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Why, for the love of God, don’t governments utilize the most obvious solutions to solve their budgetary challenges whenever a global financial crisis hits, instead of defaulting to budget cuts that can appear either inept or mean-spirited?
Finance Ministers don’t set out to craft inept or mean-spirited policies during times of economic crisis, but that’s how it plays out in the media and in living rooms across the country or wherever people gather to discuss the economy.
In the UK, this manifests itself in the names that people call their political parties.
If government austerity cuts don’t affect you, you continue to call the Conservative Party by its rightful name. But if austerity hits you hard, then you’re one of those who’ve taken to calling the Conservatives ‘The Nasty Party’ — and they’ll never get your vote ever again, etc., etc. (Yes, I do empathize, BTW. But that’s not what this blog post is about)
It just depends upon which side austerity hits you.
And budget cuts (at least budget cuts perceived as unfair by a significant percentage of the population) almost always result in either a lost election or loss of parliamentary majority at the next election. Check out those stats! (You’ll see how true that statement is)
Theresa May’s ‘hung Parliament’ election result in June 2017 is 100% attributable to the UK austerity budgets that have been in effect since 2010, and hers is just one example out of many majority governments around the world that have suffered as a result of their austerity policies.
There IS a Better Way!
Due to market conditions, about every 25-years a recession comes along in the capitalist countries. You can almost set your clock by it. It’s the ‘nature of the beast — carry on’ is how recessions are described by economists, and nobody tries to prevent recessions, as such ‘resets’ help to prevent even worse economic crashes in the future.
Still, there’s a way for countries to survive economic downturns WITHOUT shooting themselves in the foot every day of the recession. (A novel idea!)
The public knows an economic downturn when they see it. In fact, they have enough experience in their own lives balancing family finances when times are good, let alone when domestic financial challenges appear such as a job loss or (suddenly) another mouth to feed. Therefore, they know the government must compensate whenever the country faces a financial challenge.
The question for governments is how to do it and not lose the next election. Or the one after that.
And the answer is; To do it fairly.
That is; Apply cuts that will be perceived as ‘fair’ by a majority of the public — instead of deep cuts to some departments while other departments see no cuts at all, or worse, are able to increase their spending.
Does it seem fair to you while in recession that Health or Education should receive deep cuts, while spending on the military or the environment is unaffected? (I’m just using hypotheticals here for an example. Every Briton knows their military is chronically underfunded and few begrudge the UK military being exempted from budget cuts)
Back to the subject at hand; Every department in practically any organization on the planet has 5% ‘fat’ built-in to it. It’s just the way of organizations.
Budgets tend to be tightly managed in the first few years, then, over time, surpluses accrue or unused properties aren’t sold off as quickly as they could be, or in other ways there’s potential for either budget savings or revenue increases. Or, depending on the department, perhaps a combination of selling off unused assets and departmental savings could meet the new budget targets set by the government.
If you’re a large organization like the UK government and you expect your revenue to fall by 7% (for example) here’s the way to do it fairly!
Simply inform your departments of the 7% budget exigency, and instead of arranging deep cuts for some departments and zero cuts to others which sets the seeds for future electoral defeat, inform all departments to cut their budget by 7% — or alternatively — tell them to find ways to increase their revenue by the shortfall amount.
Let me be clear, if former Chancellor of the Exchequer George Osborne had simply told every government department in 2010, “We’re facing a 7% (or whatever percentage) cut in revenue, therefore, each government department must cut 7% from their annual budget until further notice,” each department would’ve done exactly that and hardly anyone would’ve noticed. (Remember, every organization/department already has 5% ‘fat’ in their system, so only a 2% budget challenge remains in this hypothetical example. At that point, accounting for the final 2% equates to selling off surplus real estate assets until that amount is obtained)
On the other hand, some departments might be real estate ‘heavy’ and could counter their entire 7% budget challenge by simply unloading their surplus real estate, thereby meeting the government’s directives to cut costs by 7% or increase revenues by 7% (or any combination thereof) to hit their departmental budget targets.
Wouldn’t that have been much better than the pain inflicted on the bottom-two economic quintile people in Britain (and which cost Theresa May a parliamentary majority) all of which has conspired to cheapen the ‘British brand’ around the world?
Read here, in the New York Times just how ‘fairly’ or ‘unfairly’ (depending on your worldview) the United Kingdom’s austerity plan has been portrayed around the world.
A country’s fortunes (fairly or unfairly) can rise or fall based on the perceptions of large numbers of people. Let’s hope that future UK budget cuts will not only be fair, but be seen to be fair by large numbers of Britons and by people around the world.
A new Energy & Climate Intelligence Unit report confirms that Britain has been the most successful G7 nation over the last 25 years on the combined metric of growing its economy and reducing greenhouse gas emissions.
In the 25-years since 1992 when clean air and the corresponding lowering of healthcare spending became an important policy for the United Kingdom, the country grew its per capita GDP by 130% while lowering GHG emissions 33% — proving that a country can simultaneously grow their economy AND lower greenhouse gas emissions.
In the same timeframe, Japan grew its per-capita GDP by 83% while increasing its per-capita emissions by 10.5% — making it the worst performer of all the G7 nations. (Not to pick on Japan which has the most difficult population pyramid demographic problem of any nation on the planet)
“It’s really time to slay once and for all the old canard that cutting carbon emissions means economic harm.
As this report shows, if you have consistent policymaking and cross-party consensus, it’s perfectly possible to get richer and cleaner at the same time. Britain isn’t the only country that’s done it – it’s true for most of the G7 – but we’ve clearly been the best of the bunch.
There are signs that these successes are now transferring to the rest of the world. Globally, emissions have been flat for three years while world GDP has grown by 8%. But science indicates this isn’t enough to fulfil the objective of the UN Convention and prevent ‘dangerous’ climate change – for that, emissions need to start falling soon. This study should give confidence that with good policies, it’s achievable.” — Richard Black, director of the Energy and Climate Intelligence Unit
And in the United Kingdom, Scotland has led the way on the switch from coal to renewable energy and it rightly deserves much of the praise handed to the UK over the ongoing clean air success story, while England and Wales deserve much of the credit for growing the UK economy. As usual, Northern Ireland is ‘holding its own’ and although it is presently caught in the middle of an election cycle it seems that it might ramp-up to follow Scotland’s environmental success, post-election.
The Road to Decoupling: 21 Countries Are Reducing Carbon Emissions While Growing GDP (World Resources Institute)
By far, the biggest reason UK emissions have dropped in every decade since WWII is a HUGE shift away from coal. At one time almost 100% of Britain’s electricity was sourced by brown or black coal. Some of which was replaced by hydro-power, and later, by nuclear. Eventually, even more coal-fired capacity was replaced by natural gas, and most recently, by renewables.
The inexorable march away from coal-fired generation in the UK has resulted in cleaner air. It is by far the biggest factor in Britain’s ongoing clean air success story.
Still, it’s not enough progress. Scotland has set the standard that the rest of the UK should follow — which will take strong leadership in the House of Commons.
The Way Forward for Clean Air, Lower Healthcare Spending, and a Thriving Economy for Britain
There are many ways to accomplish those goals and everything has its own particular cost. But two pathways jump out as the most beneficial per pound sterling.
ONE: Continue to replace coal-fired power generation with any other power generator. Yes, everything else burns cleaner than coal! Burning home heating fuel is cleaner than coal. Natural gas-fired power generation can be up to 1-million times cleaner than burning some grades of brown coal. Even upgrading coal-fired power generation from brown coal ‘lignite’ fuel to black coal ‘anthracite’ fuel results in astonishing improvements in air quality.
Fortunately, this is the (unevenly applied) default in the United Kingdom, which, when combined with the solid and thoughtful policies of Scotland and Wales, results in cleaner air, lower healthcare costs, and boosts economic growth via lower energy prices.
Record UK wind generation lowers electricity prices (Power Engineering)
TWO: In addition to everything mentioned above, the other low-hanging fruit leading towards cleaner air, to lower healthcare spending, and to boost economic output (by lowering energy costs) is via energy-efficiency.
Prime Minister Theresa May should recognize that no matter how cleanly we can generate one GigaWatt of electricity — energy-efficiency savings (demand reduction) that are equal to one GigaWatt are many times cleaner — and energy-efficiency improvements are typically simple and cost-effective.
Imagine a UK government policy that lowers primary energy consumption (demand) by 30% across-the-board over the next 5-years.
That’s possible with the right policy, and infinitely cheaper than adding the exact same amount of energy production capacity to the grid.
Cheaper, by orders of magnitude. In fact, the Hinkley Point C nuclear power plant construction could be cancelled AND other proposed power plant projects could be shelved for at least a decade with that much efficiency added to the grid.
Simple programmes get the best results
If the UK government added an energy-efficiency programme shared between three government entities, costs and (importantly) accolades would be shared.
The Department of Energy & Climate Change, the Secretary of State for Business, Energy and Industrial Strategy, and the Department for Communities and Local Government, would gain support from voters and expats by supporting a national energy-efficiency programme consisting of a £100 per capita credit on energy-saving electronics and materials.
For a business that employs 5 people, that’s a one-time credit of (up to) £500 towards energy-efficiency at that business, which will buy A TON of efficiency and thereby lower energy consumption/energy bills for that company.
All else being equal; Are those business owners more likely to vote Conservative in the next election? I would have to say, Yes.
Obviously, those 5 employees also live near their workplace and use electricity at home. Therefore, they too should receive a one-time (up to) £100 per capita credit at the hardware store for the purchase of LED or other energy-saving lights, smart thermostats, weather-stripping, insulation, receptacle gaskets and other energy-saving electronics or materials.
Each of those 5 people will now save significant amounts on their monthly electricity bill.
Again, all else being equal; Are those homeowners or tenants more likely to vote Conservative in the next election? The answer is likely to be affirmative if the present government decides to save each one of them, tens or hundreds of pounds per year on their annual electricity bill.
It sounds expensive until you consider the cost of adding 30 GigaWatts to the UK grid to cover wasted energy vs. spending a much smaller amount to conserve the same amount of energy.
There is simply no comparison. Energy-efficiency wins every time, and is dirt cheap in relation to the costs of building new power generation capacity.
A £100 per capita energy-efficiency credit is the way forward for clean air, lower healthcare spending, and a thriving economy for Britain (via lower energy costs) and pound for pound, nothing else comes close to accomplishing those goals at such a comparatively low spend.
by John Brian Shannon | February 10, 2017
Under the expert care of Exchequer Philip Hammond, Britain’s growth rate will outperform all developed nations until 2050
What a relief it must be for Prime Minister Theresa May that the UK economy is expected to grow strongly every year until 2050, with a growth rate that surpasses all developed nations.
Britain will grow faster than any other major advanced economy over the next three decades as the EU’s share of global output diminishes, according to PwC.
UK economic growth is predicted to outpace the US, Canada, France and Germany between 2016 and 2050, with average annual growth of 1.9pc.
This is also double the average annual pace of growth expected in Japan and Italy. — The Telegraph
The chart below shows the average annual real GDP growth rate of G7 countries from 2016 to 2050.
And to show where the UK ranks in terms of global GDP here is another graphic for you.
It seems that Brexit will barely register as an economic hiccup and that Britain’s economy will continue to thrive in a post-Brexit world — and that, after many dire reports to the contrary were published prior to, and since the June 23 2016 referendum on EU membership.
You see? The sky isn’t falling, it’s snowing. Get outside and enjoy it! The UK is going to be just fine.
- Brexit will not affect UK economy’s long-term future (The Independent)
- The World in 2050: Will the shift in global economic power continue? (PriceWaterhouseCoopers)