A balanced budget?

According to Jan Cheek a balanced budget tops the Councillors' list of priorities. Therefore under current circumstances of reduced investment and fishing income we can expect this to mean that either FIG spending is going to be reduced and/or taxes and charges will be raised.

With the worldwide economic downturn it is perhaps easy to begrudgingly agree that these are our ways of experiencing the pain that everyone else in the world is suffering. However when something on the horizon suggests I might suffer pain, I'm quick to scurry about in search of reasons to avoid it.

Following the Wall Street crash in 1929, the Hoover administration obsessed with maintaining a balanced budget; in doing so they raised taxes and cut spending. It is now recognised that there could hardly have been better policies for driving the US economy deeper into recession. A better strategy would have been to cut taxes and maintain or increase spending. Whether economists unanimously agree on that or not I don't know but given the massive deficit that the UK government, and others, are running this would seem to hold some water.

In the Falklands, government spending probably makes up a large part of the economy and therefore any reduction in that spending can be expected to have a significant impact on the economy so it is therefore likely that budget cuts would have the depressing effect that they had in Hoover's time.

Running a budget deficit would mean using some of the reserves, which we are told are there for a rainy day. Well if it isn't raining now, what is it doing? Note as well that a deficit means using reserves and not in fact borrowing which is how most other governments manage deficits.

By this time next year we'll probably know whether or not oil is here and that's another reason not to make things too painful now. Of course it will probably be a number of years before royalties start to flow but if we know they are on the way then taking a bit of the reserves in the interluding years would hardly be the work of Beelzebub. If there's no oil then of course we'll have to whip ourselves severely for being so extravagant this year but I think I'd prefer to suffer pain when it's clearly necessary rather than “just in case”.

Click here to comment on this post at The Nest