November 10, 2010

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The effects of the Comprehensive Spending Review are beginning to become clear, especially the impact on councils.

In Sefton, the council has to cut £38million from its budget next year with a further £20million by 2014. To some people these are just numbers on a balance sheet. The reality in Sefton is rather different. 

 

Some estimates show that the savings mean the loss of 2,000 jobs. That means 2,000 families who won't be able to pay their mortgage or the rent.

 

It also means 2,000 families not spending money right here in our shops and on services provided by small businesses like builders.

 

It also means that there will be little or no money for leisure centres, libraries or road repairs. And the cuts will also bite in the health service, in schools and in police numbers.

 

History shows us that no government has ever made cuts this deep and reduced the deficit. The last time a government tried this approach in the UK was in the early 1920s. The result was little or no growth in the economy, high unemployment and increased poverty. This was at a time when the United States enjoyed a boom period, known as the Roaring Twenties. 

 

In the UK there was no boom and the problem only grew worse during the 1930s during the depression. 

 

It was only when the post war Labour government invested in council housing and reconstruction that the economy recovered. That government decided to pay off the deficit over the long term and the final payments were made only four years ago. By the way, the government also found the money to create the National Health Service and the modern welfare state was consolidated.

 

So the decisions taken in the early '20s to cut spending took more than 20 years to put right. For a more recent example of a government which has cut as deeply as the UK government in planning look at Ireland. The Irish economy has gone back into recession and unemployment has gone through the roof. In Ireland they call it the 'new poverty'.

 

I’ve said before that I have seen small signs that the chancellor is beginning to think again. 

 

He has suggested that the banks need to start lending to small businesses again and he is right about that. He has suggested that the Bank of England needs to put more money into the economy, by increasing borrowing and he is right about that as well.

 

Remember that the level of debt after the Second World War was three times the level it is now. We managed to pay off that deficit. We can pay off this one too.

 

I just hope that the coalition government does learn from history, both in this country and in Ireland. 

 

The government can still change its mind and continue investment in public services. I hope that the signals from the chancellor mean a change of heart. Otherwise, I fear that we are destined to repeat the mistakes of previous generations.

 

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