There’s no room for complacency

 

           Today’s figures for public borrowing reinforce the need to control spending. Public sector borrowing is up from £16.79 bn last year in November to a stunning £22.774billion this November. Tax revenues are up as well.

           Professor Tim Congdon has recently pointed out that over the last year our financial service exports are down by £10 billion, or around one fifth lower. He thinks this is the price for the bank levy, the balance sheet tax and the other moves against the sector. If so, it could prove costly in  terms of lost revenues.

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31 Comments

  1. Iain Gill
    Posted December 21, 2010 at 2:43 pm | Permalink

    given that we now know Vince Cable has forced the so called Visa cap to be the way it is the conservatives should at least come out at say what they would really have done if they had won, there is so little substance its crazy

    Cable should be fought on this issue, one person allowed to do this should not be allowed in a suppposed democracy

    Force the real deatiled visa cap issues into the mainstream press and let Cable fight there, he wouldnt stand a chance amongst the voters if they understood what he has done

    • The ESSEX GIRLS
      Posted December 21, 2010 at 5:19 pm | Permalink

      It’s very disturbing that the Secretary of State for Business can be so very indiscreet with 2 total strangers. What has his mistaken belief that they were constituents got to do with it – they were unknown to him.

      Apart from the sheer hypocrisy of Mr Cable’s remarks how on earth can he be trusted with the secrets of state if he is so immature at 66 that he has to boast of being able to bring down the government when a ‘couple of bits of skirt’ show up on his doorstep!
      Clearly it’s all in the man’s mind or it wouldn’t have been said. So sad and counter-productive when we have several very able Conservatives sitting on the sidelines.

      • Stuart Fairney
        Posted December 21, 2010 at 7:13 pm | Permalink

        Lib Dems are amateurs, you do not join the lib dems with a reasonable expectation of actually being in office, thus when you actually fluke a job, you have to dump the wish-list manifesto and get serious. Lib Dems don’t like this because they can’t be all things to all men hence the hissy-fits some Lib Dems are throwing and Cable’s boasting to bimbos (or serious credible journalists like those from the Telegraph).

        • alan jutson
          Posted December 22, 2010 at 9:14 am | Permalink

          Agreed.

          They never ever expected to be in a position of having to honour their manifesto, hence it was a simple wish list that was never costed with a sensible deficit reduction in mind.

  2. alan jutson
    Posted December 21, 2010 at 2:45 pm | Permalink

    The so called cuts are not working yet then !

    Surprise, surprise given that you have already said many, many months ago, that Public Expenditure will rise over the next 5 years as per the red (if that is the colour) book.

    When will the Government learn, that to reduce a real Deficit, you have to make real cuts, and not just slow the rate of debt growth.

    What I simply do not understand, is that you have taken the flak for cuts, but not taken any real action, so you have the worst of both worlds at the moment.

    The Government needs to get a grip and get a grip fast.

    Yes it is unpleasant, but very soon the public will forget (Brown) who got us in this mess in the first place, and you will be getting the blame and flak for that as well.

    It begining to fall apart John, both home and abroad.

    • NickM
      Posted December 22, 2010 at 7:03 pm | Permalink

      Agreed, Alan Jutson. Efficiency savings are never enough and never easy, because the departments have a vested interest in preserving the status quo. The only option for real savings is to cut out a function of government entirely.

      Three spring to mind: the Climate Change act (£18 billion saving); DfID (£10 billion saving); ditching the EU (net saving £14 billion, but the total gain for the whole UK economy probably approaching £100 billion).

      Separately, the Tuition Fee proposal is self defeating. Effectively an extra layer of bureaucracy is being created (strictly, expanded) to administer the ‘new’ graduate tax-n-benefit system. Poor students will get grants, the rich don’t care, but the aspiring middle will be hit hard. An extra tax, and tax complication, from the ‘low tax’ party – crazy. All this trouble and bureaucracy for so little.

  3. Stuart Fairney
    Posted December 21, 2010 at 2:52 pm | Permalink

    Sure, if you tax something you get less of it, so populist measures to tax bankers are utterly self destructive.

    • Sally C.
      Posted December 21, 2010 at 6:01 pm | Permalink

      I disagree with you with regard to the bailed out banks, in particular Northern Rock, RBS and the HBOS part of Lloyds. There is the additional point that the banks have all benefited from unlimited supplies of cheap funding from the B of E and the interbank market. I’m sure if we were able to access funding at under 1% cost we could make a lot of money as well. Unfortunately, every day that this goes on, the more existing bubbles are supported and, potentially, new ones are created. I completely agree with grahams comment below.

  4. waramess
    Posted December 21, 2010 at 3:05 pm | Permalink

    Re-arrangement of deckchairs pretty well on target with a few annoying exceptions; sun-beds next on the list, a bit more problematic because towels need to be replaced on same beds; moving on next to parasols.

    Can’t really expect much because these things take time. Nothing achieved so far but it will all come together in a year or two.

    How many times do we all hear this sort of thing in business? Those that can, do, and those that can’t, prevaricate-and believe me they are well versed in the art of prevarication.

    What a shame. We should all by now falling in line behind the high achievers but we can’t because they are not.

    Give them a chance? Yes, that’s what they want, a chance to consolidate and to get everybody else singing from the same flawed hymn sheet.

    Well it’s not important, we’ve been here before and it’s just a case of trying to manage the economic downsizing.

    I suppose nobody has considered tax reductions? No? Of course not

  5. lifelogic
    Posted December 21, 2010 at 3:35 pm | Permalink

    I think the attack on the banks will indeed be very costly all they need is good efficient regulation to protect depositors and ensure some stability and some proper competition. The 50% tax band is a similar own goal as is the way HMRC are now often winding up sound companies up rather than accepting deferred payments, also most equality legislation and employment regulation and the EU the list is endless.

    Own goals all round. You can see from most of your blogs that most know what needs to be done but how can it be made to happen in the so called oldest democracy?

  6. Geoff not Hoon
    Posted December 21, 2010 at 3:54 pm | Permalink

    Mr. Redwood, In your Select Committee role are you in posession of any kind of budget that you can share with us as to how PSBR is going to come down. The change obviously comes either from greater income or less spending. To my simple mind neither are going to change significantly for a very long time particularly when viewed against interest costs in the figures for PFI’s and loans etc.

    Reply: the government has published figures showing it relies on extra tax revenue

    • Geoff not Hoon
      Posted December 21, 2010 at 6:52 pm | Permalink

      Thank you for your reply. I have not seen the detail you refer to but it surely is not expecting increased tax revenue to reverse or wipe out c.£20B of borrowing requirement every month?

      Reply: In year 5 they expect £174 billion more revenue than last year.

  7. Johnny Zero
    Posted December 21, 2010 at 4:36 pm | Permalink

    The proof is in the Pudding. The Pound fell to 1.55$ against the weak US Dollar today, the worst position for a Year. Inflation, here we come!!

  8. grahams
    Posted December 21, 2010 at 5:03 pm | Permalink

    Tim Congdon may in this case be taking a rather blinkered view. It seems more likely that “banking” exports have fallen because the business no longer exists, rather than being diverted elsewhere by tax or regulation. It has disappeared because it was unsustainable, much like credit-financed consumption, public spending or the house price boom. Importantly, this represents a classic example of the phantom excess capacity that you have rightly highlighted in your recent excellent analysis of monetary policy. The idea that the economy can recover and prosper by returning to where we were is a dangerous illusion.

  9. English Pensioner
    Posted December 21, 2010 at 5:03 pm | Permalink

    In spite of these figures, Vince Cable wants to spend even more if today’s papers are to be believed. He seems to believe that if he resigned it would bring down the coalition.
    Cameron should fire him before he does any further harm; I doubt if Clegg would pull out and force a fresh General Election so soon.

    • Stuart Fairney
      Posted December 21, 2010 at 7:17 pm | Permalink

      I should say he won’t with the Lib Dems at about 8% in the polls! Imagine the irony, be out of office for a hundred years then bail out after six months of seriousness for another hundred year sojourn in the wilderness.

  10. Brian Tomkinson
    Posted December 21, 2010 at 5:56 pm | Permalink

    If Cable keeps his job after his recent behaviour then your coalition will have shown that it is so weak as to be useless.

  11. Javelin
    Posted December 21, 2010 at 6:26 pm | Permalink

    Is spending EVER going to go down? I’ve said on this site before that I’ve always doubted the ability of The Conservatives to make the cuts. Their only choice is to stop the cash and FORCE the civil servants.

  12. Eoin Clarke
    Posted December 21, 2010 at 6:26 pm | Permalink

    There is a lot of reason to be pessimistic:

    The tax take was 7% lower, and retail only grew by 0.3% in Dec. If we say that winter slows construction, and that the weather damaged consumer spending, what in the face of this willa 2.5% rise in VAT do? Aside from this, inflation is stubbornly high and set to go higher, also house prices have officially entered their own double dip. Unemployment took a spike.. and next week is set to see Q3’s growth forecasts downgraded. In addition, next year sees the most strignest fiscal tightening in at least a generation, and the CBI has downgraded its growth forecasts. A Euro ciris is also on the horizon, simultaneous to which, interest rates are likely to climb. Oil and other energy sources are rapidly rising in price…

    Bar a PMI [Nov] of 58, and some reasonable Q2/Q3 figures, I do wonder if we are really out of the Danger Zone?

    • waramess
      Posted December 22, 2010 at 12:30 pm | Permalink

      Every time they talk of growth, must remember to ask from where? Construction? don’t be silly! financial services? with two of our largest still on life support!
      No growth, no recovery just politicians hoping there is such a thing as the tooth fairy

  13. JimF
    Posted December 21, 2010 at 6:42 pm | Permalink

    Yes right and our exports in manufactured goods fell massively over the past 50 years for similar reasons. It’s more an argument for removing taxes on business in general than removing bank levies etc. from those poor banks who sucked in £100 billion of public money, was it? Somehow we need to get that £100 billion back, support ALL private business, and allow ALL private business to go out of business if it goes bust, and not just non-bank business.

  14. Mark
    Posted December 21, 2010 at 7:43 pm | Permalink

    There should be no room for a Minister at War with business either. We need businesses to succeed, not having to waste time fighting an antipathetic government department.

  15. Phil Kean
    Posted December 21, 2010 at 8:09 pm | Permalink

    I have spoken out against this Coalition’s vendetta against the bankers.

    and one can only see continued contraction in the UK financial services industry.
    This was predictable, and it will prove expensive.
    However, as I am only an armchair economist, I must excuse myself for missing a fairly obvious reason to chastise the banks for some of their business decisions.

    It was obvious to quite a few of us that the economic model of some of the less prominent Euro-zone members was flawed from the very start of the currency’s launch, and that these economies would eventually fail.
    Why then are British banks so heavily exposed in this area, when it has been obvious for some time that the fantasy was completely unsustainable?

    Ok, we can all mis-time things and get them wrong. I mean, I got out of the markets some two years before the expected crash. But the sums lent to these ‘straw’ economies is mind-boggling, and surely, inexcusable?
    .

  16. norman
    Posted December 21, 2010 at 9:06 pm | Permalink

    I hate to keep saying this, as I really do want the Conservative Party to do a good job, but this is yet another day for lovers of farce.

    First we have record borrowing figures, far worse than anything Labour gave us from a government which for 6 months has been trumpeting how tough it is cutting spending. I do realise that hands are tied for at least the first year but there must be some discretionary spending, surely? I know if I suffered a financial disaster I could find spending to cut, I wouldn’t be relying on credit cards to keep the ship afloat.

    Then there is the Vince Cable affair which doesn’t need comment, everyone can see it for what it is. It’s especially jarring after recent put downs of two Conservative peers who made far less damaging statements.

    The policies that were shining lights for us, education and welfare reform, now appear to have been kicked into the long grass as the dates for any action are so far in the future as to be meaningless.

    As I said earlier, Eric Pickles seems to be doing what he promised before the election, no one else is.

  17. APL
    Posted December 21, 2010 at 10:42 pm | Permalink

    “…the problem is when a nation borrows from a bank as proverbs tells us, the borrower becomes servant to the lender, that is not soveriengty, so what is the result? The nations becomes addicted to the loans and the banks then have power over it. So you no longer have soveriegn democracy the banks have power over it …”

    “… Mr Obama has stimulated the economy with about $2 trillion, but here is the problem, he has borrowed the money, he has borrowed the money mostly from the big banks with interest attached. Then what has he done? He has turned around and given it, given it to the big banks …”

  18. Framer
    Posted December 22, 2010 at 12:05 am | Permalink

    Public sector salaries and wages, not to mention future pensions, must be cut as in Ireland – at least no new unemployed are created.

    However this government seems to be in pre-thrall to the public sector unions.

    For example, the Superannuation Bill has so been watered down as to be worthless while the union bosses are entertained in Downing Street.

    The Hutton report on public sector pensions reveals a man determined not to act in a radical fashion. But then he was a coalition appointment of someone from the Labour Party cabinet!

    If we do not act, an appalling prospect looms.

  19. Alte Fritz
    Posted December 22, 2010 at 1:56 am | Permalink

    Punitive taxes seem a nonsense. Government failure in the US and here to split retail and investment banking seems folly.

  20. Lindsay McDougall
    Posted December 22, 2010 at 2:45 am | Permalink

    If borrowing is up and taxes are up, this is a government expenditure problem. Which Minister is spending too much? Off with his/her head. If Civil Servants are responsible, off with their heads.

    Let me remind everyone what a company with a good underlying business but bad short term cash flow once did. They stopped paying bills for two months. The stress for staff dealing with suppliers and customers was extreme – but it worked.

    Also, I once worked for a UK company making good profits. Its spendthrift US parent defaulted on a loan. Within one week, the news crossed the pond and our UK bank was more or less telling us how to run our profit making business. Long term considerations didn’t matter; it was all about ensuring that we didn’t default in UK.

    Motto: if it must be done, it can be done.

  21. Gary
    Posted December 22, 2010 at 8:48 am | Permalink

    What is required is a great visionary like JJ Cowperthwaite, who as governor between 1961 and 1971 took Hong Kong from a fishing village to one of the most dynamic economies in the world. He did it by getting govt out of the way almost completely and fixing the top rate of tax at 15%. Most people paid no tax. With this bunch of marketing men and petty bureaucrats licking Brussel’s boots, we have no chance.

  22. Gawain Towler
    Posted December 22, 2010 at 3:07 pm | Permalink

    Good to see you highlighting the concerns of UKIP’s Economics spokesman Mr Redwood.

  23. Gary
    Posted December 28, 2010 at 7:01 pm | Permalink

    “If a large number of people request a referendum, it does not change the votes in the Commons.”

    Well then we had better bypass the commons then. If they are so out of sync with the wishes of the people then they serve no purpose to the people. And if we are supposed to have democracy by the people, the Commons must get out of the way.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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