The £600 billion problem awaiting the next government | IFS Zooms In
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- Опубліковано 3 чер 2024
- Today, we’re setting the stage for a key moment in UK politics - the upcoming spending review, expected this November. The spending review will set some £600 billion of departmental budgets from April 2025 onwards, and will be a crucial moment for the next government to lay out its priorities and plans for public services.
How should the incoming government go about doing the next spending review? How can the government make sure they deliver on their priorities? And will they be constrained by so-called ‘treasury orthodoxy’?
To help us answer these questions, we're joined by two people who have been at the heart of government - David Gauke, a lawyer and former MP who served in the Treasury under David Cameron and Theresa May’s governments and Giles Wilkes, a senior fellow at the Institute for Government and former special adviser to Theresa May and Vince Cable.
Find out more: ifs.org.uk/articles/ps600-bil...
00:00 - Introduction
4:50 - What is a Spending Review?
11:16 - How cuts are managed?
13:35 - The politics of Spending Reviews
20:46 - The role of political capital
24:55 - The post-election Spending Review
35:08 - With 2010 Spending Review
36:48 - The role of the fiscal rules
40:12 - The size of government debt
42:41 - How does budget get spent?
47:20 - What should the next Chancellor do?
50:26 - Conclusion
How many spending reviews did it take to increase debt from 1T in 2010 to 2.6T today. What did we get for 1.6T apart from inflation. That's enough for 334 Aircraft carriers. We have 2, so where are the other 332 carriers that the taxpayer bought on the never-never?
Public debt grew because there wasn't enough growth/tax take to cover spending. Cut spending you say? Cutting spending leads to lower growth unless private-sector demand takes up the slack. Why has private-sector demand been so anaemic? Because between 1997 and 2010, private-sector/household debt increased from 200% of GDP to 400%.
These people would bring Britain to the 2010s hell of austerity, underinvestment, 0 interest rates and infinity house prices in a heart beat and call it an achievement because the deficit would be smaller. Public borrowing to make up for a broken private sector which refuses to invest productively is good.
Before 2008 financial crissis UK had about 800 billion debt, now it has about 2,7 trillion. If you borrowed 2 trillions in order to create all this problem in your public services, how much should Labour borrow in order to fix them?
1 trillion?
3 trillion?
5 trillion?
more?
@@Beliefish With public services on their knees and welfare cut, why isn’t the deficit 0 by now after 14 years of the Conservatives? Because cuts crimp growth (particularly capital investment), which starts the country on a slow road of decline. Investment is what makes and keeps countries rich, not a balanced budget, which is based on the ridiculous fantasy that the government acts with no impact on the real economy.
Way way way to many low paid immigrants contributing nothing but costing a fortune!
@@Beliefish Don't forget that we have our own sovereign currency and could pay off UK debt overnight if government wanted to but that isn't realistic and would create problems of its own. We keep on referring to a debt and a lack of money and Theresa May stated that there was "no magic money tree" yet when covid came we had no trouble in finding £450bn. We do have our own sovereign currency and provide government is sensible additional money can be made available. Stephanie Kelton's book "The Deficit Myth" is a good and useful reference for anyone not familiar with this area of economics.
Also don't forget that £377bn of UK debt is owed by government to itself as part of QE. If that is taken out of the equation then net debt is closer to 70% of GDP. Richard Murphy did a useful short video on that: ua-cam.com/video/9VP61W2ELeQ/v-deo.html
@@Beliefish they shouldn’t borrow anything, they should create money and give it directly to services and infrastructure projects
Why aren’t annual spending reviews viewed as agile iterations where you are gaining feedback on your actions and reacting accordingly?
I like the devolve decisions to level where spending in 1 area can save in another. In my area sweeping streets is borough council job, but unblocking drains county council. So borough council no financial incentive to sweep the leaves up in Autumn that will block the drains up.
Sounds like a lot of councils around d country pass d buck😢😢
I love how AI gets trotted out in all of these conversations these days :) AI will 100% reduce the need for people writing marketing copy and helping with admin, but it's not going to empty a wheelie bin, clean a street, deal with petty crime or refurbish a dilapidated school or hospital.
NO - and its going to make people unemployed and reduce the tax revenues for the government. The incoming government faces basically insurmountable problems - even if they were visionary and amazing.
They are not - it Starmer.
Of course we must cut much more, because there are going to be multiple pandemics hitting us, costing £400 billion for each one! Thank god we have this talent to help us!
Great conversation!
You talk about government spending in a bizzare way considering how much money is being printed and almost all of it going to the wealthy who don’t pay tax and tech companies who also don’t pay tax, in other words it’s either being extracted from the real economy or it’s being used to buy the assets of the middle class. Maybe just maybe if we managed those problems better we would have ample funds to spend on public services and not have a bankrupt government. It’s not as complicated as these people try to make it seem.
Take the tin foil hat off, stop parroting Gary's ideas as if they are your own and start learning more about how the system actually works
@@vvwalker7261 I am learning about how the system actually works and Gary Stevenson is one of the people I’m learning from, that’s why I mentioned him 🤣🤣 Of course he doesn’t know how the system actually works. Just keeps getting lucky I guess…
*THE UK US UTTERLY F-U-K-D* it needs to make up for 45 years of near-zero investment - about £4 Trillion over the next 10 years is needed.
Available budget - £0.00. And AI is about to make thousands redundant so the situation is going to get WORSE not better.
UK debt at 100% of GDP? £377bn of that is owed by government to itself as part of QE. If that is taken out of the equation then net debt is closer to 70% of GDP.
We keep on referring to a lack of money and Theresa May stated that there was "no magic money tree" yet when covid came we had no trouble in finding £450bn. We do have our own sovereign currency and provide government is sensible additional money can be made available. Stephanie Kelton's book "The Deficit Myth" is a good and useful reference for anyone not familiar with this area of economics.
@@Derek-Trotter Thanks but I didn't actually comment on the context under which debt may or may not always be equal or devalued.
You may be correct about the £900bn as the latest debt figure. I was just going by Richard Murphy's recent comment about it being £733bn: ua-cam.com/video/9VP61W2ELeQ/v-deo.html. He didn't clarify what his source was and how up to date it was. Of course the accounts of the Bank of England Asset Purchase Finance Facility Ltd could be checked at Companies House (I haven't done so) but the figures there can easily be 9 months out of date. What was your source?
Printing money means devaluation of the currency, forcing up prices so hyper inflation and the onset of poverty, look at Argentina a socialist economic failure
@@Derek-Trotter The face value of debt can't be devalued but its actual worth can. This is the main constraint on the use of MMT as a lid needs to be kept on inflation. Where did you get your figure of £900bn from?
@@Derek-Trotter That doesn't answer my question. Did you get it from the accounts od Bank of England Asset Purchase Finance Facility Ltd or where?
@@Derek-Trotter That's nonsense. It is a recognised fact that the control of inflation and full employment are the limiting factor.