The Coalition 5 year economic plan – a game of two halves

 

                  The Coalition economic strategy always proposed a squeeze on the private sector for the first half of the Parliament, brought on by tax rises and relatively high inflation, followed by more of a squeeze on the public sector in the second half as a backdrop to planned private sector growth.

                 The latest figures show just how big is the contrast between what has gone so far, and what is proposed in the second half of this planned 5 year Parliament.

                 Let’s take public spending first of all. The years 2010, 2011  and 2012 are estimated to show growth in real current public spending of 1.5%,0.3% and 0.5% or 2.3% over the three years. 2013  and 2014 are forecast to bring a real decline of 1.1% and 2.1%, or 3.2% in total for the two years. This produces a total five year figure of minus 1%.  This as I have said before is an unusual approach, with the increases put in up front, and the cuts left for the last year, an election year.

                 Then there is economic growth. The economic estimates say that the UK economy will grow 0.8% in 2011 and 0.8% in 2012, but will accelerate to 2.0% in 2013, 2.7% in 2014, and finally to a lively 3.0% in 2015.  The main driver will be a pick up in real household income, as more people get jobs and as wages start to go up faster.  After a fall of 0.2% in the first year, 1.4% in the second  and small growth of 0.2% in the third, real incomes are forecast to rise by 0.5% and 1.9% in the last two years.

               This welcome return to faster growth is also forecast to bring in a surge of extra revenue. Particularly interesting are the forecasts for Self Assessment income tax, where the top payers are well represented.  In 2010-11 this brought in £22.1 billion. This year a fall to just £20.1 billion is forecast, and next year a return to £22.3 billion. The following year they estimate  £22.9 billion, with a massive rise to £28.5 billion in the final year, when the full effects of the lower 45p rate will be felt and the better growth helps. I think they will be lucky to sustain  higher levels next year at the continuing  50% rate.

               Overall, Income Tax receipts stutter along for the first three years, with totals of £153.3billion, £152.6 billion and £154.8 billion. It takes off in the last two years, rising to £165 billion and then an impressive £179.4 billion.

               When I have helped turn round near bankrupt companies I have always taken the toughest actions at the beginning. I find people like to know how bad it is, and get the bad news out of the way. In the first few weeks you need to stop the money flowing out of the door. You need to stop hiring people, stop buying anything other than the essentials, defer the capital spending and  stop the daily deficit as quickly as you can.  You look for assets to sell if  the bank manager is knocking on the door for money. You can always spend more if you overdo the parsimony, but going back for a second round of cuts after the first treatment is not so easy and is bad for morale.

             I appreciate turning round a country’s finances is different, and coalition politics greatly complicates the management task. However, we do need to ask how strong are those forecasts of cuts to come, and how realistic are the estimates of much faster growth in the closing months of the 60 month plan?

              The first half has shown that carrying on spending and borrowing does not produce faster growth. It will be interesting to see if reducing the rate of increase in spending and borrowing is a better mix.  I certainly agree with the official forecasters that we should get more income tax paid once rates  are down a bit and thresholds up a bit. Curbing growth of spending in the public sector could be fine if at the same time the tax, regulatory and banking policies are really going to deliver fast private sector growth. It could all work well, but it will require strong action on banks, regulations, and government approvals for new projects to get things moving.

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72 Comments

  1. lifelogic
    Posted March 27, 2012 at 6:22 am | Permalink

    Tax borrow and waste and squeezing (strangling) the private sector on which the state fees is hardly a good idea. Much of what government spends is pointless waste just cut it for once and get some lending to SMEs.

    I see Gavin Esler on newsnight “interviewed” Angela Merkel. It was so absurdly toady that surely she and the EU must have written all the questions. They seemed far more interested the influence of Marin Luther and how she felt treated as a “woman” leader rather than the fate of the PIGIS. Perhaps the BBC think woman cannot answer hard questions on real policy – they certainly gave that impression. Is that not a bit sexist of them?

    http://www.bbc.co.uk/iplayer/episode/b01f6cht/Newsnight_26_03_2012/

    • lifelogic
      Posted March 27, 2012 at 6:33 am | Permalink

      Turning round a country’s finances is indeed different from turning a company round but not by very much. You need to stop wasting money (investing as they call it) on stupid things, to inspire confidence to the private sector investors, provide law and order, stability, little but sensible regulation and sensible low tax rates and give the right incentives to people to work rather than not to.

      Cameron is doing the opposite on all the above and looks like losing to Labour soon too as a result.

      Then Unison can take over and make it even worse.

      • norman
        Posted March 27, 2012 at 8:50 am | Permalink

        How a Labour led Ed Miliband, who comes across as useless even to Labour voters, can be 10 points ahead of Cameron (natural leader, Tories best asset, best PM since Churchill, etc.) and Osborne (a political genius in touch with everyman) must have the spin doctors in No.10 scratching their heads.

        It shows how completely out of touch with their natural voting base the Tories have become. Stay at home or UKIP seem the only two options.

        Imagine if Cameron was up against Blair in his pomp, it would be a bloodbath.

        • lifelogic
          Posted March 27, 2012 at 4:46 pm | Permalink

          Indeed very lucky he had only hopeless brown and useless Unite puppet Miliband. To be fair they were left a huge mess and he was bound to get some of the blame. Also due to his failure to put a proper Tory agenda at the election he has the Libdems standing on his throat- but he does seem to quite like that.
          He could at least make a start in the right direction he has had two years.

      • Disaffected
        Posted March 27, 2012 at 10:40 am | Permalink

        Here here. I agree with you Lifelogic.

    • lifelogic
      Posted March 27, 2012 at 6:41 am | Permalink

      Is he heading for a Heathite “who rules Britain election” after a three day week and general Unison strikes perhaps. He is already going for state dictated price controls on alcohol after all.

      With the answer “Not You Cameron” expected loud and clear. I hope not but rather fear the worse. What is it about Eton and PPE that hones these socialist or is it all in the genes from birth?

      • lifelogic
        Posted March 27, 2012 at 6:51 am | Permalink

        I see Heath was another PPE yet again. Perhaps the countries problems could be solved just by closing the Oxford PPE faculty down and replacing with Physics, Engineering, Logic and some sound economics. A PELE course perhaps. With someone sensible like Jamie Whyte in charge.

        • Disaffected
          Posted March 27, 2012 at 10:58 am | Permalink

          Academic ability is sometimes confused and conflated with emotional intelligence as being the same thing. It is the latter which gives people their values, know right from wrong, make decisions etc. That is why we have captains of industry who are good at business without formal education as well as those who have received good education. These hoons might have received a good education but it does make them leaders or possess the qualities of leadership. Recent sleaze, once more, the lack of emotional intelligence, self serving greed unable to know right form wrong and the need for the implementation of the Kelly report and mark 2,3,4,5,etc to get anywhere near the standards of integrity and honesty the public deserve for people holding office as an MP.

          15 years on from the last time Tories held office and we are back to the old boy network, self serving interest and spoilt boy greed. Spoilt boys always want more no matter how much they have. And they always want to be in charge- for their own interests no one else. Least of the all the country.

          Supporting Gay marriage, trying to change the Christian faith or the accession to the throne will not cut the mustard with core Tory voters only alienate them and confirm Lord Ashcroft’s view that no one knows what the Tories stand for. I do not see this as genius but madness.

          People voted to get Labour out not Tory in. People voted to oppose AV to spite Clegg not because they cared one way or the other- ask any student who voted. The same was true at by-elections. To make public sector spending cuts before an election would be stupid- I suspect that is why it has now been kicked into the next parliament. That is not in the national interest because we all have to pay the financial price. Osborne is making a political gamble at our expense. Once more, self interest not national interest.

          At what point does the age calculator switch off to stop the pension age increasing? Or do we all send an IOU to HMRC when we are dead? Our children are already being lumbered with national debt and even debt for education that should be free. Are this lot going to start placing our Grt Grt Grt grandchildren in debt as well?

      • Bob Webster
        Posted March 27, 2012 at 9:40 am | Permalink

        I can’t see a resurgence of the mass industrial action that characterized
        the 1970’s. The unions simply don’t have that kind of power anymore. What Cameron is heading for is a ” who owns Britain” election. This government is failing to curb public spending, and has no desire to reduce immigration, despite all the rhetoric. Cameron’s plan to concrete over the countryside will be final nail in the coffin for this wretched administration. I can see many former Tory voters supporting UKIP in 2015. Sadly, that probably means a return to Labour Government.

        • Disaffected
          Posted March 27, 2012 at 11:02 am | Permalink

          True, but I will be one switching to UKIP. At least they stand for one thing I want i.e out of Europe. Tories offer me nothing and the reasons increase by the day.

          • Bob Webster
            Posted March 27, 2012 at 2:59 pm | Permalink

            I left the Tory Party last year and joined UKIP.

    • Disaffected
      Posted March 27, 2012 at 10:39 am | Permalink

      I agree with John that the best time to do the cuts was at the beginning to get all the criticisms and hard knocks out of the way so that a promise of land and honey before the next election. Of course there could be spin to say it was much harder a task etc and might take a bit longer but we are doing our best.

      But what has this shower achieved to date? Nothing. The position on all key policy issues has got worse. The perception of CEO bashing, more taxation, more immigration, more EU all damaging. And now it is clear that Osborne is borrowing more, spending more and taxing more and leaving the huge deficit to increase by 40% into the next parliament because they do not have the courage to make spending cuts. Disgraceful. They should be ashamed of their inability and stand aside.

      • A Different Simon
        Posted March 27, 2012 at 11:27 am | Permalink

        Quote “But what has this shower achieved to date? Nothing.”

        Maintaining the status quo ?

        Furthermore the worthwhile reforms that the likes of I.D.S. is trying to make are now too late to be implemented by the next election in any sort of controlled way that would stop them being a disaster .

        They’ve been in power for 2 years and the euphorically optimistic project plan has slipped more than 2 years !

        Talkers , not walkers .

    • stred
      Posted March 27, 2012 at 12:18 pm | Permalink

      She praised David Cameron for his tough cuts in spending. Obviously, she doesn’t read Johns blog. The importance of Germany being in the Euro in order to help industry was also made. They need the Pigis to keep prices competitive and this is accepted as a reason for not saying goodbye to Greece.

      • Disaffected
        Posted March 27, 2012 at 9:03 pm | Permalink

        Spain is up the proverbial river without a paddle. 22.8% unemployment, 52% youth unemployment and no sign of growth whatsoever. The Pm has said he will implement 15% cuts across all public sector departments- why did Spain not do this before?

        Why doesn’t the UK get ahead of the game and make the cuts now- after all most people still think this is happening. Crossing fingers will not change the position action is required.

      • Disaffected
        Posted March 27, 2012 at 9:04 pm | Permalink

        She would praise Cameron, she wants the financial transaction tax without too much bother.

    • Disaffected
      Posted March 27, 2012 at 9:06 pm | Permalink

      I see on the news Ireland will hold a referendum on 31/05/2012 on the fiscal compact. Why not a straight forward in our of Europe? Weasel words already in play I wonder.

  2. Andy Man
    Posted March 27, 2012 at 6:32 am | Permalink

    I find this preoccupation with forecasts very strange since I cannot remember any forecast by government being correct. The huge, bloated public sector is squeezing the life out of the private (productive) sector and any illusionary growth that statisticians manufacture in the figures will not change that. With the vast deficits that we have a decline of 1.1% and 2.1%, or 3.2% will have virtually no effect. Britain is bankrupt using any accounting method except the “government is allowed to hide liabilities that would land a company director in prison” method. Start talking about real cuts of 10 or 20% a year and you might just save the currency, otherwise look forward to more money printing and very high inflation.

    • APL
      Posted March 27, 2012 at 5:02 pm | Permalink

      Andy Man: ” otherwise look forward to more money printing and very high inflation.”

      And a slow agonizing national death.

    • uanime5
      Posted March 27, 2012 at 8:32 pm | Permalink

      Given that many private sector companies are making million and billions of pounds in profits i’s clear that the public sector is not squeezing the life out of them.

      The private sector relies on the public sector as much, if not more than the public sector relies on the private sector.

  3. zorro
    Posted March 27, 2012 at 6:37 am | Permalink

    As in your previous post, the figures here are, let us say, highly aspirational….If they couldn’t do the necessary in the first two years, they are hardly likely to do it with an election approaching.

    Expect inflation to start creeping up again if things go well…..They will print more to try and fund infrastructure projects and stoke up house prices Barbour style. The only way they will get 5 per cent wage increases is if inflation is higher and thry are forced into some kind of incomes policy.

    Bearing in mind how they have failed to readjust and the public/private sectors, does anyone on this blog believe that they will be able to successfully unwind over 500 billion QE by 2015 (dependent on infrastructure spending before the election)?

    • zorro
      Posted March 27, 2012 at 6:38 am | Permalink

      ….without high inflation resulting.

      Zorro

      • zorro
        Posted March 27, 2012 at 7:44 am | Permalink

        Sorry….predictive text, I meant Barber boom style. I note that others have noted the latent Heathism in Cameron’s political genes.

        Zorro

  4. Mike Stallard
    Posted March 27, 2012 at 6:43 am | Permalink

    The right wing middle class parties and their governments are suffering bankruptcy with increasing frequency.

    In these circumstances, the working classes are in a position to defeat the reactionary forces opposed to the interests of the people, to capture a stable majority in parliament, and transform the latter from an organ of middle class democracy into a genuine instrument of the people’s will.

    In such an event this institution, traditional in many highly developed capitalist countries, may become an organ of genuine democracy – democracy for the working people.

    Nearly there………

    (PS this is copied out of the Report to the Central Committee of the 20th Congress of the Communist Party by Nikita Kruschev, 1956)

    • Max Dunbar
      Posted March 27, 2012 at 8:49 pm | Permalink

      Correct in a way. The Chinese “communists” are playing us at our own capitalist game. They have the perfect system to destroy us with; an authoritarian command structure where the individual is of no importance and winning is all that matters, and they work very hard and single-mindedly to achieve results. We appear to be nearing the end of a way of life that will soon be gone forever – and nobody, not even Mr. Redwood, can do much about it. The real world is waiting for us. Not long to go. Sink or swim?

      • Mike Stallard
        Posted March 28, 2012 at 6:12 am | Permalink

        And here we have our very own Working Class Man (on £250,000 a year) causing the tanker strike over Easter.)

  5. James Sutherland
    Posted March 27, 2012 at 7:04 am | Permalink

    Looking at progress so far, I think the later predictions are fantasy. Having failed to deliver lower inflation or lower public spending during the downturn, when public support for actual cuts is surely much stronger than it will be during a recovery, is there any reason to believe they’d finally deliver when it’s less urgent and less popular instead?

    At this point, with the track record to date, it seems more likely spending will continue to increase throughout this Parliament. External factors will improve private sector employment and earnings in the latter part, pushing tax revenue up, probably pushing the MPC to begin doing their job and raise interest rates to bring inflation down at last. A “second” round of cuts, when the first round were a lie? No chance. It’ll take the next recession, probably the Parliament after next, before there’s any prospect for actual cuts. With luck, I’ll be living and voting elsewhere by then anyway.

  6. Jonathan Mackie
    Posted March 27, 2012 at 7:09 am | Permalink

    John

    The problem remains. The state and public spending are just too large. They are crowding out private sector investment and growth. Until the cause if the disease us tackled we are in for prolonged economic anemia.

    • Alan Wheatley
      Posted March 27, 2012 at 8:51 am | Permalink

      Indeed.

      John, what is the history of and forecast for public spending as a percentage of GDP?

      Reply: It declines as growth picks up.It was 46.5% in 2010-11, forecast to be 42.2% by 2014-15

      • Richard1
        Posted March 27, 2012 at 2:08 pm | Permalink

        Labour are making much play of how much better things are in the US. This is questionable once you adjust for GDP per head. Also the deficit (ie debt-financed ‘stimulus’) in the US is about the same as it is in the UK). But the great differences between the US and the UK I would like Conservative politicans point out more frequently are: 1) the US has a much smaller public spend / GDP %age than the UK (10% less?) and therefore a much lower tax / GDP ratio and 2) they have much more flexible labour markets

        • A Different Simon
          Posted March 27, 2012 at 5:48 pm | Permalink

          Richard1 ,

          What about the energy revolution which is taking place in the US ?

          Natural gas wholesale prices of around $2.20 per thousand cubic feet in the UK compared with $14 in the UK .

          The UK energy regulator Ofgem encourages the existing main suppliers to charge as much as possible in order to make renewable energy closer to viable . As with banking there has been complete regulatory capture .

          The US and other countries have put their renewables effort on ice until they are ready or a new type of fuel comes along which renders them redundant .

          Whilst we persist with a renewables fantasy that costs jobs , they have gone for a more pragmatic solution ; hydrocarbons extraction from onshore shale formations which has supposedly added 600,000 direct and indirect jobs .

          Jobs are coming back to the US , particularly in the chemical industry .

          The UK can have our own shale revolution too replace imports and falling North Sea output except it seems the UK is incapable of implementing anything any more .

          Unlike us , the US are free to decide their immigration policy and have the political will to actively enforce it .

          An American-Israeli who had worked in London pointed out to me that the UK will not get anywhere till it dumps it’s class system .

          Looking at Cameron , Osborne and the people from the “good backgrounds” who are fast tracked up the civil service give reason to think he might be on to something .

          • A Different Simon
            Posted March 27, 2012 at 5:49 pm | Permalink

            Typo

            “Natural gas wholesale prices of around $2.20 per thousand cubic feet in the U.S. compared with $14 in the UK .”

          • A Different Simon
            Posted March 27, 2012 at 9:45 pm | Permalink

            I concede that the example of John Major doesn’t exactly support his argument !

            Would anyone argue that our Prime Ministers are not being picked for us at 15 years of age when there is a direct pipeline which leads from Eton to Oxbridge studying PPE to Westminster via one of three fronts of the establishment ?

          • Richard1
            Posted March 29, 2012 at 8:09 am | Permalink

            I agree thats another important factor. Let’s hope the Government sees sense here and allows & encourages exploitation of shale gas

        • lojolondon
          Posted March 27, 2012 at 7:31 pm | Permalink

          The US have also had massive QE – or ‘the printing of money’

    • Kingbingo
      Posted March 27, 2012 at 9:54 am | Permalink

      Jonathan, what is the cause of this pervasive overspending affecting every major democracy?

      Sadly, I can only conclude that the nature of our democracy is flawed. A system where people want to be bribed with someone else’s money cannot be sustainable.

      Yet I found it interesting that only a few days ago someone was rounded upon on this blog for suggesting that representation be linked to contribution.

      • norman
        Posted March 27, 2012 at 11:13 am | Permalink

        I sometimes half-joke half-serious that votes should be tied to the amount of tax you pay, say first vote for free then one additional vote for each £5k of income tax. You wouldn’t put the vote for the chairman of Tesco to the country at large but instead to the shareholders who depend on him doing a decent job to get a return. If you put it to everyone all it would take is someone to say ‘free groceries for a month if I’m elected’ and that would be that.

        It would also be the end of Tesco’s but the new chairman would be trousering a nice big chunk of change as well as rubbing shoulders with other bigwigs, we’d get a month’s free groceries so what’s not to like (unless you’re a shareholder)?

        It’s even more perverse in that shareholders can sell up when they see things going belly up, we’re stuck with what we get under threat of the theft of all our private property and eventually imprisonment.

      • Adam5x5
        Posted March 27, 2012 at 7:50 pm | Permalink

        Read ‘Starship Troopers’ by Robert Heinlein.

        Very good book talking about all these issues (written in the early 20th C).

        He describes a system of government which sounds like it could actually work:

        2 types of people citizens and civilians

        Civilians are not allowed to vote or allowed in certain jobs (like politics)
        Citizens are people who have done 2yrs national service (min) and shown that they can put the body politic ahead of their own well-being.
        No-one can be denied the chance to do national service – even if severely disabled, they have to find them something to do.
        No-one can be kicked out of national service (except for not following orders). You can drop out of national service at any time.
        No-one can be forced to do national service either.

        This system prevents the ‘vote for your own benefits increase’ that seems to be prevalent in much of democracy, as those who can vote have social responsibility to the bigger picture.

        Obviously a truncated summary, but that’s the gist – well worth a read.

  7. alan jutson
    Posted March 27, 2012 at 8:02 am | Permalink

    You highlight it in one.

    Fail to take decisive action which works at the start, means a failure to have understood the problem in the first place.

    A second bite at the cherry confirms the first policy was wrong, actions and thoughts were poor, and the result is a huge loss of confidence by the workers/population in your ability to get it right a second time.

    Get it wrong a second time, and it proves you never had a clue, and means a complete loss of any credibility at all.

    Time is running out John, and the signs are not good.

  8. Paul Danon
    Posted March 27, 2012 at 8:02 am | Permalink

    How on earth will we get 3% growth in 2015? There seems no sign of a new enterprise-culture; no new firms using cheap labour to compete with China.

    • Mike Stallard
      Posted March 27, 2012 at 3:40 pm | Permalink

      OK so the Eu and the Unions and the Labour – Conservative consensus are against slave labour. There is a socking great minimum wage and countless provisos for the working classes legally and bureaucratically in place.

      BUT

      These are terribly easy to get round. Charge, for instance, travel fees to and from work. Charge for luncheon. If possible charge for bed and breakfast.
      Lovely young ladies of course will be pleased to surrender their passports for security against the travel fees.
      All these ruses are quite common, I understand, in Wisbech (at second hand, not first hand).
      The country is flooded out with desperate third world immigrants.
      There is a Marxist proletariat out there waiting to compete with China.

    • uanime5
      Posted March 27, 2012 at 8:37 pm | Permalink

      Cheap labour isn’t the only type of enterprise. The pharmaceutical, IT, and electronics industries need highly qualified people to produce new products.

      Trying to compete with China, rather than Germany or Japan, will just drag down the whole UK.

  9. Alan Wheatley
    Posted March 27, 2012 at 8:48 am | Permalink

    A population heading to 70,000,000 seems to have become the accepted norm. Is this a “stealth” policy?

    Growth needs to be adjusted for population.

    • rose
      Posted March 27, 2012 at 4:45 pm | Permalink

      It’s worse than that: they are aiming to keep it to that if they can manage it, knowing that they probably won’t. And it’s all going to be concentrated in England,
      particularly the South East and West.

  10. Kingbingo
    Posted March 27, 2012 at 9:50 am | Permalink

    “I appreciate turning round a country’s finances is different”

    This is something I often hear politicans say, although I have never understood why, apart from the lack of cojones.

    Now with 15 years of business experience and a dabbling into politics at various levels, and I am still none the wiser as to why at a national level instead of doing the right thing, one must first dig the hole deeper. I would be very grateful if at some point Mr R would explain.

    Reply: Because it has to be done through the civil service and the Parliament – no-one has the strong powers of CEO to just do it.

    • Kingbingo
      Posted March 27, 2012 at 1:19 pm | Permalink

      Thank you for your reply. Although I still find myself wondering if it is the strong power that is lacking or the strong will.

      If you’re primarily concerned with winning re-election, and you think keeping the Guardian/BBC on board is the way to secure power I can see why such single mindedness fails to emerge.

      Perhaps if all those years ago I had remained in politics rather than switching to a career in business I would be more understand for our leaders total failure to achieve anything other than then most incremental or superficial change.

    • lifelogic
      Posted March 27, 2012 at 5:56 pm | Permalink

      Indeed but is the CEO even trying to do it?

  11. stred
    Posted March 27, 2012 at 10:14 am | Permalink

    Do you know how the Treasury calculates these forcasts over 3-4 years? Do they use a computer programme, feed in masses of inaccurate information and then expect a super-accurate answer, like a long period weather forcast. If so, Chaos theory can be used to modify the results and in the end to prove that the Crapincrapout theory is the best available. Then, as with long period weather they will stop trying.

    • uanime5
      Posted March 27, 2012 at 8:39 pm | Permalink

      The forecasts seem to be based on wishful thinking and are constantly moved back a year until they become true.

  12. stred
    Posted March 27, 2012 at 10:21 am | Permalink

    Off subject. Anyone who has been fined by HMRC for not pressing the SUBMIT button on their user-unfriendly system may be interested to know that I have been pardoned, following my appeal. It is necessary to point out that the button is invisible without scrolling, having ignored the reference number and receipt. Also, be very grumpy on the phone and say you will go to prison before paying an unjust fine. Then they will decide to be reasonable. Bless them!

  13. Acorn
    Posted March 27, 2012 at 10:38 am | Permalink

    Last year, OBR reckoned that Self Assessment would yield £32.5 billion for 14/15. They also had £192.1 b for gross income tax, which they have now cut to £179.4 b. Also VAT receipts are going up by 6% compound for the next 6 years according to OBR. Is someone pulling my plonker here?

    For them that like numbers have a look at http://budgetresponsibility.independent.gov.uk/economic-and-fiscal-outlook-march-2012/ . The Budget EFO is at the top of the list.

    At the bottom of the list; especially to raise lifelogic’ s blood pressure, is the EFO supplementary fiscal tables (.xls file). Have a look at the DWP and PS Pension pages.

  14. Neil Craig
    Posted March 27, 2012 at 12:12 pm | Permalink

    Economic Freedom + Cheap Energy = Fast Growth

    That seems undisputed even by the politicians pushing for closing most of our generating capacity and greatly increasing prices.

    More importantly it is shown by the rest of the world where, in this era of “world recession” growth outside the EU & USA AVERAGES 7%.

    We need a free market in energy as much as elsewhere. I see no sign that the Tories want that and it is certain that the LudDums don’t. To claim to want growth while acting deliberately to prevent it does not inspire belief in the integrity of politicians.

    • uanime5
      Posted March 27, 2012 at 8:46 pm | Permalink

      Economic Freedom = no employee rights = low employee satisfaction = poor performance.

      Low employee rights only increases production in low skilled jobs at times of high unemployment because you can easily replace employees with people desperate for a job. For industries that require a skilled or educated workers low employee rights equals skill shortages and a brain drain.

      Developing countries always grow quickly because they can attract business from developed countries due to their low costs. As their standards of living and costs increase their growth will slow down because they’ll receive less investment from developed countries.

      • Bazman
        Posted March 28, 2012 at 6:51 pm | Permalink

        The wages my now trade pays makes bar work and shelf stacking an attractive option. Can’t say I’m willing to travel or up my skills. They can get someone else to do the work. It’s now not my business. I’ll work on the fringes until the trade is finally dead.

  15. javelin
    Posted March 27, 2012 at 12:31 pm | Permalink

    The real danger comes from rising interest rates = house prices will fall drastically.

    • Electro-Kevin
      Posted March 27, 2012 at 4:56 pm | Permalink

      Despite interest rates being at a record low house values in this vicinity are already taking a big hit – ignore the asking prices. 10% off before haggling starts.

      Even a few percent rise in interest rates will cause a flood of housing coming onto the market from distressed vendors. Cheaper housing will still need to be heavily discounted for first timers to have achieved their 20% deposits.

      For interest rates to go up safely there first needs to be some wage inflation.

    • APL
      Posted March 27, 2012 at 5:19 pm | Permalink

      javelin: “house prices will fall drastically.”

      Which is what should happen.

    • JimF
      Posted March 27, 2012 at 7:34 pm | Permalink

      No houses are the new Mortar Standard
      We print to keep prices stable or rising

    • Adam5x5
      Posted March 27, 2012 at 7:43 pm | Permalink

      Not necessarily a bad thing – house prices in this country are badly over-valued.

  16. Phil Richmond
    Posted March 27, 2012 at 12:42 pm | Permalink

    John – unfortunately even if Cameron & Osborne were Conservatives who knew what they were doing (they arent and they dont) nothing will fundamentally change until we leave the EU and stop immigration (of the non-skilled type)

  17. BobE
    Posted March 27, 2012 at 1:29 pm | Permalink

    The next election is a certainty for Labour.
    The Lib Dems will vanish, and the Tories will be decimated.
    UKIP will grow, a lot I hope.
    But the liebourites will get the next administration.

    • Electro-Kevin
      Posted March 27, 2012 at 4:58 pm | Permalink

      Not with Ed Miliband.

    • JimF
      Posted March 27, 2012 at 7:36 pm | Permalink

      And next UKIP
      March on 2025

  18. Lindsay McDougall
    Posted March 27, 2012 at 1:44 pm | Permalink

    I accept that it takes a year to plan significant public expenditure cuts but we have been in office for nearly two years. FY 2011/12 is when the axe should have been swung, not 2013 and 2014. Perhaps the inherited deficit has been too big to fight on all fronts at once.

    • JimF
      Posted March 27, 2012 at 7:39 pm | Permalink

      That was Labour’s plan. We needed a government with guts and Brown was right that this one wouldn’t have any.

  19. Patrick Loaring
    Posted March 27, 2012 at 3:11 pm | Permalink

    I am currently very disappointed with this Conservative led government and will probably not vote at all at the next General Election. I’ve always voted Conservative in national and local elections but I am so angry at what they are not doing and what they intend to do that I do not see Cameron and company as true bearers of the Conservative torch. They’ve been taken over by those Liberal idiots!

  20. uanime5
    Posted March 27, 2012 at 8:26 pm | Permalink

    The problem is where is this growth going to come from. Given that firing several thousand people in the public sector didn’t result in the predicted millions of jobs in private sector there’s no guarantee that cutting state spending will increase spending in the private sector. The most likely outcome is that growth will remain sluggish and unemployment will increase at the same rate unless the Government does something that will cause growth.

    (another issue and site ref left out-ed)

  21. Vanessa
    Posted March 28, 2012 at 1:23 pm | Permalink

    The only way any government will get extra revenue is to reduce taxes as shown in Hong Kong and, amazingly, Russia when Putin first came to power. Unless the UK increases its population continuously for ever taxes will not go up, but benefits will !

  22. Derek Emery
    Posted March 28, 2012 at 10:49 pm | Permalink

    Why not reduce public sector salaries which are increasingly in front of private sector salaries by 15-20% and include large pension liabilities that are only partly funded by the public sector?

  23. Dennis Anthony
    Posted March 28, 2012 at 11:26 pm | Permalink

    Redwood continues to talk about growth but he yet has to tell if he knows what is the fundamental source of growth/wealth. I have asked him a few times but he hasn’t answered so I don’t think he knows – same applies to all commentators, MPs, interviewers etc. Anyone here know?

    Reply: Growth comes from the efforts of people, creating more goods and services from the resources available to them. It requires talent, money and natural resources. To bring this forward the UK needs good education, infrastructure, functioning banks and a sensible tax system etc.I wrote a whole book/report about this which is available as a download on the website, the Economic Competitiveness Report.

    • Dennis Anthony
      Posted March 29, 2012 at 4:53 pm | Permalink

      Thanks for your reply in which you have buried the fundamental source of growth – natural resources, in other words the environment/biosphere.

      You simply state that growth ‘requires’ , among other things, natural resources without further comment so one can infer that you think this is inexhaustible and that we are not now rapidly decreasing and polluting these resources. Without primary attention to the position of resources one cannot blithely posit future plans assuming these resources will always be available in usable quantity and quality.

      I hope you have addressed this in the Economic Competitiveness Report, which I will read, and if so I feel that this should be the first item you should always mention in any discourse in any medium as no one else in the media seems to be aware of it which also leaves the public unaware. As I have never heard you do this I feel you haven’t realised the importance of it.

      Of course I understand the importance of resources, but you should understand the importance of people. Some resources are finite, but many are renewable, as with power, water etc. There are also substitutues and new technologies which can change the need for resources.

  24. Dennis Anthony
    Posted March 29, 2012 at 5:52 pm | Permalink

    Thanks again.
    I did ask you for the ‘fundamental’ source of growth and people is not it – without resources there can be no growth no matter how many people.

    Now from your E.C.R. I don’t see any stress on the importance on the environment/biosphere, not mentioned I think.

    Some quotes from it :-

    ” Like China, India, now growing quickly, will be another giant consuming large quantities of the world’s supply of oil and other raw materials, and delivering an important part of world output.
    Sheer weight of numbers will propel China and India to the two top slots in the world league of economic output
    We recognise that the UK remains one of the richest countries in the world.
    What can be done to make the UK more prosperous? ”

    The last is shocking – you admit we are one of the richest countries in the world yet you want us to be even richer! This policy is greedy, selfish and disgusting when we are now taking more than our fair share of the world’s resources. Don’t you see this?

    The previous quotes show how resources are increasingly being used and you think we can continue to do so without any comment except how can we compete!

    Your idea to get resources seems like asking a poor person to go to a cashpoint as there is plenty of money there without realising that money has to be in it to be able to withdraw it.

    You say, “There are also substitutes and new technologies which can change the need for resources.”

    What are they which are the equivalent to today’s, let alone tomorrow’s, energy needs with or without a rising world population?

    Reply: We disagree. Most UK people agree with me we would like a more prosperous society. There are many renewable technologies for energy which are being developed rapidly,as well as many new sources of gas and oil being discovered.

  • 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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