The government borrowing crisis intensifies

Readers of this site will not be surprised that world markets are starting to tell individual governments that they are borrowing too much. If there has been a surprise, it has been the delay before markets wake up and force changes on reluctant administrations. The sloth of markets to say “No” to excess will just ensure that as each country crisis comes it will be bigger and the reckoning heavier, because each country will have borrowed even more.

Iceland, Ireland and the Baltic Republics had their medicine administered sometime ago. They have each been forced into spending cuts, and have to pay more for their loans. Last week the storm surrounded Greece. Yesterday the pressures began to envelop Spain and Portugal.

This is the period of maximum pressure on the Euro. Markets are saying to countries in the Euro who have wandered miles away from the discipline of keeping public borrowing down to an annual 3% of their national incomes, they need to cut spending. If they refuse, they need to seek loans and subsidies from the better run members of the Euro area, as the markets are no longer willing to lend to them at German rates. It turns out they are not part of an integrated money union where all are for one and each is for all. Each Euro member has its own deficit problems, and each has its own credit rating. So it will remain unless and until they each guarantee each other’s borrowings and freely transfer cash from the richest to the poorest, from the best run to the worst run, as needed. Germany is understandably reluctant to do that at the best of times. When she is wrestling with her own recession and deficit problems she is unlikely to bail them all out to the extent needed.

Some in the UK look on with a sense of relief or even amused superiority because we stayed out of the currency union. As a keen advocate of UK currency independence myself it is tempting to write of the advantages for us of not being caught up in this particular Euro crisis. I have always said there are just two decisions made by Gordon Brown as Chancellor that I fully support – the decision to keep us out of the Euro, and the decision to set sensible CGT and standard income tax rates.

I will not do so , for one very good reason. It would be foolish of us to say we welcome being out of the Euro to give us the flexibility to borrow to excess, to borrow more than the prisoner members of the Euro, Greece, Portugal, Spain and Ireland. There is one very simple observation. It does not matter whether you are in or out of the Euro when it comes to world market reactions to how much money you can borrow. The UK will not escape the government debt crisis. It has been living on borrowed time for too long. What can happen to Greece, Portugal and Spain today, can easily happen to the UK tomorrow.

Far from enjoying the collapse of the Euro against the dollar and the good questions now being raised over the whole shaky edifice of the single currency, we should look to our own problems. The UK has borrowed too much already, and is borrowing far too much going forward.

The Bank “paused” quantitative easing yesterday, to start to let the bubble in government debt down gently. From here it gets tougher to borrow all the money the government needs. If the UK government does not take the right budgetary action soon, it will be the UK’s turn to be tossed around in the world’s bond markets. The end of that process is for all of us to have to pay more tax to pay the rising government interest bills as the rates go up. At a certain point, just as happened in Ireland and now in Greece, the government has to cut spending.

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55 Comments

  1. backofanenvelope
    Posted February 5, 2010 at 8:57 am | Permalink

    Let's not give Gordon Brown any pats on the back for keeping us out of the Euro. He did it for one reason only – it would have diminished his power base in the Treasury.

    Did I read the other day that if the EU bails out the Greeks, we will have to contribute? Even though we are not in the Eurozone.
    Reply: You may have read that, but no sensible UK governemnt would do so. This is a problem for the Eurozone, not the EU.

    • backofanenvelope
      Posted February 5, 2010 at 1:00 pm | Permalink

      But do we have a "sensible" government? Or indeed, opposition?

      • Posted February 7, 2010 at 7:53 pm | Permalink

        Right, and they will just up our contribution anyway but claim oh it's not to bail out greece.

        They must think I'm an idiot.

  2. alan jutson
    Posted February 5, 2010 at 9:19 am | Permalink

    Interesting comment by Andrew Haldenby in this mornings Telegraph.
    No Party is yet outlining enough cuts to public expenditure which will avoid the problems you have suggested John.

    The Public Sector could save the economy- if only Politicians let it. http://www.telegraph.co.uk/personalview.

    The problem is we now have too many State funded employees, too many State funded Benefits claiments, too many State funded Tax rebate Scheme claiments.

    None of these would vote for cuts unless it is spelt out to them that it simply cannot go on as before, otherwise bigger cuts than planned will follow after international pressure.

    Time for somone to stand up and be counted instead of playing around with all of our futures.

    • Posted February 5, 2010 at 6:16 pm | Permalink

      And if they do?
      They can kiss goodbye to ruling the country. Ask IDS or Michael Howard, both of whom played it straight and even talked about im**gr*tion!

      • Brian Tomkinson
        Posted February 5, 2010 at 7:26 pm | Permalink

        Mike,

        If the Conservatives can only get elected by deceiving the electorate then they will risk reaping the whirlwind of riots and strikes when they take action to cut government spending for which they would have no mandate (always assuming that they would intend to sort out the massive debt burden). They could expect no support from Labour – in fact quite the opposite. It is possible that such a government wouldn't last long and would be consigned to the dustbin of history. The Conservatives should play it straight and if the electorate don't vote to take the necessary medicine so be it. The day of reckoning is coming regardless of how gutless politicians try to pretend otherwise.

      • alan jutson
        Posted February 5, 2010 at 7:47 pm | Permalink

        Mike

        That is the difficulty I agree, but if somebody does not spell it out, then rest assured they will have problems when the s..t hits the fan, after they have been elected and will be branded liars.

        Perhaps the way forward is to talk about any policies, subject to a forensic examination of the books.

        Labour could not use this as an excuse as they have the books and know the score.

        Both Conservatives and Liberals do not have such detailed up to date information.

        Remember IDS and M Howard were up against Bliar the consumate proffessional of presentation.

  3. Andy
    Posted February 5, 2010 at 9:46 am | Permalink

    I don't think you've got the correct potential source of our collective smugness.

    The smugness we might reasonably experience is not because we have avoided Greece's mess (as you rightly say, we haven't), it is because the UK is the equivalent of Germany in your missive — despite our current dreadful position we are still one of the richest nations on the planet, and it would be to Germany and us that Greece would be looking right now.

    If we were in the Euro, our currency would be pulled down not only by the hubris of our own government but by the hubris of the governments of Portugal, Italy, Greece and Spain. On the other side of that coin is Ireland, who instead of being able to devalue their currency to cope with recession have been forced to alter output, we at least have the advantage that some contraction of capacity can be protected against by devaluing the pound.

    I for one am glad that we only have our own inept leaders to deal with, without loading us with a boatload of others too.

    I take even more enjoyment from the situation because it is a macro-scale example of socialism — if you are on the low side of the average line, you are happy; if you are on the high side, you must pay for the mistakes of others.

    • The Voice of Truth
      Posted February 5, 2010 at 3:04 pm | Permalink

      Sadly, it is a matter of time before Sterling is tested again. First the markets will see if the ECB will step up to the plate or not, as they will push until the ECB reacts in order to save both the currency union and European project and then they will turn to the UK as neither the current Government nor opposition are being honest in what medicine this country needs to balance the budget. The usual compromise is being touted, when maybe for the first time the electorate is waking up to the fact that we need hard cuts, the markets will not accept anything less than at least a 100bn worth of government cuts to current not projected expenditure over the next 2-3 years, any more tax rises will simply condemn teh economy to stagnation or sub trend growth at best.

  4. Posted February 5, 2010 at 9:59 am | Permalink

    Dear John, I work in the NHS (GP) and witness terrible and disgraceful waste every day (not in my practice, we run ourselves like small businesses). We have "managers" by the thousand who cannot and do not make decisions, and all clinical specialties have highly paid clipboard people who do negative work (ie create paper and meetings). We have specialties that we do not need, and there are empires all over the place that do not serve the public: take a critical look at public health, learning disability, health visiting, physiotherapy, the pretend internal market, health service education, almost any branch that is normally under your radar and I will show you a castle built on sand with perhaps one little turret or cellar of usefulness.
    Solution: call the NHS a "sickness service" and put "prevention" back in its box, letting aspects of prevention out of the box item by item where they can be shown to be cost effective rather than mere wishful thinking. Then employ whatever you need to deal with sick people. Send the redundant army of second spaceship people to another planet.
    While Mr cameron promises to ring fence our budget I promise him faithfully that the NHS will ring fence its empires within empires and still watch sick patients waiting 6 hours to see the "hello nurse" in its "medical assessment units" as a tired man looks at flies.

  5. Posted February 5, 2010 at 10:06 am | Permalink

    PS what I meant to say was, giveusloadsofmoney, and keep big primary school classes, get soldiers to buy their own boots, but giveloadsofmoney to our sister-ship social security as that is almost as important as the Nash. Surely private enterprise understands the need to keep propping us all up?

  6. Stewart Knight
    Posted February 5, 2010 at 10:16 am | Permalink

    the decision to keep us out of the Euro, and the decision to set sensible CGT and standard income tax rates.

    Brown and Blair would have had us in the Euro on May 2nd 1997, and the tax rates are still collected but by stealthy means and the headline rate kept down for purely electoral reasons.

    Don't you start this ridiculous avoidance of ya boo politics and trying to be nice to attract none of the electorate [sic]

    • Mark
      Posted February 5, 2010 at 7:21 pm | Permalink

      CGT will soon become a tax on inflation, not on real gains, since both indexation and tapering have been abandoned. It is biassed in favour of converting income to capital gain and short termism.

  7. Brian Tomkinson
    Posted February 5, 2010 at 10:17 am | Permalink

    JR: "the government has to cut spending"

    Most who contribute here will agree wholeheartedly; but what of your party? Rather than clarifying their determination to face up to this task they prevaricate. People look to them to sort out Labour's mess but they don't inspire confidence. We seem to have political leaders who are gutless and afraid of putting the dreadful truth to the public. Whoever wins the election on the basis of a further fraud that they can hide the bad news from the voters will reap the whirlwind when they do take action. I have said it before but nothing has changed my view that they would all secretly welcome the IMF's intervention to tell them what to do and then have someone to hide behind.

  8. John
    Posted February 5, 2010 at 10:29 am | Permalink

    Not long to wait before the s**t hits the fan! Batten down the hatches.

  9. Posted February 5, 2010 at 10:56 am | Permalink

    The Western economies are in a perpetual loop and will not break it without a very significant cleaning of the hard drive. The use of military force in Afghanistan and Iraq to secure Capitlism for the privileged few is a disgrace and being very well exploited by those bent on destroying our way of life.

  10. Lola
    Posted February 5, 2010 at 11:06 am | Permalink

    “The end of that process is for all of us to have to pay more tax to pay the rising government interest bills as the rates go up.” Nope. I am flatly not going to do that. Ever. Why?

    One, rasing taxes at all will kill stone dead wealth creation.
    Two, government spending of The Taxpayer’s (i.e. wealth creators in private business, not state bureaucrats) money is epically too high…
    Three, …so releasing lots of people that turn up to collect a bunch of cash from The Taxpayer to find more productive work in private business (almost certainly at a a lower wage, i.e. internationally competitive wage) is the first priority.
    Four, It has been proven time after time that cutting taxes, especially on the ‘rich’ always raises more tax in total.
    Five………oh I’m getting bored now……..but you get the drift.

    Read my lips ‘No more taxes and cut taxes on enterprise and trade now”.

    PS None of the cuts need affect a single teacher, doctor, policeman etc. But changing the structure of health education and law enforcement will enable us to see if we already have too many of them. My guess is that we probably do.

    • A.Sedgwick
      Posted February 5, 2010 at 1:46 pm | Permalink

      Many contributors like us see the blindingly obvious – we need to make savage cuts in spending combined with seriously reduced business taxes e.g. corporation tax, rates and employers' N.I. to create wealth and productive jobs. There would be a rocky two years with unions and unemployment, but it is akin to chemotherapy for the economic life of the country.

    • Posted February 5, 2010 at 1:47 pm | Permalink

      Carswell and Hannan's ideas on localism might be the key. You would have to wean people off their knee jerk opposition to "post-code" prescribing or post-code anything. "Post-code" variation caused by local decision making is just what we need.

  11. Sally C.
    Posted February 5, 2010 at 11:27 am | Permalink

    I can't help but think that the B of E knew how bad the output and input producer prices (published by the Office for National Statistics today) were going to be, and that it may have influenced their decision to halt QE. This is the headline statement from the ONS report… 'Output price ‘factory gate’ annual inflation for all manufactured products rose 3.8 per cent in January. Input price annual inflation rose 8.4 per cent in January compared to a rise of 7.4 per cent in December.'
    The most worrying figure was the month on month increase in input prices which rose 2% month on month or an annualised rate of 24%!! I am not saying that it will continue at that rate but if that figure is not a sign of worryingly high inflation down the road, I don't know what is.

    Reply:Yes, indeed – the predictable inflation that comes from devaluation and money printing is underway in Q1.

  12. Javelin
    Posted February 5, 2010 at 11:28 am | Permalink

    The day the Euro was announced my first reaction was that the Eurozone countries would have to have a better fiscal framework because they were the best levers they had to control the economy.

    I thought then that if the Eurozone countries would be forced to use tax to control economies then it would show the benefits of a low tax economy (esp to pull out of recession). I was expecting Governments to completely reform their tax structures and prepare their economies for rising and falling spending. That was wishful thinking.

    The blots on the landscape since then have been (1) relatively standardised VAT rates and (2) controlled subsidies (3) left of center governments. Further more Governments in the Eurozone simply havent grasped the requirements for fiscal control and management – even in the slightest. They have been lazy.

    The Conservatives have spoken about reducing spending by small amounts. As I have said before a figure of about £100bn over five years is needed given a 2% growth rate – a number which the markets are now converging on. This is of course dependent on how well UK Plc pulls out of the recession. Given the red-tape and Government controls faced by most business then I don't think we will achive the growth rates needed to revise that figure down.

    I agree John there will be a crisis – but a crisis in the Conservative Party – about spending and taxation. Perhaps the Conservatives should wait for the crisis to come in order to justify the depth of the cuts they must make.

  13. IJ
    Posted February 5, 2010 at 11:28 am | Permalink

    They will need to restart QE but it wont work as its just hiding the problem rather than fixing it…. or more moving it to someone else. The UK, Spain etc over extended credit on a massive scale. It has to be cleared, only ways are deflation of assets or inflation of general prices. QE just reinflated the assets and the inflation coming through is imported which is no good for realigning prices to assets!

    Add to that the Govt spending is 53% of the economy, no capital investment and extra regulation means the economy can only grow at 1.5% rather than 3%…..

  14. MaxVanHorn
    Posted February 5, 2010 at 11:35 am | Permalink

    I don't honestly see how we can possibly pay more tax.The government may raise the percentages, but I'm convinced the revenues will go down as the bankruptcys pick up pace, and those who are liquid will leave.NI as we all know is a tax on jobs, fuel tax at 80% is ruinous, more VAT will close restaurants, pubs,fashion outlets.People are hanging on a thread in the real economy.It's desperate times and no clever mathematical models are going to solve the problem.We need a fundamental shift to a caretaker only function for government, and to re-insentivise those who really earn this countrys living with a whole new tax structure.

    • The Voice of Truth
      Posted February 5, 2010 at 3:08 pm | Permalink

      Simple really – is the government expenditure necessary for survival or to 'compete' then if not it must go !

  15. Robert K, Oxford
    Posted February 5, 2010 at 12:18 pm | Permalink

    And isn't the timing interesting? Surf the last dregs of the wave until May and let the next government get dumped on. The cynicism of our parliamentary "democracy" is breathtaking.

    • Sir Graphus
      Posted February 5, 2010 at 2:43 pm | Permalink

      Yes, and isn't the amount printed interesting too; about the same amount as the annual deficit.

      No debate, despite JR's best efforts, in the Commons. A matter for the independent BofE, apparently.

      We'd like to be reassured that the amount needed to be printed matched a calculation of that amount needed to stimulate the economy while not exposing us to hyperinflation. But no, the BofE printed what the Labour party needed for this year. We can't be sure whether that was too much or too little.

  16. APL
    Posted February 5, 2010 at 12:24 pm | Permalink

    JR: ".. wandered miles away from the discipline of keeping public borrowing down to an annual 3%"

    Wandered? More likey, never met. Then Greece has found 40Bn of 'off balance sheet' debts.
    http://www.telegraph.co.uk/finance/comment/ambros

    Public Private Partnerships anyone?

    From that article there is a choice quote from the Greek prime minister "… we cannot be at the mercy of creditors". Well, you know? The way to be in control of your debt is to control you debt.

  17. Norman
    Posted February 5, 2010 at 12:49 pm | Permalink

    There may be trouble ahead then. With both main parties refusing to deviate from their Micawber-like spending plans in the vague hope that 'something will turn up' I'm afraid we only need to look to Greece to see what the something will be.

    Added to that neither party seems to want to drive our way out of recession by focusing on private sector growth through a competitive tax regime and we have the perfect storm.

    Maybe the answer is to emigrate to Australia?

    • The Voice of Truth
      Posted February 5, 2010 at 3:22 pm | Permalink

      Sadly you are correct!

  18. Posted February 5, 2010 at 2:07 pm | Permalink

    There used to be a saying of the past to describe a chaotic and disastrous situation, it was "the biggest shambles since Mons". What could well happen will be a far bigger shambles than the Battle of Mons ever was.

  19. Steve Cox
    Posted February 5, 2010 at 2:45 pm | Permalink

    All to the point, John, so when are the markets going to turn on Sterling? Will it be in the next few weeks, when they get bored with toying with the Eurozone and realise that no party in the UK is currently spelling out an effective debt reduction plan? Or will they give us the good grace of waiting until after the election, which is still another agonising 3 months away (at least). I rather suspect that we are about to get a good kick up the pants, so that whichever party wins in May realises that major changes have to be made if we are to avoid bankruptcy and impoverishment. Britain may still be a rich country, but our national debt including unfunded public sector pensions and off-book PFI commitments is still about the largest in the developed world. Plus we are rapidly sliding down the scale of wealthy countries as the pound continues to slide – look at its fall against the pathetic USD in the last few weeks alone. We desperately need interest rate increase now to shore up Sterling, or we are heading for a Zimbabwe style abyss.

    • The Voice of Truth
      Posted February 5, 2010 at 3:23 pm | Permalink

      Spot on!

    • Ian Jones
      Posted February 6, 2010 at 9:13 am | Permalink

      They already have, the pound has against the dollar and yen by the same % as the Euro. We are linked to it regardless.

      • Posted February 7, 2010 at 8:01 pm | Permalink

        All currencies are falling off a cliff, comparing them to eachother is misleading, we should bre comparing them to real wealth like Gold.

  20. Sir Graphus
    Posted February 5, 2010 at 2:48 pm | Permalink

    The advantage the Euro has is to impose discipline on an ill-disciplnined govt. If we were in the Euro, the govt would be forced to make the cuts now, as Ireland has.

    Printing money, instead, has allowed the currency to devalue; as if that's an unalloyed good thing. All the govt has done, though, is to use that devaluing to lead an ill-disciplined wasteful spending program for another year.

    Being in the Euro would have meant pain now. QE and devaluing means pain later (cynically, after the election).

    I would have preferred to keep the pound and had a financially continent govt. Can't have everything, though, but the Greeks had neither.

  21. APL
    Posted February 5, 2010 at 3:26 pm | Permalink

    As it has at last become obvious that we need to cut public spending and make savings, why are the MET Office and the British council squandering public money buying global warming activists?

    According to Richard North who through a FOI request has discovered that between 1997 – 2007 the MET office has spent £146,275,582 on 'studying' climate change.

    £146,275,580!!! WTF?

    I assume that doesn't include the money spent at the UEA 'climactic change unit', although I grant the both orginsiations are hand in glove.

    Then the British Council has spent £3.5 million over two years.

    (website ref removed owing to lack of time to check out-ed)
    £3.5million!!! WTF?

    What is the British council doing with that money? Why recruiting people to lobby governments to support climate change leglislation?

    Incestious or what?

    £146,275,000 here, £3,500,000 there, pretty soon you are talking about real money.

  22. Tony G
    Posted February 5, 2010 at 4:18 pm | Permalink

    I am not sure that being out of the Eurozone saves the UK from being on the hook for bailing out Greece et al. The bailout considered would be in terms of Article 122 of the Lisbon Treaty and come from the EU coffers not the Eurozone to which we would have to contribute directly or indirectly. Additionally, the decision would be by the Council of Ministers. Whether this would be by unanimous or majority vote I do not know!

  23. Mike (Scotland)
    Posted February 5, 2010 at 4:40 pm | Permalink

    backofanenvelope
    "Did I read the other day that if the EU bails out the Greeks, we will have to contribute? Even though we are not in the Eurozone.
    Reply: You may have read that, but no sensible UK governemnt would do so. This is a problem for the Eurozone, not the EU."

    The reply above ignores the fact that Brown under the Lisbon agreement has committed the UK to join in such bail-outs. If the figures are of the magnitude requested by Portugal then we are talking about the UK having to find c£6 billion!

    • backofanenvelope
      Posted February 5, 2010 at 11:22 pm | Permalink

      Thank you Mike!

    • APL
      Posted February 6, 2010 at 10:28 am | Permalink

      JR: "You may have read that, but no sensible UK governemnt would do so. This is a problem for the Eurozone, not the EU.”

      It has always been envisaged that the Euro zone would need 'massive transfer payments' from the well run northern countries (aka Germany) to the PIIGS to keep the whole shooting matcht viable. The topic was quite common place in the media at one time.

  24. Posted February 5, 2010 at 6:25 pm | Permalink

    I have read the comments down to here. One thing to add:
    A little sleep, a little sleep, a little folding of the hands in sleep, and want shall come upon you suddenly like a villain.
    When the Haiti earthquake struck, it was the result of years and years of preparation. And nobody noticed……

  25. Mark
    Posted February 5, 2010 at 7:08 pm | Permalink

    One of the reasons to be relatively sanguine about the EU is that the pressures of dealing with the fault lines exposed by the Euro could force it to re-evaluate its mission and how it operates. It has been entirely predictable since the outset of the Euro project that the strains would emerge (indeed, the UK was effectively the first ejectee back in 1992).

    There are certainly risks that citizens in some of these troubled countries will look harder at the EU as they come to understand that its impact isn't the net budget contribution or payout, but the costs of doing things the Brussels way. There may be an interesting moment when the pieces can be picked up after the explosion of the Euro and re-assembled into a workable free trade area and no more.

  26. Ex Liverpool rioter
    Posted February 5, 2010 at 8:56 pm | Permalink

    I sense the "Event" is getting close but it might not happen on Gordon's watch………Some how we much ensure it DOES happen on Gordon's watch.

    Mike

  27. Posted February 5, 2010 at 10:40 pm | Permalink

    Schadenfreude is a German word, isn't it?
    I imagine a few Germans are anticipating getting their sun loungers a bit cheaper this year.

  28. APL
    Posted February 5, 2010 at 10:49 pm | Permalink

    It seem to me that Jim Devine MP has just (made unfortunate comments) in public on C4 News, and also implicated an unnamed Labour whip…….

    What a numpty.

  29. Javelin
    Posted February 6, 2010 at 7:07 am | Permalink

    Just thought I'd answer your question on why the markets have taken so long to come around to questioning sovereign bonds.

    First a lot of the analysis is retrospective and technical. Prices are based on credit ratings, historical volatility, inflation, trade figures, fx and interest rates. The pricing algos are pretty similar and well known.

    A few Market makers set the price in the credit derivative markets, often using standard software. There are so many bonds on these system it's very difficult to manually set the forward volatilities and then manage them all, so generally traders rely on algos.

    The second point is what the markets don't do, which is crystal ball gazing. Contrary to the belief of politicos there is very little prediction based on political analysis. To illustrate this the large investment bank I work at recently blocked Internet access to political betting dot com. Mike smithsons analysis is unrivalled. I had to point out to the head of IT that a hung parliament may have a bearing on significant Market movements. So don't be surprised is the trading markets haven't turned their attention to the political world yet.

  30. Fox in sox
    Posted February 6, 2010 at 8:42 am | Permalink

    My acute hospital trust has just announced a pack of financial measures meaning 10% job losses at the Trust. Our PCTs are making a 30% cut in their staff (excluding GP practices, who run as small businesses as you say. Whether the right people get cut, I have my doubts.

    Last night I had dinner with a teacher and a probation officer, both have similar levels of cuts to face. And these are small cuts relative to what we need.

    What we really need is an Irish style public sector paycut, and a similar cut in benefits. I write as a hospital doctor myself.

    If we are in it together, all need to share the pain, rich and poor alike. No one wants to pay more tax, but most will see the neccesity and grudgingly go along with it if is accompanied by similar cuts in all benefits, right across the board.

    • alan jutson
      Posted February 6, 2010 at 3:24 pm | Permalink

      Fox in sox

      We also have information from friends and contacts that the NHS Bugets to certain areas are being very significantly cut for the next financial year.

      Where does this leave DC who is talking about ringfencing the NHS expenditure, when it would seem that Labour have already instigated the idea/proposal of cuts (but not publically).

  31. Fox in sox
    Posted February 6, 2010 at 4:21 pm | Permalink

    Medical inflation is higher than general inflation, for example new drugs being authorised by NICE. There is also an ageing population and an epidemic of diabetes. Finding funding for these items within a static ring fenced budget means cuts need to be found elsewhere. So ringfencing and cuts are not incompatible.

    I could walk through my department and sack 10% without altering productivity if I was given a free hand. I know the workers and the shirkers at all levels. This will not happen as the unfair dismissal cases would explode. This is a real refuge for the incompetent, competent people who get sacked rapidly move to another job.

    Limit awards for unfair dismissal to 1 month pay per year of service and employers both public and private would jump for joy. The shake out would concentrate minds wonderfully. Pour encourage les autres…

  32. Posted February 7, 2010 at 7:58 pm | Permalink

    If they Printed EXACTLY What they had Borrowed over the past 50 yrs, there would not be ANY Govt Debt.

  33. Lindsay McDougall
    Posted February 9, 2010 at 1:43 pm | Permalink

    Readers of this blog are not going to believe this. The following appeared in a short article on the front page of Daily Telegraph of Monday 8th February:

    "Gordon Brown will attend crisis talks in Brussels this week as the eurozone faces a crisis over the debt Greece and other countries have built up.

    The Prime Minister will preach a "tough love" message for Greece and, along with the other European leaders, will urge the country to cut its spending over the next three years. Greece will be presented with an agreed plan which will demand that its deficit be cut from 13 per cent to 2 per cent by 2013. That will mean heavy cuts in spending and a drive to take on the public sector unions that many blame for the country's problems."

    Two points:
    (1) I can think of another country that should cut its annual deficit from 13% to 2% [of GDP] by 2013. If Gordon wants to discover which one, all he needs to buy is mirror.
    (2) The euro is none of our business. If we allow it be, a group of Eurozone nations will try to dip their hands in our pockets. Let the euro crash and burn and the eurozone break up.

  34. Posted February 15, 2010 at 11:17 am | Permalink

    It is such a nice and useful blog that i come daily to read this blog it has got all the informative stuff that i wanted to know about the postings on this blog are really great thanks for sharing such an important and useful stuff.

  35. E B Fairfax
    Posted February 16, 2010 at 3:47 pm | Permalink

    Ring fencing the NHS budget is wrong if we are to cut public spending. Great lumps could be cut out, for example physiotherapy, and this privatised, in which case it would sink or swim.
    Sit in the grounds of an NHS hospital and count the middle-aged overweight ladies walking around with clipboards—-that's where the cuts should be made-they're not healing anybody.
    Also if you replace the Health & Safety Executive with a "Use Your Loaf" Act you could save a fortune – not just the cost of the silly quango itself but the millions of professional hours wasted writing meaningless risk assessments so that boxes can be ticked on meaningless forms in order to prove that meaningless targets have been met.

  36. Posted February 27, 2010 at 1:32 am | Permalink

    Hello! Your post (John Redwood MP » The government borrowing crisis intensifies) does so well that I would like to translate it into French, publish on my french blog and link to you. You have something against it? Regards

    Reply: By all means translate it and publish it. Please state clearly on it that John Redwood wrote the English version, and that you are responsible for the translation.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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