Friday, April 17, 2009

Labour MP Calls for Spending to be Slashed - And He's Right

Do read Frank Field's article on why public spending must be cut in this week's Spectator. It's a very powerful exposition of the case for sound money and saving the country from potential insolvency. His words. Not mine. Here's an extract...

The government appears to hope that it will gain enough cover by repeating ad nauseam that it is Keynesian common sense to borrow during the downturn and pay back when the economy is on a more even keel. Whether it really believes this is anyone’s guess. But its bluff might be called, and here will be a test not only for the current administration, but also for the opposition, whose consistent poll lead suggests it may form the next government.

The 30 per cent fall in sterling over the past year is cheerfully presented as opening up huge new export opportunities. While these opportunities seem somewhat delayed in registering in the balance of payments, its inflationary stimulus is already all too apparent. Despite the ever-present predictions of deflation, three of the four official price measurements are now on an upward path. The first signs of difficulty in raising any of the new walloping tranches of debt will not only result in long-term interest rates rising, no matter what the Bank of England gets up to in printing money, but will push sterling into yet another nosedive. Rising long-term interest rates and a collapse in sterling will place a firm grip around the government’s throat...

The government not only has a moral duty now to cut public expenditure, but may be forced to do so by its inability to borrow on the scale necessary. The price demanded for a continual and adequate supply of credit will be to begin now — and not after the next election — the Herculean task of bringing government spending nearer to what it can raise in taxes...

...Again, it’s worth going for a cash ceiling on all public expenditure programmes. The drive must then be to ensure that falling real budgets result in increased output. This goal will not be easy to achieve and it will require a serious budget devolution so that entrepreneurial skills that are within the public system operate to full effect. But there will be no escaping the need to take out whole programmes if there is any prospect of bringing expenditure down merely towards tax revenue levels in a time-span necessary to continue attracting scarce credit...

...The threat to the country’s solvency is now so serious that both opposition and government need to use next week’s Budget on what needs to be done this year to begin rebuilding the country’s solvency.

Frank Field has always been a man of vision and courage. Quite what he is still doing in a party that a) takes no notice of him and b) usually seeks to ridicule him, only he can explain. Read his full article HERE.

31 comments:

Newmania said...

only he can explain

He has done Iain , he said , they would love me to disappear but that would make it easy for them. He was, of course ,one of the first muggees of the Brown bootboys , he would not rejoin the Government ( he was asked) and he is saying what we all know to be true .

Great spot

Adam Smith was right said...

Field is, at least, a voice of sanity in the Labour ranks.

It is a pity that those bailing out the banks do not reveal that a majority of the depositors of monies into those banks want paying in foreign currency - so printing Pounds does nothing to address the central issue that the money has already been blown on buying Chinese goods, foreign holidays etc.

Brown's economic "policy" has been the road to ruin.

Red Riding said...

But what do the Tory front bench have to say about this, apart from weasel words open to multiple interpretations?

Anonymous said...

I feel quite uncomfortable sympathising and agreeing with a socialist, labour politician. In an age where it is impossible to believe anyone about anything, does Frank Field offer the possibility of being an honest person. I hope so. I so want to have just one person to admire.

Will Fisher said...

Cameron should be courting Frank to switch sides. Such a sensible man would be useful when the Cons win the election.

Adam Smith was right (again) said...

It is fascinating seeing the point where practical politics collides with practical economics. No party so close to an election, is going to admit what is going to have to be done in the way of balancing the books - hence the Tories keeping shtum. The Romans had bread and circuses, we have the welfare state...

Guy H said...

Field's a bit authoritarian for my taste, but he's honest. What I can't understand is why he's not crossed the floor.

Peter Pedantry said...

"Do read Frank Field's article on why public spending must be cut in this week's Spectator."

I'm sure the Spectator is looking to trim costs where it can. Oh, wait, you must have meant:

"Do read Frank Field's article in this week's Spectator on why public spending must be cut."

Mark Senior said...

Wrong , wrong and wrong again , the route to 5 million plus unemployed .
He cannot even give the correct figures for the fall in sterling over the past year .
At todays figures the fall in sterling v the dollar is 25% and v the Euro just 13% .
Also note bank shares have been zooming up again today . Good job I ignored all you doomsters talking down the British economy and bought some Lloyds , Barclays and RBS at near the bottom .

The Economic Voice said...

The Government's borrowing is actually taking money out of the system. which I think the quantitative easing may be balancing out but its sticking a plaster on an amputation £175bn borrowed and 75bn printed......lets see how this plays out

RW said...

Frank Field is still firmly a man of the Left, like poor muddled Martin Bright who seems distinctly uncomfortable in his incongruous Coffeehouse slot. Neither of them can let go of old loyalties.

I could see Kate Hoey crossing the floor sooner than Frank Field.

Plato said...

OT I tripped across this earlier this afternoon - quite revealing observations by Mr Draper - tells a lot about Mr Brown's persona IMHO

martin day said...

Frank is correct - He seems to be the only one with any brains in Labour!

Just imagine how much better this country would have been if Gordon Brown had not managed to push him out of the Department of Social Security under Blair. If Field had become the Sec. of State and reformed Welfare I am sure we would have a more dynamic economy now and moreover dealt with some of the barriers to economic progress.

Frank is a decent oponent as he wants what is best for the country rather than just helping Labour. Ironically if Frank had been able to set the people free, Labour would be more competitive politically as would the country.

neil said...

A man of vision, a man of courage.

He should join the Conservative Party.

Provided he could put aside any socialist feelings he may have.

martin day said...

Mark Senior April 17, 2009 3:07 PM

Have you paid the Gold Soveriegn up on your economic forecast for no recession yet?

LOL!

P.s. I have updated Nick Clegg = Neil Kinnock! Though I think Nick Clegg = Invisible man more fiting for the present circumstances!

Kate G Arraway said...

It has to be "Haitian Divorce" from 1976's The Royal Scam.

Mike said...

Red Riding@ 2:50

Osbourne has been pretty unequivocal today in the FT:
http://www.ft.com/cms/s/0/77c1057a-2ac9-11de-8415-00144feabdc0.html
Strange to see hardly comment on of this in the blogosphere.



O/T - the leak from the FSA, also in the FT today should be getting more coverage - http://www.ft.com/cms/s/0/611c2ba6-2ac9-11de-8415-00144feabdc0.html
It says a lot about the failure of Brown/Balls' regulatory set up and its obsession with 'procedural' rather than 'prudential' regulation. I fear that the clamour to 'clamp down' on the financial industry is just going to result in more of the former and no more of the latter - exactly the opposite of what we need. Thoughts Ian? CityUnslicker?

PRL said...

Mark Senior - the only person wrong here is you. If you genuinely think the pound is going to hold up then you need your head testing. Measuring against US$ and Euro is all very well, but those currencies are almost as up the creek as the pound (i say almost as even the shoddy Euro appears to have more staying power right now, although I would tip that to change). Why not have a look at CNY, where we've gone from close to 14 to 10.1 and will continue to fall. Share bounces are being caused by armageddon outcomes having been factored in to most prices. Bravo if you've managed to skim a profit there but please don't try to use that as justification that the economy isn't screwed. It's just not quite the worst case scenario - but we still have that to come.

Mirtha Tidville said...

Frank Field is a man of courage, honour and old fashioned decency who wants the best for Britain and its people. He hangs on in the Labour Party on the premise that you can do more on the inside, to effect change, than you can on the outside...

He also believes that sooner rather than later this bunch of carpetbaggers, shysters and frauds will be gone and he lives in hope of a return to decency within his party..

Lets hope he is right....

Tony Blair said...

A very obvious claim to lead Labour after Gord is eased out during the Party conference

Anonymous said...

Readable, but lightweight. For those serious about understanding our financial predicament go straight to Professor Buitter on the FT's Mavercon.

The prof's been inside the whale; he sat on the monetary policy committee. IMO, he's about the best investigative journalist working in the world, simply because he knows so much.

It's worse, much worse, than Field thinks.

(Apologies for your using Iain's bits to advertise another blog)

DespairingLiberal said...

I haven't heard any realistic way of doing this that won't further deepen the crisis. The big increase in debt is mostly on bank bailouts and related things. Cancelling or retracting these now would presumably cause a massive collapse. Alternatively, the government could close the NHS or education.

On the other hand, there's always the insanely expensive and utterly pointless Trident programme! But that would make too much sense for it to be implemented as a cut.

So the crisis of government debt is going to continue and intensify.

Newmania said...

Also note bank shares have been zooming up again today . Good job I ignored all you doomsters

Did they wave at unemployment figures and tax receipts as they hurtled down? How exciting all this zooming around is

jon dee said...

Frank Field speaks with a voice which easily crosses political battle lines.

His analysis and case for cuts is strong and argued with an honest clarity which is welcome.

As Bower so grippingly described, Field is a man of ideas but in standing up to Brown, and often winning the arguments, he lost out to the Labour thuggery, now back in the spotlight.

His potential is ignored and wasted.

Alex said...

It is so much a question of solvency (although it is important that we pay our way) it is the fact that with a deficit of £170 billion every year (4 times the annual corporation tax receipts) no foreign investor is going to consider investing in the UK. Having a low or average rate is no good if every one can see that taxed will have to go up in future. At the moment this country is an international basket case.

Brown's deluded thinking is that he can stimulate the economy by pumping in cash. That might e effective as a short term measure but he has been doing that for years and the cost of the tax to support Brown's policies has long since created a drag on the economy.

Oliver Drew said...

@Mark Senior - So what is your alternative?

The nadir of spending your way out of debt is a false one - it is the equivalent of getting a new credit card because you've maxed out all the ones you have, and hoping you can get out of debt using said credit card. Of course, the net result is that you just end up more in debt.

So are you suggesting that we keep spending and spending until we go bankrupt completely? If so, then at least you can be comfortable with the current economic direction of this country.

just call me madam said...

Field was one of those Labour guys that gave me hope when this lot were voted in. (After my final vote in my entire lifetime for that feral, trough-sucking band of special-adviser-needy incompetents. Never again,; which is part of the reason why I joined the Con party last year.) And what happened? He got sacked. Bring us the new thoughts and revolution, requested (suggested?) Blair. Field did and he got sacked.

He's been a welcome critical opponent to his own party since, although like you, Iain, I wonder why he remains in it.

Easter weekend 2009 has been a turning point in politics and thank God for that. Eyes have now been opened across the country. The role of the independent political blogger has finally been acknowlegded for the value it deserves.

We deserve a democracy that means that, and the sooner the better. Under Labour we have no such thing. People have alluded to or joked about the "nanny state", but now the truth is coming out. J Smith would have met her sword under the Tories ages ago, due to sleaze, but it only shows the complicity and lack of values that she is still in place.

Time for a BIG overhaul. The sooner the better.

neil craig said...

A very impressive article Iain however i think the most important bit to quote is:

"No government, however intent on making the pips of the rich squeak, has been able to raise in taxation more than 37 per cent of our gross domestic product. It is as though one of Adam Smith’s invisible hands has constructed a lead ceiling over the amount of income governments can lift off us taxpayers."

I'm sure Mr Field thinks this is indeed a practical ceiling - that above that level it is so much more worth working in the black economy, or in Switzerland, or in taking up even the most expensive tax fiddles or just putting one's feet up that this is indeed a ceiling. In which case he is right that government spending simply cannot permanently be above that.

http://www.spectator.co.uk/the-magazine/the-week/3540376/part_4/politics.thtml

I wish those on the opposition front bench could also give such an unfinching recognition of reality.

We should have some serious discussion as to what proportion of the economy ideally should be government spending - I would guess 15% as the economic optimum & a poll I ran on my blog said under 20%. Mr Cameron seems to be afraid of saying anything in case it might be controversial.

Anonymous said...

Frank Field - the voice of sense amongst a sea of money grabbing no marks.

wonderfulforhisage said...

"xxxxxxxx has always been a man of vision and courage. Quite what he is still doing in a party that a) takes no notice of him and b) usually seeks to ridicule him, only he can explain."

For xxxxxxxx read DD or John Redwood.

DiscoveredJoys said...

There are a few Labour politicians that I respect - even if I don't agree with many of their ideas.

I truly disappointed that 20 or 30 of them have not yet refused the party whip (say on parts of the Budget) and forced a vote of confidence - and voted against the government.

It would be good for Labour (in the longer term), good for the Tories, and more importantly good for the country.