Ed Balls wants growth. He wants us to spend our way out of recession.
I am all for investment. Even in a time of austerity. Maybe even precisely when things are hard. Entrepreneurs know this. Investment leads to long term wealth.
Spending leads to bad debt and long term poverty. “Poverty” (noun, sing.): the state you get in when idiots believe there is a free lunch and other idiots accommodate them. Highly toxic. See also under “Greece.”
Here is a little insight into public spending. I have to be cautious because of professional confidences, and parts of this are taken on a friend of a friend basis, but I have a job, I am not a full time journo or blogger. But here we go.
I have a client who supplies and installs “things”. Let’s call these things…. “computers”, just for the sake of argument.
A few years ago he supplied and fitted out a whole building full of these computers to a Public Body. I can’t say which one, but it is funded by the Government and Local Authorities. That is, you and me.
Gordon and Ed were very good and spending and the funding was lavish and shiny new computers were put in every room. In fact what happened though was that the Public Body actually “purchased” or rather hired the computers from a finance company for a period of 10 years or so, with my client taking a slice off the top. That is actually a much more expensive way of doing things than just buying the damn things outright. It also means the computers had to go back when the leases were over because they were technically rented not owned (a funny investment that) but there we go…
Anyway, so there are all these rented computers.
Now the Public Body knew that it was going to get a shiny new Palace to go with the shiny new computers in a few years (thanks Gordon! thanks Ed!), so it wisely specifically asked for and got a system that could be packed up and moved to the said new venue in due course.
All went well. The computers hummed and whirred and did their jobs. Everyone was happy. Then a new development. Another pot of money became available. Even more money for computers! It is not that the old ones were not fine or capable of being upgraded, it is just there was this great big pot of money waiting to be spent.
There was only one catch. The Public Body still had all these lovely, fully functioning computers on its books. It could not get the new funding whilst that was the case. That would be a waste!
So, by circuitous means it has paid off the finance leases in full. That meant that it did not have any computers, because the leases were over. So now it has applied for and got more funding for even shinier, more expensive computers and moved them into its shiny new Palace.
Not that the old ones weren’t fine, and capable of being moved in. It just wanted new ones.
It has got a bigger budget. Perhaps a bigger budget means higher pay for its officials? Who can say? I couldn’t possibly comment.
What has happened to the old ones remains unclear at time of writing. The finance company does not really want them. It makes it money in financing the deal and charging exorbitant rent for the computers. Perhaps they will all be just given away or scrapped. No one seems to know.
A relative who is a teacher tells me similar tales of schools replacing perfectly good computers every two years because if they do not they are deemed not to need funds at all so they have to get rid of the old ones and buy new ones or lose that part of the budget for the future, so when the computers did break down, they would get no funding.
Is this sensible investment in public services? Or spending for spending’s sake? Will spending like this boost the economy? Or the economy of Japan or China or wherever the computers are made, and the finance houses?
All governments take this sort of approach to spending, because Government thrives on bureaucracy and is obsessed with targets. Figures and numbers that can be spat out in a sound bite. And because it is using someone else’s money.
Spend! Spend! Spend!
That is the madness that got us here in the first place.
Photo is of the musical Spend!Spend!Spend!