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Bookmark and ShareAndy Wimbush is nef‘s Communications Officer and blogmaster.

David Cameron yesterday described the need to make drastic cuts as “critical” and “urgent”. He said that his predcessors in government had “thought the good times would go on forever”, and that not we must face up to the fact that “we have been living beyond our means”. Profligacy and waste “is the legacy our generation threatens to leave the next.” The current situation is “unsustainable”. Now is the time to “face the music” and stand up to the “most urgent issue facing Britain today”.

Cameron was, of course, talking about cuts to public spending. But wouldn’t it be nice if he used the same language, the same gravitas and urgency to talk about need to cut carbon emissions, in order to address the far more urgent, far more dangerous and far more unjust problem of climate change?

We’re often told that politicians can’t take drastic measures to tackle climate change because they are unpopular, or because it would be electoral suicide to talk about the need to make sacrifices. But this whole discussion of the deficit, and what George Osbourne has called the ‘painful’ cuts to come, shows that our political discourse can cope with talk of unpopular sacrifices. So why, if our Prime Minister can make a grave and serious speech about the deficit,  can’t he do the same with climate change? If he thinks people can cope with hearing that there will be painful cuts to public services, why does he think that they’ll baulk at the idea of painful cuts to their carbon budget?

At nef, we don’t believe that tackling climate change means sacrificing everything we hold dear. In fact, we’re adamant that the Great Transition to a sustainable economy could result in us living happier, more meaningful lives. But we’d be foolish to say that such a transition would be easy. It won’t be. It’ll be the greatest challenge we’ve ever faced. And yet no politician can be honest about it. None of them are talking as frankly about the need to cut climate emissions as they are about the need to cut spending. Something is seriously awry when we make a huge fuss over the deficit, while the climate on which our economic and social stability depends is getting ever nearer to meltdown.

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Bookmark and Sharelindsay-mackie2Lindsay Mackie is a consultant at nef. She is leading nef’s post office campaign and works on Clone Town and Ghost Town Britain.

I’ve always been keen on scanning the skies for new forms of avian life. And as I twitch with other bird watchers, I’ve registered the dark and looming shape of the deficit hawk.

This creature  seems to be a bit picky about what it will devour. It swoops hungrily on some prey and whimsically leaves other, fleshy and well padded beasts well alone. It seems to be concentrating its attentions on our publicly owned pastures, leaving the private estates well alone.

Enough with the metaphor. What is happening is that the response to the financial crisis is being dictated by those, in Government and outside it, who believe that the words ‘bloated’ and ‘public sector’ belong together and that the crisis cannot be resolved without first cutting back – 20 % is being mooted – on our public sector. The deficit hawks are currently in control of the skies.

Since the banking crisis began nef has been clear that we cannot resolve our economic crisis without first reforming the banking system. We know that the banking system has decoupled over the past decade from the productive economy. That linkage has to be restored but with a banking system radically re-formed.

The Government seems to agree: Vince Cable said last week that ‘ we have a seriously dysfunctional banking system’.  And in case anyone forgets that our crisis came about through banking failure  these figures will remind them:

  • UK government support package for banks totalled £1.3 trillion
  • Combined losses of ten major international stock markets reached $9.5 trillion between the start of 2007 and 2009 , or over 10 per cent of global GDP

We now urgently need another linkage between the programme of public service cuts and the demands we must make of the banking system. These principally refer to availability of credit but also to the establishment of a Universal Banking Obligation which means that the banks offer a service to the millions of people who currently have either no bank account or who cannot get  even small amounts of credit for the kinds of economic activity that will help our economy to grow (money for training, for education, for  house maintenance, for energy saving).

Only radical reform of the UK banking and financial sector can deliver institutions capable of investment and lending that is economically and socially productive. And a concentration on cutting public spending without this reform will be disasterous for our country.

Image by The Original Ki via Flickr

Bookmark and ShareStewart Wallis is nef‘s Executive Director.

Letter to The Times, 26 May 2010.

Sir, While your leading article (“Cuts and the coalition”, May 25) hails the “restoration of the public finances” through the cuts announced on Monday, it is important to remember that this is not an expenditure crisis, it’s a revenue crisis caused by the behaviour of the banks. Failure to tackle the bank issue will inevitably lead to the same situation remerging all too soon.

Government should, as a first step, look to rein in the money it is already owed. In November last year the Treasury Select Committee reported that HM Revenue and Customs was sitting on £28 billion of unpaid tax bills that had been agreed but not settled. A further £25 billion could be sourced by plugging tax loopholes that the Government considers contravene the spirit of the law.

Stewart Wallis
Executive Director, New Economics Foundation

Bookmark and ShareAleksi Knuutila is a researcher in the Valuing What Matters programme at nef

In times of debates on budgets, dizzying large figures are passed around. What does it really mean to curb back government by £6.25 billion? The numbers can be made a bit more concrete by thinking what you get for the money. Some estimates say the first round of cuts equals losing about 100,000 jobs in the public sector. It also seems that the cuts are just about enough to finance a potential coming round of expanding prisons.

In the run-up to the elections, only the Liberal Democrats were rejecting expanding the UK’s prison capacity. The Conservatives were committed to matching Labour’s plans of expanding prisons by 14,500 beds. In the outlined coalition agreement, any mention of policy on prisons is strikingly missing. This may mean that commitment is being scaled down. Given the Conservatives’ tough stance on law and order, an era of penal moderation seems unrealistic.

The Ministry of Justice recently estimated that the building and running costs of five Mini-Titan prisons could be up to £4.5 billion pounds. These would deliver about half of the planned increase. England and Wales already have the proportionally highest prison population of all Western European countries. After the planned expansions, it would offer Zimbabwe and Tajikistan tough competition in the statistics.

In the current state of public finances, decisions around public spending warrants stronger scrutiny than ever. Are the billions we are disbursing for locking people up really creating a safer society?

A new report by nef studies in depth the consequences of imprisonment of young people and children. The evidence reviewed for Punishing Costs shows that going through prison makes it more likely for released young people to face unemployed, to have unstable accommodation, and to live on a lower income.

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Bookmark and ShareJulia Slay co-ordinates nef‘s work on co-production.

Last week I received a call from a director of services from a large London council. Let’s call him Mr Borough. He had just read our latest report, Public Services Inside Out, which makes the case for people and professionals designing and delivering public services together in equal partnership: what we call ‘co-production’. This innovative approach, we argue, results in much better outcomes, often shifts towards a more preventative model of public services and can lower costs. Mr Borough had also been told that he would need to make a 30 per cent cut to his budget within the next three to five years. But instead of heading straight for the nearest pub to drown his sorrows, he was actually excited by what lay ahead. Mr Borough felt that the current ‘squeeze’ on public services represents the biggest opportunity he had ever faced to radically revisit the shape and style of the support he is able to offer people.

Co-production offers such an alternative, as a wider transformation of our public services by bringing new resources – people’s time, skills and experience – into the system.

Mention “co-production” to someone and the chances are most people won’t know what you’re talking about. But although the vocabulary of co-production isn’t well known, the practice of it is increasingly happening all around us. Almost any service can be co-produced: while the actual process and activities can vary, it almost always looks and feels the same as the principles which underpin the approach are manifested in everyday practices, as well as in strategic level governance.

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A letter published in last weekend’s Observer, Times and Sunday Times:

Sir,

We urge the UK Government not to heed the siren’s song of the 20 economists who, having failed to predict the crisis, now seek to advise on its resolution.

The world economy is in the deepest recession since the Great Depression. In the UK, output has collapsed by £70bn on an annual basis. Under such conditions, common sense tells us that the government must compensate for the collapse in private investment and address the high level of unemployment.

The only way to restore the public finances to health is to restore the economy to health. And that means public investment (not cuts) to create jobs and income in the private and the public sector. Government should oblige the banks that have been effectively nationalised to lend to the public sector at low rates of interest. Consequent tax revenues raised and savings on benefit expenditure will reduce the public debt. As Keynes observed: “Look after the unemployment and the budget will look after itself.”

There is already a credible plan on the table. It is called the Green New Deal. Invest now and we could kick-start the transformation of the UK’s energy supply while creating thousands of new green-collar jobs, restoring the UK’s skills-base and building the recovery on the manufacture of necessary goods. We urge the government to act now and implement the Green New Deal without delay.

Andrew Simms
Policy director, nef (the new economics foundation), London SE11

David Blanchflower
Professor of economics, Dartmouth College

Dr Anastasia Nesvetailova
Assistant professor, international political economy, City University

Victoria Chick
Emeritus professor of economics, University College London

Andy Denis
Senior lecturer in political economy, City University London

Ann Pettifor
Director, Advocacy International

Christine Cooper
Professor of accounting, University of Strathclyde, Scotland

Colin Hines
Convenor, Green New Deal Group

George Irvin
Professorial research fellow, University of London, SOAS

Ismail Erturk
Senior lecturer in banking, Manchester Business School

Prem Sikka
Professor of accounting, Centre for Global Accountability, Essex Business School

Richard Murphy
Tax Research LLP

Dr Stephanie Blankenburg
Department of Economics, SOAS

Stephen Spratt
Chief economist, nef

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nef employees blog in their personal capacity. The opinions expressed here do not necessarily reflect those of the new economics foundation.