Merryn's Blog

Forget Trident – here's where we really need to slash spending

Labour politicians have tried to avoid using the word 'cut'. But even they now seem to accept the idea that something needs to be done about public sector spending. The trouble is, our leaders have been rather reluctant to say exactly where the axe should fall.

Labour politicians have tried to avoid using the word 'cut'. But even they now seem to accept the idea that something needs to be done about public sector spending. The trouble is, our leaders have been rather reluctant to say exactly where the axe should fall.

So it's good to see that Vince Cable, the Liberal Democrat Treasury spokesman, has now identified some specific targets. Some are even new. Cable suggests a freeze on public sector pay overall (saving £2.4bn a year); a 25% cut in the total pay bill of staff earning over £100,000; and an end to bonuses for the civil service (saving £200m a year).

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

Others are just the usual "painless" cuts that have already been suggested. These include scrapping several major IT systems including the ID card scheme (£5bn over 10 years), the child database Contactpoint (£200m over five years), the NHS IT scheme (£250m over five years) and the proposed "super database" (£6bn). He suggests that big military projects such as Trident and the Eurofighter are also open to debate.

Unfortunately, Cable is much more cagey about the one area that could really make a difference to the UK's massive deficit public sector pensions. With several million public sector workers looking forward to early retirement on guaranteed pensions, it's no surprise that politicians are reluctant to tackle this one.

Advertisement
Advertisement - Article continues below

But they have to. The UK government already faces a whopping £1 trillion retirement bill, said the Organisation of Economic Co-operation and Development in June. That's costing taxpayers £3.8bn a year, according to the latest statistics, almost £1bn more than a year earlier.

Cable fudges the issue by calling for a "radical review", with the view to employees making higher contributions and working for longer. But if Britain is ever going to make a significant dent in its growing public debt pile, it's not yet more radical reviews we need it's radical action. If our politicians can't find a way to confront this at a time when the country's back is against the wall and most people agree with the idea of cuts, we may find ourselves forced into it at a later date perhaps by the International Monetary Fund.

Advertisement

Recommended

Visit/519858/how-long-can-the-good-times-roll
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Visit/516758/beyond-the-brexit-talk-the-british-economy-isnt-doing-too-badly
Economy

Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019
Visit/economy/uk-economy/600824/how-the-bbc-can-survive-the-end-of-the-tv-licence
UK Economy

How the BBC can survive the end of the TV licence

The TV licence that funds the BBC is looking way past its sell-by date, says Matthew Lynn. Here's how it could survive without it
16 Feb 2020
Visit/economy/uk-economy/600837/rishi-sunak-new-chancellor-spending-splurge
UK Economy

Britain has a new chancellor – get ready for a major spending splurge

The departure of Sajid Javid as chancellor and the appointment of Rishi Sunak marks a change in the style of our politics. John Stepek explains what's…
14 Feb 2020

Most Popular

Visit/investments/property/house-prices/600840/the-biggest-risk-facing-the-uk-housing-market-right-now
House prices

The biggest risk facing the UK housing market right now

For house prices to stagnate or even fall would be healthy for the property market, says John Stepek. But there is a distinct danger that isn't going …
17 Feb 2020
Visit/economy/600838/money-minute-monday-17-february-good-news-ahead-for-the-uk-economy
Economy

Money Minute Monday 17 February: good news ahead for the UK economy?

Today's Money Minute looks to a week in which we get the latest employment and inflation numbers, plus retail figures for January and a slew of eurozo…
17 Feb 2020
Visit/currencies/600842/eur-usd-euro-slide-against-us-dollar
Currencies

The euro’s slide against the US dollar looks set to continue

The euro has been in a bear market against the US dollar for two years now. And on a broader scale since 2008. A decline like that is telling us somet…
19 Feb 2020
Visit/517625/tr-european-growth-trust-why-investors-shouldnt-overlook-europe
Sponsored

Why investors shouldn’t overlook Europe

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, tackles investor questions around Europe’s economic outlook and the conseq…
6 Nov 2019