Pre-Budget report plans imply cuts

Paying back the debt or servicing it?

Good question Saga, my guess is hidden option 3 - cutting the deficit.

The banking bailouts effectively moved bank debt to public debt in the blink of an eye...and the bankers will still get their bonuses/increased basic salaries.

...and still not a single politician or banker has appeared in the dock for this fraud i.e. the greatest transfer financial liability from rich to poor, in history.

DEMOCRACY IS SHAM!

Because £2,400 per family over 8 years (if we mean that, rather than per annum over 8 years) is not very much. Guess it's per annum. And even that (£50 a week) is not that much if it would PAY BACK the debt. You mean SERVICE the debt, I'm betting. Can you clarify for me please, Nick? Cheers.

No surprise they (the government) have not been completely open about what their plans actually mean.

And when you see how easily the banker bonus tax can be avoided (took me 20 seconds to find two 100% guaranteed loopholes) what was disappointing was not the tax, not that it would be unsuccessful in generating income but that the government was so dense it could not see the safe loopholes (if I saw two then there must be loads more). How much do the government understand tax and finance ?

It was also a surprise that despite the massive borrowing, how much it is going to cost us and how long it is going to take to pay-off that they intend to tax and spend for the next few years !! Amazing really.

What we seem to be achieving is wasting our way out of recession. The waste might help get us out of the recession slowly but if we spent the money usefully we would end-up with something for the money (roads, housing or something rather than just money wasted and gone forever).

So now we begin to get the true story...

So much for "a serious man doing the serious work of cutting the nation's budget deficit".

Looks more like a shameless politician trying to pull the wool over our eyes for electoral advantage to me.

36 billion pounds in cuts plus say some 8 billion raised through higher tax and NICs imply the government has failed to halve the structural budget deficit, which the OECD estimated at 100 billion pounds (over 4,200 pounds per person working in the private sector) last april - this estimate may have well prove optimistic by the way.

Re the OECD's structural deficit estimate I refer you helpfully to:

https://news.bbc.co.uk/2/hi/business/8004567.stm

Please note that the IFS will have used the Treasury's optmistic growth forecasts for 2011 and beyond ans also note that many government departments sponsor the IFS.

Do you ever get the feeling you've been cheated?

sagamix 1

First of all, it depends on what "the debt" is.

On a very very VERY rough estimate, the total of the excess expenditure by government as a result of the extra expense over the course of the recession and the recessionary collapse in tax revenues is £400bn. That is what I am calling "the debt". Assume there are 20 million families, so that's £20,000 each. Aim to pay that off in the fashion of a mortgage (see

https://bbc.kongjiang.org/www.bbc.co.uk/homes/property/mortgagecalculator.shtml

for a handy calculator),

over 8 years and with an interest rate of 5%, and you get to a cost of £3100, per family, per year.

It doesn't answer your question, but it replaces NR's glib comment with something actually resulting from a calculation.

You/Institute of Fiscal Studies say: Pre-Budget report plans imply cuts

I don't agree with this: I don't think Labour are capable of making meaningful public spending cuts, and certainly not on this scale. They've never done it before now; rather the reverse, they've always insisted that they would protect public services investment. Protecting public services is simply a pre-requisite, a non negotiable.

I think we are looking at further and massive tax rises; Labour will try to soak the rich, but ultimately as this Budget has shown, everyone earning over £20,000 will pay. And investment in public services will thereby be protected.

From memory, I think someone yesterday said the 0.5% increase in employees' national insurance would raise ~£3 billion. So to sort the deficit of £78 billion next year alone would require a 26% increase in employees' national insurance. I'm sure therefore that it will be spread around as much as possible: possibly 3-4% on VAT, 4-5 pence on income tax, alcohol duty etc etc. But that's basically just solving for the same number in terms of shortfall another way.

FYI: Happy to stand corrected on how much the 0.5% raises if I've got this worng by the way; I don't have time to follow all the detail as I work for a living; but even if the number is wrong, suspect the situation still requires massive tax increases across a whole range of taxes to bring revenues into line with public sector investment. And this is, of course, before we start repaying any of the debt itself.

#1 saga

I gather from treasury figures, the cost is to simply service the debt.
We can only pay it down when we have some surplus cash...

But doesn't it seem sad that the Chancellor could not have simply stated to the HoC - and hence to us - what we already knew. That is the evident fact that spending across "un-protected" departments simply has to fall.

It's the lack of transparency that makes you mad. Brown was a master of Budget hubris in the chamber, then waiting for people to trawl through the details and discover the horrible bits.

I'd hoped Darling would be more honest this year. Though with Brown lurking around (no doubt armed with staplers, mobiles and other projectiles) I guess you can't blame him.

And it's cowardly not to project forward spending intentions across the departments, leaving that till after the election. Rather foolish, too, as the economic analyst groups will do it anyway, well before the Spring. So Brown and Darling will have to defend themselves without any fig leaves to hide behind.

And you can bet that some bright spark in the Treasury will then leak documents that show the government already has 3 year projections.

No6 Badger,
Surely you are not suggesting that a politician is doing his best to win an election. What is the world coming to.

Or do we mean the "cost" of halving the deficit in 8 years? But halving the deficit is just reducing (by 50%) the additional amount we're borrowing. So there IS no paying back. We just have ...

(1) Servicing the debt, i.e. the interest costs.

and:

(2) The difference between what the deficit WOULD be if we didn't take tax & spend action, and what we think it WILL be if we do - that's the 50% amount, I suppose.

So (1) is a hard money cost, and (2) is more of a projected Delta in our annual tax & spend cashflow.

So this £2,400 per family:

- is it just 1?
- just 2?
- 1 + 2?
- is it annual?
- or is it aggregate over the 8 years?

Any case, I thought we were halving the deficit in 4 years?

Maybe Nick is talking about paying back actual debt - returning to the 40% of GDP position in 8 years.

No, he can't be. Least I don't think he can.

We might struggle to have our normal high level of intelligent, informed debate on this one.

Paying for 'Frontline' jobsworths we can't afford is theft.

How many receptionists does a GP surgery need?

How many reports do we need saying newlabour have doubled spending every year on education with no result whatsoever for people to realise the 'frontline' spending claim is utterly bogus.

This is like the man who loses his job and claims he can;t do without his 4x4, his three holidays a year in Dubai, his weekly night out in the local restaurant.

Needs must.

We don't have the money for newlabour 'frontline' jobsworths and they have to go.

Frontline spending is theft. newlabour taxes are theft. newlabour have put up taxes for twelve years in a row and we still ahev no investment in power. How does the party who came to power at the beginning of the world wide web, watch pc and internet usage surge and do nothing at all on power provision?

Let's just increase public sector spending, that's a good idea. They all vote for us.

Call an election.

Nick

Go back to the Treasury and ask they what is their assumed interest rate in the calculations for SERVICING the debt. Then ask them to redo the calculations using a realistic interest rate.

To write that it is "paying back the debt" is clearly wrong but then the government seems to be in la-la land at the present time.

Actually, I got curious re the real numbers so went to the Institute of Fiscal Studies website.

They say that 'increasing the basic rate of income tax by 1p would raise £4.5 billion in 2011-12.'

So assuming it's the same for 2010/2011, to solve the proposed £78 billion fiscal deficit for that year alone would require a 17.3p increase in the basic rate of income tax (assuming all other taxes stayed the same).

So the basic rate income tax needs to rise from 20 pence per pound to 37.3 pence per pound, or by 86.5%.

That's before we start repaying the debt; this is just to eliminate the current structural deficit.

Now it is clear what Labour and the Chancellor were hiding. Having said that, public service investment must be protected.

Was Gordon Brown's summerhouse 'frontline' spending?

Was Quentin Davies' £20,000 bell tower 'frontline spending?

Was Liam Byrne's black king size bed 'frontline' spending?

The history will take a very dim view of this parliament, especiallyu as the man in charge will be judged by history to have been a talentless bully along with his talentless bullies of attack dogs; many of whom appear on these posts.

Call an election

13 sagamix

I think what you mean - and this point was made by politicans, journalists, business representatives etc on BBC news, Sky News, ITV news and Newsnight yesterday - is that no one is clear or understands fully what Darling actually meant by what he said yesterday.

What is worse is that individual departments where applicable, will have to pay off their PFI repayments for new schools hospitals etc. out of their existing budgets. All sides in the HoC seem quite happy to keep that little gem swept under the carpet. When interest rates rise (there is no if about it) the servicing of the debt will be enormous.

Why there is a consensus of maintaining DFID expenditure is beyond me. Greg Mortensen's American charity can build a school in rural Afghanistan/Pakistan for USD 50,000 and yet our government is proud that each school we build in pakistan is budgetted at GBP 15,000,000! That works out at over 450 times more expensive!!!! A fair and equitable use of taxpayers money? Don't think so.

How much can be save by a complete withdraw of ALL our troops, not just in Iraq and Afganistan, but everywhere?

Is not £2,400 per family a gross under-estimate by several factors?

14 Robin wrote:
Frontline spending is theft. newlabour taxes are theft.

You forgot bankers' bonuses.

We, the taxpayers, stumped up billions to stop the banks going under.

Needs must.

We gave them our hard-earned money in order to keep the system working, not so it could line the City boys' pinstripe pockets and fund their cravings for beluga and bollie. That's why

Bankers' bonuses are theft.

This is scandlous. But why are we shocked. I forecast this yesterday. Platitudes in the HoC from Darling and then the drip drip of the bad news. Even I did not expect it to be this bad. And we give them £400 a month for food? They are a waste of rations as we used to say in the Army.

Its always the same with Gordon & Co. Always read the fine print. Gordon is a past master at hiding the truth. Unfortunately this is only just the start. The hike in NI will just add to the number of unemployed people in this country as employers look to cut costs. Wages will be frozen or cut so as for Dalings assertion that it will affect those earning above £20k is a load of nonsense. If transport for example is going to suffer really savage cuts I suppose that mean that fares will have to rise well above inflation -again!. I think the best thing is to do, is to hand all our wages over to the government and just let them give us a weekly allowance. Then we all could be living on inflation proof benefits with all the free add ons that brings. Then we would not need to go to work at all and we will all vote NuLabour because we think they are so wonderful.

Nick,

'The cost of paying back the debt...'

This mistake is made throughout the BBC. Do you undertsnad the difference between debt and deficit?

Reducing the deficit still increases the debt.

Some basic high school arithmetic:-

1 + 1/2 + 1/4 + 1/8 + 1/16 + 1/32 + 1/64 + 1/128 + 1/256 + ... n

Although the number you are adding is halving every time, the TOTAL of the above sequence Nick tends to infinity as 'n' tends to zero.

There is no plan as yet to pay back the debt… only service it. And the debt will keep increasing till the deficit is zero, or in other words, Labour can balance the books. Something they haven’t done since they abandoned Ken Clarke's spending plans in 2001.

Benefits to rise in april ? My first rise since 2005! That feels so good , recognised as a valued member of society at last ! An equal !

There must be some kind of {growth} way out of here ... said Maurice Saatchi in todays Times.

And indeed there is, as Saatchi indicated, but it essentially does mean that the English public have to throw off the tired old duopoly of Labour and the Conservatives.

Labour have seen reduced social mobility on their watch, and for that alone deserve the chop whilst 'Dave' and around seventeen of his front bench chums comprise part of the 1% constituency that owns 70%, yes 70%, of the wealth in this country (using the Gini co-efficient measure) and therefore, if elected, will have even more opportunity to entrench the incredibly priviledged position of that tiny percentage of our population.

English people have nothing to lose except their Labour and Tory chains.

#12

The merest suspicion of such a thought had not even begun to cross the outer tendrils of my mind...

But now you come to mention it, I am sick of politicians (of all parties) who put their sectional interest before that of the country. It's pretty clear than the current Labour government are doing so, and deliberately making things harder for the next government. Presumably they have now accepted that they won't be a part of it?

Of course, the other parties are not saints - the Tories deliberately privatised the railways in such a way as to make it very difficult to re-nationalise them. Not that they need to have worried, but they had no way of knowing that the incoming Labour government would be just as much in thrall to the banksters and privatised industry barons as they had been.

One of the reasons I have consistently argued that a hung Parliament would be best for the UK is that it might restrain the worst excesses of this naked political opportunism.

"On a very very VERY rough estimate, the total of the excess expenditure by government as a result of the extra expense over the course of the recession and the recessionary collapse in tax revenues is £400bn. That is what I am calling "the debt". Assume there are 20 million families, so that's £20,000 each. Aim to pay that off in the fashion of a mortgage"

I think you will find that the amount by which Government spending exceeds tax revenues is the structural deficit. That is the amount the Government is borrowing on its current account to fund expenditure outside of the recession and is where the figure of around £180bn that is being bandied around comes in. It is this deficit Labour has "committed" to reduce by half in four years. And pigs might fly!

If you look at the graph for this figure it began to rise sharply in 2003 as the effects of Labour abandoning the policies of the previous Conservative administration began to kick in.

Over and above that, the debt is the total that the UK owes - the nation's mortgage against future earnings. This figure includes the money used for bailing out the banks. That is where the figure of £1.3 trillion [that's £1,300,000,000,000!] comes in. However, that does not include items such as the unfunded commitment for public sector pensions and Private Finance Initiatives where the figures are - to use accountancy jargon - below the bottom line. In other words, they are not shown on the balance sheet.

sagamix wrote:
Or do we mean the "cost" of halving the deficit in 8 years? But halving the deficit is just reducing (by 50%) the additional amount we're borrowing.

Saga, it is even worse than this...the pledge to halve the deficit in 4 years is totally meaningless. We can borrow trillions for 3 years and then as long as the deficit in year 4 is half of year one, the pledge has been met !! In a leap and a bound we are free !!!

Nick

Do you not have any clever comments on this revelation? No query on the Governments motives, morality?

Why not, you usually include some negative aspect if the opposition quote a figure on our economy.

Are you accepting New Labour motives without question up to the election?

I think the next election is one for the Tories to lose and let the blame lie with those who engineered it.

21: Your point might have slightly more validity if Labour had not had a Faustian pact with the bankers. Labour turned a blind eye to the worst excesses of capitalism provided the banks generated the taxes to fund the worst excesses of socialism that we have seen under the current government.

And as, until recently, the banks contributed 27% of the total tax take perhaps someone could turn their thoughts to who will generate the profits to replace that amount if the Government continues to hound the banks.

Curiously there was no reversion of the increase in fuel duty that was put on when he reduced the VAT. This would have an immediate knock on effect on the economy, allow people to feel they have a little more in their pocket plus it would cost nothing to do.

Oh but I forgot the green issue! D'oh!

On the cuts that are coming, how shady is it that it requires the experts to work out that there is this much coming? Can they not be straight with us about the deficit and what they intend to do? Instead they are waiting for the tories to provide their plans and no doubt will scoff at them that they only serve the wealthy. What a tiresome loathsome democracy we have!

I am not entirely sure what Nick Robinson is saying here. The situation to my knowledge is this, for the year 2009/2010 our deficit is 178 billion this means we are spending 178 billion more than we are raising in tax. Next year it will probably be more depending on the tax take and what we spend. We are therefore paying around 30.7 billion in debt interest. Our national debt is forecast to be around 1.47 trillion in the coming 5 years. These will not be the true figures or include debt which is not accounted for.

It is interesting to note that servicing our debt today on the pre-budget report has just become more expensive. This proves that there is no faith that Darling actions yesterday will help Britains chances of coming out of this debt crisis. The Chancellors forecasts for growth are opptimistic to say the least, if this does not happen Britain is in very serious trouble indeed.

24 Dr G wrote:
Some basic high school arithmetic:-

1 + 1/2 + 1/4 + 1/8 + 1/16 + 1/32 + 1/64 + 1/128 + 1/256 + ... n

Although the number you are adding is halving every time, the TOTAL of the above sequence Nick tends to infinity as 'n' tends to zero.

I'm no Maths boffin, but doesn't that sequence tend to 2 rather than infinity?

G the celt, Not wishing to crow but I also said that he would not reduce the petrol duty......

I dont think I am that clever but are these politicians so easy to read?

#24 Ignore my number sequence please, I've had a few wines.

jr perry @ 9

Okay JR, let's discuss your figures since Nick is making no sense.

£400 billion of debt. That's about half the current cumulative, isn't it?

And we forget the deficit for now ... yes yes I know! ... but just for now is all I'm saying ... one thing at a time.

So, we can clear - i.e. PAY OFF - £400 billion's worth of our debt in 8 years at a cost of about sixty quid a week per family. That's what your calc is telling me.

That doesn't seem so bad (does it?) when you put it like that.

I know not EVERY family has a heavy smoker these days but, if they did, all we'd have to do is get he or she (whoever is the puffer in the family) to give the filthy habit up - put the money in a jar instead - take out at the end of each month and place into a 5% earning depo account (not many around, I know, but still you get the idea) - then at year end, empty the account, hand over the money to the Treasury and start again - for 8 years.

Yes.

You've cheered me up no end with that.

Or am I missing something? ... something important, I mean.

21. At 4:24pm on 10 Dec 2009, pdavies65 wrote:


Bankers' bonuses are theft.

===

Does that include The Cooperative Bank?

The deficit is without doubt our greatest problem but paying it back gradually over a number of years can make the payback and its effects less painful.

It's a pity really that politicians can only think one way when they get the country into financial difficulty i.e. they can only think of cuts.

An alternative is to think more in terms of generating greater wealth.For example we have a million or so people out of work receiving benefit for doing nothing.

Imagine if, for the sake of the nation, the unions and the government got together and placed all those people in a job in companies that needed extra workers but could not afford them.

The benefits would be tremendous.The unemployed worker gets work experience.The company gets an extra worker free of charge, has the opportunity to increase its productivity without extra cost and stabilises its position in the market place.The unions are happy because only the unemployable are out of work and the government is happy because it's massively reduced the list of unemployed, increased productivity without paying out any extra benefit.

Another example might be that when awarding government contracts, we ensure that they are given to companies in the UK employing British workers and paying British taxes and National Insurance.Such companies may not be as cheap as those abroad but at least money from them is coming back to the UK treasury and not going elsewhere.

Another opportunity available to the government is to change building regulations so that every new building has in-built power-generation in the form of solar panels, wind-turbines, geothermal energy etc as this might get round objections to wind-farms etc.In this way over time we become less reliant on public services as more and more buildings have their own free source of power.

Another possibility is to massively raise fines for those offences which cost society money.In this way not only can we cut down crime, misdemeanours etc but the money raised can be paid into the UK treasury to be put to good use paying off part of the deficit.Savings might also be made by not having police time wasted.

Every small amount of money we raise or every penny we save puts the people and the country in a better financial position.

There are many ways that any government can raise monies in a positive way.All it takes is some creativity, common sense, a bit of logical thinking and a lot of goodwill.

Alistair Darling could have put the "Great" back in "Great Britain" but sadly he didn't.Let's hope the new Chancellor in the next goverment can do that before it's too late.

#34

Xeno's paradoxes.

If Alistair Darling shoots an arrow at you, then before it hits you, it must travel half the distance....before it travels half the distance left, it must travel half of THAT distance. And so on. before it travels the remaining distance it must travel half of that distance. If distance is infinitley divisible, the arrow will never reach you but if distance has a finite smallest particle, what is half of that? Since a finite smallest distance is illogical, it "stands to reason" that you will never get hit by the arrow.

Thus Darling can fire an arrow at you and as you stagger around bleeding to death from internal injuries, he wil explain that it isn't really happening.

That's how current Labour economic policy works.

Darling has effectively ensured the destruction of the Union.

A labour leader in Scotland that holds no sway over a Labour colleague in London is dead in the water.

If Labour expect to win any seats in Scotland come the GE the Grey man will have to go.

24 DrG

"Some basic high school arithmetic:-

1 + 1/2 + 1/4 + 1/8 + 1/16 + 1/32 + 1/64 + 1/128 + 1/256 + ... n

Although the number you are adding is halving every time, the TOTAL of the above sequence Nick tends to infinity as 'n' tends to zero."
=========================================

No it doesn't, this geometric progression will actually tend towards a total of 2.

Basic school arithmetic ? Don't tell me you are New Labour "A+" grade at maths! Perhaps it is you who is advisng Darling on his sums.... he can't add up either.

This government has surpassed itself with the abilty not to tell the truth and be open with the people. Enquiries have been framed in such a way as there could only be one result. WMD, and Scarlett was prevaricating on what was meant in that report. Helicopters, body armour etc. Budgets where they would help all citizens surely they meant politicians because I know no one who has been helped. I do know a lot who have been don a disservice by this government. Education spending has gone up but the standards have dropped. What was O'level Maths and Physics 40 years ago is now on the Alevel syllabus this has to be wrong and a stpe backwards.

I shocked and dismayed by the self serving attitude of them all, I doubt that there is anyone there who knows the truth. Never mind tell it. Stand up and say one thing and let the truth filter through 24 hours later. Or 2 years to say sorry your son died.

The lunatics are running the asylum and we are led to believe they can mange the economy. They would have difficulty managing their way out of a wet paper bag.

Excuse my rant but this takes the buiscuit for deceit and duplicity.

It will be playing with fire to cut defence any more. Why is it that it is the top of the list every time? How many ships, planes and soldiers have the latest set of give aways cost?

There is a gigantic mound of counter productive welfare payments and voter bribery measures to be looked at instead of defence.

NO MORE CUTS.

Sagamix says "one thing at a time"

Exactly, Brown is only considering his re-election and to hell with the long term debt problem.

When Brown and Darling retires its away to bonnie Scotland and thank god for devolution and the Barnet formulae.

Xeno's paradoxes number 2

Imagine a massive debt is 100 metres behind Alistair Darling. It can run at 10 times the speed of Darling. The debt runs 100 metres but in that time, Darling has run 10. The debt runs 10 metres but in that time Darling has run 1. The debt runs 1 metre, Darling runs 10cm. 10cm, 1cm.
1cm, 0.1cm and so on.

Thus the debt never catches up with Darling.

As the country collapses under a mountain of debt, Darling is able to explain that logically, it isn't really happening.....

@ 40 and 46

I do hope that's the last of those, Andy.

Nick,
this must be the shortest entry ever. You have reported a piece of news in the "breaking news fashion" without a comment (let alone bringing up the Tories). Is it because you caught up, like the rest of the Country, with yesterday's con job and it is too painful to admit it or you are simply lost for words? :-)
Perhaps you could quickly switch to a piece of investigative story: the bell tower repairs bill.
Did our dear Quentin try a quick one, is he so incompetent not to realise that an invoice bearing charges not related to his property shouldn't be accepted or does he think, like all the New Labs, that we are a bunch of idiots to believe his stories? Either way shouldn't he resign? How can Superman back him? Are all these scandalous claims part of our national debt?

40,46,47

I'm a fan of the ancient chinese proverb :

"Beware the naked man who tries to sell you his shirt."

#47

Sagamix, you may be pleased to know that while infinite processes remained theoretically troublesome in mathematics until the early 20th century, Kurt Gödel's proof of the logical independence of the axiom of choice, and the epsilon-delta version of Weierstrass and Cauchy (or the equivalent and equally rigorous differential/infinitesimal version by Abraham Robinson), developed a rigorous formulation of the logic and calculus involved. These works have resolved the mathematical problems involving infinite processes (including those relating to Xeno's paradoxes).

Essentially, they proved that both Brown and Darling's economic theories are the mathematical equivilent of a donkey's bottom.

Still, at least we can put Xeno to bed.

Where have the media been in the last 12 months ???
This isn't a story, its the survival of the UK has we know it. The plan to borrow our way out of this was always very high risk and was almost certain to fail and the BBC and others have been very slow to air real opposition to this suicidal approach.
The 12 year of labours "Investment" was built on the back of the massive debt bubble and we need to be honest to ourselves in what we can truely afford.I believe 75 % of the population doen't realise the mess we are in and its all down to the media's in ability to tell the facts, or at least expess other views other than the goverment / treasury.
We need to start educating the masses that there is not a bottomless pit in cash and wonder drugs at £20,000 are most certainly off the agenda unless the can compare favourably against minor heart surgery and other valuble NHS treatments.

At least the general election in the next 6 months will allow democracy some say in the way forward , my fear is that the problems are so big is how does the man on the street grapple with the choices .

sagamix 37

I haven't any particular problem overall with your interpretation of my post 9. It almost doesn't matter what "£400bn" is, if we agree that it is the type of sum that would need to be paid off before national debt ceased to be the biggest problem in the UK economy. For the record, however, it is about two thirds of the projected increase in the public net debt in the period 2008-12.

Your £60 per week per family conclusion is fair enough, though it doesn't quite express the real impact of the amount on families and individuals. In practice, there will be a lot of people who can't pay £60pw, and not so many who will pay their own share and a whole load of other people's share on top.

Here's another way of looking at it. The total personal taxation take last year (i.e. income tax, NI and VAT) was £227bn, which works out at a bit over £11,000 per family per year. Paying off the debt costs £3,100 per year (as we have seen) and that is 27% of the tax take. Therefore, paying off the debt, without expenditure cuts at all, would require a 27% increase in personal taxation. Not quite as cosy sounding as £60pw!

My points:

1: No one cares about the PBR I find. Just like the conferences. Maybe a 3 day blip in the polls either way, and then back to normal. Voting intentions are far too deep seated for people to be swayed on whether we start paying back debt in the first 6 months, or 18 months later.

Labour make an announcement. The tory media machine destroy it the best they can. Back to normal. I actually think there is a bit of cynicism in regards to these sort of meaningless announcements now. Just like the conferences.

People realize that the tory media machine would have reacted the same way, no matter what happens, so it’ more a case of, errr, let’s just get on with the election.

To be fair, it was the same with Blair. The newspapers/SKY news destroyed any Major policy, no matter how sensible or stupid.

2: When you come down to it, people probably know that spending will be cut, and taxes will go up. I’m not sure people care who does it. I wouldn’t say cuts and taxes will actually play a big factor in it.

People know it’s inevitable, no matter what parties say. The tories will argue until they are blue in the face that there won’t be tax rises. Ditto Labour with cuts. We all know there will be a bit of both.

As I said, I think voting intention has risen above this sort of squabbling. We all know what’s coming, financially, and other things will decide the election. Or a hung parliament. Or the size of a majority

3: When you actually look at the plans, and read the numbers, I’m not sure Darling said anything that wasn’t that apparent anyway.

He’s done a pretty smart thing in truth, politically. To explain, he’s not announced any Labour cuts. He’s just given pretty exact figures to the economists and said “you work it out”. Today we have the department of fiscal studies saying there will be 15% cuts.

Now in truth, both Labour cuts and Labour tax rises are out there in the open. And they’ve only admitted to one of them.

I really wouldn’t be that surprised if that was the actual plan, and the department of Fiscal Studies latest story hasn’t been released with the full support of the labour party.

4: I think the whole purpose of the budget was more political. Cameron wanted tax rises off the agenda, and did a pretty nice job controlling the media so they weren’t discussed. All cuts cuts cuts. Nothing on tax.

It looks like a Mandelson move to me. When the media aren’t playing ball, and your not getting what you want on the media agenda, just force it on through policy.

Whether it’s a popular move or not, all we will talk about now is tax rises. And with Osborne none committal on the subject at the minute, it’s a question he will get again and again and again, until he makes himself clear.

His options won’t be good. Admitting tax rises will hurt him far more than it has Labour. Denying tax rises and he will be accused as being flimsy on the recovery. If you like, the Labour party could just use the same attacks as the tories did on cuts.

As in, admit it, or “you’re dishonest”.

5. Finally. Budgets like this, that in essence mean nothing, when you are both behind in the polls, and have another budget before an election, are largely political.

What’s the politics? I’d say putting tax on the agenda. And Darling giving himself a “nasty” reputation. Something Osborne was loving having – being the chancellor that will make nasty moves. Bizarrely in a recession it’s a decent rep to have. Certainly better than “weak”.

The tory media machine has been in overdrive, as Labour did something unexpected. They admitted to a rise taxes. Probably out of desperation, and to force the tories on to the back foot on the subject.

Secretly, I think Labour know that it’s a very clever little electioneering budget. Purely because tax rises are now at the top of the agenda, and will be there until the election.

The last thing the tories want to debate about is tax rises, with a 10 point lead.

All in all, I still see a hung parliament, which may be a good thing, with so much economic uncertainty at the minute.

Poll lead is about 9 or 10. Which is about a 15-20 majority. Not much to play with.

I actually think the tories have been a bit naïve in regards to the election. As in, peaking too soon.

Most of there serious ammo on Labour, in my opinion was used earlier in the year, and the polls reflected it. And is why most tories were trying to force an election up until then.

The polls peaked, but have dropped again. In my opinion, seriously, I think, in regards to electioneering, leaks and tricks, I think they may well have run out of ammo. Or started too.

Labour have actually been quite reserved in the “dark arts” in the last 2 years. Not many leaks at all. No leaked memos, letters, policy.

It will exist. It’s naieve to think they have nothing. I think you’re just looking at a battle hardened party, who know the system a bit better.

They haven’t really blatantly attacked the tories that much, up until about 2 weeks ago with the Eton thing.

That’s my issue really. The tories were doing this far too much, last year. And you could argue that they are running out of material. Cameron has been a bit tepid in the commons in the last few weeks.

Labour may well have simply saved up their best work until the election (the advantage in being able to call it) and will go on the offensive in the coming few months.

Osborne warned that “Labour will use every trick, leak they can to stay in power”. Translated, that probably says, “we may have peaked too soon with our attacks, and may get both barrels back in the come up to the election.

I think Labour have more of the ammo anyway, in the election months. Just because they haven’t used much of it yet.

As in, fox hunting. One of the most popular laws in the country. Hugely elitest, potentially, in overturning it, without a referendum. As Cameron wants to do.

How often have Labour seriously mentioned that so far? Not at all.

Just like “tax avoidance” “eton” “inheritance tax”, I’d maybe suggest that they are holding a lot of this back.

The only saving grace for the tories being, that Cameron controls nearly all the media at the minute, and he’ll probably do a decent job keeping it off the front pages.

I’d say hung parliament anyway. I can only see a 7-8 point poll lead going into an election. Probably lower

I wonder how many 'real' people are actually remotely concerned about this? For better or worse, everyone only has one vote and they are allowed to cast it in any way they wish, not for the 'logical' or 'reasonable' option, but based on whatever personal opinion they have about politics and politicians. So, imagine how many previously suffering houseowners are now basking in their reduced mortgage payments and seeing tentative signs of their properties value increasing again..and imagine they are in stable employment and this state of affairs continues until May..If they voted Labour at the last election what possible reason would there be for them to vote Conservative in 2010?

Also, don't think for a moment that Labour's traditional voters in the North of England would ever remotely consider voting for a candidate of the party that they consider destroyed their social and cultural identity (although they wouldn't put it quite like that!) led by an Old Etonian and populated entirely by people who 'talk posh' and despise the working class..

What I'm saying is that a working majority of 63 (actually 68 when you add in the Speaker and Sinn Fein) is very difficult to overturn in a single election, especially where there is not a homogenous mass of dissenting supporters who can be reliably identified. The only way the Tories can win is by convincing substantial amounts of people who voted Lib Dem and Labour last time to change their vote and what positive reasons can anyone give to do that? 'We need a change' - fabulous argument, its what football supporters clamour for when the team isn't doing well..Why can't someone explain EXACTLY what positive benefits a Lib Dem or Conservative administration would bring to this country, other than 'they aren't Labour'..I'm sounding like a Brown apologist or something, actually I have no time for politicians of any stripe, I'm trying to be objective and hoping someone can give me a reason to believe that voting in May 2010 will make any fundamental difference to the future of this country.

"I wonder how many 'real' people are actually remotely concerned about this? "

Next to none. Casual voters probably outnumber politically knowledgable people by about 10'000-1.

Elections are won and lost by people who take no interest in politics. Which is why the media is so vital. And why people like Cameron and Brown just hammer The Sun, and the tabloids.

If you're interested in politics, you don't read The Sun. But those are the types of voters who win it.

Who cuts, and who raises taxes, it won't matter a jot. We all know it's coming either way.

Core, basic factors will win it.

1: The media - who's controlling it, and speaking to these people
2: Bordeom - people just wanting a change of leadership/opinion/scenery

Both probably point to Cameron. Although, I think it will be close. He may well lose more of his lead before an election. Especially of the economy picks up/

To explain, conservative politics is generally more effective, the worse things are. Prudence, savings, family, responsibility, cuts, low taxes. That's what the connote to the voters.

The better things are, the more they generally struggle. Because when people have cash on the hip, that's not really what they want to hear.

That's why major got hammered. He was campaigning on the above. Blair was more "rock and roll, Noel Gallacher, Cool Britannia, aren't we amazing, let's shoot for the stars, lets all go to uni, lets all dream a bit".

And let's remember, this message was incredibely popular for a long long time. Even in 2005, he was winning a big majority on it.

The only reason the tories came back into it was by Cameron changing the party message, and being a bit more Blair-esque and adventurous. And the recession, where traditional tory policy is popular.

Would the tories win an election, with Blair still there, and a booming economy in 2009? Definitely not. It would never happen. Just because Labour politics and policy is built for this.

Let's remember, 2005/2006, the war was on, we all knew the immgration policies, we all knew the EU policies, we all knew the public spending policies. He won a big majority, and quit with a big poll lead (double figures). That poll lead lasted right up until 2007, even with Brown.

The only thing that changed was recession, and the public mood therefore changing from Labour principles to tory ones.

As I said, it works both ways. A booming economy, people want to shoot for the stars, and more growth. And people like Blair and Brown do well.

A recession and people want prudence and caution. The tories do well.

A lot of it to do with the global climate.

As I said, the Labour party (and Blair) in regards to public opinion were still very popular, in regards to polling right up until 2007. Brown has led Cameron in polls - that's how recent it is.

The only real factor being the world landscape changed, and people's priorities changed.

That's all politics is. Voting priorities.

I doubt Cameron/Hague/Osborne would have a remote chance in a 2010 election, if we were going through a boom. Just because people don't want to be hearing about "saving money, responsibility, lets keep our feet on the ground". We are an exciteable nation. We want to hear "aren't we amazing. Let's do amazing things. Best country in the world. Lets show everyone how great we are with our money.

Money burns holes in the pockets of British people. If we have it, we want to do something with it. The only time we want to save it is if we have to.

Ditto, Labours chances of winning a recession election are pretty hard, just because voting principles has changed. And people want safety, assurance, savings. Something Labour don't offer.

As I said, the only real reason we as a nation flip flop between Labour and the tories is a combination of boredom and the fact that we have no control over the rest of the world' finances.

As voters, we just react to the times. Vote in who we think will be best with the situation.

Mark my words, 10 years time, most people will just be critcising Cameron's prudence with a good economy and stifling growth and jobs.

And he'll just lose a landslide to whoever the Labour party are going with. Maybe Ed Milliband.

As I said, voters vote situationally.

54 misschieviouscheesy101

"what positive benefits a Lib Dem or Conservative administration would bring to this country, other than 'they aren't Labour'..... hoping someone can give me a reason to believe that voting in May 2010 will make any fundamental difference to the future of this country."
===================================================

The contradiction inherent in this paragraph is quite striking !!!

Do you want more of the same ? No ???? I don't.

Xeno's paradoxes No. 3

Zzzzzzzzzzzzzzzzzzzzzzz

55 mike

"That poll lead lasted right up until 2007, even with Brown.

The only thing that changed was recession, "
===================================================

New Labour's poll lead had virtually disappeared by the time of the "election that never was" in October 2007. Long before the recession.... bottler Brown, dithering .... remember it ???

JR @ 52

Well there we are then. To fill your hole, we need to generate of the order £60 billion per annum positive delta to the Tax & Spend net cashflow. Seems fair (just in the way of opening gambit) to split that 50/50 spending cuts and tax rises. So £30 billion of spending cuts and £30 billion of tax rises. On the latter, that means taxes going up by just over a tenth. That's doable. That's very doable. Quick "back of envelope" gives me that Joe Average pays an extra £100 per month, that sort of figure. Which leaves us with the £30 billion spending cuts. I'm not sure about that, need more info. What percentage is that £30 billion, please, of current TOTAL (per annum) public spending?

I am sure that the actual progression intended was

1 + 1/2 + 1/3 + 1/4 + 1/5 + 1/6 + .... 1/n

This is the harmonic series and DOES tend to infinity. In fact it is the Zeta(1) function which is the starting point of the Reimann Hypothesis (not yet proved I believe) and the fact that this sum tends to infinity is also proof that there are an infinite number of primes.

Still doesn't excuse the uselessness of the PBR

Whoever wins the next election must increase taxes to unheard of levels, and reduce government spending by a phenomenal amount, just to service the debt the prolifigacy of this disgraced government has created. Though Brown and his chancellor like to shift the blame to "America" , "the worldwide recession" and anything else that comes along the fact remains that as custodians of the economy they have failed as dismally as every Labour government since WW2 has done. Had their fiscal policies been anything but incompetent and motivated more by political aim than integrity the recession may well have been short lived and surmountable. Sadly , the Tories will again be expected to clean up the mess, which I have no doubt they will do, and hopefully this will be at the expense of the present government's benefit army and it's army of government employed minders. Most of our holy cows, NHS, education,policing and local government could use a savage pruning also to get rid of the unnecessary management structures which cost so much and deliver so little.

jr perry @ 59

Okay don't worry, I've checked myself - just can't get the staff these days, can you? - it represents 5% of public spending. Also seems not completely out of the question.

We're there, JR.

30 bill of tax rises and 30 bill of spending cuts (per annum)

That's tax up by a tenth and spending down by 5%.

Doable as anything.

What's with all the wailing and gnashing of reactionary teeth?

Today we are told that the national debt now stands at £800 billion and is set to rise over the next few years to £1.4 Trillion.We also have 200 Billion of QE - is this in addition to the £800 Million? I do not understand how paying back £36 billion over 3 years is going to help reduce this debt since it will not even cover the interest payments.Am I missing something obvious???

sagamix 59

It is as well not to get too caught up too soon in rounding errors.

The total cost of paying off the debt at a national level is £62bn per year. Split 50/50 between tax rises and expenditure cuts, that's £31bn each. For Joe average and his family, that works out at £1600 per year in increased taxes, which is £130 per month or £30 per week or a 13.5% increase.

Total government expenditure in 2008/9 was £630bn, so measuring the required cuts, the other £31bn, as a proportion, that means a cut of 4.9%. However, if you take out the three areas that are hardest to cut - pensions, £110bn, health, £111bn, other welfare, £94bn - then you have to find the £31bn among what's left, £315bn, and that figure for expenditure cuts becomes a rather more gruesome 9.8%.

Governmental budgets are illusions constructed to entertain the public. They also provide those without marketable skills, economist, with jobs. Such self-professed smart people created the mess but are at a loss of how to correct it. The numbers didn't add up in the housing financing scheme of the bankers, but that didn't prevent them from proceeding, so why should the government be any different. The basic strategy of most national governments is to hope that something good happens in the near future and everyone will forget about the robbery they have witnessed by the banks with governmental complicity.

Of course the Pre-Budget report plans imply cuts; they also imply taxes, but most of all they imply deception ahead of the election.

RR 17

"The history will take a very dim view of this parliament, especiallyu as the man in charge will be judged by history to have been a talentless bully along with his talentless bullies of attack dogs; many of whom appear on these posts."

Do tell,I`m shivering with excitement."

23. At 4:31pm on 10 Dec 2009, brian g wrote:
"Its always the same with Gordon & Co. Always read the fine print. Gordon is a past master at hiding the truth. Unfortunately this is only just the start"

Wouldn`t it be wonderful if trhe corridors of Whitehall were actually stalked by Machiavellian subtlety and guile.That Malcolm Tucker had taken up residency in NO 10.

The reality for both government and opposition is they are rather like us.They get through the day and enjoy a sup in the evening.Your conspiratorial fantasies are wasted,write a novel,go for a walk, doodle some comics.Don`t get over tired,it is not conducive to rational thought.

robb 63

"Today we are told that the national debt now stands at £800 billion and is set to rise over the next few years to £1.4 Trillion.We also have 200 Billion of QE - is this in addition to the £800 Million? I do not understand how paying back £36 billion over 3 years is going to help reduce this debt since it will not even cover the interest payments.Am I missing something obvious???"

No, you aren't missing something. £36 bn over 3 years merely has the minor effect of slowing down the rate at which our net indebtedness increases. It is nibbling at the edges of the problem. Without a major programme of debt reduction - at about three times the rate you mention in your post, as established in the exchange between sagamix and myself above - we are stuck for the long term in a state of indebtedness only replicated in our history in the aftermath of the two world wars.

It is surely no surprise that budgets cuts are going to be enforced to eradicate the enormous deficit. Every political party, commentator and dare I say it...us the people are aware this is required.

Lets cut to the chase and bypass the phoney war of your cuts are bigger than our cuts. At the next election the choice is straighforward and you can either:

Vote Labour who will tax jobs or Vote Conservative who will tax everyone by raising VAT.

The choice is that of the Great British public.

This country is like a yo-yo... never going to go anywhere except one step back and one step forward.

Labour left this country in one hell of a mess, along came the Conservatives and in came Labour, looks like it's going to happen all over again.

Lack of industry is going to make revenue harder to grab so things are going to either get hard or we become bankrupt, we can't blame the Unions this time.

The PBR obviously an election gimmick it stands out like a sore thumb, and does nothing to resolve the mess we are in.

Guess we won't know how anyone will get us out of this rot because Labour will not reveal the true figures so Gordon Browns 'gofer' can stuff their PBR... I bet they are nowhere near right!

We know whats gonna' happen, the Conservatives will win and be in Downing Street for a decade and up pops Labour again... do we really want that all over again - certainly could do without it!

Saga

Seein lots of figures on this blog that I have been asking questions about previously, Croftie got the 1.47tn, projected by some to 2tn.

Your 3k per "family" puzzles me a little, someone else came up with 20k per"family" but this I think is the difference between servicing and paying off a debt? ( A conservative debt of 400bn)

Also I find "family" an odd unit. A he a she and 2.4 kids? There are so many other combinations and single people too.

It is looking like my 33k for every man woman and child wasnt far out tho.(To pay off 2 trillion)

And I did like the Xeno bits , all I ever heard him say was "going home" he obviously had more to him.

On reflection I am with Robb at 63 who cant see how this piddling budget amount , in deficit terms, is going to scratch the surface of the total real debt.

Can still see us doing a Dubai.

#68, bryhers wrote:

"....The reality for both government and opposition is they are rather like us.They get through the day and enjoy a sup in the evening.Your conspiratorial fantasies are wasted,write a novel,go for a walk, doodle some comics.Don`t get over tired,it is not conducive to rational thought."

The difference, bryhers, is that during the day they play around with the lives of everybody in the country.

And the money they play around with is NOT their own. It is taken, on a whim and a quick but of parliamentary chatter, from the pockets of the citizens and spent on projects they decide must be good for "us".

There are lots of private sector business activities I believe to be totally wasteful. But the private sector has to earn the money it wastes. Governments simply take the money and waste it. (Or, with a bit of luck, spend it in a "Predent" way. For a while...)

"Yet another Labour apologist"

Bryhers wrote (previous thread, but relevant to this):

"Like all good scientific ideas [Keynesian economists] are counter intuitive,for instance that a government should go into debt in periods of depression, and pay itself back when good times return.Crass statements like "They didn`t fix the roof when the sun was shining." Show a dangerous misunderstanding of modern economics."

Please don't be bullied by all this semi-intellectual banter. Bryhers never justifies or explains why Labour never mentioned Keynes until recently, and why Labour increased borrowing in the "boom" years. When are we supposed to "pay back when the good times return" when this is exactly what Labour did not do during the last boom (inflated asset prices etc).

Labour's 12 year record shows an ignorance of Keynesian economics.

For Labour Keynes is a like a child's toy, just for Christmas.

61kaybraes wrote:
"Sadly , the Tories will again be expected to clean up the mess, which I have no doubt they will do, and hopefully this will be at the expense of the present government's benefit army and it's army of government employed minders."

Odd use of the word "sadly" - it sounds like you relish the prospect!

Out of interest, please explain the thinking (if there is any) behind the phrase "the present government's benefit army". Thanks.

It has to be said that the last time the Tories came in to "clean up the mess" they rather added to the benefit army.

I think that the £2,400 is an annual figure as verified by the IFS and reported via Stephanie Flanders.

The only certain things are that pubic debt will get bigger as will the level of inaccuracy in forecasting GDP in future years.

FOM

" There are lots of private sector business activities I believe to be totally wasteful. But the private sector has to earn the money it wastes. Governments simply take the money and waste it. (Or, with a bit of luck, spend it in a "Predent" way. For a while...) "

I am including these comments previously made to Coats.They contrast your ideas with my own reading of the current situation.

184 Coats.


"The only way out,is for us to discover some object which is admitted even by the deadheads to be a legitimate excuse for largely increasing the expenditure of someone on something."

"It's a good quotation but utilising public spending to maintain the status quo and any protected interests therein is not the same as using it for great works or improving the infrastructure, which will leave a lasting impact after the recession and create jobs in the interim."


I think you have misunderstand the thrust of Keynes remarks.The object of public expenditure is irrelevant,you can pay a man to walk up and down the street 400 times.By paying him you support the shopkeeper,the distributor,the importer and so on.Although the original activity is useless,it has increased demand whose effects have multiplied through the economy.

The test of Keynes` ideas was wartime.When we entered the war there was still mass unemployment and unused resources.By 1942 there were labour shortages and woman joined the workforce.The object of this activity was war production,tanks,munitions,aircraft,none of this increased wealth,it was destroyed as fast as the factories turned it out.Yet standards of nutrion improved through the war because people had work Total output exceeded its 1919-1929 level for the first time.

If you have unused resources you increase effective demand (Consumption +investment) by public expenditure.You don`t of course choose useless projects,here Keynes was being paradoxical. But material which is quickly destroyed is better than no spending at all,or worse,cutting when the economy remains depressed.
Complain about this comment

74 JH66

If we accept your assertion that Labour did not sufficiently reduce debt during the boom years, it doesn't follow from this that a Keynesian approach is not the best one to adopt now. It isn't the Keynesian doctrine you're disputing, it's Labour's fickleness in adhering to it.

I don't have a problem with the "didn't fix the roof while the sun was shining" line. Quite admire it, actually, grudgingly. I do have a problem with simplistic analogies which equate a national economy with a household budget, and which draw bogus parallels spending cuts and 'belt-tightening'.

By the way, I think it was puppies that were (or rather shouldn't be) just for Christmas, wasn't it?

@77
I replied on the previous blog "ouch" - I do understand your position - in my petty middle class way I just want something tangible to show for my contribution

I defer to your greater knowledge on Keynes, I am not in principle against expenditure to stimulate demand however I personally would prefer it to have a more tangible result other than keeping public servants in their feather bedded existence.

This is not some anti public sector rant, I know we need them but I can only contrast their expectations to the way industry is at the moment where 3/4 day weeks are routine and pay rises are a distant memory. Many people have accepted these sacrifices to keep going through the recession so when they come out the other side they still have some sort of future.

This supports the argument for keeping people in work [even subsidising to some extent] rather than paying out benefits but politicians should not use it as an excuse to avoid addressing the reforms needed in the public sector.

Meanwhile back on planet politican:

Gordon Brown refunds the taxpayer £500 which paid for a summer-house repaint - so that is a perfectly clear example for taxpayers, fiddle until you are caught and then offer to refund the money.

David Cameron claims £20,000 in mortgage interest despite being in the top 1% of wealthy people in this country and that is somehow a morally acceptable way for an independently wealthy self-professed public servant to behave.

Nick Clegg tells the expenses office that he needs the money to 'attack a big bush' - presumably Cleggover is familiar with a Brazilian wax and so can do it himself at no charge to the taxpayer.

The biggest mystery of all is why any English voter would offer their precious vote to the political parties represented by the three politicians identified above.

I said in one of my posts this week that the PBR would unravel within a day, and boy has it ever.

Mike I dont know where you have been today but the PBR and what it means to people has been the main topic in the Public Service. The length of the posts suggest a briefing from tired Labour press office.

I dont always agree with Saga, but the lower earners in the public sector will be hit very hard both in a pay cap, 1% NI rise and an increase in pension contributions. Oh yes a large portion of those staff are also "frontline" directly treating patients.

This could be yet another "10p tax mess" for GB and tired Labour.IFS is seldom wrong and other BBC commentators have said that the additional blackhole is an open secret.

We need an election now

#78 pdavies65

I think I more or less agree with your response (and yes, it was a puppy, not a toy). If Labour had repaid debt in the boom years, and operated a more effective counter-cyclical fiscal and monetary policy, the UK's scope for Keynesian measures would have been greater.

Clearly the deficit has exploded under the pressure of reduced tax revenues. For political reasons I think the importance of the (modest)discretionary fiscal stimulus, for good or ill, is much exaggerated by both Labour and Conservatives. My figures may be wrong, but both parties seem to have accepted a deficit of some 160-165 billion for this financial year. The argument seems to be about the other 10-15 billions. Significant, but not a chasm.

74. At 9:56pm on 10 Dec 2009, johnharris66 wrote:
"Yet another Labour apologist"

Bryhers wrote (previous thread, but relevant to this):

"Like all good scientific ideas [Keynesian economics] are counter intuitive,for instance that a government should go into debt in periods of depression, and pay itself back when good times return.Crass statements like "They didn`t fix the roof when the sun was shining." Show a dangerous misunderstanding of modern economics."

Please don't be bullied by all this semi-intellectual banter. Bryhers never justifies or explains why Labour never mentioned Keynes until recently, and why Labour increased borrowing in the "boom" years. When are we supposed to "pay back when the good times return" when this is exactly what Labour did not do during the last boom (inflated asset prices etc).

The last thing I want is for anyone to be bullied by semi-intellectual banter,however there is a legitimate case to be made for not cutting government spending while we are in a recession.As for not paying back in the good times,the deficit and government spending was well controlled by tax receipts.

The "Times" editorial yesterday quoted Keynes`before commenting "This insight has dominated the thinking of the government."(during the recession),going on to commend Mr.Darling who `averted disaster`

You would not expect a set of counter cyclical propositions to be prominent in political circles when the economy is in equilibrium.In the same way that Marxism had a revival in the thirties,so Keynes for today with two Nobel Laureates this year.In the 1930s governments cut spending and worsened the crisis,this time governments across the globe have increased spending and catastrophe has been avoided.This shows the fertility of John Maynard`s ideas.

The difficulty I have with your posts is that you treat a credible economic argument as political positioning.Both Conservative and labour Governments accepted the main thrust of Keynes`s analysis prior to 1979.It is not of course a panacea,the policies have unintended consequences.But if you are commited to full employment and an optimum use of resources, then Keynesian analysis deserves serious consideration.

My problem with Mr.Osborne`s policies is I cannot see the case for cuts while the crisis continues,,nor has an intellectual justification been offered.It may surprise some people to know that despite wanting to roast bankers,Mr.Brown is respected in the city of London.

The crisis, as the IMF now accepts, began in the private sector not government,the inflation in state spending is a consequence of the crisis not its cause..The policy dilemma is to cut enough to protect the currency,not so much or too quickly to choke off recovery.

#83 Brhyers

Actually I agree with much of what you say (and see my reply to pdavies65 above). I am not a crass anti-Keynesian (or at least I hope I am not).

Since I am not an economist I will quote Mervyn King again:
"There must be elimination in large part of the structural deficit over, say, the lifetime of a parliament which is the period for which a government is elected. Anything beyond that is a statement of intent or hope rather than a plan to which someone can be held accountable."

King also said, in the same Select Committee, that UK financial services tax revenues were unsustainable. Retrospective wisdom possibly, but Labour have not owned up to hindsight wisdom about this or many other issues.

There is of course a difficult issue with the timing of the exit from fiscal stimulus, as everyone acknowledges, and you quite rightly say.

If we accept that the amount of discretionary fiscal stimulus has been constrained by a seriously weakening UK budget deficit then we might also say that the exit from the stimulus may have to be sooner than otherwise might have been the case.

Osborne never (to my knowledge) advocated reducing spending in a recession. What he did was to take Labour's GDP growth projections at face-value (going back to the ill-fated PBR of one year ago) to argue that if these growth figures were true then the Government could afford to reduce the deficit earlier.

There was a dispute between the parties over the discretionary fiscal stimulus. My argument is that this was not a large proportion of the deficit and the dispute has been overdone, for poliical reasons, by both parties. Whether it was effective, or implemented in the best way, will no doubt be a subject of academic study in the years to come.

78 pdavies,

Whilst some of your comments are thought provoking, it is all very well to chatter on about Keynesian economics and how complex a National budget is. This Government has never projected any plan to recover from the extraordinary amount of money it has borrowed, printed and spent. The banks are to blame for a portion of the National debt, and I agree that there should be no Bonuses paid to their Senior staff, but Mr Brown must take responsibility for his actions and omissions in the current financial crisis, and his complete lack of financial acumen and planning.

Most of us run a house-hold budget, and most of us have a plan to pay off our debts, even long term ones like a mortgage. We all suffer set backs from time to time, we may loose our job or have a reduction in income, but we tailor our coat to suit our cloth. That is why I can understand spending cuts and belt tightening, it’s how we survive the tough times – so save your sneering about how simple we are for the next party conference. I, for one, am having difficulty grasping the size of the current National debt, to me it looks as it simply cannot be paid off. We’ve only just finished paying for the Second World War, and we defaulted on our debt to the Americans for the First World War. Let’s face it, most of us do not borrow large sums of money and then spend it all on a night out in the pub, hoping that we’ll get lucky on the one armed bandit, or we’ll find a wallet stuffed full of cash on the way home. For myself, that is the only analogy of what seems to be Mr Brown’s long term financial planning.

Keynes proposed to borrow to spend on the production of assets. Gordon Brown has tried to disguise his financial incompetence as Keynesian wisdom. So far, we have no real assets to show for his spending. He wanted to sell off assets a few weeks ago to raise a few piddling millions, assets such as bridges and the Student debt. Selling debt, isn’t that how the Senior bankers got themselves into serious trouble over the last few years?

Ordinary people are very, very angry. Those who are working are going to feel the pain in the next few years, and the less well of and middle income earners are going to be hardest hit. There are simply not enough rich people in the UK to support taxation to clear such a debt.

Gordon Brown and his sycophants have been corrupted by excessive power and have never truly been held accountable. They do not, never have and never will represent the “working man”. They represent only themselves, and the grass roots members of the Labour part should do the honourable thing, de-select them, and cast them out into political oblivion.

85 fedublittefellow wrote:
save your sneering about how simple we are for the next party conference

I'm sorry if you felt I was sneering. That wasn't my intention. Nor was my comment particularly partisan.

My worry is that difficult and complex economic decisions will be ducked because they cannot easily be sloganised. There is little space in modern politics for debate or explanation. Both main parties are equally culpable; they are in the thrall of the marketing men, and there is a reluctance to put forward arguments which are ambiguous or counterintuitive even if they are in the best interest of the country.

I agree that people on middle to low income will bear the brunt of the pain. I have consistently argued that people on higher incomes should contribute more and have taken a fair amount of flak for doing so.

By the way, although we have now paid off our WW2 debt, the government still has some debt which predates WW1, in the form of consol bonds. Long term debts are not bad per se - it depends on the terms. (The terms for the WW2 debt were pretty good, hence the relaxed attitude to clearing it.)

Nick -- why not do the good thing and say what many other commentators are saying about Brown and Darling's PBR.
Dishonest and full of hidden cuts coupled with unrealistic growth estimates.
In short an attempt at an election giveaway that will destroy the UK economy even further.

Re my post above (nr 7) and Mr Robinson's piece:

I now understand that the 36bn cuts are the total over a 3-year period, i.e. 12bn per annum, which with some 8bn in extra revenue would leave a gap of 80bn to close the structural deficit of 100bn.

Also, the 2,400 guinnies are the extra cost per annum per family of the extra debt for 6 years, i.e. total 18,000 per family

And not to forget that the IFS uses the Treasury's optimistic growth forecasts for 2011 and beyond.

Time to take action if you're not on a public sector indexed pension.

Anyway, good WE

So no cuts Brown stopped Darling from telling the truth.
Oh what a tangled web Brown weaves when he practices to deceive.
What a pathetic figure Liam Byrne cuts trying to defend labour lies.
Latest news is that labour is to introduce a Bell Tower scrappage scheme.
Labour toffs - summer houses, bell towers, ding a ling!

If there's only one thing we can be sure of from the event of the past couple of days, Nick, it's that we, the electorate, or not getting the full story.

As a public service journalist, I just wish you would put your energies into uncovering this full story, rather than just repeating what other people have already said.

It's obvious that there is a lot of semantic posturing going on over the differences between "debt" and "deficit", and that the government are just hoping that nobody looks at the details too closely.

This is what we pay you for, Nick. Look closely. Dig up the truth. Report it to the public you're supposed to serve. To hell with what the government tell you to say, otherwise they'll just drag you down with them when we're finally given the chance to kick them out of office.

Nick,
are your secret sources abandoning you? How come your junior colleagues found out about the Oliver and Hardy couple of politics overruling the Chancellor before you? Or did you choose not to be involved with this issue?

What worries me is if Brown stopped Darling telling the truth, what else are they covering up. Can we wait until May for the election, 5 months more of Labour could see us lose our triple A rating.
Come on labour back benchers, are you really prepared to see the country go under. Wake up!!!!

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

68. bryhers:

"The reality for both government and opposition is they are rather like us.They get through the day and enjoy a sup in the evening.Your conspiratorial fantasies are wasted,write a novel,go for a walk, doodle some comics.Don`t get over tired,it is not conducive to rational thought."


Absolutely right ap... but you left out some other traits they share with us, the general public, in varying degrees... vulnerability, ambition, self-preservation, incompetence, greed, deceit, vanity ... so brian g's comment is not totally outside the realms of possibility. As you say, they're only human after all.

I notice we've just pledged £1.5bn to help developing countries deal with "climate change".

Nice to know we still have money to burn.

With the situation here as dire as it is, I'm thinking that the first thing we should be cutting is all overseas aid, at least until we're in a better position ourselves.

https://news.bbc.co.uk/1/hi/uk_politics/8407318.stm

Seems like Brown has been meddling again. Like Hitler ranting in his bunker and pushing around imaginary armies on his map, Brown overules all his subordinates. How much damage will he and the odious Ed Balls manage to do before they are finally ejected from office?

@ djlazarus
Yes, and according to the Italian press this is a voluntary contribution to convince other European countries to meet a fund of 6 billions.
At the same time Gordon has ordered the Bank of England to work overtime to print more money (including a £ 500 note) :-)
The man has either completely lost it and is acting in shear desperation or, like his predecessor, he is buying himself a job for when he is thrown out of his present one.

95 djlazarus

With the situation here as dire as it is, I'm thinking that the first thing we should be cutting is all overseas aid, at least until we're in a better position ourselves.

Compared to many of the countries we give aid to, things are pretty rosy here, even in a recession. For example, whatever happens with government borrowing, tax rises and spending cuts, I won't have to watch any of my three young children die of malnutrition. There's dire and dire. I don't think overseas aid is the thing to cut.

"The Institute for Fiscal Studies says that government plans imply £36bn of cuts in departmental spending ie over 19% from 2011-2014 in order to protect schools, hospitals and increase overseas aid. They say the police pledge is meaningless. They also say that defence, higher education, transport and housing are most likely to be hit."

My paper yesterday (D. Mail) printed a pie chart showing (in very broad terms) government expenditure for 2009 - 10. The chart (with the Treasury cited as its source) shows (inter alia) Social Services at £219Bn, Health at £119Bn and Education at £88Bn. Defence, law and order, transport and housing *together* total £127Bn. (Higher education and the police are not separately itemised.) FWIW debt interest is given as £30Bn. It seems fair to assume that all other things being equal the equivalent chart for 2010 - 11 would not look greatly different.

Where within the chart public sector pensions are hidden is not disclosed; neither is there any indication of whether the totals include PFI commitments.

With a quoted total expenditure of £676Bn (not all the slices have been accounted for above) shaving off £36Bn really is just tinkering on the margins. With Social Services (however that may be defined; it simply is too broad a category to allow meaningful analysis) and Health and Education gobbling up some 63% of the total expenditure those headings cannot be allowed to escape unscathed; to even try to leave them untouched makes no sense whatsoever. Contributors to earlier discussions would have us ditch the Trident submarine replacement programme, but in reality the saving that would provide comes nowhere near being sufficient. Looked at carefully it becomes abundantly clear that defence and law and order (to cite two out of several possible options) are such small slices of the whole pie that they could almost be left out of any cuts programme completely.

Another pie showed in graphic and horrifying detail the fact that income for the 2009 - 10 period included some £178Bn of borrowing (NB - not debt, *borrowing*) which is just over 26% of the total.

How can anyone see this sort of budgeting as sustainable? I certainly can't. None of us could run our domestic accounts like this, and yet we are required to hand over our money so that NuLab can run the country this way.

I hope I live long enough to see some sanity restored to politics in general and governance in particular. If it wasn't so bl**dy serious it would be funny.

98. pdavies65 wrote:

"There's dire and dire. I don't think overseas aid is the thing to cut."



Well said.