Britain to emulate Canada's radical solution to tackle debt

[Smallc]

The Chancellor will announce a "once-in-a-generation" revolution in public spending inspired by Canada in the mid-1990s, when the government turned a budget deficit of nine per cent of GDP into a surplus.

Canada brought public spending under control guided by the principle that people should ask "what needs to be done by government and what we can afford to do".

Mr Osborne and his Liberal Democrat deputy, Danny Alexander, will attempt to bring about a similar change of mindset in Britain.

The ambitious plan will be welcomed by those who believe swift and decisive action is necessary to bring Britain's budget deficit and spiralling national debt under control quickly.

Article by Andrew Porter

According to some here, the Liberals did nothing to help Canada.....I guess the UK Conservatives don't agree.

Edited June 7, 2010 by Smallc

[Smallc]

http://www.telegraph.co.uk/news/worldnews/northamerica/canada/7807047/Coalition-government-the-Canadian-cuts-model-that-the-Tories-wish-to-emulate.html

And other info.

[Shady]

According to some here, the Liberals did nothing to help Canada

That's definitely not me. I applaud the job the Liberals did in the 1990's. In fact, I think Paul Martin's been our best ever finance minister. I was actually suprised that he turned out to be somewhat of a dud as a PM. But at the sametime, I also applaud the job done by people like Mike Harris. Yes, cuts can hurt sometimes. But sometimes they're necessary. And without a little short-term pain, there'd be no long-term gain. And the pain would eventually be much worse than it had to be.(see Greece).

[charter.rights]

That's definitely not me. I applaud the job the Liberals did in the 1990's. In fact, I think Paul Martin's been our best ever finance minister. I was actually suprised that he turned out to be somewhat of a dud as a PM. But at the sametime, I also applaud the job done by people like Mike Harris. Yes, cuts can hurt sometimes. But sometimes they're necessary. And without a little short-term pain, there'd be no long-term gain. And the pain would eventually be much worse than it had to be.(see Greece).

If you consider the post Harris chaos, Harris ran a bigger deficit than Bob Rae did. The only difference is that Harris so muddled the books that no one understood what was really going on. If you remember, when McGuinty took over, Ernie Eves (a Harris legacy) had deliberately understated the deficit and changed the books to make it look like Ontario had more money than they really did.

[Keepitsimple]

If you consider the post Harris chaos, Harris ran a bigger deficit than Bob Rae did. The only difference is that Harris so muddled the books that no one understood what was really going on. If you remember, when McGuinty took over, Ernie Eves (a Harris legacy) had deliberately understated the deficit and changed the books to make it look like Ontario had more money than they really did.

You're one of many people who for blindly partisan - or personally hateful reasons - try to re-write history. Harris inherited an operating deficit from the NDP that, proportional to revenues, made McGuinty's look like peanuts. Businesses were fleeing Ontario and the province was literally inches from bankruptcy. There's no sense in going over all the details again - you'll never accept them. The important point is that all the indebted European countries need the discipline and courage of a Mike Harris......someone who didn't want power for the sake of power - someone who will do the tough tasks and not worry about being liked or winning the next election.

[Smallc]

The important point is that all the indebted European countries need the discipline and courage of a Mike Harris

I don't see anything about Harris in the article. I do see something about Chretien. Despite the Sponsorship Scandal, Chretien probably remains one of the most popular politicians in recent memory. Harris...not so much from what I can tell.

[Argus]

According to some here, the Liberals did nothing to help Canada.....I guess the UK Conservatives don't agree.

What makes you think foreigners know more about what happened in those times than those of us here who lived through them?

The Liberals did move to combat the deficit, but for the most part, did so on the backs of workers (stealing the UIC surplus) the provinces (cutting transfer payments) and the military. Few hard decisions were made. The end of the recession brought a huge surge in government income - in large measure due to the GST they had fought so determinedly against. That is what turned a deficit into a surplus. Mind you, they are to be congratulated for not immediately splurging every fresh dollar which came in. But I feel the main reason for that parsimony was not so much fiscal prudence as a desire to withhold the money until they could use it to their own profit, as in before an election. The sorry state of the opposition for much of Chretien's reign meant that need did not arise until the Right united. Once it did, the stinginess evaporated and both Chretien and Martin spent or committed the entirety of the surplus before Harper ever got into office.

[Smallc]

The Liberals did move to combat the deficit, but for the most part, did so on the backs of workers (stealing the UIC surplus) the provinces (cutting transfer payments) and the military. Few hard decisions were made.

That's a bunch of bull. As the article said, the average reduction in department spending was 20%. In fact, your entire post is revisionist bull. You are perhaps, next to Shady and Punked, the most partisan person on this board.

[munsinger]

Martin skimmed 40B+ from UI/EU, and cut 13-15B in transfers to the provinces. Revenue from GST and surplus monies from the FTA (both items that his party swore to eliminate) also helped......

Obviously a financial genius.

[Smallc]

Martin skimmed 40B+ from UI/EU, and cut 13-15B in transfers to the provinces. Revenue from GST and surplus monies from the FTA (both items that his party swore to eliminate) also helped......

Obviously a financial genius.

Ha, more revisionist history. Everything that the government did to eliminate the deficit was completely legitimate. Yes, free trade and the GST helped a great deal, and the previous government should have credit for that. Martin and Chretien still deserve credit for what they did.

[Argus]

That's a bunch of bull. As the article said, the average reduction in department spending was 20%. In fact, your entire post is revisionist bull. You are perhaps, next to Shady and Punked, the most partisan person on this board.

The article cited no source. And I am actually not a partisan. I simply hate liars and fools, and question everything I'm told whereas you uncritically, unthinkingly, blindly accept anything which you think agrees with your general beliefs.

[Keepitsimple]

I don't see anything about Harris in the article. I do see something about Chretien. Despite the Sponsorship Scandal, Chretien probably remains one of the most popular politicians in recent memory. Harris...not so much from what I can tell.

I was responding to Charter-Rights post who was railing on and making no sense about Harris running a deficit. After explaining that the Ontario that Harris inherited was in much worse shape that that of McGuinty......I'm making the point that the troubled European countries are actually worse off than the old Ontario - making them all in need of someone like Harris who didn't care about a long political career - just fix it and get out. The Europeans are in big trouble and they need tough medicine. It'll definitely be interesting.

Martin did his job as Finance Minister but the credit has to be shared with the Provincial Premiers upon which Martin downloaded much of the deficit in the form of cuts to transfer payments. In my opinion, Martin got a disproportionate amount of credit.....but there can be no arguing with the results.

Edited June 7, 2010 by Keepitsimple

[Moonbox]

Martin did his job as Finance Minister but the credit has to be shared with the Provincial Premiers upon which Martin downloaded much of the deficit in the form of cuts to transfer payments. In my opinion, Martin got a disproportionate amount of credit.....but there can be no arguing with the results.

Exactly. If you actually looked at the budget numbers from those times smallc you might see that the majority of the actual spending cut decisions had to be made by the provinces.

I'll give credit to Paul Martin and Chretien for not spending, but I'll give them only marginal credit for cuts in expenditures. Mike Harris and his contemporaries had to do the dirty work.

[Shady]

That's a bunch of bull. As the article said, the average reduction in department spending was 20%.

I have to agree with Smallc. Government cut spending across the board. It had to be done. And we're much better off for it. Yes, it was initially painful. But in the long-term, necessarily and beneficial. I applaud the Liberals for sticking to their plan. Especially during the inevitable backlash.

Like I've already said. I think Paul Martin's been our best ever Finance Minster. I'm not sure why he became so spineless as PM, when he showed such courage as FM. It's still a mystery to me.

[fellowtraveller]

Martin skimmed 40B+ from UI/EU, and cut 13-15B in transfers to the provinces

that is $15B every year.

Note that the one and only reason the Lberals undertook any sort of fiscal reform was the intense pressure from the upstart Reformers. Chretiens entire career was based on doing nothing, or at least nothing that might risk a vote or two. And nobody has mentioned the other great contributor to the slaying of the deficit in the 90s- sharply reduced interest rates on the bloated national debt. All gravy for Mr Martin.

[fellowtraveller]

It's still a mystery to me.

It is no mystery at all, once you understand what really happened in the 90s.

[Smallc]

Exactly. If you actually looked at the budget numbers from those times smallc you might see that the majority of the actual spending cut decisions had to be made by the provinces.

I'll give credit to Paul Martin and Chretien for not spending, but I'll give them only marginal credit for cuts in expenditures. Mike Harris and his contemporaries had to do the dirty work.

Right, you'll only give credit to non Liberals. If you'd take off your partisan hat for a minute, you might see that all sources talking about the Liberal cutting years talk about deep departmental cuts. This article gives a number - an average of 20%.

[Shady]

This article gives a number - an average of 20%.

Exactly. Here's another story I read about the same topic last week.

What America Can Learn From Canada

In the Weekly Standard, Fred Barnes writes about the strength of the Canadian economy, and the soundness of their budget, when compared to America:

Canada was called an “honorary member of the Third World” by the Wall Street Journal in 1995, and for good reason. Out-of-control spending, soaring debt, and the government’s bite of the country’s gross domestic product (GDP) growing at a furious pace—those trends prompted the Journal’s harsh putdown. Sound familiar? Those are exactly the trends that endanger America’s economy and standard of living today.

Only with Canada there’s a difference. Beginning in the mid-1990s, Canadians came to grips with their fiscal crisis. They cut spending at both the national and provincial (state) level, reduced the size and payroll of government, slashed debt, and produced what Paul Martin, then finance minister and later prime minister, called smaller, smarter government.

Canada is now in a far better economic situation than the United States. Its unemployment rate is lower, its budget deficit breathtakingly smaller (after nearly a decade of balanced budgets), its debt burden far lighter, its banks more stable. The Canadian dollar, once worth as little as .62 cents, is currently nearly at parity with the American dollar.

Link

It's pretty much a consensus. The long-term gain (lower budget deficit, decade of balanced budgets, lower unemployment rate, stronger dollar) never would have happened without the necessary cuts. Those of you naysayers can complain about the short-term pain. But if you think about it logically, like adults, instead of a short-term, instant gratification-like adolescence. There'd be more economic pain now, if this particular policy hadn't been implemented.

[Smallc]

And that's not to say that the Liberals deserve all the credit (the GST and FTA were both very important), but some would like to pretend they deserve none. I can't tolerate such partisanship.

[punked]

You're one of many people who for blindly partisan - or personally hateful reasons - try to re-write history. Harris inherited an operating deficit from the NDP that, proportional to revenues, made McGuinty's look like peanuts. Businesses were fleeing Ontario and the province was literally inches from bankruptcy. There's no sense in going over all the details again - you'll never accept them. The important point is that all the indebted European countries need the discipline and courage of a Mike Harris......someone who didn't want power for the sake of power - someone who will do the tough tasks and not worry about being liked or winning the next election.

Wrong the NDP inherited the mess from the Liberals during a recession which was worse in Ontario then the one they are going through right now. Good try.

As for Britain do they have an EI fund they can take 50 billion out of to make the books look just fine? How about downloading around 85% of health care costs to the province from around 60 before they took office? GST? I mean honestly the Liberals were able to do all these things cause they had no opposition the British conservatives actually have an opposition it wont be so easy.

Edited June 7, 2010 by punked

[Shady]

Wrong the NDP inherited the mess from the Liberals during a recession

Yes, wich they immediately made worse by raising taxes, raising spending, and soaring debt. Which is exactly the opposite of what the Liberals did in the 90's, and what Britain seeks to do now. Also add Germany to that model. Their recent budget trims in a similar manner. Nobody if following the NDP model. Except perhaps Obama. But that's another story.

[ToadBrother]

Wrong the NDP inherited the mess from the Liberals during a recession which was worse in Ontario then the one they are going through right now. Good try.

As for Britain do they have an EI fund they can take 50 billion out of to make the books look just fine? How about downloading around 85% of health care costs to the province from around 60 before they took office? GST? I mean honestly the Liberals were able to do all these things cause they had no opposition the British conservatives actually have an opposition it wont be so easy.

Actually, I think they will pull it off, in part because they have absolutely no choice, and in part because the further the Tory-LibDem coalition wades into these rough seas, the more they'll see that the only way they can stay afloat is by staying in the same boat. Of course Labour, the SNP and all the other opposition parties will try to knock it down, but Labour is going to be spending much of this critical period as the Coalition formulates what amounts to a Five Year Plan obsessing over its leadership race, which for Labour is going to be a dangerous thing with the Blairite New Labour faction so thoroughly discredited by Brown's defeat.

It's true that the situation's are not identical, but the word is out that Osborne has already been to Northern Island and basically told the government there to expect substantial cuts in the devolution version of transfer payments. Scotland will be a lot trickier because the other part of the balancing act is not giving the SNP a reason to accelerate its plans for an independence vote of some kind, but still, the fact is that it very much looks like some very severe cuts are coming, and that local governments in the UK are going to have to make do with a lot less cash, just like the provinces did when Martin began taking the axe to things.

And let's never forget one of Martin's greatest tricks, which was to consistently underestimate revenue. If Osborne really wants to emulate the Chretien Liberals, make the sharp cuts, but always overestimate expenditures and underestimate revenues. It's a shell game, of course, but it seems to be a shell game that allows the Minister of Finance to look like a super-genius.

[fellowtraveller]

They won't pull it off for a couple of reasons.

The coalition will require internal consensus between partners, and jointly they have promised extensive consultation. Strikes one and two, because consensus and consultation is not required , action is required. That is a major political hurdle.

Secondly, they cannot offload huge expendioture cuts for health care to provinces because the NHS is a national repsonsibility, unlike Canada where Ottawa collects the cash but the provinces provide all the services.

Scotland was going to get pounded regardless, but not because of any supposed independence revolution. They will get pounded because they have been a Labour stronghold for years, the recipient of considerable patronage and largesse from London, and because Scotland has one of the highest ratios of public service jobs in the world. Some of that will change, if the govt has the spine.

The coalition was proabaly the worst electoral result possible for the times. I wish them the best of luck.

Edited June 9, 2010 by fellowtraveller

[Topaz]

That's definitely not me. I applaud the job the Liberals did in the 1990's. In fact, I think Paul Martin's been our best ever finance minister. I was actually suprised that he turned out to be somewhat of a dud as a PM. But at the sametime, I also applaud the job done by people like Mike Harris. Yes, cuts can hurt sometimes. But sometimes they're necessary. And without a little short-term pain, there'd be no long-term gain. And the pain would eventually be much worse than it had to be.(see Greece).

Sorry, I can't agree with you on Harris. More people DIED under Harris. He cut health care, sent the system into a mess, people were in the hallways because of lack of beds. He had people dying because of the change to counties to municipality's, which in the end he cancelled but people died because of the stress they had a council meetings.Dudley George died because of him, people also died in ambulances trying to find a hospital that would take them.

[ToadBrother]

They won't pull it off for a couple of reasons.

The coalition will require internal consensus between partners, and jointly they have promised extensive consultation. Strikes one and two, because consensus and consultation is not required , action is required.

You've been reading too much of Simon Heffer's blather. The basic question being asked, when you strip everything else off, is just how small a government can the UK get away with. What better thing to do than to try to reach some sort of consensus? At any rate, the cuts are going to begin even while this process is ongoing.

That is a major political hurdle.

Secondly, they cannot offload huge expendioture cuts for health care to provinces because the NHS is a national repsonsibility, unlike Canada where Ottawa collects the cash but the provinces provide all the services.

The UK has the distinct advantage the smaller political divisions have precisely the power Westminster gives them.

Scotland was going to get pounded regardless, but not because of any supposed independence revolution. They will get pounded because they have been a Labour stronghold for years, the recipient of considerable patronage and largesse from London, and because Scotland has one of the highest ratios of public service jobs in the world. Some of that will change, if the govt has the spine.

I would think the LibDems will be staying that hand any ways.

The coalition was proabaly the worst electoral result possible for the times. I wish them the best of luck.

It's what the electorate clearly wanted. Everyone knew this months before the election.