George Osborne has been rather clever in that he is reducing the overspend of annual spending exceeding revenue by reducing departmental spending rather than cut capital expenditure. The biggest reductions are the subsidy to Local Government and the Welfare Budget administered by the Department for Work and Pensions.
At the end of the current Parliament the public finances could actually be back in balance but more importantly the ongoing waste of public money will have been reduced. That will have more lasting effect and could even halt the year-on-year growth in Government spending that has been with us all since the end of the Second World War in 1945.
The main point of the change in direction by the Coalition compared to the previous Labour Administration is not that it is a ‘bad thing’ to borrow money (Governments can double the ‘value’ of a loan overnight by exchange rate manipulation and, at the same time, create more pounds to pay of the debt interest more cheaply!) but that money spent badly does not achieve worthwhile result and, as debt increases year-on-year as the cash is poured into these wasteful and bottomless pits, the government starts to pay more and more in debt interest repayments. The UK currently gives international financiers £44bn a year in interest which is more money than the whole of the UK Defence Budget.
Labour would (and did) throw money at the Public Sector to create Jobs … Diversity Champions, Social Fund Managers and Community Cohesion Officers to name but a few. The Conservatives, with the assent of the Liberal-Democrats, will target the spending more effectively so that people in need of jobs will get those jobs through recruitment by the Private Sector and, if they need welfare support, the welfare supports but does not cosset idleness and perpetuate a ‘life on the Dole’. That has to be better than simply creating jobs such as Social Fund Managers, Diversity Champions or Community Cohesion Officers which nobody understands what the jobs entail but have burgeoned under Labour auspices
That is far better spending of OUR money and by the end of this Parliament the structural deficit will be reduced if not eliminated even if we, as a nation are still up to our eyeballs in personal and public debt owed to lenders.
My only worry is that the better targeted spending and the reduced departmental spending is not enough as the structural deficit of the UK is far greater than most people can imagine and that debt, if it is not tackled and reduced now, will increase in size and scale and the austerity imposed today might have to be even more drastic and more painful in the future.