market cuts

 

When Journalist and Broadcaster Alistair Cooke joined the New York Times he was puzzled by a large sign – KISS – hanging on the wall of the newsroom. His editor explained: ‘Keep It Simple, Stupid. Your readers have 10 minutes on the subway to read and understand your article. Then tomorrow it will be on the bottom of their budgie cage’. The business consultancy Deloitte did just that in December with their annual ‘State of the State’ report published in partnership with independent Think Tank ‘Reform’ it showed the progress the coalition government has made in restructuring the economy after the 2008 financial crisis.

A Deloitte reports suggests that: ‘Councils are likely to move away from providing services they are not legally required to provide ‘ i.e. discretionary services such as Markets.

According to Deloitte/Reform just under half of the necessary spending cuts have been achieved but all the quick fixes – public sector pay freezes and redundancies etc – have now been used up. The second half of the necessary cuts is going to be MUCH tougher. The report suggests that of necessity ‘Councils are likely to move away from providing services they are not legally required to provide ‘ i.e. discretionary services such as Markets. There’s also a nasty sting in the tail with the warning that: ‘Whilst early spending cuts took place in a recession, the coming ones will be in a period of economic GROWTH. Citizens are more likely to experience roads in disrepair, dirtier streets, unkempt parks, and fewer pools and libraries’. The UK may now have emerged from recession and be the fastest-growing economy in the EU but government spending needs to be savaged for years to come. The report suggests ‘the UK’s governance, public sector and citizen experience of public services is likely to change profoundly’ i.e. ring their Contractor, not the Council if your bin isn’t collected on time. The report illustrates the enormous growth in the public sector over the last 50 years which in inflation-adjusted figures has risen from £190 billion in 1964 to £730 billion in 2014. Public sector spending now represents an unprecedented 44% of the UK’s Gross Domestic Product.

£1.4 trillion of debt was borrowed to buy Royal Bank of Scotland to prevent total economic meltdown. This debt continues to rise and costs the taxpayer £1 billion per week in interest payments – more than the government spends on education.

The report steers clear of political point-scoring but does confirm the record annual budget deficit of 2010 meant the government spent £159 billion MORE than it received in income. This annual deficit has now been reduced by about half after the coalition government set itself the ambitious target of eliminating it entirely by 2018/19. Once this has been eliminated by ‘fiscal consolidation’ HMG can start paying back the £1.4 trillion of debt borrowed to buy Royal Bank of Scotland etc and prevent total economic meltdown. This debt continues to rise and costs the taxpayer £1 billion per week in interest payments – more than the government spends on education. If this isn’t reduced then by 2023 the interest payments will be three times greater than total expenditure on the armed forces. Whichever government we have after next May the need to buy-down the debt is so pressing that hoping economic growth will make the problem go away is not an option.

Quarterbridge has unrivalled experience of securing investment and restructuring Markets services to meet the challenges

If you cast your mind back to 2010 you’ll remember the long overdue creation of the independent Office of Budget Responsibility to produce ‘Whole Government Accounts’ for the UK. In retrospect it’s amazing that prior to then there was no set of trading accounts for the government. That’s not exactly the way to run a Business or a Markets Service or Country, but it happens. The good news is Quarterbridge has unrivalled experience of securing investment and restructuring Markets services to meet the challenges.

You can download a copy of the Deloitte report from: http://www2.deloitte.com/content/dam/Deloitte/uk/Documents/public-sector/deloitt-uk-state-of-the-state-2014.pdf

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