How? Answer: go to the IMF for a bailout. The markets might still be open for UK sovereign debt, but the IMF would insist on the same terms as Greeece, which of course the UK would have to accept, even for a very small bailout:
- 2-3% increase in value-added tax
- Three-year public sector pay freeze; recruitment frozen
- 14% pay reduction for public sector workers; 5 per cent cut in allowances
- No renewals for short-term public sector contracts
- Closure of quangos
- Opening up of more than ‘closed-shop’ professions
- Raising average retirement age to 67 for men and women; cutting state corporation pensions.
- Privatisation: sales of state corporations; flotations on stock exchange; sale and leaseback of state assets
5 comments:
So, about £10bn from VAT, 14% (and 3%pa real-terms cut) in public sector wages (assuming £200bn) would be worth £44bn/year, £101.7bn/year from the 1162 quangos identified by the Taxpayer's Alliance... yeah, back-of-an-envelope suggests that'll work just fine to get rid of the deficit :D
(Of course, we need to get rid of some of the debt as well, but at least we'd stop digging the hole we're in...)
Also, the pension bill £120 bn would be slashed by 25%, and cancelling agency workers in the NHS and management consultancy contracts several billion more.
Ah, yes, of course - slashing wages means, by definition, slashing their final salary. Given the 3-year window for the civil service pension scheme, it'd probably also encourage a lot of people to take early retirement so their 2009 wages still counted...
So, yeah, the extra savings would be enough to wipe out the national debt in a couple of decades. Rather better than the proposal to double it again by halving the deficit over four years.
Do any of you understand economics?
What would slashing public spending in this way do to the rest of the economy, ignoring the massive civil unrest it would likely cause?
Typical nonsense from dyed in the wool Tories, thank god you didn't get a majority.
@Bill Bell:
I understand economics well enough to know that govenment spending is not the economy - which is apparently a concept that both you and Gordon Brown find tricky.
And I know that the velocity of money calculations that the neo-Keynesians use to push for greater state spending to "prime the pump" were done when state spending was <20% of GDP, not >50% as it is now - which is why taking £200bn (~20% of GDP) of freshly-printed money, buying up government debt, and blowing that, has made sod all difference to the recession.
But, yeah, it's lucky we have a hung parliament - a full-scale run on the pound leading to parity with the Euro will make mental forex calculations so much easier!
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