Tag Archives: UK economy

Britain, Defence, Economic, European Union, Government, Military, Politics

Labour’s defence spending. A ruse

UK DEFENCE SPENDING

Intro: Ministers are resorting to desperate measures to boost Britain’s military budget

“We cannot defend Britain with an ever-expanding welfare budget … We are under prepared. We are under insured. We are under attack. We are not safe … Britain’s national security and safety is in peril.”

If these words had been said by James Cartlidge, Britain’s almost invisible shadow defence secretary, no one would have batted an eyelid. This sort of rhetoric is what Opposition politicians are supposed to say, whether justified or not.

But when it’s said by no less a Labour stalwart than Lord George Robertson – a former secretary general of NATO and the principal author of the Government’s recent Strategic Defence Review – it really is time for everyone to sit up and take notice.

Robertson is blunt and direct in his language when he says policy was being determined by the “corrosive complacency” of non-military experts in the Treasury. This has led to repeated delays to the 10-year investment plan caused by arguments over how to fund it.

It is of course a core part of the Treasury’s function to say no to the constant stream of departmental demands for more money. Someone has to keep the lid on burgeoning government spending and it falls to the Treasury to perform that role.

It should be said that this would be an understandable, even an admirable, characteristic if it were applied across the board to all forms of public spending.

What so infuriates military chiefs, however, is the double standards the Treasury seems to apply, not to mention the vast gap that separates the political dogma from reality. There could scarcely be a more vital government function than defence of the realm, for everything depends upon it from national to an individual person’s basic security; yet ministers pay lip service to its importance.

At the same time, too, they’ve squeezed defence spending to virtual oblivion. The proportion of national income devoted to welfare and public sector pay, coincidentally, has run out of control.

This didn’t happen by accident. It was done deliberately from the end of the cold war onwards. The resources once thought necessary for defence were instead diverted into social and health spending – a so-called peace dividend that allowed for a massive expansion of the welfare state.

Defence spending has meanwhile shrunk from about 5pc of GDP at the time of the Falklands war in the early 1980s to just 2.3pc last year.

Only belatedly have ministers realised their peril. Russia’s invasion of Ukraine was warning enough. US threats to withdraw from NATO provided another wake-up call. Then came the national humiliation of being unable to field a single frigate to defend British interests in the latest outbreak of hostilities in the Middle East.

There seems to be plenty of money that can be found when it comes to inflation-busting increases in public sector pay, yet ministers struggle to find the resources needed to sustain an operational navy. Somewhere along the line, the Government lost its sense of priority.

While welfare spending, taxes, and borrowing mushroom, there are still no answers as to how to deliver even the relatively unambitious targets the Government has set for defence – 3pc of GDP by the end of the parliament and 3.5pc by 2035.

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In acts of desperation, ministers are reaching for what they amusingly call “creative solutions”, apparently unaware of the unfortunate connotations the expression carries in accountancy circles – as in “creative accounting”.

If increased defence spending can somehow be kept off the public balance sheet, then miraculously it immediately becomes perfectly “affordable”.

In pursuit of such sleight of hand, the UK is exploring setting up a new mechanism for collectively funding defence spending with the Netherlands and Finland. There is also the possibility of Poland and other NATO allies joining in.

The attraction of the scheme is that under international accountancy conventions, the additional spending moves “off balance sheet” if the entity pursuing it is multinational. Typically, a minimum of three countries is required to satisfy these requirements.

It’s cajolery and a swindle, because whichever way you cut it, and however the entity is funded, ultimately it’s the customer that pays, and the customers here are the three countries involved. Eventually, the costs will bounce back on to the British taxpayer.

Still, if it helps support the additional spending the military so desperately needs, it would perhaps be perverse to knock it. But it is also just an accounting ruse that allows the Government to spend money that it doesn’t have. Markets are sensing hidden deception and that something is wrong, and rightly so.

As is apparent from International Monetary Fund (IMF) analysis just published, Britain is in a dire fiscal hole, with fast rising taxes and borrowing struggling to keep up with increased welfare and other forms of government spending.

The peace dividend is gone, so the Government is desperately searching for ways of cooking the books in the hope that nobody notices. In practice, few are going to be fooled by this kind of window dressing.

Already, there are hundreds of billions of pounds worth of government liabilities conveniently shunted into the shadows of off-balance sheet finance, including the costs associated with previous wars in Iraq and Afghanistan. This would further add to them.

How Britain is going to pay for increased defence spending is anyone’s guess. Even the Prime Minister, Sir Keir Starmer, said that the Government was still trying to figure out how to do it in conjunction with European partners. Many will be sensing what he meant is the charade of international defence procurement and financing.

Seeking solutions in Europe is becoming a bit of a thing with this Government. Getting closer to the EU is also proposed as a solution for the country’s lack of growth, even if it is hard to see how a little “dynamic alignment” in standards is going to make much of a difference. But this halfway house doesn’t get the Prime Minister or the country anywhere. It is certainly not going to get the UK out of the fiscal hole it has dug for itself.

In terms of the public finances, Britain is on the ropes. It is also widely considered to be acutely vulnerable to the current energy price shock. The IMF expects UK growth this year to be slower and inflation higher than any other major advanced economy.

Worse still, the tax burden is projected to rise by more than anywhere else in the world during the remainder of this parliament, and that’s on the basis of what we already know about the Government’s plans. It is eminently possible to imagine further shock announcements to come. And yet public debt is still expected to swell to more than 100pc of GDP by 2029.

A rational person would have thought that somewhere in this developing financial Armageddon, the money might have been found to at least keep the military operational.

But no, social spending priorities continue to eclipse all else.

Resorting to accounting tricks only makes matters worse.

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Britain, Economic, G7, Government, History, Human Rights, Politics, United Nations

Standing up to the global panjandrums

BRITAIN

IN Britain, it shouldn’t have gone unnoticed that the world’s great and good seem to have it in for us these days. Barely a week passes by without some grand panjandrum from a mighty global institution having a run-in with the way things are done on these shores.

The International Monetary Fund (IMF) is the latest to have a go. Last week its chief economist urged the UK Treasury to forego further tax cuts in its March Budget and pump-up public spending instead.

The IMF has form when comes to lecturing Britain – often getting it completely wrong in the process. The IMF has no particular expertise when it comes to Britain and often regurgitates the global consensus advocating high taxes and big government.

The IMF is also something of a slow learner. It consistently underestimates the performance of the UK economy yet remains stuck in a doomster type loop.

For example, just twelve months ago it forecast that the UK would be the only G7 economy (a group of the world’s major free-market economies) to suffer a recession, with a 0.6 per cent decline in GDP.

In the event the recessionary wooden spoon went to Germany, which is often the apple of its eye. The UK economy grew by only a smidgen last year, but, contrary to the IMF gloomsters, it did not decline.

However, the political damage had been done. When the IMF starts predicting that we’ll be the worst in class, a cacophony of vested interest groups among us with a permanent grievance against their country, start to shout loudly and gleefully about how this is yet further proof of what a basket case we’ve become.

Yet, when it transpires that the forecasts were wrong, they’ve already packed their bags and moved on to some other alleged weakness. They never pay a price or any form of penalty for running the country down on a false premise.

Of course, the IMF isn’t just wrong about Britain. It forecast the U.S. economy would grow by only 1.4 per cent last year when in fact it expanded by over 3 per cent. A significant difference.

It predicted its beloved eurozone would grow by 0.7 per cent when it barely managed 0.1 per cent. There is no doubt, though, that it has a particular penchant for being down on the UK.

Undaunted, the IMF is now forecasting that the UK will be the slowest growing G7 economy this year. That’s likely to prove once again to be a cheap stunt. A study of IMF predictions about British growth since 2016 found them to be wrong 80 per cent of the time – and always for being too pessimistic. The IMF has rarely been wrong for over-estimating the performance of the British economy. No surprise there.

Brexit has given added piquancy to the gloomy predictions.

The powerful elite of the IMF, World Bank, OECD, et al, have never forgiven the British people for blithely ignoring their advice not to vote to leave the European Union in 2016.

The current chief economist of the IMF, Pierre-Olivier Gourinchas, rushed into print two days after the referendum with a posse of other disgruntled economists to warn of all the dire consequences which lay in store for Britain. A year later, he was forced to admit none had materialised – but still thought our future prospects were grim.

Having found a comfortable berth in the IMF, the Frenchman is typical of the socialist-leaning types who now dominate the global power structures of the higher echelon. Previously, he was economic adviser to the failed French socialist government of Francois Hollande.

Yet he’s a veritable moderate compared to some of the people who produce reports about Britain that comes out of the United Nations. Its “special rapporteur on extreme poverty”, Olivier De Schutter, recently visited these shores to opine that poverty in the UK was “simply not acceptable” and insisted it violated international law. Welfare payments, he concluded, were “grossly insufficient”. You might think his time would’ve been better spent in Somalia or North Korea. The UN has a strange way of acting.

It is not clear exactly what qualifies this Belgian lawyer to pontificate on British welfare policy, but his remarks were nothing new when it comes to UN criticism of us. His predecessor accused the UK Government of implementing a policy of “systemic immiseration” when it came to the poor – this in a country which spends over £265 billion a year on welfare (over a third of all state spending). De Schutter claims it has got “worse” since those remarks were made.

To get the full flavour of his global Leftist mindset, we must consider what he said: “We should stop focussing on creating the macroeconomic conditions that will stimulate growth… and focus instead on providing support to low-income households… to create a much more inclusive economy rather than one that creates wealth for the elites and particularly for the shareholders of large corporations.”

And there it is in all its unalloyed, anti-growth, anti-capitalist glory. Put aside the fact that most shareholders these days are pension funds whose investments we all depend on for much of our retirement income. Just look carefully at what is being proposed: do not look to economic growth to help lift up the impoverished, look instead at greater redistribution of wealth from the better off to the poor (as if that isn’t already happening). The better-off in Britain already account for a huge chunk of tax revenues. The generous slicing of the cake has more than found its balance.

Force middle-income earners to pay even more tax in a no-growth economy and they’re likely to up sticks and head for friendlier climes, as Scotland is about to discover, undermining the very foundations of the tax base in the process.

These days there is no end of nonsense coming out of the UN about Britain. No more so than on human rights. Another rapporteur, dealing with such issues, recently complained about the “severe” sentences ordered on two Just Stop Oil protesters.

They were imprisoned for scaling the Dartford Crossing Bridge and causing traffic chaos for 40 hours. The UN saw this as an attack on the “right to freedom of expression”. It might want to look more closely at those currently languishing in the gulags and forced labour camps of Russia and China if it wants to see a real denial of human rights.

But no, its rapporteur doubled down, claiming new legislation in 2023 was a “direct attack” on public protest. I guess we’re just imagining the pro-Palestinian protests that have been commandeering central London almost every Saturday since the horrifying Hamas attack on Israel in early October.

But perhaps the greatest recent absurdity was the UN High Commissioner for Refugees (UNHCR) claiming that Government plans to send asylum seekers to Rwanda was wrong because Rwanda was “not a safe country”. Fair enough, you might think. Like many people in this country, I’m not a great fan of the Rwanda scheme either. But the UNHCR has recently been relocating vulnerable migrants from war-torn Libya to Rwanda itself.

This didn’t stop the High Commissioner from accusing Britain of a “general disregard for human rights”. This of a country in which, even if your asylum claim has been knocked back multiple times, it is well nigh impossible to be deported.

Despite the global elite never forgiving us for Brexit, the more the Left consolidates its grip on powerful world bodies, the more we are likely to hear this sort of nonsense about Britain.

There’s one other factor at work too.

We live in an age of identity politics in which the sins of the past, from slavery to colonialism, need to be atoned for. As a country complicit in the trans-Atlantic slave trade, which also presided over the largest empire the world has ever seen, Britain is in the crosshairs of the new global elite’s agenda.

It doesn’t matter that we were also the first to abolish the slave trade or that so many citizens of the old empire now want to come and live on these shores. We have sinned and we must be made to pay, through reparations and being cast down in ignominy.

There is only one remedy: to stand up for ourselves.

We know our past mistakes, but we also know the great contribution we have made to world progress. We don’t need lectures from the global great and good.

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