As the Guardian noted yesterday evening:
Ministers are being asked to draw up billions of pounds in cuts to infrastructure projects over the next 18 months despite Rachel Reeves pledging to invest more to grow the economy, the Guardian has learned.
Members of the cabinet have been asked to model cuts to their investment plans of up to 10% of their annual capital spending as part of this month's spending review, government sources said.
The demands would mean big projects such as hospital improvements, road building and defence projects being slowed down or stopped altogether as the government looks for ways to repair what they say is a £22bn black holein the public finances.
The kindest possible interpretation of this is that it is economic madness. Not only is the country more than capable of delivering the things that will be cut - meaning that there must be a reduced economic activity as a result of them not being done because the private sector is not going to pick up and use the skills of those people who would have been engaged on them - but the goal of growth that Rachel Reeves has set for itself requires that they be done. And in a great many cases, so does need.
So why is Reeves doing this? I can only offer an updated version of a quote from John Maynard Keynes:
Practical people who believe themselves to be quite exempt from any intellectual influence are usually the slaves of some defunct economist.
Reeves is exactly that. She very obviously believes in the defunct economics of neoliberalism. And we are all going to suffer for it.
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False Prophets are sometimes not just misinformed, thanks Richard.
Oh I expect a huge increase in military spending and that will make it all fine. Starmer is taking us into war.
There are going to be some v interesting conversations between ministers and permanent under-
secretaries.
In the Horizon Inquiry last week we heard from a former Permanent Secretary, Sir Martin Donnelly, about what that looked like in the Dept of Business & Trade, less money, more responsibilities, a lot of stress, and an inability to have a handle on the largest miscarriage of justice in British history arising from dishonesty at the top of the PO. It was v informative as an inside view on austerity, from a civil servant. (transcript &/or video)
https://www.postofficehorizoninquiry.org.uk/hearings/phase-7-27-september-2024
This makes a mockery of British democracy where the economy is based on the lies of economists who shill for the rich who want out of sheer greed to pay the least possible in taxes. This is sociopathy in action otherwise known as Neoliberalism or Thatcherism! As I said yesterday the country needs a National Mourning Movement to revive its caring and this in turn to spawn a New Way Party.
We can always afford to spend more on military hardware, especially if it is for export.
There are special fiscal rules for that kind of “economic growth”
It beggars belief.
Their election pitch was to fix public services…. this action is directly contradictory to their manifesto pledge. A simple pledge that lots of people voted for.
They also pledged to follow some arcane fiscal rule that few people understand and very few based their vote on.
So, when something “has to give” (and in government there are always “tough choices”) they choose to trash the future of public services (which is, after all, what investment is). You couldn’t make it up.
Sometimes even the best of blogs can find itself outflanked by the range of interconnected disasters by which we are currently plagued. So, this comment is being offered, if Richard permits, on both the blog posts to which refers.
Today the awful prospect of Reeves’ and Starmer’s economic blunderdum and the explosion of the middle eastern war risk flashing by without a chance to draw them into focus – yet they expose they awe-full nonsense of contemporary economic and political hegemonies with the brilliance of exploding missiles. The illumination is in this Guardian article – https://www.theguardian.com/world/2024/oct/01/stopping-iran-attack-would-have-forced-israel-to-use-sophisticated-and-expensive-defences
The figures are far beyond jaw-dropping. The simplest additional arithmetic, when set against any single week of armaments expended in the middle east, makes it clear that these are capable of almost unlimited expansion. NO commentataor is ever even given pause as to whether the combatants can ‘afford’ this degree of manifest prodigality.
There is NO limit whatsoever to government expenditure for military pusposes – however morally vile.
Neo-liberal economics is a huge tottering structure of lies – and the military industrial complex knows it while the City in all its forms and in all its international locations literally banks on it.
Thanks
And that question is wholly appropriate
And the BBC will never mention the $800K cost of each Israeli anti missile – as you say the implication being that this kind of ‘spending’ is limitless.
I have got to the stage of switching to radio 3 when after a string of apologists for an ever wider war – the presenter says ‘ and now a spokesman for the IDF’.
Sorry for my penchant for off-thread comments; but it is germane. I wish to suggest readers to dip into the Horizon Inquiry, 1st October – Henry Staunton, ex-Chairman of the Post Office, here :https://www.postofficehorizoninquiry.org.uk/hearings/phase-7-1-october-2024 (morning session, I simply haven’t had time to review both sessions).
This session would make a brilliant, revealing Harvard Business Review Case Study: how not to run either Government or Business. British business and government culture produces leaders incapable either of management, independence of mind or are prepared to face and act when faced with failure that does not protect the prevailing culture (they are primitive machine minders). We have all the wrong people in power; that is quite obvious. It is jaw dropping, I have seen the characteristic incapability through my business life too often, but it is fundamental to Britain; inherent and endemic.
Let me very briefly summarise what this tells us about Government, from a single quotation of a very senior Civil Servant ‘managing’ the Post Office Chairman (from his own reported notes on the meeting): “Politicians do not necessarily like to confront reality” (Sarah Munby is the Permanent Secretary at the Department for Science, Innovation and Technology). Staunton took from this meeting his purpose in the Post Office from the Government perspective: “don’t rip off the band-aid”, and allow Government to “hobble” to the next election. This was in the middle of the Postmasters compensation debacle in the last two years, grinding almost to a halt. And many still struggling to have their legal cases overturned. The biggest driver of Staunton’s active ‘leadership’ seems to have been stimulated not by Government, but by the ‘Mr Bates’ ITV drama.
I am sure your reasoning is correct
At the start of today’s Horizon hearing (2-10-24), two witness statements were “read in to the record” which throw further light on Henry Staunton’s oral evidence. Draw yr own conclusions!
You can find them here:
Benjamin Tideswell (former Senior Independent Director, POL
https://www.postofficehorizoninquiry.org.uk/evidence/witn11290100-benjamin-tidswell-witness-statement
and here:
Marianne Tutin (Barrister conducting recent whistleblowing investigation)
https://www.postofficehorizoninquiry.org.uk/evidence/witn11620100-marianne-tutin-witness-statement
Phase 7, the current hearings, is quite explosive stuff and is dealing with v recent events. As others have said, it gives good but depressing insights into how things are (mal)administered in run down UK nowadays – some v interesting witnesses coming up soon.
https://www.postofficehorizoninquiry.org.uk/phase-7-timetable
Best stuff since “Yes, Minister!” (which IMHO, should be essential viewing for anyone involved in or commenting on politics).
Dusting off my PhD in the Bleeding Obvious
We have to spend a certain amount of money annually to keep our existing publicly owned infrastructure in good condition, something that hasn’t been done for some time.
That is before we look at new projects to update and expand the public estate to cope with changing demand.
If we carry on not spending enough then we begin the gentle slide to developing national status or failed state.
Is that what Labour and the Tories want
A totally fair question
But remember, everything is money to them. Reality is an inconvenience beyond the spreadsheet
If we spend say £1200m on a bridge – like the Queensferry Bridge, then we have a capital asset, hopefully of equivalent or higher value* than the actual costs of the project, and that physical entity then will endure as collective capital infrastructure.
I think the Treasury has always worked on the principle that money spent on such material benefits as being able to drive across the Forth just disappears into some accounting black hole and Reeves’ proposed fiddling the definitions of “debt” and “deficit” will have to involve some equation to tot up national assets.
Pragmatism really doesn’t have as substantive a form as cast iron fiscal rules.
But, like its neighbour the Forth Railway Bridge, this new bridge needs constant maintenance to sustain its value, and retain its physical functional capacities.
Then there will also be capital depreciation over time and, eventually the public asset may need replacing. So, there is both a need for a sinking fund to cover depreciation, plus day to day maintenance and operational costs.
Every physical development creates both needs, whether public or private.
The revenue costs involved in sustaining publicly owned infrastructure and facilities cannot be ignored, or JB’s bleedin’ obvious PhD was a wasted effort.
Yet, those costs are rarely included at the outset and seem to be ignored in public accounting.
I was involved in a decade of capital projects development, and we always asked the question as to how these two sets of costs, both depreciation and maintenance, would be accounted for, and the usual answer that came back from managers was ….. errrr……
*value is an entirely moveable feast depending on which economist is consulted.
That sounds familiar
I get a sense that they actually get some kind of cathartic kick out of taking “tough decisions”. For Reeves and Starmer it’s a virility test to be tougher than the
Tories who, despite also taking “tough decisions” left poor Rachel with a horrible “black hole” to fill.
They’ve looked at the 300,000 excess deaths between 2012 & 2019 (before Covid),https://www.theguardian.com/business/2022/oct/05/over-330000-excess-deaths-in-great-britain-linked-to-austerity-finds-study?CMP=share_btn_tw
they’ve looked at our crumbling infrastructure, the libraries closed, the schools and hospitals not built, the doctors and nurses not recruited, the millions of food parcels handed out by food banks, the bullshit jobs that dominate much of the economy, the decades of stagnant wage growth for many, the increases in inequality with the top getting even more of the cake, and have decided Austerity 1 wasn’t austere enough and that they would do it properly and to hell with the consequences.
What is most dispiriting is that the 66% who didn’t vote for them plus the 20 million who didn’t vote plus those not correctly registered which might be as many as 8 million can do nothing about it.
I’d be interested in your thoughts about what it is that prevents so many millions of people being able to do something about the problems being caused by govt policy, it sounds like it might be a good root cause analysis. I do wonder why millions can’t act, but a minority in govt can, what stops the collective actions that really sits at such odds with those in the cabinet, which are tiny in number.
I think that comes down to control of the media – which is an issue we have not solved as yet
This blog is nit a challenge to the Daily Fail
I would like to remind the treasury that if you slow down a project it will always increase the cost due to inflation, overheads are generally a fixed amount per year and you can not reduce the labour force in per portion.
Some examples:-
HS2. In addition contracts were ‘design and build’ and payment as ‘cost plus’. This enables full payment for substandard work. Promotes over expenditure which is rewarded with extra payment.
The children’s hospital in Dublin which is currently expected to cost three time the budget after rescheduling 14 time to date. BAM the contractor is laughing. all the way to the bank.
Agreed
Between 2015-17 I used to write to my Tory MP about those sort of xs death & poverty/relative poverty stats, as well as my own locally gathered stats from the foodbank I ran. The DWP was allergic to real world data. They used faked “satisfaction surveys”, ignored any references to growing inequality, and smeared the voluntary sector or, if things got too hot, ignored us. They consistently ignored the “real world” events caused by their ideology. Even when they lost court cases, they never admitted their responsibility. Our new Austerity 2.0 Labour Cabinet will be just the same as they make the “difficult decisions” to needlessly perpetuate OUR suffering, to preserve THEIR power, all justified by flawed ideological commitment to failed economic theory.
Labour’s approach is like the UK’s 19th and early 20th century approach to war. Fight as you fought the previous war, get caught out but without changing tactics.
Plus broadcast that the entire public sector is broken and needs the private sector to knock it into shape.
Forget to be honest about ultimately filling the private sectors pockets with gold.
Result a recession and get kicked out at the next election.
When do we stop calling them Labour? There isn’t a single Labour policy to he had at the moment.
I just researched Rachel Reeves. Amother Oxbridge PPE graduate with a masters from the LSE.
The more I think of it, the more I can only assume the E element of the PPE degree is no more than a 2-week introductory course to learn the dictionary definition of a few words.
There can’t be any level of decent Economics instruction in such a degree to cause the chancellor (and many before her) to think she knows what she’s talking about?
As if it’s not bad enough cutting £100bn out of the economy and keeping interest rates at 2.5x inflation she now wants to cut infrastructure spending.
I’m aghast. Recession is the goal.
Let’s be clear, they get the equivalent of a first year course in each of these subjects, if they continue them all to their final year. It shows.
Top marks to Reeves if she can explain how cutting public expenditure – and in particular investment in infrastructure – leads to greater growth. Should someone mention sectoral balances?
Feels like she is steering towards another recession. Will she resign if there is no appreciable growth?
I’d rather she was sacked
I imagine if there’s no growth, for exactly the reasons you’re stating – the blame will reside elsewhere, as her worldview will likely preclude questioning the truth she believes she is privy to. That the world doesn’t conform to that truth will be the world’s fault, rather than an opportunity to update her understanding of it. It saddens me that one person has the power to make such unwise choices on behalf of so many, with a good measure of impunity, especially since chancellor after chancellor has done the same, certainly in my lifetime. It may well be that a lot of us may need to look at reality and compare it to our ideas about how we think things should be done (Einstein’s view of insanity comes to mind). I do know, from various reports that can be found online that, globally, there is a majority dissatisfied with elected representative government, many see it as failing to represent the concerns of most, which may link to the fascist turn. Ideology will always grind against reality, and sometimes in ways that cause a lot of damage.
Much to agree with
Wars and general unrest get them off the hook. Under Starmer we are attached to the USA/Zion axis, if Harris wins more the same, if Trump the chaos will benefit from a ‘stable and sensible’ UK. We will continue to feed war and of course domestic unrest will be met using the draconian approach that sees rapists get far lesser sentences than protesters or dissidents. LINO.