Deficit reduction delayed?

 

             The statement yesterday from Mr Cameron that cutting deficits was difficult was taken by the media as a sure sign that the government will report slippage in its programme of getting the deficit down. The FT led with the view that it will now take well into the next Parliament to eliminate the stuctural deficit. I doubt they would have written that without good sources telling them.

           This is a defining moment. It is such a contrast with the stalwart recent performances of junior Treasury Ministers in the House  and on TV saying that the government intends to eliminate the structural deficit this Parliament. This, after all, was said to be the  fundamental point in the Coalition agreement. This was the priority which they just had to achieve to stabilise the economy.

             I have been arguing for 18 months two main economic points. Firstly, I urged the Coalition  to curb public spending plans  in the first two years when they needed to. Their unwillingness to do this was always going to make getting the deficit down in due course more difficult. They needed a lower cost starting point. I suggested a spending freeze in Year One, instead of the 5% increase we got. This would have created a lower base for the subsequent years, when the same percentage increases could have occurred as planned by the government.  It is always a good idea to get the bad news out of the way at the beginning of a recovery programme. You can carry people with you more easily if there is just one difficult round of changes. This would have saved £150 billion over the five years, making the borrowing amounts more sustainable. They could even have increased spending a bit more than planned in the last two years on this model.

           Secondly, they need a growth strategy, which has to centre around sorting out the banks, and cutting costs on business through regulatory and tax changes. Dealing with  Northern Rock and creating a new banking competitor in the North East will help at the margins. Sorting out RBS is more fundamental, as it is many  times the size of Northern Rock.

             The government will probably claim that much of the extra borrowing they now need to write into the accounts comes from lower growth. They always said that they would use the fiscal stabilisers. Any lower growth rate brings less revenue and more spending. They will borrow to cover that. It makes the briefing that they also plan to delay correcting the structural deficit by say three years more difficult to grasp, as that will mean more borrowing on top of the extra borrowing to take care of the cyclical disappointments.

                It probably means they are expecting more quantitative easing. The only way they can hope to keep the cost of borrowing down is to lend to themselves by money printing and through the bond merry go round.  The government sells a new bond to the private sector, who sells a second hand bond to the Bank of England. Private sector buyers of UK government paper will be concerned to read of the delays in the much advertised deficit reduction strategy.

                The truth is the deficit needs to be brought down. To do that they need to spend less. When I helped lead the turnround of a near bankrupt company we had to take strong action at the outset. We did, and it worked. We saved most of the jobs and created a good business. At the beginning we had to stop all capital expenditure, We stopped  all purchasing unless we had completely run out of the items concerned so we could destock rapidly, saving cash.  We had to cut costs everywhere. We were particularly  tough on new hiring. We could not afford any external consultants.

                The government needs to get a stronger grip on its spending. It could stop all new hirings, other than valued professionals like nurses, doctors and teachers. It could speed up its reduction of quangos and the administrative overhead. It could spend less on external consultants, as recent MOD disclosures have shown. It could cut the number of new projects until it has better control on spending levels. It could defer the new high speed railway. It could delay rises in overseas aid. It could go back to demanding  a better EU budget deal for the UK.  There are many options for cutting the rate of increase in spending.

             If we are going to have the language of public sector austerity it would be wise to have the reality as well. The government was right to say it needed to cut the deficit by cutting spending. The issue remains how.

             I forecast some time ago on this website that lower growth was likely. This I thought meant that instead of borrowing £451 billion extra over 5 years (June 2010 Plan) the government would borrow £520 billion, with the possibility it might end up borrowing more. It seems possible  from the tone of the press yesterday we will be at least at £520 billion in the Autumn Statement.

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101 Comments

  1. alexmews
    Posted November 23, 2011 at 6:59 am | Permalink

    Thanks John. Your blog has highlighted this for a long time. I have too – much to the disbelief of people I speak to who believe cuts have already happened and have been savage.

    Unfortunately the ‘cuts’ have been a PR exercise and a political posture. How now do Dave and George really cut spending when everyone believes we are already done with austerity. A spectacular leadership failure in my view.

    • Paul H
      Posted November 23, 2011 at 10:08 am | Permalink

      +1.
      The government has allowed itself to take a lot of political pain over “cuts” with no economic gain. Pure incompetence, but exactly what you might expect from an inexperienced but arrogant privileged man with an inbred sense of superiority and being right.

      • Disaffected
        Posted November 23, 2011 at 2:36 pm | Permalink

        +2.
        The UK has given £9 billion to bankrupt Greece, £7 billion to Ireland, another tranche of billions is being lined up for bankrupt Greece who is buying submarines from Germany and planes from France. It has population of 11 million with a 100,000 standing army and the Uk is throwing away tax-payers money on a bankrupt country to boost the economies of Germany and France! What did Cameron negotiate from the EU or these countries for the money- naff all.

        Welfare payments are so generous that welfare lifers rightly know they could not command such salaries even if there were plenty of jobs around. Hundreds of billions of pounds!

        Mass immigration continues where Mr Green recently commented immigrants with jobs were allowed to bring 40,000 partners with them who did not jobs. They are now looking at this! Asylum seekers and immigrants receive more than pensioners! Why not give asylum seekers a loan, university students have to pay their maintenance loans for life why not asylum seekers?

        Legal aid for persistent offenders is out of control and soft on crime Clarke continues to let them out early. It is getting to the point where we ought to consider why not cut the legal and prison costs and let them off!! Legal aid for asylum seekers who ought to be deported- why do we foot the bill?

        Wasted billions on a NHS computer, £500 million on regional fire brigade head quarters lying idle and not being used. The waste goes on and the PFI contracts continue to beat deadlines.

        2.2% increase in EU budget. EU costing the uK £44 million a day rising to £60 million a day. Good news for Patten, Mandleson, Kinnocks and co who get over inflated EU pensions when people in this country are told to work longer, pay more!! MPs continue to fail to lead by example and treat themselves differently from the public sector including pensions and taxes.

        Reply: The government does not agree that migrants receive more than pensioners.

        • uanime5
          Posted November 23, 2011 at 4:37 pm | Permalink

          “Welfare payments are so generous that welfare lifers rightly know they could not command such salaries even if there were plenty of jobs around.”

          Job Seekers Allowance is £67.50 per week or £3.510 per year. By contrast if you worked 37.5 hours per week at a job paying minimum wage you’d earn £228 per week or £11.856 per year. So unless you get £160.5o per week in other benefits you’ll make more money if you have a job.

          The point is moots as there are 2.6 million people unemployed (1 million between 18-24) and less than 500,000 jobs, so over 2 million people will be on benefits even if they want to work.

          “Why not give asylum seekers a loan, university students have to pay their maintenance loans for life why not asylum seekers?”

          Because if they don’t get a job they’ll never have to repay it. Also losing part of their pay for the repayment of a large loan will further discourage asylum seekers from working.

          “It is getting to the point where we ought to consider why not cut the legal and prison costs and let them off!!”

          Or do something that doesn’t involve prison, which costs more per night than staying in the Ritz.

          “Legal aid for asylum seekers who ought to be deported- why do we foot the bill?”

          Natural justice, human rights, and UK and EU law all agree that people should not be penalised because they could not afford legal representation.

          • Robert Pay
            Posted November 23, 2011 at 5:41 pm | Permalink

            Unamine, you have a point that benefits recipients are not the cause of overspend. For that we have to look for the massive unfunded pension for rich public sector employees for which they have made less than 10% contribution of the cost…doctors, senior civil servants and other middle ranking managerial posts. Plus all the uneeded senior ranks in the armed forces as JR has outlined…

            Mr Stallard below gives another reason…

          • Richard
            Posted November 23, 2011 at 8:20 pm | Permalink

            You need to allow for the Government paying your rent as well, on top of your benefit figures.

          • Disaffected
            Posted November 24, 2011 at 10:20 am | Permalink

            Uanime5, Your post contains much drivel.
            There are 370,000 households where no one since the age of 16yrs has ever worked. Households not people. Bishops wrote a joint letter this week to protest that capping welfare at £26,000 (net) per family was likely to cause child poverty. No family should receive this amount of welfare, they could not attract the same in salaries.

            Perhaps I should state that I believe everyone deserves a helping hand when made unemployed on a temporary basis or unable to work through being disabled etc, this does not extend to people who make welfare their career.

          • McTodd
            Posted November 27, 2011 at 11:31 pm | Permalink

            uanime5
            Posted November 23, 2011 at 4:37 pm | Permalink
            Job Seekers Allowance is £67.50 per week or £3.510 per year. By contrast if you worked 37.5 hours per week at a job paying minimum wage you’d earn £228 per week or £11.856 per year. So unless you get £160.5o per week in other benefits you’ll make more money if you have a job.
            ————————————————–
            You forget that if you’re unemployed you also receive housing benefit and are exempt from council tax. In London, an unemployed person can easily ‘earn’ that £160.50 per week you quote in benefits by having their rent paid through housing benefit, and ‘earn’ even more by having their council tax paid/exempted as well.

        • Disaffected
          Posted November 23, 2011 at 6:47 pm | Permalink

          They do not agree that mass immigration is continuing but the facts say otherwise. Asylum seekers are not allowed to work for six months or while their application is being processed. The state houses and pays for them during this process unless, they go missing like 140,000 already have.

          • Rick
            Posted November 27, 2011 at 10:11 pm | Permalink

            Richard, the average housing benfit payment is £84.

  2. Mike Stallard
    Posted November 23, 2011 at 7:07 am | Permalink

    “The truth is the deficit needs to be brought down. To do that they need to spend less.”

    Ok we all know that. You have been saying that for years now. You are totally correct too.
    So why isn’t it happening?

    First of all, the government needs to be re-elected. In our little market town, there is to be a huge new multi million pound scheme to bring in some new Council Offices. When I asked a local councillor (whom I very much respect) about this, he said, “I don’t see why you are objecting. It brings money into the town.” Our local Comprehensive has just had £25,000,000 splashed on it which makes for some lovely photo ops.

    What is true in little is also true in large. Like High Speed Rail. Like the Olympic Stadia. Like the man who, with £70 a week expenses off the taxes to run his car. Like the people living in central London on the dole, paid for out of the taxes. Like the lost generation on the dole.

    And then there are the Charities and Lobbyists. Hard to resist a free lunch – eh! Or a fact finding mission to Bali?

    And then there is just laziness. Why bother making trouble? Enjoy.

    And then there are the civil Servants who have derailed the free School Movement – and it is all done in the best possible taste! Now they are caring for the vulnerable, by the way, in case you asked.

    It all adds up to a drift into bankruptcy.

  3. lifelogic
    Posted November 23, 2011 at 7:32 am | Permalink

    I agree fully with what you say “If we are going to have the language of public sector austerity it would be wise to have the reality as well.”

    Indeed we would be far better with the reality of big cuts and not the language rather than, as we clearly have, the opposite.

    Of course growth is weak, they have made it weak with the large state, 50% taxes and no confidence in Cameron, no cuts, high green energy costs, high inflation, now sensible banking, no real employment and other regulations improvements and perhaps Labour soon back in power.

    • lifelogic
      Posted November 23, 2011 at 10:33 am | Permalink

      Listening to the anti-business secretary Cable this morning was as depressing as usual this time on the employment regulations. “We do not want people to be in fear of loosing their jobs” he said. Well they already are anyway and one of the main reasons is that companies cannot get rid of people who are not pulling their weight. Yes people do need sometimes to be in fear of losing their jobs if they are not performing – otherwise the company will close down and all the staff will loose their jobs – all to be done abroad.

      The best way to preserve jobs is easy hire and fire then new jobs will be available should they need one and set a pro business agenda (just the opposite of what he is doing). Keeping bad performers is a sure way to disaster Libdem style. Cable seems to think that employers have money trees and are part of social services – I would not want to put him in charge of a sweet kiosk even for a day.

      • uanime5
        Posted November 23, 2011 at 5:05 pm | Permalink

        “Yes people do need sometimes to be in fear of losing their jobs if they are not performing – otherwise the company will close down and all the staff will loose their jobs – all to be done abroad.”

        Actually most companies close down and relocate abroad because it reduces overheads (mainly because they can pay their employees much less). It wasn’t poor performance that caused a large proportion of UK manufacturing to go to India and China it was because the Indians and Chinese could be paid much less.

        “The best way to preserve jobs is easy hire and fire then new jobs will be available should they need one”

        Actually this policy has caused the UK to lose a large number of jobs to continental Europe. Simply put if a multinational company needs to reduce its workforce it will fire people where it is easiest and cheapest. As the UK has weaker dismissal laws than France and Germany if 1,000 people need to be fired between these 3 countries all 1,000 jobs will all be in the UK because it’s easier to fire people in the UK. Making it harder to fire people would cause these job cuts to be more evenly distributed.

        Also the current law allows temporary jobs to be created; whereby an employee is hired for a set amount of time, such as 3 months, and at the end of the contact they are dismissed at no cost to the employer. Funny that the Conservatives never mention this.

        “Cable seems to think that employers have money trees and are part of social services”

        Judging by their salaries, perks, and pensions some CEOs believe the same thing.

  4. alan jutson
    Posted November 23, 2011 at 7:52 am | Permalink

    Yes John 18 months wasted, as both yourself, myself, and many on this blog have been reporting during that period.

    Cameron has calculated badly. he has pussy footed about when he needed to be strong.

    Yes of course you start with heavy cuts right at the start, reason.

    It sends the message that you are serious, then you follow up with supervision to make sure that what you have decided will happen, and does happen, and take corrective action where it needs to be done, to enforce the original message.
    Only when the hard yards have been completed, and progress is being made can you even think of any future slight relaxation.

    A change of Policy takes time to work through, Cameron has now lost over 25% of his time, another 25% of his time will be further wasted trying to reset the agenda.

    Do not hold your breath for a Conservative success at the next election when we will surely be right in the middle of some very neccessary, and serious cost cutting.

    Perhaps Wavy Dave is learning that being good at PR is not a means to an end in itself, you actually have to have policies that do the job, and people around you who are capable of enforcing that “doing of the job”.

    I live in hope that you may get a telephone call, but again, will not hold my breath.

    • lifelogic
      Posted November 23, 2011 at 3:55 pm | Permalink

      As you say “Cameron has calculated badly. he has pussy footed about when he needed to be strong.”

      His first mistake was loosing the election with his soft left agenda against the hopeless Brown – even a stuffed bear could have won.

    • martin sewell
      Posted November 23, 2011 at 7:50 pm | Permalink

      I have a son in marketing who says that the secret of success is ” under promise – over deliver”. Didn’t DC learn that at PR school?

  5. Pete the Bike
    Posted November 23, 2011 at 8:08 am | Permalink

    There is only one thing the coalition is going to achieve and that is a complete failure to accomplish anything. Total failure to cut spending, deal with the EU, cut regulation, reduce business costs, prepare for energy shortages, reduce involvement in illegal wars.
    A combination of having to rely on Lib Dems, weak leadership and lefty policies will mean Cameron will not be remembered kindly by history.

    • lifelogic
      Posted November 23, 2011 at 4:03 pm | Permalink

      He will be remembers as someone who pretended to be a soft right Euro-sceptic to win the leadership then kicked his supporters and voters in the teeth and turned out to be a green big state, socialist, Europhile but who was good at debating that black was white, giving taxpayers money away and silly PR stunts. Such as happiness indexes, royal succession, PV bling, green deals ……………………..

  6. Andrew Duffin
    Posted November 23, 2011 at 8:40 am | Permalink

    Increases, increases, always increases.

    If we keep increasing spending, of course we are never going to get rid of the deficit.

    Anyone (except, apparently, politicians – with honourable exceptions such as our host) can see that if you need to borrow to pay for the housekeeping, you’re heading for a disaster.

    We need cuts – real actual cuts. However many umpty-squillions the state is spending this year, we need it to spend 90% of that next year, and 90% of THAT the year after, and so on until we are living within our means.

    Actual numerical reductions, not just reductions in the planned rate of increase, for heaven’s sake.

    When and how did a reduction in the planned rate of increase become regarded as a cut? Is this due to Labour’s spin culture, or is it the fault of comprehensive education, that people can’t distinguish between a value and its derivative?

    I have no sympathy for the government: if you don’t reduce your outgoings, of course you don’t pay off your debts.

  7. Posted November 23, 2011 at 8:54 am | Permalink

    The Government should start seriously cutting the Quangos, consultants to various government departments and the like.
    Apart from this being a good thing, it would be very hard for the opposition to criticise as most of the public would be glad to get rid of many of them.
    It should also look at the huge administrative overhead in the NHS, identify those NHS trusts which are the most efficient and impose something like similar Patient/Doctor/Nurse/Administrator ratios on rest – we have pupil teacher ratios, why not patient/nurse ratios in general hospitals?
    Throughout government service it is the Administrative overhead which costs big money, and which is the most difficult to cut, and the impression that I get is that there is little willingness to tackle it by the ministers involved. The mandarins won’t do anything, their whole prestige depends on the number and grades of staff and the size of their department!

    • APL
      Posted November 23, 2011 at 3:12 pm | Permalink

      English Pensioner: “The Government should start seriously cutting the Quangos, ”

      Well we all thought Pickles was going to do that, but …..

  8. Brian Tomkinson
    Posted November 23, 2011 at 8:55 am | Permalink

    This site has highlighted the failure of this government to deal adequately with deficit reduction for at least twelve months. I became alarmed when our host brought to our attention in the early months of this government that the public debt would increase by at least 50% over the term of this parliament. What is most annoying is that they have created an impression that they were cutting savagely when their whole failing strategy was based on reducing the structural deficit by increased taxation. Now that they are conceding that their plans are not working it suggests that cutting spending was not the right approach; but the fact is that they have been spending more not less. Since senior ministers including the PM talk about reducing the debt (which they are in fact increasing) rather than the deficit, it should not surprise us that they clearly are not competent to deal with this critical situation. It can only be a matter of time before market sentiment turns against them too. They have wasted the opportunity to really deal with the economic crisis and seem now to be repeating the same sort of nonsense we saw from Labour. Their only realistic claim is that their opponents performance would be even worse.

  9. Steve Cox
    Posted November 23, 2011 at 9:08 am | Permalink

    It’s been clear for months that the government could not achieve its deficit reduction targets. If they stopped chucking money like confetti at overseas dictators, the EU and the IMF it might help a bit but no, Mr. Cameron insists on acting as if Britain is prospering. This is yet another example of his notorious doublethink. When addressing his peers overseas or on major international institutions, we have plenty of money to spare, 5 billion here, 10 billion there, no problem, just ask and you shall receive. But when he addresses the peons back home it’s all doom and gloom, tighten your belts lads, I can’t even afford to renew my Bullindon Club membership this year.

    So the plan now is to continue printing money to finance the government’s never-ending appetite, which will further depress Sterling and keep inflation high and probably rising. Is there any chance that the bond markets can make a run on gilts that might jolt the government and BoE into their senses? Can the government simply print everything it needs to borrow and spend with impunity for year after year? It sounds like the road to Weimar Britain to me.

  10. Nick
    Posted November 23, 2011 at 9:14 am | Permalink

    So how is St Vince the Befuddled coming along with his regulation bonfire.

    Last I heard he had managed to help Beglium Chocolate makers by reducing their regulatory burden.

    No help for the Brits so far.

    • lifelogic
      Posted November 23, 2011 at 11:56 pm | Permalink

      Liquor chocolates was it not – that will certainly make a big difference – but what about firing staff who are not doing their jobs without being sued anything in that directions clearly not.

      • Bazman
        Posted November 24, 2011 at 6:25 pm | Permalink

        As if sacking people is going to create one single job. Germany has very strict laws on this, but also has lower unemployment. When labour made the employment laws tighter rates of employment went up. We need customers not more easy ways to sack people in a race to the bottom that will not apply to many well off peo0le. Lowering of the minimum wage whilst scrounging bosses bleat about the 50% tax rate. At least they have massive pay rises and have had for a number of years.
        As you do not work in the normal sense lifelogic. I presume you have a private income. Do not put harsh laws on the people who do the work and expect them to do more. It makes anyone want to do less.

  11. javelin
    Posted November 23, 2011 at 9:21 am | Permalink

    Politicians are being “passive aggressive” – and not actually carrying out their responsibilities to cut the deficit.

  12. NickW
    Posted November 23, 2011 at 9:26 am | Permalink

    Government is growing and public expenditure is rising because Government is doing more. Everything (nearly) that the Government does restricts growth.

    The ONLY way to change the growth dynamic is de-regulation. Having less and less to do will change the growth of the public sector to shrinkage, and take the ball and chain off private industry.
    How can managers be incentivised throughout the public sector to shrink their expenditure?

    Even more scandalous climate change e mails have been released which confirm once again that the Green Lobby are simply religious nutcases who have seized the ear of legislators because it suits their desire to increase Government income with (so far) no great electoral pain.

    We need an energy Minister who is committed to a sensible policy which provides energy security at the lowest cost. Huhne has to go.
    We need cheap energy for homes and industry. The main cause of my own cutting back in discretionary spending is the huge rises in my energy bills. My income is more or less fixed, and the extra money for energy has to come from somewhere.

    For some, with huge pensions from industry and the public sector, the old age pension and winter fuel allowance is pocket money. Are their incentives available to the Government to encourage people to give up benefits which are not needed?

    One last point. If we manage to keep the shrinkage in our GDP close to zero or even manage low growth, we will be doing really well. We need to compare our growth to other countries embarking on a heavy deficit reduction programme, such as Greece and Ireland.

    Our growth in the past was based on borrowing; it was never real, and it is foolish to think that it is achievable under the current circumstances.

    • NickW
      Posted November 23, 2011 at 2:06 pm | Permalink

      Here is an idea;

      Allow any member of the public to commute any unwanted benefits, (old age pension, winter fuel allowance, carer’s allowance etc) into a (long term) UK recovery Bond, which pays (say) 3.5%, free of tax and exempt from inheritance tax.

      We are probably going to have trouble funding our borrowing in the open market, ( given that Germany has just had a failed ten year Bond auction), so establishing incentives for UK Citizens to become buyers is probably going to be essential.

    • Mike Stallard
      Posted November 23, 2011 at 4:43 pm | Permalink

      From what I hear you are up against the EU in all its might. You are up against the Trades Unions who pay the bills for Labour. Then there is the world wide Green-Ecological-AGW lobby. The LibDems in the Cabinet, I read, are determined to upset none of these three massive forces.
      Meanwhile, the cabinet and its inner circle are becoming increasingly isolated from their own backbenchers and, of course, from the voters.
      Charming dinner parties will not be enough to deal with this “disconnect”.

    • uanime5
      Posted November 23, 2011 at 6:10 pm | Permalink

      What areas of the public sector do you believe should be de-regulated and why?

      Also can you explain why almost every science has confirmed that climate change is happening; even when they have no vested interests, such as the American scientists who repeatedly told George W Bush that climate change was real?

      • Richard
        Posted November 23, 2011 at 8:22 pm | Permalink

        Is this the climate change that was previously called global warming?

      • Jon Burgess
        Posted November 23, 2011 at 10:32 pm | Permalink

        ‘Climate change is happening’

        well of course it is; it always has and it always will. Before humans influenced climate it was colder in the past and it was warmer in the past.

        It is the causes of changes in climate that are so difficult to prove, like the extent to which increases in CO2 levels in the atmosphere attributable to human activity are increasing global temperatures.

        Looking at very long term temperature variations it seems far more likely that global temperatures will reduce rather than increase.

        But don’t take my word for it – see what Ian Plimer has to say on the subject.

        • Bazman
          Posted November 24, 2011 at 7:39 pm | Permalink

          Ian Plimer is a director of four mining companies. Of course he would say this in no way effects his views, but there are accusations his work lacks science and he accepts any factoid that supports his conclusion and rejects any evidence that contradicts his conclusion.
          You can wheel out as many crackpot scientists as you like to prove what you already believe.

          • Jon Burgess
            Posted November 25, 2011 at 10:57 pm | Permalink

            He is a geologist, after all, so no doubt this is why he’s involved in mining. Why should being a director of mining companies influence his ideas on climate?

            Is he a crackpot just because he doesn’t agree with you, then?

      • John Maynard
        Posted November 24, 2011 at 12:19 pm | Permalink

        uanime5

        You often make very valid points, but on “climate change” you are completely wrong.

        I write as an earth scientist (geologist, geophysicist).
        The “climate” of the earth is a very long and complex story, with astonishing extremes through geological time.

        The “new science of climatology” is based on a miniscule data set from a short time period, a lot of primitive modelling, and total disregard for many of the geochemical and geophysical influences.

        This “science” has the same level of credibility as some of the new exotic “social sciences”.

        It is notable that those who consider the science “settled” are invariably non-scientists (like the whole BBC cadre), or ex-scientist, members of the establishment.

        The several dozen earth-scientists that I know, are sceptic to a man/woman, and NOBODY believes “the science is settled”.

        • Bazman
          Posted November 24, 2011 at 6:47 pm | Permalink

          The fact that an artificial self sustaining eco system has never been created is worrying, except for right wing religious people who believe man or individuals have no sway on their own fate. Man has free will only when it come to getting a job they believe.

      • Bazman
        Posted November 24, 2011 at 6:42 pm | Permalink

        So the people who actually use the services pay and in the misguided belief that private is more efficient. Profits being the sign of efficiency. Their enthusiasm for toll roads is strangely less.

  13. oldtimer
    Posted November 23, 2011 at 9:31 am | Permalink

    It looks as though this coalition goverment has muffed its opportunities to tackle the deficit/debt problems in a way that actually works rather than kick the can down the road. Presumably that explains the current blame game – namely our lack of growth is the fault of the EZ for failing to print enough money. Mr Cameron evidently got short shrift on that idea when he visited Mrs Merkel the other day. She believes in sound money; he believes in weak money.

  14. MajorFrustration
    Posted November 23, 2011 at 9:33 am | Permalink

    Like you was involved in a number of workouts and as you say the first rule – of many – is to get the pain over early on – cut the costs, take the hits on the balance sheet and provide firm corporate/commercial leadership.
    All of the above are missing from the present government and if Mathew Parris in the Saturday Times suggests a hint of public dispare at the way things are being handled (or not) then the writing is really on the wall.

  15. backofanenvelope
    Posted November 23, 2011 at 9:45 am | Permalink

    Apparently George Osborne visited the MoD a few months ago to discuss “the cuts”. He was interested to discover than no civil servants in the Main Building were to be cut. Exactly the same thing happened about 30 years ago when lots of one star officers were made redundant. No one on the 6th floor of the Main Bldg were given the push. Perhaps, Mr Redwood, you could ask how many empty offices there are on the 6th floor – where the Manderinate live.

    • John Maynard
      Posted November 24, 2011 at 12:26 pm | Permalink

      Perhaps that’s what you get when the Defence Minister is Dr Fox – darling of the far right and military groupie par excellence !

      Thank God we now have Hammond – much more chance of some rationality and ruthless pruning, much less chance for the special interest pleading.

  16. Bob
    Posted November 23, 2011 at 9:50 am | Permalink

    - HS2 should be cancelled, and the money saved should be ploughed into improvements and better integration of existing transport infrastructure.

    - Anyone fit to work and receiving benefits should report for work street sweeping every morning. Based on our unemployment numbers we should have the cleanest streets in the world (apart from Switzerland and Singapore maybe).

    - VAT on fuel duty should be reduced, and eventually phased out. It’s immoral.

    Interesting to hear that income from fuel tax is declining now that prices are at record highs! Should be a lesson then for young Mr. Osborne, as costs increase, so demand will decrease.

    - The TV licence fee should be subject to corporation tax.
    Chris Patten really needs to get to grips with the blatant “lefty” bias exhibited by the so called impartial BBC. Just have a look at the John Sopel interview with Nigel Farage last week, three against one (and he still wiped the floor with them!).

    -Reinstate school discipline. It will cost nothing, just say the word.
    Teachers will then be free to teach instead of spending their time just trying to control the classroom. We might even be able to produce a generation of people who don’t leave school thinking that the world owes them a living.

    I could go on but why bother, nothing that needs to be done will be done under a Lib Dem led coalition government.

    • Paul H
      Posted November 23, 2011 at 11:23 am | Permalink

      Not to mention idiotically throwing taxpayers money at the housing market in an attempt to keep it over-inflated. Complete idiots.

      • APL
        Posted November 23, 2011 at 3:31 pm | Permalink

        Paul H: ” throwing taxpayers money at the housing market in an attempt to keep it over-inflated.”

        Have a heart Paul, poor MPs have their property portfolios to think of, generously provided via the recent HOC expenses ‘bubble’.

        At the very least tax payers should prop the prices up until the poor unfortunate fellows can unload their tax payer funded assets onto the taxpayer.

    • uanime5
      Posted November 23, 2011 at 6:18 pm | Permalink

      “Anyone fit to work and receiving benefits should report for work street sweeping every morning.”

      So your plan to reduce unemployment is to fire all the people who sweep the streets and replace them with the unemployed. Won’t this just lead to more unemployment?

      “The TV licence fee should be subject to corporation tax.”

      As long as you don’t mine a reduction in quality of the programs on the BBC.

      “Reinstate school discipline.”

      Do you mean corporal punishment?

      Given the number of dysfunctional homes children will continue to be poorly behaved, so the only way to fix this is through mass expulsions. Though mass expulsions just leads to a large number of illiterate and innumerate young people who are unlikely to ever get a job.

      • Bob
        Posted November 24, 2011 at 1:40 pm | Permalink

        @uanime5

        “Anyone fit to work and receiving benefits should report for work street sweeping every morning.”
        So your plan to reduce unemployment is to fire all the people who sweep the streets and replace them with the unemployed. Won’t this just lead to more unemployment?

        Reply: No, there are plenty of streets, dirty buses and trains and other public areas that need cleaning.

        “The TV licence fee should be subject to corporation tax.”
        As long as you don’t mine a reduction in quality of the programs on the BBC.

        Reply: LOL

        “Reinstate school discipline.”
        Do you mean corporal punishment?
        Reply: Not necessarily. For example if a pupil refuses to stop using their mobile phone in a lesson, then the phone should be confiscated, better still, ban such items (ipods, games consoles etc.) from school altogether.

        Given the number of dysfunctional homes children will continue to be poorly behaved, so the only way to fix this is through mass expulsions. Though mass expulsions just leads to a large number of illiterate and innumerate young people who are unlikely to ever get a job.
        Reply “..a large number of illiterate and innumerate young people who are unlikely to ever get a job.”?? That seems to describe the situation we now have.

  17. lojolondon
    Posted November 23, 2011 at 9:56 am | Permalink

    On a totally unrelated topic, John, Climategate 2 is happening – 5,000 emails were released yesterday. (refers to a site which says they have not yet verified these emails-ed)

    If one dollar can save a child and we are spending 37 Trillion dollars on ‘neutralising greenhouse gases’ then we have decided AGW is more important than millions of lives. If the global warming theory is false, and we have been deliberately mislead, then the perpetrators should be locked up for manslaughter!!
    (etc-ed)

    If anyone has any doubt about the BBC’s total lack of impartiality, see this article and note the news has been kept off the front page!

    http://www.bbc.co.uk/news/science-environment-15846886#dna-comments

  18. waramess
    Posted November 23, 2011 at 10:04 am | Permalink

    Your previous post set out quite well how the government failed to get a grip on it’s mandate. Now their vision is to spend their way out of debt. Just the same as Gordon Brown.
    50 percent of GDP now, at what point does the government collapse because the private sector becomes too small to support it?

  19. Paul H
    Posted November 23, 2011 at 10:06 am | Permalink

    How long before the bond market decides the UK is not a “safe haven”? At its current rate of progress through the Eurozone it will be looking for new targets.

    • Shade
      Posted November 23, 2011 at 11:35 am | Permalink

      Ah! that could be Dave’s opportunity to put through real cuts – forced on him by the market.

  20. The Realist
    Posted November 23, 2011 at 10:15 am | Permalink

    Within 18 months we will most likely have a Sterling crisis as this Government has not grasped the bull by the horns and tackled a debt mountain, which will put us alongside Japan as having the largest debt/capita in the world! The Government has wasted 18 months in not aggressively reducing expenditure. We should have followed Ireland and cut all Government salaries by 20-30% – as a starter for 10. Just freezing salaries which have risen by c. 2.5% in the public sector is simply not good enough. There was a huge and unsustainable expansion in Public sector employment ( 800/-+) under the last administration and that has to be reversed. I have for 18 months now, warned quite clearly that the Government’s policy was too risky in that it relied predominently on increased tax revenues to reduce the deficit. The only positive has been our lower interest rate costs as a result of our perceived ‘safe haven’ status, this will be lost when the markets are less fixated on the break-up of the Eurozone and see that we will miss our initial plan by some considerable distance. Growth in itself will not get us out, the black economy will grow as people are sick of the confiscatory nature of the high levels of taxation, and on the other hand are not seeing serious cuts in spending, regulation etc. An opportunity has been missed and time is running out, we have been in a phoney period of austerity which is about to get an aweful lot worse! It pains me to say that we have not grasped the metal in anyway at all.

  21. javelin
    Posted November 23, 2011 at 10:37 am | Permalink

    Der Spiegel reports that Germany’s fiscal management is rubbish too. Ms Merkel may like to pretend it is her moral compass that is preventing her from bailing out the PIIGS – but the reality is that there “is no more money left” in Germany too.

    PS The FED has also ruled out backing the IMF bailout of the EZ – as they have no money either.

    REALITY IS ABOUT TO BITE.

    http://www.spiegel.de/international/europe/0,1518,799059,00.html

    “The German government likes to pride itself on its solid finances and claim the country is a safe haven for investors. But Germany’s budget management is not nearly as exemplary as it would have people believe, and the national debt is way over the EU’s limit. In some respects, Italy’s finances are in much better shape.”

    • Chris
      Posted November 23, 2011 at 12:51 pm | Permalink

      See Der Spiegel this morning which has further bad news:
      “Europe short on cash as bond fears deepen”
      http://www.spiegel.de/international/europe/0,1518,799397,00.html
      “The euro zone is stuck in a double crisis. On the one hand, investors are no longer interested in purchasing sovereign bonds. On the other, banks with such bonds on their books are being treated with extreme caution. A massive financial crisis threatens — and it could be worse than the last.”

  22. Shade
    Posted November 23, 2011 at 11:23 am | Permalink

    Growth, growth, growth – this is the mantra of the era. If you take out asset inflation and factor in bank support etc, it is questionable just how much real growth there has been for the last 20 years or so. Similarly in China, that miracle of our times, the 9% reported growth level would probably be near zero if you took out the massive white elephant investment that will probably eventually prove illusory .

    I am all for trying measures to stimulate the economy, such as reducing taxes and loosening up labour laws to give the unemployed some chance of getting a job (not going to happen), but the focus on the growth issue is deflecting attention from the real problem which is spending. I note that JR concedes that the government is not trying to do anything more than “cutting the rate of increase in spending” or eliminating the “structural deficit” (and that can of course be all things to all men).

    Like John, I too have had some experience of pulling businesses out of near bankruptcy and returning them to financial health. I didn’t do it by “cutting the rate of increase in spending”, I did it mainly by cutting spending absolutely, and changing outmoded practises. Anything that didn’t need to be done or that could be done better elsewhere was eliminated; pay wasn’t frozen, it was cut; headcount was significantly reduced but better people were also hired at the same time. It was extremely tough and I would have had a much easier life by giving way to the many objectors – but you don’t usually get very far with appeasement.

    Ah, the great Keynesians will say, if you cut back payroll and spending, there will be no growth and living standards will fall. Well that’s probably correct – for a while, but we never earned the living we were paying ourselves over the last decade and we will have to adjust for that before we can go forward again. In the 60s and 70s, jobs were artificially kept in existence and the economy failed. There had to be the realism of the 80s to get things moving again. It is unfortunate that the lessons from 40 years ago have been forgotten.

    Toodle pip

    • Mike Stallard
      Posted November 23, 2011 at 5:00 pm | Permalink

      “you don’t usually get very far with appeasement.”

      Oh yes you do!

  23. Electro-Kevin
    Posted November 23, 2011 at 11:27 am | Permalink

    I note from a reason chart that the the overwhelming amount of Govt spending goes on welfare – it dwarfs the EU and it even dwarfs the NHS (I would estimate by a factor of 200%.)

    Displacing UK workers with foreign labour must have added immeasurably to this bill. Instead of getting it down it’s becoming worse under the Coalition.

    It seems to me that we have reached the situation where high street chains are effectively being subsidised by the taxpayer to take on cheap labour. They remain able (despite 5% inflation) to offer wages below 50% of national average and because those wages afford a standard of living only level with (or even below) welfare they effectively exclude indiginous workers.

    You might argue that welfare is too generous (in some cases it is) but what would you do in the same circumstances ? Especially if getting fired (often for some dubious reason) or taking temporary work actually meant it cost you more in lost benefits than you could ever earn.

    Wouldn’t it be better for the taxpayer to raise the minimum wage, restrict immigration and get tougher (fairer) on benefits ?

    If all we’re left with is a useless rump of uneducated workers then the urgency to raise standards will become paramount. However, it’s perfectly numerate and literate people now finding themselves out of work. However, if we do find that our people aren’t up to the task then we have to accept that Britain is not up to the task either. I don’t believe this for one minute. I can see so much potential to improve things – not least excessive expenditure and the motivation of our youth.

    Building a city the size of Birmingham to house benefit dependants every five years so that we can buy an affordable and well served Americano is not the solution.

    • lojolondon
      Posted November 23, 2011 at 5:34 pm | Permalink

      I agree with 99% of what you say, but the last sentence – if people are serving Americano then they are working, paying tax, joining the system. Not great, but not too bad. The worst is where people arrive, cannot speak English, do nothing but claim for the rest of their lives. Unacceptable.

    • uanime5
      Posted November 23, 2011 at 6:27 pm | Permalink

      I agree that minimum wage must represent a living wage or people will choose to remain on benefits. Requiring minimum wage to be 60% of the average wage would soon fix this.

      • Bob
        Posted November 24, 2011 at 2:55 pm | Permalink

        How would that operate in practice?
        Surely, the increase on minimum wage itself would increase the average, and so you would need to increase the minimum wage continuously as the average kept increasing until everyone was paid the same.

  24. Caterpillar
    Posted November 23, 2011 at 11:33 am | Permalink

    Well on the ‘positive’ side the Eurozone crisis may prop up the GBP for a little longer, giving a little bit of downward pressure on prices … if only the BoE would stop its QE/ZIRP policy.

    Anyway all through the simple answer of cutting public spending, controlling inflation, allowing resources to reallocate and encouraging savings (which flows through to invesment) has been ignored and replaced by ‘unconventional monetary policy’. I wonder how the word ‘unconventional’ will be defined in future dictionaries.

  25. Posted November 23, 2011 at 11:44 am | Permalink

    Cutting the deficit in the way you say is perfectly feasible.

    Achieving growth should also be possible in the manner you say.

    However with our electricity supplies reducing in quantity; set to rise yet another 60% in price; to be drastically cut in 2015 when new EU emission controls close much of our coal fired electricity generators; and a climate change Act which requires the long term closure of up to 80% of our power generation equipment, the arithmetic suggests not only that growthn is impossible but that it is intended we spend decades recedin g to virtually 3rd world standard of living.

    Were the market freedom and end of regulation to include the electricity industry the free market would certainly build large numbers of nuclear reactors and we would be able to achieve at least Chinese levels of growth.

    With any decent level of growth, even slightly less than the world average of 4.8%, the deficit ceases to be a problem.

    Personally I would add a few wrinkles like X-Prizes to ensure our growth well exceeds the Chinese level.

    No significant politician in any of the 3 parties disputes in any way that this would work. The only possible conclusion is that none of them want it to work because then the people would no longer be, to quote Mencken, “cowed and eager to be led to safety” by those in charge.

    • uanime5
      Posted November 23, 2011 at 6:32 pm | Permalink

      It’s not just EU emissions laws closing these power plants. Some of them are 15 years old, so they’re reaching the end of their industrial life.

      New power plants needed to be built back when Tony Blair was in power. Unfortunately nimbies and other pressure groups prevented this. By the next election it’s predicted we will have lost 8% of our power generating capabilities.

  26. Posted November 23, 2011 at 11:47 am | Permalink

    Agreed,

    with some provisos/suggestions.

    Where initial financial plans are shown to be deeply flawed in that they will not deliver the projected savings, in some cases time needs to be allowed to find alternatives. All involved in discusssing such adjustments must understand that there should be no compromise on the requirement to balance the books but there should still be proper consultation both to avoid seriously costly mistakes and prevent this government becoming hated by those who share its aims but can’t stand its ignorance.

    While I agree with you your comments regarding economic growth John, there is an element of the discussion missing here. What’s missing is that this government does not understand its own espoused policy regarding the big society and it does not understand the new opportunities for personal freedom that communication technology brings. It is therefore a very long way from understanding how either of these things can be effectively harnessed to energise robust economic growth.

    • Posted November 23, 2011 at 11:49 am | Permalink

      Oh yes and for goodness sake please, someone, stop this ludicrous fantasy in education policy which is clearly going to be disatrous for education, is very obviously ludicrously economically inefficient and will cost more and more to correct the longer it is allowed to go on.

  27. Iain Gill
    Posted November 23, 2011 at 11:51 am | Permalink

    and as we all know the “immigration reduction delayed” announcement must be coming along soon too as there is no way they can hit their promises with the lack of action in evidence

  28. javelin
    Posted November 23, 2011 at 12:12 pm | Permalink

    With Coalition government’s deficit reduction plan doomed to failure, Tullett Prebon’s Tim Morgan says tax cuts are the only policy left for the Chancellor and he must take it.

    I recommend it as a read – It says that tax cuts are all that is left – because the CURRENT spend and borrow has failed. Indeed whilst the Government has continued to spend (I believe to keep Labour out the argument) – they can now show that they have spent and spending has failed.

    http://ftalphaville.ft.com/blog/2011/11/23/759531/what-if-the-uk-misses-its-deficit-reduction-target/

    • uanime5
      Posted November 23, 2011 at 6:40 pm | Permalink

      The problems with tax cuts is that you have to borrow more to make up for the lost revenue.

      Also this article doesn’t prescribe tax cuts; it calls for public sector job cuts, the public sector to pay more for their pensions, and benefit cuts. I also feel that their claim that front line staff won’t be effected is dubious.

      • Bob
        Posted November 24, 2011 at 2:58 pm | Permalink

        No. A rate cut will usually result in more tax revenue.

  29. ian wragg
    Posted November 23, 2011 at 12:28 pm | Permalink

    Wait till the bond markets are bored with Europe. Savage cuts will be foisted on the country as interest rates rise (as they are currently doing on inflation proof gilts). Current account spending will be slashed to service the debt and then watch the public sector squeal.

  30. Damien
    Posted November 23, 2011 at 12:39 pm | Permalink

    The publication of ‘A Housing Strategy for England’ includes plans to rejuvenate the right to buy scheme so that 100,000 homes may be sold to aspiring homeowners and the capital raised will be used to build another 100,000 new social housing units at no extra cost to the taxpayers. This scheme will be more successful if it also allows housing association tenants to participate also.

    Eric Pickles published a document showing the location of sites of land and property owned by local authorities many of them vacant and under-utilised. Those that are empty or derelict are a blight on the local community and a waste of public assets. Pickles should consider publishing a strategy to assist the local authorities and other public bodies so that they can effectively dispose of these properties and be able to recycle the capital back into the financing of their core activity.

    London’s westend is one of the bright spots in this difficult economic climate. There exists a thriving 24/7 local economy drawing in tourists and locals alike. The Crown Estate has been busy regenerating its properties around Regent Street, adding to the amenity of the area including a new 5* star hotel for the area. Contrast that with the virtual blackout of Whitehall after 6 pm where prime property owned by the government stands empty for 18 out of every 24 hours. It is really time now for the Mayor Of London to work with central government and bring forth a strategy similar to that being undertaken by the Crown Estate.

    • uanime5
      Posted November 23, 2011 at 6:43 pm | Permalink

      So they’re going to finance building 100,000 homes by selling 100,000 homes. Will this include vacant homes or are only homes currently in use going to be sold?

      Also how will they ensure that the new 100,000 homes are in a location where people will want to live? It would be counter productive if these new homes became vacant or under-utilised.

  31. David
    Posted November 23, 2011 at 12:44 pm | Permalink

    A few more ideas:

    1. Delete the DTI
    2. Cut 20% of the MoD staff who work in offices in London
    3. Pass a Bill to repeal the automatic uprating of benefits
    4. Limit now Public Sector pensions to a maximum of £50k per year (making it retrospective)

    • APL
      Posted November 23, 2011 at 3:53 pm | Permalink

      David: “4. Limit now Public Sector pensions to a maximum of £50k per year (making it retrospective)”

      Let’s not forget the mutual backscratching society who are the chief executives of the unitary local and regional authorities. They are having a veritable field day.

    • uanime5
      Posted November 23, 2011 at 6:44 pm | Permalink

      Why should the poorest in society have their benefits slashed? It’s not their fault the economy isn’t providing enough jobs.

      • Bob
        Posted November 24, 2011 at 3:09 pm | Permalink

        Slashed? No, just not automatically uprated regardless of the economy.

        If you don’t do anything, you can’t be blamed for anything, but at the same time you should not demand to be paid much for what you haven’t done.

  32. JimF
    Posted November 23, 2011 at 1:00 pm | Permalink

    It would be interesting to hear your informed opinion as to why this has happened. Why has the promise to reduce housing benefit collapsed into a much-delayed and watered-down reality?
    Why are we spending money propping up house builders to sell their product at inflated and unrealistic prices?
    Where are the real reforms, real incentives, 18 months on, to get people off of benefits and working again?
    Where is the hard negotiating deal to save the public purse from massively generous public sector pensions?
    It’s all lost in the mist, in the long grass, for somebody else to do later. Is the modus operandi of this government so contrarian that it is just spending until the levy breaks? If so Ed and Ed will do a better job.

    • Mike Stallard
      Posted November 23, 2011 at 4:55 pm | Permalink

      ……..and free schools?

    • uanime5
      Posted November 23, 2011 at 6:56 pm | Permalink

      “Why has the promise to reduce housing benefit collapsed into a much-delayed and watered-down reality?”

      Those who get the most housing benefit tend to have jobs in high cost areas, so reducing house benefit will mean some people in high cost areas will not be able to hire low paid workers. Thus it’s counter-productive.

      “Why are we spending money propping up house builders to sell their product at inflated and unrealistic prices?”

      Construction tends to benefit the people of this country by providing jobs (unless companies only hire Polish workers).

      Also some people greatly benefit from year on year increases in house prices and care little about those who can’t afford a house.

      “Where are the real reforms, real incentives, 18 months on, to get people off of benefits and working again?”

      Nowhere because without more jobs you can’t reduce unemployment. At present all the Government can do is force people to go on the Work Programme for 2 years to hide the level of unemployment (the Government wants 2 million people on the Work Programme and off the unemployed statistics).

      “Where is the hard negotiating deal to save the public purse from massively generous public sector pensions?”

      So far this had produced mass strikes on the 30th November and high levels of opposition. Expect it to falter.

      Also for most employees public sector pensions aren’t that generous.

  33. SimonS
    Posted November 23, 2011 at 1:00 pm | Permalink

    What I find particularly dispiriting is the Prime Minister demonstrating that he is a fully-paid up member of the political zeitgeist when he asserted that “things are proving harder than anyone envisaged”. The use of this lazy and deceitful piece of propaganda categorises Mr Cameron into a group of people who are so intellectually deficient that they can have NO good answers to the difficulties we are in.

    There were PLENTY of people who have been pointing out for years the difficulties we have been building up for ourselves, but the New Labour/Pink Conservative cabal have successfully excluded them from the political process by claiming them to be cranks whose opinions are inadmissable to the political process. Cameron is right when he says no one saw what was coming, because his definition of “someone” is “a person who agreed with a strand of mainstream opinion”. Anyone who was critical or sceptical of it was deemed by the hierarchy to be a non-person.

    Can we revert to a process of proper intellectual consideration before it’s too late? I doubt it.

  34. javelin
    Posted November 23, 2011 at 1:03 pm | Permalink

    From reuters – only 61% of auction sold.

    Contagion has now reached Germany

    Just to recap …

    Bond Buyers are on strike and WONT buy EZ Sovereign Bonds
    China WONT buy EZ bonds and wont lend the ECB dosh
    the US WONT lend the IMF dosh
    The UK WONT lend the IMF dosh
    Germany CANT lend the ECB dosh

    It’s not just a disaster for the PIIGS its a disaster for the the EuroZone. THERE WERE 2 OPTIONS – Germnay bailing out the EZ or the EZ breaking up. Germany now CANNOT bail out the EZ.

    Hobsons Choice Fellas …

    “A “disastrous” sale of German benchmark bonds sparked fears on Wednesday the debt crisis was beginning to threaten even Berlin, with the Bundesbank forced to dig deep into its pockets to ensure the auction did not fail.”

    http://uk.reuters.com/article/2011/11/23/uk-markets-bonds-bunds-idUKTRE7AM0SL20111123

    • Javelin
      Posted November 23, 2011 at 5:56 pm | Permalink

      I think we are very close to the end game in the EZ.

      ALL the EU Governments are running out of credibility and bond buyers have stopped lending to them. Even the ECB has lost credibility as its ESFS fund has failed and its last credible lender, Germany, seems unable to raise the cash.

      Worse still no other major economy is willing to stump up the cash to keep feeding this FISCAL OBESITY.

      So this is how it will end. With not even the ECB or IMF able to bail out the PIIGS. I don’t see large IMF rescue packages. It will be acdefault pure and simple across the PIIGS. Markets will freeze up until politicians change their lifestyles and stop stuffing their voters with fiscal bribes.

      • uanime5
        Posted November 23, 2011 at 6:57 pm | Permalink

        Expect the UK to suffer another recession as our European exports suddenly end.

  35. Chris
    Posted November 23, 2011 at 1:35 pm | Permalink
    • Mike Stallard
      Posted November 23, 2011 at 4:54 pm | Permalink

      Thank you for this pointer! Much appreciated.

  36. forthurst
    Posted November 23, 2011 at 2:04 pm | Permalink

    When the richest man in the world came begging, Cameron handed him £814M of taxpayers’ money. People have only to rattle the collecting tin, and Cameron dips his hands in the taxpayers’ pockets: India, so strapped for cash it needs to buy our industries and then be given a billion pounds to transfer them back to India; but better give them another 300M aid money just in case. A Polar bear sighted riding on an iceberg; no question, we must cover the country with windmills, immediately. The Irish, spent all their money on Friday night, need a few billion sub, the IMF need lots to refresh Greece to maintain its leasurely Mediterranean lifestyle.

    Then of course there are the neocons, armed to the teeth, but still needing our blood and treasure to wage their wars: Iraq, Afghanistan, Libya, why was Cameron stiring up trouble in Syria, tightening the noose on Iran, all preparatory for spilling more British blood and spending billions on fighting wars in the Middle East on behalf of a country with an insatiable craving for other peoples’ territory and resources but only after they have been disarmed at others’ expense of blood and cash. After that we can, of course, give them aid to rebuild what we have trashed as in Iraq, Afghanistan, Libya.

    Cameron is too generous with our money by half. We need a replacement urgently.

  37. uanime5
    Posted November 23, 2011 at 4:15 pm | Permalink

    The problem with the Government’s regulatory changes is that they’ll reduce growth, not encourage it. This is because

    1) If you reduce job security by making it easier for employers to dismiss staff then employees will spend less money in the economy and save more money in case they lose their job. As 75% of the economy is retail based any slowdown in spending will cause major problems.

    2) If a multinational company has to make job cuts they’ll make these cuts where it’s easiest. So if they need to reduce their total workforce in the UK and France by 1,000 they’ll fire 1,000 UK workers because it’s easier than trying to fire 500 French workers. This is why continental Europe retains businesses while the UK keeps losing them.

    3) More unemployment means an increasing welfare bill. It will also increase the number of people who oppose welfare cuts.

    The Government should instead be increasing job security to encourage those in employment to continue spending and to prevent unemployment increasing.

    What are these tax changes? Will they benefit the majority of those in employment or only the rich (such as removing the 50% tax rate)?

    • Nash Point
      Posted November 23, 2011 at 10:44 pm | Permalink

      1)” If you reduce job security by making it easier for employers to dismiss staff then employees will spend less money in the economy and save more money in case they lose their job. As 75% of the economy is retail based any slowdown in spending will cause major problems.”

      Nobody doing their job poorly should have job security. And besides, we really need people to save money so that it can be lent to business. With interest rates as they are, this isn’t going to happen.

      2) “If a multinational company has to make job cuts they’ll make these cuts where it’s easiest. So if they need to reduce their total workforce in the UK and France by 1,000 they’ll fire 1,000 UK workers because it’s easier than trying to fire 500 French workers. This is why continental Europe retains businesses while the UK keeps losing them.”

      Can you give any specific examples of this? You’re always asking other bloggers to give you references and statistics before dismissing them. Personally, I think many more important factors will determine where people are fired.

      3)” More unemployment means an increasing welfare bill. It will also increase the number of people who oppose welfare cuts.”

      Yes, it will in the short-term, but it’s cheaper than employing somebody in a non-job for 40k a year. And, hopefully that person will go on to find work in a more productive part of the economy.

    • Jon Burgess
      Posted November 23, 2011 at 10:58 pm | Permalink

      Oh, where to start…?

      Employees are already likely to have tightened their belts. Gloomy economic news, fears over losing your job because your employer is going bust etc are prime drivers for this.

      How do you propose increasing job security – passing a law to make it illegal to sack people? A private enterprise can still go bust. That means all its employees can lose their jobs regardless what legislation the Government puts in place. Even you must realise that adding costs onto private companies will result in fewer jobs offered by them.

      You seem keen elsewhere for other contributors to give evidence for what they say. What evidence have you got that continental Europe retains its business and the UK loses it?

  38. Tad Davison
    Posted November 23, 2011 at 4:41 pm | Permalink

    I have said it before, and I’ll say it again. The country was in a deplorable state following the mess the last Labour government left (and yes, history does have a nasty habit of repeating itself). We needed a Churchill to put it right, but instead, we got a Chamberlain. Cameron had a massive opportunity to take the country along with him, just as Margaret Thatcher did in 1983, by delivering to the people, all the reforms they’re calling for, on things like immigration and the excesses of the welfare state, but we’re beginning to see that he’s all bluster. Cameron won’t do it, because he doesn’t really want to do it!

    I get the feeling Cameron has made far too many concessions to the ‘Woolies’, and that is a dangerous game to play. No self-respecting Conservative administration would ever have done such a thing, so by extension, (and in the words of Sir Paul Beresford) politicians are not part of the solution, they’re part of the problem. Spending, and waste, should have been slashed from the outset, and positive inroads would already have been made, but somebody hasn’t had the bottle to do it! Either that, or there’s another possibility.

    Now call me an old cynic if you will, but I think there’s more to not doing what is necessary and right, than meets the eye. The issue of Britain joining that nasty old Euro hasn’t completely gone away, and as witnessed yesterday with Ashdown’s commitment to it, there are still a lot who would have us part of it. The idea of a hidden agenda might sound far-fetched, until you wonder as to the reasons for not getting the deficit down – something that flies in the face of common sense. I didn’t at first think the phrase, ‘We’re all in this together’ extended to the EU as well, but unless we sort out the Lib Dems, and change their pro-EU mindset, together with those on the left-wing of the Conservative party, we WILL BE PART OF THE EURO at some point.

    That’s a concession too far, because for it to work, in needs complete political matriculation – watch this space!

    Tad Davison

    Cambridge

    • Disaffected
      Posted November 23, 2011 at 6:44 pm | Permalink

      Agreed. I still think that the deficit will play into the hands of the Europhile argument that our only hope is to be part of a pan European state. Cameron is well educated and has decided to take this course with the Lib Dems, it is not an accident a deliberate choice.

      I hope John, Boris David Davis and others step up to the plate, using their intelligence, to force Cameron to act on what he pledged or make him stand aside. He has been a waste of space for 18 months. he had hoped growth would have provided him an answer for this parliament in the hope to do better in the next. It is not going to happen and Tory voters are already fed up with him.

    • zorro
      Posted November 23, 2011 at 7:48 pm | Permalink

      Could you be suggesting that some in the Coalition might be engineering events so that we are targeted by the markets some time close in the future in order to manufacture an excuse to go knocking at the door of Europe to be let in the Euro and of course ‘maintain our place at the table’ in order to ‘influence events and be good Europeans’……?

      zorro

      • Kevin Dabson
        Posted November 24, 2011 at 8:17 pm | Permalink

        Entirely feasible. A sterling currency crisis followed uncontrolled spending and inflation in the 70′s. The reason some of the PIIGS countries have not had a currency crisis is because they are bolted to the euro.

        Remember Cameron was an advisor to Norman Lamont when the ERM fiasco occured. What his true views are on the Euro, I am not sure.

        I have wondered about the mothballing of strategic defence capabilties yet increased spending on other items. So it was nothing to do with money….

        Let us hope the Euro breaks up before the people of the UK are forced into it without having a say (it’ll be too important a decision for a public referendum the politicians will say! aka the french). It’s the later point that wants me to favour the first scenario.

  39. Steven Whitfield
    Posted November 23, 2011 at 6:23 pm | Permalink

    Mr Redwood, I think you should relax as the Conservative Leader has a great plan to solve all these problems. Being the figurehead of Of Great Britain plc, no doubt the finest minds available have been advising him on the plan.

    Drum roll please ………………………………………

    The plan is – A big Bazooka!

    Erm of course it’s just another big pile of nonsense from DC – he has no real understanding of the world outside his Islington bubble. All very fine for chasing a sound bite in opposition – but useless in times of a crisis.
    He puts on his statesmenly face and serious voice..but behind the image there is no substance and depth of thought – other than dumb observance to Political correctness.

    In good times this is mildly irrating – in a crisis it is tragic.

    Please could someone at the Conservative party go into the cockpit and talk some sense into Captain chaos Cameron…or should we all assume the crash position and brace ourselves for the inevitable economic crash ?.

  40. zorro
    Posted November 23, 2011 at 7:41 pm | Permalink

    As I have said consistently, there will be more QE, no growth, and no sizeable reduction in the annual deficit.

    It is too difficult for Cameron….his only plan is to talk tough, try and control increases in public spending and inflate away the debts, leading to decreasing living standards.

    I still think that inflation will be high for the rest of this Parliament at least. Hoping that it will come down because commodity prices might weaken and previous VAT rises will fall out of the calculations, is looking less likely…..particularly when they will continue further bouts of QE to pay for extra government spending.

    John, even you must think that it is a distinct possibility that inflation will continue to be high for several years. Further QE and weakening of the monetary base will start to feed stronger inflationary trends, particularly with a more vociferous workforce, becoming less convinced by the ‘we’re all in it together’ refrain, and falling standards of living.

    zorro

    Reply: The high inflation we currently suffer came primarily from the large devaluation of the pound in 2008-9, with a further effect from the two VAT increases imposed by Labour and the Coalition from the reduced base of 15%. I assume there will be no more tax induced rises, which will help. Inflatino will fall from here unless more QE unsettles the pound. So far it has n ot done so, as QE or the equivalent is also expected by markets in the USA and Euroland, and Japan, Switzerland and others are actively printing to try to keep the value of their currencies down by selling across the exchanges.

  41. barrie
    Posted November 23, 2011 at 7:53 pm | Permalink

    Talk talk talk talk !!!!
    When will we see change?

  42. Jon Burgess
    Posted November 23, 2011 at 10:47 pm | Permalink

    Sounds like another example of ‘Cameron in failure to live up to expecation’ shocker. He really is in danger of becoming a serial under achiever!

    How about passing a law forbidding Government from borrowing in the first place?

    Cameron has certainly lost the next election, anyway.

  43. John Maynard
    Posted November 24, 2011 at 12:40 pm | Permalink

    Whilst I sympathise with John’s wish that there had been earlier and deeper “consolidation”, the logic at the time, (supported by the usual cohort of economists), was that the economy was still too fragile and recovery needed time to build momentum.
    And then came the Euro-chaos !

    We have to hope that Osborne has some contingency plans – IMHO, the fuel surcharge will definitely go ahead.

    Much of John’s piece is built on what the FT (as a supposed inside source) says.
    Personally, I wouldn’t give much creedence to that EU sold-out publication.

    The German press, irritated at our comparative tranquility, are indulging in very heavy Brit-bashing at the moment, and hinting darkly that we are ‘heading for the rocks’.
    The FT always takes it’s lead from the EU master-economy (sic).

    Reply: I do not for one moment think a tougher approach to spending in the first year would have damaged recovery. It did not in 1982.
    The increase in borrowing forecast by the FT looks very likely given the probability of much slower growth. we also need to remember Mr Cameron’s own words on this topic.

  44. Mike
    Posted November 29, 2011 at 1:16 am | Permalink

    For me, although I accept the general thrust about the difficulties in reducing the increase in spending and all the “poison pills” left by brown, balls and byrne, having to deal with the national broadcaster “going large” with the hard cuts, biggest cuts ever, back to the 30 s narrative has probably been the final nail. the Beeb have really let themselves down and it is only in recent months when they have got “toenails” asking the brits if they are up for more welfare spending that the balance is moving in the other direction. for months the bbc led with the cuts etc etc and that helped make people very nervous. whilst the public sector teach and make better the population, those tasks are carried out by the private sector. The public sector need to think about that.

  45. Steven Whitfield
    Posted November 29, 2011 at 1:51 am | Permalink

    http://news.bbc.co.uk/1/hi/programmes/andrew_marr_show/9649249.stm

    If you could allow this BBC website link please John

    The goalposts do seem to be shifting.

    I agree with John Redwood – we were told this coalition was formed to sort out the budget deficit of New labour. That’s why party differences were put aside.

    It seems we were misled.

    Apparently the purpose has now changed. According to George Osborne, “The heart of our purpose in government is to get the British economy moving “.

    Is this an admission that we are returning to the doctrine of the economic perpetual motion machine. As Lifelogic said ” the logic of pulling yourself up by your own shoelaces” is being employed by our own chancellor.

    Credit to George Osborne, he gave a masterclass on how not to answer an awkward question on the Andrew Marr show on Sunday. I think he we asked three times whether it was now impossible to eliminate the budget deficit in one parliament. He just refused to acknowledge that the central plank of his economic policy was broken!.

    I like Andrew Marr he’s a genial host but he really needs to toughen up and do his homework properly. Why can’t senior politicians be forced to answer tough questions by a modern day Brian Waldren ? Why didn’t he ask George if an “austerity programme” and “increasing spending” are incompatible ?.

    As so often in life, those that ‘talk a good game’, use this as a cover for the fact that they are out of their depth or just not up to the job. The Rt Hon George Osborne is a good example of this principle .
    My view is that events will prove that George Osborne was an unmitigated disaster for the Conservative party and more importantly, for the country of krakatoan proportions.
    I think ‘Euro Sceptic’ Conservative Mp’s need to imagine the fallout from the ERM crisis. Then multiply that by 10 and that will be close to the fallout if the economy crashes . The Conservatives wont so much be cast into the wilderness as into outer space.

    I respect John Redwood’s position that he has more influence on the inside of the party than out – despite the fact that the ‘modern’ Conservative party seem to disagree with many of his views. But there must be a way for the sceptic heart of the party to exert more influence ?.
    I think the sceptics need to ask if they wish to carry the can for both Labour’s binge and recklessness and the Coalitions refusal to connect with economic reality.

    Muddling on,not rocking the boat and hoping everything will turn out okay is a foolhardy strategy in my view. In my view, we need to hear an opposing and credible voice now from this group.
    Notable Comic highlights of Osborne’s performance include :-

    “Now we have got a deficit reduction plan that has brought us record low interest rates.”.

    Is that the deficit reduction plan that has actually increased spending and debt ?. Does he think that if a lie is repeated often enough it becomes the truth ?

    I suspect that the money printing press is much more influential. The idea that the money markets could possible be influenced by phoney talk about ‘austerity’ and ‘cuts’ is frankly risible. The bond dealers may arguably be greedy but not that stupid surely.?

    “Now we have got a deficit reduction plan that has brought us record low interest rates, that has earned us that triple A credit rating, and we are absolutely going to stick to that plan”

    Is this the plan that is so rigid that it has led to tens of billions of pounds of extra spending we can’t afford? . Now he has the bare faced cheek to boast that ” we are absolutely going to stick to that plan”.

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  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. 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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