From the TUC

A fightback on public spending?

22 Jul 2009, by in Economics, Labour market, Public services

Adam and I have both been depressed by the recent debate on public spending. Indeed there now seems to be a BBC editorial policy that allows presenters to assume that the case for immediate cuts in spending to reduce the deficit is as obvious as Neil Armstrong’s first footsteps on the moon. Perhaps we will soon get a quirky Radio 4 programme investigating whether those who think the moon landings were a hoax are all Keynesians too.

But perhaps there are signs of a fightback. Larry Elliot is rightly allowed into a bit of the Guardian that people actually read today. He argues firstly that you can also close the deficit on the other side of the balance sheet by raising taxes and that even more importantly it would be crazy to do it now.

David Kern, the Chief Economist of the British Chambers of Commerce, is also clear that it would be wrong to cut spening during the recession.

It would be wrong to tighten policy while the recession continues, but maintaining Britain’s international credibility requires a robust plan for restoring our public finances over the medium-term. “

Given that the BCC are often seen as close to the Conservatives, this is a significant statement. Perhaps BCC members had read the TUC’s own report that makes the rather obvious point that if you cut public spending it has inevitable consequences in the private sector. Indeed we were quite surprised when we worked out that:

Since 2005-06, public sector job totals have fallen and spending increases have gone disproportionately to buying goods and services from the private sector. This spending has increased by 13.5 per cent in real terms in the last four years to reach £167 billion – taking it above the £151 billion spent on public sector pay (which only increased by 5.2 per cent in real terms since 2005-6).

It would simply not be possible to make big cuts in public spending without reducing the procurement budget. And of course if you sack thousands of public servants then they will have less money to spend and this will also depress the private sector.

While the National Institute’s forecast out today is much gloomier than the Treasury (as they assume that consumers will not start spending again and that the recovery will have to come from exports), Simon Kirby told the Today programme that immediate spending cuts would be a mistake.

And we have linked before to Will Hutton‘s take.

There are then mounting signs of a defence of keeping anti-recessionary spending going, even among people with sharp disagreements about what should come after that. But there are parts of the media where these arguments are unheard and all economics proceeds on the government as a household budget model or even more irritatingly in that smug phrase UK PLC (nicely skewered by Richard Murphy).

Clifford Singer has some interesting thoughts today on taking the campaign forward. It seems to me that this is one of those rare moments in politics where there is really is a simple and straightforward choice to be made.

Is the top priority for government reducing unemployment or reducing the deficit? Which side are you on?