Toynbee and economic illiteracy
The Tories’ plans for a tax cut on savings have the benefit of feeling right. Interest rates have plummeted in an attempt to recover from the costs imposed by excess borrowing – punishing the thrifty to protect the ill-disciplined (and I speak here as a prime representative of the latter category). It seems only just therefore, that incentives to saving be introduced, both to compensate savers for the collapse of their earnings, and to encourage a more prudent ethos in the future.
What it isn’t, of course, is a panacea to the economic downturn, nor a complete answer to the question “what would you do?” In fact, at a total cost of only some £5bn or so it’s not enormously significant to the Treasury – though it would be pretty significant for those living of savings income. That’s a pretty good combination as it happens, though Polly Toynbee is enraged by it. As so often with la Toynbee it’s not entirely clear how much of her fury is genuine, and how much a sort of tribal reaction. Lets have a look anyway.
In fact she spends the first half of her article more or less acknowledging the force behind the Tory arguments – the piece is littered with “He is right…”, “On the face of it, Cameron should walk it with constant finger-pointing…”, “Superficially, he has all the best lines…”, “It chimes with commonsense instinct…” and the like. But she needs to demonstrate that, even though it might sound reasonable and plausible, it is, of course, “part populism, part poison and part snake-oil.” So she has a go at that, arguing that to make cuts, any cuts, in public spending is “economically illiterate” and runs contrary to the sainted Keynesian economics that were last tested to destruction back in the days when she failed her first-year exams at Oxford.
She focuses her fire (such as it is) on what will be the Government’s main line of attack – any cuts in public spending will affect ‘frontline services’ and will make matters worse for everyone. The Tories have pledged not to cut health, schools or international development – and this means it will cut business, work and pensions, transport etc. Disaster, doom, gloom and so on.
But there is one area that the Tories could very profitably examine for spending cuts: quangos. As has been said repeatedly by the right-wing of the press and the blogosphere, massive amounts of money are spent on rule by quango: £124bn in 2006, and much more now. Total Government spending for last year was in the region of £557bn. For Toynbee to state that savings of $5bn cannot be found is the far side of ridiculous – less than 1% of a budget is a rounding error, not a series of unaffordable slashes into the ethos of the public sector.