Britain: From bad to worse ...



LONDON: Orlando Crowcroft

Published — Saturday 19 January 2013

Last update 19 January 2013 12:03 am

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The decision last week by the Ministry of Justice to close seven prisons in England and Wales to save £63 million annually is only the latest in a long line of cost-cutting measures announced by Britain’s Conservative government. As a result, it is unlikely to provoke much backlash against a backdrop of seemingly endless spending cuts.
Much more controversial is the proposal to cater for any increase in the prison population by the construction of so-called “super prisons” or “titans” at a cost of over £ 2.9 billion and capable of holding over 2,500 inmates. The plan was scrapped in 2009 by the Labour government in the face of opposition from prison reform bodies and unions, who are now curious as to why it has been revived.
“Closing prisons and reducing prison numbers offers major social and economic gains,” said Juliet Lyon, director of the Prison Reform Trust. “But it would be a gigantic mistake to revive the discredited idea of titans and pour taxpayers’ money down the prison building drain, when the coalition government could invest in crime prevention, health care and community solutions to crime.”
The overall cost of public order and safety in the UK is higher than any country in the EU and even the US, at 2.8 percent of gross domestic product (GDP). And as the prison population has grown — by 19,650 or 30 percent between 2001 and 2011 — so has spending, rising 4.6 percent between 2001 and 2009. As part of the drive to reduce Britain’s deficit, the Ministry of Justice is expected to make overall resource savings of 23 percent by 2015. All other departments of government — except health and international aid — face reductions of 6 percent per year.
But despite the government’s we’re-all-in-it-together “belt-tightening” rhetoric, many Britons are wondering what is ultimately being achieved by the cuts. Late yesterday, the National Institute of Economic and Social Research estimated that British gross domestic product (GDP) fell 0.3 percent in the fourth quarter. At the same time, manufacturing has fallen, industrial production also failed to rise as expected and the PMI services index for December had its first fall in two years.
“It’s looking like the last quarter for 2012 was a lot worse than it looked a month or six weeks ago,” said Spencer Thompson, an economic analyst at the Institute for Public Policy Research. “Looking forward, forecasts are saying that 2013 is looking to be quite similar to 2012. They expect weak growth and unemployment to rise.”
“It’s very hard to see where the positive news is going to come from,” he added.
What the government needs is for Britons to go out and spend money, but the slump in Christmas high street sales — revealed last week — suggests that this could be wishful thinking. Britain saw as many as six high-street brands go into administration in 2012, with electronics retailer Comet amongst them. This was compounded Monday by the news that retail giant HMV had finally gone under, with 4,500 jobs at risk. The prospect of unemployment rising in 2013 is hardly going to make British consumers want to go out and hit the shops.
“(The Treasury) is expecting to happen consumers to start spending more over the next year, and they see this as being driven by an increase in household indebtedness, so they see people taking on more debts to increase their spending,” said Thompson.
“Now, if that was to happen then that would be a massive reversal of the trend for the last three years, and we think it’s quite unlikely. We expect consumers to carry on paying down their debts and saving rather than spending, especially when salaries are rising slower than prices.”
Chancellor George Osborne’s plan for reducing the deficit by cutting costs relies on the NHS and defense budgets remaining static, which they have rarely done. It is estimated that the ageing population in Britain will add as much as 1.5 percent of GDP to public spending between 2018 and 2013 as well as 5 percent of GDP to the NHS. The defense budget is easy to control at present, as Britain winds down its involvement in Iraq and Afghanistan, but international politics is as unpredictable as ever. Another intervention such as Libya could scupper a zero budget growth target.
The risk is that either taxes will need to rise to cover the increasing costs — a difficult sell for Prime Minister David Cameron’s fiscally conservative party — or further cuts will need to be made to areas so far considered sacrosanct. These could include universal benefits for the elderly, which all pensioners in Britain receive regardless of whether they are the poorest of the poor or millionaires. “It’s increasingly looking like universal benefits for the elderly –- for very rich pensioners shouldn’t be as hallowed ground as they are now,” Thompson said.
“In six or nine months time the government may also start to make noises about even more cuts to the welfare bill. Everything you choose to spend money on means you have to make decisions about where to cut elsewhere.”
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