Weekly Update 20th June 2011

The Economics of Hope

Ed Balls’ call for a cut in VAT was timely. The UK economy is flat-lining as was feared by Labour. George Osborne’s reliance on savage cuts to eradicate the deficit without a strategy for growth risks consigning the UK to the slow lane. Unless we can stimulate the economy, clearing the deficit will prove to be dream rather than reality. Retail spending is down and investment is down. As the public sector shrinks, we need the private sector to pick up. The danger of going so fast is that the private sector can’t respond and as demand falls we enter a spiral of stagnation.

The council workforce is shrinking and services are being reduced. We’ve seen concessionary fares for young people hit and we’re seeing support for pupils travelling longer distances pretty much scrapped. I saw the Messenger was carrying a poll on the proposals. People were generally in favour of the cuts to the support. There wasn’t many comments but I suspect the mood was encapsulated by the words “Why should I pay for….?”.  I can well understand the sentiment but the move provides a small snapshot of the dangers of the austerity measures. The families previously entitled to this support are going find the money out of their family budget which will reduce their ability to spend on other things. The council taxpayer is not going to see any reduction in council tax anytime soon so it’s not as though their income will be increased to offset the reduction. Multiply the change a million times in different ways with different cuts and the economy is taking a huge hit. It may be a cut in public spending but the private sector takes the hit as well.

Fundamentally, there isn’t a successful precedent for the Government’s economic policy and the Govt will have to revise the plans at some point. The trouble is that the Govt is so welded to the idea that it’s all Labour’s fault that any plan B or plan C becomes an admission that Alistair Darling got it right. And he did! So they’re stubbornly resisting any change.

A cut in VAT will not be a panacea, but it will help. The analysis of the effects of Alistair Darling’s earlier cut showed it did make a marked difference. It didn’t make huge changes to individual spending decisions but it did put more money in household budgets. It worked; as did the car scrappage scheme. It’s vital the Tories listen and take heed. Yes there has to be cuts and Labour would have been cutting too, but there has to be stimulus. Cut too fast and the whole economy grinds down. Cut at the right time with a package of growth stimuli and you end up with the tax intake maintaining its level and the deficit becomes manageable.

Trafford has been portrayed as a place where the cuts can be made without hitting frontline services. Of course this is a complete fallacy and we are seeing significant reductions in service. Lostock is not going to see the completeion of the road resurfacing programme, schools are being hit and care for the vulnerable is taking a significant cut. We’ve seen the crisis in Southern Cross Nursing Homes; the fact is their business model didn’t anticipate local authorities like Trafford making such swingeing cuts. It was a flawed business model in the first place but Trafford is equally shortsighted in believing that its austerity will not hurt.


Met with the acting heads of Transformation and Resources at the Council. And it is becoming a familiar story of officers having departed. The focus of the directorate was naturally on the decanting of staff to Quay West which in effect will be the temporary town hall for the coming year. Whilst I believe that building schools would be a better target for capital spend, clearly the investment in the local economy is not without merit and it will be good to see Quay West really come alive.

The shifting of Trafford’s Libraries into an independent trust continues to proceed. I have significant concerns as to how this pan out but as yet I’m not getting much in the way of detail other than than the council is talking to Wigan and Salford councils who’ve already gone down this path.

In finance, the officers are continuing to look at how the Welfare Reform Programme is developing. At present, Housing Benefit is paid by local councils but it’s proposed that it will become part of the Universal Credit. However Council Tax Benefit does not seem to following the same course. So how is this going to pan out?


Attended opening of Bridgewater Way footpath/cyclepath between Stretford Town Centre and Moss Road/Watersmeet. I love this improvement; apparently the use by cyclists along the stretch between Sale and Stretford has increased from 19,000 to 90,000. It’s a huge success. We need to be doing more of this sort of investment.





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