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2010-10-20 09:57:49
By Jon Kelly BBC News Magazine
Simon Francis
The government is unveiling plans to reduce its outgoings, but could our household budgets withstand cutbacks on the same scale? One man decided to find out.
Britain may be bracing itself for the deepest spending cuts in decades, with the government preparing to announce where the axe will fall.
But, on a much smaller scale, one man has spent the past four weeks finding out for himself what it's like to experience such an age of austerity.
Back in July, the Treasury ordered government departments to identify 40% of cuts in spending.
So blogger Simon Francis decided to see if he could reduce his own outgoings by the same proportion.
It would involve a severe squeeze on his habitual cashflow. Food, drink, energy bills, mortgage payments and Simon's social life would all have to be scaled back drastically if the target were to be met.
Simon's deficit reduction plan
Simon, a 33-year-old from Kentish Town, north London, might not exactly have have been facing a fiscal crisis like that which ministers warn is confronting the UK state. He does not have children and his salary normally allows him to spend 2,100 a month.
But all of this, he reasoned, made it all the more relevant for him to volunteer for the role of austerity guinea pig.
"Working in PR, I'm not exactly on the breadline," he says. "So my thinking was: if I can't do this, then someone whose personal finances were in the same state as the country's couldn't either.
"Economists say we should be spending more, so perhaps I'm being irresponsible. But none of us know how the cuts ahead are going to affect us, so I think it's important that we all see how we're going to make savings."
His early cuts were easy. Visits to cafes for breakfast or coffee were banned. Lunch was to be prepared at home rather than bought pre-packaged. Spending on mineral water was abolished following a one-off 3 capital investment (the purchase of a robust plastic water canteen).
Start Quote
Eating is similar to front-line armed forces - it's not like you can go without and it does need to be properly funded
End Quote Simon's diary
Even a mini-break to eastern Europe helped bring down revenue costs, thanks to the reduced price of beer.
But, for the most part, the fiscal squeeze proved tougher than he anticipated.
The slashing of his food budget proved more difficult than he thought. First he had to hack away at his principles and stop eating free-range chicken. Then, after exceeding his spending limits, he found himself going without dinner altogether.
By moving from a fixed rate to a tracker mortgage, he was able to reduce his monthly repayment by 20%. But this still fell short of the overall 40% target, so savings would have to be made elsewhere - and he will have to save the difference to ensure he is covered in the event of future rate rises.
His attempts to reduce energy costs by switching from gas supplier were hampered when a competitor quoted him a higher bill.
And, like the government, which has protected the National Health Service and Department for International Development budgets, Simon ring-fenced certain areas of spending.
His ability to get to work depended on public transport, so train fares were excluded from the 40% cuts target - as was the cost of beer, regarded by real ale lover Simon as being as much of a necessity as the NHS.
It might sound whimsical. But the coalition government has used the comparison with household budgets to make the case for its own cuts.
Continue reading the main story
Spending review branding
At the Liberal Democrat party conference, Nick Clegg compared the UK to a family which earned 26,000 while spending 32,000 a year on top of 40,000 debts. David Cameron has also described the deficit as "a bit like our credit cards - we all know the longer you leave it, the worse it gets".
Nonetheless, this line of reasoning has its limitations, Malcolm Sawyer, professor of economics at the University of Leeds, says.
He argues that, because about a third of the government's debt is owed to pension funds, repayments are going from one set of taxpayers to another.
"Politicians like to refer to the image of the housewife doing her weekly shopping budget - it's a powerful analogy that's easy to understand," he says.
Continue reading the main story
How did Simon do?
"But the reality of why governments run up deficits is harder to explain in a soundbite - it's because tax revenues collapsed."
Simon acknowledges the comparison can only be taken so far. His focus, he says, was on the tough decisions involved in making the cuts - choices that he found harder than he anticipated.
And, in the event, they did not prove decisive enough.
Despite his best efforts, he still ended up spending 1,545 - a reduction of 555 on a typical period, but still only 26% of the original total.
In this respect, his experience resembles that of the government. In his June Budget, Chancellor George Osborne said most departments would face budget cuts averaging 25% - health and DfID being protected, and defence and education facing less harsh reductions of 10% to 20%.
Now, at least, Simon has a bit of extra cash - but this, he says, will be put aside for a rainy day in case the cuts start to bite him.
"It's not like I'm going to carry on with most of these savings," he says. "The only permanent saving is the mortgage - but even then I'll have to put aside the difference to protect against future rate rises.
"But I am going to have to get used to making savings because the government cuts will affect me, too. If Camden Council puts up my council tax, then I have to find a way to pay for it."
But he suspects governments will always have projects which they will look upon in the same way that Simon looks on real ale - not really a luxury, a habit of which he is just too fond to give up.
"It's a light-hearted exercise but it has given me some extra sympathy for politicians," he says.
"I now know that it's easy to promise you're going to make cuts but a lot harder to deliver them."
Below is a selection of your comments
Interesting exercise, although I can't help thinking that going to a tracker mortgage is a going to be a case of jam today, complete financial catastrophe tomorrow. Okay, so not actually tomorrow, but soon enough.
Mr C, Cranleigh, UK
That's all very well for someone who has spare money to make these savings! I already do all that, and you know what - I cannot afford to make even a 10% saving in my budget, without not eating at all. While it's a nice idea, he should try living on the budget of someone who doesn't work in PR with such a high monthly budget... I certainly couldn't try and mirror the governement!
MF, Manchester
It's a long way from poverty but maybe represents the government departments well, e.g. having been used to not really considering how much money they spend on unneccessary things. The use-the-budget-or-lose-it culture....
David, Norwich
While this is interesting, Simon would have had to have previously been haemorrhaging cash like the last government for it to be truly representative.
Steve, Southampton, UK
I must say I have reduced my out goings i have cleared all my debts and put money in the bank, yes savings. I have no plan to take out credit again and now only buy what i need, I grow my own stuff, and with like minded people have traded or good old swopping of goods.
Dave B, Bridlington
It was a useful excercise, and yes he is rather lucky to be able to afford to spend that sort of money every month on cafe breakfasts and a lot of socialising. I have already been making my own sandwiches, doing without breakfasts altogether, cutting my shopping bill to a lot less than he has cut it to by buying supermarket cheap labels etc and still I am struggling. If Simon cannot hit anywhere near 40% then most of the rest of us will be lucky to cut any further than 10%, and that is hurting!
Keith B, Leicester
This is a reasonably interesting article but it ignores the fact that Simon was probably reasonably money-savvy in the first place and wasn't wasting cash hand over fist. Making reductions of 40% is very hard if you're prudent to start with but a lot easier when you're wasting massive amounts.
Tommy, Maidstone
What this demonstrated rather well is that what we are actually presented with by the national reaction to the current economic situation is a self-imposed spending cut to prove a socio-political point, rather than one driven by pure economic necessity.
Neil Chatten, Malvern
Perhaps if Simon had employed some middle management to pay his electricity bill, to do his supermarket shop and another to fill in the endless amount of bureaucratic documentation required for Simon to go about his day to day job then we would have something to compare.
Michael, London
Simon could easily have gone further if he hadn't ringfenced some of the things he did - or thought more flexibly about them. Could he have switched to cycling to work, saving his tube ticket price? Similarly, he could switch to making his own beer instead of buying at the pub. I suspect that he could have made further cuts easily. Getting rid of the TV and watching programmes on iPlayer instead and making our own bread are some of our latest economies. Also, he hasn't tried to increase his income... a critical part of any budgeting exercise.
Nicola Morris, Southfields, London
I think Simon has done better than he thinks here. To really compare his own spending with the country he should be treating his mortgage as the debt he needs to pay off, rather than as something he needs to save on (although savings through refinancing would be nice for the country as well). So if the debt is excluded from his calculation he has actually achieved savings of about 34%.
James A, Reading