Tough times ahead

The majority are not expecting what is to come, they have no idea.

The elephant in the budget room is surely public sector pension entitlements and possibly general pensionable age also may need to be ramped up sooner rather than later.

After all these things were designed to see people over the last 5 or ten years of thier lives with some public sector jobs (soldiers or nurses e.g. retiring at 55 due to the tough nature of the job...(fair enough for them but what about a pen pusher?). It has turned into a huge money gobbling completely ludicrously unsustainable and divisive gravy train.

My uncle retired from the police as a sergeant at 55, he is now 82 and in fantastic health (as he was when he retired), he too thinks it is ludicrous, there is a growing army of people like him who hit the advances in healthcare jackpotand good luck to them, but the sooner we deal with the fact that it is no longer possible the better.

How can it possibly be affordable to fund 25, 35..40 + years of retirement!!!

It is bonkers.

Surely a phasing out of working and a phasing in of retirement over anumber of years would be better, so you can claim a percentage of your pension at 65..more at 70 etc etc and subject to some kind of health check for those who genuinly can not or whom have proven some exceptioonal service such as nurses, police, soldiers etc.

Instead of just fiddling with public sector fat cats a schedule of higher rate progressive taxation starting at £100K rising to 75% marginal at half a million would be more effective especially allied with a military style crack down on tax avoidance and evasion would yield benefits.

Cutting public services even if the NHS is protected makes no sense because not only will it affect the poor and vulnerable disproportionately but the associated loss of jobs will prolong the recession and expand the benefits dependency culture into new territories. The priority must be to stimulate the real economy to resume growth which is more likely to close the funding gap. Public opinion will rapidly change when people are confronted by the loss of public services across a wide front. The Government must campaign itself out of the short term 30's balance sheet mentality.

#1 glanafon. If people listen to what I and others have to say then they will have every idea.

Sadly the BBC seems to have no idea - Watch out for ongoing headlines that start "An unexpected...loss/rise in unemployment/decline in trade etc etc. You will see lots of them if you look.

It will never be explained as to why the news is "unexpected"

#2 Jericoa - Yeah and what are you going to do with all the people that you have retired without pensions? Either you leave them to starve or to do whatever they can or you keep them in work which means you keep the next generation out of work. Not all problems have solutions!!

Is there not a danger that your survey merely helps to muddy the waters further as far as the general public are concerned?

As you point out the start of this piece, there is high degree of mis (non) understanding of the size and implications of the defecit. Yet we still talk about the political proposals as being sufficient to rectify the situation!

Forget about Keynes, the Austrian School, etc. !! Try Micawber's Law !!

If we live beyond our means, then the result *WILL* be unhappiness !! This government *IS* living beyond our means and has no way of increasing those means. Therefore, stringent cuts have to be applied. The best area will be the civil servants of central government and the local councils.

Another area is the irresponsibility of various levels of government for their own failures !! The "lessons have been learnt" excuse is no good anymore !!

"Imagine the next government did freeze the public sector wage bill for one year, and cut wages for the top 10% of public sector workers, and get rid of child benefits and tax credits for middle class families. That could deliver a permanent saving of maybe £10-£12bn a year, as against a structural budget hole of £70-80bn."

Did anyone ask just exactly how much money was wasted on failed IT projects because of sheer arrogance and incompetence ?? I'd bet it would be around £6 billion at least !! Sorting out the absolute shambles of "defence spendings" will save a very significant amount too *and*, at the same time, save quite a few lives on the frontline !! Pulling the troops back home will save even more money and lives !!

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It is clear that there needs to be massive action on public sector pay and benefits (especially pensons). The first target can be crown servants who retire after 30 years' service. All public jobs should have a 44 year term for full pension rights.
The state pension needs fast reform, with the age set at 70 by 2030 and 75 by 2050.
Unemployment and disability benefits need reform. We must also question the rationale to pay people to have children.
The number of public servants needs to fall by 1% a year for upto a decade, simplifying taxes and benefits could cull HMRC, plus there are many quangos that can go.
Finally, even the vital public services of education, defence, and health need 5-year 0% change on funding.

Oh and leaving the EU would probably not be a bad financial move either.

Arm n leg

People listen? I should cocoa. They are not listening- who wants to hear bad news that there simply is not the money, no they mainly will beef in chorus. The survey approach is cherry picking. The choices are not conditional so choice is meaningless, people will arbitarily nominate what appeals. It is like those terrible nice chocolates at the ambassadors party all in a pyramid, pick from the top only. Totally irrelevent. Life is not a chocolate.

I went to a renweables discussion. Not uncommon to hear 'above my head'. Some do not even understand the lights may go out. Start talking about 'peak oil' and they think it is a brand name ask where it will be available. Its gone buddy. Thats why its peak oil.

'If liberty means anything at all, it means the right to tell people what they do not want to hear.' George Orwell. When is liberty to be practised by the media, given that they have been granted liberty..

We are heading for de Sades world ''All, all is theft, all is unceasing and rigorous competition in nature; the desire to make off with the substance of others is the foremost - the most legitimate - passion nature has bred into us and, without doubt, the most agreeable one.'' Marquis de Sade

We have the situation that powerful voting blocks can effectively vote for what they want without being educated as to the consequences. We have a steadily reducing wealth creating base, and a ever increasing non-contributing sector. This is all like the Mary Rose, highly likely to heel over in a storm situation.

Steph

"Both men know that there will be a lot more tough choices ahead. The question is how many they can afford to share with the voters this side of the general election."

Nothing has changed we will not be given the true picture of the impact of the necessary measure this side of the election.

The electorate are still living in cloud cuckoo land where the Labour Party and the media opinion formers like Toynbe have led them.

We are in limbo until after the election so I believe any chance of a recovery is held up because people will not start spending until they know how much money they are likely to be left with after the budget reducing measure have been implemented.

My one major concern is avoiding a Stirling collapse due to the bond markets giving up on us.

There are a lot of pensioners and the prudent who are being robbed via low interest rates to bail out the imprudent. If they then had their savings value swept away in a devaluation then the cost to us all would be massive.

I feel that we will be driven that way.



Who is in charge of the clattering train?

The axles creak and the couplings strain,

and the pace is hot and the points are near,

and arrogance hath deadened the driver's ear,

and the signals flash through the night in vain,

for Brown is in charge of the clattering train.

Some interesting stuff Stephanie, I suspect freezing the public sector wage bill for one year will faily easily be achieved by redundancies alone. I would suspect secretly, the public sector would be relieved if redundancies for the next two years were only in the region of 5%

With regards to higher paid workers having a reduction in pay of 10% it never fails to amase me how many of D's and E's seem to support the rich get richer. I'm not sure while the public sector should be any different to the private sector, therefore personally i would favour a higher tax rate band. A 10% or 20% cut in take home pay would be in line with an awful lot of the workforce on much lower pay hoes hours have been cut.

The £6bn tax saving for withdrawing child benefits to families who earn over £31,000 attracts me, i dosen't seem clear whether this is a gross figure or whether any allowance has been made for loss of tax revenue for people who will reduce their hours. However, in my opinion, there is a large element of choice in having children, Im sure i would consider whether the family could live in a fairly comfortable lifestyle before i considered being part of the decision to start one,on a macro level with children likely to live to over 100 years there is a limit to how many children the country can afford. I know i sound hard, but unlike the pensions crisis it would be good to tackle a potential problem when it can be foreseen rather than when the crisis level is so high something absolutely needs to be done which is much more painful.

I would also suggest the "bravest" discussions would be on pensions. As i understand it when the pension age was brough in only 33% of people reached this age as compared to 66% reaching this age, the length of anticipated pensions is rising rapidly from a few years to 20 to 30 years. I personally do not buy the arguement that the pension age can't be raised faily rapidly as people have not had the time to plan, if were honest not many of us pushed our leaders to tax us more for the decades we have known the pensions crisis would be inevitable. I also believe in the virtues of keeping mind and body active

Im sure not too many people would vote for these proposals, but if budget cuts are needed, which they are, these areas to me seem the most equitable of finding large chunks of money while tacking the building up of further inevitable future crisis

8 Cyborgia

'We must also question the rationale to pay people to have children.'

The tax - benefits - public service system runs on payments going out as some as they go in. No future generation working then no future tax. No future tax then no outgoing payments.

BTW Last time I heard 1/3 of LGA budgets was going on trying to meet existing pension liabilites. This was first publically aired as a forthcoming problem when Thatcher was in power. The forecast then was that the problem would probably peak arounf 2030, so some way to go then.

4. arm n leg times

''What are you going to do with all the people that you have retired without pensions? Either you leave them to starve or to do whatever they can or you keep them in work which means you keep the next generation out of work. Not all problems have solutions!!''

I keep saying there there is plenty of work, it is just not the 'recently traditional' type with people who want to be told exactly what to do all the time on autopilot. It demands a different type of worker. Here we are under tremendous pressure to expand but have to train extensively from scratch. So tell me - Do we expand and invest very heavily in training here, go abroad where the skills are more likley to be available and workers more receptive, or just have an easy life and combine a deliberately limited world wide trading activity with developing being on the beach more. Answers on a postcard to the right location.

#4

i was not aware i mentioned anything about starving people, more of a worksharing ethic rather than a ''look at me I am smart i work for government I put in 30 years pushing my pen now you all have to pay for me for ever no matter what the stockmarket does or how the country is doing''kind of thing...

You may scoff at the fact that ending tax credits for families on more than £50,000 a year because it would only raise a paltry £400m a year but that just happens to be nearly four times the amount this Govt spends on new energy R&D.

It's a classic example of this Govt's lousy priorities.

In simple English , if every person in inkland wether sick lame or laissee fairee picked up an equal part of the tAAAb it wood come to £ 1.3000 per head in perpetuity[OR EVEN LONGER] . The dream has yet to end before the nightmare on AAAlm street begins and the soylent green factories export to china.

I can here it now from the cafes in Peking "LETS HAVE SOME OCCIDENTAL TONIGHT "

When the public realises the scope of the shotgun civil union with the t/axing AAAuthoritease ,that the government has in store for them, will this be the reaction.

https://www.youtube.com/watch?v=PWFayY47RZM

It is not an equitable solution for the public sector to suffer so much for the greed of the private sector bankers. I am in favour of higher progressive taxation to contribute a greater proportion to make up the deficit.

Ultimately, with the great deal of apathy that the majority of voters have with the mainstream political parties (who are all neo liberal apologists) I sincerely believe we need a party that promises a return to social democratic values, a mixed economy, significant welfare provisions, social insurance and safety nets. Government should be funding public sector projects to reduce unemployment, and especially create jobs in the North, where there is a lot of discontent. I genuinely don't think the public sector should suffer for the excesses of the City. Possibly the Social Democratic Party, Cooperative party or the Labour Socialist party are the only parties that can offer an escape from the injustices of neoliberal capitalism.

I watched Question Time last week, and it was blatantly clear that the main political parties are not going to offer anything that will help economic development and social justice. The writer (forgot his name) was the only individual on the panel who "got it". He's realised that the political philosophy of the last 15 years has been that individuals are self cantered individuals, who cannot be expected to work for purposes other than personal gain. This has culminated in the "privatisation" of the public sector, as the writer on QT so eloquently put it. This obsession with "targets" and incentives has led to civil servants working for personal gain, rather than having in mind the fact that they are carrying out a public duty, and feeling good because they are making a difference. In this way, the Tory/NuLabour policies have acted as perverse incentives that have destroyed the idea of a public service.

The immigration issue as well, is something that most people are not looking at from the right angle. The ultra right will sprout extremist views regarding "Britishness", and make claims about "claiming our heritage" and stressing about the erosion of traditional British values. This, I feel is missing the economic implications of immigration. Again, I feel the writer on QT last week hit the nail on the head. The issue with immigration is that a lot of immigrants come and do NON UNIONISED work for very low pay, therefore undercutting other workers (both British and migrants) who subsequently are kept unemployed. This policy has suited NuLabour well, because it has enabled private companies to make large profits, and growth statistics look impressive at the end of the year. I believe this is the fundamental issue with immigration. I genuinely think that the majority of people in the North of England believe immigration is a positive thing, and certainly hold liberal views with regards to multiculturalism, something that I think has been a very positive aspect on British society (being able to speak to people from all over the world has been a great experience.)

The issue with immigration is just an extension of the neoliberal dogma that has been espoused by politicians both here and in the USA, and so few people get the real issue. The Tories may talk tough on immigration, but ultimately, they secretly approve of the fact that wages have been pushed down in some industries, allowing massive profits for their fat cat chums. What the Tories disapprove of his the loss of this concept of Britishness and traditional family values, which are aspects that are extremely vague.

So in all my rambling, what is my overall point? Basically, we need to take a completely new direction, and a new political philosophy that has a more positive view on human nature, and endeavours to create a more equitable society, a society based on cooperation, humanism and moral values, and an emphasis on economic and social democracy, so that ordinary people, especially the working class, can take control of their economic lives and are able to find work without being hindered by socioeconomic class.

If headless chickens could cackle then it would accurately describe what has been written above. It's just mindless noise!!!

Sure cut and cut the Public sector and apart from bloodletting what do you really think you are going to achieve? All you have done is further mutilate society but you have done nothing to add any economic benefit. Strategically you will have achieved nothing.

The real reason for the economic situation being out of control is that the theories, concepts and models that you have been using do not fit. Just look at your last diatribe about free markets. By either accident or design we have developed a new capitalistic model tht does not naturally fit the old descriptors. So saying that Public Sector is merely cost is not just myopic it's plain WRONG.

It's not a question of good and bad it's a more complicatd question of balance.

What the "Great British Public" has not been told is that there is actually plenty of money around.

It just happens to be "owned" by a smallish number of very rich people. The distribution of wealth in this country is now at its most unfair since 1929. Coincidence? I think not....

The very simple answer to our problems is a wealth tax. Over in Germany a few weeks ago there was actually a petition by a number of their super-rich asking for such a wealth tax - something like 10% of the wealth of the German super-rich would pay off all the debt built up in bailing out their banks. I would be very surprised if the same wasn't true here.

There's no need for low-to-middle income people to suffer years of austerity at all. We just need the decades of growing inequality to be corrected. Years in which the rich have grown so rich they couldn't think what to spend it all on, and so they lent their money to the rest of us as we got deeper and deeper in debt. And now they are lending it to the government as well.

Come on Gordon. Now's the time to make up for all these years of cowardice and groveling before the rich elite....

Cuts in public spending are not the answer and will leave us in even more of a mess.

We still haven't recovered from the public spending cuts of the last Tory government.

Over the last 30 years there has not been enough public spending for the government to govern effectively.

It infuriates me that there are a lot of people in this country who worked hard for low pay during the boom years so that the fat cats could get richer and it's those workers who are going to suffer again through cuts.

Some of us had been warning the 'elite' for years that their policies were flawed and would cause a crash but we were told our ideas were 'out of date'.

Those who messed up the economy through sheer greed should pay the debt. There should be a retrospective tax of all bankers bonuses from the last ten years. Bankers pay above 100,000 a year each year over the last decade to be taxed. If a banker cannot afford this then they should pay it back as a loan with interest over 10 years.

No pension should be above 20,000 a year, all excess to be confiscated.

All second homes should be confiscated by the government and sold to those who have been priced out of the market in this boom whilst living in normal cities where the average wage required to buy a property has rocketed to 50,000 a year whilst the average local salary remains at 18,000.

Buy to let mortgages to be banned with all buy to let properties and profits through buy to let over the last ten years confiscated with tenants allowed to remain in the properties but paying a lower rent to the government.

Some people will comment that the rich 'elite' will leave the country and we need them to run the businesses. I don't think we need them at all. This 'elite' have made a complete mess and are clearly incompetent, they are quite welcome to leave and at the same time the government should confiscate 75% of their assets as they go to compensate for us having to put up with them for so long.

All of the political parties have claimed that 'tough choices' have to be made. The tough choice is to be strong and stand up to those who are responsible for the mess we're in; the easy choice is to offload the responsibility for the debt onto the average worker through cuts in spending.

Who will pay for EDF to build new nuclear power stations in the UK?

The original idea was for EDF to foot the bill, and then receive income from the sale to British consumers of the electricity generated. However, the income stream when converted to euros (EDF being a French company) has been reduced due to sterling having lost 30% against the euro in recent months. EDF is now saying it would like more support from the UK government. EDF probably expects sterling to remain weak for some time to come. Sounds like the British taxpayer will have to get involved one way or another........

The French have the expertise to build Britain's nuclear power stations. That's the benefit of globalisation and free floating exchange rates........

Nearly all the solutions to the tough times ahead that I see are based on a resolution over a number of years after 'tough action'. Many are talking about the election being the point when things start to be fixed. Our creditors, even the whole world, are assumed to be standing waiting to see what the next government will do. Not so. We do not have years. I doubt we have until the election.

While I'm at it my prediction for the next prime minister is Brown with Clegg as the deputy prime minister and then Brown being replaced by a Milliband shortly after. However it matters little who is the PM. Disaster is inevitable...though how would you tell the difference from how it is now.

We have a perverse society and a sort of "Socialism for the rich". Clearly there are a lot of people who agree that it is morally abhorrent that the public sector and its workers will have to suffer for no fault of their own. The talks of "savage cuts" are disgusting in my opinion, because ordinary people are going to suffer. In fact all this talk of cuts and taking the foot of the accelerator is economically dubious as well, so it's clear the mainstream political parties don't really know what they're doing.

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#12 glanafon - I wouldn´t fancy spending too much time on any beaches near to where you are.

If you have a viable globally portable business there are plenty of places that will offer inducements for relocation, and a lot of these places have a lower cost of living, and hence a lower wage base.

A lot of people are going to get crushed so personally I´d stay away from anywhere with a large population and a low resource base. The more deluded the population the more I´d stay away. Canada, Australia, NZ spring to mind as likely being OK. Parts of S America specifically Chile and parts of Argentina and maybe Uruguay are also OK. If you fancy island living there are a few around.

Basically steer well clear of anywhere that is likely to be materially effected by a US$ collapse e.g. the Middle East

I would be very wary of investing anything in the UK. You may be OK and may stay that way, but what about everyone else? If you think that wouldn´t bother you check out somewhere like India - you can live like a king there provided you don´t mind being surrounded by abject poverty.

If I had any business in the UK I would be busy stress testing it to see how it might perform with an absence of all kinds of public services. Check out South Africa and see what kind of measures are taken to protect against crime. Could be coming to the UK sometime soon.

It´s a personal choice affected by conditioning. I know people that would never leave - fear of the unknown and too attached to all kinds of trivial things (but not trivial to them). I know a lot of people that never want to set foot in the place - put off by all the drunks, incredible prices for all kinds of basic junk, and put off from a business perspective by the vast and growing complexity of compliance. Compliance is likely to get more onerous as they go more overtly for a revenue raising public sector. If you pass enough laws you are bound to be breaking at least one, and then you can be fined or criminalised.

Do want you want, but take comfort that at least your problem has a solution.

I would be extremely surprised if there were ANY redundancies in the bloated public sector due to the lack of political will - Labour will be too afraid of the unions (as if they are going to win the election!) and the Tories will be afraid of alienating voters (the public sector is so enormous that even relatively small redundancies will endanger their new-found popularity.

I expect to see:-
#1 Pay freeze on public sector (I sympathise with another poster who thinks this is a bit harsh but most in the private sector are on pay cuts or edging towards redundancies).
#2 Slashing of budgets so it impacts on the providers of services/products to the public sector.
#3 Elimination of child allowance for really high earners (£100,000+) just so it gets into the public consciousness and then can be ratcheted down over time so only the most needy eventually get it.
#4 Increasing retirement age more rapidly.
#5 VAT increased or zero rated VAT items to carry VAT (dangerous one this - might stunt all those 'green shoots'

Oddly enough there are an extra few billion associated with the BBC licence fee. Can't imagine anything happening to that!

no.20

''Bankers pay above 100,000 a year each year over the last decade to be taxed. If a banker cannot afford this then they should pay it back as a loan with interest over 10 years.''

genius!!..where do i sign up for what would be a very popular policy?

Which mainstream party is offering it?

what do you mean non of them!!

This is a democracy isnt it?

So you are telling me it is not a democracy at all and we are ruled by behind the scenes manipulators of no particular organisation, guarded unwittingly by a profesional political class who mean well but cant see past their own psychological need to feel important and powerful and to 'make a difference' (is it me or do most politicians seem... well intelligent but a bit detached from reality and 'needy' in some way?)

In other words the systemdesigned to protect us from spivs who exploit the darker side of human nature has been learnt by the spivs now and is conctrolled by the spivs behind a veneer of democracy protected by a bunch of intelligent people suffering from some kind of deep rooted psychological problem which makes them easy to manipulate without them knowing.

.......yes minister.

#13 Jericoa - No, you didn´t mention anything about starving people I did. You didn´t mention anything at all as to the likely consequences of your proposed solution - so I thought I would just fill in the gaps for you.

In the real world there are not that many jobs that lend themselves to work sharing. A lot of those that do are probably jobs that shouldn´t exist in the first place. Sure you can have part time rubbish bin inspectors (but you can equally have no time rubbish bin inspectors and the world will still turn), but tell me would you be happy for your surgeon to go home half way through your operation and hand over to his work sharing colleague?

A lot of people aint going to get no justice and a lot of people are going to get crushed. The sooner people wise up to that fact the better for everyone.

#23, #20

Although I understand your sentiments, There is a lot of evidence that the public sector is massively bloated and much of the Labour public sector spending boom has gone on very expensive initiatives (Choose and Book, I.D cards) and lots of people to augment services including large numbers of bureaucrats. I believe that a strong public sector is important but its size is now getting to be too large and is the main employer in areas of the country - how are we going to EARN our way out of the mess we are in without actually CREATING wealth.

No matter how many people are actually helped by public sector services I am not convinced that they actually create wealth although some of them create the POTENTIAL for wealth creation (Education!) although we'll have to become more entrepreneurial as a nation and those areas of the UK dependent on largesse from the government through heaps of public sector jobs will have to start reducing dependence on this source of employment.

Maybe we should try and encourage more (gasp!) manufacturing of high value products (e.g. Rolls Royce - well done winning more business!) instead of churning out graduates in Media studies. CUE CONTROVERSY

Remember, we are asking those who caused the problem to fix it but also understand that the bankers for whose bidding the PMs worked are free to continue as usual. A tax on banks and investment companies should be first. But this will not happen as they already own the votes. The question is if the decisions will be fair and without inappropraite influence. We also know this won't happen. You appear to be suggesting that the government will be both fair and honest, for which it has no recent record. Certainly, monies can be found in cuts, but political protections will not allow those cuts, taxes could be raised for certain incomes, but of course that won't happen. The usual across the board cuts will result because the politicians are cowards and in the name of "fairness" will duck all responsbilities. Nothing has changed they are only trying to pretend harder that they care. They don't and are unwilling to do what is right for the people. Flip them over and you have the same thing, the elections will change nothing except for who is working directly for the bankers. Broken things don't usualy work well and this is an example of that.

#27

We are a democracy - YOU can start your own political party and stand for election rather than rant about the lack of choice. Yes I know that you'll only get three votes and lose your deposit but so what. At least your not sentenced to death or life imprisonment for it!

Some contributors are spot on here, others are tinkering.

We are right to think about how we should be regrowing and restructuring our economy for the future and time needs to be spent on that, however there is one area and one alone that needs a massive revamp.

Public sector pensions in certain cases are patently too generous and incredibly expensive. There is over one trillion of unfunded public sector pension liability which is not shown on UK Plc balance sheet because the politicians and the civil servants will not face up to it, partly because it has a direct impact on the feathering of their own nests.

An average private sector pension employee on the same salary as a public sector person needs to find an extra 40% of salary every year to get the same average final salary pension benefits as the equivalent private sector person. It is mind blowing.

Time and time again, various members of the public sector retire early in their fifties with generous packages that would cost well over £1M for a private sector pension pot to provide the same benefits. It has been going on for years. Civil servants, doctors, surgeons, council leaders, the judiciary - the list is endless are paid gargantuanfinal salary pensions which cost millions and overly reward them. Why do they need such large pensions, they each cost over a million and some many millions.

It has to an extent been going on in some private companies and did go on in the banks as well, however it is largely being eradicated with the closure of most private sector final salary pension schemes. And that is before taking into account the millions of self employed who receive absolutely no employer or state contributions.

If someone (and this would need to be a non self interested politician or civil servant) grasped the nettle on public sector pensions (and I have no issue with low paid public sector pensions) this country would save billions a year.

It is the single largest liability to be funded through the tax rises or spending cuts.

Somebody do something about it !!!!!!!!!!!!!

When are we going to start hearing about the savings which could be made by reform of the public sector pension schemes. Many private sector firms have closed final salary schemes to new members etc, when will the government front up to this inevitable policy

#22

The worlds creditors will have to wait until Gordon Brown has left us his legacy of untold billions of debt and trillions of potential liabilies as well as the lunacy of QE (aka bonkers) to give us a nice dose of inflation so Labour can then blame the tories for the poor state of the economy at the next election and even potentially win (dont laugh - the electorate have short memories).

Then after the next election we will see - expect debt downgrades and spiralling inflation.

#1. glanafon wrote:

"The majority are not expecting what is to come, they have no idea."

Quite so, but who is to blame for this situation? Who has been deliberately misleading the British public? Politicians on all sides, but they are just professional politicians who know nothing but politics. They rely on the advice of economists so it is these economists who have been deliberately misleading the public. It is not reasonable to suggest that economists, as a group, do, at least, have the insight of history to help them produce estimates of the out-turn of any economic situation.

The economists (indeed we who contribute to this blog and Ms Flanders) either are not capable of producing any rational predictions or produced these outcome estimates and decided not to tell the truth.

Was it right that we chose not to tell the truth to the public (and to deride those who did tell the truth)? Well possibly, as the economic outcomes are improved by both rational and irrational misinformed optimism. I however think that we should always offer the more Germanic and brutal unalloyed truth as not to do so will inevitably as day follows night create the maximum of irrational expectations, another bubble, and this is exactly what we are suffering from now. We cannot permit the re-inflation of the bubble for one very good reason - it will not work!

I know many of us have been writing just this for well over a year, but reading Ms Flanders's it seems that no-one was listening.

To repeat: the banks are too big (because if they fail no economy can sustain the damage). Therefore they must be broken up - it is the only logical conclusion. Even Mervyn King knows this (and if you heard it, on the World Service - The Interview -, Eliot Spritzer) - everybody know this - but nobody wants to do anything about it. Unless and until something rational is done we cannot hope to recover. In the UK we have 4 banks we need 50.

My solution as I written before is to force the banks to divide their businesses in twelve roughly equal parts by giving each shareholder in the existing banks shares in the twelve new banks after the banks have been forced to spit their operations. Further more these new banks cannot be permitted to merge. The economic disruption will be gigantic, but without it there is no solution to the present crisis. Just imagine the incandescent rage of the British Banker's Association representative of the box - I think the veins on her neck would burst!

How else however does one solve the 'too big to fail' conundrum? And if this is not solved how can we recover?

To tax or cut is a trivial problem compared to the 'too big to fail' problem, but without a practical solution to the 'too big' problem taxes or cuts will not fix the economy!

#20. barni101 wrote about steps towards a more egalitarian society.

Bravo, but I fear that you will find that you will be alone when you too march on the post office in Bologna (see P.J.Proudhon c 1874)

The hole we are in is still getting deeper!

While I am on a roll, I'd also like to propose that everybody's capital gains on their houses are taxed. I've posted about this before but we need to stop speculating on properties and just start viewing them as:-

a) somewhere to live or
b) somewhere to rent out and keep as a future pension rather than waiting for capital gains.

This measure would be the kiss of death for any political party but I think it'll stop all the property based boom and bust since it wont really pay to keep 'moving up the ladder' unless you really need the room. People would tend to extend their house so the construction industry would still have a source of income although it wont really pay for the big boys to do it.

FORCE...THE...BANKS...TO...CUT...BACK...*OUR*...INTEREST RATES..........
..
SO...THAT...DEBTS...CAN...DECREASE....
..
AND...INCOME TAX...CAN INCREASE...



for crying out loud. Can it be made any plainer?

I am amazed by how easily the debate skews around either reducing spending or taxing workers (high salary or more commonly low). What about taxing capital? What about closing the tax havens? What about taxing financial transactions in the form of a Tobin Tax? The Tobin Tax alone could yield the deficit (and more) even at a rate O.O5%. The way that the state (and both parties) bend over backwards for capital, even after the recent financial crisis, is shameful. At the very least I would expect the public to have a clue about when they are being asked to bail out capital for a second occasion. But instead we get into a classic British game of one down-manship about who can envisage the hardest scenario. Self regarding melancholia might be sustaining, in some way, but it is hardly progressive in political or economic terms.

#17 SR819

Nail, hammer, head.

It's the same perverse arguments that have led to people clamouring for DEregulation as though an absence of management was a good thing.

To be perfectly frank I hold the US largely responsible for this kind of tripe.

#32 I have a cunning plan

Raise retirement age so that contributions keep going up but the time to take them out gets smaller. By the time the retirement age is 90 I reckon we'll have the problem licked. The only slight issue might be the geriatric doctors, surgeons etc with shaky hands and the public sector will be even less productive as the geriatric bureaucrats spend half a day making a cup of tea and the other half trying to remember where they put it!

#2 jericoa

"How can it possibly be affordable to fund 25, 35..40 + years of retirement!!!"

Very easily, if you take into account that it only needs maybe 20 million people working in this country to keep the whole population in a reasonably comfortable state. And most of those would be in the public sector (health, education, police, etc). The fact is that to create the food, energy, housing and manufactured goods that we need only actually requires a few million workers.

The real problem is finding an acceptable way of organising the distribution of wealth and income in these circumstances. Having 50% of the population retired is one way. Having everyone working 3 days a week is another. The current approach of having lots of people doing non-jobs (in finance, public sector admin etc) and yet more people discarded from society (long-term unemployed, invalidity benefit) is probably the worst option. Personally I think the only "good" option is one involving high rates of personal taxation - but that is hard to sell in a democracy.

25 Arm n leg

Arm, you shortlist my shortlist. Not a great surprise. Its pretty obvious isnt it. I see entry requirements rising somehow. I have a young family member heading that way next week. UKs loss in my opinion.

Meanwhile the good and great burble on above about how the public sector cannot possibly be cut. What a joke. There is not the money. It never ceases to amaze me how the public sector is somehow expected to be kept afloat by borrowing. Its like the strongman in the circus with a inverse pyramid of passengers on top, all aboard, all aboard. The strongman aka private sector can't do it any more. Just one shortfall - Stamp duty, paid for by borrowed money in most cases, was in the region of 4 Billion pa - from memory so I might be out - at the peak of the housing boom.

I posted above that one third of LGA income goes to prop up LGA pension shortfalls. This is even worse than most people realise. Only one third of LGA income is from community tax, the rates. The other two thirds is from central government. So effectively ALL of current community tax payments by the public are going towards the LGA pension problem. ALL. Thats how bad it is. This sort of structural problem is everywhere.

So many seem to be in a dream. ''All men dream, but not equally. Those who dream by night in the dusty recesses of their minds, wake in the day to find that it was vanity: but the dreamers of the day are dangerous men, for they may act on their dreams with open eyes, to make them possible.'' T. E. Lawrence

I know it is terrible lazy to use quotes n all, but I am a product of the times, and its easier to let others do the talking.

The immigration thing is just hilarious. We now have recent immigrants saying they dont want immigration. It all neatly ignores the fact the 500 million in the EEC have the statutary right to come here whenever they want. If the Med gets too hot some will move, and where? North quite likley. But never mind, 1 in 2 citizens do not think climate change will affect them here.

Scrabbling around due soon. Last figure for the public sector employment I saw was 2 percent growth whilst everything was falling appart in the wealth generating sector. The collapse in the economy has all been in the private sector, just part of the economy, and the pubic sector has to follow, what is so difficult to understand about that. Beats me.

I'm just waiting for Smooth Dave and Boy George to get in and saying oh my gawd the books are much worse than we could possibly have believed. Or Gordon Blair and Ali D in da House actually saying just how bad it is.

# 37. At 10:13pm on 16 Nov 2009, FrankSz wrote:

FORCE...THE...BANKS...TO...CUT...BACK...*OUR*...INTEREST RATES..........
..
SO...THAT...DEBTS...CAN...DECREASE....
..
AND...INCOME TAX...CAN INCREASE...



for crying out loud. Can it be made any plainer?
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

not sure this makes much sense. The banks owe a whole lot of moolah.
Decrease interest rates levied on individuals then banks earn less and cant pay off their debt although individuals have less debt. But isn't it just shifting the debt around rather than reducing the net debt. The only way to reduce our debt is to EARN our way out of it and that requires a financial system to provide one. If we follow your approach then there'll only be a few banks left and then we are REALLY done for!

"In the Budget, the chancellor forecast a public deficit of £175bn in 2009-10".
- Houston, we have a problem was a famous phrase from the Space Race. It is no good saying stuff the Bankers, stuff the rich, keep shelling out benefits, don't reduce the Public Sector costs because something has to be done about Government spending. Get real! Regardless of whose fault it was (I have my views) we need to get out of the massive borrowing hole we've dug and are still digging. If you don't want to be taxed to the eyebrows, the Government have got to rein in spending. All parties are in denial because it's going to be savage - probably worse than clearing up the mess left by Callaghan etc in the late seventies. The solution then as now is to cut back the Public Sector otherwise Sterling will go down the plughole and we might as well call ourselves Mugabeland and start producing wheel barrows to cart around trillion sterling notes to buy a loaf of bread! Every month we delay we go £15 billion more into debt!!!!!!!!!

35 John From the land of the Sane

Have you notice how refreshing it has been not to have the pop up bankers posting what a brill job the banks do recently. I wonder where they have all gone. I eventually had my answer about fraud on UK mortgages probably because of a lack of due diligence when C and G announce it alone has had to write off something like 230 million , persumably because the insurers refused the householders insurance policy. And the FSA had to say 49 percent of all mortgages where self cert at the peak.

37 Frank

Yes, when are the media going to ask SERIOUSLY why BoE rates are near ZERO but high street bank lending is in mid double figures as a percentage and if this is not abuse. Now why do I limit my borrowing.

3. At 7:06pm on 16 Nov 2009, watriler wrote:
Instead of just fiddling with public sector fat cats a schedule of higher rate progressive taxation starting at £100K rising to 75% marginal at half a million would be more effective especially allied with a military style crack down on tax avoidance and evasion would yield benefits.
========
How about we ALL get paid the same wage, 25K, and all the rest of the money we earn goes to the Government?

Bring back JadedJean. What happend to that soul?

#41

I agree with that actually, I guess the idea was to demonstrate how unfair it is at the moment rather than implying we need to all keep working our buts off to buy ever more complex stuff that is ever less reliable...which is the way everything seems to be heading under the current modus operandi, the financial crash just being one manifistation of it.

hmm my sentences are getting too long again..

#38 james brassett. You are surely having a laugh. There is absolutely no intention to tax capital, to close tax havens or to introduce any form of tobin tax. Not on the agenda period!!

You are witnessing the greatest forced transfer of wealth in human history. This is not being done by accident. The oligarchs are not suddenly going to say "oh we never realised the effects that our demands would have on the average man in the street - here have some of the money back"

If you want what you propose then you will need to fight. Their bet is that you will not fight. I don´t see any self pitying meloncholia - I see a population too dumbed down and too self obsessed to have the first clue as to what is being done to them.

it's not public debt' its the bankers debt. their profits should be taxed at 70% till its paid off.

why should we pay for a ponzi scheme?

as it stands its still legal to bankrupt the country. they have done more harm to the uk than the taliban have?

#41 random_thought I wouldn´t worry too much about democratic impediments - they were removed a long time ago.

Maybe you would be better advised to look at whatever you have in your house and identifying how much of it has a UK source. Then you might wonder why Johnny Foreigner may want to keep making things to give to you in exchange for a currency that will soon have the same value as the paper on which it is printed.

38. james brassett -

...''At the very least I would expect the public to have a clue...''

Thats your stumbling block James.

'A man should look for what is, and not for what he thinks should be.'
Albert Einstein

I'll stick with Albert.

Do you really think a poulation that got here, with far too many morbidly obese, far too many morbidly debt obese, far too many voluntarily android - stuck to game consoles, or unable to make any job decison without reference to the great computer in the sky, are suddenly going to provide a great parting of the sea of misunderstanding and march through to some blessed land. No.

As far as the public sector goes. I'll say it again. The total tax take is 46 percent of the economy. Has been for donkeys years. Similar in developed EEC countries for heath and social services. Just how high a tax take do you think is needed to prop up the current public sector size and do you think such a take would screw the competiveness of the country internationally. As, for example, France an Germany do not appear to have the UKs problems, despite Gordon Blairs claim we were best postioned etc etc.

As the economy size goes up the volume goes up but stays within 43 to 46 percent, as the economy size goes down it stays within 43 to 46 percent. ONS have the data I believe. So the only other route is borrowing which is maxed out. So the public sector will drop. Means testing will occur. Simple as.

I think we should cut costs and maybe raise taxes if need be.
To start with:
I'd freeze public sector wages right across the board.
I'd change the public sector pensions scheme to raise the retirement age and reduce the level of pay out.
I'd cut benefits, particularly for single parents (we should not be paying an underclass just to have of kids as a career).
I'd be more aggressive in reclaiming money from those who abuse the system both benefit cheats and MP's.
I'd cut the overseas development budget until we're in better shape ourself.
I'd withdraw the troops from Afghanistan.
I'd pull out of the European Union.
I'd cancel Trident.

43 EmK

''Decrease interest rates levied on individuals then banks earn less and cant pay off their debt although individuals have less debt. But isn't it just shifting the debt around rather than reducing the net debt.''

No - its putting the debt back where it should be on the banks accounts, not in my bank account by short changing my saving.

Further - .....''If we follow your approach then there'll only be a few banks left and then we are REALLY done for!''

Goodness all these banks rushing just rushing to save us all. I think this called banker transference https://en.wikipedia.org/wiki/Transference

41 random_thought

Err could you explain, as I am a very simple man, where the wealth you are wanting to redistribute is coming from in this utopia you propose where 20 million work in a public sector providng services to 60 million+ and 2 million work supporting them through taxes. Could you also explain why anybody would want to be one of the 2 million doing the wealth creation. Please do not say the public sector create wealth or talk about gearing etc.

#53 Colin Smith. It is a bit difficult to go after those who abuse the system when you are still in the process of handing to them the topside of $1 trillion.

How they must laugh as they sit on their ocean going yachts sailing from one tax have to another imagining the rush to blame it all on the poor.

But don´t worry they intend to massively expand the poor - so that the blame can be spread more widely. New swathes of benefit scoungers and the workshy can be identified on an almost daily basis.

#52 armagediontimes

"Maybe you would be better advised to look at whatever you have in your house and identifying how much of it has a UK source."

Actually I doubt if more than 5% of the overall value of my house and contents is imported.

We're beating ourselves over the heads with how we as a nation have failed to pay our way over the past 15 years. And I agree that the trade deficits of the last decade were an act of serious folly. But even if you sum together the balance of payments deficits of all those years, it comes to only a small fraction of the total personal, business and government debt that we now have.

In other words only 10% or so of our debt is external. The reast is internal - owed to rich people in this country (and to ourselves via pension funds). And therefore we can (quite easily) do something about it.

#50

Hear, hear!

Stephanie, you say "the message of our poll is that most voters have still not got their heads round the scale of the problem"

That is not unsurprising because this level of debt is really unprecedented. The real question for voters now is which party is best placed to turn things around? The party who created the mess in the first place, or the party in opposition?

You report 63% agreed that "the NHS should be protected at all costs, even if it means imposing larger cuts on other public services or tax rises"

Again, this isn't surprising. People want to know that the NHS will be there for them and their family as and when needed. However, there is room for improvement as to how the money is spent. Fewer managers, and more doctors and nurses would be a good start.

Labour give the impression that it doesn't matter if public money is wasted on bureaucracy, quangos or unnecessary projects, because there's always 'plenty more where that came from'. And if that runs out, there's always the printing presses.

What a way to run (ruin?) our finances!

#55 glanafon

"Err could you explain, as I am a very simple man, where the wealth you are wanting to redistribute is coming from in this utopia you propose where 20 million work in a public sector providng services to 60 million+ and 2 million work supporting them through taxes. Could you also explain why anybody would want to be one of the 2 million doing the wealth creation. Please do not say the public sector create wealth or talk about gearing etc."

I agree, it is hard to get you head around. But wealth creation is not about money. It is about goods and services. And (apart from a few labour intesive sectors like health and education), the goods and services we actually need are produced by a pretty small number of people. What percentage of labour force is involved in producing food, water, shelter, heating etc? Not many. And most manufactured goods are going the same way - the actual cost of making TVs, fridges, etc is very low (mostly because of automated manufacturing processes rather than cheap Chinese labour). There are of course vital service sector jobs like plumbers and electricians, just as there are non-essential ones like bankers and advertising executives.

So I'm not trying to describe a utopia. Just what we have today. Maybe we all need to work 3 days a week and retire early - I'd be quite happy with that. Maybe we all (public sector and private sector) need to pay 60% income tax to pay it - OK fine (I'm currently paying a pretty large amount of money into a private pension fund which I confidently expect to be worthless by the time I retire, so I'd be quite happy to pay via the taxation system instead). The problem is there - how else would you suggest we fix it? I just can't accept that working ever longer hours to pay for a load of junk that we don't really want is really all that sensible.

57 random thought

Debt remains debt and has to be paid one way or the other. There are various routes but the debt has to be paid.

I think you will find the action you wish to be impossible. The actions that will result are that debt repayment by whatever route will reduce the money available for the public sector. That youth unemployment will continue to be a problem and that the many economically inactive will continue to clamour for public services that cannot be funded to the level they wish.

As many provisions are by law ammending law is going to be difficult. it will not be straightforward or quick if it even occurs. You cannot wish away a declining health aging population, a proportion of the population who cannot work as they are ill or because there is not the work. Nor can you suddenly create growth in the private sector. Why do you think such effort was made to promote the financial sector, it was seen as a saviour. You can expect an economic caste system. It is already here, were those with long term contracts of employment seen as being secure are given access to very low interst rate loans and others are arbitarily shut out onto double digit rates. This sort of situation will extend and deepen. The push is already for those not working to work to access benefits. Thus those denied work have to work for less than the minimum wage. This will extend also. Unemployment is still growing and will not drop easily. It does not matter if you have the redundancy withing the work system as jobshare or outside it as unempolyment. it is still reducnacancy. The issue is wealth creation. If wealth creation falters then everything based on it falters. People talk about protecting services. This is rubbish. The services are there because of demand from somebody, so as soon as any service is threatend up will pop a supporter or provider or reciever of those services arguing why they should not be cut.

This is the same lunacy as going around an organisation and every department you go into can produce a spider diagram with themselves located in the centre saying why they are the reason the organisation works, they are essential, absolutely essential, core to the very being. the only activity which is core is sales, ie money inwards, all else follows. No money inwards and everything goes inwhole or part. The only way cuts can be made is by pressurising all accounts equally and seeking what works, and that is what will happen. And if growth in the wealth creating sector does not occur then more cuts will follow. It is just a matter of time.

I saw a programme the other day, a repeat. It had some numpty saying how clever he was because he had bought a house for 45k 10 years or so earlier and now it was worth 400k. It never seemed to occur to him what when up could also go down. He was just too comfortable in his world of artifical wealth. Take housing away and tell me what the UK has got, what edge internationally. the whole thing has been a fantasy for decades. Thatcher onwards.

Meanwhile other countries who have not had the Gordon Blair treatment and are not 'as well postioned' as the UK will not stand still will they. Its just Darwinism.

So if you think this is all going away quickly, or easily then think again. It actually has not even started in the public sector. And growth is not expected in interger percentage points is it. And when the projected growth rate is smaller than the uncertainty of projection the projection is just so much rubbish isnt it.

60 random thought

''So I'm not trying to describe a utopia. Just what we have today.''

Sorry you are not describing what we have today, far from it. You are imagining a static system, a steady state, when what you actually are looking at is a dynamic(s). You are looking at systematic structural failure under dynamic load. The stresses are building up, just like the stresses in the earth build up before tectonic plates move.

As far as wealth creation goes - We work in manufacturing and sales. We gave up on working in a conventional business because quite frankly most do not know what they are doing and are in decline, with a few honourable exceptions, and most just will not take the advice give to them. We run a successful and expanding business which has an international customer base reached directly over the internet. We are a topic on Facebook and Twitter, we never been there, it is reported to us. We have never advertised in the conventional sense. BTW I have also worked in the public sector, or should I say the politically driven sector. The way we work here is completely different to conventional businesses.

All of this talk of tweaking a few percent here and a few percent there is rubbish. A structure has failure points in it. An arch has a keystone in it. You dont remove a few percent of a keystone. Not if you have any sense. Nore do you make effective structures when loads are not spread evenly throughout all available members. Hence the current situation will force the placement of loads throughout all memebers of the population as uniformely as possible. That is the only way to ameliorate stress points. That is exactly what has been done with QE and other policies, they are all designed to take a failure stress point and spread the load on it far and wide to dilute load. That policy, of dillution will continue and all the talk in the world wil not stop the process. Dillution will proceed to load reduction in public expenditure reduction. But by all means dream on and imagine you have self determination. You have not. Sorry but thats the way it is.

#20, wow, radical thinking, comrade. But if I wanted communism I'd go and live in Cuba. Hurry along now, haven't you got a red flag to raise somewhere?

#40, EmKay:

"the public sector will be even less productive as the geriatric bureaucrats spend half a day making a cup of tea and the other half trying to remember where they put it!"

So not much less productive than much of the public sector is today then. I've worked in the public sector and the levels of waste are truly terrifying. Not only that but when wastage is identified nobody even cares.

from Peston's Picks - Tories bash the rich

134. At 02:55am on 07 Oct 2009 I wrote:

It is hard to get a cigarette paper between the parties, New Labour, New Conservative and New Lib/Dem are all talking cuts (of varying degrees)

It's doom and gloom from all sides, no thought as to what we are going to do if the global economy starts to pickup. Everybody is saying that we have to tighten our belts, reposition ourselves (downwardly) into a new world order.

Why ?

I thought these people were the brightest and best, where is their ambition ?

Why not invest some really huge sums of money on making sure that when a global recovery happens we are able to reposition ourselves higher in the world order.

Large scale investment both in the long and short term in electricity generation for export would provide huge amounts of productive work over a very long timescale.

Only a government can provide this kind of stimulus.

None of the parties seems to acknowlege that it is the lack of general economic activity that is the problem, their vying for the sharpest cutter will only make things worse.

Most of the comments, rather than the article, cover my thoughts, particularly the view that people haven't a clue about the inevitable austerity coming. It will either be stagflation, mass unemployment, a sterling crisis and quite possibly a combination of all three.

The really sad thing is that the election debate will be as sterile as ever, with lip service being paid to 'cuts'. It won't be until the wet fish slaps whatever Chancellor in the face, like Lamont in 1992, that the true picture will set in. Yet again, leadership is sadly wanting in the UK.

Get out if you can.

All this talk by politicos about "cuts" sounds like "chickens" and "heads cut off". This mess wasn't generated in a year and it won't be fixed in a year, either. Somebody needs to sit down with a pencil and a piece of paper and make a PLAN:

- where the money is being spent now
- where the money is being collected from now
- what are the outstanding obligations (pensions, debt, etc.)
- what are the population demographics (currently and in the next 20-30 years)
- what is the population's skill distributions
- what are the country's energy requirements

Then they need to decide what mix of industries should be fostered to maximize
a) the percentage of the population in work
b) national income, and
c) number of houses with the lights still on

Once they know where they're headed, it will be much easier to decide what should be cut and what should be taxed, which immigration/education should be encouraged and which discouraged. They can then chirp about their 30-year plan, which will reassure investors and give everybody breathing room to make gradual, *directed* changes; rather than random, panicked swings of the axe.

I vote you lock BOTH your parties in the Tower of London, and feed them bread and water until they come up with something reasonable.

It seems to me that the core problem is to do how the decisions, that got us into this mess, were made. They were political decisions made by career politicians who do not understand the concept of a balance sheet or the real consequences of massive public sector debt. They seem to think it's a 'get out of jail free' card

There is no indication that this is changing. Indeed 'normal service' has been resumed. Until taxpayers actually come to terms with this problem and remove a good deal of their decision making powers (No idea how) I'm sticking with the Euro.

From The Guardian, April 13, 2009: The new figures mean that the total cost so far of Britain's military engagements in Iraq and Afghanistan since 2001 - not including civil aid money, which also runs into billions of pounds - is now about £14bn.
GO figure.

I agree with the comment that most people do not realize what the state of country's finances are. Most people are more interested in Strictly or The X Factor! I am afraid a lot of people are going to have a rude awakening after next years general election. I think that both taxes will have to rise and goverment spending will have to be cut.

The proposal I have the most problem with is the one to raise the pension age to 66 for people in their mid-fifty's. I think this is grossly unfair to people who have already contributed between 30-40 years of taxes & NI. It also causes a problem with youth unemployment, if older people have to work longer there will be fewer jobs for young people. Perhaps a form of job sharing could be an answer to this problem?

But at the end of the day the people who should take responsibility for
the state of the economy are (a)The Bankers/Speculators for being so
greedy and reckless with other people's money and (b)The Goverment for
beliving what these people told them when they asked for "light touch-
regulation". The Bankers/Speculators are the people who should shoulder
the burden of tax rises as they were the people who caused the bulk of
our current finacel problems.

If we are going to end up as a nation one trillion pounds in debt, who is expected to pay off both principal and interest?

Answer: Those who are still working and more particularly those who come after us.

We are leaving the younger generation, our children, with a mountain to climb rather than a level playing field.

How many people in this survey were those who are about to inherit this mountain of debt?

Perhaps this debt should be written off, rather passed on to our children?

I know the value of sterling would fall, and fall considerably, but then if there were no gilts, there would be no interest to pay on them either.

Whilst immediate austerity would be foist upon us and the going would be tough for the adults for a while, our children would inherit a debt free country.

#11 "The £6bn tax saving for withdrawing child benefits to families who earn over £31,000 attracts me, i dosen't seem clear whether this is a gross figure or whether any allowance has been made for loss of tax revenue for people who will reduce their hours."

Firstly, nowhere does it say that scrapping child benefits to the higher earners will save £6 billion !!

Secondly, as with all government statistics, this is a blind assumption based on simple arithmetics that support a government viewpoint. No consideration is given to the consequences of scrapping this benefit. As you rightly point out, no consideration is given to those cannot work because of a lack of child care.

I know of one case, a couple of personal friends, where the husband is an accountant and the wife is a doctor. They have a 1 1/2 year old son. If the child care is scrapped, the wife has to take care of the child and *SHE* is the higher earner !! So, how much tax will be lost if she does not earn ??

This idea was probably thought up by uneducated spin doctors who cannot see past their noses !!

"Im sure i would consider whether the family could live in a fairly comfortable lifestyle before i considered being part of the decision to start one,on a macro level with children likely to live to over 100 years there is a limit to how many children the country can afford. I know i sound hard, but unlike the pensions crisis it would be good to tackle a potential problem when it can be foreseen rather than when the crisis level is so high something absolutely needs to be done which is much more painful."

Alternatively, use the Chinese Method - one-child families unless *BOTH* parents have proven abilities that *SIGNIFICANTLY* benefit the country !! Also drastically reduce immigration to only those with proven *AND* needed abilities like the Aussies have done for the last 20 years and are still doing so !! Stick all illegal immigrants in an island camp until their respective governments come to collect them !! That's what the Aussies did too !!

"I would also suggest the "bravest" discussions would be on pensions."

A significant part of the problems with pensions arose when Our Glorious Leader, in his guise as the Chancellor of the Exchequer, looted them !! He taxed them to fund his extravagant spendings and, now that the hard times are upon us, there is little left in to pot for the poor pensioners. I can say this because I am a "pensioner" too, although the amount that I can get from my "pension" is derisory compared to what I can still earn.

"I also believe in the virtues of keeping mind and body active "

So do I !! So do I !! That's why I'm still "earning a crust" despite being a fully paid-up BOF (Boring Old Fart) !! :-)

"Im sure not too many people would vote for these proposals..."

Turkeys and Christmas !! It's better to hope for 40 days and 40 nights of rain. It's more likely anyway, given the climate change, these days !! If so, then start preparing a very large boat and remember, NO MORE DAMN MOSQUITOES AND FLIES !! :-)

#12 "No future generation working then no future tax. No future tax then no outgoing payments."

The operative word here is "working" !! There can be as many future generations as you like but if they are *NOT* working, there will *STILL* be no future tax !!

#14 "It's a classic example of this Govt's lousy priorities."

And exactly how much were the total MPs expenses ...?

#17 "Ultimately, with the great deal of apathy that the majority of voters have with the mainstream political parties (who are all neo liberal apologists) I sincerely believe we need a party that promises a return to social democratic values, a mixed economy, significant welfare provisions, social insurance and safety nets."

And just who will pay for all that ?? Fine words with no practical basis !! When the government *AND* the nation is almost bankrupt, spending more will so *NOT* solve the problem. *EARNING* more will but that depends on encouraging the "wealth-earners" and reducing their "dependents", including an over-burden of civil servants !!

#25 "A lot of people are going to get crushed so personally I´d stay away from anywhere with a large population and a low resource base. The more deluded the population the more I´d stay away."

Sounds like a very accurate description of Britain today !!

"Do want you want, but take comfort that at least your problem has a solution."

In one word, emigration !! Aussieland is still good. Kiwiland is a trifle packed already. Canuckistan is rather cold; in fact, it is rumoured that the polar bears are migrating South over there !! So, take heed if you are a brass monkey !! :-)

The only way to deal with the unaffordable is to cut it from your expenditure.

We have a state so bloated in size that we cannot afford it.

We have acquired liabilties in the financial sector we cannot afford.

We have a benefits system that we cannot afford.

The conclusion is simple; we have to get out from under these very expensive liabilities. This can only be done by focusing on what is needed rather than what is nice to have. The public seem to understand that the health service is needed but other things are less necessary. I should think that gives an angle for the policy makers to work on.

With regard to policy making we need to return to an economy which is both productive and adds value. This can only be achieved through tax cuts.

Also we need a financial system that makes sense: retail banking needs to be split away from the casinos and money needs to have a value so that the prudent are rewarded.

If we do none of these things then the consequent bust will make the credit crunch look just like an amusing interlude.

This all means change: are we up to it? I don't think so somehow.

There is only one problem,

its not really the next budget that we need to worry about as it will be full of pre-Election give-a-ways and headline grabbing tax rises for the wealthy etc.

All designed to make Brown look good and for laubor to chalange the Troys to say they will reverse the Tax rises etc! Ignoring the damage these rises will do for UK PLC.

Its the emergancy budget that the next goverment will have within weeks of getting / retaining power. That budget will contain massive cuts, tax rises for the common man, a vat rise, fuel, drink and ciggy duty up, all and any goverment asset open for sale etc.

Its this emergancy budget and the damage the pre-election high earner tax rises does to UK PLC that is keeping me awake at night.

"3. At 7:06pm on 16 Nov 2009, watriler wrote:
Instead of just fiddling with public sector fat cats a schedule of higher rate progressive taxation starting at £100K rising to 75% marginal at half a million would be more effective especially allied with a military style crack down on tax avoidance and evasion would yield benefits."

Interesting, IF we drive the wealthy / high earners out of the country we will ALL pay a lot more tax!

As for Tax avoidance and evasion the MPs and PM are very good at it!

Not declairing to the TAX man any of the ACA for their second home that was not solely and exclusivily needed for their job as an MP ment that for example the MP who received £1500 for a duck house AVOIDED paying £1000 Income Tax (ie 2500 - 40%tax = 1500 Taxed income). Even if he repaids the £1500 he is still liable for the £1000 income tax and the fines for not declaireing the benifet in kind.

It must be rememberded that under Browns watch as chancelor the Capital Gains Tax rules were changed such that for CGT perposes MP's were considered to have TWO main homes both of which were expmpt from CGT. The so called "Flipping" is a red herring as their CGT rules changed in the late 1990's!

And the Brown's them selves managed to "sell" there london flat, via a "Whole Of Life Mortgage" which do not incure CGT.

The banking crisis developed from a build-up of vulnerabilities. Governments were following an economic policy of “light touch” and de-regulation. Too much trust was placed in financial institutions that had little internal management, were poorly supervised by regulatory authorities and placed too much trust in people whose rewards encouraged self-interest above sound risk assessment.
People too easily believed the unbelievable; they believed it was sustainable that property prices could rise significantly year after year. The whole phenomenon caused a lack of common sense. People borrowed money without discretion from financial institutions who were too willing to lend it.

The property market was not the truly extraordinary, marvellous and sustainable one we thought, but too many of us acted in accordance with the belief that it was.

A crisis was bound to follow. The vulnerabilities have increased to provoke the economic collapse. Confidence in the banks was lost and on their own, they were unable to resist damage to their financial security.

In such times, action had to be taken to avoid a complete breakdown in the system and ensure the crisis is only temporarily debilitating to the country’s economy.

So what is all the panic about. The current budget deficit is the result of a banking crisis that took 20 years to manifest itself. Let's take a reasoned approach and return things to normal over A similar period and save the pain that will otherwise inevitably hit the poorest hardest by attempting to do it over the next few years.

It seems to me that politicians are trying to out do each other in a "who can be toughest" competition. More posturing than real progressive thinking. Soon they will convince a majority of voters that the only way to save the economy is for us all to agree to working longer and expect smaller pensions. This current crisis has presented the opportunity an incoming government looking to cut public spending has long sought but dared not announce.

Tougher times ahead should not mean a return to Victorian expectations for people who have to work for a living. The good people of this country deserve better.

#36. EmKay wrote:

"I'd also like to propose that everybody's capital gains on their houses are taxed..."

You haven't really thought this through, have you? The result of such a policy would be to bring the entire housing market to a complete and permanent halt, for every move would necessarily have to be a trade down to a less expensive property, with huge destruction of personal wealth in the process.

#35 "How else however does one solve the 'too big to fail' conundrum? And if this is not solved how can we recover?"

Simply by *NOT* believing the spin from our government. All the banks that have "failed" were and are *NOT* too big to fail !! They could and still can be allowed to fail if the government had not wanted to buy votes by propping them up with taxpayers' money !!

As for more banks, "Nature abhors a vacuum" !! When those banks fail, others will step in to fill the void. It is just that the government will not allow other banks to rise or flourish in case they make the government look stupid for supporting their favoured banks !!

#38 "The Tobin Tax alone could yield the deficit (and more) even at a rate O.O5%."

As had been said many a time before, a Tobin tax is utterly impractical unless it is implemented worldwide !! And since most other countries are not in such dire straits ad Britain is and in such a dire debt situation, they will flatly refuse to implement a Tobin tax !! Unilateral implementation will simply destroy what's left of the British financial system and force Britain into a Zimbabwean situation !!

Well we've had the VAT and car price giveaways and they've just benefited those with spare cash, the VAT giveway being the a total waste of time. Have they generated jobs? Have they generated tax income/benefits reductions to justify them? No really , have they?

Windfall tax.
We've applauded such taxes on Big Oil; now let's have it on Big Incomes.
It's a one off.
Big incomers can afford a lump sum proportioal to their total earnings over the last 5 years.
The question is at what level does it start?
The government says (rightly or wrongly) that up to £60000 pa you are entitled to working tax credit (though it diminishes with rising income), so this is a starting base. Been earning over £60000 - pay windfall tax of say £5000. Over £100000, windfall tax of £20000; etc. What's more you could also get them to pay back all their Child benefits over that period. High income earners get disproportionately high benefits from CB relative to low earners. Ain't right.

What should not be happening is job loses and tax increases at the lowest end. And this means no increases in regressive taxes such as VAT and fuel taxes. This is just so negative. So when it is advocated to cut Public Sector jobs, just which ones are we talking about? The guys who run round emptying the bins for less than £15000k per year? Straight onto full benefits; net gain to treasury, peanuts.

60% of low key Public Sector jobs are bottom end payers. And the 'generous pension': well its not that fantastic is it when what you get is based on what you earned near the bottom end of the scale.

Raising pension age - hah - have you tried getting a job once you are over 55; guess where you end up.... Public Sector. Just go down the job centre today and see the age balance, especially when you look across the genders. All the males are either school leavers or over 55. Look at who is employed in the job centre.....

What all our politicians will NOT do is a radical reform of the tax and benefits system and they will not address the fundamental issues that cause demand for such a high level of benefits payments to those in lower income jobs (just try to forget about the scroungers for the moment as they will always exist). None has the guts to tell it like it needs to be

Is it right that lowest income jobs (national minimum wage, below official poverty line) should be taxed, and at marginal rates that significantly exceed those on upper tier incomes? Is it right that we then pay benefits back to cover the shortfall created in part by taxation?

What is the acceptable discrepancy between the official poverty line and the national minimum wage?

How do we hold labour costs to a level that makes them competitive enough that the jobs are not exported, but at the same time not push more into UK-based poverty and benefits-dependency?

I've no answers. What I do know though is that I'm carrying the can for other's extravagances, and that I'm soon going to be paying through the nose for it on the little work I am able to get.

Here's my own greedy thought. Anybody made redundant over the past year will only have to pay 15% of any tax raises the rest have to pay. Having been sacrificed once for the common good, society now agrees that it is unfair to hit the unemployed again - HAH fat (not cat) chance.

#40 "...and the public sector will be even less productive as the geriatric bureaucrats spend half a day making a cup of tea and the other half trying to remember where they put it!"

Absolutely not !! One cup of tea and they'll spend half a day in the loo trying to remember how to "do" it !! :-)

#72
Get real.
Your accountant/doctor example is just so out of touch. They can easily afford the care. What they are not prepared to do is give up their 'good life' in part funded by the state. Cake and eat it comes to mind.

why does SHE have to childcare. is the bloke incompetent?


Get out there and look at all the parenting couples who both have to work to get 1/3rd of what your couple earn, and these low incomers fund child care that takes 60% of their post tax income, even after childcare vouchers.

For me the only way to deal with the crisis facing our country is for the three main parties to have a lot of discussions behind closed doors and come out together and make a joint announcement that this country is in a mess and that they are all joining together to sort it out and govern the country together. Probably would require them all to agree to blame world economic factors rather than past policies.

This would then enable the combined group to have a discussion as described in 67 and really tell the population the way it is and what needs done.

Remove our choice and remove the need for vote winning - we need the hard facts and to face up to reality.

Public sector pensions - one key difference between a Private Sector scheme and a Public Sector Scheme - the private sector has a fund in place to pay the pensions - over the last few years due to changing demographics and stock market falls these have led to deficits and uncertainties that have led companies to closing these schemes - but I think this is to new entrants rather than telling people they can't contribute any more.

The problem with the public sector schemes is that they do not have a fund - what goes into the govt as contributions comes out as pension payments - the fund is the govt purse.

So on assumption pension payments must continue if the schemes were closed to new entrants then surely the predicted deficits into the future would be astronomical?

So the retirement age must be adjusted upwards and the amount of pensions payable must somehow be reduced - unfair and unpalatable but we are in a tough spot - until the severity of our position is understood it is not possible for anyone to understand the measures required to sort this out or support them when it affects them personally. The super wealthy have to contribute disproportionately too to enable buy in for the costs required from the masses.

For me we should aim for 5 years of massive pain rather than twenty years of misery.

stephanie,
for sometime business models and government policy has worked in tandem believing they can create wealth by introducing a minimum wage that employers must not pay below but allows big business a target to stay at or just above. the minimum wage ignores unsoialable hours and weekends.
this has allowed, for example, retailers to remove premiums for sunday working, to pay below inflation pay awards and to also stage wage rises over 18 months.
the result has been a collapse in disposalable income for the modest and low paid. however managers and executives have benefitted from larger pay rises and huge bonuses, its not just the banks and m.o.d you know.
ethicalblog believes that is why we are seeing a longer period of economic failure. if individuals are not paid money they cannot spend money.
the government can redistribute via the tax credit system because corporation tax is higher than that of income tax, but that will continue to benefit the few and the cost of the many.

ethicalblog believes that as what has occurred is the result of short term shock we need a short term shock to correct it.
for one year only no one should earn more than ten times what someone on the minimum wage earns.
for one year only no private pension should be above ten times that of the state pension.
if we are to restore a fair society we should look very closely and taxing some retrospectively, a few have benefitted from paying little or no tax and now benefit from financial independance.

'Both men know that there will be a lot more tough choices ahead. The question is how many they can afford to share with the voters this side of the general election.'

So even the BBC acknowledge, they are both lying through their teeth!!! So what is the point on voting for Lab, Con and LibDem really?

# 72 Ishkandar

"Firstly, nowhere does it say that scrapping child benefits to the higher earners will save £6 billion !!"

in fairness to myself this is the figure in paragraph 16 of Stephanie's report.

Secondly the example you have given of the Doctor / Accountant couple that the decision to work by the Doctor would change if child benefits were withdrawn is frankly unbelievable, albeit based on simple arithmetics.

The fact that you see your pension as a derisory compared to what you earn is one example showing where pension payments can be reduced without significant pain being inflicted

I am please you read my comment and i admit i often make comments to provoke thought and other comments. However could i please ask that you make crystal clear where you are giving your views rather than following on from somebody's elses view. The idea that you can judge a childs right to be bourne based on their parents or make allowances for the number of children a couple may have based on how privlaged the parents have been is completely opposite to my opinion.

There are so many factors which shape peoples lives that my philosopy tends to be "there but by the grace of god" rather than being judgemental.

1 MILLION pubic sector workers will soon be on the dole, then what?

What will the eventual unemployment figure be? Another 600,000 graduates next year - That's a lot of McDonalds jobs.................

No war, no famine, no disease, delayed death.

Even when we look at the terrible deaths in Afghanistan and Iraq we are talking about 1 soldier a day (I am not saying this is not a terrible loss of life)which is very small in comparison with historical wars where hundreds, if not thousands, of people died every day.

Famine - currently the UK deaths from famine are limited to anorexics and child abuse plus possibly some neglected elderly.

Health care & vaccination have all but eliminated death by disease.

Death - due to health improvements we are living longer and longer.

So we need to control the number of births and number of immigrants or somethings got to give, we live on an island after all.

The artificail gravy train that has disproportionately favoured the elite will have to be dealt with as the minions proportionaly take the biggest hit in living standards. A re-think alround from HMG to Business has to address the past ill afforded renumeration perceptions and achievements. We are stuck with the loss of wealth and capital destruction the same will have to apply to wages or inflation and defaults on a grand scale will ensue.

Stop giving treatment on the NHS for people who don't deserve it because the problems (or just plain greed in the case of the last example) is of their own making:

Alcoholics
The obese
Smokers
Drug addicts
Cosmetic surgery (except where NEEDED because of an accident or similar)

That would save the public coffers more than all of Steph's proposals put together. These people got themselves into their messes, they can pay to get themselves out - not us. Or, in the case of those getting cosmetic surgery for free, we were born like we are warts and all for a reason so deal with it like the rest of us have...listen to the rest of us not some stupid trashy magazine which prints nothing but falsehoods.

I've long been expecting a portfolio of spending cuts to be announce along with an increase in the basic rate of income tax of around 5p (possibly with an associated increase in tax free personal allowance to offset imact on the most poorly paid workers).

How much would this generate?

There's no universally pleasant option, surely its just a combination of contribute more and spend less?

All else is politics.

I totally agree with those who say that if we live beyond our means we have to pay. But, I didn't. Moreover, I've probably contributed more than most to production of real wealth and UK exports (by the boring an unfashionable method of producing stuff).

Many of the people who contributed to pension schemes, final salary or otherwise, have not been living beyond their means either. Were they the ones who gambled with their pension funds?

Who are the guilty ones? Bankers and the finance industry. The government. Some, but not all, house buyers. People who like to see how high they can bounce their credit card. Those who look for a fast buck for themselves by riding the bandwagon of bubblonomics.

So, tell me why should I pay the cost of a problem that I didn't cause and that I warned we were sooner or later going to hit?

Re salaries, it seems to me that above a level it has become a way of 'keeping score', OK in itself till it starts hurting other people, which is what it is doing by the way people are focussing on boosting already extravagant remuneration(by normal standards), indulging in ways of working which will beggar the rest of us.
To my mind we need to identify 'how much is enough?' and introduce punitive taxation above this point - if peoples are driven to certain behaviour by increased riches, perhaps punitive taxes might dampen their ardour. In my opinion, it gets hard to justify much above the level of the PM's salary.
There seems to have been a real disconnect between the southeast media and the rest of the country - if the median average salary is ~25K then half the population (30M) are on less than this. I open the papers and see fashion pages pushing handbags and outfits priced upwards of £500, the equivalent of at least several weeks take home for these folk. I dont buy the argument that this is aspirational - I could look at pictures in top shelf mags and make the same argument.
We are all in for some real pain (unless we can emigrate) which will no doubt be mitigated by pushing it down to the next generation who dont have a vote yet (cf PFI/Student Fees/Civil Service Pensions) so that the folk who enjoyed the good times dont suffer quite as much. Personally I will be recommending my kids to look overseas for their future, there seems to be an inability to smell the coffee here.

#84 - p45 builder

''Raising pension age - hah - have you tried getting a job once you are over 55; guess where you end up.... Public Sector. Just go down the job centre today and see the age balance, especially when you look across the genders. All the males are either school leavers or over 55. Look at who is employed in the job centre.....''

A good point that, we seem to be collectively (on this blog) looking down blind alleys which ever way we turn!!

The consensus of the unleveraged on this topic on here seems to be.

- Most people out there either have no idea or would rather not think about what £70 billion of cuts / tax rises will mean (the whole welfare budget is 160 billion) to fill the structural deficeit hole. It is ****** massive people!!!!!....Helooooooooo.

- Thanks to the prevailing culture of the last 30 years nobody wants to take the pain ' in their back yard' and the sense of british collective has been replaced by 'multiculturalism ( aka a set of discrete economic and cultural ghettos who dont interfere with eact other unless it is to fight over something)so there will be a god awful fight involving strikes / riots etc depending where the axe falls.

- About the best thing you could possibly do in such circumstances would be to take a chunk out of it all accross the board so everyone feels some pain, pensions and welfare bring the easiest dividends v pain factor I would say. My personal favourites are a windfall tax on spivs and hacking out the pen-pushing non job culture from the civil service and building some landmark sustainable energy schemes (without the burecrats intereference) with some of the money saved as a long term positive legacy for the future.

The least we can do for our kids is keep the lights on for them!!

#42 "Or Gordon Blair and Ali D in da House actually saying just how bad it is."

And the sun will rise in the West tomorrow !! :-)