Keynesians are wrong, because George Osborne's cuts are actually very modest

Sometimes, doing the right thing requires sticking your fingers in your ears, singing ting-a-ling and blocking out the shrieks from those around you who have lost their heads.

Refusing to listen to critics is not a course of action I would usually recommend to George Osborne, the Chancellor, who has made far too many mistakes already.

manontheomnibus: First: Child Benefit should be limited to a maximum of 2 children at any one time and stop at 16. This would have saved far more than targeting higher rate tax payers. Second: public sector pensions (and future obligations) should be cut by 10% per annum until the match our private sector pension hopes and expectations. Private sector pensions were of course decimated by Gordoan Brown's very first tax rise of changing ACT which has sucked out more than £200billion from private pensions. Another example of Labour destroying our future. Third: the tax free benefits cap of £26,000 which equates to £35,000 per annum before tax if the person were working should be reduced further annually - as let's face it, a lot of the recipients are never going to be capable of earning that much - and if £26,000pa is the average wage, then that is before tax and therefore benefits still pay more and should not be available unless you have paid 5 years of NI and tax and unemployment should be limited to 10 years of ones working life. Reducing red tape by suspending  employers NI contributions on new permanent jobs for 2 to 3 years, reducing business rates for small shops on high street, reducing corporation tax, raising personel tax thresholds would also help and have the supply side effect of increasing tax revenues. Build a third runway at Heathrow and a second at Gatwick or Stanstead and Manchester. Ditch HS2, create enterprise zones in all areas where teh public sector is the largest employer and start trimming down the number of civil servants created (2 million) by Labour and getting rid of most of the ridiculous 30,000 pieces of socialist legislation that continue to hamstring this country. And the shares in Lloyds and RBS should be given to all tax payers, after all it was our money which bailed them out. This would remove the debt from the governments book and so long as a part went back to government on selling we would get the profit and the government the initial layout. We would all feel much better too. And now for work. Good morning.

Ben265: Its not the Keynesians who are wrong, its the people who believed you can have budget deficits during booms and have an economy that relies heavily on the finance sector, a property bubble and north sea oil .

Midtown_Bookie: The Post-Keynesians are wrong very much so.

charlescawley: If you chuck money around but do not control fraud, corruption and bad management; it will not create wealth all by itself. It's the managers stupid. In the old days, management became more effective when the pressure was applied.  The current batch are unsackable and their numbers have not gone down, their cost has continued to rise and they appear to be controlling the government and calling the shots. Normally, with financial armageddon threatening, managers are sacked or forced to manage better.  Currently, we have the reverse. Nothing will change, Plans A, B, CDEFGHI etc: until the managers are sorted out.  Wealth can only come with improved management given the capital to employ.  Plan A takes the money away but hopes the pressure will drag managers into line. They have not changed. Plan B chucks money around hoping managers will use it well.  They will only take more and do less if plan B is adopted. In both cases the key, to get managers under control and doing jobs well, just is not happening.  Bullet proof Nicholson is the most startling example of this phenomenon. We have a new political force.  It is no longer Capitalism V Socialism.  It is now Capitalism and Socialism V Management Parasitism.

responsible: Labour ignored Keynes completely.  Keynes said cut state spending in the upswing cycle, then lift state spending in the down cycle.   Labour ignored that and boomed state spending in the up cycle.  But then Labour thought they had ended the cycle!   Labour stupidity is piled on ignorance mixed with arrogance and delivered with deception and spin wrapped in a claim for fairness. Fairness is the last virtue of Labour.  Mrs T's death clarified the real  ignorance and unfairness in Labour, which hits their own supporters hardest.  In the 1970's Labour policies destroyed manufacturing. Mrs T left manufacturing at over 20% of GDP.  By the end of Brown manufacturing was down to 12% of GDP.  In the 1970's Labour ministers and TUC leaders visited Moscow and took instructions on policies for the UK.  The USSR overtly threatened to 'bury the UK' both economically and militarily.   Coal at UK ports cost £20 per tonne.  UK taxpayers were paying UK miners £100 per tonne.  In the UK the TUC, miners leaders and Labour overtly said they would bring down the government.  They had a favoured few that Labour twisted the UK economy to subsidise, and had screwed the UK so badly Labour had to call in the IMF.  Labour favoured a few at the cost of the majority of the UK savers, pensioners and taxpayers.  Labour in government started with about 560 pits.  Labour closed over 300, far more than Mrs T.  When Mrs T became PM there were 219 pits left, and when she left there were 65 pits open.   Mining had been uneconomic for decades.Labour and TUC leaders and Scargill openly vowed to bring down the UK government.  Miners were offered by Mrs T hugely generous redundancies and transfers.  These were naever put to a ballot, and  miners and others strikes lost 29.5m working days.   The UK was in chaos under Labour, 30% of the UK worked for the State.  The last Labour disaster did the same, again enlarged the State using huge subsidies at the cost of the rest of the UK.  It will take a generation to rebalance the UK.  Labour hate savers who take responsible decisions about their own money.  Labour want the state to decide about individuals money.  Labour want that money to buy votes and they do not like self reliant people, who prefer a smaller state.   Labour policies are designed to encourage state dependency, less personal dignity, less personal progress, more state control and decisions.    

aqyyu: The priority must be to keep Labour out of power for at least next 12 years. They are the worst thing that can happen to this country for sure.

Schadenfreuden: It's inevitable that Labour are going to win the next election. I've got to the stage now where I wish we'd just let them win the last election and bankrupt the country.

edhooper: responsible " Labour ignored Keynes completely.  Keynes said cut state spending in the upswing cycle, then lift state spending in the down cycle." Yes those elections kept getting in the way.

bill40: Allister, Keynes is not wrong and never has been. As he still continues to be dead we will never know what he would make of todays financial shenanigans. May I suggest you stop quoting selectively from the OBR? It isn't spending on ordinary people that is out of control it is spending on the financial centre, ie the City of London, that has as much again national debt as the rest of the UK put together. That's where I'd start cutting. The coalition policies are increasing unemployment, increasing the debt, increasing underemployment, increasing the deficit (fiddles discounted) and destroying work stability. Spending isn't being cut because he dare not cut Londons spending.

$27593494:  "Keynes is not wrong and never has been." So you agree with Keynes that at the peak of the economic cycle (e.g. the mid-2000s) one should work to repay the national debt, not run up yet more debt? Most people who call themselves Keynesians seem to believe in only half of what he said.

bill40: Goodgulf… I support a branch of post Keynisian economics call MMT. What people forget is that all of Keynes' work assumed a policy of full employment by all parties. That is why we are where we are. Billions urinated against the wall by QE to bail out a few banks in the name of Friedmanite lunacy. Keynes was always right.

sonofboudicca: So long as the taxpayer funded BBC acts as the official opposition to the "cuts", and not a day passes without its news channels finding another hard case to publicise, this Government will not win the argument.  I, for one, greatly resent being forced to pay, under compulsion of law, for what is effectively the broadcast wing of the Labour and Lib-Dem parties.  Time to cut the BBC adrift from the teat that delivers taxpayers' money and let it earn its way in the real world.

barncactus: If you really want to hear the BBC at its worst, tune to 'Radio 5Live' (aka Truckdriver Radio from its frequent listing of the blocked motorways of the day). The endless stream of interviews with the hard done by is quite amusing once you realise what is going on. The broadcast wing of the Labour party is exactly what it is. They clearly scour the country for hard cases to interview, and brief them carefully before broadcast to ensure the correct line is followed, leading the witnesses in the most egregious way. Perhaps the supposedly required socio-political balance is transmitted on some other frequency, perhaps DAB with an audience of 20?

letahead: sonofboudicca second and third that.

kestrel: It is a long time since it was appropriate for one organisation to take on the three disparate objectives:  to educate, to inform, and to entertain.  Media organisations will always conflate these aims in order to create and enliven stories.  There is not necessarily a political agenda. The best that can be said for the BBC's approach to news is that it is perhaps more moderate than an independent replacement.

weejonnie: If I want an independent replacement then I can subscribe to one. Unfortunately my £144.00 a year is being paid to an organisation that is no longer fit for purpose and I can't avoid doing so. The BBC Tax is horrendous.

elliemaesgrandad: Stop complaining and just stop paying the TV tax. Stop watching the rubbish that is today's broadcasting. When enough people actually do this, watch change happen.

returnedexpat: A depressingly spot-on analysis. I would add two things - the government arguably made a strategic error in banging on about austerity without actually cutting expenditure as radically as their rhetoric implied. In effect they are suffering the political damage without gaining the fiscal benefits. - the Keynsians (or should I say pseudo-Keynsians) were noticably silent when Brown was running a budget deficit at the top of the economic cycle. That is the real reason we are in such a hole now.

charlescawley: Nicely put. Some people seem to think the way money behaves changes depending on who is in charge.  Chucking around money partly got us into this mess… But there could be something new around that was not there in Keynes' day.

martincarter:  Agree that Allister has hit the nail on the head. What astonishes me is that there are things that everyone thinks SHOULD be cut, like councillors allowances and local authority fat cat salaries, but these remain untouched. Until there is some shrinking of GOVERNANCE in all its forms - from 850 'pigs' in the HoL and 650 in the HoC, MEPs in abundance, spads and constituency office workers all troughing at the private sector's expense, no self-respecting entrepreneur is going to invest in socialist Britain.

drjonathanwilson:  returnedexpat I agree, this is a robust critique by Allister. However I think that Allister could have been more specific about two things. The first is that Allister fails to mention Osborne's ring fencing of "health" and "education". These two comprise over 30% of government spending. Without doing away with such ring fencing, infrastructure investment and defense will continue to take the hits. The second area that Allister could have been more specific is with supply side reforms. In particular supply side reforms of those areas that have been ring fenced! Allister should open up the debate on the fiscal benefits of removing the state as a monopoly producer of health and education services and replacing them with fully competitive industries supported by fully competitive upstream supply industries and fully competitive downstream consumer markets. Allister should move the debate out of the language of fiscal cuts into the language of fiscal restructuring coupled to the positive language of tax cuts. Jonathan

Partners