It's a Double dip

Quote: DaveO "It's only silly if you don't want to admit you were wrong in your original post. There is now plenty of analysis coming out from various economists and they are dismissing Osborne's stance it was all down to the Eurozone and even the ONS is saying its down to the purely domestic issues mainly constructiopn that is is suffering from the governments cuts.

The ONS said output of the production industries decreased by 0.4%, construction decreased by 3% and output of the service sector increased by 0.1%.

It added that a fall in government spending had contributed to the particularly large fall in the construction sector.

"The huge cuts to public spending - 25% in public sector housing and 24% in public non-housing and with a further 10% cuts to both anticipated for 2013 - have left a hole too big for other sectors to fill," said Judy Lowe, deputy chairman of industry body CITB-ConstructionSkills, said."

From herehttp://www.bbc.co.uk/news/business-17836624rl

What profitable areas? And how do you do this? Is the government to do as I suggested its strategy is, to cut corporation tax and cross its fingers it will work? If not just what do you mean by "Resources will be reallocated into profitable areas if the public sector shrinks"? What does this mean and what magic wand will do this?

What happened after Thatcher was we became a service led economy and guess what? The only thing that is pinning up at the moment is the service sector and what little retail activity their is. The stuff we really need to do it isn't.

A public sector middle manager (your original words) will never be on a pension of £50K. You don't have a point.

The handful of council CEO's who earn 6 figure salaries might be. But then I guess the old argument we have to pay the going rate to get the best man for the job so often trotted out to justify high salaries in the private sector doesn't apply in the public sector.

My wife sees the cost (not savings) associated with using private companies. I have lost count of the number of stories she tells me of how the attitude is charge for everything. And councils pay it because they no longer have the old ethos of being custodians of the local finances. Most of them involved in the finance departments are overworked and the level of scrutiny is quite shocking.

At her school to give one example Biffa turned up when they shouldn't have to collect the refuse. Could not gain access so then proceed to charge the council for return visit. Invoice lands on my wife's desk - she refuses to pay it. Or should I say she tries to. The effort involved to sort this out was huge. She got it sorted in the end but there are plenty of other small amounts of money incorrectly billed that the attitude is (because it has to be) that it is not worth the effort to chase up. The books balance, there is money in the budget so stuff the effort.

My wife hates this attitude and has saved the school a small fortune over the years but how many people do you think are like this? Not many is my guess and if this is replicated across the country the costs will be huge overall. And this would not be happening anything like this if the money stayed where it was, within the local authority.'"

1. So huge cuts in government spending have caused a modest reduction in construction activity. So what - that will be filled in the medium term. There are railroads and airports to build (government plans) and relaxed planning constraints (more private construction) on the way. You are still looking at things at a single point in time rather than the longer, probably beneficial effects of policy. The stats are always erroneous anyway and will be revised twice (probably upwards to say we are not technically in recession).

2. If you have redundant resources such as capital and labour they will find a niche to exploit. Too big a public sector sucks up resources and stifles the economy. To suggest you make people redundant en masse one day and they all find new jobs on equivalent salaries the next is silly. The process inevitably takes time. As to where new jobs come from that'll come down to insightful entrepreneurs and demand just like it has throughout history. One thing for sure is that no government will ever be able to predict where new economic growth will come from. They just need to create the conditions to permit it.

3. So, you say Thatcher created a service led economy which is only being pinned up at the moment by the service sector! Enough said.

4. I think your final point sums things up. It's some one else's money so people waste it. Could you imagine Lord Sugar, as one example, from the private sector paying?