While the political world is convulsed by the most exciting bit of news since Oliver Cromwell disbanded the Long Parliament that had sat too long, namely Gordon Brown saying one thing to a potential voter's face and muttering something else about her once he turned away, I have been sent an interesting summary of what sort of figures we are talking about if we really do want the deficit to shrink.
This comes from Ian Milne, Director of Global Britain, erstwhile editor of eurofacts, and a man who seems to understand millions and billions the way most of us understand tens and hundreds of pounds sterling.
• Four months ago, in January 2010, Global Britain (in Briefing Note No 57: How Much Should Public Spending Shrink ?) estimated that, in order to return UK public finances to sustainability, public spending needed to shrink immediately by £ 100 billion a year compared to its level in 2009/2010.
• Other serious commentators (e.g. Roger Bootle, Trevor Kavanagh) have also come up with that £ 100 billion figure for the level of shrinkage (perhaps combined with increases in taxes) needed. Damien Reece, in his article on the Institute for Fiscal Studies report in the Telegraph’s Business Section of 28th April, plumps for £ 70 billion per year as the “need for a national belt-tightening”.
• As we know, the three main parties are arguing about “savings” (most of them spurious) or tax increases in single-figure billions, for example (Labour) by increasing National Insurance contributions. We have no idea how the three main parties would achieve reductions of the order of magnitude needed - and probably neither do they.
• Given the already high level of UK taxes – 48 % of GDP in 2009/10 – the argument that even higher taxes will damage economic growth is compelling. Yet, all three main parties seem to think that taxes need to rise.
• UKIP is the only party to demonstrate how savings of those magnitudes (from £ 70 billion per year upwards) can be permanently achieved without increasing taxes: by leaving the EU & freeing the UK economy from its £ 120 billion per year EU-caused burden.
• The UKIP plan would not be realisable instantaneously, since leaving the EU, then unravelling the huge amount of EU-derived legislation & regulation embedded in UK law, would take time: at least two years, perhaps four.
• So in practice, on coming to power, a UKIP government would immediately have to implement public spending cuts of the order of £ 100 billion per year, probably for the first two years of its term. Thereafter, as the savings from leaving the EU began to flow through, there would be room to invest in expanding the armed forces, rebuilding our power stations & restoring & increasing our transport networks as set out in UKIP’s manifesto.
Let me make it quite clear: I claim no credit for any of the calculations. They are Mr Milne's but I thought readers of this blog would be interested in them.