A reminder about Tuesday’s Autumn Statement

 

             The Parliamentary debate about the Autumn Statement is likely to be about the small numbers that have little impact on the scale of the problem. Labour will probably call again for a £2 billion a year bankers’ bonus tax, and think of ways of spending it a few times over on well intentioned schemes. The truth is spending an extra £2 billion or even an extra £10 billion does not make much difference in a £1500 billion economy.

             The Coalition government will rightly say that they need to have a credible path to cut the deficit, or else they could lose market confidence just as Euroland has lost market confidence. A country which has to face soaring interest costs can get into a vicious spiral like Greece and Portugal, where the extra cost of  borrowing forces them to cut other more worthwhile expenditures. This in turn can cut output more, and reduce tax revenues further. They then need to borrow yet more, but the interest cost is always against them.

             Labour do not deny this worry. They say their modest spending ideas can be paid for from extra tax on unpopular people. They now complain that the deficit under the Coalition is coming out at higher levels than planned. We are all deficit cutters now. Labour, after all, enacted law to require a halving of the deficit.

           So the issue is how do you cut the deficit?  Coalition plans to “limit” extra borrowing to £451 billion this Parliament were revised up to £485 billion in March. Few in the mainstream media noticed this. On Tuesday the OBR/government is likely to increase this extra borrowing to well above £500 billion for the 5 years. People will notice this. The mood has changed and the markets are circling other countries with debt problems.

           In order to preserve the confidence of lenders to the UK it is vital the government shows a credible path from here to cut the deficit, assuming lower growth than past plans. We have to live with a weak Euroland economy for the forseeable future. Privately financed infrastructure, and sensible measures to lend more to well based private sector business plans will help.

             Best of all would be a determined effort to shift most of the £1.2 trillion gross  liability of the state owned banks into private sector hands. RBS must be broken up, and three new banks that are strong enough to lend and trade without taxpayers support are needed. If they could inject say £30-50 billion of well based new lending into the economy from their private sector sources, that could generate some growth. They could help pay for the reservoirs,broadband links, toll roads, airport capacity and other things we need. They need to lend to good profitable schemes, not bubble lending like 2007.

              On the government’s own figures the UK state has outstanding liabilities of £3.5 tn. Shedding most of the banking risk would greatly improve the UK’s true credit standing. The government also needs to show it has new ideas to curb the growth of public spending, and has a will to achieve an affordable public sector pensions settlement. Then it can truly say it is tackling all three main areas of debt and worry. It needs to show strikers on Wednesday that there is a serious problem of pension affordability, and show it intends to grapple with it sensibly and fairly.

 

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65 Comments

  1. Mike Stallard
    Posted November 27, 2011 at 6:56 am | Permalink

    I know that election promises are about as reliable as the serious commitment of celebrities, but nevertheless, the coalition, was elected to cut the debt and cope with the deficit.
    They must keep this promise.

    I understand (I think) why the government is getting slack. Lobbyists, charming civil servants and consultants and economists are very good at shroud waving and providing free lunches and all that. Also everyone else from America to Greece is in the same boat.

    Unloading the banks – common sense. Do it now.

    • Disaffected
      Posted November 27, 2011 at 2:11 pm | Permalink

      Listening and reading about Osborne’s plans this morning reminds me of Gordon Brown economics- I just can’t believe he is following the same borrow and spend plans with interventions by the state. How about less intervention, less state, less tax and let people get on with it, as Cameron stated before the election.

      Language of fear used by Osborne to scare the public about the EU only confirms the Coalition’s aim to remain in the EU as long as it can and at all costs.

      Tories and labour sound the same with Lib Dems holding on to the shirt tails of Labour’s former policies. I despair.

  2. lifelogic
    Posted November 27, 2011 at 7:00 am | Permalink

    So far it has very done little to reduce the deficit, to reduce numbers in the state sector and virtually nothing encourage the private sector to grow. Indeed it has continued to kick it with no retirement rules and more. Why on earth not after a year and a half – are they keen to loose the next election?

    The state sector pensions offer is far too generous, the banks are still not lending to productive industry, employment law is absurd, green energy policy just a job export scheme.

    When will they actually start to act?

    • Bazman
      Posted November 27, 2011 at 11:33 am | Permalink

      Employment law is absurd because the nations workforce cannot be hired and fired at will is what we have so far established. Other than that you seem not to have any other reasons?
      Maybe employers should be allowed to avoid any heath and safety and employment laws in return for paying a higher rate?

    • Disaffected
      Posted November 27, 2011 at 2:20 pm | Permalink

      Never as long as they allow Lib Dems to lead policy matters.

      Look at the key issues: UK’s budget, EU, immigration, defence and crime and disorder, WHS and university/schools. All of which are in a worse position now than before the election. The ministers responsible are not even being shuffled or sacked. More borrowing and taxing, subservience to the EU, mass immigration continues-higher than Labour,massive cuts to armed forces and equipment, 65,000 criminals with 15 or more offences not put in prison with more rights from the wretched HRA including allow to vote.

      There is not even any credible spin. 20 months of wasted opportunity. A pathetic election campaign that has transpired into a pathetic government.

      • lifelogic
        Posted November 27, 2011 at 8:36 pm | Permalink

        Agreed.

  3. Dr Alf Oldman
    Posted November 27, 2011 at 7:04 am | Permalink

    I totally endorse this analysis by John Redwood MP.

    However, I would like to comment on a couple of the points raised.

    I am a passionate believer in stimulating demand by enormous support for properly justified capital investment, both in the Private and to a lesser extent in the Public Sector, leveraging the multiplier effect. In the case of the Public Sector, I believe that capital spending should be financed by further savings/cuts.

    So far cost-cutting in the Public Sector has probably been from the bacon-slicer approach, rather than strategic reallignment & transformation. There are still enormous opportunities for effective cost reduction.

    With regard to banks and especially the state-owned banks, they are operating as an oligopoly and I endorse the need to privatization/breakup to stimulate competition. The Cabinet Office has introduced draconian centralized controls over consultants & contractors, yet there has been little public challenge for Lloyds Bank’s vast armies of contractors & consultants since public ownership.

    Finally, I would like to stress the case for small businesses (SMEs – the Small Medium Enterprises). It is well recognized that job growth is likely to come from SMEs, rather than large businesses, which are often sitting on vast piles of cash or rapatriating it to shareholders. Small businesses need readily available and cost competitive funding for both working capital and expansion, plus serious reduction in red tape.

    • JimF
      Posted November 27, 2011 at 11:56 am | Permalink

      Now we have the prospect of the Government underwriting loans made by banks to SMEs.
      So the Government is letting banks keep the business at say a 4% margin instead of a 5% margin, charging the end customer around 4.5% instead of 5.5%, and insuring part of the loan for the difference. If the Government were to lend directly to small business and insure the loan itself, loans would come in at around 2%. My point is, that if the Government is insuring part of a loan made by (mainly) its own banks, with the balance of the loan risk taken by the banks it (mainly) owns and guarantees, why not go the whole hog and have HMG lend directly to small businesses? A 2% rate would make a real difference (wow, even lower than a 3-year fixed residential mortgage), and the zombie banks would be cut out of the picture, which, in the long run, is what many small business people would prefer….

      • lifelogic
        Posted November 27, 2011 at 8:38 pm | Permalink

        Indeed zombie banks are totally pointless and need cutting out.

        • Bazman
          Posted November 27, 2011 at 9:42 pm | Permalink

          We had a zombie banking system living next to the real one for years.

    • JimF
      Posted November 27, 2011 at 12:12 pm | Permalink

      To follow on from my post above, I think there’s something the Government don’t “get” about small businesses not borrowing from Banks. That is, that we treat the banks as a bad but necessary supplier. If a supplier of, let’s say, stationery to our Company had behaved in the way banks have been shown to behave, including the effective oligopoly, bail-outs, unjustified salaries, and so on, the last thing we’d do is to sign a contract which tied our Company to that stationery supplier for several years. Companies are paying down debt and not borrowing for holistic, as well as economic reasons. We really don’t like dealing with banks as suppliers. Many entrepreneurs go into business to change their bit of the way things are done, not to let the old bad ways continue. The banks represent a big bit of the old bad ways continuing. Why tie yourself to the banks’ flaky mast when you can run a surplus, not grow fast, but keep your sanity and business intact?

  4. Martyn
    Posted November 27, 2011 at 7:27 am | Permalink

    John, you say “The government also needs to show it has new ideas to curb the growth of public spending, and has a will to achieve an affordable public sector pensions settlement”. I hope it has the bottle to do so, because the planned strike this coming Wednesday and beyond gives them the opportunity of fronting up to the unions.
    I am a primary school governor and our splendid head teacher with a small army of concerned parents and other governors has a safe plan to keep the school open that day. It is not that we blame individual members of our staff for striking – it is their right – but are angry at the Unions being obviously quite disinterested in the principles of ‘every child matters’ and ‘every lesson counts’ when setting their agenda.
    And OT, in the STel paper just delivered I see that we are to donate £1bn to help climate change in Africa. Is the government quite mad, funding slurry pits and solar panels and other things in Africa when our economy is on the ropes?

    • zorro
      Posted November 27, 2011 at 8:49 am | Permalink

      Probably on the road to being certified…..

      Zorro

    • lifelogic
      Posted November 27, 2011 at 9:12 am | Permalink

      The government is indeed quite mad, funding slurry pits and solar panels and other largely useless things in Africa and even worse Huhne nonsense such as “green” house bling in the cloudy sun lacking UK and the useless HS2 wind farms and similar.

      It is all politics, PR, photo opportunities, banker bashing and the green religion – over sound science, engineering and economics every time.

      • Mike Stallard
        Posted November 27, 2011 at 5:00 pm | Permalink

        I wonder how much of the one billion for climate change in Africa will go to the German firm of Mercedes Benz?

  5. Steve Cox
    Posted November 27, 2011 at 8:46 am | Permalink

    Can anybody tell me how exposed the UK gilt market is to the so-called ‘bond vigilantes’?

    The reason I ask is that the bulk of UK government debt is held domestically. The largest owners are pensions funds and insurance companies, which have little alternative to buying large quantities of gilts as they require low-risk, Sterling-based investments in order to pay people’s pensions. The second largest tranche is owned by investors based overseas, though nobody keeps a record of which countries own them as far as I can see. This group would be the main ‘bond vigilantes’, I assume, as they are free to invest pretty much wherever they want to? Not far behind them are the banks, including the Bank Of England. Commercial banks were forced to increase their capital provisions after 2008, and I believe that much of this was done via the acquisition of gilts. The Bank Of England, of course, after its £200 million QE1 money-laundering exercise, is now also a major holder of gilts. Other financial institutions hold about £100 billion of gilts, and the remaining owners, such as private individuals and local authorities, are really quite insignificant.

    Based on data from the end of 2009, overseas investors appear to hold between 25% and 30% of gilts. Pension funds and insurance companies seem to have little alternative, and the Bank Of England has shown that is is both willing and able to print money to buy gilts ad nauseam. So I may be completely wrong here, but based on this it seems to me that the only major threat to gilt prices/yields is from the overseas investors who constitute a relatively small part of the overall market, and if push came to shove then I can’t see any reason (other than common sense about inflation, but the Bank has shown us how little of that it possesses!) why the Bank Of England couldn’t easily replace them, at least for a period of time until inflation went hyper.

    Can anybody tell me if I’ve got that wrong, and if so where? Could the ‘bond vigilantes’ push yields up to the 7% bail-out danger level? Grateful for any insights.

    Reply: As you say, all the time the Bank buys the equivalent of the whole new issue there is a strong upward pressure on prices to counter sellers. It has worked so far.
    However, it would be possible to lose confidence if holders did not believe in the deficit reduction strategy, for example. All sorts of holders sell bonds if they think they are about to lose money on them.
    In the very different conditions of the mid 1970s (higher inflation, no QE etc) gilt yields on long dated stock went above 15%.

  6. zorro
    Posted November 27, 2011 at 8:47 am | Permalink

    http://www.telegraph.co.uk/news/politics/georgeosborne/8918242/Osbornes-pain-relief-plan-for-squeezed-middle.html

    People more concerned about rising prices shocker….as government continues soft inflationary default.

    Zorro

  7. John
    Posted November 27, 2011 at 8:54 am | Permalink

    I fear that the process embarked upon has tipped into ‘mission drift’. There is still plenty of low hanging fruit ripe for picking. The Autumn statement will hopefully refocus minds and sensible decision making.

  8. Paul Danon
    Posted November 27, 2011 at 9:16 am | Permalink

    The deficit won’t shift (and growth won’t come) because the coalition is pursuing Labour’s policies of high spending and debt. It’s a £1,500bn economy with a £5.5trn debt.

    • Bazman
      Posted November 27, 2011 at 11:47 am | Permalink

      Says right wing think tank which have exists with financial assistance from right wing donators. and anti HS2 people interestingly having their houses on the proposed route.
      It would seem they have no interest in the weak, and only the strong are considered such as pensioners.
      Have a look at their list of Fellows. Alan Arthur Walters for example Chief Economic Advisor to Mrs. Margaret Thatcher. Strangely most have well passed their retirement age too.
      Those who know these details know this institute is continually pushing any government, not just Conservatives to move more and more to the right.

      • Winston Smith
        Posted November 28, 2011 at 10:49 am | Permalink

        You appear to follow a logic that says “right-wing” = bad and I guess you’d like to see “right-wing” banned. As opposed to good old left-wing organisations and think tanks funded directly and indirectly by the State. Orgs that use taxpayers money to promote the theft of more taxpayers money. Of course, independently funded rivals are “right-wing”, so they must be bad. Life is so simple with such childish logic.

        • Bazman
          Posted November 28, 2011 at 6:19 pm | Permalink

          My point is that they are not as impartial as they would have us believe, but on this subject we have seen how right wing thinking has took the economy, letting the banks do what they like has caused more damage and cost more than any left wing metal bashing trade unions ever did. This was right wing thinking under a Labour government supported by Tories.

          Reply: It must have been left wing thinking, as Mr Brown demolished the Tories regulatory framework, and imposed his own which was both more detailed, and less effective. It took a sledgehammer to miss the nut.

      • RDM
        Posted November 28, 2011 at 11:36 am | Permalink

        “Alan Walters” Easily one of the best Economists to serve his country!

        From 1997 onwards; He wouldn’t not of accepted any of this nonsense.

        Blair/Brown/Balls & boys need to understand, and use (in the Real world), the knowledge they think they have! “Eliminating Boom and Bust” what ever next! Borrow more money to pay off our debts, Magic?

  9. Brian Tomkinson
    Posted November 27, 2011 at 9:18 am | Permalink

    The coalition government has been far too timid in its approach to reducing their own current spending, concentrating their deficit reduction strategy too much on increased taxation. Given that Cameron is a PR man he has been spectacularly unsuccessful in clearly communicating the real nature of his government’s approach to deficit reduction. The clarityand expression of thought shown regularly in this blog would be welcome. For those who wanted and expected rigorous action to bring the finances under sustainable control this has been a very disappointing performance. It is little wonder that there is no confidence when they have failed to deliver to the satisfaction of those who expected to support them, let alone those who would always be opposed. This week may show that the markets are not convinced that the UK is the “safe haven” the government boast about. Members of the MPC are already briefing of the need for more QE.

  10. Javelin
    Posted November 27, 2011 at 9:20 am | Permalink

    The Government need to spell out what we can afford.

    They need to say we can’t afford any more taxes. Gordon Brown taxed every last nook and cranny. There is just fraud and tax evasion left. The cost of raising taxes is higher than collecting them.

    Keeping pensions at the levels promised means that the money now must come off future salaries and pensions.

    • Javelin
      Posted November 27, 2011 at 11:31 am | Permalink

      I don’t believe any voters believe Lab, Cons or Libs any more.

      The 20% overspend is simply way over the few percent difference between the three parties. Everybody knows it. Politicians are relying on the irrationality of human nature. They are relying on the almost universal attribute of humans to accept the overspend on themselves in the hope that the overspend is spent on themselves.

      I am amazed at the universality of human hope of receiving more than they spend at the cost to other people’s children. We are living in unhealthy psychological times. In the same way Thatchers Britian has been accused of selfishness, Browns Britian has shown the same selfishness. Rather than the strong getting too much under Thatcher the weak got too much under Brown. The hypocrisy is blatant as an objective outsider- but the hypocrisy is masked psychologically by the prospect of rewards by those receiving the tax payers money.

      Something is badly out of place in today’s society just like is was as the peak of the Thatcher years when greed was good. Only today the leaders are allowed to be greedy and over pay themselves as a reward for going along with the current situation.

      The only way forward from today is to be honest with British people and stop the deficit.

      • Winston Smith
        Posted November 28, 2011 at 10:55 am | Permalink

        I agree with you, except your misunderstanding (I’ll give you the benefit of doubt on that one) of Thatcher’s policies. It was not about greed – striking public sector workers are greedy – it was about releasing the strong from the shackles of the State, to enable them to achieve a better life for them and their children.

    • Mark
      Posted November 27, 2011 at 1:13 pm | Permalink

      Presumably pensions were budgeted on the assumption that inflation would hit the BoE 2% target? (sarcasm off)

    • Mactheknife
      Posted November 27, 2011 at 1:40 pm | Permalink

      There is tax evasion and tax avoidance, where one is illegal and the other not. Ideas have been floated by the ‘left’ to capture all outstanding taxes and close loopholes so that the avoiders cannot avoid any longer. However the so called ‘tax gap’ is seen by the left as the answer to our econmic ills and no doubt they have already got plans to fritter it away, but in reality it will have little effect on our debt.

  11. A.Sedgwick
    Posted November 27, 2011 at 9:22 am | Permalink

    Public sector net debt was £966.6bn last month, up from £836.8bn in October 2010 – an astonishing 15pc rise, and that doesn’t include the bank bail-outs. And we’re told this is “fiscal austerity”.

    Liam Halligan, Telegraph today.

    • lifelogic
      Posted November 27, 2011 at 10:54 am | Permalink

      Yes 15% increase is “Cutting too hard too fast and risking a double dip” in Labour/BBC language.

  12. alexmews
    Posted November 27, 2011 at 9:33 am | Permalink

    Thanks John.

    I recall at or just before the last election Tories hosted a delegation from Canada who were advising how the Federal Governement there exited whole areas of public service in order to deal with a debt and deficit crisis in 1990s.

    I never saw any output from this nor any policy balloons floated subsequently to suggest the Coalition were looking at this. I agree with the previous poster in that what, if any, cuts have been announced have been on the ‘bacon slice’ approach with the largest spending departments pretty much ring fenced.

    Isn’t the only way to cut your suit to fit the cloth really only going to happen when government – indeed voters – decide the public sector should actually stop doing a number of things? I have no magic list – but the fact that nobody is even making suggestions at the Cabinet table suggests this approach is not even being looked at.

    why?

    It is a matter of time before gilts get tested in the same way they are in Europe. We have the “benefit” of being able to devalue to meet this but since when is devaluation a good thing? It is theft from the prudent.

    Taxpayers need to say “enough” and hold their representatives to this. Public debate on the subject still seems to show that voters remain happy to be bribed by politicians with their own money.

    BTW • I continue to be amazed at the weekly pantomime the brothers dimbleby host on tv and radio each week. Routinely at least 3 of 5 pannelists and it seems the bulk of the studio audience have no idea where wealth comes from and who pays for public services. Well done martin Sorrell and CEO of sainsbury’s who at least were brave enough to have a go.

  13. Sue
    Posted November 27, 2011 at 10:09 am | Permalink

    £1 billion of UK aid to fight climate change in Africa http://tgr.ph/rT5Qtb

    British taxpayers’ multi-billion pound international aid budget is being further devoured by third world (countries where there is the danger of ..ed)corruption http://bit.ly/vFhEBU

    Foreign Aid is being devoured by (questionable-ed) officials and we are funding the misery of millions of poor people around the world.

    Europe plan to ‘green’ public buildings to cost £50bn http://tgr.ph/tBM2ji
    While climate change is being ignored by the biggest three polluters on the planet, the billions that we are being conned out of, will make no difference to the CO2
    levels.

    You squander our money on idiotic projects. Climate change & Foreign Aid are without doubt the biggest and most expensive scams of all. By all means, shake the charity tins around so people can give voluntarily but stop these ridiculous amounts of money being wasted.

    While we are in the financial mire, we need to be frugal and keep our money! Food banks are being opened by churches and charities all over Britain to help feed those who are finding things difficult here in the UK. You simply can’t justify flushing billions down the drain when we need the money at home. It’s downright criminal!

    Unemployment and poverty will continue to be a problem while we have an open door policy for any foreigner to walk in and get a job. It’s impossible to try to force people into jobs which don’t exist. Britons should come first in the jobs industry, especially in unskilled labour. We would save millions on the benefits bills if we could get people into work.

    It will be interesting to see the outcome of the European Union Membership Cost Analysis when it has been finalised. Then, we will be able to see how much of our money you lot have squandered on the EUtopian project!

    Reply: Not me- I voted No to the EEC in 1975, and did not vote for the Climate Change Act.

  14. Rebecca Hanson
    Posted November 27, 2011 at 10:13 am | Permalink

    “The truth is spending an extra £2 billion or even an extra £10 billion does not make much difference in a £1500 billion economy.”
    Disagree.

    Agree to the rest.

  15. Denis Cooper
    Posted November 27, 2011 at 10:52 am | Permalink

    I think that much of the population still hasn’t fully absorbed the precariousness of the government’s financial position, and that’s because it still hasn’t been implanted in their minds in simple terms which everyone can readily understand.

    Daniel Hannan had a go on Question Time last week:

    “Out of every four pounds that the government is spending, one of them is being borrowed … we just can’t afford to carry on with this”

    For which he got a small scattering of applause.

    That’s the simple message which should have been driven home again and again throughout 2009 and early 2010 and finally during the general election campaign, when instead the public debates sidestepped the sheer magnitude of the problem and focused on relatively small “cuts” which one party or another might or might not make.

    That communication failure has meant that the government is still having to constantly explain why it must take unwelcome actions, even if they don’t amount to actual “cuts” in overall public spending.

    As I understand it’s now closer to one pound borrowed for every five pounds spent, rather than for every four pounds spent, but obviously we can’t carry on with that either.

    • Quietzaple
      Posted November 27, 2011 at 9:26 pm | Permalink

      Try googling Britain’s Fiscal Stance since the Second World War, read and worry less.

      Worth noting that some of Britain’s debt from the Napoleonic Wars never was repaid.

      • Denis Cooper
        Posted November 28, 2011 at 8:32 am | Permalink

        Just the kind of stupid and irresponsible attitude that’s got us in this mess.

        Would you manage your personal finances in the same way?

  16. A different Simon
    Posted November 27, 2011 at 10:57 am | Permalink

    John ,

    The Govt is being given a gift horse opportunity to take the unaffordable offer on public sector pensions off the table and remove the risk of shortfall from future generations .

    How about freezing existing public sector pensions schemes , automatically enrolling public sector workers in NEST and increasing their basic pay by 25% to compensate ?

    • uanime5
      Posted November 28, 2011 at 3:23 pm | Permalink

      The Government won’t make more money if it does that. Creaming off the difference between the money collected for public sector pensions and the money paid out for these pensions is very profitable.

      • A different Simon
        Posted November 28, 2011 at 6:45 pm | Permalink

        Rubbish .

        The amount collected from public sector employees and employers is not enough to cover the pensions being promised .

        Do you think it is acceptable that future taxpayers should have their lifestyle downgraded in order to fund the shortfall ?

  17. forthurst
    Posted November 27, 2011 at 11:10 am | Permalink

    This is a travesty of a conservative administration with (large inward migration-ed) in from the third world, (words left out-ed), wars and sabre-rattling in the Mid East on behalf of (UNFLATTERING ADJECTIVE LEFT OUT) neocons, dumping our tax money on sub-saharan Africa where it is bound to be well spent, not, worshipping at the Green alter, whilst the ClimateGate 2.0 emails verify that we have been (misled-ed) with the very active assistance of the BBC (etc ed), as usual, were very keen on its promotion, treating it as yet another money making oppportunity through carbon credits.

    Cameron is a traitor and it is quite clear that he is the choice, not of the English people,(but of overseas interests-ed) Many people have lost confidence in a purely democratic process yielding a result corresponding with their reasonable expectations of good governance.

  18. Barbara
    Posted November 27, 2011 at 12:08 pm | Permalink

    If it is *really* serious about getting growth going – which, judging by its actions, I am sorry to say seems increasingly doubtful – the government just needs to dump the ridiculous carbon emission reduction targets (aka ‘Death to the West’) and repeal the industry-destroying Climate Change Act.

    The public are growing increasingly angry about this. We cottoned on to the fact that catastrophic AGW (or whatever it’s called this week) was a scam long before the politicians did – perhaps because there are still a (dwindling) number of us out here who have had a decent science education. The Act passed with only three MPs opposing it: Lysenkoism in action. It’s a disgrace.

    Reply: Some of us refused to vote for it and explained to our whips our objections.

  19. Sue
    Posted November 27, 2011 at 12:18 pm | Permalink

    This is what I am talking about, it’s making me very angry!

    “Is the global warming scare the greatest delusion in history?”
    http://tgr.ph/to1oaB

    “DESPERATE families are facing a Dickensian Christmas with at least 100,000 Britons relying on food parcels because they can’t afford to eat”
    http://bit.ly/vt6ZW7

    And to top it all, we get told to SHUT UP by that little worm Sarkozy and arrogant Schauble insulting us by predicting the end of Sterling AND WE CONTINUE TO CONTRIBUTE a criminal amount of money to a club MOST OF US DON’T WANT TO BE IN!

    And you lot call yourselves “Honourable?”… I don’t know whether to laugh or cry quite honestly.

  20. Damien
    Posted November 27, 2011 at 1:28 pm | Permalink

    I agree that there should “be a determined effort to shift most of the £1.2 trillion gross liability of the state owned banks into private sector hands” however that is easier said than done.

    First the UK banks you refer to have not been able to separate their non-performing toxic loans and so the intrinsic value of these loans is 60% greater than the market value.

    The Irish recognised this problem early on in 2009 and formed a National Asset Management Agency (NAMA)to encourage the banks to face up to these toxic loans. 1500 property loans were acquired by NAMA with a nominal value of 74.2 billion euros which the agency paid 31.7 billion euros (a discount of about 58%).

    In truth nobody knows (or will admit) the true scale of the toxic loans contained with the £1.2 trillion underwritten by HMG in the UK banks. This will be an impediment to disposing of these banks to the private sector as evidenced by the Northern Rock disposal.

    In the NEMA report of 26/10/11 to the Public Accounts Committee it admitted that it had to make an additional 719 m euro provision for impairments on the discounted property loans they are already holding. The report also said that they had made 4.6 billion euro of asset sales but that they still had the following outstanding loans on their books ; N Ireland 13 bn ,London 6 bn, England & Wales 4.7 bn euros.

    It seems that we are set to choose the worst possible option for the taxpayers where the bailed out banks will be split up and disposed of at a loss for the taxpayers because potential buyers will recognise that these banks contain such huge unaccounted for liabilities.

  21. BobE
    Posted November 27, 2011 at 3:19 pm | Permalink

    Each year we should live on 90% of the previouse years expenditure.

  22. Sue
    Posted November 27, 2011 at 3:57 pm | Permalink

    If the EU get their way, we’ll be paying for banks and bailouts until we are all so broke, we wont be able to afford to get to work.

    Yup. Not only have the taxpayers bailed out the banks, we will now be expected to bailout the bailouts!

    I do hope the UK government is not going to agree to this fiasco. How poor do you want us to get? We’re already queuing at food banks!

  23. frank salmon
    Posted November 27, 2011 at 3:58 pm | Permalink

    Leave the EU. End all subsidies. Put the public sector on privates sector pensions.
    job done.

  24. Mazz
    Posted November 27, 2011 at 4:40 pm | Permalink

    I wonder what you make of this John:

    http://hat4uk.wordpress.com/2011/11/27/eu-crisis-bombshell-how-the-eurozone-plans-to-sell-us-out-to-the-banks/

    Reply: It is n ot clear what evidence backs this up, or how they would access enough taxpayers money to do this.

    • Mazz
      Posted November 27, 2011 at 8:29 pm | Permalink

      Thank you, John.

  25. Quietzaple
    Posted November 27, 2011 at 5:20 pm | Permalink

    The issue is want of Growth and the confidence of those whose Market making activities are continuing their work in straightening circumstances and buying consumer goods.

    VAT cut clearcut, initiative to persuade trading partners to follow suit toute suite.

    Osborne, Cameron and other treacherous Tories have spent so much effort undermining Britons’ confidence in the previous government, in Britain, our economy and in ourselves that a change of government will be necessary to reverse the current collapse. What a shame!

  26. uanime5
    Posted November 27, 2011 at 6:07 pm | Permalink

    An £2-10 billion tax would slightly reduce the amount that needs to be borrowed. This could stop the deficit rising so fast.

  27. Derek Buxton
    Posted November 27, 2011 at 6:43 pm | Permalink

    This government is spending way beyond it’s means, this has to stop. Cuts, except to the deserving pensioners, private that is, are non existent, local authorities are spending far more than drunken sailors ever did and ripping off the poorer sections of society to do it. When is the “not the conservative party” going to get it’s act together? Mind you with the “green” taxes and subsidies for solar panels and the Indian Air Force, the only conclusion is NEVER!

  28. Mark
    Posted November 27, 2011 at 6:52 pm | Permalink

    We have a series of pre-announcements about extra spending plans and plans to inject printed money into favoured sectors (and thereby stoke inflation for the next couple of years). Unfortunately, such measures are not preceded by such essentials as moving to a cheap energy policy, and cutting the impact of regulation on costs on everything from health and safety through employment law and so forth.

    The effect is akin to telling a farmer that he can have some seed, but he must not use fertiliser or plough the field. The result will be similar: seed that falls on stony ground will not prosper, and neither will businesses bound by sclerotic regulation and high energy costs. The money will have been wasted.

    Hearken; Behold, there went out a sower to sow: And it came to pass, as he sowed, some fell by the way side, and the fowls of the air came and devoured it up. And some fell on stony ground, where it had not much earth; and immediately it sprang up, because it had no depth of earth: But when the sun was up, it was scorched; and because it had no root, it withered away. And some fell among thorns, and the thorns grew up, and choked it, and it yielded no fruit. And other fell on good ground, and did yield fruit that sprang up and increased; and brought forth, some thirty, and some sixty, and some an hundred. And he said unto them, He that hath ears to hear, let him hear.

    Who has ears?

  29. zorro
    Posted November 27, 2011 at 6:58 pm | Permalink

    ‘there is a serious problem of pension affordability, and show it intends to grapple with it sensibly and fairly.’…..

    Unfortunately, as in a lot of things, the government makes problems more intractable by its bellicose nature at times. The pastiche presentation of public services in the press has been counter-productive and the curled lip, ever so slightly patronising attitude has not helped a sensible solution come to fruition. Instead, the government has managed to bring about a lot of unions who have never gone on strike before to the brink…..hence the chicken without a head approach around the policing of the borders…….

    It is all very well calling public sector workers ‘leeches’ or ‘parasites on society’ being amongst some of the choice phrases I have seen, but it doesn’t bring about a spirit of resolution.

    I’m sure that a lot of the people saying this may be the same people who would look down on public sector workers in the past and laugh at their small salaries and say that some people who worked in the public sector were ‘wasting their time’ or could be ‘earning lots more money elsewhere’. You don’t hear that much now, but rather the ills of society are being moved on to the public sector after the bankers.

    Working in the public sector is not a road to riches (unless you are a chief executive!) and people in the public sector often do their jobs in a spirit of public service (army, police, nurses and teachers etc).

    A small point, but I think that the government has missed a trick here and bearing in mind the Olympics are coming next year, as John says ‘a sensible and fair’ solution should be negotiated.

    zorro

  30. sm
    Posted November 27, 2011 at 7:03 pm | Permalink

    Stop contributions to the EU. (10’s of Billions)
    Bring in the anti-avoidance rule asap.( Many 10’s of Billions)

    How about a landvalue tax and a reduction on labour taxes.

    Review the tax deductability of interest of commercial loans on non productive assets- which allow for example a commercial landlord to outbid a private actual resident buyer.

    Note Steve Keens suggestion of QE to fund spending and forced debt write downs. Giving funds to everyone not just preferred insiders.
    http://news.bbc.co.uk/1/hi/programmes/hardtalk/9641873.stm

    • The Realist
      Posted November 28, 2011 at 11:20 am | Permalink

      Have you looked at the problem from the other side – ie much less expenditure – we seemed to survive on an aweful lot less Government expenditure a few years ago! It always how we squeeze more out – why not go the full hog and let no-one have any disposable income!

  31. Iain Gill
    Posted November 27, 2011 at 7:05 pm | Permalink

    isnt the reality that even if the banks were shifted into the private sector the state would still in practise be a backstop if any of them went belly up again?

    to really get banking liabilities off the states worry list we either need lots of smaller banks (so that individual banks can be allowed to fail) or we need them small with the old building society practises in play (ie if any fail the others buy them up and take on the risks)

    or maybe i am missing something?

  32. Paul H
    Posted November 27, 2011 at 7:23 pm | Permalink

    How long before the bond markets run out of EZ targets and start looking across the channel? Could be sooner than anyone thinks.

  33. Antisthenes
    Posted November 27, 2011 at 8:11 pm | Permalink

    If only businesses could borrow more money and at low rate of interest so says the new mantra everything will be all right. Even you are calling for it. What part of the dim corners of your mind do you think up such rubbish. Free markets work very well and the lending market says that at the moment lending is a risky business there is enough evidence to support that view. But no you want to manipulate the market into lending more than it is deems wise even after seeing the effects of doing the very same thing over the last decade or so that has given us the crisis we have to day. I know you will say that credit was too loose before but we cannot afford to tighten up now. The problem with that is that the fundamental economic and social structural flaws are not being addressed and until they are any more borrowing is going to be wasted and be more debt that will not be able to be serviced or repaid. There is only one answer now that is to tighten not loosen including everyone’s belt until such time as the deadwood is cut away, economic prudence is re-established and the nation’s businesses can offer goods and services at a quality and value that is competitive in the world market place.

    Reply: My proposal is to create 3 stronger private sector banks which could make sensible judgements about credit for good projects and businesses. It would be their risk, with no government bail out as backstop. That would be prudent and helpful. The current economy is being slowed too much by very tight money, resulting from banking market worry about the Euro crisis.

  34. outsider
    Posted November 27, 2011 at 8:16 pm | Permalink

    Without underestimating the credit rating issue, I feel that the greater financial threat is that the interest rate on AAA bonds is bound to rise, probably doubling for 10 year bonds, if stagflation persists or if there is a return even to 1.5-2 per cent GDP growth.

    Only if the Bank of England’s fears of Japan-style deflation are realised, which does not seem the most likely scenario under current policies, could UK government bonds be worth holding as an investment at current prices. So higher interest costs will dampen the effect of hoped-for recovery in tax revenue.

    Not sure how the Bank of England’s losses on its massive holdings would then be accounted for.

    If UKFI cannot be privatised as a whole, as I would prefer, have you considered the possibility of it being sold to the Bank of England in exchange for cancelling a hefty chunk of its gilt-edged holdings? Not sure if this a practical option but, if it were, it would help to clean up the Government accounts in the way you wish.

  35. Quietzaple
    Posted November 27, 2011 at 9:29 pm | Permalink

    If you want to save some money and make done friends instead of alienating emerging nations you’d cancel the Trident revamp and save £100 Bn or more.

  36. Bernard Otway
    Posted November 28, 2011 at 12:18 am | Permalink

    Apropos comments regarding the Green agenda and climate change or whatever other Buzz words used ,today Sunday I took a friend up to Melton near Hull to buy a car and returned
    in the afternoon,I did not count how many wind turbines I saw but it was a lot,my wife and I
    looked very carefully and we both agree that less than 10 % were actually turning,the reason was obvious especially from about 10 miles north of Luton High Winds,highlighted by warnings on the notice boards and reduced speed limits ,especially around the bridge over the Ouse near Goole and with 5 major power stations within 20 miles radius,reduced to 40 mph.
    Really incongruous was the one power station with about 8 turbines within 250 yards
    of it’s cooling towers,belching smoke and steam out of the towers ,with NOT ONE TURBINE spinning , what an utter WASTE,I wish that the cost of LOSS could be calculated.
    BUT if you extrapolate what we saw in a 540 mile round trip to the UK as a whole,I am
    convinced that this Green climate change madness will be the end of the UK,and is symtomatic of the whole damned Catastrophe ,there are but 42 months at the outside to the next GE ,What govt do we get,I know I am voting UKIP BUT the majority of voters are
    quite frankly Tribal and ignorant unable to comprehend much less articulate what/ who/
    and why they are voting.It is the equivalent of allowing the ordinary seamen to dictate the navigation of the small boat in which Fletcher Christian allowed Captain Bligh and the non mutineers to embark into at Tahiti,they would have rowed or sailed round and round in circles until the all starved.

  37. RDM
    Posted November 28, 2011 at 11:47 am | Permalink

    JR,
    Will the Small Business Loan Guarantee scheme apply within Wales, because (according to the Coop Business banking), it does not and has not? Or any of Tuesdays Startup/SME support?

    Please excuse my suspicious nature, but have the LibDems done a deal with the WAG to (just) bring forward some infrastructure projects?

    Regards,

    RDM.

    Reply: I do not know – let’s see what Mr O says tomorrow

    • RDM
      Posted November 30, 2011 at 12:09 pm | Permalink

      John,
      Just got off the phone with Coop Business Banking; The Loan Guarantee scheme for startups is not available within Wales, as far as they know? The only loan schemes available requires matched funding or collateral.

      I have just sent of an email to BIS, no reply. Is it to early?

      Who would know where I could get funding for a Technology startup (I don’t have any collateral, or anything else for that matter)?

      The LibDem’s seem too have it their way?

      Many thanks for any help given!

      Regards,

      RDM.

      Reply: They are still setting up the one announced yesterday. Ask your own MP to help.

      • RDM
        Posted November 30, 2011 at 2:09 pm | Permalink

        No, Labour Party.

        Cheers anyway.

  • 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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