Future threat to public services

The Financial Times reports that cuts in public services are on the cards for 2011 as the government plans to boost short term spending.

Alistair Darling has made clear that he will not cut spending now as the economy slows to recession, but will try to bring forward capital spending and "reprioritise" current expenditure on areas that support the economy or protect people from the downturn.

As the £115 million a week net Britain hands to the audit-failing EU falls into neither of these priority categories, when will Mr Darling be heading to Brussels to break the bad news that their huge weekly cheque has been "reprioritised"?

A range of government departments including Work & Pensions, Revenue & Customs, the Ministry of Defence and the Foreign Office already face sharp real-term cuts in their budgets.

Latest spending plans squeezed virtually all government departments to protect health, education and law & order, which themselves received lower rises than in previous years.

However it will be beyond 2010 - after the next general election - when the real pain will be felt.

"What has happened recently will leave a permanent scar on the economy," said Ray Barrell of the National Institute of Economic and Social Research.

"After the dust has settled, all governments will have to give serious thought to the level of public services that they want."

However not all the pain may be taken by public services. Some of it could well come from tax rises.

In the current economic turmoil, the billions of pounds a year Britain lavishes on the wasteful and fraud-ridden EU is looking less and less sustainable. As public finances tighten, the government needs to act urgently to redirect these huge amounts to more productive purposes.

Treasury budget shortfall rockets to £10.2bn

The Daily Telegraph reports today that the Treasury's budget shortfall soared to £10.2bn last month, leaving the Government's coffers in a perilous state as the UK enters what could prove a prolonged downturn.

The figure was a third more than economists expected and the largest since records began in 1993, driven by higher government spending and lower tax receipts.

"The public finances are in no way ideally positioned for the slowdown," said David Page, an economist at Investec. "They've almost no room to step up borrowing."

The news makes the recent 63% increase in our payments to the EU's terminally leaky budget to £115m (net) every week once again look an extremely irresponsible choice by both the Government and those MPs who subsequently endorsed the deal.

With public finances tightening, the price of such unjustified extravagance to as wasteful an organisation as the EU will be paid either through higher taxes or cuts affecting public services within each of those MPs' own constituencies.

An outcome for which each of them must take personal responsibility.

City concern at Treasury deficit figures

City warnings that government finances are set to plunge far deeper into the red than Alistair Darling has forecast mounted yesterday, after figures were released showing that the Treasury racked up its biggest December deficit on record last month - reports The Times.

Tax receipts that were weaker than expected by the Chancellor were the driving force behind the latest sharp deterioration in the public finances, fuelling fears that government borrowing could spiral as a faltering economy further undermines revenue.

The worsening state of the Government's books was underlined by figures showing that net borrowing for the financial year to date climbed to £43.6 billion, £11.4 billion more than in the same nine months in 2006-07 and far above Mr Darling's full-year forecast of £38 billion for 2007-08.

The worse-than-expected December data released yesterday showed that the Treasury was forced to borrow a net £7.8billion last month to plug the gap between spending and the month's disappointing revenues.

Economists said that the Chancellor was on course to breach that forecast by at least £2billion or £3billion (NB: net increase in payments to the EU: £2.5bn), but could end up exceeding it by much more if inflows of revenues continued to weaken.

This news once again highlights the huge irresponsibility of those MPs who approved a lavish 63% increase in payments for the wasteful and fraud-ridden EU, at the recent Third Reading of the European Communities (Finance) Bill.

Beyond such an increase being completely unjustified while auditors cannot explain where the "majority" of the EU's money goes, such extra payments are clearly just not affordable.

Yet, while the public finances take a nose-dive, post offices close and the government quibbles with the police over £30m of their pay deal (to give just two recent, practical examples of the consequences) these MPs seemed to see no problem in approving the extra £2.5bn (net) a year (on top of the £3.5bn net a year we already pay) to an organisation that has failed its audit for 13 years running.

Despite the valiant efforts of some Labour MPs, like Ian Davidson and Austin Mitchell, most of their colleagues seemed unable to distinguish between the government spin (the money is to help poorer countries in Eastern Europe) and the reality (it will be paid to EU institutions, and where the "majority" of it goes from there has long been anyone's guess!).

All the MPs who voted for this Bill either failed in their responsibility to properly scrutinise the government's actions on behalf of their constituents, or they tried but are simply not up to the job.

Either way you cut it, MPs who approved this deal are not of the calibre necessary to be making such important decisions, and have got to go.

With any problems being suffered by public services in their constituencies caused by a shortfall of public money now being their fault, and theirs alone, for voting to approve this abject waste of public cash on the EU, we can only ensure that those MPs who made such an irresponsible choice are punished by local voters at the next election.

This blog, and the DM's Hall of Hypocrisy, will continue with that goal in mind.

State borrowing to rise as Treasury left with little 'wiggle room'

The Government is on course to exceed its borrowing targets by as much as £4bn this year, as public finance data came in much worse than had been expected - reports The Times.

Analysts said that the public sector net surplus was £993 million in October, compared with expectations of £3 billion, putting a dampener on the health of Alistair Darling's forecasts as the economy enters the second half of the fiscal year.

The Chancellor forecast in his Pre-Budget Report that public borrowing over the year as a whole would reach £38 billion. But the Institute for Fiscal Studies (IFS) said yesterday that the figure could reach £42 billion if present trends continued.

PriceWaterhouseCoopers predicted that the State would borrow £40 billion this year and next.

The IFS said that the overshoot in borrowing was because capital spending was growing twice as quickly as the Treasury forecast.

John Hawksworth, head of macroeconomics at PriceWaterhouseCoopers, said: "At this point in the economic cycle, the public finances should be improving in order to provide some 'wiggle room' in the event of a future cyclical downturn."

"The fact that they are getting worse will be of concern to the Treasury, since it suggests possible structural weakness and a potential need for further tax increases or greater spending restraint looking ahead."

In this context, the apparent enthusiasm of the government and many MPs to spend an extra £7bn on paying the European Union's extravagant and largely unverified bills looks particularly ill-advised.

Those MPs who vote approve these extra payments when the final vote in Parliament on the European Communities (Finance) Bill comes will consequently have to bear major responsibility for the tax increases or other public spending restraints impacting on their constituencies that analysts are now saying will have to come if the public finances continue to worsen.

Such irresponsible decisions to throw billions more pounds every year into such a black hole of waste, extravagance and fraud cannot possibly come without a price.