The responsibility of borrowing

Brown out now.

Jonathon Freedland pointed out in his book 'Bring home the Revolution' that that the Americans are not keen on QUANGOs because they are fundamentally undemocratic.

I agree, and therefore cannot work up much enthusiasm for yet another QUANGO the mooted Office of Budget Responsibility.

Which part of 'democracy' do these politicians get?

Is the BBC out to commit some form of ritual suicide in the event of a Tory election win. This headline, https://tiny.cc/FUZdh could equally well have been Mandelson admits to lie over original dates of Russian meeting. However it is not. Why does Osborne headline with Mandelson buried at the end of the article? I know what I think, I also believe that many thousands of others think the same.

Is Gordon Brown gambling on spending and borrowing to get us through a recession? That's certainly what he and his chancellor have led many people to believe. It is not, however, what the prime minister actually said this morning. Nor does it appear to be what the government's actually planning to do.

No Nick, that's exactly what they're planning to do.

After all, they had to borrow to pay for that £2.7bn tax cut to end the political crisis over scrapping the 10p tax rate.

No Nick, they didn't end it. Get real.

What ministers cannot afford to do is to appear reckless about borrowing or spending.

No Nick, what ministers cannot afford to do is to BE reckless about borrowing and spending.

What has history taught us? Labour governments end in total carnage, every single time.

However, the prime minister also went on to say that:

"As economic activity rises, as tax revenues recover, then you would want borrowing to be a lower share of your national income."

The PM also said 'no more boom and bust.'

Disgraceful.

And you Nick--- you've given up all pretense of impartiality. You ought to be sacked.

"The responsible course is to borrow now to maintain growth and output, and to reduce borrowing as a proportion of GDP as the economy recovers and tax receipts rise again."

I may be cynical but to this Government if £100 billion is borrowed this year and £50 billion borrowed next then 'borrowing has reduced' - true but DEBT has risen. The Government should be saying that DEBT as a proportion of GDP should be reduced - if this does NOT happen then all that occurs is that there will be a new credit crisis when the Government, as opposed to the banks, can't service its debts.

'What ministers cannot afford to do is appear reckless about borrowing or spending.'
(Chokes on biscuit and sprays mouthful of tea at monitor!)

Brown's big plan for recession is the same big plan he's been running during the boom years - tax, borrow and spend. The same policy that helped us get into this mess in the first place. All the "hard pressed families" up and down the country will be dealing with their drop in disposable income by cutting back on spending, not maxing out their credit cards.

I fear that the taxpayer will be paying off this man's folly for generations to come.

the prime minister is playing god with the future finances of this country this is typical of a megalomaniac that just cant help himself.
will he reduce the wage bill of mp's to help pay for his loan? no he will give himself a pay rise as always.
so when it all goes wrong we can only assume that income tax will increase, duty on tobacco,alcohol and fuel.
as beer sales drop in this country the governments income drops thus a raise in prices is to be expected.
we the people of this country will have to suffer and he will walk away scot free.
there is nothing we can do about it sadly but we will know its coming.
if his borrow and spend policy works he will be as big a hero as is possible and the country will survive and be better off, and still our taxes will rise to fund the next high risk plan.

The Golden Rule was the symbol of everything the Chancellor of the day wanted himself to be projected as.

Along with no more boom and bust, the golden rule was the easy to grasp concept (if not easy to prove in actuality) that everyone 'knew' that G Brown knew his stuff.

But the reputation of G Brown is about to be officially buried by the current chancellor, along with his Golden Rule.

Where do I send flowers?

The notion that there are still 'fiscal rules' to break, is laughable.

Brown bent the rules by constantly re-assessing the length of the 'economic cycle' to suit himself. He also put billions off the public balance sheet by duplicitous application of the debt in PFI schemes. Then he mortgaged tens of billions for Northern Rock and other bailouts. Then he announced an interest rate cut ahead of the 'independent' Bank of England, on whom he had already leaned in breach of his own legislation.

Just what do you think is left of the 'iron rules'? They aren't rules if you simply change them whenever something doesn't suit you. They are spin.

How is it countries like Australia and Canada have entered this recession with budget surpluses? They didn't seem to have lots of dazzling fiscal rules, but simply managed their economies better.

Typical Labour shambles. Always ends the same: broke and taxed to death, with the cream of our up-and-coming emigrating to escape the despair.

Why anyone votes Labour is beyond me!

Nick - I was expecting a scathing blog on Mandleson's actions today... will it be online later?

Quote, Nick Robinson: "Is Gordon Brown gambling on spending and borrowing to get us through a recession? That's certainly what he and his chancellor have led many people to believe. It is not, however, what the prime minister actually said this morning. Nor does it appear to be what the government's actually planning to do."

Two words is all you need to understand on this matter: PETER MANDELSON.

re: 2, JohnConstable

I agree, and therefore cannot work up much enthusiasm for yet another QUANGO the mooted Office of Budget Responsibility.

How ironic, the office of Budget Responsibility will end up costing the taxpayer a fortune. No doubt the directorship, probably with a five hundred grand a year (plus) salary will be a reward for political obedience ... I feel sick.

I don't agree with all this borrowing, however if its spent on decent things its better than what the TORIES have always spent large borrowing on. (usually tax cuts for the wealthy), for over 18 years they pushed up borrowing one way or another while hospitals and schools crumbled and society DIED!

We might have fairly high debt now, but at least some of the money has been invested in the future of schools and hospitals etc.

"power to the ppl"

3:40pm on 27 Oct 2008
However, the prime minister also went on to say that:

"As economic activity rises, as tax revenues recover, then you would want borrowing to be a lower share of your national income."

The PM also said 'no more boom and bust.'

Disgraceful.

And you Nick--- you've given up all pretense of impartiality. You ought to be sacked.
The responsibility of borrowing
3:37pm on 27 Oct 2008
Is Gordon Brown gambling on spending and borrowing to get us through a recession? That's certainly what he and his chancellor have led many people to believe. It is not, however, what the prime minister actually said this morning. Nor does it appear to be what the government's actually planning to do.

No Nick, that's exactly what they're planning to do.

After all, they had to borrow to pay for that £2.7bn tax cut to end the political crisis over scrapping the 10p tax rate.

No Nick, they didn't end it. Get real.

What ministers cannot afford to do is to appear reckless about borrowing or spending.

No Nick, what ministers cannot afford to do is to BE reckless about borrowing and spending.

What has history taught us? Labour governments end in total carnage, every single time.


.......................

One trick pony with nothing to say. This article is not in any way biased to of supportive of Brown. Find somewhere else to rant your ill-informed prejudices.

Since 1997 and the rise of the Blair/Brown Axis of Evil regarding the welfare of the British Economy, few commentators talk abuot the 800,000 or so people we have added to the public payroll, are they still needed and who pays their wages and pensions.

The currency speculators and others in hedge funds look at sterling as a sure thing regards its spiral of decline.

Unless and until the British Government take hold and reign in the often useless and reckless Public spending on Officials who produce nothing but are on the payroll for life, with index linked pensions to follow, then international currency markets will not take stelring seriously and bet agianst it, just as Soros did to Major and Lamond.

I have been forecasting a run on sterling for three months to banking friends and advocated an all powerful dollar. ( The only reserve currency standing) They did not listen then, but may do when sterling hits 1.4 or less to the US Dollar. Should this economic and financial "Tsunami" continue to Christmas, then sterling may go back to 1;1 for a US Dollar and the IMF will be called in to see Mr Brown and his buffoon Chancellor.

Whilst savings and pensions in the Private Sector are being savaged and decimated, the Civil Servants with gold plated pensions smirk quietly in the background as their Champion Brown plays the by election game in Scotland. Those in the BBC should reflect on their own consciences, when they give Brown and his Cohorts such an easy ride. Sterling lost 10% last week against the dollar, shall we see another 10% this week before you start to hold this Government to task? Those who save, those who are honest, those we take responsibility for themselves and their families lives, are financially being wrecked by Brown and his final grab for the ultimate Socialist State

I'm generally satisfied that taking a more investment and employment led policy is the best way forward whether that is paid for by reduced earnings or raised borrowings. The numbers are complex and leave that up to economics experts and vested interests to argue but I'm looking to where the puck is going to be. This is just a blip and anyone who gets too caught up in it only has themselves to blame.

I've been around enough companies that went bust and people who are now dead, and spent enough of my adult life kicking depression that I'm not going to lose my mind or fall down a hole now. I don't care whether it's business, personal life, or running an empire, the underlying mechanics is the same, and I don't just intent to survive but prevail.

By all accounts, this recession isn't going to anywhere near as long or deep as previous recessions. Plus, there's people around like, say, Philip Green who have the right idea. The retread economists and vested interests have had their day and are just procrastinating. Change and the challenges of change are here, today, and if they don't get with the programme we'll see who's left standing when it's done.

See you on the other side.

re: 10, SimonGeorge

Where do I send flowers?

Where can I wee?

Brown's plan for recession borrow a lot and spend a lot.Does he want us to all to do the same? Brown the Boom and Bust leader.

10.

Gordon loved making rules when the economy was humming along; funny how everything falls apart like a pack of cards at the first sign of trouble.

He keeps on about "investment".Can we talk about "spending" please.

ANd do chase Mandelson.He is in Moscow again!! Hopefully he has a visa this time

ppl @ 5

And you Nick --- you've given up all pretense of impartiality. You ought to be sacked

What on earth is wrong with Nick's blog this time? - I can't, for the life of me, see that it's written with any trace of an anti BTP slant.

Seriously, help me out here ... what's your problem?

"What ministers cannot afford to do is to appear reckless about borrowing or spending."


I assume you've been in a coma for eleven years and someone else has been pretending to be you all this time. I mean, are you serious?
The Taxpayers’ Alliance estimates that Labour wastes £81billion annually on useless projects and bureaucracy.

"Prudance Brown" has been rumbled and his days are numbered. He's on a complete scorched earth policy from now until polling day. He'll either (a) convince enough mugs to vote Labour with his "investing" or (b) leave nothing in the cupboards for the Conservatives. It's win-win for this cynical bunch.

Roy Hattersley certainly thinks the government is going to borrow and spend its way out of a recession using 'good old fashioned Keynesian economics' (he used a similar phrase on BBC's Question Time last Thursday).

Is he mistaken?

Rationalising public spending by changing priorities; 'helping' benefit claimants 'back' into a shrinking or non-existent job market; sounds faintly like a Tory policy.

(Perhaps they will be put to pouring concrete on some of those 'public projects').

Nick,
There is no point trying to say nice things about the tories to make up for the blatant disregard for bias last week. The front page of the BBC news headline is " I made a mistake, admits Osborne". If you actually listened to the news at one, you will know that he continued to deny any wrongdoing, but said that it was a mistake to be in a position where people could think there was wrongdoing. He is not admitting culpability at all.
Mandelson, on the other hand, is refusing to disclose the extent of his meetings with Deripaska, but this somehow does not make the headline.
Are you now writing economic pieces in retaliation for Robert Peston's political pieces?

I am now past being amused by the antics of the Browns Labour regime.
I note the use of the term "Gordon Brown gambling on spending and borrowing"
Actually he isn't gambling - We are. He, just like all in the political class is totally immune to the consequences of his actions.
It will not affect his income, it will not affect his gold plated diamond encrusted pension. So he happily sells the future of 60 million people just to try and prove that his 10 years of deceit.
I will take him seriously when he stakes his personal wealth on the outcome of his actions.
How about an announcement from The Cabinet saying if this does not work we will resign and forgo our payoffs and pensions
Ah, the sound of silence

meltonmark - Maybe because, despite the best efforts of the Daily Mail mafia and their ilk as mewlingly displayed on here, people can still not bring themselves to trust the Tories. Ever thought that?

Once again, the ignorance of these bloggers is astonishing to me. Thank god power_to_the_ppl and sweetsmellofsuccess will never get close to running this country.

power_to_the_ppl - you really don't understand the points that Nick's making, do you? The government cannot APPEAR reckless about corrowing for fear that the pound will devalue further. And as for every labour govt ending in fiasco, your writing style suggests you are too young to remember the end of the Thatcher/Major tory hegemony. Whilst I am no big supporter of Brown, your ill-informed rantings serve to lose you any vestige of credibility.

sweetsmellofsuccess - You cannot compare the UK to medium-sized economies such as Australia and Canada. What you should do is compare our levels of debt to economies such as the US, Japan, Germany and France. The UK's current level of debt as a proportion of GDP is lower than all of them.

Nick,

I think this is a fair summary and treads carefully between both sides.

For my part, this pretence at now prudent borrowing is classic spin. Whatever happens with the economy collapsing, benefit costs rising, tax income (stamp duty, income, corporation, CGT) shrinking, clearly borrowing is spiralling massively already.

That's before any political bail-outs like 10p funded by more borrowing.

The FX markets aren't buying the spin and are worried the Govt is going to borrow even more than the existing in-built borrowing surge (ie borrowing all the way through a prolonged book) and the now fear there will be even more borrowing to try and buy some votes.

The extent of mistrust of the supposed UK strength is clearly shown by the crashing rate of GBP vs USD or JPY.

O/T why no mention of GB's latest u-turn and ditching a Britishness day. Is it in the bin with slogans like British jobs for British workers.



Simple as that.

We are going to have to rely on Mandelson self destructing, as he inevitably will because it is not going to be reported here.

As for Brown's borrowing requirements, when is he going to address the oublic sector pensions?

My meagre pension pot is shrinking fast but my tax bill does not but I am expected to support all the civil servants who are cushioned from reality.

I understand that falling tax revenues and rising unemployment increase the borrowing requirement but companies are having to cut their cloth according to their means - why not councils?

The legacy of debt for the next government will limit their options for years.

I think the image of the iron chancellor is tarnishing fast.

Pre-moderation - every single message is checked before it appears on the board. All of the BBC's children's message boards are supervised in this way.
Post-moderation - all messages appear on the board first and are checked afterwards. Most BBC message boards are supervised in this way.
Reactive moderation - messages are only checked if a complaint is made about them. This approach is only used on boards for adults.


So we are chlidren?

#3, "Is the BBC out to commit some form of ritual suicide in the event of a Tory election win."

If the Tories win the next election they should be heaping praise on the BBC: after all, the BBC faithfully reports every Tory-derived scandal and prejudice as being rooted in reality, while every Government story is reported along with "David Cameron says..." or Osborne etc.

If I was a Lib Dem, Green, SNP etc I'd be mighty annoyed by this.

Suggestion to the BBC: do some research of your own on the Corfu Yacht affair: namely, is this meeting in Corfu unusual or quite normal. As others have said, government ministers (or possible future ones e.g. Osborne) have to meet major players in the business world. But the media's obsession with P Mandelson has made this one appear unusual. I suspect this meeting was no different from hundreds that happen (and need to happen) every year.

Because Brown can't accept or admit that he is in the slightest bit to blame for our current predicament, when everyone knows he is (not solely to blame, but substantially - look at our currency plummet), he is unable to offer the right answer to it.

The answer is not to increase government spending save where it is a necessary consequence of the recession (e.g. on benefit payments). It is to cut interest rates and cut taxes on ordinary people to put more money into the economy.

Now that we can all see that his boasts about prudence, the end of boom and bust and golden rules were just rubbish. He has conned some of the people for some of the time, but now his poor management of our finances stands revealed.

I dread to think how he can make things worse. But he will manage it. Anything to try to cling to office.

re: 16, correctopinion

We might have fairly high debt now, but at least some of the money has been invested in the future of schools and hospitals etc.

Spending's not the same as investment...!

re: 17, NHH

I eagerly await your explanation of why I'm wrong... somehow I don't think it will be forthcoming.

* * *

Every time you vote Labour a fluffy puppy dies. Vote for anyone other than Labour. Save the puppies.

Its quite easy this NuLabour Chancellor job isnt it?

You tax, spend and squander during a boom and the during a recession you do even more of the same, you just have to borrow the short fall.

Ill run it by the wife tonight, see if she approves of doing the same with the family’s finances for the next 2 years.

Might not be able to print her reply though.

@ 12
too true
its a shame these people cannot be brought to book for there actions.
thus they will wiegh the pro's and con's before the decide upon highly risky plans that will affect the nation as a whole.
may be one day it will happen we can only hope.

Browns game plan is to claim he is bringing forward money from tomorrow to spend today, so overall borrowing will not increase - and claim he is doing it for the good of the economy.

Apparently the golden rule - balanced books over an economic cycle do not count in a downturn. So Darling will abandon them.

Brown as Chancellor only met the rule by manipulating the start and end date of the previous cycle. Now when massive borrowing is needed his government will abandon it.

Brown simply wants to win an election. He will borrow whatever is needed to do that and to hell with the economic legacy he will bequeath the country.

In his mind his measure of success is simply to be re-elected.

He will retire on a handsome pension, with lucrative book and speaking roles. His children will be well set up financially.

Neither he nor his children will need to worry about the National debt that his policies put the country in hock for.

That's socialism for you. Look after you and yours and to hell with everyone else in the future.

GBs fiscal rules are blown to shreds & you say this puts the Tories in a tricky position. That's exactly what BBC commentators said at the Tory conference. Do you think if you say it enough times people might actually forget who caused the mess?

When will this institutionalised BBC rally around Brown end?

They say it takes a lifetime to build a reputation and a foolish moment to ruin it. This is clearly the case here - for Mr Brown and shamefully for you Nick. This is not punchy journalism. This is pandering.

The whole idea of borrowing our way out of this is a disaster. We need to encourage business back into this country with tax cuts, but we also need to cut waste in all public services and scrap some of the large projects being mooted. Trident to start with, but also ID cards would be a massive start to getting public finances in order.

This crisis is lurching on in the economy, and we have wishywashy leadership and wishywashy journalism tackling the issues our government is raising. We should be screaming for an election - as should you Nick - before it is too late

re: 24, sagamix

It's what's not said: there's not a single mention of Lord Mandelmort's wrongdoing. If Nick wants to plunge the knife into Osborne fine, but he should do the same to Mandelson, considering that Mandelson's involvement is a much bigger story.

Rationalising public spending by changing priorities; 'helping' benefit claimants 'back' into a shrinking or non-existent job market; sounds faintly like a Tory policy.

(Perhaps they will be put to pouring concrete on some of those 'public projects').

The New Deal failed because the CBI andtheir Tory pals didn't want it to work, and the 'senior economists' and Tories are opposing the governments investment led strategy by calling for tax cuts.

Government can't do everything on its own, and a little help from the likes of the CBI and their well heeled Tory pals would go some way to creating the innovation and support that's needed to get through this.

The government is correct to identify 'green technology' as a source of economic growth as well as a better world. Effort tends to follow focus so people would be bettter off paying attention than wallowing.

Haul ass, soldier.

Re 31
In your excitement about bashing the tories, you claim that Major/Thatcher left a fiasco. Is this the same major as the one who left after five years of economic growth? Or is the one whose policies were so mad that Nulab promised to abide by their spending targets for two years. They left politically in a fiasco but the point made by all the other bloggers is that Labour always leaves a FINANCIAL mess to be cleaned up by the tories. This one will be no different.

You might care to recheck your borrowing figures once you add in Northern Rock, PFI, public sector pension liabilities, the current bail-outs. We shall see.

re: 31

The government cannot APPEAR reckless about corrowing for fear that the pound will devalue further.

The best way not to appear reckless is not to be reckless. Simple enough eh?

And as for every labour govt ending in fiasco, your writing style suggests you are too young to remember the end of the Thatcher/Major tory hegemony.

Did I mention the Tories?

Conman Dave and Giddy Garbage have no clue, I will never trust anyone who makes the same mistake 5 times in one weekend! hisTORY!

What is it with yourself and the BBC and G. Osborne you just cant leave the story alone. Again Osborne is the headline and Mandelson lower down, you get an interview with D. Cameron and we all want to know his policies and you bang on about the Osborne affair again this time trying to bring Camerons judgement into question as well.

The only judgement in question is the BBC and yourself for not being impartial. Its not just me everyone is saying it, why is the BBC so bias.

As to your comments today they are more pro Labour, you do not point out that the total debt is massive because you lower borrowing in one year this does not get rid of the debt. Furthermore we all know that Brown wants borrowing to be seen as a good thing because its inevitable it will go up as unemployment rises he has no great schemes in mind at all.

Brown and Mugabe - two men clinging on to power and bankrupting their respective countries!!

If Brown couldn't borrow on the markets he would be doing a Hungary or Denis Healey............doffing his begging bowl at the IMF because the country is bankrupt!

It's time to live within our means whatever the consequences.

No more extra Gov't spending, no more taxes, no more borrowing.

Get interest rates down putting more money into peoples pockets. Take advantage of the low pound and "export" our way out of recession through hard work.

Brown got us into this mess by borrowing and spending far too much and saving absolutely nothing at all!

Only the "wealth creators" can get us out of this...............and that is private enterprise.

Set the entrepreneurs free!!!!!!!!!!

So, this article is still biased towards Brown? Not the other way?

Come on, where are the positives? NR seems to be accepting the line that Labour have spent too much irresponsibly and wasted a lot of money, and that the Conservatives would prevent such irresponsibility in the future. I think the Government would certainly disagree with that.

Let's run through the key points:

Para 1 Gordon Brown is gambling (not really a positive word is it?)

Para 2 Brown has been borrowing more than he said he would over the past few years, causing him embarassment as Chancellor (again, is that positive?)

Para 3 The Government's fiscal rules have been broken and will have to be torn up and replaced. They would like people to believe this is a positive development

Para 4 George Osborne is correct when he says people are anxious about Government borrowing

Para 5 Borrowing is too high because of previous Government failure

Paras 6 & 7 Some advisers to the Government might be encouraging increasing spending (as opposed to keeping it constant as per current plans) as they think it will put the Tories in a difficult position

Paras 8 However, this view is reckless. The Conservatives are correct when they say the Government has lived beyond its means. They have a policy (Office of Budget Responsibility) to prevent spending getting out of control (like it has been under Labour)

Hmm. Mandelson must have wrote it

""power to the ppl"" drooled:

re: 17, NHH

I eagerly await your explanation of why I'm wrong... somehow I don't think it will be forthcoming.

* * *

Every time you vote Labour a fluffy puppy dies. Vote for anyone other than Labour. Save the puppies.


....................................................

You are wrong because you cannot understand basic English. This story is reported in a way that is more favourable to the Tories than to Labour. Therefore, to accuse Nick of bias on the basis of this story reveals only the gross stupidity of the accuser.

Yet again I have the uneasy feeling that the Government's policies are not designed for the good of the country. Instead policies appear calculated purely to try and outwit the Conservatives.

Saving Gordon Brown and Labour's skin has cost us billions so far.

I thought the 3 billion pound attempt to bribe Crewe and Nantwich was expensive - but that was just small fry compared.


We are going to be paying for these policies for years.

Financehero: Nice try, but no cigar. The Thatcher/Major years destroyed our economy to the point where Britain was a laughing stock by 1992. Just because Major had a few years of growth before he was kicked out does not change his and Thatcher's chronic mismanagement of the economy (2 recessions in 12 years).

Clearly, once you hit bottom, things will improve - the same will be true here in 5 years' time, Brown or no Brown. But would you give Brown credit for it? Of course not.

In fact, it is Thatcher's deregulation that caused the current mess far more than anything Brown has done.

Re: the recent increase in borrowing through bailouts etc, these are the IMF's figures, not mine. Or are the IMF now part of the BBC save Brown conspiracy?

The crux of this is that if Brown does borrow, then what does he spend that money on?

If he puts the money back into people's pockets then it could work (ie tax cuts), but if he uses it to create non-productive public jobs/work then it's doomed to failure and will lead us into a downward spiral which has already started.

He needs to be specific, and he needs to do it in the next few days, otherwise we're all finished. The downward spiral has started already, and he still doesn't realise it, and he still doesn't understand how economics works.

Either he needs to start listening to people/advisors who understand economics, or he needs to hold an election, and one of those 2 things needs to happen right now.

Mr Robinson you said, "In theory, governments could cut spending or raise taxes to avoid this. No serious economist or politician I know of is arguing for this".

You must be kidding, surely?! As any fule kno, this government (according to the Taxpayers' Alliance) has masterminded the waste of a staggering £101 billion of taxpayers' hard-earned spondoolicks in the year 2007-08. Are you sure that "no serious economist or politician" is not now arguing that the government should be doing what I and millions of others like me are now faced with doing - that is, squeezing our budgets until the pips squeak? Let's call that "cutting spending".

Gordon Brown is treating this crisis as a golden opportunity to borrow and spend the country into destruction (he was well on his way to this before the current debacle). Remember, Brown's track record is one of a man who has a remarkable ability to filch banks' and taxpayers' cash (the latter deceitfully) and spend (waste) it on a galactic scale (the other side of the Flash Gordon coin). That's why we're in this unholy mess, and furthermore why the UK is in the most parlous state of virtually all the OECD countries. So much for the arrant nonsense (well, lies really) that the UK was well placed to weather the storm. How do they get away with such screaming, barefaced disingenuity?

As for the Tories' Office of Budget Responsibility idea - risible. I want an elected politician to be responsible for the public sector budget, ie the Chancellor of the Exchequer. And I want about 650 other politicians to hold him to account in Parliament. I do not want another quango or some other committee who can be blamed for yet another politician's incompetence as his budget crashes and burns around his ears. You can just imagine it, "It wasn't me guv, it was that lot in the Office of Budget Responsibility who cocked up ...".

What on earth has gone wrong with our political class? As this crisis gets deeper, my faith in politicians shrivels.

Dear GHBRich,

You state - "You cannot compare the UK to medium-sized economies such as Australia and Canada". But why? Is there some structural reason why larger economies must run higher deficits?

Asfor your comparison with Japan, USA, Germany and France. Are you comparing like with like? Do any of these countries have PFI liabiities off balance-sheet?
Moreover, you seem to be forgeting that the Japanese deficit springs from their GVN's failed attempts to kick-start their economy with increases in public spending. The very policy that Brown wants to emulate.

One further point, if the UK economy is in such a great shape, when compared to Japan, Germany, America and the Euro zone - then why is Sterling falling through the floor, agianst all of their currencies? And don't repeat the GVN line that the markets are dicounting expected interest rate cuts, because similiar cuts are expected world-wide.

Good post though...

On the topic of bias...

I accused the BBC of bias in their reporting of the Osborne affair, but I can see none in Nick's latest post.

#46 power_to_the_people

Simple enough if you have no understanding of economics, yes. As Nick correctly says, every schoolboy economics student understands that spending must be increased in a recession. As governments found out to their cost in the 1930s, doing the opposite turns a recession into a depression. Like I say, thank god you are not in charge of our economy. Even Cameron accepts that spending should increase. But obviously you know better.

And no, you didn't mention the tories expressly, but if the point of your comment about labour govts ending in fiasco wasn't that tories do better, I'm struggling to understand what you were getting at. Explain pls?

So this is Gordon's way of saying put all your debts together over a longer term and everything will be all right - you'll even have enough money left over to go on holiday.

Carol Vodermann does it better, and I don't believe her either.

Nick,

during the good times the chancellor, as he was then, continually said that he was investing in the health service, or investing in education or investing in the railways, or anything you care to mention the mantra was investing.

"The responsible course of government is to invest at this time to speed up economic activity." That is his latest quote.

So, all the investment was to speed up economic activity was it all along. So, the wonderful Gordon has now admitted that all along it was not investment it was spending, now don't be fooled, he is not investing he is spending. I say he because he seeems to be both PM and chancellor.

The man is a complete idiot.

May I also quote the former leader Tony Blair from his speech to the labour party conference in 2001:

'Today conflicts rarely stay within national boundaries. Today a tremor in one financial market is repeated in the markets of the world. Today confidence is global...'

Now then Gordon are you trying to tell us that you were not listening to the speech of the previous great leader, or did not help to draft it, especially as the economy was your sole concern.

I'm sorry Gordon, you really should get somebody to give you good advice. Project Griffin continues to gather momentum.

ceh @ 19

this recession isn't going to be anywhere near as long or deep as previous recessions

That's a big call, Charles, a very big call. We will see ... as the blind men said on hearing about the revolutionary new optic drug entering its final testing phase.

"49. At 4:52pm on 27 Oct 2008, IDB123 wrote:

Brown and Mugabe - two men clinging on to power and bankrupting their respective countries!!"

I fear you may be right. Ten years sulking in the background whilst golden boy Tony kept on winning elections and getting all the glory. It seems that now the crown is on his head Gordon will do everything in his power to keep hold of it. How much debt burden will be loaded onto our children's future for one mans ego?

ppl @ 43

It's what's not said: there's not a single mention of Lord Mandelmort's wrongdoing

Yes but the topic is government borrowing, isn't it?

Would be nice to namecheck Hart and Foy in every piece but it might look a bit, I dunno, funny.

ppl @ 43

It's what's not said: there's not a single mention of Lord Mandelmort's wrongdoing

Yes but the topic is government borrowing, isn't it?

Would be nice to namecheck Hart and Foy in every piece but it might look a bit, I dunno, funny.

The cupboard is bare Cameron notb know how to move on and explain his policy in further detail? He is sooo disappointing...

re: 52

Therefore, to accuse Nick of bias on the basis of this story reveals only the gross stupidity of the accuser.

It appears that you cannot understand basic English. See 43. Yawn.

Presumably you resisted pressure to write this piece Nick? Brown said: "The responsible course of government is to invest at this time to speed up economic activity."

Yet we are supposed to believe this means no increase in spending? So this will be just a reallocation from those "essential front line services" we keep being told cannot spare a penny whenever tax reduction is mooted. Come off it.

Who ever heard of a stimulus package funded from within existing spending plans? If this was your attempt to swap jobs with Peston I think you just talked yourself out of the job.

northern @ 50

Only the "wealth creators" can get us out of this...............and that is private enterprise

Very much doubt that seeing as they got us into it.

"The responsible course of government is to invest at this time to speed up economic activity."

Borrowing to pay unemployment benefit is not investing.

"As economic activity rises, as tax revenues recover, then you would want borrowing to be a lower share of your national income."

Sums the Brown philosophy.
Borrow loads in a recession, borrow during a period of growth.

When does he pay back some of the debt, he cannot sell radio spectrum every year?

Does the BBC have any news on the Mandelson front yet Nick?

This comment was removed because the moderators found it broke the house rules. Explain.

gordon @ 55

If he puts the money back into people's pockets then it could work (ie tax cuts), but if he uses it to create non-productive public jobs/work then it's doomed to failure and will lead us into a downward spiral

I think the idea is to put it into productive public works. The risk with a tax cut is that people will be sensible and spend it on debt reduction.

I've lost it. Once upon a time the BBC employed a Political Editor, a Business Editor and an Economics Editor. Now we have Robert Peston opining (with what ought to be viewed as career-halting bias) on shipping news from Corfu, Nick Robinson giving his views on public sector borrowing, tax rates and the like and Hugh Pym .... er, popping up on TV now and again and giving his imitation of that awfully sound chap from the Upper VI who has always done his prep.

Shouldn't cordwainers stick to their lasts? Or have Brown, Darling and the rest of them so fudged all aspects of modern life into such a single politico-economic commercial hash that it's all inter-changeable?

Come on bloggers, let's push for 1000 posts on the previous entry!

What are the Tories going to do? They have a big chance to put one over Labour and yet I hear nothing. Are they thinking that people will just vote for them because we are in a recession/depression (delete as appropriate)? People are fully aware that New Labour is a continuation of Thatcherism but with a social conscience. Does anyone seriously think that the Tories would have raised Interest Rates because house prices were too high, that people were using too much credit?

When I hear/read people discussing the economic crisis and I come across comments that blame Broon for the global crisis I just switch off. They're idiots!

Don't know if people are aware but there's half a chance of getting up to 1000 posts on the previous blog ... just needs another little push and we're there!

Keynes wrote his stuff when we had a manufacturing industry. Public Projects used to make work for British people who then spent in the economy - now it will only stop Polish builders going home (but not sending their money there) and suck in more imports.

Similarly a low pound used to help manufacturing industry to export - now it simply starves our companies of investment as no-one can invest in the UK and rising import prices drives inflation.

Lastly, low interest rates will encourage us to put our savings abroad, starving our banks of the funds they need.

New solutions required please!

www.kontraband.com/videos/13991/The-Dark-Bailout/#show

Says it all .....

Nick

So you finally acknowledge that

1) The the impression that Brown gives
and
2) What Brown says
and
3) What Brown does

Are not related.

The natural conclusion is that Brown is either a liar, or delusional.

Which do you think it is Nick?

Sorry to ask you to dis a close friend, but it is your job and what we are anually mugged to pay you for.

In your excitement about bashing the tories, you claim that Major/Thatcher left a fiasco. Is this the same major as the one who left after five years of economic growth? Or is the one whose policies were so mad that Nulab promised to abide by their spending targets for two years. They left politically in a fiasco but the point made by all the other bloggers is that Labour always leaves a FINANCIAL mess to be cleaned up by the tories. This one will be no different.

The Tories decimated industry and left millions on the scrapheap while the infrastructure crumbled. Labour have brought things back to the stage where people have jobs, communities are being included, and the infrastructure is in rough shape. The Tory business plan is just more Thatcherism which would knock us back and nobody in their right mind wants that.

If there's one thing that annoys me it's that I can see some pluses in Tory governments and cut them some slack, but the Tories and their little helpers in here can't find that in themselves. At the most basic level that's ignorant and selfish, and doesn't hold water under the most cursory of analysis. It's certainly not a replacement for a proper sense of vision and it's not very people friendly.

I hear some folks suggesting Gordon Brown should put his pension plan on the line if his policies don't deliver. Here's a reality check: if Gordon Brown acted with a fraction of the maturity as they did the country would already be sunk. Any fool can mouth off from an armchair but making it happen is the only part that counts. If the "Brown Plan" works can we count on them donating their pensions to the Labour party?

Set the entrepreneurs free!!!!!!!!!!

The idea of freedom plays a key role in Plato's moral and political thought. In the Republic justice is shown to be beneficial because the just man alone is truly free. There are parallels here with modern discussions of freedom. The Laws argues that to be free a city must avoid the extremes of liberty and of authoritarianism. The legislator should rely on persuasion, not force, so that people willingly obey his laws. The underlying idea is that we are free if we willingly follow the demands of reason rather than being coerced by external forces or by unruly desires.

Abstract: Plato's Doctrine of Freedom, R F Stanley.

This outline is very Daoist in its reasoning insofar as it recognises realities and self-actualisation, and highlights the benefits of positive goals over mere punishment. I leave it to the reader to decide which of Gordon Brown and David Cameron lie closer to these ideals.

62 Sagamix

I agree with you there.

In actual fact, I get the sense that there is nobody, neither in any party, or any economist anywhere who has got a clear vision or plan - which is worrying.

It seems to be a case of the blind leading the blind.


My central beef with our government are that we are so poorly prepared for a downturn. I think they genuinely believed their "we have ended Boom and Bust" hype and didn't prepare.

There is no way the government can get through the whole recession spinning that they will increase spending, without actually increasing spending.

If they just re-allocate and re-prioritise funding during the down turn, that won't fuel growth will it - surely? Because there will be no new money in the system.

I can only see one outcome - that because the government did't get debt down during the good times, they are going to have to hike debt up even further during the bad times. That is expensive

Borrowing = future taxation.

We are all taxed to the hilt. Now he's going to tax us more.

Never mind. We can all claim tax credits. Fine (unless you are self-employed, in which case it is a nightmare)

ngodinhdiem

I assume your "good post" comment is sarcastic, althogh I was rather proud of it.

Surely you are not suggesting that like-for-like comparisons are wrong?

The debt figures are the IMF's, not mine. And yes, I am sure that ours is not the only country to find ingenious ways of keep debt off the books. And the Japan example merely proves my point - the so-called lost decade was a direct result of the Japanese government not spending money quickly enough and prolonging a recession - a bit like the 30s in fact.

As for the devaluation of Sterling, please explain why I am not alloweed to advance the interest rate argument, despite the fact that you had no counter-argument to it. And how about the Australia? Their currency has plummeted far quicker than ours and has required govt intervention to prop it up. yet Australia is, according to you, an example for us to follow.

I do think yours was a well thought out and articulate post. Unfortunately you are about as well informed as Sarah Palin.

54. "In fact, it is Thatcher's deregulation that caused the current mess far more than anything Brown has done."

Taking supervision of the banking sector away from the Bank of England has IMHO contributed greatly to this fiasco. As far as I can see, the FSA has been tasked with supervising the way in which financial products are sold. It should be tasked with supervising the types of product available and saying no to 100%+ mortgages. It should also be scrutinising the "rocket science" products to see if there is any real worth underpinning them. Generally, they're just gambles. Also, lenders should not be allowed to shift loans off their books, which leaves them free to lend again and again against their capital base, often with no responsibility for collecting the money owed by borrowers.

Yes, Thatcher deregulated, which enabled London to become a financial powerhouse, but it was Brown who effectively removed the supervision which is essential in any deregulated market.

We should also examine the role of the major shareholders. In their fairly understandable enthusiasm for large dividends for the pension funds, they were castigating any company that didn't produce double digit increases in profits - at a time of low single digit inflation. A total nonsense, but Brown's raid on the pension funds probably caused this attitude.

I really believe that Brown doesn't understand how the economy works, and that's scary.

Nick

By the way - any update on Mandleson disclosing his diary?

I know he was in europe when we (the public) finally forced MP's to disclose their expenses... but surely he isn't so 'out of date' that he thinks secrecy is still 'the norm'.

You will be reminding him regularly wont you?

A week of headlines over osborne when there was no suggestion of illegality should justify... say a month of headlines about Mandleson refusing to disclose information?

Look forward to your coverage -- no rush, next blog will do.

GHBRich,

Yes we all realize that GVN borrowing will increase in a recession, as welfare bills go up and tax recepits fall.

This is not why Brown is culpable. My gripe with GB is that he failed to significantly reduce GVN debt in the good years. He ran budget surpluses for Labour's first term (by ironicaly following Tory spending plans) but then he and Prudence got divorced :)

Remember, Brown claimed that 40% of GDP was the maximum that a GVN could prudently borrow, at any time in the economic cycle. But by running GVN borrowing so close to this limit in the good years (2001-7) he left cupboard bare for the recession to come. Perhaps, Brown had come to believe his own rhetoric that he had somehow abolished 'boom and bust'. So with the nation's credit card maxed-out and near (if not over) its limit, what will we do when the recession really bites?

Mt fear is that we might not be able to borrow more money. After all, who is financing this debt? How long before we go cap in hand to the IMF again? And trust me, they will only lend, if we agree to serious cuts in public spending...

I reckon amongst taxpayers (in contrast to non-income-payers) 80 out of 100 would prefer any extra borrowing to result from ... TAX CUTS (something we used to experience under the Tories, but is now forgotten as a possibility).

Public Spending? Labour could not organise a beer-drinking gathering in a brewery. I reckon each £5 mn. of public spending adds 10 times more to public pension liabilities than to any useful output/outcome.

Incidentally it's so nice to have the nuances of Brown's policy explained by someone so close to those at the power table.

My central beef with our government are that we are so poorly prepared for a downturn.

Government can't force businesses to be innovative and look after their people, and workers to be realistic about pay and making dumb decisions. That's something that business and society have to learn for themselves.

Before this crisis blew up the feintest whiff of a slowdown saw famous name companies slashing R&D and loading up the hopper with P45s, and workers dashing for inflation busting payrises before the door shut.

Sure, the government has some responsibility and other folks may have been a bit greedy, but procrastinating just limits your own scope for developing success and ignores the fact that you're "other people" to someone else.

Funny thing, perspective.

#85 pammyammy

The Conservatives would like to blame the impact of the financial crisis on the UK, on taking regulatory powers away from the BoE into a new organisation, the FSA.

Doesn't wash though. I understand why they say it though, as it is about the only comment they can make without sounding terribly hypocritical and totally lacking any credibility whatsoever.

The powers that the BoE would've had, sit in the FSA. The only conceivable impact of keeping the powers in the BoE would have been to improve coordination of A RESCUE after the crisis begun, and even that is debateable.

The ONLY thing that would have protected the UK was far stricter regulation. The Conservatives were SUGGESTING THE OPPOSITE before 2008, and are not advocating re-regulation now.

The State would have needed to get involved in:

* Dictating to banks who they can and cannot lend to (no, Mr Banker, you do not know best who you profitably lend to and which risks are too great for you. The Government does)

* Preventing banks from holding complicated (and risky) securities on their books (no, Mr Banker, you cannot hold that asset. We, the Government, think it is too risky for you, you do not know best)

* Intervening in banker renumeration packagers (no, Mr Banker, you cannot structure your bonus schemes like this - it'll give your staff the wrong incentives. The Government knows best, and we think you should structure your schemes like this)

A side-effect of unilateral tough regulation such as this would have been a massive flight of capital and firms from London to New York, Shanghai, Frankfurt etc.

I'm sure the Government would have been supported in taking this tough regulation by the Conservatives, even if it meant the flight of City firms from London. Really.

#54

It's not deregulation that's the problem. but how a deregulated system is policed.

The FSA has enourmous powers at its disposal. These are set out in the Financial Services and Markets Act 2000. At the time the FSA was created those who worked in compliance in the the financial markets were actually quite spooked at what type of monster it was.

One central plank of the FSA's approach to regulation was/is to hold senior management responsible for the actions of their firms. There may be enforcement action in progress, although I've not heard of any.

It's the job of the FSA to police the system. However only a short while ago we heard that if they had done so they would have been charged with undermining the success of the financial system.

And then we hear from the head of the FSA that they're going to stop regulating on the cheap.

What we also know, is that after 9/11, the US economy was boosted by low interest rates and a rush to property - thus inflating property values and creating this bubble that was bound, at some point, to burst.

We also know that in creating the FSA, which commenced regulating on 1st December 2001, the sector specialists were disbanded. Gordon mentions this fact with some pride. It took ages for the FSA to properly understand all of the businesses within its remit - and even to understand it's own rule book. It turns out it never did really understand the banking system. Such regulation should probably have been left with the Bank of England, but if I recall correctly, the BofE's remit was removed through an act of revenge or something or other.

So, the problems we have today are all down to Thatcher, are they? Was the boom under Brown down to Thatcher too?

As I've said before, are all road deaths down to Henry Ford?

Chuck_E_H..... @81,

Jeeez! Just how much tosh can one man write?

Anyway, I thought you were emigrating to Japan.... (As if they lack merchant bankers of their own).

All together now:

I think I'm turning Japanese
I think I'm turning Japanese
I really think so.

I'm interested at the number of people on these and other blogs who are in some way scared of the Tories. Let's look at the last few times the government has changed hands. A the end of the 70s we had a general strike, inflation and interest rates wholly out of control, and unemployment heading up very very rapidly. When the Tory government who took over handed over power to the Labour party in 97 they handed over what is widely accepted to be the best economy handed from one government to the next in over 100 years. It was in fact so good that Gordon Brown agreed to follow the same plans for 3 years. Then after the 3 years were up he went on a programme of massive spending. Most of it on the army of 800,000 bureaucrats added to the government since then. The spending was funded by excessive borrowing, and stealth taxation. Taxing dividends on shares was a particularly clever move for example, since most people wouldn't notice it until they retire as paupers. Now troubled times hit (as they always do despite lies about no boom and bust), Britain is the worst placed economy in the world to cope (with the exception of a few like Iceland). We come out 4th on a list of amount borrowed in the country (total - personal, government and corporate) compared to GDP. Iceland was top of the list. Switzerland and Netherlands are the 2nd and 3rd if I remember correctly. If Labour lose the next election they will hand over a wreck of an economy again, which the Tories will have to spend another 15 years trying to repair like they had to in 1979.

Nick,

What can be witnessed by his handling of this crisis is that Gordon Brown is clearly out of his depth. He is clueless and I am very surprised that anyone with more than 1/2 a braincell would actually believe a word he says or even offer to put any amount of trust in his 'global plan.' All this nuLabour government has been good at is spending our money recklessly and employing good spin doctors. They clearly have no idea about economics and about how to deal with the crisis we are experiencing now.

As I keep stressing. The current credit crunch (banks not lending to each other) is not the cause of the problem we are experiencing. It is a result of the problem. Increasing spending and loosening 'fiscal policies' (like the reckless, irresponsible Greenspan Fed did, which was a major contributor to the current problem) is not the solution. You don't give a cocaine junkie more cocaine to solve his problem.

All our dear leaders and particularly GB who still can't see what damage Alan Greenspan has personally inflicted on the global economy, don't realise this, or have chosen to stick their heads in the sand.

There will be no lasting solution (merely band aids on the gaping wound) until they wake up and realise this.

I agreed to the financing of the stupid banks but I do not agree with government borrowing to assist our failing economy. It is a bad example to those who have become used to living on others money rather than live within their own income. It is time the younger generation and middle aged woke up to the fact that bills have to be paid eventually and the longer you put off paying the interest you have to meet far exceeds the value of the item thought to be essential in the first place. Don't they teach economics at school any more or has that gone the same way as history lessons? I am and OAP I live within my income and live each day so that I can look every damn man in the face and tell him to go to hell. It is a nice feeling and one I reccommend - try it The "Jones" wont pay your bills why try to impress them?

This is more like it

ngodinhdiem

I agree with what you say and have a similar gripe with you about gordon brown - I am not a supporter, believe me!

What annoys me, though, is all this looking backwards. The prevailing view seems to be that Gordon Brown is to blame for this mess by borrowing too much in the good times (I largely agree), so the answer must be to reduce borrowing now. That doesn't follow and is basically the "my dog has four legs" line of reasoning.

Whatever the failures of Brown in the past (which is a worthwhile debate to be had when the economy starts growing again), the question is what do we do about it now.

IMHO, the answer is borrow more and increase spending to kick start the economy out of its moratorium. Some tough decisions will need to be made when the corner has been turned, but all this knee-jerk reaction stuff about tightening our belts and cutting spending now is EXACTLY what caused a depression in the 1930s.

Brown needs to borrow to keep current spending up as the political price of not increasing spending is to be accused of making cuts in spending: not something a Labour leader wishes to do as his main client group relies on taxpayer funds for their lifestyle.

However, there is no forward plan. There never has been a forward plan other than to keep feeding the state sector with taxpayer pounds. There hasn't even been a plan to make the state sector more productive.

The simple reality is that government policy has to hold off doing anything more than keep the ship afloat until the economy hits the bottom. Only then will anyone know where we are and it will be grim.

Then we will have to consider Keynsian policies to pump prime the economy. I stress the economy and not the state sector.

Out of all this the state sector has to shrink to fit the economy we will have. Sure, we will need more regulatory supervision of the financial sector but since the financial sector is also going to shrink this need not involve much more cost than we are currently paying. But in what other areas can extra spending on regulation be justified? None as far as I can see.

As one of the old manufacturing sort I want to see a return to production in the UK economy as the value to be derived from such investment is more than any other return now possible. This can be done through pump priming and could initiate technical breakthroughs in fuel cell technology, renewable energy and pharmaceuticals to name a few.

The markets are currently crashing. They will or are overshooting. The consequential sort out will be tough, However, there is a future and we need to start thinking now as to how we will build that future.

Just sploshing taxpayer pounds to keep your client groups happy is just not acceptable. We are either in this all together or we lose everything: a bit like 1940 all over again but you can forget any talk about the `Dunkirk spirit'.

For those of you still wondering exactly what Mandelson effects in politics, think of it this way - his return is akin to pouring concrete into the sewage system.

QED

The credibility of the government is already shot. As well as a domestic recession, the pound has fallen like a stone, which will inevitably lead to much higher inflation and the poor will be hit the hardest. A fall of nearly 25% against the dollar in the last two months will be hugely inflationary, as the Chinese and many other currencies are linked to the dollar. A normal response to such 'stagflation' would be higher interest rates to improve the exchange rate and head off inflation, coupled with fiscal measures such as tax cuts. Instead, we are probably going to see more interest rate reductions, even though real rates are already negative, i.e. lower than inflation, and more public spending. If this does happen it will be the end of any pretense that the Bank of England is independent.
This is not an economically rational response, it is a purley political one to try to head off defeat at the next election and we are all going to pay the price for that. This is back to the 1970's.