Friday, 22 October 2010

Uncomfortable Sums

So, finally, it is here.  The Comprehensive Spending Review (CSR).  A country on tenterhooks has finally exhaled as it realises that actually, maybe things aren't going to be as bad as they thought.  Say what you like about this government, but so far they have managed the expectations of the populace very well.  Of course, it makes it easier to get away with beating someone around the head if you've already told them to expect a kick in the crotch, but anyway.

I have decided to take a purely objective viewpoint to the CSR, which may be a little bit at odds with the anti-coalition stance in a few of my previous posts, but there is a whole lot of rhetoric out there about the changes, almost all of which comes with an unspoken political agenda and hardly any of which can be said to reflect all the facts.  I have taken a few numbers from sources I consider to be reliable, and where relevant below I will back my comments up with these.  You, dear readers, are of course free to agree or disagree as you choose, and I welcome your comments and criticism below.

Firstly, a few obvious points.  Figures from a number of sources suggest that between 490,000 and 550,000 local government jobs will be lost over the next four years as a result of ConDem policies.  This is clearly very bad news indeed for the staff involved, and is completely at odds with Nick Clegg's claim in the Guardian yesterday that by the end of their tenure, there will be another 200,000 people emplyed in the public sector. Quite how that goes hand-in-hand with Osborne's claim of £12bn savings in that sector is anyone's guess, but by my estimation this plan is already a victim of what the Americans might call 'bad math'.

Let's assume that this particular section of the Chancellor's calculation is correct, and the job losses do result in a reduced wage bill of £12bn.  Once again, taking into account the losses that can be achieved due to natural wastage and assuming that these jobs are genuinely lost rather than farmed out to the private sector at a premium, there will be redundancy payments for those staff at an average cost of a few thousand each, plus an increased benefit bill of between £60 - £80 per week for each member of staff.  These two factors alone come to nearly £3bn, and they do not reflect lost taxation and spending, massively increased housing costs, the extra costs of social protection other than direct benefits and the reduced social cohesion of entire communities.  By my estimation, George will be lucky to see half of those proposed £12bn savings in real terms, and I therefore tentatively suggest that the real reason behind the cuts to local government jobs is ideological in nature.

While we're on the sticky subject of ideology, Northern Ireland, Scotland and Wales can all expect massive cuts in the funding they receive for their devolved parliaments.  Given that these areas are generally highly nationalistic or pro-Labour, there are no surprises here, and a fair few of the English electorate will be supportive of those changes.

There will be further cuts to public sector pensions, which have already been ravaged in years past and subjected to further changes to their terms and payouts.  Trade unions suggest that the average public sector pension is less than £5,000 a year, which goes some way towards deflecting frequent media claims that local councils are being bled dry by fatcat staff members.  I will save this discussion for a future date, as I wholly expect to be blogging from Suffolk sometime soon, and I'm keen to do a full analysis of the UK's first 'virtual' council when I do.

Changes to pension age proposed by the former government are to be brought forward slightly.  Once again this is a good measure for Osborne as it is arguably not that controversial, affects only a minority of people and generates a small amount of money without ever actually being his policy in the first place.  The French are anything but universally popular on these shores but as they blockade another seaport and close the roads for the umpteenth day as a result of government proposals to increase the state pension age there from 60 to 62, I admire them more and more.

Rail fares are set to rise 3% above inflation - a move that by definition, penalises those on lower incomes who can't afford a car.  As a regular user of public transport, I am used to being discriminated against in a whole host of ways for being too poor to afford my own vehicle, and I am sure that anyone else in my situation will agree with me on this.  I will not comment further, except to say that I'm sure the quality and frequency of rail services will raise in kind (otherwise, I might start getting the bus.)

Finally we come to the matter which is now something of an old chestnut in post-apocalypse politics: the banks.  A new levy has been proposed which will see banks pay £2.5bn extra a year in taxation from 2012.  Just to clarify, that's in total, rather than each, and the levy doesn't even apply to smaller banks.  There is naturally an outcry from lenders here, who suggest that this could make the UK a less attractive place for banks to operate in future.  To which I really want to cheerfully reply, 'That's fine, feel free to leave whenever you want.  Oh, and we'll have our trillion pounds back before you go, please.'  Childish, I know, and not reflective of the jobs that these organisations provide in one of the few employment sectors still operating in this country.  But I still feel that every time there is a cut, the UK resident should be asking himself, 'would a tax on the banks have paid for this?'

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