Cuts

The UK economy shrank by 2.4% percent in the first quarter of this year, much more than expected. Companies continue to shed jobs and there predictions of another sharp decline later this year. Nonetheless, given the massive intervention to stabilise the banking system and prevent a total collapse, all parties are now engaged in debate about the extent of necessary cuts to public sector spending to balance the books.

A Conservative shadow minister accidentally blabbed on TV a few weeks back that the Tories planned a 10% cut across the board to public services from 2011. Labour says they're not going to cut that much, but it seems generally agreed in the media that they will also have to cut spending by that much (in the event that they win, which is of course highly unlikely).

However, I heard that some agencies are preparing contingency plans for a budget cut of up to 20%. This would be equivalent to the drastic cuts of the Thatcher government in th early 1980s. Most likely, the Conservatives will take government next spring and, shortly afterwards, delcare that they opened the books and were 'shocked' at the 'unanticipated' scale of public sector overspending, and that even more drastic cuts than planned at the election would be necessary. Just like the Australian Liberal government's '$8 billion black hole' mantra that we heard after their election, year after year.

Public opinion polls are already reporting that the public would accept public spending cuts and minor tax rises to pay off the debt, so Labour's pro-spending argument is unlikely to get very far with the voters. In two years' time, all public sector employees are likely to be squeezed, and I imagine I will be thinking about how to squeeze another dozen students into my tutorials.