Ideology vs economy

Yesterday, in Birmingham, David Cameron announced that public sector funding levels would not be restored once the budget deficit has been addressed. This will, hopefully, spell the end of any pretence that these cuts are anything but ideological in nature.

Most people out there agree that reducing the deficit is a necessity at this time, where the political parties differed was on how deep and fast to cut, with Labour choosing to wait before cutting, while the Tories were keen to wield the axe as soon as they had taken their shoes off in Number 10. The Lib Dems said they would wait but once in government Clegg said he had changed his mind. Who knew?! (This is all, by the way, ignoring those small numbers of people who do not see the deficit as a massive problem and something that would have been dealt with when the economy picked up.)

By stating that public sector funding will be expected to continue at the levels forced upon departments, councils and other organisations by the economic downturn and the coalition government’s unwillingness to continue funding the deficit, Cameron has stated that regardless of how the economy (and therefore Treasury take from tax revenue) improves nothing will encourage him to spend more.

Furthermore, a big issue is made of how much of the deficit is made up of interest payments – some £43bn this year alone out of a budget deficit of approximately £150bn. But hang on, if you successfully reduce the deficit, you are no longer paying that interest and therefore is it not free money which could be reinvested by the government? Oh wait, I forgot about Cameron’s comments yesterday!

All of this begs the question, if the Treasury are taking in more tax through a recovered economy, and have an extra £43bn freed up by not having to make those interest payments, what does the coalition government plan to do with the extra cash? My guess would be bring taxes down, something that would disproportionately benefit the wealthy, purely by how much they pay in taxation, while the poor will suffer from the decreased investment in public services they rely on.

We are now starting to see Cameron’s true colours seeping out.

P