistent with what I've always said about Tory policies on deficit reduction: They are much too much, much too soon. Dress them up as you will (apparently 400,000 people leave jobs in the public sector a year anyway - but are replaced usually), they are cuts to a weak economy. There is no attempt to work ourselves out of the mess - it's entirely belt tightening.

Anyone who has had debt problems will know that you don't solve them just by belt tightening. Any start-up company will tell you they didn't pay off their initial creditors when they hadn't established themselves as going, viable entities. So why does it make sense to cut back so drastically spending in a weak economy?

You'll note: I'm not saying that some cuts will be useful - undoubtedly I'm sure I'll come across things the state is doing that I don't think it should (e.g. the Post Office). What my concern is about is the timing of these cuts.

The response from others is: We'll grow faster because of these cuts, there will be less crowding out. We'll abstract from the absence of any evidence on a strong crowding out effect and just say: Who are you kidding? The half-million and more jobs that are going, these are folk that will be spending less - and paying less in taxes, and claiming more in benefits. So it's not immediately clear how much the saving will be anyway. Then there's the multiplier effect - the jobs in small businesses reliant on local councils for contracts - small businesses that may go under as a result. I can keep on going.

It simply does not make sense to cut right now. Despite the "there's no money left" assertions that many throw out frequently, the fact is there IS money: The government is able to borrow at very cheap rates of interest (rates that are not going up either). That's not a justification for government borrowing and spending per se, but if we push the economy into recovery by a bit more borrowing that is a much better basis on which to cut than the current one.