More on Osborne's plans

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Yet more anarchistic free-market lovin' clap-trap!....deck chairs and Titanic springs to mind, CAPITALISM JUST AINT WORKING...is this really the best they can come up with (that means all of them Lib/Lab/Con).

Why should we have to accept any of this ? It is the banks that have "lost" trillions of pounds and it is they who should be forced to recover it. Money lost and not recovered is money stolen.

A bit more on how Osborne's package compares with the government's plans ?
A totally pointless comparison really. I'm not going to pay for somebody elses fraud and I somehow don't think others will either.

Perhaps we're all being too pessimistic. After all, within 10 years of the Great Depression, the world still managed to afford the most expensive war in history. Caledonian Comment

#4 CaledonianComment wrote:

"Perhaps we're all being too pessimistic. After all, within 10 years of the Great Depression, the world still managed to afford the most expensive war in history".

WWIII as the solution to get people to tighten their belts and accept having less?
A bit drastic and possibly Bush's thinking, but it worked once (although it did allow the US to dominate Britain economically).

Worryingly the pessimism may actually be optimistic, however once things stabilise, people tend to have short memories (negative equity in the early 1990s following an asset bubble anyone?) and with the return of optimism and everyone with a vested interest promoting that ethos, the bubbles will re-inflate.
Unfortunately, that will probably mean people decide things are okay and ignore the structural deficiencies in the economy.
(e.g. high imports, total dependence on exporting financial services to finance them)

My 9 year old daughter just asked if he is related to Sharon and Ozzy. I think she might be on to something...

"The pressure will now be on the Chancellor to show how he plans to fill that £36bn hole next month, in his Pre-Budget Report"

I expect it will be a fudge of some sort. The current chancellor knows he has only a few months left in the job, then it will be someone else's problem.

The problem for the Tories is the medicine will not be to everyone's liking. No doubt the economy will recover in a few years, by which time Labour will be waiting in the wings to wreck it all over again. People have short memories....

Is there a list anywhere of who will cut/tax what? I'm a public sector worker so rather woried about a combination of pay freeze and increased tax and inflation from the blue team. But the red team have promised to get rid of childcare vouchers which are worth £140 per month to my family.
Both are promising to kick me. Who will kick the hardest?

Today's announcement by Osborne is a taster of what lies in store who ever wins the next election. It is however difficult to argue if everyone is being asked to contribute. Yes the banks brought us to our knees. I guess it goes to show that it is never wise to think that it is not our problem because it clearly now is!

There are a couple of lines in the piece that are quite frightening.

"even if all of George Osborne's plans were adopted tomorrow - and achieved that £7bn a year cost saving by 2014 - you'd only be one fifth of the way to the total squeeze in spending that the government has pencilled in for the next parliament."

and

"It all goes to underline the point I made earlier - that you ain't seen nothing yet. "

I've noticed that some government ministers, including Brown, have started commenting that when UK borrowing peaks at (according to their projections) around 80% of GDP, then we will still be only "on a par" with countries like Germany and Japan. This makes me wonder if Gordon Brown's unstated ambition is for net public sector debt of 80-100% of GDP to be re-defined as the new normal.

Politically it has obvious attractions. By never repaying the vast sums he is now borrowing, he can minimise confrontation with the unions and his own party. There will still be a fair amount of pain, but it will arise from reducing the annual borrowing figure from the current 180 billion or so down to 30 billion or so and not from repaying many hundreds of billions of pounds as well.

It all highlights the sheer immensity of the economic disaster that this government has created. Unfortunately, it may also mean that the challenge is so huge that even the conservatives will eventually by forced to give up - probably in the face of looming electoral meltdown in the 2015 election.

If public sector debt did stabilise at, say, 90% of GDP, where would that leave us?

I also recommend everyone reading this blog reads writingsonthewall as well...this guy is smart!...he's got the zeitgeist!

Yes it is the banks that caused this crisis and it's the public that's going to pick up the tab - that's capitalism for you! And don't expect the banks to charge you less either!!

People don't seem to be talking about this 'W' shaped recession that the CEO of HSBC is convinced is going to happen. What happens when the banks get in trouble again? What happens if the Govt can't stimulate the economy again? All this will be happening in the background of cuts in public and private sector pay and high unemployment. The State will be facing a legitimacy crisis with the public. And about time too I say!

Large cuts in public expenditure will only be possible with widespread redundancies which will in the short term actually make the deficit worse as well as reduce some of the services the poor and recently unemployed will need. Only by Taxing large accumulations of wealth and super incomes can the 'circle be squared' Both the public accounts and the private sector need the economy to pick up sharply turning off the government spending tap is a form of economic self mutilation. What is needed is bringing forward the future inflation adjustment increases in benefits combined with targeted public works. The public sector debt may have to be refinanced and maybe we need the government to borrow from the IMF. There must be a new way of running the economy with comprehensive intervention on private credit creation together with direct control of the current nationalised banks becoming at least a desirable medium state.

#9 cooldrmichael. The banks did not bring you to your kness, the people fell on their own knees in supplication. Stand up - you can still walk.

1) Reduce the school-leaving age to 15 or 14. Large numbers of kids in their final year at school are not even there, with the connivance of the "authorities". At least that is the way it was four years ago when I was a supply teacher. They are on "extended study leave." This applied to the kids who everybody knew wosn't going to get no GCSEs.

2) Reduce National Insurance contributions and all taxes which discourage honest work and honest employers.

3) A new property tax for those with large properties who pay little or no income tax. I suspect this would apply to Il Presidente Tony Blair. What a crying shame!

4) Road pricing, especially for trucks.

5) Lowish import taxes especially targetting un-eco nasties.

6) Leave the "EU"!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

#10 "This makes me wonder if Gordon Brown's unstated ambition is for net public sector debt of 80-100% of GDP to be re-defined as the new normal."

It's an interesting question, and I think it depends on whether the Government can borrow the money at a low enough level of interest. I understand that the Japanese achieve this because lots of ordinary savers choose to invest in low-risk, low-interest, government-owned savings accounts. Maybe after what's happened over the past couple of years plenty of people here might be persuaded to do the same. Alternatively forcing the banks to hold large amounts of assets in the form of Government Bonds might have a similar effect.

The world has changed. We want to move to a system where the banks hold much more capital relative to what they lend. Maybe a much higher level of Government Debt is part of that same new formula. We should not assume that any "Golden Rule" will be the same as before.

What is interesting is the mentality as to how difficult this is. Using household economics its clear that cutting the goverment departmental expenditure limits by 5% (without exeption) and you save £42bn or so per annum. 5% is painful for two years but not the end of the world - private sector companies handle this sort of volatility all the time. Perhaps we should be more aggressive and get over the hangover within 1 year by accepting 10% reduction.

# 10. hants_gw wrote:

"If public sector debt did stabilise at, say, 90% of GDP, where would that leave us?"

Spending vast amounts of taxpayer money to finance borrowing whenever interest rates rise.

The problem is with low growth and a systematic deficit, even stabilising debt is another matter, never mind reducing the accumulated debt.

btw:
Do these forecasts of public sector debt include things such as PFI and public sector pensions?
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#13 watriler wrote:

"Large cuts in public expenditure will only be possible with widespread redundancies which will in the short term actually make the deficit worse as well as reduce some of the services the poor and recently unemployed will need."

??
Only as the result of redundancy costs, unless those made redundant in the public sector somehow cost more on benefits... or the redundancies are done in the usual haphazard way via voluntary redundancies for large pay offs, where gaps are left to be filled by agency staff or by overtime / acting up and not targeted specifically at the least productive roles.

Of course there is an argument for subsidising any job up to the level of benefits that would otherwise be paid; but that doesn't just apply to the public sector.
Unfortunately while companies make profits, its sometimes hard to determine the value added by many public sector bodies and value for money of many public sector roles.
If such things were performance related, the treasury would have been fired en masse.

The thing is the public sector has evolved and grown from historic roots and along departmental lines, perhaps we need to take a "big step back" and consider what we want the public sector to do at what cost and what we need to achieve that; defining priorities and allocating resources accordingly - not just based on last years budget plus or minus a few percent. Looking at where we need to be, rather than just trying minor amendments to the current position.

What is interesting about all this is that until only a very short time ago, Brown was still denying there would be any need to rein in spending at all. Remember how he was boasting about Labour 'investment' versus Tory cuts.

Eventually realising people weren't buying that, he tries to suggest Tory cuts will affect front line services, whereas Labour cuts can come from greater efficiency, all gain and no pain.

If Labour had ever understood the concept of 'efficiency' their words might carry more weight. But they understand only profligacy.

This is the government of tax-and-waste.

No 13 "The public sector debt may have to be refinanced and maybe we need the government to borrow from the IMF. "

If the IMF's track record is anything to go by, they'll insist on even deeper cuts as a condition of their loan(s) so that the national debts can be paid off as soon as possible. They may attach other conditions as well.

After all, they did force Hungary to cut a fair bit of their public sector spending as a condition of their loan.

No 16 "I understand that the Japanese achieve this because lots of ordinary savers choose to invest in low-risk, low-interest, government-owned savings accounts."

Most East Asians are obsessive and cautious savers. As such, they will opt for the least risky means of savings. One of them happen to be their equivalent of the Post Office Savings accounts. In return, their government had to ensure that this money is not looted and spent on crazy schemes. One of their investments will be in JGBs.

The JGBs (Japanese Government Bonds) were backed by their world class manufacturing and export industries. That made them more acceptable as low-risk instruments regardless of the interest rate.

Britain does not have such industries in place and therefore, the Gilts will be considered to be more risky. As such, their interest rate(s) will have to reflect that level risk.

All this is just the blowing of smoke over the eyes of the electorate. As Ms. Flanders said in the article, taking all that had been said into account, this just amounts to approximately 1/5 of the total needed cuts !! Where will the other 4/5 come from ?? We are still waiting.....

#19 DistantTraveller wrote:

"....Brown was still ..... boasting about Labour 'investment' versus Tory cuts."

And its also noteworthy how much of that "investment" was nothing of the sort, it was pure expenditure.

An investment is paying for something now to gain advantage from it in the future, not increasing the amount spent on something and committing to spend that and more every year from now on.
And how many of the investments were successful?
- ID cards?
- computer systems?
- etc.

Even things like school buildings, hospitals and health centres were not governmment investment, they were financed via PFI; we haven't paid a fraction of the cost of many of these projects yet and will be paying for them for years to come.
Yet to keep the costs out of the borrowing figures, we pay more than could otherwise have been the case.

Now surely investment would've been employing those not currently needed in the construction industry on non premium boom time wages to increase the social housing stock - cheap properties built in a depressed market, with supply of materials / labour exceeding demand.
But then an increased supply of housing would potentially drive down property prices and result in losses for those who speculated on buy to let or overstretched in buying as expensive a home as possible as "an investment" that they "couldn't lose on".

I can't actually see much in the way of a "stimulus", except for QE, allowing banks to strengthen their balance sheets and profit while servicing the ever increasing government debt.
All we've done is prop up the banks and throw money away on VAT and to the motor trade and foreign car manufacturers .
To say other public sector excesses are a "stimulus" is deceptive, given that most of these were commitments preceding the downturn.

Just more token initiatives for whatever happens to be in the headlines next.

Perhaps proper budgeting and accountability in the public sector would be a start, rather than, add 5% to last years budget, and then the rush to spend everything at the end of the year, regardless of whether things are needed, to justify that budget for the following year... protecting empires rather than delivering value for money, and wasting money that could be better used elsewhere. Its a process the treasury manages and is common throughout the public sector, it is also incompetently wasteful.

Stephanie:

Thanks for the excellent information in the Osborne plans....

~Dennis Junior~

Armagedion - responded in an "embarassment of cuts". Feel free to cntinue thread here

Here's what will happen:
a) Banks will become further nationalised / regulated
b) The banks will be told to limit interest rates, perhaps with a fix on monthly repayments of household and commercial debt so that principal reduces, while raising income taxes

re: 16. random_thought

"I understand that the Japanese achieve this because lots of ordinary savers choose to invest in low-risk, low-interest, government-owned savings accounts."

Thanks for that response. I hadn't really understood how the Japanses were able to get away with such seemingly huge levels of borrowing.

I'm not at all sure that the same would work here. I remember in the early days of the banking crisis seeing claims that total British debt (ie government plus corporate plus personal) was around 300% of GDP and that personal debt was the largest part of that. If so, getting to the Japanese model would require a) paying down vast amounts of personal debt and then b) accumulating substantial amounts of personal savings. That would take a lot of money out of circulation and might even resemble the apocalypse that Brown says would happen without his borrowing binge.

It increasingly seems to me that we have a choice between two unpleasant alternatives. If we seriously try to re-pay the debt, that will mean harsh cuts in public spending, tax rises, quite possibly another recession and all the political conflict that flows from those things.

If we just try to live with the debt we end up paying interest on a 100% of GDB debt, much of which will be money borrowed abroad (since, unlike the Japanese, we don't have a large pool of domestic savings). If interest rates average, say, 3%, we will pay 3% of GDP in interest each year. If the economy grows at 2% per year (rough historical trend for a mature economy) that looks to me as if the economy will actually be shrinking. Of course, if growth is lower or interest rates higher ...

The choice seems to be between several years of very real misery and a sustained future of (at best) anaemic growth and more likely actual slow decline.

I will be very happy for someone to explain why I have got it all wrong.

At 10:49pm on 06 Oct 2009, SuffolkBoy2 wrote:

1) Reduce the school-leaving age to 15 or 14. Large numbers of kids in their final year at school are not even there, with the connivance of the "authorities". At least that is the way it was four years ago when I was a supply teacher. They are on "extended study leave." This applied to the kids who everybody knew wosn't going to get no GCSEs.

You're joking that you were a Supply Teacher?

RE 18. Reaper_of_Souls

"btw:
Do these forecasts of public sector debt include things such as PFI and public sector pensions?"

As far as I know, no they don't include either of those things. I've tried to use the government figures as far as I remember them since the situation looks bleak enough as it is and the things you mention just make it even worse.

Remember all these cuts are attempts to realised the vast amounts of fictitious capital that have been built up.

That is, to avoid capital devaluation, profits have been artifically maintained through asset price rises, e.g. stockmarket and housing bubbles.
But all these 'clever' financial instruments rest upon the ability to extract value from the workers at some point in time, i.e. pay ever increasing amounts for a house, work longer (in hours per day & in years), paying more in taxes, etc.

Ordinary people are struggling today.
Squeezed even harder tomorrow there will eventually be a backlash (even if initially an ugly jingoistic one).

And even if the Tories manage to resolve the fiscal blackhole (looking unlikely), the UK is very much exposed to the collapse of the US dollar (which although long predicted now seems on the horizon).

For it is the US dollar that has been behind the huge growth in fictitious capital since the 1970's.
The fictitious capital that has been recycled through the City of London.

Bye, bye dollar, hello inflation.

Just go the whole hog, re-introduce rationing and make the population feel miserable like they did after the war. A fearful population is more easily controlled history tells us, so why not give it a go?
I have no real solution or ideas as to what to do, but I do know that I have heard non this week persuade me that anyone else has an idea either....... shame really.

This all looks like the Tory Tax increases of the 1980s when VAT was doubled and beer taxes increased and higher rate income taxes cut. That only increased unemployment still more. As consumers' confidence in their futures declined, families saved more and business revenues dropped further. Bankruptcies and government debts soared.
In short what we're offered now is more of the panic measures that made the 1980s an inflation boom and an economic bust. Enoch Powell warned us: trades unions demand extra pay because money supply is boosted by government borrowing that causes runaway inflation.
So we've had these panic measures before from Geoffrey Howe and Nigel Lawson. They made things much worse then, and Osbourne wants to repeat those disasters.

#31:

"A fearful population is more easily controlled history tells us, so why not give it a go?"

Perhaps a good start would be to start something called a "war on terror", and convince the masses that there's a terrorist around every street corner just waiting to blow us all up. Once you've done that, you could introduce control orders for people who aren't convicted of anything, ban demonstrations anywhere near Parliament, give the police scarily wide ranging powers, and set up a giant database that records every single email and phone call we make. Then you've pretty much got that level of control when you could introduce rationing or do pretty much anything else.

Fortunately, it'll never happen in this country, because we value our freedoms too much. Don't we?

#7
engage your brain pleeeeez

Hants-gw

A lot of your description of the problems facing any new chancellor is right however what you have not factored in is what the real economy effects will be if a new government does attempt to reduce public spending . There are at the moment a lot of bookkeepers with their pocket calculators advocating drastic cuts whereas in reality the level of cuts being proscribed will inevitably pitch the country into a deep recession. The W described by the CEO of HSBC does not properly describe the side of a mountain the economy will tip over.

There is no clarity from any politician what the sustainable level of long term public spending should be, nor is there any real clarity over what is the level of total dept is sustainable for our size of economy. All that seems is apparent we need to be able to be able to sell government bonds - if we can do that and reflate the economy without high interest rates (sic) we should all be fine.

Unfortunately for the bookeepers a lot of increases in public spending have been spent on trying to make up for the effects of the deindustrialisation of Britain in 1981, the then following disinvestment in public sector buildings and staff. Although many have been able to share in the profits of growth since then our society has grown increasingly unequal - this will have potentially damaging long term effects, which no big sticks will solve. Any government which does not focus on the disaffected underclass will simply be throwing our money, our childrens and our grandchildrens money away - as well as being inhumane.

Of course what this means is that there is little room for manouver - it is not about efficiency it is about effectiveness, the truth we all know is that we need higher levels of tax* to make up the deficit, we probably also need an economy that does not rely so heavily on the financials. We also need a government any government which will not be run by public opinion. I can't see any out there at the moment.

*especially from people like me that own over 50K

At 09:24am on 07 Oct 2009, Vimeiro (28) wrote:

"You're joking that you were a Supply Teacher?" about SuffolkBoy2 (15)

Unfortunately he probably isn't joking and nor has he worked out why you made your comment.

We oldies at the chalk face find it all quite depressing. Sigh.

#27 hants_gw

Yes, the high levels of personal debt are a big concern, and it is the total British debt that really matters, not just Government debt in isolation.

One factor that needs to be taken into account though is that each debt is owed to some creditor somewhere - and I'm not talking about the banks (which are just intermediaries) but the net savers in the banks, or the wholesale money funds which have lent to the banks, or indeed whoever it is that has put money in those wholesale money funds.

And I think who this money is owed to is of great significance. If it's owed externally - eg to the Chinese - then we haven't got a lot of choice and we're going to have to pay it back.

However a lot of the money is owed internally within our own economy. Perhaps to rich individuals (including the bankers and landowners who have made so much money during the preceding bubble). Perhaps to our own pension and insurance funds. Where the money is owed internally, then we can actually do something about it - by using the tax system to redistribute wealth and/or income and thus reverse the inequalities which have developed over the past couple of decades (and which should be seen as an underlying cause of our current problems).

It is very difficult to discern from the broad/general statements by Osborne the impact of cuts/changes on the population and on public services. In relation to pensions there are sub-groups who have been hard hit by changes of recent years -for example, a woman born in 1955 had an expectation until a couple of years ago that she could retire in 2015 with a state pension -ur if she had been careful she might have planned to have a modest occupational pension to begin at 60- having seen that date slip to 2020 under Labour, it now seems, under Osborne proposals that she might find that she will have to work until 2021 (perhaps not as there seemed to be some fudge at eleventh hour) or even later if some future Chancellor decides to take a further shot at the state pension. Does Osborne think that few women in their 50s are Tory voters?
I am worried that when it comes to cuts in public services some potential Ministers don't seem to have a clue (they have not thought about it)about the detail. I saw Chris Grayling interviewed by Paxman last night on Newsnight -he ended up spouting some nonsense about Forces sharing helicopters but would not answer on police overtime (does he even know what the spending on that is?). Given that Cameron has not ring-fenced the Home Office, Grayling should have been examining H.O. budgets minutely but appeared pretty clueless.
However, I am a lot less gloomy than many contributors - near financial disaster was last year (and actually Labour did quite well on averting that). When I was a lad in the 60s earning £12 per week in my first job I paid income tax at the standard rate of 8s3d in the £ , or at 42.5p in new money and got by okay - so there is a lot of scope for tax rises without the wheels completely falling off.

Dear old Sam Johnson once said `There is nothing like a prospect of a hanging to concentrate the mind'. He was right.

It is quite apparent from the chaos and misery expressed on this and other blogs that it is starting to dawn on the population at large that the country is not just in deep doo-doo up to its chin, that there is quite possibly no way out which does not involve swallowing several unpleasant mouthfuls.

It would seem that the expectation to date is that unemployment, dispossession and poverty was the preserve of some mythical other; some statistic, or someone who can be simply dismissed as incontinent or deviant in one way or another. No: if you are lucky misery will just be the property of someone close to you.

In meeting the challenge of the government by fleshing out simple propositions and the methodology for cuts in a very moderate and minimal way, Osborne has opened the doors in the public's mind as to what a fiscal deficit of GBP 200 billion actually means.

Now the government must begin to become more frank in how it will dispose of this huge deficit, as putting it off until tomorrow is not an answer. This deficit was GBP 175 billion earlier this year but it is now nearer GBP 200 billion: the price of doing nothing is very expensive.

Sacred cows will have to be slaughtered and illusions consigned to that cliche-ed dustbin marked history.

The country is just beginning to wake up to the reality. The economic, social and political elite have failed fundamentally. It is no longer a case of a couple of bad years followed by a slow recovery; this time it will be a number of bad years which might be followed by a slow recovery or by something a lot worse.

To fail to do something promptly about the deficit - and we have to accept that Osbornes proposals are very moderate, probably inadequate and are going to be implemented too late - will lead directly to a run on sterling, inflation, large increases in interest rates (Barclays wrote to me today offering me a deal on savings of 5.25% over five years: obviously they expect interest rates to be higher than that then), a collapse in domestic demand, an economic slump with very high unemployment coupled with the prospect of malnutrition and even starvation is some quarters (don't forget we import 40% of our food).

It will get worse if we are not very careful. It will get worse if we don't do something very soon. If Osborne scares you, then you ain't seen nothing yet. What scares me is that the government is away dancing with the faeries.

33 DisgustedOfMitcham2

"Fortunately, it'll never happen in this country, because we value our freedoms too much. Don't we?"


So very true. I could believe it might happen under the Tories, but never under a Labour government, no way........

If George Osborne really wanted to convince me that "we're all in it together", then how about announcing a new higher rate of inheritance tax for large estates: say 95% on any estates over £1 million? That would certainly help to reduce the deficit (I have no idea how much, but even if it's not significant in the grand scale of things, every little helps), and is also the fairest of taxes, as dead people don't need any money.

But given the enormous wealth of David and Samantha Cameron's parents, that's not really going to happen, is it?

Once again, we see that politicians are only interested in looking after their own.

Sorry I did not refer directly to George Osborne's plans, they miss one essential point which is we have over the last 30 years been paying far too little tax. The prevailing political paradigm shaped by the 79 and 83 governments constructed a perception that we could have good public services without paying any tax. TSArthur is right we simply do not pay enough tax. All the cuts, efficiencies and different way of doing things are a chimera in dealing with the size of deficit we have. They are peddled by liars we all know that but we were stuffed so full of jam we cannot bear the idea of real social responsibility.

oops I did it again what I should have said was he has only talked about a sliver of what is needed to be done. His pan to keep the inheritance tax showed that he is a coward, and his party are not ready to take the decision a government needs to.

stanilic (#39) Yes. I hope this is a sign of you coming round. Some of those sacred-cows have rather vitriolic defenders in these blogs and elsewhere. The problem Si, it's not just the very young and rather old which have the cognitive ability of children, many adults come close to being ineducable beyond a point and need to have their behaviour managed by others. How many people are prepared for that in our, non-defering, liberal, society? How did it ever come about, and are we all in this together?

No 37 "However a lot of the money is owed internally within our own economy. Perhaps to rich individuals (including the bankers and landowners who have made so much money during the preceding bubble). Perhaps to our own pension and insurance funds. Where the money is owed internally, then we can actually do something about it - by using the tax system to redistribute wealth and/or income and thus reverse the inequalities which have developed over the past couple of decades (and which should be seen as an underlying cause of our current problems)."

The pension funds have already been looted and pillaged once by Our Glorious Leader in his guise as the Chancellor !! To loot it more by re-distributing its "wealth" when pensionable age will be raised to 66 and beyond will be quite unacceptable to the near-pensioners and there will be a revolt (electorally, if not physically) !!

As for looting little old ladies' meager savings.....

No 38 "When I was a lad in the 60s earning £12 per week in my first job I paid income tax at the standard rate of 8s3d in the £ , or at 42.5p in new money and got by okay - so there is a lot of scope for tax rises without the wheels completely falling off."

But at that time, the maximum tax was 112.5% (22s 6d), made up of 19s 6d top rate tax plus 3s in a quid Investment Income Surcharge on top of that; i.e. you paid the government for the "privilege" of invest or saving your money !! That was what destroyed the savings culture in this country !!

From what you have written, I gather that your annual income would be about £625 and at that time your single person personal allowance (assuming that you didn't get married at 16) would be £475 per year leaving a taxable income of about £150 per year.

At 42.5% tax, it would mean your tax would be about £63 15s per year or £1 4s 6d per week, not 8s 6d !! Still, you would have had more than £10 per week which was much more that I got when I had to do such sums on a mechanical calculator before Sir Clive brought out his electronic one !!

#44 ishkandar

"The pension funds have already been looted and pillaged once by Our Glorious Leader in his guise as the Chancellor !! To loot it more by re-distributing its "wealth" when pensionable age will be raised to 66 and beyond will be quite unacceptable to the near-pensioners and there will be a revolt (electorally, if not physically) !!"

Well I beg to differ. The tax exemptions on pensions are a huge and regressive aspect of our tax system - ie they disproportionately benefit the better off.

Scrap all tax exemptions on pensions, use the savings to double the State Pension, and you would still have billions per year left over to pay down the National Debt.

There's been a lot of talk about clawing back middle-class benefits and subsidies. Well this is the biggest of the lot. Subsidising the pensions of the rich, while the poorest part of the poulation rely on an utterly inadequate State Pension.

No 41 "...say 95% on any estates over £1 million? That would certainly help to reduce the deficit (I have no idea how much, but even if it's not significant in the grand scale of things, every little helps), and is also the fairest of taxes, as dead people don't need any money."

That will help lose them all the Outer Boroughs of London (their strongholds) !! £1 million *doesn't* buy a terribly fancy property in the Outer Boroughs !!

Just as NuLabour dumped £billions trying to shore up bankrupt Scottish banks and starve off losses to the SNP, the Tories will not want to lose their Outer Boroughs strongholds !!

No 46 "Scrap all tax exemptions on pensions, use the savings to double the State Pension, and you would still have billions per year left over to pay down the National Debt."

It's all very good in theory but in practice, all the savings will be used elsewhere for various politicians' pet projects and the state pension will be as poorly as ever !!

Addendum to No 48 - Scrapping gold-plated final salary pensions for Civil Servants will claw back much more that scrapping tax exemptions for private pensions !! There are significantly more of them than there are of people paying for large private pensions. Small private pensions are usually held by the very people that you want to help and scrapping their tax exemptions will defeat the purpose of the exercise !! Think of all those small shopkeepers and self-employed tradesmen !!

I'm truly amazed that families earning over £50000 a year are actually getting benefits at all. They are hardly living in poverty.

Just shows the huge giveaway by Gordon Brown over the last few years to those who don't need the money but arem't going to refuse it either. But of course he was wooing the middle classes whilst starving those at the bottom. What a chump he is.

I keep thinking of that figure of £60 billion pounds every year. How badly it would be needed over the next few years to alleviate the harsh bite of never ending cuts. It should be stressed over and over again that this is through Brown's inept handling of our economy.

£60 billion pounds of our hard earned money handed over to those who saved rather than spent and are happy to lend to us for a nice return for doing nothing and we see nothing for it. £60billion pounds of our hard earned money going up in a puff of smoke.

That is the biggest disgrace of all and Brown should be constantly reminded of that.

35. balancedthought wrote:

"the truth we all know is that we need higher levels of tax* to make up the deficit, we probably also need an economy that does not rely so heavily on the financials."

Just as you noted earlier in your post with spending cuts having knock on effects elsewhere, much is the same with taxation.
In many cases higher levels of tax lead to lower total tax revenues.
The best way to increase tax revenues is through systemic (non-bubble) growth.
Whilst we certainly need a more diverse economy, we need to be able to produce those things better and more efficiently than can be done elsewhere.

The simple fact is, public spending has increased too rapidly to be supported by our underlying economy.
Its a shame, in his first few years a chancellor, Brown did actually show prudence and was a decent custodian of the economy. However, labours 2nd and 3rd terms have been an unmitigated disaster, the demands to throw money and be seen to throw money at any and all problems eventually held sway and expenditure surpassed revenue even in the bubble fuelled boom years.
Some of this expenditure was in all probability done with the best of intentions, some had the flavour of trying to buy political capital. We've all heard the "X% more spent on this that and the other" drivel in response to virtually any question.. they still don't get it - its about results, throwing money at areas doesn't guarantee improved results; especially when so much is wasted by moving the goal posts with a new initiative for every headline.

What the public sector needs is balance and stability, can't we reach a consensus on core elements that are required, ensure these areas have clear objectives, prioritise funding them, minimise other areas (subject to the political winds and available funds) and reduce political [and by extension union] interference in core services delivering our needs.

Surely we don't "need" all of the new regulations that have sprung up in recent years, and by extension, if we don't need a regulation, we don't need people to write, publicise, monitor and enforce it.

When I'm paying for a service I want to see I'm getting something for it - okay I'd prefer not to use some services, but I want to know what I'm paying for it is being well spent.

The problem with a democracy is that those who are taking have an equal (and with the boundaries favouring labour often a greater) say in how things are done... so, in an extreme hypothetical situation, if you have 49% of the population work as virtual slaves to support the lifestyles of the other 51% you have a good chance of being elected (depending upon the morality of the 51%... increase it to 60% and self interest is likely to win the day).
We now have one of the highest proportions of the population dependent upon the state for the majority of their income in our history.

We used to support our standard of living and wealth through owning (and exploiting) businesses around the world, yet now many of our businesses are owned by foreign investors.
As such, we do not have the safety net to fall back on anymore, we need to import, and to fund this we need to do something other countries want... which other than aid and EU fees the public sector isn't very good at.

As previously stated, balance is the key, and as it stands the public sector exceeds our means to pay for it... a reality check is required, but then socialism has always been more about dreams and principles than reality and practical workability.

45. Ishkandar-you are quite right, I was not a big contributor to the Exchequer in the 60s, but there were many older workers at the top of the scale for the job (about £1400 I think)who paid that rate on a much higher proportion of their income-and many of them were Labour voters. My more general point was that people have lived, reasonably happily, with higher direct taxes in the relatively recent past. I also realise that comparisons are not straightforward, we have higher NI contributions now, and also VAT at a high rate takes more than the old purchase taxes do (not sure about relative levels of exises). However I would suggest a rough comparison would be 42.5% then compared to 20% standard rate now plus VAT 17.5% x 0.8 (ignoring exemptions and assuming income consumed) = 34% - with other taxes in both periods balancing each other out - suggesting that for the general population back then, taxes were relatively higher, and as you note taxes on high earners were definitely higher.

#43 JJ

I am not `coming round'. There is nothing in my post 39 which I have not said or implied before.

Politics is by definition the art of the possible. At least we now have some in the political class who are taking some note of the harsh realities that our country faces. This allows everyone to move on in their thoughts as the potential of the possible is now extended. We are no longer screaming impotently at a studied indifference. Yet, for as long as the government remains in denial then matters can only deteriorate.

I remain as I have always been a non-believer in the state, even the social-democratic state which in my view is an hypocritical construct. I have offered you the intellectual basis of that position in the past but you are unable to accept it. I don't care if you don't accept it; people can always agree to disagree, but what I am unable to accept is your continued and very abusive denial of my intellectual reality.

Lastly, to me there are no sacred cows but we still need the milk of human kindness to bind our society together. You and others talk about revolution. I have seen revolution and I have seen aborted revolution: neither are worth the time spent thinking about them as all that happens is the innocent get hurt. We need to allow our politics to evolve as circumstances change, we need to be pragmatic and allow our preferred dogmas to take second place to what is practical. Survival is the first criterion before other more pleasing criteria can come into play.

#49 ishkandar

I was suggesting removing tax exemptions on all pensions - public pensions, company pensions and private pension.

Actually many public sector pensions belong to low paid workers (eg in the NHS) whereas private sector pensions are havily scewed towards high earners. To wuote the Government figures:

­• 21 per cent of men and 32 per cent of women with gross weekly earnings of less than £300 were members of an employer-sponsored pension scheme, while

­• 76 per cent of men and 82 per cent of women on gross weekly earnings of £600 and over belonged to an employer-sponsored pension scheme.

The reason why more low-paid women are in pension schemes than men is precisely because they are employed in the public sector.

A principal often used as a basis to promote efficiency is "Keep it Simple"..

Unfortunately legislation is rarely planned in a structured way, it evolves with bits bolted on here, there and everywhere to respond to new circumstances, omissions in the original legislation and random "political initiatives". Sometimes these rules and objectives don't even follow a consistent theme.

The public sector has in turn evolved in response to legislation and fluctuating policies, in light of this, is it any wonder the public sector is inefficient?
Unfortunately the hierarchical nature of the civil service and the associated bureaucratic working practices mean that there is limited flexibility, old structures and methodologies are kept in place and used to tackle new problems for which they are not suited.
In many ways the size of many public sector organisations is what limits their ability to respond quickly to new circumstances.

The fact that the public sector is often seen as a secure job for life encourages a certain mentality, can suppress energy and innovation and get people into a rut of just following rules and procedures and not questioning anything. People know many such rules and procedures are pointless and wasteful, but the culture dictates following them rather than challenging them to change things for the better.
In many cases public sector departments are extensions of academia, people going into them from school or university and remaining there; which probably explains the "be seen to tow the line" approach and the sometimes somewhat blinkered outputs, people not having seen other potential approaches. The fact the public sector is often seen as a secure and "cushy" career path, also inevitably has an impact on the profile of people who often apply.

I somehow doubt that if we were building the public sector from scratch it would take its current form (except perhaps to maintain ministerial "empires"), but change tends to be resisted tooth and nail especially by the unions.
Pay someone for the job they do, not the number of years they've been doing it; perhaps then it would encourage flexibility, people entering from outside industry and (other than the inertia enforced by the pension schemes) giving civil servants an opportunity to work outside the public sector.

I think the phrase is "root and branch" review - and its what the public sector needs, but would any such review be truly objective?
Consultants are paid to tell those who engage them what they want to hear to justify actions that are already planned, civil servants would have an interest in defending the status quo...

The public sector needs to change, and change rapidly, we can't afford it as it is, and those who have looked at the demographics will know that its going to get a lot tighter in 20 years time.

Stanilic #53

"Politics is by definition the art of the possible." That's your definition, originally coined by a German conservative with the name Bismarck. Like many conservatives, he had a direct interest in seeking to restrict politics to what he thought was possible, and in his case, as the first chancellor of unified Germany, he was in a strong position to keep wider perspectives off the agenda.

I prefer to think of politics as who gets what, when and how. That focuses attention on the use of politics to maintain the prevailing distribution of resources. You might get a different answer if you think like that.

No 52 "...(about £1400 I think)... "

WOW !! Filthy rich sods. I was on £400 per year plus 3s Luncheon vouchers per working day !! Looks like you were a damn sight better off than I was !! :-)

No 55 "The fact that the public sector is often seen as a secure job for life encourages a certain mentality, can suppress energy and innovation and get people into a rut of just following rules and procedures and not questioning anything. People know many such rules and procedures are pointless and wasteful, but the culture dictates following them rather than challenging them to change things for the better.
In many cases public sector departments are extensions of academia, people going into them from school or university and remaining there; which probably explains the "be seen to tow the line" approach and the sometimes somewhat blinkered outputs, people not having seen other potential approaches. The fact the public sector is often seen as a secure and "cushy" career path, also inevitably has an impact on the profile of people who often apply."

In one word, "Jobsworth" !!

#53 stanilic. You are so right, and yet so wrong. Yes politics is the art of the possible, and sadly it proved possible for the political apparatus to be captured by financial oligarchs.

"We" cannot allow our politics to do anything as "we" have no control at all. Look at facts - do you really think the people were demanding that we invade Iraq? What are we doing in Afghanistan? Ask 6 people and you will get 7 different answers.

The probable reason that we are in Afghanistan is because of a fear of the fall of Pakistan. Did we, the people, allow AQ Khan to develop and sell this weapons technology? The answer is no - but someone did. Someone working for an agency that is notionally under democratic control, but not for any practical purpose. Why did they do that, and how are they going to be held accountable? Answer we will never know and they will never be held accountable.

Did we the people allow RBS to develop a balance sheet equal to the entire GDP of the nation? Did we have any idea what they were up to until it all went wrong? How can you have any form of control or choice when one single company is notionally as large as the entire country.

You are absolutely right that revolution merely hurts the innocent,and I have also seen first hand some of the horrors that you allude to. But understand this: We have been subject to a hidden revolution and we are going to get hurt without ever understanding why.

Many people will not survive what is happening and what is coming. Just because at the moment the death, misery and agony are not in your street, don´t be under any illusion that it will remain that way.

Look at mainstream political parties - all lining up to compete as to who can beat the poor over the head the hardest. Meanwhile the US Treasury, the US Federal Reserve, and the US Congressional Budget Office all issue reports that serve to confirm the unavoidability of financial meltdown. Even with this knowledge "our" leaders cannot resist taking one last kick to the heads of the poor.

Yes we need the milk of human kindness to bind our society together, that is our only hope. But you will get none of that from the captued political classes - like ravenous parasites they will devour the milk of human kindness faster than it can be produced. And like parasites they will not depart the host until it is dead. Yes revolution is terrible - but what do you suggest as an alternative? We have gone past the stage where stealing some poor persons pension will resolve our problems.

58. ishkandar wrote:

"In one word, "Jobsworth" !!"

lol - a lot more to the point, but I thought I'd use a lot more words to justify a case with some basic psychology and the fact it is a combination of nature and nurture.. the public sector environment often suppressing positive behaviour.

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

As to those advocating tax rises, remember not only do we have massive and growing public sector debt, we also have unprecedented levels of private debt.

For balancing the public purse, the public sector debt and underlying deficit is obviously a priority.
However, when considering the economy as a whole, perhaps our total level of indebtedness including future commitments under PFI, public sector pensions etc) and private debt is equally significant.

We need to generate income to finance all kinds of debt, and if taxes rise substantially to close the public sector deficit, it means less of an already dwindling pot is available to service private debt.
Driving defaults higher is unlikely to have a beneficial effect on the financial system.

When you combine that with potentially being considered a hostile place to do business, driving more businesses under, etc such measures need to be looked at very carefully.

Even then, why should people in the private sector pay more to subsidise those in the public sector with total remuneration packages far in excess of their own?
Especially if they aren't seen to get value for money from their contribution.

Perhaps the public sector would show improved efficiencies by employing people with the specialist skill sets to perform roles with excellence rather than the internal processes where people without those skills are transferred around at their existing grade and then left to learn on the job, leading to prolonged learning curves at considerable cost.
The "public sector experience" required, tag applied to many roles also speaks of a closed mindset and defensive attitude.

Its a shame that the private sector can't withhold tax in relation to waste and poor service, after all, they're not getting what they paid for, so why should they pay for it? They wouldn't in many other deals.

At least the threatened public sector strikes create the possibility for a few more savings. although no doubt people will be allowed to claim the days missed as "sick" and then paid overtime rates to make up missed time and do work they conveniently allow to pile on the days they attend.
Perhaps those who strike should be denied the right to overtime for a month or so afterwards.

Of course the threats of strikes due to a pay freeze (which doesn't apply to the lowest paid), when others who foot the bill are experiencing the same or even pay cuts, says much of the unions' commitment to services.

Perhaps it should be those who pay to run the country who decide how their money is spent, they might insist on value for money.

(and please nobody use the "public sector workers pay tax too" line - it would be a strange job where they paid more in tax than they received, they are therefore net recipients and as such paid for by the private sector).

#47:

"That will help lose them all the Outer Boroughs of London (their strongholds) !! £1 million *doesn't* buy a terribly fancy property in the Outer Boroughs !!"

Maybe it didn't in 2007, but it sure does these days. Still, I'm sure you're right that the Tories are not going to want to alienate their core supporter (ie rich people).

#50:

Nice post. I particularly like your use of the word "chump": presumably in the Mandelsonian context?

56. verymuchso wrote:

"I prefer to think of politics as who gets what, when and how. That focuses attention on the use of politics to maintain the prevailing distribution of resources. You might get a different answer if you think like that."

Its more the art of doing whatever you have to to get re-elected.
Being a convincing liar is certainly useful in this given that people want to believe in positives and until you (repeatedly) prove the error they have made, they are likely to want to believe you.

Some people come into politics with the best of intentions, but the need to be re-elected tends to take over, as does complacency and taking the people for granted, (plus the tendency to have lots of new "initiatives" to be seen to be doing something) hence the decline in standards the longer a party has been in power.

Since their first term labour have been going downhill rapidly especially in terms of the economy with internal dogma gaining precedent over the needs of the country.

Stephanie,
From your article:
'So, roughly speaking, both the government and the Tories have signed up to £9bn in tax rises between now and 2014. But even on the government's own plans, that still leaves a roughly £36bn cut in public spending between now and 2014 relative to what you might have forecast before the crunch.
Today Osborne set out his stall. But even if all of George Osborne's plans were adopted tomorrow - and achieved that £7bn a year cost saving by 2014 - you'd only be one fifth of the way to the total squeeze in spending that the government has pencilled in for the next parliament.'

If the Government's own plans leave £36bn to be cut in the next 5 years and Osborne's plans achieve £7bn per year by 2014 ie 5 years, does that not equal £35bn by 2014 or do Osborne's savings only save £7bn in the last year before 2014? I do not understand your sums on this one.
It is either £7bn savings in total by 2014 or if it is £7bn per year, then the Government and Osborne's savings are the same.

63. saltfordman wrote:

"If the Government's own plans leave £36bn to be cut in the next 5 years and Osborne's plans achieve £7bn per year by 2014 ie 5 years, does that not equal £35bn by 2014 or do Osborne's savings only save £7bn in the last year before 2014? I do not understand your sums on this one.
It is either £7bn savings in total by 2014 or if it is £7bn per year, then the Government and Osborne's savings are the same."

Unfortunately as I understand it we need to reduce the deficit (annual gap) by £36bn... so debt is increasing by £36bn p.a. more than "pre-crunch" forecasts.
So that's £180bn over 5 years and Osborne has "found" £7bn p.a. versus the £36bn currently claimed by labour to appear eventually.

And £36bn p.a. isn't the entire deficit, its the increase in the annual deficit (in real terms).

The hole is getting deeper and deeper and these cuts are just looking to reduce the rate of descent, not stop it.

After much searching on the ONS & HMT web-sites (which are best described as user-hostile (but maybe that's the point!)) I found a set of numbers which make for chilling reading and which underlines Stephanie's contention that much more will need to be done.

The UK's GDP is £1270bn. Government expenditure accounts for some 53% or £671bn of this. Government income is only £496bn leaving a gap of £175bn in this year alone. I.e. the Government is spending 35% more than it gets in income. Total government debt is £800bn and will rise to £1300bn by 2013 as further annual deficits arise and will continue rising unless Government income increases by more than 35% or cuts of more than 25% are made to Government expenditure (or some combination of the two). And that's before we even consider how to repay (even a proportion of) the £1300bn national debt. If say, the political sentiment is to get back to a national debt to GDP ratio of 40% (remember the "golden Rule") over 20 years the Government will also be repaying an average of £50bn p.a. So the real gap that needs to be closed over the economic cycle is the budget deficit + the repayment of some of the national debt a figure in excess of an average of £200bn p.a for some time to come.

So where does £200bn p.a. come from? (1) hoping that the current fiscal policy will eventually lead to economic growth which will result in increased tax receipts to close some of the gap (but the financial services industry is on its knees and no longer the "Golden Goose"); (2) raising tax rates, but even a whooping (and hugely unpopular) increase of say 20% on income tax and NI receipts only raises £48bn; (3) severe cuts in public expenditure, but even if Social Protection, Social Services, Education & Health (which accounts for 64% of total spend) was cut by 10% this saves only £43bn. No doubt there are many other ways of cutting the income and expenditure cake but you keep coming back to the same conclusion there will need to be a notable rise in tax receipts (economic growth + higher tax rates) and some very tough cuts in public spending.

This assumes, of course, that in the meantime we can continue to borrow from willing lenders at sensible rates because we retain our AAA credit status. But that AAA credit status is predicated on fiscally responsible government (whatever its complexion) and is already under review by the international credit reference agencies.

Even if you view this analysis as pessimistic (although it is based on officially published numbers which have already been shown to be optimistic) it demonstrates that both the Labour, Liberal & Conservative parties have a lot more to do to explain how the UK will recover from this economic culder-sac! But if the UK doesn't face up to some harsh realities in the next election the global markets will do it for us. The pound will slide against other currencies, import costs will rise driving inflationary pressures (e.g 40% of our food is imported) although our exports should also rise (if only we had a significant export industry), lenders will want higher interest rates and re-payment in their own currency (and not a devalued pound) and maybe we'll even be back at the doors of the IMF?

I'd appreciate other contributors views on the economic realities and the real choices we have to make.

RE 64. Reaper_of_Souls

"Unfortunately as I understand it we need to reduce the deficit (annual gap) by £36bn... so debt is increasing by £36bn p.a. more than "pre-crunch" forecasts."

Are you sure about that? This year's borrowing projection is around £180 billion - about 12% of GDP. If the extra borrowing attributable to the recession is just £36 billion, that implies that about £144 billion would be "normal", but it wasn't. Pre-crash government borrowing was typically in the £30-35 billion range.

To put this in context £180 billion is about £3,000 for every single person in the country - and that's just this year.

There is an assumption that a lot of this deficit will just "go away" as the economy recovers. That is reasonable up to a point. The trouble is that if the deficit halves in that way (to about £90 billion) it will still be three times the pre-crash level.

The size of these numbers make me sceptical about whether any current proposals mean very much. There are various people posting here who quite eloquently argue for either tax rises or public spending cuts. My concern is that I don't think many people grasp just how big these numbers really are and therefore just how big the tax rises/spending cuts will have to be if they are going to succeed.

Just had the calculator out again and I conclude that George Osborne's plans do not add up. They are all politics and very little arithmetic, but isn't that we expect from a politician?

The weasel words are on interest rates - the threat from David Cameron is that unless we take to bad medicine interest rates will have to rise. This is so blatantly stupid as a statement as it suggests that interests will not rise from zero. Now what this actually means is that the Tory party is not planning for a recovery at all, as unless and until interest rates rise there can be no genuine recovery as the price on money is set at such a level as to make it virtually worthless. The only recover will be in the price of houses - and that is exactly what caused the crash in the first place!

Punishing the people to continue to protect the bankers is simply not a path to a real economic recovery.

In essence my sums indicate that George Osborne needs to raise three times as much, and very much sooner just to pay off the debts so far run up and there is no indication that the Bank of England will stop quantitative easing any time in the foreseeable future.

Further without raising interest rates there will very soon come a time that the coupon rates on government bonds will not be high enough for the government to be able to sell the bonds in the market. (I also note Australia put up its interest rates yesterday.) Sterling is likely to come under severe pressure quite soon too and this will also blow away his already faulty calculations. Joining the Euro at parity will seem like it would have been a good idea in a year or so's time I am afraid.

Finally, will the Tories be the party to get rid of the pound and join the Euro? That should get the lunatic warmongering xenophobes going!

# 66 Hants_gw wrote

"Are you sure about that? This year's borrowing projection is around £180 billion - about 12% of GDP. If the extra borrowing attributable to the recession is just £36 billion, that implies that about £144 billion would be "normal", but it wasn't. Pre-crash government borrowing was typically in the £30-35 billion range."


I was using Stephanies comment below as my reference:

"that still leaves a roughly £36bn cut in public spending between now and 2014 relative to what you might have forecast before the crunch."


However, your figures appear more realistic and representative of the £36bn is the underlying systemic deficit. Although given that £30-£35bn was typical in the good times and that more public sector commitments are coming into force all the time, combined with an ever increasing demand for services; it would seem that £36bn is somewhat optimistic; especially if we consider the additional cost of servicing the ever increasing debt.

Apologies, it serves me right for taking a journalists commentary at face value, without checking my sources :P

# 67
John_from_Hendon

I couldn't agree more... the fact is low interest rates aren't stimulating the "real" economy (other than maintaining house prices and supporting the banks) at all, because rates for businesses are vastly higher and finance is severely restricted.

For now the government is able to sell bonds due to the combination of insisting on banks strengthening their balance sheets and quantitative easing - meaning really the debt is being "financed" by "printing" money, while paying the banks commission for making the arrangements.
Of course once the banks are seen as "stabilised" or the creation of currency drives sterling even lower...
& you're also right as to the cuts announced by Obsborne being the tip of the iceberg compared to what is necessary to right the ship; its a mere fraction of what is required but unfortunately Labour has recklessly and unrealistically raised expectations meaning people are over committed on the basis of unsustainable levels of spending; it is perhaps with a view to reigning in these excesses gradually in order to in part soften the impact that a gentler approach then is merited is being advocated, with the result of course, that in the meantime, the debt continues to soar.

#65

I'm going to be simplistic because its to easy to get to 'to trident or not to trident'

A household would have to change its ways. Stop doing something. Eventually it would have to stop having foreign holidays or nice new kitchens or buying iphones or yet another pair of shoes manufactured overseas. It might have to turn off the lights when not in the room or turn the thermostat down.

So fundamentally government has to change its ways too. Its needs to be more frugal. It needs to stop think that it can solve every human problem and protect us all from each teeny little harm. Life ain't guaranteed - death and taxes are.

Clearly, there have to be some huge sweeping changes but I'm in favour of starting a list of simple, consistent, easy to achieve proposals..

a) turn off street lights between midnight and 6am. (when did this become necessary? what is the cost to the public purse of being seen from space?

b)increase duty on alcohol and significantly reduce licencing hours (this would raise some revenue, reduce the need for policing and the stress on accident and emergency departments and redirect personal expenditure)

c) tax sugar and fat based products and their artificial substitutes (its ludicrous that there is no VAT on food and obesity is growing)

d) prevent use of consultants by public bodies. (If the managers aren't capable of doing their job, we need new managers - perhaps there's a saving)I distinguish between consultants and contractors.

e) stop paying people to be on the boards of the hundreds public bodies. (If these mutually self appointed individuals aren't prepared to operate voluntarily as they would have done in the past one has to question their motive). Stop paying allowances to councillors for the same reason.

f) no bus passes or travel cards until you are 70. (Is it reasonable that any woman over 60 can travel for free on the bus anywhere in the country).

g) get rid of the child trust fund

h) stop any re-building contract that has not been approved

i) cut all budgets for catering, conferences, overseas trips or other jollies from all public sector budgets

j) rebase all salary budgets (in a dim and distant past, after three years of blood letting, we were still finding slack in salary budgets)

k) no overtime, no agency staff. If there is work to be done, employ someone on standard rates.

l) include all the employees of the nationalised banks in any scheme to limit pay rises in the public sector (they are now classified as public sector employees)

OK, the cuts might seem like peanuts but I'd guess we'd get to at least a billion per annum maybe two - five billion per annum.

The taxes could bring in somewhat more.

I might then ask

what is trident designed to keep us safe from
or why do we feel that we should be involved in foreign conflagrations when some other nation might benefit from the exploitation of resources
or do we really need 80,000 people working for the MOD
or are MPs pension arrangements reasonable (let alone expenses)
or is there any reasonable reason why a civil servat shouldn't contribute to their long term security by contributing to a pension scheme like the rest of us
or whether winter fuel payments are actually needed by all those that get them
or which of these quangos is actually adding any value

OK there's a start.

Its not theoretical or even numerical but possibly achievable

OutAtSea

The answers lie here:
a) Private debt write-offs
b) Income tax increases based on mandatory loan interest rate restrictions

If you want more info post again

RE: 65. 0utatSea

"I'd appreciate other contributors views on the economic realities and the real choices we have to make."

That's a really good post. Well researched.

Looking at how desperate Brown was to avoid admitting to any kind of cut in public spending, and now the outraged response of so many to Osborne's proposals - which are in fact far too modest to address the debt problem - I'm left with the impression that the fundamental problem is that the majority of people are still unaware or in denial.

Ironically, this means that things will probably have to get a lot worse before enough of the electorate are willing to face facts. Which is, of course, precisely what is happening.

I wish I had something more constructive to say.

Very interesting comments, observations and analysis! But before we all start crying in our beer, looking for the nearest exit, cutting 20/30/40% of the public sector budgets or whatever let's put our situation into perspective.

Firstly we need to look closely at our European parteners situations. In reality we need to look at France, Germany and Italy ( though an examination of Holland and Spain could also be useful). Let's look at their 'real' debt obligations in relation to GDP and how they propose to fianance it or repay it. Our situation is bad, I am not denying it, but I want to know just how bad it really is. Who's Treasury door is the Grim Reaper going to knock on first?

The second analysis is perhaps more complex. We really need a dispassionate analysis of the US economy and its prospects. As far as I can see this has not yet been undertaken.

Thirdly we need the same critical examination of China's economic position. A shed load of foreign debt is no use if the foreign goivernments can't/won't pay. An overheating economy is a dangerous thing when the world stagnates into long term economic depression. So what is the true picture for China?

Things have to change that is beyond question. Re-inflating the bubble is no answer for anybody. But until we are all looking at the truth (or as close as we can get to it) then unilateral economic remedies are bound to fail. Even if the final decision is, "look to yourselvs, defend yourself at all times and come out fighting".

No 65 "...and maybe we'll even be back at the doors of the IMF?"

What you have written is quite correct. However, the IMF route is the last thing that is desirable because that means that the cuts are not deep enough. The IMF is well know for demanding very, very deep cuts as part of their loan conditions !! It would be the most painful of options !!

#71 frankSZ


Private debt write-offs is probably THE LAST thing that we shold do! All that would do would be to inflate the biggest bubble the World has ever seen.

We desperately need to address the inbalances in global trade and the economic and social inbalances that exist within our own economies. We need to completely overhaul the structures and mechanics of international trade - if necessary prohibit commodity exchanges from speculative dealing.

No 70 "...death and taxes are."

My dad always told me that there are only two jobs that are truly guaranteed for life - a taxman and a funeral director !! :-)

"a) turn off street lights between midnight and 6am. (when did this become necessary? what is the cost to the public purse of being seen from space?"

Turning off every other light on motorways will go some way towards saving a fair bit and helps the environment too !!

"c) tax sugar and fat based products and their artificial substitutes (its ludicrous that there is no VAT on food and obesity is growing)"

Food should not be taxed but abuse of food should be punished by not treating its symptoms on the NHS !!

"d) prevent use of consultants by public bodies. (If the managers aren't capable of doing their job, we need new managers - perhaps there's a saving)I distinguish between consultants and contractors."

If they are not "fit for purpose" then they should be replaced by some one who is !!

"g) get rid of the child trust fund"

Better yet, get rid of the CSA !!

"...do we really need 80,000 people working for the MOD..."

Well, some one has to hand out leaflets telling them that "smoking is bad for their health" just before they go out on foot patrol looking of roadside bombs and IEDs !!

"...which of these quangos is actually adding any value..."

Surely, you jest !!

No 75 FDD - "if necessary prohibit commodity exchanges from speculative dealing."

It is difficult to prohibit speculative dealing because it is difficult to (a) define what is or isn't speculative dealing, and (b) how to identify what is or isn't speculative dealing !! It is far easier to ban all support for organisations that deal in such "markets" like investment banks and hedge funds and any others who indulge in such activities like borrowing on short terms for long term lending (i.e. Northern Rock) !!

#76

jest indeed

I am considering establishing a new voluntary body called the "Office of Frugality". Ideas on a used napkin please.

Taxing food is tricky I'd agree but Coke, mars bars, biscuits, cakes, chips, crisps?

And have you checked to see how much sugar and fat is put into sliced bread these days and what about sugared cereals or ready meals?

A bag of tate and lyle or pat of butter, I might let pass.

And stuff the various interest and lobby groups.

Alternatively, given our common concerns, perhaps there is a market for domestic bunkers. The concept is in its early stages - sort of based on the anderson shelter but with much more storage and emergency generators or solar power, optional extras would include tunnels and wells.

Yrs

Mrs Bloggs

#77 ishkandar,

I agree with you that the definition and policing of speculative dealing is extreemely difficult. However, if we take no action against it then investment banks/ hedge funds/ etc. will only continue to do it under another guise!

How would you go about ensuring that support was removed from organisations that were participating in speculative trading?

#73 foredeckdave. You want to know about the prospects for the US, here they are

https://www.moneyandmarkets.com/three-government-reports-point-to-fiscal-doomsday-4-35722

You want to know what China intends doing, read this:

https://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html

You want to know about Europe, try this on Spain.

https://www.safehaven.com/article-14360.htm

Or try this on Latvia

https://www.telegraph.co.uk/finance/financetopics/financialcrisis/6263039/Banks-brace-for-Latvias-collapse.html

You can be pretty certain that the EU core states will be fully occupied trying to bail out their near neighbours.

The subject is covered, it is just that no-one is paying attention.

Mrs Bloggs,,

Surely you have nothing against our American cousins do you? You only mention US brands in your foods to be taxed!!

You really do have it wrong with your price increases on booze - only the 'health gestapo' feel that they have any evidence that price controls consumption. Their Scandinavian evidence totally ignored the local 'vodka shops' as they are supposedly illegal - but never seem to get raided!!

#80 armagediontimes

It's loose analysis as per your first link that makes comparative analysis so difficult. What is actually claimed in that article is NOT what was said in the publications referenced.

As for Fisk. then a lot of what he has previously claimed as fact in the Middle East has later proved to be wishful- thinking. I reserve jusdement thanks!

That Europe, at least the EU, will have to concentrate its efforts on supporting itself is I feel a given.

76. ishkandar wrote:

"Better yet, get rid of the CSA !!"

I believe that's actually happening, although of course it will be "replaced" by the Child Maintenance and Enforcement Commission.

More anti-Jewish stuff from JadedJean (#43) connected by links within links to racist drivel posted on other blogs and external websites.

Moderators, do you actually read or cross reference any of this? Do you speak to your colleagues on other BBC blogs?

Do you ever wonder why, whatever the topic, JadedJean manages to keep coming back to her pet subject?

#81

Dear Dave

My food and drink taxation possibilities were income generators based on consumption which have potential side effects that might reduce costs. I'd not dream to take on the role of nanny.

Yrs

Mrs Bloggs

No 78 "Alternatively, given our common concerns, perhaps there is a market for domestic bunkers."

I'm not so sure that there will be a market for such. It will be much easier for those in international demand to "fold their tents and depart" !! Of course, this will leave behind a greater proportion of those incapable of satisfying international demand, thus making it much harder for the economy to recover.

Jingoism cannot match the harsh realities of "food on the table" !! Unless something is done *NOW* to reduce or solve the problems of poor industrial output and exports on the one hand and ever mounting national debt on the other, "food on the table" reality will come to pass and it will be ever more painful as time goes by.

Deep swingeing cuts are needed with total disregard to entrenched interests. If entrenched interests win out, Britain will soon become a Third World country. Zimbabwe, once the food bowl of Africa, has mass starvation and galloping inflation because entrenched interests took precedence over economic reality. It is but a very short step for Britain to go the same way !! One hundred trillion quid notes ?? This way, please !!

No 79 "How would you go about ensuring that support was removed from organisations that were participating in speculative trading?"

Cue Northern Rock, HBOS, RBS, etc. Just yank the rug out from under their feet and collect back every penny loaned to them. That will "encourage others" not to go the same route !! The Romans used to decimate their legions to "encourage" them. We still have banks that haven't "taken the Queen's shilling", so we can do the same, too !!

You might find this interesting..

https://www.nytimes.com/2009/10/07/opinion/07kaplan.html?_r=1&scp=1&sq=kaplan%20afghanistan&st=cse



US...debt...China...raw materials... Afghanistan... US....debt....

Mrs Bloggs

No 81 "Their Scandinavian evidence totally ignored the local 'vodka shops' as they are supposedly illegal - but never seem to get raided!!"

According to my Norweigian friends, more central heating equipment is sold than can be accounted for by housing needs. One (reliably) rumoured reason is that they make excellent stills !! Of course, I know nothing about this !! :-)

No 83 "I believe that's actually happening, although of course it will be "replaced" by the Child Maintenance and Enforcement Commission."

Get rid of them too !! Let's get back to court-appointed administrators. That worked out far cheaper than the billions wasted in IT, moneys not collected, moneys collected but not handed out, massive salary bills, massive expenses, etc.

No 88 "Kandahar and other areas will most likely fall to the Taliban, creating a truly lawless realm that wrecks China’s plans for an energy and commodities passageway through South Asia."

Err....

(1) Afghanistan has a fairly large border with China, especially in Xinjiang (Chinese Turkestan). It does not need the North-west Frontier to reach Pakistan and India.

(2) During the Sino-Indian war in 1962, the Indians concentrated their troops to guard the (perceived) traditional route from China - i.e. the North-west Frontier. The Chinese troops came *OVER* the Himalayas !! That route has just been reopened a few months ago !!

(3) Traditionally, most of the China-India trade came through the Southern-most Silk Route - by sea, via Majapahit (Java), Palembang (Sumatra), Ceylon (Sri Lanka) and Calicut (still there to this day) !! Singapore now sits in the most strategic position and gleefully rubs its collective hands together watching the trade pass along that route !!

(4) The traditional Jade Road, unfortunately passes through basket-case Burma (Myammar) and cannot be counted on as a conduit of free-flowing goods !!

Therefore, stability in Xinjiang is more important to the Chinese than stability in Kandahar and the Helmand Province. OTOH, American (and UK) supplies that have to be routed through Pakistan needs the Helmand Province to the sufficiently stable to allow the flow of material to their more Northerly placed troops !! Air supply through Central Asia is dodgy, at best, and prohibitively expensive, at worst !!

More importantly, that war will suck Britain dry as surely as Vietnam sucked America dry and that will not help solve Britain's national debts !! Look up the Nixon years and see how America's debts soared during the Vietnam War !!

https://news.bbc.co.uk/1/hi/business/8296079.stm

Just to add to the fun and games, the Americans, too, are under pressure to make extensive cuts. Therefore, for Britain to hope that exports alone can help recovery and save the economy is unrealistic since the US is Britain's largest trading partner !!

When America stops "buying British", the British had better start selling elsewhere or have deep swingeing cuts !! This becomes even more important when the Yankee dollar goes tippy-toeing off to the sunset dragging the quid with it !!

#92 ishkandar,

"US is Britain's largest trading partner"


No. The EU acounts for over 50% of all UK exports.

Message 56 verymuchso

I have no idea as to what Bismarck may or may not have said. He was a very competent German Chancellor as the country went off the rails as soon as his generation passed on.

That apart, the context I was using is that set by Bernard Crick in his book The Art of Politics. In politics there is little point in setting out to get what is impossible: you need to work by compromise appreciating that the process is a never-ending dialogue. History is always happening.

59 armagediontimes

There is a risk of losing a sense of proportion.

Political success requires that the most important thing is to get the people on board without frightening them. Many years ago when I was an activist I was taken to one side by my then employer and advised that in Britain so long as you kept your nose clean, worked hard, kept quiet then all things will come your way. He was trying to buy me off my activism.

Do you think though that his definition was correct? This was in the early Seventies and possibly his view was valid then. It isn't now and hasn't been for many folk for at least the last fifteen years. I agree that it has got a whole lot worse in that time.

Yet you and I are the politically informed. We know these things but the ordinary people don't. They still think in deferential terms. I have had people explain to me that they know nothing about politics and so they leave it to the government. This is madness but it is going on.

We need to reshape our politics by bringing ordinary people back on board. We need to expropriate it from the political parties through public engagement in the issues. In this way we will begin to redefine the landscape of our society.

However, if you run about crying woe and the end is nigh you will either frighten people away or allow politics to be hijacked by a bunch of nutters. That is always assuming the nutters (Blair, Brown, Balls)haven't already hijacked it.

#95 stanilic

Great post!

As barriesingleton (over on the NN blogs) has often commented; cleverness has never been a substitute for experience and wisdom (and never will be).
[No slight on armagediontimes btw]

You just can't read this sort of stuff anywhere else!

No93 "No. The EU acounts for over 50% of all UK exports. "

Possibly my info is outdated !! Still, the US accounts for a large portion of the exports !!

No 94 "In politics there is little point in setting out to get what is impossible"

I think a certain Ernesto Guevara will disagree with that statement !! Seven different governments didn't spend much of their effort trying to stop him or kill him for nothing !!

Read about how he started in "The Motorcycle Diaries" !! And while you are at it, try reading "The thoughts of Chairman Mao" aka The Little Red Book !!

97 ishkandar,

I wasn't just trying to be clever - honest. UK exports to the USA have been falling in both volume and value for over 25 years.

Some of that decline could be due to the reltively high price of UK manufactures but a critical proportion of it is due to UK exporters looking towards other markets.

ishy,

Oh no! NOT the Little Red Book? Not the longest journey bit - AGAIN?