Tuesday, 22 September 2009

Balancing the books

As the UK attempts to recover from the recession and prepares for the coming elections, there seems to be a focus on reducing expenditure supposedly to balance the books. The government, including local government seems to have spent more than it has earned. Admittedly, there may be some waste in the system but with the government having had to bail out banks because of bad debts, I would have thought there would have been some warning bells that suggested that something is really out of balance in the economic accounting.

As I understand the cause of the current recession, it related to the defaulting on high risk debts. If the government removes a large chunk of its expenditure or endeavours to balance its books by increasing taxes then surely this is going to put more pressure on those struggling with debt.

The government in its bid to reduce costs makes more people redundant. This shifts the cost from the government's operating bill but increases the social welfare bill. The savings may exceed the increased cost from an accounting perspective but what is the social cost to society caused by increased unemployment. At what point can a government say these things are needed and we need to inject capital or credit into the system to bring it into balance?

People need to live. They need shelter and food. Can this social responsibility be ignored simply so an accounting equation can be brought into balance? It seems to me that the foundation of our economic system is faulty and that the balancing equation isn't one of balancing need with available resource. Rather some monetary figures that don't reflect the needs of society seem to be dictating the way governments and society behave.

I am not advocating unlimited expenditure. Rather I am asking whether the method used to decide whether the government's books are in balance be re-examined. The solution to all problems seems to be increasing income (i.e. increase taxes) or reduce costs (laying off workers or reducing services). Certainly services need to be examined to determine whether they are still needed but I am not convinced that the proposed slashing of costs is based on accessing the need for services. I am not even against charging for services especially when a service isn't a necessity.

I would like to hear the government talking about accessing the need for services rather than a need to balance the books by reducing services. All that will happen is that there will be a reduction of services that will be reinstated when either the economy improves or when there is enough political pressure that the politicians see it as necessary in order to be re-elected.

What I see is that monetary issues are dominating the decision making and not clear thinking about what is required for the people to foster a balanced society.

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