The PBR and the warning of Ireland

I thought the PBR was a good social democratic response to the current phase of the economic crisis i.e. protect frontline services; concentrate on growth and recovery in the short term; and fund the protection of frontline services with extra taxation focused where possible on the best off.

Personally I would have added to the three frontline services the government is ringfencing (police, schools and hospitals) two others - the armed forces and children's social services. You can't get much more frontline than our troops fighting the Taliban or the people trying to stop another tragedy like Baby P, so it seems odd these were not given equal status to the three picked.

Economically I think Darling is right not to withdraw the whole stimulus package yet and to have one more year of deliberately not prioritising deficit reduction. My local Labour Party heard a very interesting speech a couple of weeks ago by Larry Elliott, the Guardian's Economics Editor, where he warned that even with what Labour is doing to stabilise the economy through maintaining public spending there is a serious risk of a W shaped recession - a second dip in the economy in Q2 of 2010 as people and businesses panic that they have overextended themselves during the current early recovery phase and rein in spending. He warned that the Tory plans for retrenchment on spending turn a W shaped recession from a high risk to an absolute certainty. Then we really would see the deficit spiral because tax take would fall again, benefit payments would rise again and even the most draconian cuts wouldn't cancel these changes out.

I'm alarmed by the way that the Tories and the media discuss public spending as though it was purely an economic tool to be switched off in order to reduce the deficit. Actually all the things government spends money on have a primary purpose which is intrinsic i.e. delivering services for citizens. Their economic effect is secondary. There seems to be some kind of fantasy that there are areas of public spending that are so unnecessary that taking an axe to them is actually desirable. Whilst there are undoubtedly a few percent efficiency savings that could be found in any government organisation, reining in public spending to the extent advocated by the Tories or even by the Government is very soon going to lead to the switching off of services that citizens feel they are entitled to and value.

If anyone wants to know what a Tory budget and a Tory approach to deficit reduction could look like they need only look at Ireland where the budget was delivered yesterday. Guido helpfully summarised it as his libertarian take is that it looked great. It included cutting welfare payments back to 2006 levels, cutting unemployment benefit and cutting public sector salaries by 5% for the lowest paid workers. So in Ireland the right's response to the recession is to make the poorest and those that are actually victims of it pay the price, along with the people who deliver public services. I'd describe that as evil, as well as economically insane. The political attractiveness of this slash and burn strategy is shown by recent opinion polls in the Republic which show Fianna Fail in third place behind Fine Gael and Labour when historically it has had a 20%-ish lead over the next party in most elections.

UPDATE: Iain Dale has posted: "Guido is right. The PBR the British Chancellor should have delivered, was delivered yesterday in Dublin. Hopefully George Osborne is studying it in great detail."