Plan A, Plan B and Plan C – how to run the economy?

 

              I find it difficult to do interviews on the state of the economy. The BBC interviewers all think there have been large cuts in public spending. They want to debate the question should the state spend and borrow more to lift the economy out of recession. I always have to start with explanations of just how much extra the state is spending and borrowing. They cannot point to anyone recommending a  large figure for extra state spending and borrowing,  who thinks deficit reduction is not important. They cannot explain why so much state spending and borrowing so far has not produced the growth most of us want. Under the Coalition government  an expanding state sector has increased national output, but not by enough to offset declines in the private sector.

               I am a strong supporter of the government’s Plan A. That Plan was stated in words. It was to remove the structural deficit by 2015. 80% of the work would be  done through spending cuts, and just 20% through increased tax revenue. It would actively promote a private sector led recovery by supply side measures. That was a good plan, and would probably have worked fine. The trouble is they never implemented that one.

               The embarked on Plan B in their first budget. This kept the sensible idea of eliminating the structural deficit by 2015, but decided to do it by a huge forecast increase in tax revenues, whilst allowing public spending to rise. At the time I suggested the tax forecasts were too optimistic, as the higher rates were always likely to lead to revenue shortfalls.  I also suggested that if they simply froze public spending  for the first year, they would borrow £160 billion less over the 5 year period of this Parliament. That would have given them more leeway and help secure success. They opted for a plan which proposed borrowing an extra £451 bn over five years instead, to allow a substantial spending  rise in the first year.

               Now we are on Plan C. Plan C delays eliminating the structural deficit until 2017 or later. It is seeking to reinstate some of the cuts in public capital spending made by Labour and included  in Plan B. It recognises that revenue will be lower than forecast in Plan B. It is, if you like, a massive fiscal stimulus plan, based on borrowing  £556 billion  extra between 2010 and 2015. Latest figures imply they may well add additional fiscal stimulus to this package, as so far this year they have borrowed £9 billion more than budget. How much more borrowing do the additional  fiscal stimulus enthusiasts think it takes? Why hasn’t the huge fiscal stimulus administered by the current large structural deficit done the job?

           State borrowing is simply deferred taxation. It all has to be paid back, with interest, by taxpayers. Too much deferred taxation is as damaging to enterprise, incomes and prosperity as taxation itself. The government has increased planned borrowing by £105 bn for the period of this Parliament when shifting from Plan B (Budget 2010) to Plan C (budget 2012).  How much more deferred tax do people want?  This autumn will probably see a further rise in the official forecasts for the borrowing total.

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254 Comments

  1. Brian Taylor
    Posted August 23, 2012 at 6:13 am | Permalink

    If you going to Cut,Cut early and Cut Hard,the voters would have been with you,now like Blair they have wasted 2 years and prolonged the agony.

    The public sector should have had salary reductions of 20% no recruitment no redundancies. tax free PAYE should have been raised to £10000 no increase in welfare payments including pensions VAT back to 17.5% abolish the 40% bit on private pension and suspend winter fuel payments !

    • lifelogic
      Posted August 23, 2012 at 7:19 am | Permalink

      Why only 20% reduction for the state sector they are nearly 50% over paid relative to the private sector (when you include their pension remunerations). They also work fewer hours, do less shift work and take more days off in general. Furthermore many do nothing of any real value, just taxing or inconvenience the productive.

      • lifelogic
        Posted August 23, 2012 at 10:41 am | Permalink

        Might I recommend delingpole’s excellent blog on the green issue and the Severn barrage nonsense:

        http://blogs.telegraph.co.uk/news/jamesdelingpole/100177587/tory-sleaze-is-worse-than-ever-yeo-and-deben-must-go/

        • Timaction
          Posted August 23, 2012 at 7:31 pm | Permalink

          Here’s another area we could cut as the word is out around the globe that we have an easilly abused International Health Service and continuing mass migration policy. Come one, come all. This is just the tip of an unchallenged iceberg!

          http://www.telegraph.co.uk/health/healthnews/9494485/Nigerian-health-tourist-flew-to-UK-for-caesarean-birth-on-NHS.html

          • Bob
            Posted August 23, 2012 at 8:32 pm | Permalink

            @Timaction

            We’ve created a rod for our own back.

            “The hospital will now try to bill the woman for her treatment but has no powers to force her to pay or to prevent her leaving the country.”

            We’re being taken for mugs.
            The French wouldn’t be so utterly stupid.

          • lifelogic
            Posted August 24, 2012 at 6:18 am | Permalink

            At least the mother and baby are doing well, it sounds like a better way to spend public money than so much of what the government wastes our money on. The pigis, the green tosh, the Olympics, the augmenting of the feckless, the EU, HS2 ……. at least some good has come of it.

    • Pete the Bike
      Posted August 23, 2012 at 7:26 am | Permalink

      Like your thinking Brian. I’d have said 20% cuts across the board, with overseas aid, EU funding and several others getting a 100% cut. The second year I’d go for another 20% along with very large tax cuts reducing income tax to a flat rate of 25% then down to 20% and a total elimination of NI and all the stealth taxes that Gordon invented. That would force a huge reduction in the public sector and a big rise in freedom from government. I’d also stop any full time overseas deployment of troops i.e Afghanistan being evacuated as fast as they could get on a plane.

      • Vanessa
        Posted August 23, 2012 at 3:30 pm | Permalink

        I agree. The trouble is this government has no guts and would never have the courage to upset the “lefties” because they are all lefties at heart. There would be strikes everywhere and they would cave in. They are all SO WEAK and WIMPISH. Nothing will be reduced by 2015 when labour will get in and it will all start again until Britain hits the bottom of the pit.

    • Rebecca Hanson
      Posted August 23, 2012 at 7:54 am | Permalink

      Three years pay freeze then a 4.5% cut in public sector pay + promotion + recruitment freezes during times of rapidly rising prices have been hell for those of us trying to balance budgets but have been borne quite well by those of us involved. The advance notice of it coming has been essential.

      In education there should have been real cuts instead of years of persecution of teachers by an abysmal SoS for education. But really important things were cut and the volume with which we were told these things were being cut – things like the development of technology in the infrastructure of education, online forums for teacher development and teachers TV which created programs to help us understand reforms and best practice and university departments in teaching. Of course these cuts were all to do with fixing the deficit weren’t they – as the press told us so clearly. Back then it didn’t occur to anyone to look at where Murdoch’s interests in education lay and we had no idea how much money Gove would stream into his own silly projects – wiping out the benefits of these cuts.

      You’re right Brian – there should have been fast cuts. But the cuts in income were right – cuts in jobs were needed. But instead the government managed to make everyone very, very angry and disillusions with this government by being deeply ignorant and pursuing it’s own agendas which were never in the interests of anyone but them and Murdoch. Especially in education and they certainly tried to in health.

      By the way have you noticed today’s lunacy? Let’s be clear about this – the pass rates have improved because children, teachers and parents have become better at spoon feeding children to the correct grades, in general at the expense of all their wider skills development. So what Gove has done is abandon norm referencing (which means that the standards for a C grade are agreed and children who reach them get that grade) and returning to criteria based referencing (the government controlling the % of children who failed). This is utterly stupid. What’s needed is that the wider skills of the child (such as being able to apply their knowledge) need to be taken into account in exams too. This could be effectively achieved. Only Gove doesn’t believe in any of that stuff because he’s no interest in the real world – only in the world that his time as a Murdoch hack taught him about.

      Reply: The schools budget was forecast to rise by a very small amount in real terms over the 5 years, with bigger cash increases. To give readers some feel for the reality of this on the ground, Wokingham Borough saw an increase in schools grants from central government from £117.6m in 2011/12 to £120 m for 2012/13. Wokingham schools also held necessary cash balances of £4.7m in March 2012.

      • lifelogic
        Posted August 23, 2012 at 9:57 am | Permalink

        But even after pay freeze they are still hugely over paid relative to the private sector that pays for them all and is being killed by them.

        • Rebecca Hanson
          Posted August 23, 2012 at 6:16 pm | Permalink

          Then why aren’t you working there lifelogic? Go try it. Then your comments could be a little better informed (while of course you buy your mansions and have your expensive holidays with your super duper public sector salary).

          • lifelogic
            Posted August 23, 2012 at 8:23 pm | Permalink

            My comments are simply informed by the facts. Including the true value of pensions the state sector is about 50% better remunerated than the private sector. I do not need to work in this sector to state these simple facts – I just look at the published figures.

            I also know from personal experience that many (not all) of them do nothing of any use to anyone and many merely cause extra pointless work for the private sector. I do not in the main blame the individuals but the system.

            The idea than one can only state, for example – that riding a motorbike is more dangerous than a driving a car – if you personally ride a motor bike is clearly an absurd form of logic. Do you have any real figures to dispute my statement of facts beyond the irrelevant assertion that I should try working for the state sector?

        • uanime5
          Posted August 23, 2012 at 7:56 pm | Permalink

          Actually private sector teacher, nurses, and doctors get paid much more than their public sector equivalents. Do try to keep up.

          • lifelogic
            Posted August 23, 2012 at 8:25 pm | Permalink

            On average the 50% higher pay, in the state sector, is about right, when you include pension rights. I just state the facts they are well known and clearly published. Do keep up.

          • uanime5
            Posted August 24, 2012 at 9:04 pm | Permalink

            Lifelogic you do realise that 90% of teachers in independent schools have access to public sector pension schemes. No one would work in the private sector if they could get paid more working the public sector.

            Perhaps you should check your facts.

            http://www.telegraph.co.uk/education/educationnews/8889759/Private-school-teachers-could-quit-over-pensions-reforms.html

          • lifelogic
            Posted August 25, 2012 at 12:00 pm | Permalink

            I stand by my comments that on average the state sector is about 50% better remunerated when you include pension rights. They also have better conditions, better pay offs, take more sick leave, more sociable hours and more days off in general. Do you dispute this?

      • Phil A. Grey
        Posted August 23, 2012 at 11:22 am | Permalink

        I’m sorry, call me naive, but I do not get all these references to ‘Mudoch’s interests in education’. Could you explain further? You seem to assume that everyone knows about this particular conspiracy.

        reply: I did reply before explaining why I thought it was wrong.

        • Rebecca Hanson
          Posted August 23, 2012 at 6:14 pm | Permalink

          I’m working on that one. It’ll be in the blog which follows “The Coming of Age of Ofspare” which you’ll see if you follow the link form my name to my blog.

          • Jerry
            Posted August 23, 2012 at 8:31 pm | Permalink

            Rebecca, the simple, quick, version will do, don’t leave it like a hanging chad….

            I assume you are referring to the time that he spend working on the Times newspaper, why that makes him disinterested in life as you keep asserting can only be guessed at, after a quick look at a brief independent bio of Mr Grove I would suggests that he might actually have more life experience than you think. You might detest him for what ever reason Rebecca but for many he is/should be an inspiration, he was given the chance of educational betterment and now wants others to have the same life chances.

            Anyway thanks Rebecca, I respect the bloke more now than I did before you refused to answer for yourself!

      • nicol sinclair
        Posted August 23, 2012 at 2:38 pm | Permalink

        @Rebecca Hanson. It’s called the Gaussian (or standard distribution) curve. From this, the majority, by definition, should be graded ‘C’ with some ‘D’ & ‘B’ and even fewer as ‘E’ and ‘A’.

        We seem to have forgotten the standard distribution within society…

        • Rebecca Hanson
          Posted August 23, 2012 at 6:13 pm | Permalink

          Nicol if you follow the link from my name to my website you’ll see I’m a lecturer in maths education so can pitch your comments accordingly.

          If you norm reference then you decide that a certain proportion of children will get each grade as are describing. This means that it’s not the standard you achieve in you test which gets you your grade, it’s how many people you beat.

          Many years ago we moved from norm referencing to criteria referencing, which means that standards are set for each grade and if achieve the standards you get the grade, no matter how many people you beat. So everyone has focused on achieving the grade but that’s been at the expense of their wider development so overall they’re generally not so bright as if they’d got the grade without such a narrow and intense focus on meeting the criteria.

          Only this year Gove’s changed back to norm referencing – i.e. after the children have produced the work to get a C grade according to the descriptions of what a C grade is, their mark is then changed to a D to fit the %age of children getting each grade Gove wants.

          He identified a real problem which could have been properly addressed but had inflicted a solution on it which bears no relation to the sources of the problem and will just create general meaningless chaos and misery.

          • alan jutson
            Posted August 23, 2012 at 7:32 pm | Permalink

            Rebecca

            This is far too complicated thinking for a simpleton like me.

            No wonder education has been in a mess for the last few decades, and cannot produce enough people capable of meaningful work.

            Or even produce people who want to work with some commonsense a can do attitude and some personal responsibility.

            But then perhaps I am asking for too much, and getting too old.

          • Rebecca Hanson
            Posted August 23, 2012 at 9:27 pm | Permalink

            Indeed Alan,

            Running an education system which creates no neets in a tough area is a difficult thing to do and requires great experience and intelligence.

            It’s not obvious to those who haven’t got such experience what those who have are doing. That’s fine and normal.

            What’s not fine and normal is when those who’ve no idea how to improve things keep organising the sacking of those who in order to impose their ignorant and counterproductive views. It was a disturbing feature of the Blair government this government could have learned from. Unfortunately they learned from it in the wrong way and have decided to do it to a vastly more extreme extent.

          • Bill
            Posted August 23, 2012 at 9:54 pm | Permalink

            I don’t think this is correct. The assumption Rebecca is making is that it is easy and uncontroversial to apply criteria to the passing of complex A level questions. But it isn’t, and so criterion referenced exams must in some sense be subjectively graded.

            When I took A level the top 10% got As and the next 10% Bs and so on. I think last year about 25% received an A. I do not believe that an A last year is worth the same as an A 25 years ago. In other words Gove is doing the right thing to try to make sense of our examination system.

          • Adam5x5
            Posted August 24, 2012 at 12:17 am | Permalink

            Surely the norm reference is the better way.

            That way you can look at a person’s grades and determine how good they are at a subject relative to their peers.

            Keep the test somewhat consistent over the years (obviously some variation required to prevent rote learning) and you will get a picture of the population overall.

            Of course, the best kept secret of the education system is that it doesn’t make too much difference once you get into the world of work. Show intelligence, a willingness to learn and a basic ability to write properly and you’ll do well. The higher grades make it easier to get your first job, but at the end of the day grades aren’t the only thing companies look at – if you get an interview, they accept your grades as good/bad as they may be, it’s all down to personality and ability to fit in and what they can bring to the company.

          • lifelogic
            Posted August 24, 2012 at 10:06 am | Permalink

            Just say he/she was in the x percentile relative to the other candidates why bother with grades – the candidates do no change much year to year.

          • lifelogic
            Posted August 25, 2012 at 12:11 pm | Permalink

            Norm referencing is by far the most sensible way. The intake does not change much year to year – it should also include a quality of intake figure for that exam (perhaps obtained by averaging all the exam scores across all subjects that took that exam). This way subject with a better intake say German/Music/Further Maths are clear and the boards no longer have no incentive to inflate grades to get more candidates. Then it is clear you were better than 91% of the candidates or perhaps 91% were better than you.

          • Lindsay McDougall
            Posted August 27, 2012 at 12:52 pm | Permalink

            If Michael Gove had had cooperation from the educational establishment instead of dumb and sullen resistance, there might indeed have been a more considered approach to making qualifacations and grades more meaningful.

            We’re going back to norm referencing because criteria referencing has not been impartially implemented. The pace of human evolution (not of human beings + technology) is very slow, particularly if you have a welfare state dedicated to counter evolution.

            It is absolutely impossible that average human ability has increased as much as the trends in GCSE and A level results over the last (say) 25 years imply. The exams simply must have been dumbed down. There is no other explanation.

    • Sebastian Weetabix
      Posted August 23, 2012 at 7:59 am | Permalink

      Salary reductions of 20% for the public sector? What utter, utter rubbish. Take – for example – a civil service admin assistant on £17K. A real fat cat, on £17K. Do you seriously think you can batter someone on that level of pay for a fifth of their income with no ill effect?

      By all means have a salary freeze for everyone over £40K. By all means slash salaries of those on >£80K. Have a hiring freeze. But a pay cut for the low paid at a time of 5% inflation? You’re either unthinking or simply callous.

      • alan jutson
        Posted August 23, 2012 at 9:04 am | Permalink

        Sebastian

        Whilst I understand your point, I do not think you understand by exactly how much many private sector workers have had their incomes cut.

        Many in the construction industry have had to accept cuts of 40% or more, many have been put out of work with no big redundancy payments, because when you are self employed you do not get made redundant, you are just told not to turn up next week, or, the contract has ended, or indeed, you can work next week but the rates are 50% less.

        Thus whilst I accept that any reduction is hard for the familes concerned, some have it much harder than others, and believe me those people are not public sector workers.

        The sad fact is that none of us got the country into this mess, but we are all now expected to pay for it, even public sector workers on low salaries.

        • lifelogic
          Posted August 23, 2012 at 10:00 am | Permalink

          They also get pensions in addition to remuneration (worth about £50K PA for MPs for example). All in all they are about 50% better paid than the private sector even after the freeze.

        • APL
          Posted August 23, 2012 at 10:30 am | Permalink

          Alan Jutson: “The sad fact is that none of us got the country into this mess, but we are all now expected to pay for it, even public sector workers on low salaries.”

          Ahem! The politicians have been in charge.

          Let them take a share in the hard times too. A 20% cut in their pay and a further 20% cut in all allowances, a additional 20% cut in ‘short money’.

          • alan jutson
            Posted August 23, 2012 at 1:40 pm | Permalink

            APL

            You will not find me arguing against your reasoning.

            That is why I said and we are expected to pay for it.

            I did not mean we should.

        • Jerry
          Posted August 23, 2012 at 10:36 am | Permalink

          The sad fact is that none of us got the country into this mess, but we are all now expected to pay for it, even public sector workers on low salaries.

          Sorry Alan but I think you are very wide of the mark there. If none of us got the country into this mess then prey who did?! Wasn’t the problem caused by a credit bubble, you know borrowing money that ‘we’ either couldn’t pay back or didn’t being pay back – like when people were transferring their debt from one account to another rather than paying off the (original) debt. Yes I know that the actual problem was in the much wider banking sector but that casino banking was just a symptom of the wider credit bubble.

          Whilst some credit/debt is unavoidable, business development loans for example and very few can afford to buy a house with a ‘cash payment’ (even then, what the hell were people -banks and customers- thinking of with 110% plus mortgages and the like), but paying off one credit card debt by loading another card…

          All this was total madness and the sooner that we accept the need to learn again to buy only what we can directly afford the better, few people need a £3000 60″ flat screen TV or what ever, certainly not if it’s on the ‘never-never’ that never is and perhaps not if it’s manufacture doesn’t directly improve our own economy [1], as someone pointed out, cutting VAT does little to improve the UK/EU economy but it does help places like China.

          [1] or the EU wide economy, otherwise we will break EU law, crazy that we now can’t have a “Buy British” campaign

          • alan jutson
            Posted August 23, 2012 at 1:47 pm | Permalink

            Jerry

            I would agree that some people thought the good times would never end, but please do not include me amongst them.

            I have no personal borrowings, so I did not contribute anything to the credit bubble.
            My Company did not run on any borrowed money either, it expanded only slowly, but out of profits.

            I was bought up by my parents not to purchase what you could not afford, because if you cannot afford it this week, sure as hell you will not be able to next week when you are making payments plus interest, but instead wait until you could by saving a little each week.

            If only some of our politicians could think this way.

            Thus whilst I agree many went mad, many did not.

          • Jerry
            Posted August 23, 2012 at 2:59 pm | Permalink

            Alan, indeed you were/are not alone, but I would contest that you never had credit, did you always pay cash/cheque/debt-card for your companies supplies, did you always pay your bills either in advance or on demand, never 30 days, you didn’t/don’t have a credit card – if not then who do you think financed that credit/debt at some point along the chain?

            I’m not getting at you Alan, just suggesting that we can’t avoid credit/debt, in fact we have been encouraged to enjoy the ‘benefits’ of credit/debt at every turn even if we would prefer not. Why, because that casino banking was (supposedly) making money from our debt.

          • alan jutson
            Posted August 23, 2012 at 7:47 pm | Permalink

            Jerry

            Yes of course I had a personal credit card (more than one actually), paid off in full each month, thus no charges.

            Yes my Company did have trading accounts, and yes did pay under the terms of trading, normally 30 days, but on most accounts we offered to pay early, and thus qualified for an early settlement 2.5% discount where applicable.

            I did not mention credit as in credit cards or normal trading accounts, I said borrowings and that in my view is very, very different.

            Many, many times the Bank offered me loan facilities and arrangements suggesting that I could expand further and faster, but it meant putting our family house on the line, and my answer to the Bank manager was always the same.

            Sorry, but what Alan’s got, Alan keeps.

            Eventually he stopped offering, and I never asked.

            Oh yes, did have a mortgage for a while, so I suppose that would count as borrowing, should you wish to include that form.

        • Sebastian Weetabix
          Posted August 23, 2012 at 5:42 pm | Permalink

          @Alan Jutson: I am in the private sector. Compared to 2008 my income is 35% lower. But as I am lucky enough to be a company director, still on a very decent salary, I can stand a pay cut. The really low paid cannot, not in the private sector, not in the public sector.

          Screwing admin assistants on low pay makes no sense. Sticking a 40% cut on those being paid more than the Prime Minister not only makes sense, it needs to be done now, and it should have been done 2 years ago. Those on low pay in the public sector would applaud it.

          • Jerry
            Posted August 24, 2012 at 6:43 am | Permalink

            Let me guess, Mr Weetabix is a low paid admin who still expects his two weeks on the Costa’s,his Sky subscription and that nice new 3D TV…

            The fact is Mr Weetabix, other than those on the NMW [1] everyone else has room to take pay cuts, even more so when people who through no fault of their own are either are being forced onto benefits (or having those benefits cut). There is no automatic right for constant improvement to living standards, nor even that they remain static. It’s just been the political and social convention for the last 60 years that there should.

            [1]and even there, the NMW might not be increased, or at least not keep up with inflation

        • Rebecca Hanson
          Posted August 23, 2012 at 9:33 pm | Permalink

          Alan here in Cumbria low income workers in the public sector have been hit by pay cuts of 20%, forcing many to give up their work and go back onto benefits as it no longer covers the cost of getting to work, hugely reducing the quality of the provision.

          http://www.newsandstar.co.uk/cumbria-teaching-assistants-in-pay-cuts-appeal-row-1.817016?referrerPath=

          Please get in touch with reality. You really haven’t a clue.

          • Jerry
            Posted August 24, 2012 at 7:01 am | Permalink

            Very interesting article Rebecca, especially the bleating about individual appeals, I bet their union would not allow such individual pay bargaining if we were talking about a pay increase and some members were arguing that they don’t need such a rise?… Just a thought!

            Also, what has the duties of these different teaching assistance got to do with the percentage of any pay cut, if some of these people have higher skills then that should be reflected in their basic salary scale, I suspect that there is a reason this is not so, thus differences in any percentage pay cut between ‘grades’ would bring such differentials in via the back door – possibly with adverse consequences, for either the unions, the LEA or wider government (spending).

          • alan jutson
            Posted August 24, 2012 at 8:53 am | Permalink

            Rebecca

            I do have a clue actually, and since I am now retired, have served a fully indentured apprenticeship, been employed PAYE in a number of industries, been made redundant 4 times in my life, been self employed, run my own business, and also been a union shop steward.
            I would suggest I have had rather more work related experience than you, and thus have seen rather more of work life in all of its forms.

            I suggest you read all of my comments on this thread, to get a more balanced view of my comments, rather than just take one point.

          • lifelogic
            Posted August 24, 2012 at 10:09 am | Permalink

            Travel to work should perhaps be allowable as an expense of working (in some cases) as it clearly is and benefit payment needs to be reduced so there is a real incentive to work.

          • Jerry
            Posted August 24, 2012 at 1:55 pm | Permalink

            Lifelogic, many people have had their benefits reduced, in effect, what do you think the DWP raising the minimum number of hours before these people being able to get additional benefits that made sure that “working always pays”. Now more than ever there is a real disincentive [1] for these people to take that 20 hour only at the NMW job because for many they are worse off.

            [1] and some simply can’t take such jobs and stay alive, out of the bankruptcy courts, whilst some will no doubt be driven into the grasp of the loan sharks and crime

      • Jerry
        Posted August 23, 2012 at 10:01 am | Permalink

        A real fat cat, on £17K. Do you seriously think you can batter someone on that level of pay for a fifth of their income with no ill effect?

        Yes, give them a choice, either a 20% cut or a 100% cut with little or no redundancy either, perhaps just enough to allow them to buy a bike and a spare inner-tube…

        • Duyfken
          Posted August 23, 2012 at 2:52 pm | Permalink

          That’s too unfair Jerry and ridiculously OTT, but the cuts might be graduated (in percentage terms), the severest being those in high salaries (not £17k but say £50k +). At the lower salary levels, one can sympathise with the description given by Mr Weetabix that a flat 20% cut could be callous, and any such cuts for those other than higher-income executives should properly need to be implemented over several years.

          • Jerry
            Posted August 23, 2012 at 4:28 pm | Permalink

            @Duyfken: £17k less 20% (£3,400) = £13,600. OK, so perhaps 20% is a little steep but not excessively so, they are still better off than many on the NMW… What sort of percentage would you start these pay cuts at, 15% perhaps, and why do you think that those on 17k should be exempted from cuts those in the private sector (such as the self employed as Alan pointed out, and often far more than 20%, often implemented with 48hrs notice) are having to accept?

          • Sebastian Weetabix
            Posted August 23, 2012 at 5:43 pm | Permalink

            I’ll bet Jerry’s on more than £17k.

          • APL
            Posted August 24, 2012 at 8:01 am | Permalink

            Duyfken: “and ridiculously OTT”

            Compare with Greece?

            Then suggest that severe cuts now might save us from that fate, or carry on cheeseparing* and get the Greece treatment five years hence.

            *of course this government isn’t even ‘cheese paring’ it isn’t even cutting, since the deficit is increasing.

        • uanime5
          Posted August 23, 2012 at 8:04 pm | Permalink

          You do realise it’s illegal to fire people who refuse to take a pay cut. Unless you want companies to be sued for bullying, unfair dismissal, and harassment you shouldn’t preach such nonsense.

          Also increasing the number of people who are unemployed increases welfare costs and reduced the amount spent in the real economy.

          • Jerry
            Posted August 24, 2012 at 7:23 am | Permalink

            @uanime5 “You do realise it’s illegal to fire people who refuse to take a pay cut.

            I didn’t say that, I said give them a choice of being retained (on the lower salary) or made redundant. Very true about the cost of benefits, but those are still less than 17k pa. so in real terms there would be a net increase in available government funds, even more once the civil service is purged of more senior ‘non-job’ positions and departments.

            Sorry but the only nonsense being talked are by those who seem to think that there are money trees in the courtyard of the HM Treasury, what don’t these people understand about the fact that all these civil service non jobs are a 100% drain on government tax revenue.

          • alan jutson
            Posted August 24, 2012 at 8:48 am | Permalink

            uanime5

            Ever heard of people having to re-apply for their own jobs at a lower rate with different terms and conditions.

            I do not agree with it, but it goes on big time in the real world.

          • A different Simon
            Posted August 24, 2012 at 8:56 am | Permalink

            No tribunal in the country will find against a company which makes workers redundant when it is in such dire financial straights that it has to reduce the workforce .

            Tribunals will always look to keep the company going and preserve some jobs rather than force it to the wall so everyone loses their job .

            Why should the state be any different from a company ?

          • lifelogic
            Posted August 24, 2012 at 10:10 am | Permalink

            Another daft law that need addressing.

      • A different Simon
        Posted August 23, 2012 at 10:02 am | Permalink

        Sebastian ,

        Last I heard staff wages amounted to less than money paid by the Govt to suppliers so there is much more scope for cutting there .

        When you are talking about everyone over £40,000 do you mean a £40,000 package or a £40,000 basic pay ?

        There could be a difference of over £10,000 between the two .

        Ireland managed wage cuts of the order of 20% . If the UK followed Ireland’s template then surely costs be brought down with a minimum of hardship ?

        When your customers are having a hard time and do not have the money to pay your rates you have to reduce your rates or you will either find your contract terminated or end up driving your customer to the wall and killing the golden goose .

        • Sebastian Weetabix
          Posted August 23, 2012 at 5:43 pm | Permalink

          I mean basic pay.

      • Bob
        Posted August 23, 2012 at 8:58 pm | Permalink

        The cut should be applied to earnings above 25k.

    • David John Wilson
      Posted August 23, 2012 at 9:46 am | Permalink

      Putting VAT back to 17.5% is a wrong solution. If the money to do this can be found it should be used to reduce employers’ NI. This should partially come through as holding or possibly reducing retail prices but if properly targetted could increase employment of under 25s and improve the cashflow of small companies.

      Removing winter fuel allowance would be catastrophic for our poorewr pensioners. I would agree strongly that it should be changed to a suppliment to the old age pension during the winter months. This would stop it being used as a Christmas bonus and make it taxable which would reduce its value for the better off.

      • outsider
        Posted August 23, 2012 at 12:04 pm | Permalink

        Two excellent suggestions Mr Wilson.

    • Jerry
      Posted August 23, 2012 at 9:52 am | Permalink

      Well that last bit about benefits and heating allowances would have helped to reduce the balance of payments deficit somewhat, once the state have picked up the cost of a few funerals for the poor and destitute of course…

    • Lindsay McDougall
      Posted August 25, 2012 at 1:29 am | Permalink

      I’ve become a pensioner in the last year. You can get rid of the index linking of state pensions, concessionary fares, winter fuel payments, the annual Xmas bonus and free prescriptions, as long as in exchange you grant me two wishes:
      (1) A rapid move to zero inflation
      (2) Stop trying to make me buy an annuity – they are crap value.

  2. norman
    Posted August 23, 2012 at 6:14 am | Permalink

    Remember when George Osborne decided to throw all our economic weight behind saving the Euro? His answer to the Eurosceptics who had been proven right and were suggesting this may not be the best way to spend British taxpayers money was to snootily dismiss you with ‘I told you so isn’t a policy’.

    If the above facts (that raising taxes and then forecasting wildly optimistic growth rates) were met at the time by the likes of John Redwood with a hint of scepticism he wouldn’t admit he did anything wrong but simply dismiss his critics with his old favourite ‘I told you so isn’t a policy;.

    It’s a pity George Osborne has to continually wait until he’s been proven wrong before admitting that I told you so isn’t a policy. If he introduced some conservative policies (and we realise that runs counter to every fibre of his being) maybe he could say to his opponents ‘I told you my plan would work’.

    I’d have thought someone of his political strategic brilliance would have seen the advantage in the second approach so I must just be too thick to not see the brilliant plan he has for a Conservative majority in 2015. For a thicko like me it seeems to be ‘let’s see how much we can get away with printing before the proverbial hits the fan’.

    Which was Brown / Darling’s plan in 2008. As Douglas Carswell calls him, he really is continuity Brown in every way,

    • lifelogic
      Posted August 23, 2012 at 7:32 am | Permalink

      By “Continuity Brown” I assume mean the strategy of leaving as bigger mess as possible for the following government.

    • startledcod
      Posted August 23, 2012 at 8:32 am | Permalink

      I am constantly surprised by references to George Osborne’s supposed ‘political strategic brilliance’, where is this in evidence? Did his electoral strategy win a majority at the last election, did he masterfully avoid Gordon Brown’s 50% rate trap, are the Conservatives headed for a thumping majority at the next election? Hmm, let me think.

      • lifelogic
        Posted August 23, 2012 at 10:02 am | Permalink

        Did he handle the last budget well, did he have to do U turns, was it sensible to call honest, hard working taxpayers, more moral than himself “morally repugnant”? Is he on track to reduce the deficit by 2015?

      • norman
        Posted August 23, 2012 at 10:40 am | Permalink

        I think you’ll find his political brilliance is matched only in it’s prowess by his economic competence.

        That the Conservatve Party have this man leading both these crucial areas and so condemnding the Tories to another spell in the wilderness is either a magnificent piece of farce or tragedy. I find myself wavering between the two. When he opens his mouth I go for farce, when I think of the actual damage being done I think tragedy.

        Tragi-comic I guess we could call him, at least in language that will make it past the censor.

      • norman
        Posted August 23, 2012 at 10:45 am | Permalink

        David Cameron assures us Osborne has the greatest political mind since Gladstone so it must be true. When has Cameron ever been wrong / misled? Don’t answer that but if you feel you must list when he has been right / honest to save poor John Redwood reading a post that would put Tolstoy to shame.

    • A different Simon
      Posted August 23, 2012 at 10:11 am | Permalink

      It was obvious to almost everyone that the forecast figures were wildly optimistic .

      I find it hard to believe that Osborne ever though the actuals would match the forecast

      I also find it hard to believe Osborne would allow figures to be published that he knew to be bunkem .

      Confused . Surely Osborne must have known that the unspoken policy of all three parties is to print ?

      Osborne and Cable to their credit have recognised the potential of onshore hydrocarbon exploration – something which Cameron , Clegg and Davy haven’t .

  3. Martin Cole
    Posted August 23, 2012 at 6:16 am | Permalink

    Government “help” to business is just as disastrous as government persecution… the only way a government can be of service to national prosperity is by keeping its hands off. Ayn Rand

    • lifelogic
      Posted August 23, 2012 at 7:20 am | Permalink

      Exactly.

      • backofanenvelope
        Posted August 23, 2012 at 8:33 am | Permalink

        There is no situation a government can not make worse. Ronald Reagan I think.

        • michael mcgrath
          Posted August 23, 2012 at 3:57 pm | Permalink

          Sir John Cowperthwaite, in charge of finances in Hong Kong in the sixties refused to collect economic statistics for fear it would encourage officials to meddle in the economy.

          He insisted that there would be no high taxation or government intervention to “boost the economic performance of the (then) colony. Instead he let those who knew how to do it, to do it.

          I wish here were here today

    • uanime5
      Posted August 23, 2012 at 8:07 pm | Permalink

      So you object to the Government bailing out the banks and would have preferred them to collapse and cause a 1929 style depression?

      • lifelogic
        Posted August 23, 2012 at 8:31 pm | Permalink

        Yes a collapse and new phoenix companies would probably have been better than the Brown rescue.

        • uanime5
          Posted August 24, 2012 at 9:10 pm | Permalink

          Given how bad the 1929 collapse was for Herbert Hoover’s political career and the Republican party it’s obvious why Labour decided to bailout the banks. Nobody votes for a party that forces them to live in poverty and hoped that the private sector will fix everything.

          • Lindsay McDougall
            Posted August 27, 2012 at 1:02 pm | Permalink

            The 1929 collapse occured in America because the American money supply had contracted by 25% (at least Milton Friedman thought so). Herbert Hoover and his bankers were not malicious, simply ignorant.

            Believe me, there was never any danger of a 25% contraction in the money supply (however measured) in the 2008 crisis.

            You might at least acknowledge that instead of huge taxpayer losses in RBS and Lloyds/HBOS, there should have been huge losses by RBS and HBOS shareholders. That’s capitalism, proper capitalism, not “too big to fail” capitalism.

      • outsider
        Posted August 24, 2012 at 12:21 am | Permalink

        Sorry Uanime5, you have missed the point here.

        The original, basic government interference , imported from America which has a very different banking structure, was for taxpayers to guarantee the public’s bank deposits. If deposits were not guaranteed, banks would continually have to demonstrate to the public that they were prudent, cautious and well-capitalised, as aged bank and insurance advertisements once used to do. Retail deposit banks would never have competed with each other for market share with frenzied lending or indulged in fancy financial trading.

        Of course, this well-meant government interference helped to foster a more dynamic, competitive banking system but there was price to pay for this risk subsidy. We are now paying it, not least in the rescues.

        And in case you ask, I am not suggesting that deposit guarantees be axed just now, because that would damage confidence. But if the Treasury announced that they would disappear in five years time, banks would restructure their operations without any new, and doubtless equally well-meant and ultimately disastrous state interference to “reform” them.

        State interference is sometimes needed and helpful (eg to safeguard employees and the public) but the implications need to be thought right through and non-interference should be the default position.

      • APL
        Posted August 24, 2012 at 8:08 am | Permalink

        uanime5: “to collapse and cause a 1929 style depression?”

        Allowing the banks to collapse didn’t cause the depression, it was the credit boom and the collapse of that credit bubble that triggered the 1929 wall street crash and ensuing depression.

        The world economy today is several times bigger than the 1920s economy, but we are following the same basic trajectory.

      • Lindsay McDougall
        Posted August 26, 2012 at 2:26 pm | Permalink

        There wouldn’t have been a 1929 style depression. If Brown had simply sent in administrators into RBS and HBOS and announced due diligence, the brunt of the costs would have been borne by shareholders, not taxpayers. And Lloyds, without HBOS, would have remained a good company, as indeed is Barclays.

        Why, 4 years on, are you still denying the obvious. Banks are not special. Let failed companies fail.

  4. Nicola Clubb
    Posted August 23, 2012 at 6:45 am | Permalink

    You want to know where it has all gone, i think you will find to the people in the top jobs or on other items in a similar vein.

    It is a joke how much the bankers and other top fat cats get paid and get away with paying virtually no tax on it

    • Jerry
      Posted August 23, 2012 at 10:53 am | Permalink

      So is the politics of envy…

      Tax is bad, any tax, that said some tax revenue is needed so that the country can actually function in a civilised way, so don’t criticise those who pay to little tax (either because they have clever accountants and avoidance or actually get paid out of the jurisdiction of the UK HMRC, and I don’t mean evasion!), if you wish to criticise then do so to those who make the majority pay to much tax due to their tax and spend policies.

      • uanime5
        Posted August 23, 2012 at 8:09 pm | Permalink

        It’s not the politics of envy to want the wealthy to pay their taxes when you have to pay yours. The fault is with the wealthy, not those who make the law.

        • Jerry
          Posted August 24, 2012 at 7:30 am | Permalink

          Exactly “uanime5”, and as avoidance is not illegal, I to have no truck with those who evade there tax liabilities.

          Somehow I don’t think you actually meant what you said! 🙂

          As for envy, it is the politics of envy to expect the rich to pay ever greater tax simply because they are rich…

          • uanime5
            Posted August 24, 2012 at 9:32 pm | Permalink

            I never said tax avoidance was illegal, though I have said it should be reduced.

            Just because you didn’t understand my post doesn’t mean I said something I didn’t.

            Finally expecting those who profited the most from the UK to pay greater taxes is a fair charge. The last thing the UK needs are people solely motivated by greed who seek only to enrich themselves.

          • Jerry
            Posted August 25, 2012 at 8:25 am | Permalink

            Just because you didn’t understand my post doesn’t mean I said something I didn’t.

            Sorry uanime5, you said what you said, you didn’t say what you meant, if you actually think that tax avoidance should be reduced then that the fault is with those who make the law and not the tax payer/accountant.

            Also uanime5, you seem to think that businesses and industry grow on trees, many (not all) of those ‘rich’ people you talk about have made their money from providing work so that others can convert their labours into a cash, so it could be argued that the people who have profited most are not the rich -who could have just shoved their money and themselves into some off-shore tax exile- but those who have benefited from the work being made available available. Or perhaps you would prefer to go back to bartering your chicken and sack of corn for that new cart wheel or what ever…

        • APL
          Posted August 24, 2012 at 8:25 am | Permalink

          uanime5: “It’s not the politics of envy to want the wealthy to pay their taxes when you have to pay yours.”

          Someone on £20,000 will pay tax on £11,895 which by my simple calculation at 20% is £2379.

          Someone on £100,000 will pay tax on £91,895 assuming for the purposes of demonstration the same tax rate of 20% will be £18,379

          The person on £100,000 is already paying £16,000 more tax than the fellow earning £20,000 and that is at the same rate of tax. Given that the higher rate of tax is 40%, the higher rate tax payer will actually be paying £36,758 that is fifteen times more tax than the lower earning person.

          This is a very simplified example, I quite understand that National insurance and the tiered tax rates makes the situation worse.

          But you cannot claim that the higher paid individual pays less tax than the lower paid individual.

          • uanime5
            Posted August 24, 2012 at 9:28 pm | Permalink

            Given that the person earning £100,000 is earning £80,000 more than the person earning £20,000 it’s not unreasonable to expect them to pay £16,000 more in taxes.

            Let’s not forget that even at the 40% tax rate the person earning £100,000 has 3.6 times the disposable income of someone earning £20,000. If both pay the 20% tax rate then the person earning £100,000 has 4.6 times the disposable income.

            Finally if the wealthy using tax avoidance reduce the amount of tax they have to pay to from 40% to 35% of their income they’re still avoiding paying 12.5% of their taxes. So they shouldn’t be surprised if those earning less than them object because they can’t manipulate their tax bill to reduce it by 12.5%.

          • APL
            Posted August 25, 2012 at 9:43 am | Permalink

            uanime5: “it’s not unreasonable to expect them to pay £16,000 more in taxes.”

            Why?

            With their additional disposable income, there is a very good chance that the higher earning individual is not using as much of the services provided by the government as the lower paid individual.

            uanime5: “at the 40% tax rate the person earning £100,000 has 3.6 times the disposable income of someone earning £20,000. ”

            So what, he has 3.6 times as much disposable income but is already paying 15 time as much tax and probably using the government services less.

            You haven’t made a convincing rational that he should pay even more? Other than your moral outrage.

            uanime5: “Finally if the wealthy using tax avoidance reduce the amount of tax they have to pay”

            That is a argument for a sensible simple tax rate, with little scope for avoidance schemes. That is a completely other tax regieme than Gordon Brown introduced.

            But in any case, you do not seem to be able to comprehend that avoidance, arranging your tax affairs efficiently with in the law is perfectly legal.

            uanime5: “can’t manipulate their tax bill to reduce it by 12.5%”

            Even if such a person does this, it is legal to do so. Even when his tax bill has been reduced by 12.5% he is still paying substantially more tax than the lower income individual. Very probably costing the state less too.

        • Lindsay McDougall
          Posted August 25, 2012 at 1:09 am | Permalink

          We expect the wealthy to pay income tax at the 40% rate that applied throughout Labour’s term in office. They also do without child benefit, pay high council tax, pay stamp duty at 7%, and are expected to hand back bonuses. Actually, I’m not sure that I want to be wealthy. It doesn’t pay.

      • lifelogic
        Posted August 23, 2012 at 8:32 pm | Permalink

        tax and waste (not spend or invest).

  5. Mike Stallard
    Posted August 23, 2012 at 6:48 am | Permalink

    Mr Blair promised, I think sincerely, that he would keep the economy on the strait and narrow. He even put Mr Brown in, you remember, as “the iron chancellor”.
    He did keep his word, too, for exactly two years.
    Then it all went haywire.
    We are now two years into this present government and exactly the same pressures seem to be happening.
    Why?

    (PS there wasn’t an “iron chancellor” bit either as you prove.)

    • Brian Tomkinson
      Posted August 23, 2012 at 7:46 am | Permalink

      Mike,
      Osborne hasn’t done what he said he would do. He has not cut government spending but given the illusion that he has made “severe cuts”. He has carried on just like Labour was doing under Darling although neither party wants to admit it.

      • stred
        Posted August 23, 2012 at 9:20 am | Permalink

        There have been severe cuts, but borne by the private sector. Low interest rates and lowering the 40% tax entry have hammered disposable income, investment and charities.

        University research has been severely hit as it depends upon grants from charities and entrepreneurs. Some of the best academics have been unable to meet daft management targets for obtaining this funding and have been laid off or peed off so much that they are finding better paid jobs abroad.

        SMEs are being hit by lack of custom, even worse regulations like HSE fees and licensing, plus banks pulling the carpet in order to comply with government requirements.

        On the other hand, because no-one can be bothered to do overtime and pay 40%+, there is more work for part timers and the employment stats don’t look too bad.

        Great way to run an economy. Maybe the Downing Street Boys ought to talk to someone in the wallpaper or handbag business to find out what is going on. Better still resign and take a real job for the first time.

    • startledcod
      Posted August 23, 2012 at 8:42 am | Permalink

      The politically effective, election winning, promise to ‘keep to Tory spending plans for two years’ was forced on Brown because of the, then, intention to join the Euro; one of the requirements was that Government’s had to publish spending plans two years in advance and stick to them so the incoming Labour Government had no choice. Another prerequisite of joining the Euro was an independent central bank; Brown met this with a brilliant but unavoidable announcement the day after the election.

    • Alan Radfield
      Posted August 24, 2012 at 6:52 am | Permalink

      ‘strait’? Straight, please.

    • Lindsay McDougall
      Posted August 24, 2012 at 8:35 am | Permalink

      The last real iron chancellor was Peter Thorneycroft, ably assisted by Enoch Powell and Nigel Birch. They tried to contain public expenditure at a level to deliver zero inflation. The spending ministries disagreed and the Prime Minister Harold MacMillan sided with them, so all 3 Treasury Ministers resigned.

      That was at Epiphany 1958. MacMillan, boarding a plane to Africa, described it as a little local difficulty. It wasn’t; it was when the inflationary rot set in – and it has remained ever since.

      So when I refer to the three heroes of Epiphany 1958, you will know to whom I refer.

  6. Ralph Musgrave
    Posted August 23, 2012 at 7:04 am | Permalink

    The economically less clued up will of course agree with JR’s claim that “State borrowing is simply deferred taxation. It all has to be paid back, with interest, by taxpayers.”

    First, as regards the “interest”, the REAL RATE OF INTEREST, or “inflation adjusted” rate of interest on the debt of several countries is ZERO. That includes the UK, US, Germany and a few others. I.e. there is no interest!

    Second, I’ll deal with the point that national debt has to be paid back by taxpayers.

    National debt and monetary base are ASSETS as viewed by the private sector entities holding such debt. The more of such assets they hold, the more they’re likely to spend: i.e. raise demand. As long as the private sector stays in “deleveraging” mode, i.e. as long as the private sector is reluctant to spend, there is just no point in repaying the debt.

    In contrast, if the private sector gets more confident, or goes into “irrational exuberance” mode, then demand will rise, and government will have to raise taxes, i.e. grab the private sector’s stock of debt and/or monetary base. But that tax DOES NOT reduce living standards. It is simply a counter-inflationary device.

    I.e. the idea that such taxation is any sort of BURDEN (as I think JR implies) is just not true.

    • Mike Wilson
      Posted August 23, 2012 at 8:00 am | Permalink

      Utter twaddle.

      The fact is that £60 billion of our spending this year is paying the interest to holders of government debt. It does not matter whether there has been inflation since the bonds were issued – some of the tax people are paying today is to pay the interest on government debt.

      And, of course, at some point in the future, the capital has to be repaid too. You can only roll debt over for so long and if, at some point in the future, the government has to offer a coupon of 6% to get their debt bought, then we really are completely stuffed.

      • Electro-Kevin
        Posted August 23, 2012 at 9:01 am | Permalink

        It sounds like ‘money for nothing’ to me too, Mike.

        If it were the case that State debt is free I’m sure there wouldn’t be such a worried look on George Osborne’s face.

      • Ralph Musgrave
        Posted August 23, 2012 at 10:10 am | Permalink

        Mike: You claim that “some of the tax people are paying today is to pay the interest on government debt.” True: nothing I said contradicted or denied that point.

        What I DID SAY was to answer JR’s point which LUMPED TOGETHER interest and capital. And on a “lumped together” basis, there is no difference between, 1, me borrowing £1,000 at 2% interest while inflation is running at 2% and, 2, me borrowing £1,000 at zero percent interest in a zero inflation scenario.

        Re the popular notion that we are in trouble if the government finds it has to pay 6% when rolling over, that’s just a myth. Though I’m sure every Telegraph and Daily Mail reader goes along with the myth.

        The reality (as pointed out by Keynes, Milton Friedman and numerous other economists) is that it doesn’t make much difference whether a deficit accumulates as debt or monetary base. Indeed, much if not most of the deficit of the last two years ACTUALLY HAS accumulated as base as a result of QE.

        Thus if markets want 6% for money they lend, any government that issues its own currency can just stick two fingers up at the markets and print money instead of borrow it.

        Of course printing has a stimulatory / inflationary effect: but not a huge one. Having the central bank give debt holders newly printed cash in exchange for debt is what QE is. And how would you describe the effects of QE? I’d say the effect was a bit muted – perhaps even non-existent.

        • Denis Cooper
          Posted August 23, 2012 at 10:53 am | Permalink

          The principle intended effect is that the government should not run out of money to pay all its bills in full and on time. Achieving that ensures a situation which passes for normality – we expect as a matter of course that the government will make all the payments due from it – and so the effect of QE as practised so far in the UK may seem muted or non-existent. However as we see in Greece it would be very noticeable if the government did run out of money.

        • norman
          Posted August 23, 2012 at 10:59 am | Permalink

          So what you’re saying is Zimbabwe just didn’t go far enough? Or Argentina? Or Weimar Germany? Or any of the other countless printaholics I could google if your point wasn’t so obviously facile that it’s not worth the 30 seconds of my time.

          I like irony before you say anything, Just hard to get the creases out of the collars. Always try talk on same level as person you are adressing. Did you know Vivienne Westwood once wore a dress to meet the queen with no undergarments? What about that!

          • waramess
            Posted August 23, 2012 at 12:41 pm | Permalink

            Great response

          • Electro-Kevin
            Posted August 23, 2012 at 2:13 pm | Permalink

            Not to mention the worried look on George Osborne’s face, Norman.

        • waramess
          Posted August 23, 2012 at 12:38 pm | Permalink

          “Thus if markets want 6% for money they lend, any government that issues its own currency can just stick two fingers up at the markets and print money instead of borrow it.”

          This is something you have posted before and it simply is incorrect.

          If as a result of not receiving the interest they demanded, overseas Gilt investors decide to walk (panick) then what? You just print your own sterling?

          If the act of overseas Gilt investors walking is a massive reduction in reserves of foreign currency such that the government through the BofE is no longer able to guarantee the convertability of sterling, then what?

          Just maybe the two fingers might not have been such a good idea after all.

          The UK is at great risk in the medium of just such a scenario and the inability to guarantee convertability of the pound is exactly the same as a default on a loan in foreign currency, so lets not become too complacent about this false security of printing our own currency

        • uanime5
          Posted August 23, 2012 at 8:14 pm | Permalink

          Don’t forget that if you borrow £1,000 at 2% interest while inflation is running at 3% then in real terms the amount of money you owe keeps shrinking.

        • manicbeancounter
          Posted August 23, 2012 at 8:44 pm | Permalink

          You say

          ” And on a “lumped together” basis, there is no difference between, 1, me borrowing £1,000 at 2% interest while inflation is running at 2% and, 2, me borrowing £1,000 at zero percent interest in a zero inflation scenario.”

          Mathematically this is correct over the entire period of the loan, but incorrect in reality. The higher the rate of interest/inflation, the greater the imbalance of interest payments over the period of the loan relative to income. For instance the initial repayments on a 3x income mortgage are affordable in the first year if the interest rate is 2%, but would eat up most of people’s net income at 15% interest rates. With real rates at zero, the high interest/inflation scenarios would see rapid falls in repayment relative to income if this stayed constant in real terms.
          Government finances are different due to the constant renewal of debt. A rise in interest rates/inflation would act to reduce to real burden of debt. But over time, as interest payments became higher relative to tax revenue, the burden of debt servicing to GDP becomes higher. This is particularly true with a large deficit.

    • alan jutson
      Posted August 23, 2012 at 9:11 am | Permalink

      Ralph

      Can I ask a simple question.

      Do you run your own houshold buget on the same principles as you suggest is no problem here.

      Thus you adopt a policy of continuing evr more borrowing to cover your excessive spending year on year with no thoughts of ever repaying the debt.

      If so how long do you think it will be before you are made Bankrupt.

      We would all like a money tree at the bottom of the garden, but most of us have yet to find one, probably because we do not know what they look like.

      • Simon
        Posted August 23, 2012 at 11:44 am | Permalink

        “Do you run your own houshold budget on the same principles as you suggest is no problem here.”

        Even a household, given the choice between borrowing to repair a leaky roof now at 0% now or next year at 5% would surely choose the former.

        But the country is not a household. The government’s current plan is the equivalent of a household, on finding itself short of cash, deciding that one of its wage earners should give up work to save on bus fare.

        • Jerry
          Posted August 23, 2012 at 2:10 pm | Permalink

          Simon, that makes no sense, if you have no spare money who would borrow now, even @ 0%, if it meant either having to borrow more money at ever increasing interest rates to pay the original loan back,unless you seriously wish to contemplate defaulting with all the baggage that brings – you really are starting to get into typical loan-shark, or at least super-interest pay-day loan, territory…

      • reasoninrevolt
        Posted August 23, 2012 at 12:13 pm | Permalink

        Jesus, is this an act or are you really that obtuse? You’re really comparing the balance *of an entire economy* to an individual household budget? Did you even digest any of what Ralph said?

        Every liability for one person is an asset for another. The liabilities of the state in the form of bonds are assets for the private sector, and they are distinct from all other financial liabilities because they are issued by the currency issuer.

        A household is budget limited because it cannot control the currency it uses. A sovereign government, in contrast, does not face the risk of insolvency (though of course it can face the risk of inflation) and is responsible, unlike the individual household, for the well-being of the economy *as a whole*. The capacity and the responsibilities of a household and a government are entirely different.

        • waramess
          Posted August 23, 2012 at 12:46 pm | Permalink

          Utter and total tosh. Maybe you should read Ralphs posting again and then digest Normans response

        • alan jutson
          Posted August 23, 2012 at 1:59 pm | Permalink

          reasonrevolt

          Income – expenditure, balancing books.

          Does not matter if you are an individual, a houshold, a charity, a club, a business, or a country.

          Spend more than you earn, you get in debt, get into too much debt so that you cannot pay it off, you risk going bust.

          The only difference printing your own money brings, is you extend the time when it happens.

      • APL
        Posted August 23, 2012 at 12:45 pm | Permalink

        Alan Jutson: “Do you run your own houshold buget on the same principles as you suggest is no problem here.”

        It’s different for states! Except as Zimbabwe, Greece, Ireland, Portugal, Spain, Italy, and if we don’t do something about the problem for us the UK, illustrates it’s not different. What is different is the time frames.

        • nicol sinclair
          Posted August 23, 2012 at 2:58 pm | Permalink

          It’s absolutely about earnings & spending. You earn x. You spend y (which >than x). Answer penury. You earn x and you spend y (which is <than x). Answer success.

          What could be more simple?

    • waramess
      Posted August 23, 2012 at 9:48 am | Permalink

      “First, as regards the “interest”, the REAL RATE OF INTEREST, or “inflation adjusted” rate of interest on the debt of several countries is ZERO”

      So what. My mortgage is below the rate of inflation but that does not mean I should further leverage, particularly when house prices are going south.

      “National debt and monetary base are ASSETS as viewed by the private sector entities holding such debt”

      No more so than my debt is. My debt is an asset on their books but will not encourage them to spend more. But perhaps you mean the debt is a zero weighted asset on their books, but so what. Just because the debt is so classified does not necessarily make spending more a good idea as was clearly seen by the classification of AAA ratings for repackaged junk debt.

      The problem with demand side economics is the proponents develop tunnel vision so that any demand becomes a good thing and all else is subservient to it. Just cause demand by any means and everything will be OK. It clearly will not be. If causing demand was the answer then why has the economy not already recovered?

      “But that tax DOES NOT reduce living standards”

      There you go again Ralph with your macro ideas. Of course all taxes reduce living standards. Taxes might also delay the purchase of a few Rolls Royces, which I doubt, but for the ordinary man in the street on an ordinary wage who has not had the luxuury of “exuberance” it will mean a real loss of living standard.

      Perhaps you meant that a reversal of QE might do the trick?

      There is an argument to be had for demand economics which I am afraid you do not make very convincingly and there is one for supply side economics that our host does make very concisely.

      That is, when he is not teasing us all with a bit of socialist nonsense

      • APL
        Posted August 24, 2012 at 8:33 am | Permalink

        Ralph Musgrave: “National debt and monetary base are ASSETS as viewed by the private sector entities holding such debt”

        They are until they are not.

        They are only assets while there is a chance the coupon paid and principle repaid at the agreed intervals. The holders of Greek and Spanish debt are none too sure of either of those fundamentals just now.

    • norman
      Posted August 23, 2012 at 10:53 am | Permalink

      This is farce, right? Sometimes it’s hard to tell if someone is writing a brilliantly biting piece that I’m simply missing or if they’ve forgotten to take their meds.

      • Jerry
        Posted August 23, 2012 at 2:33 pm | Permalink

        Norman, I think Ralph’s premise is that a sovereign nation can’t go bust, true, as long as it then doesn’t mind living within an economic vacuum and is self sufficient… Ho-humm!

        • uanime5
          Posted August 23, 2012 at 8:18 pm | Permalink

          Actually all a sovereign state needs to do is be a net exporter, and import and export in a foreign currency. Thus it doesn’t matter how badly their currency declines because they pay their international bills in another currency.

          • Jerry
            Posted August 24, 2012 at 7:32 am | Permalink

            @uanime5: You assume that others will wish to do business with such a country…

          • Lindsay McDougall
            Posted August 27, 2012 at 1:05 pm | Permalink

            Zimbabwe, for example.

  7. John Hann
    Posted August 23, 2012 at 7:08 am | Permalink

    The BBC does not understand that sustainable growth requires creating the long-term capacity to make products and to supply services, which are either exported or which replace imports.

    Increased public spending raises GDP, but, without concomitant spending on private sector investment, this is unsustainable. It increases the current account deficit and leads to “boom and bust”.

    “Boom and bust” temporarily stopped during Gordon Brown’s time only because the economic models pursued by the new nations provided large amounts of spare cash.

  8. Matthew
    Posted August 23, 2012 at 7:13 am | Permalink

    Not surprised that you have a problem with such interviews.

    The BBC seems to work from a frame of reference that the reduction in the deficit is severe, that austerity is fully implemented. Labour politicians trot out the old line of “The government are going too far too fast” this line often goes unchallenged. They are just asked “Where would you make the cuts?”

    Labour often claim that we could plug spending gaps with a tax on banker’s bonuses – raising £2bn to £3bn – a mere rounding error, a week’s worth of incremental debt increase, yet they often get away with this line.

    After the election the country was ready for a tough budget and a big hit to welfare. It was a missed opportunity that has placed the government in a sort of no man’s land. An impression of drift, just waiting for a recovery to sort out the deficit.

    There is still time for Mr Cameron to get to grips with this – just hope that he does it. The markets may push us towards the original plan A.

    • uanime5
      Posted August 23, 2012 at 8:20 pm | Permalink

      A big hit to welfare won’t fix anything. All making the poor more desperate does is increases crime as they find other ways to survive.

      • Electro-Kevin
        Posted August 25, 2012 at 8:39 pm | Permalink

        Uanime5 – It might encourage them do the jobs that immigrants come thousands of miles to take.

        Otherwise your suggestion seems to be that taxpayers’ pockets must be picked in order to bribe people not to burgle their houses.

  9. Edward.
    Posted August 23, 2012 at 7:19 am | Permalink

    How much was the Treasury influenced by the coalition partners, did the Lib dems insist on ‘plan A’ not being implemented?
    Surely, it must be reasonable to suggest, that at every turn, where cuts in governments spending have been needed to be made – the Liberal democrats have opposed them – or is George a little bit soft too?

    What is the actual national debt figure, I’ve heard it is not £1 trillion but more like £4 trillion, when other liabilities are factored in to the actual amount.

    • norman
      Posted August 23, 2012 at 11:03 am | Permalink

      Call it whatever you want. It’ll never get paid back and we’ll just print off whatever the capital is and then print off the interest to cover that.

      Is there any truth to the rumour Osborne is writing a book ‘Idiots guide to destroying Wealth of Nations’? I believe he’s perfectly suited on both levels.

  10. lifelogic
    Posted August 23, 2012 at 7:30 am | Permalink

    As you say “state borrowing is simply deferred taxation” it is what they are spending/wasting that matters. Currently around 50%. This is made even worse by the fact that is it being spent so badly, on green tosh/bling, gifts to the PIGIS and the feckless, HS2, the Olympics, (now even a mad Severn barrage perhaps), poorly run overseas aid, over payment and pensions for the state sector, daft railway systems, a poor and very expensive criminal and civil law system, an absurdly complex tax system, a joke NHS, financial discouragement from working, a mad energy policy …………….

    How can industry compete (with a 50% overhead from government) against sensible countries with perhaps just 20% and far better run services too?

    • uanime5
      Posted August 23, 2012 at 8:21 pm | Permalink

      Germany spends the same percentage of their GDP on the Government has a much better economy than us. So it’s clear that there’s no relationship between the percentage of GDP spent on the state and the private sector.

      • Sebastian Weetabix
        Posted August 24, 2012 at 10:05 am | Permalink

        In Germany the public sector is smaller than he UK.

        • uanime5
          Posted August 24, 2012 at 9:37 pm | Permalink

          Depends on which measure you use. In Germany taxes as a percentage of GDP are 40.6%, while in the UK it’s 38.8%. Though Government spending as a percentage of GDP is 43.7% in Germany and 47.3% in the UK.

          So while taxes are lower in the UK the Government borrows more money.

        • Lindsay McDougall
          Posted August 25, 2012 at 1:13 am | Permalink

          The German public sector has been shrinking as a % of GDP. uanime5 is out of date.

  11. oldtimer
    Posted August 23, 2012 at 7:32 am | Permalink

    The key difference between Greece and the UK is that the UK can print its own money. Greece cannot. The coalition`s policies, like those of the Brown government, are a national disaster. The only coherent interpretation of the Cameron/Osborne electoral strategy is to punt the UK can down the road beyond the date of the next election. Then their best hope is that Miliband wins, the economy implodes and Miliband gets all the blame. It is the UK`s very own game of pass the parcel (of blame). In the EZ the aim of the other national leaders is to get Greece itself to make the Grexit decision and to get the blame.

    One day, just possibly, this country will get the national leadership it needs. I fear it will be a forlorn hope.

    • Lord Blagger
      Posted August 23, 2012 at 7:54 am | Permalink

      Printing money doesn’t work.

      Printing money creates inflation. That deals with fixed rate debts.

      However, all the pensions are linked to inflation. As fast as you inflate, the debts go up at the same rate.

      • lifelogic
        Posted August 23, 2012 at 10:06 am | Permalink

        All the “state” pension are linked to inflation (MPs still even to the RPI) not CPI. The only way to redress the Brown muggings of just private pensions is a special state sector pension tax.

    • Denis Cooper
      Posted August 23, 2012 at 10:40 am | Permalink

      “The only coherent interpretation of the Cameron/Osborne electoral strategy is to punt the UK can down the road beyond the date of the next election. Then their best hope is that Miliband wins, the economy implodes and Miliband gets all the blame.”

      That was the Brown/Darling strategy from early 2009 when QE was first started, through to early 2010; Cameron/Osborne had no effective answer to it, and that was the greatest single reason why the Tories did not get an overall majority.

      By May 2009 it had become clear that QE was being used to indirectly fund the Labour government’s massive budget deficit, and it was also clear that this would have not just economic implications but also electoral implications.

  12. Mike Wilson
    Posted August 23, 2012 at 7:42 am | Permalink

    What bothers me is the government’s inability to make people understand. As Mr. Redwood says the BBC and the media in general and people in general are under the illusion that there have been large cuts already. This failure to communicate the situation is really abysmal.

    I almost recoil as a I write this – I don’t understand why the Prime Minister does not make a 10 minute televised broadcast once a month.

    Along the lines of: Last month we borrowed £12 billion pounds to run our public services. Government spending in the last 12 months was up 1% compared to the previous 12 months. This was spent on …

    This, surely, would start getting the message through to people that, actually, something radical needs to be done.

    SLASH taxes – reduce the size and cost of government by 2% a year for 10 years – borrow to initially make up the shortfall in tax revenues – watch the economy boom – collect higher tax revenues – reduce borrowing and eliminate the deficit over 10 years.

    And, while you’re at it, SLASH government interference in business and pass a law that says that any law passed by Brussels that places additional burdens on business will be ignored.

    • Lord Blagger
      Posted August 23, 2012 at 7:53 am | Permalink

      It’s part of it. Going direct cutting out the biased BBC is one option.

      Another is to push the BBC down the subscription route and remove the tax that pays for it. Cold commercial reality on the basis of their illegal bias would shock them.

      • Mark W
        Posted August 23, 2012 at 9:12 am | Permalink

        Oddly enough I still “just” feel that the BBC poll tax is not a bad idea for a state broadcaster.

        I don’t mind that blatant bias of the BBC either. What I dislike is the pretence of impartiality. Reporters and presenters should be more public on their preference. Possibly not as far as David Dimbleby having his Labour party membership cards pinned on his tie on QT, but it should be public information at the start or end of broadcasts. I read the Guardian, Telegraph and Mail on Sunday. I know what they are. The BBC is the broadcast equal to the Guardian. I have no problem with that. It should just be honest about its default position being social democratic. There are always the seemingly Economic Liberals like Andrew Neil and Red Blooded Socialists like Paxman to compensate.

        And as for social conservatives, they are treated with such spite I’m not sure for how much longer their resepectable position will get air time.

      • lifelogic
        Posted August 23, 2012 at 10:17 am | Permalink

        BBC staff are just on another planet, one seemed to think the government could borrow and provide subsidised social housing “at a profit” they all (nearly all arts graduates) believe in the absurd global warming exaggerations and that there has been savage, state sector, cuts. Listen to the idiotic questions to Clegg on Desert Island Discs podcast as an example. They all love the EU, ever more government and regulations and the impending non democratic EUSSR too. So Cameron put Lord Patten there – it just says it all!

        I read in my dads “The Oldie” that the filming of the Queen and James Bond, for the Olympics, took 130 employees about two per second of film. Good to see they run a tight ship.

        • Jerry
          Posted August 23, 2012 at 3:15 pm | Permalink

          Lifelogic, is this a reply of what we debated the other day or do you have something new to say, please do feel free to Google the term “Devils Advocate”…

          • lifelogic
            Posted August 23, 2012 at 8:38 pm | Permalink

            He was not playing “Devils Advocate” he clearly was expressing his (or the BBC’s) patently absurd view.

          • Jerry
            Posted August 24, 2012 at 7:37 am | Permalink

            @ lifelogic: you keep forgetting to add “In my opinion”, you have no proof for what you accuse those you so clearly detest… Sorry lifelogic but you clearly do not have a clue as to what “Devils Advocate” actually means. 🙁

      • Alan Wheatley
        Posted August 23, 2012 at 1:02 pm | Permalink

        The problem is not the licence fee; indeed, it should ensure independence from commercial pressures.

        The problem is the Trust, who are supposed to look after the interests of the licence fee payer. The solution is to make membership of the Trust open to everyone by election of the licence fee payer. That way licence fee payers can
        choose which Trust candidates best represent their wishes for the BBC.

    • startledcod
      Posted August 23, 2012 at 8:53 am | Permalink

      Why not go back to calling the deficit the Public Sector Borrowing Requirement, because that is exactly what it is and it is very easily understood; it would also prevent dishonest politicians accidentally (on purpose) mixing the two up and talking about ‘paying down the deficit’.

      • Leslie Singleton
        Posted August 23, 2012 at 12:17 pm | Permalink

        Couldn’t agree more. I wrote some time back that the man in the street, to the extent he understands any of this, is likely to think “deficit” means “retained deficit” in the accountancy sense–as if there were not enough confusion.

    • alan jutson
      Posted August 23, 2012 at 9:17 am | Permalink

      MIke

      I have also suggested a state of the Nation broadcast every year, but also rather like your monthly, state of the finances proposal.

      Some people may choose not to view it, but at least the opportunity has been given.

      One rule. NO SPIN

      Well we can dream.

      • Jerry
        Posted August 23, 2012 at 3:29 pm | Permalink

        Some people may choose not to view it, but at least the opportunity has been given.

        Alan, you have just described Public Service Broadcasting (PSB) to a tee, provide what is required, what people should be watching, not light entertainment and what they want.

        • alan jutson
          Posted August 23, 2012 at 7:54 pm | Permalink

          Jerry

          I did say without spin !!!!

          Not good for DJ’s

          Although its all digital now !

    • norman
      Posted August 23, 2012 at 11:08 am | Permalink

      Roosevelt’s fireside chats.

      Only the danger we face now is far greater than then. The RN could always have launched a suicide mission to ruin Sealion (Rhine barges in English channel in September laden with heavy armour and intermittent resupply, really?). Even the paltry remains of the RN can’t get us out of this pickle.

    • Jerry
      Posted August 23, 2012 at 3:05 pm | Permalink

      ..and closing the BBC would help the national debt how?

      • Mark
        Posted August 23, 2012 at 8:28 pm | Permalink

        If you cut £3bn of advertising for ever larger debt, I suspect that might have rather an important effect.

    • uanime5
      Posted August 23, 2012 at 8:31 pm | Permalink

      The Prime Minister is called to the Commons every Wednesday for half an hour to be questioned by the opposition regarding how the country is being run; it’s called Prime Minister’s Question Time. Perhaps this would be the opportune time to explain how the country is doing.

      What are you planning to cut from the Government every year? Which taxes will produce the most growth if cut? How will you ensure the tax cuts are used to make the economy to boom, rather than being used to give senior executives and shareholders more money?

      Finally ignoring EU laws is illegal and will result in the EU suing the UK. As this will cost the UK a vast amount of money it’s clearly a terrible idea.

      • Lindsay McDougall
        Posted August 25, 2012 at 1:35 am | Permalink

        If only there were a half hour, even once a month, devoted to how the opposition is being run, what is has learnt, what it has forgotten.

  13. Gary
    Posted August 23, 2012 at 7:47 am | Permalink

    it’s quite obvious they don’t have a clue what they are doing. Their premise for growth, which underpinned all their plans, was, and is, so far off they have no chance of coming right.

    • Mike Wilson
      Posted August 23, 2012 at 8:08 am | Permalink

      Hope springs eternal in the human breast.

      They hope, they really hope, for growth to solve all the problems. But, in a globalized economy, even without all the debt around our necks, growth is going to be hard to create. With a massive government hanging around all our necks growth is impossible.

      In times past I had to sit with my wife and go through our list of expenditure. Essential, desirable and non-essential. Non-essential spending by government needs to stop.

      Easy targets are overseas aid and Afghanistan. Just stop. Next are council jobs with the word ‘diversity’ in their job description. Next is immigration. Zero immigration for 10 years to remove increased demand on public services. Next are public sector pensions. Move all new staff to the same sort of deal offered to private sector workers i.e. sort your own pension out. Tell existing staff the money has run out and any current pension over 10k a year is being reduced by 20% and frozen for 20 years – no index linking.

      There is lots that could be done but we have a government paralyzed by fear of the media.

      • Sidney Falco
        Posted August 23, 2012 at 9:25 am | Permalink

        “Move all new staff to the same sort of deal offered to private sector workers”

        I agree with this 100%.

        It will ensure two things:

        1. Everyone has a real stake in the growth of the private sector in the UK as it will affect everyone’s pension. No more two tier pensions.

        2. Government will have a greater incentive to make sure the financial sector don’t rip people off. (Sadly, a poor track record in this area to date.)

        • A different Simon
          Posted August 23, 2012 at 10:26 am | Permalink

          I agree too with one caveat .

          These should not be private pensions but something akin to a UK Sovereign Wealth Fund .

          These should own mainly UK assets and infrastructure like social housing which give both a real return to members and tools to the next generation to give them a chance .

          By putting national assets in a sovereign wealth fund we would get rid of the need and ability of Governments and Councils to flog off the family silver (generally at the bottom of the market) to balance the books or achieve ideological aims .

          Obviously politicians should have nothing to do with it .

      • lifelogic
        Posted August 23, 2012 at 10:19 am | Permalink

        You say “Non-essential spending by government needs to stop”. Well that would cut it by about 80% if that ever happened. Not very likely alas.

      • uanime5
        Posted August 23, 2012 at 8:36 pm | Permalink

        Given all the qualitative easing and MP vanity projects being approved it’s clear that the money hasn’t run out. Expect a huge number of strikes if the Government ever tries to reduce pensions for everyone who isn’t an MP.

        • Jerry
          Posted August 24, 2012 at 2:36 pm | Permalink

          @uanime5: You do understand what qualitative easing (QE) actually means, don’t you….

          • uanime5
            Posted August 24, 2012 at 9:40 pm | Permalink

            Quantitative easing is when the bank of England creating billions of pounds out of thin air to buy private sector assets. So as long as qualitative easing is possible the supply for money can’t run out.

          • Jerry
            Posted August 25, 2012 at 8:38 am | Permalink

            Thanks for confirming that you don’t actually understand what QE is, or more importantly what it’s long term effects are…

    • Lord Blagger
      Posted August 23, 2012 at 8:14 am | Permalink

      Borrow at 4% to get growth of under 1%.

      Yep, government economics at work.

      • lifelogic
        Posted August 23, 2012 at 10:19 am | Permalink

        Tax borrow and waste until you can borrow no more.

  14. Lord Blagger
    Posted August 23, 2012 at 7:51 am | Permalink

    I am a strong supporter of the government’s Plan A. That Plan was stated in words. It was to remove the structural deficit by 2015.

    ==========

    The problem is that you think the structural deficit is 50% of the real deficit. So when you give interviews, you forget to mention structural. It’s caused plausible deniability. In the future you will use that as your get out card.

    Spending is up in real terms. You’re borrowing hand over fist. You’re not making any argument that is getting through. That bit is correct.

    So why aren’t the arguments getting through? It’s very simple. People have no connection with the debts you’re running up. They are dumb enough to think that the debt is paid by the government, because that’s what you’ve told them about your ‘successes’ – which is giving them money that you’ve borrowed. You have to make the debt personal.

    That means you have to publish the fiscal gap, rather than ignore it, or say that’s not the way it works when you fail to meet election promises.

    If you publish the fiscal gap or true government debt, and give all taxpayers a pro rata share, you will get action. The agenda changes. People will want to know why its so large. You can then point them at Liebour and the Lib Dims. You point them at the BBC and ask why adding to their debts is a good idea.

    As for “State borrowing is simply deferred taxation. It all has to be paid back, with interest, by taxpayers. ” That’s complete twaddle too. You effectively borrowed lots of money from people for their state pension. You’re not paying all of it back. You’re just paying 25% of it back, and that percentage is declining.

    It’s not deferred taxation, its theft or fraud because when you look at the true debt, you can’t pay it back.

    The Clash of Generations: Saving Ourselves, Our Kids, and Our Economy Laurence J. Kotlikoff (Author), Scott Burns (Author)

    Just dropped into my reading tray. It’s a US centric view of the true debt issue. They are just as screwed as the UK. They are sticking their heads in the usual place going “nah nah nah I’m not listening”. It’s going to be the same here.

    Publishing the debt, giving everyone a statement, changes the agenda.

    Not doing it is why you have lost.

  15. Brian Tomkinson
    Posted August 23, 2012 at 8:10 am | Permalink

    The additional frustration is that from the first budget you have highlighted the truth of Osborne’s approach rather than the myth he and his colleagues have portrayed. I have lost count of the number of times you have shown the reality of his plan, shown the shortcomings and offered alternative approaches. At last you have answered my often repeated question about Osborne’s pre-election commitment to eliminate the structural deficit by 2015 , 80% through spending cuts and 20% through increased tax revenue; he dumped it when he took office! As stated regularly here, he is not only failing to achieve the deficit reduction, he has not seriously tried the original proposed approach but with the aid of the media presented the illusion that he has and in the process created the impression that these “severe cuts” have been responsible for the failure. I cannot support such a mendacious and incompetent performance. How much longer can you bear to suffer the ignominy of association with this? Perhaps more importantly, what can you do to change this? So far, regrettably, you have been ignored, but your loyalty to the country must at some stage come before party in a more meaningful way.

    • Mark W
      Posted August 23, 2012 at 9:25 am | Permalink

      Spot on

  16. colliemum
    Posted August 23, 2012 at 8:11 am | Permalink

    What were the reasons that Plan A was not implemented? I cannot believe that this plan was simply an election promise, because I refuse to believe that someone like you, John, would have been bamboozled by such trick.

    Regarding how much deferred taxation ‘we’ want – the least possible amount!
    I wonder why it is that this government seems to do their best to placate the BBC and Grauniad, and why it is that after two years they still have not grasped the fact that there is simply no way they can placate them.
    Your experience in BBC interviews illustrates this perfectly.

    I’m beginning to think there’s a Plan D: do nothing but make juicy announcements, while keeping fingers crossed that drifting along and hoping for the best is the only way to go.

    Reply: I do not udnerstand what happened to Plan A, but it never emerged from the Treasury in any budget figures I saw. Maybe officials regarded the agreed plan as being 80% by “cuts”. meaning cuts in planned increases, but even on this definition of cuts it is sifficult to get the numbers to add up.

    • colliemum
      Posted August 23, 2012 at 5:16 pm | Permalink

      Thanks for the reply, John.

      It would be interesting to know why and especially how the Treasury got away with torpedoing this plan – and why it didn’t raise any hackles.

  17. alan jutson
    Posted August 23, 2012 at 8:12 am | Permalink

    John

    I am not surprised you find it difficult, it was you, and you alone who outlined the true state of affairs some two and a half years ago, and exposed “the cuts” as a real slowing down of an increase, and that borrowing was PLANNED to INCREASE.

    Time and time again you have outlined your thoughts and perceptions of the real situation with extracts from the red book, and from the governments own historical figures and publications on this site, and I guess elsewhere in speeches.

    Unfortunately other than those who read your blog, no one else seemed to get it, or understand it, least of all the Media.

    The Cameron/Osbourne spin of cuts, cuts and more cuts was a huge illusion which played into Labours hands, with their own spin mantra of “too fast too deep”

    The simple fact is the population has been lied to by all three main political Party’s, and the Media swallowed the spin, hook line and sinker.

    It has taken two and a half years for the penny to start to drop, but the majority still do not have a clue that government spending is still rising.

    likewise the 80% cuts and 20% tax increases was also a lie, we know it, you know it, but again the vast majority of the population do not, and certainly those on Benefits do not have a clue about tax increases ( other than the rise in VAT) because all Benefits are paid tax free.

    Thus you have been fighting against the tide (and Party lies) for two and a half years.

    If only, if only the government had acted as it spun, then perhaps, just perhaps we may not be in the position that we now find ourselves.

    An opportunity lost, but completely self made by those in charge, do not expect for them to be given a second chance. because now whatever they do it will be:

    “Too little, too late”

    And we all had such hopes !
    .

  18. Mark W
    Posted August 23, 2012 at 8:22 am | Permalink

    How refreshingly honest. I have always been annoyed that the critism of cuts by media pundits and oppositon appeared to miss the point that a simple glance at the figures demonstrates there haven’t been any. (For media pundits, I’ll omit Andrew Neil who does tend to be more straight forward. Possibly why the BBC bury him at midday and the middle of the night).

    Personally I always favoured VAT as a fairer tax. How wrong I was, 20% has made me and friends I know hold off spending as it’s a psychologically easy figure to see. And far too much. Income tax with the sinister subterfuge of NIC is too high and the 42% rate (40%+2% NIC) is hitting at such a low level it is almost the standard rate of tax.

    So where does tax need to come from. And even if any government dare cut, as they should, tax will need to come from somewhere. My answer, awaiting howls of protest would be, a reduction of VAT to below 15%, a reduction of Income Tax and NIC combined to around 30% with a threshold up to the 45% rate at £150k. (No extra NIC on that). The scrapping of the secret 60% rate between £100k and £116k. Then set a new super rate of VAT on Diesel and Petrol to compensate. Note VAT not fuel tax. This is reclaimed by commercial users like lorrys and vans. I know this hammers road users but road users are income tax and VAT payers too. Give with one hand take with another but our roads are congested enough, its a sitting duck and doesn’t hit the poor at all. Owning a car and living in a tranquil village with no bus or train, is not being poor.

    • David John Wilson
      Posted August 23, 2012 at 9:57 am | Permalink

      It is a wrong decision to increase VAT on fuel. In fact the solution should be the reverse: replace all the VAT by fuel duty. This means that changes in the price of oil are buffered rather than accentuated by VAT. It also buffers the price paid in outlying areas. Commercial vehicles could be helped by reducing VED to a single low standard rate for all vehicles or preferably getting rid of it completely. Removing a lump of red tape by getting rid of VED would be a major step fo the country as a whole.

    • The Realist
      Posted August 23, 2012 at 12:58 pm | Permalink

      So I can see you live in the country !

    • Jerry
      Posted August 23, 2012 at 4:53 pm | Permalink

      @Mark W “Then set a new super rate of VAT on Diesel and Petrol to compensate. ../.. its a sitting duck and doesn’t hit the poor at all. Owning a car and living in a tranquil village with no bus or train, is not being poor.

      Well that’s the economy stuffed, why, ‘cos no one would be able to afford to get to work, and if they did they would not then be able to afford to spend their money, and don’t suggest that people buy on-line,. if the shops close most if not all your raised tax would have to go on benefits. Let me guess, you are a cyclist?

      Oh and regarding your comment about living in the country, not only are you a cyclist who lives in a town or city you think your potatoes, milk and meat (assuming you eat meant) are made in factories just pout of town on that industrial site. Try telling the low paid farm workers that they face a 5 to 10 fold increase in their fuel costs. Madness, total madness, and we thought Brown didn’t have a clue. 🙁

      • Mark W
        Posted August 24, 2012 at 3:15 pm | Permalink

        I own a car and live in a small rural town.

        My theory, for what it is worth, is that the VAT increase of fuel would equate with the Income Tax / NIC and VAT saved by an average wage earner. So they were no better no worse off. However, the penalty of fuel would be felt by those that would have little saving from huge Income Tax reductions. Hopefully price benefit lifestyle choice individuals off the road. I’d like to extend these penal (but neutral to current income tax payers) measures to international travel too.

        At present there is little insentive to work for some and benefits rise to cover necessity. Owning a car is not a necessity if you don’t work. It would hopefully make a car the privilege of the working / middle classes and remove them from the long term idle.

        The purpose of using VAT instead of fuel tax is that it is reclaimed by commercial users. That includes agricultural users.

    • Adam5x5
      Posted August 24, 2012 at 12:43 am | Permalink

      Owning a car and living in a tranquil village with no bus or train, is not being poor.

      Because living in a city is cheap???

      Rents are driven up in cities by higher demand – to the point where property and rent prices become unaffordable to many. Thus they are then forced to move to the suburbs/country to escape the higher rents, at which point the government is to clobber them for tax for using their vehicle?
      That’s effectively a tax on being poor.
      Don’t forget as well, just because you live in an urban area, doesn’t mean you don’t require a car.

      Owning a car is no longer an indication of wealth. Indeed in a lot of places or situations it is a necessity. I know very few people (virtually none) at my place of employment who use public transport or bicycles as it is not feasible when on shift work as the public transport is not reliable enough or provided at the right time for the right destination. Bicycles are more common in summer, but in winter? Only with a death wish…

      • Mark W
        Posted August 24, 2012 at 3:26 pm | Permalink

        I do seem to have got myself in bother on this issue.

        I had no intention of wishing to price private cars off the road. Just shift the Income tax / NIC burden to fuel at a neutral level for anyone on an average income. So if your combined Income Tax / NIC reduced by £350 a month you may find that as an owner of an average car doing around 12,000 miles a year your fuel bill would rise by £350 per month. However, if you didn’t pay income tax at present then the Income tax payer funded benefits system may no longer be enough for you to congest the roads.

  19. Paul Danon
    Posted August 23, 2012 at 8:26 am | Permalink

    You wonder why the coalition is content to be tarred with the cutting-brush by Labour when it’s actually pursuing Keynesian policies just as Mr Balls would have it do, and with disastrous consequences. Mr Clegg is reportedly weak. Cannot the Conservatives challenge him to support genuine cuts in tax, debt and spending which might just improve things by 2015? Maybe both parties are electorally doomed, but they at least have a patriotic duty to do their best for the country, which isn’t more borrowing and money-printing.

    • Jerry
      Posted August 23, 2012 at 5:03 pm | Permalink

      Mr Osborne following Keynesian policies? I don’t think so… “Monetarism Light” perhaps but not Keynesian!

  20. Electro-Kevin
    Posted August 23, 2012 at 8:49 am | Permalink

    It isn’t just leftists who believe that borrowing is the solution.

    Unfortunately there are many home owners who believe that borrowing is the route to wealth too. That borrowing alone is all that is needed – the more you borrow the more savvy you are.

    The nation appears to have been gripped by mass childishness on the issue of money and the belief that it grows on trees.

    A collapsed housing market is seen as political suicide and my belief is that the long-term survival of the nation has been put at risk in order to preserve it.

    Why are house prices still so out of kilter with average wages ?

    • Electro-Kevin
      Posted August 23, 2012 at 9:14 am | Permalink

      The electorate are comfortable with the concept of borrowing. The figures are so huge as to be inconcievable to most people anyway.

      Borrowing is being used (as it has been for decades) to disguise economic decline and it will take brave politicians to break the cycle and return us to sound money.

      This should have been done in the first year of office when the nation was alert to the fact that we were in trouble. Blame could have been directed at Labour and there should have been a Tory spin machine dedicated to the task.

    • Sidney Falco
      Posted August 23, 2012 at 9:19 am | Permalink

      “Why are house prices still so out of kilter with average wages ?”

      Artificially low interest rates for a starter.

      • sm
        Posted August 26, 2012 at 9:47 pm | Permalink

        Why is housing so expensive?

        The major cause:
        A ponzi scheme made possible by rampant debt money being created via the fractional reserve banking system. Which would now ordinarily collapse , but for direct central bank/public support for the exposed banks.

        You might need a home or demand a home…… but unless you get a loan or are able to pay rent or get one subsidized, you do not influence the price of housing.

        Other factors like immigration, no land tax all add to this issue.

    • alan jutson
      Posted August 23, 2012 at 9:29 am | Permalink

      Kevin

      “why are house prices so out of kilter with average wages”

      Simple, Supply and Demand.

      We import more people than we build houses for, and birth rates are also up.
      Thus there is a housing shortage, and will be for decades

      Borrowing money (for a mortgage) is cheap at the moment so buyers exist.

      Borrowing for Building is expensive and non existant, so building starts are low.

      Rents are increasing, mortgages are not.

      People like the idea of owning their own home, it gives many a feeling of security.

      Governments fear of negative equity for millions if prices drop, would savage their vote count.

      • Electro-Kevin
        Posted August 23, 2012 at 2:41 pm | Permalink

        As Sydney says – artificially low interest rates. Also forebearance on behalf of lenders is what is helping to keep house prices high. In previous postings I mention welfare landlording and the fact that the taxpayer has to foot the bill for a privated profit in the form of a monthly yield and a capital gain before the tenant is housed (taxed, I agree)

        All of these are influenced by government. Regardless – house sales have slumped in most areas so it isn’t demand keeping prices up.

        There is a huge amount of personal debt which is supported by home ownership. Nay – caused by home ownership.

        What do we say of Greece on this blog ? A good idea to default and de-lever ?

        Why doesn’t that apply to the distressed parts of the UK housing market ? I believe it to be an obstacle to our recovery.

      • uanime5
        Posted August 23, 2012 at 8:49 pm | Permalink

        Don’t forget about some people owning multiple homes, which also reduces the supply.

    • A different Simon
      Posted August 23, 2012 at 10:31 am | Permalink

      An artificially constrained supply ; BTL , lack of housebuilding and (arrival of migrants who have children-ed) .

      Generate a surplus and the prices will sort themselves out .

  21. merlin
    Posted August 23, 2012 at 8:49 am | Permalink

    But, Mousie, thou art no thy lane,
    In proving foresight may be vain;
    the best-laid schemes o’ mice an ‘ men
    Gang aft agley,
    An’lea’e nought but grief an’ pain,
    For promise’d joy
    ( Verse 7 from To a Mouse, on turning up in her nest with the plough, Robert Burns 1785)

  22. backofanenvelope
    Posted August 23, 2012 at 8:55 am | Permalink

    The only sure way of cutting public expenditure is for the government to STOP doing things!

  23. Richard1
    Posted August 23, 2012 at 9:05 am | Permalink

    At the heart of the debate is the fallacy advanced by many commentators that since interest rates are so low the Govt should be borrowing even more to invest in ‘infrastructure’ and this will somehow engender a recovery. The nonsense of this must be set out: interest rates would not be low if there wasn’t confidence in future deficit reduction; the ‘infrastructure’ purchased may well be malinvestment – like much of the infrastructure built with this logic under the Euro in Greece and Spain (eg. HS2, the Severn Barrage, windfarm subsidies etc); the debt would still be future tax and so depress private sector confidence. The only route to sustainable recovery is market-driven demand for goods, services, assets which people want. We will not be able to tax borrow and spend our way to recovery

  24. Sidney Falco
    Posted August 23, 2012 at 9:18 am | Permalink

    John Pilger has a explanation as to why many BBC journalists (and others) don’t know what is really going on.

    He says that many modern journalists are no more than stenographers. They just accept what they are told and don’t actually check facts for themselves.

    The fact that so many journalists believe that the government has made severe cuts already proves Pilger’s point for him.

    • Sidney Falco
      Posted August 23, 2012 at 9:20 am | Permalink

      an explanation!!!

      • alan jutson
        Posted August 23, 2012 at 10:42 am | Permalink

        Sidney

        It is because they are PRESENTERS, they are not really Journalists.

        They have been employed to look good, but there is no real substance or understanding of their subject, because they are used in multiple situations over a wide subject range.

        They are simply not skilled in the art of forensic interviewing

        Remember Robin Day, not much you would get away with, with him, he did his homework, he knew his facts, and he exposed lack of knowledge or spin (lies).

        Many modern day politicians would have been exposed for how they practise the dark arts of spin, which distort the facts.

        • Alan Wheatley
          Posted August 23, 2012 at 1:54 pm | Permalink

          Exactly!

        • Sidney Falco
          Posted August 23, 2012 at 7:28 pm | Permalink

          You’ve reminded me of Brian Walden. Now, there was a real political interviewer.

          I also like Andrew Neil, especially on financial stuff, as he seems to be well briefed on those topics (and the sad decline of upward mobility due to the closure of grammar schools – a pet subject we share).

    • nicol sinclair
      Posted August 23, 2012 at 3:51 pm | Permalink

      They’re not even stenographers. They are readers of the autocue…

      • Sidney Falco
        Posted August 23, 2012 at 7:24 pm | Permalink

        I wasn’t thinking of the presenters. There are a lot of correspondents behind the main presenters.

        All they do is recite the line they are given and seek feedback from others. As Alan said, they spend all their time reacting and being on camera that they have little time to analyse and cross check.

        It’s the same with a lot of “war correspondents” today. A lot of them are simply embedded with the army.

        There are some good old fashioned reporters out there but they are mainly freelancers.

        Dimbleby, on Question Time, is a joke.

  25. Derek Emery
    Posted August 23, 2012 at 9:54 am | Permalink

    Why hasn’t the huge fiscal stimulus administered by the current large structural deficit done the job?

    The answer has to be that the particular brand of economic theories they choose to believe in do not relate closely enough to the real world for their chosen solution to work. The problem is that political minds have confirmation bias so all information received is adjusted to retain the same beliefs. Economic beliefs are often tied back to political beliefs so flexibility of approach is not possible. It seems to me most economists believe in economic theories that fit with their political beliefs so in effect they have perfectly closed minds.

    The present set of bureaucrats who advise Government on the economy have to be bordering on totally useless because they never saw the damage that would result from financial deregulation and never forecast the crisis until after it had already happened. How bad can you get!

    They never saw the risks from having 120% mortgages with no deposit leading to booming house prices. At no stage of the boom did they ever see any need to increase interest rates to cool down the loan market.

    The same people will be still there now. What faith can you have that these people will come up with solutions to a problem they were totally clueless about?

  26. Denis Cooper
    Posted August 23, 2012 at 10:18 am | Permalink

    Basically the economy is ticking over, without any significant increases in overall economic activity but also without any major decreases.

    Some progress has been made in eliminating public sector jobs, and ostensibly the private sector has been able to absorb the workers who have been released from the public sector, but that is a slow process.

    The government is still having to borrow about a fifth of the money it is spending, down from about a quarter in 2009, and it is only possible for the coalition to fund that continuing massive budget deficit by following the precedent set by the Labour government, whereby the Treasury indirectly borrows new money created by the Bank of England rather than seeking more loans from private holders of capital.

    Putting that in other ways, there is little or no increase in the government’s total indebtedness to private investors, because investors are selling previously issued gilts to the Bank about as fast as they are buying new gilts from the Treasury, and for the present the government has the Bank as a captive gilts investor and is no longer reliant on private lenders except for their willingness to participate in the “money-go-round” which has been running since early 2009 with some pauses.

    Putting it more bluntly, the government has induced the Bank to rig the market in its bonds, with the Bank intervening to buy up surplus government bonds in much the same way that the EEC used to intervene in markets to buy up surplus agricultural produce; and just as the EEC ended up with a mountain of butter in cold storage so the Bank now has a £343 billion mountain of government bonds safely stored away where they can no longer do any harm:

    http://www.bankofengland.co.uk/markets/Pages/apf/results.aspx

    As I vaguely recall the EEC finally disposed of its butter mountain by giving some away free to consumers within the EEC, and some went to the Soviet Union cheap or maybe even free, but I don’t suppose that the Bank will be doing anything like that with its gilts mountain.

    • outsider
      Posted August 23, 2012 at 2:09 pm | Permalink

      Dear Mr Cooper,
      There are other, simpler ways of dealing with the gilts mountain that were not available for butter.

      The gilts are held off-balance-sheet by the Bank in a company created for the purpose. The Treasury could buy this company for, say, £1 and cancel the gilts. The loans from the Bank used to buy the gilts could then be cancelled, along with the Bank reserves created for the purpose. All theoretically dire. But that was always implicit in QE unless and until it was unwound by selling the gilts back to the private sector. It seems unlikely that the Government will want to flood the market with gilts in the foreseeable future.

      This transaction would not affect the fiscal deficit (PSBR) because the interest the Treasury pays on the QE gilts comes back to it in the form of interest receipts. These are projected by rise by £8 billion a year by 2016-17. But it would cut the “National Debt” by up to £375 billion and also cut public spending, both of which would be good for confidence.

      A better solution, canvassed elsewhere, would in my view be to buy the company and use the gilts to set up a funded pension scheme for public sector employees who are now in unfunded schemes. This would progressively cutting future public spending for generations to come.

      Unfortunately, as their catastrophic treatment of the Post Office pension fund shows, Treasury officials cannot abide the idea of funded pensions and insist on pushing the burden onto public spending and future taxes. The Chancellor and his ministers either agree fully with this policy (regardless of what they say in public) or do not understand what they are doing. Answers on a postcard please.

      • outsider
        Posted August 23, 2012 at 2:15 pm | Permalink

        By the way, the Treasury has just cancelled the gilts held by the Post Office pension fund so cancelling the QE gilts would not be anything new.

      • Denis Cooper
        Posted August 23, 2012 at 5:16 pm | Permalink

        The owner of a gilt is entitled to receive certain payments from the Treasury during the life of the bond, and obviously if the Treasury becomes the owner by whatever route then it can cancel the bond rather than paying itself.

        As I understand from this:

        http://cdn.hm-treasury.gov.uk/budget2012_annexc.pdf

        the gilts owned by Royal Mail Pension Fund were to be transferred to the Treasury as part of a larger scheme, presumably with future pensions being paid directly out of government funds rather than through payments on the gilts, and as the Treasury became the owner of those gilts they could be cancelled.

        The position is rather different with the gilts held in the APF because in his first letter of authorisation, dated January 29th 2009, Darling indemnified the Bank against any losses:

        http://webarchive.nationalarchives.gov.uk/+/http://www.hm-treasury.gov.uk/d/ck_letter_boe290109.pdf

        “The Government will indemnify the Bank and the fund specially created by the Bank of England to implement the facility from any losses arising out of or in connection with the facility.”

        If that position was maintained then the Treasury could not acquire those gilts for £1 without following that up by paying the Bank the huge sum required to cover its consequential losses on the APF.

        I’m not clear what would happen if it was decided not do that, so that the Bank then had a massive hole in its balance sheet.

        My guess is that unless the gilts can be gradually sold back to private investors at some more favourable point in the future then the APF will continue to hold them and will continue to receive the payments due from the Treasury, which are then potentially recycled to the Treasury as part of the Bank’s profits, until they have all matured and the APF can be wound up.

        Reply: The gilts “owned” by the Bank are held against a Treasury loan to buy them. The government with Parliament’s approval could cancel both the gilts and the loan. There is unlikely to be a Bank loss as gilts have stayed firm with so much state buying, but if there were the indemnity could be honoured. The UK state debt would then be a lot lower. I guess they do not do this, as they are probably nervous about how markets and the public would react. From here they have other options to cancellation:
        1. Re sell gradually in the market when they think there is enough money in circulation, as part of a counter inflation monetary policy
        2. Hold on to what they own, but allow them to be repaid as they fall due for repayment by the government, effectively cancelling part of the gilt holding and repaying part of the Treasury loan as each one matures
        3. Hold on to what they own, and replace each one which matures by buying additional holdings with the money released
        4. Carry on adding to the protfolio, as they are at the moment.

        • outsider
          Posted August 23, 2012 at 7:04 pm | Permalink

          The reason given by the Bank for holding the gilts off-balance-sheet is that all profits or losses in the company are down to the Treasury, not to the Bank. Otherwise, agree with Mr Redwood’s reply.

        • Denis Cooper
          Posted August 24, 2012 at 10:20 am | Permalink

          No, the Treasury owes the Bank, not the other way round.

          In his original letter of January 29th 2009, linked above, Darling authorised the Bank to buy “up to £50 billion of high quality private sector assets”, and in accordance with that the list of eligible assets did not include gilts; and “This facility will be financed by the issue of Treasury bills and the DMO’s cash management operations”, ie the Treasury would borrow money from private investors and lend it on to the Bank.

          However in subsequent letters that original stated intention for the Treasury to borrow money and lend it on to the Bank so the APF could buy just private sector assets quickly morphed into the Bank using “Central Bank Money” to fund purchases of a wider range of assets including gilts, and ended up with the APF using virtually all the newly created money to buy gilts and virtually none of it to buy private sector assets.

          That’s why in the APF results summary here:

          http://www.bankofengland.co.uk/markets/Pages/apf/results.aspx

          there are two categories of assets, those financed by “Issue of Treasury bills and the DMO’s cash management operations” – never very much, and now down to £29 million of corporate bonds, and marked as not applicable to gilts – and those financed by “Creation of central bank reserves” – £346 billion of gilts, plus £91 million of corporate bonds.

          The Treasury owes the owner of the gilts, which is the APF; and as the Bank owns the APF it is the Treasury which owes the Bank, not the other way round; and if the APF gave away almost all of its assets, the gilts, to the Treasury for just £1 then it would be unable to repay the Bank the £346 billion or whatever of “Central Bank Money” that was used to buy the gilts from private investors; and I don’t see how that could fail to be reflected in the appearance of a massive hole in the Bank’s balance sheet, which the Treasury would then have to fill if the indemnity was to be honoured.

          Would it matter if the indemnity was not honoured?

          Well, we know that the Treasury owns the Bank, and therefore it may seem to be a closed loop within the state apparatus; but of course it isn’t because £346 billion or whatever of new money has been issued by the Bank and is now in private hands, even if it’s not in the form of paper banknotes; and that money which is in private hands cannot be recalled or simply cancelled because it represents legitimate claims that its possessors have against the state; it can only be recovered by the state through taxation, or other means such as state asset sales.

  27. Derek Emery
    Posted August 23, 2012 at 11:09 am | Permalink

    There’s an article on the Adam Smith site “Will more state spending stimulate the economy?” at http://www.adamsmith.org/blog/economics/will-more-state-spending-stimulate-the-economy
    To quote the last paragraph

    {In a non-homogeneous world, adjustment takes time. As Horwitz says, we can “free up competition, prices, profits, and losses so that entrepreneurs and others can finish the process of tearing down the mistakes of the boom and figure out how to reallocate those resources to their new best uses”. I’m struggling to think of one major pro-competitive reform the Coalition government has made since 2010 that would speed up that tearing-down process, and they certainly haven’t freed up prices, profits or forced bad banks to make the losses they need to. Maybe that points to why things seem to have gone so badly wrong.}

    I wonder just how many (if any) politicians and bureaucrats there are in the UK who could work to this agenda.

  28. Lindsay McDougall
    Posted August 23, 2012 at 11:55 am | Permalink

    Clearly, plan A was best and to get anywhere near it, there must be massive cuts in public expenditure in the 2013 budget, particularly current expenditure. Make it easy on youselves; nothing is sacred, nothing is off limits. It is absolutely essential to remove index linking from public sector salaries, state pensions (except where there is a contractual constraint) and all benefits paid for not working – unemployment benefit, income support, housing benefit, the whole lot.

    Any EU agreement thereby violated will simply have to be suspended in the national interest – don’t procrastinate, don’t worry about European law or the European courts, just do it.

    Nor does there have to be economic growth in order for HM government to do its duty. There is an article by Danny Gabay in the business section of the Daily Telegraph (Wed August 22), in which he addresses the prosaic matter of household debt. In the era of the great clunking fist, household debt rose from around 90% of disposable income to over 160%. The household debt-to-income ratio is still above 150%. This is why the UK’s growth rate is below America’s, below the EU’s. Households are doing their best to reduce their high levels of personal debt and it is NO BUSINESS OF POLITICIANS to discourage this very healthy process.

    The coalition should do their best to resurrect plan A and prepare a huge barrage of negative propaganda about Labour’s conduct in office. It really was a bloody disgrace and the effects will be with us for years.

    • uanime5
      Posted August 23, 2012 at 9:02 pm | Permalink

      Given that 2.6 million people are on benefits and 9 million are economically inactive any scrapping of benefits will be met with huge public anger. You can’t punish the poorest in society for something that isn’t their fault without repercussions.

      Also it would be far easier for people to reduce their household debts if you didn’t scrap their benefits.

      Given how large the fines are for ignoring EU law you can expect the UK to suffer greatly in the European Courts.

      • Lindsay McDougall
        Posted August 24, 2012 at 8:42 am | Permalink

        I have proposed scrapping index linking of benefits, not scrapping benefits. There is a huge difference.

        Sod the European Courts. Just withdraw recognition from them. And don’t pay the fines.

        We will be masters in our own house.

        • Jerry
          Posted August 24, 2012 at 3:05 pm | Permalink

          What ever the details Lindsay you are proposing that the poorest get poorer, that is a simple and sure recipe for civil unrest if ever, did we not leant anything from the 1980s and those riots in employment devastated Liverpool etc, uanime5 is quite correct.

          What you propose would have been great back in the late 1960s (or even between 1995 and 2007) when we really did have the work-shy, now days there are many willing and able to work people on benefits who simply can’t work because there are not the jobs. Even the governments own figures show that to be plainly the case. Also you can’t expect people who either have a family or own their own house just to up-sticks to another part of the country were there is a better possibility of work.

          • Lindsay McDougall
            Posted August 26, 2012 at 2:43 pm | Permalink

            Public sector workers are not ‘the poor’. Nor are many pensioners. When I was the sole breadwinner for 6 people, the state made life as difficult as possible for me, taxing one income households far higher than two income households on the same total gross income and failing to raise the 40% threshold in line with inflataion. Then there were the mortgage payments.

            Now that I am semi-retired and the family are grown up, the mortgage is paid off and people are throwing money at me. It really is a crazy world.

            Does this country hate young people?

  29. Leslie Singleton
    Posted August 23, 2012 at 12:38 pm | Permalink

    “It all has to be paid back” you say, but that is not just wrong it is at the heart of the problem that getting any at all repaid is unlikely. I remember my basic banking. Working Capital lending based on Balance Sheet strength makes sense, repayable short term as it is or should be, and Term Loans were fine provided there was Cash Flow to repay them and maturities were not too long. There was always pressure from some customers for longer maturities (lending is easy if you give in) but there always had to be a limit (it wouldn’t have been so bad if margins reflected the term but they never did) and I remember being told when ever I tried to push the maturity longer “Why not make it 20 years or 100 years?” or longer still? Anything truly long should have been financed by Equity of course. All this is beyond doubt EXCEPT apparently when one is lending to Government for which to a large degree understand pouring money down the drain as I say with no hope of repayment.

  30. Daniel Thomas
    Posted August 23, 2012 at 12:49 pm | Permalink

    Government borrowing is defered taxation and will have to paid back but by who and when?

    We are being told that avoiding taxes is immoral. Thats a matter of opinion.

    What is immoral is spending money today then leaving our children and grandchildren to pick up the bill.

    We are saddling future generations with unimaginable debt because we don’t have the guts to clean up our own mess.

    Shame on us

  31. Conrad Jones (Cheam)
    Posted August 23, 2012 at 1:16 pm | Permalink

    I agree with your views of the BBC Interviewers. They seem to do very little research on the subject of Economics.

    As far as not understanding that the Government is now spending more, it is possible that they equate Austerity Measures with a reduction in Public Spending, which of course it does not as you rightly say. Some Departments have reduced, but overall, have increase as you state.

    It is difficult to disagree with your views that we need to reduce Public Spending as Public Debt is the Result, plus increased interest payments.

    Public Sector Debt is approximately 65.7% of GDP

    Private Sector Debt is approximately 950% of GDP (nine hundred and fifty)
    (The United States peaked at 303% of GDP)

    With this level of Private Sector Debt, is it feasible to expect the Private Sector to increase it’s debt levels to even higher levels?

    We have the highest Private Sector Debt level of the G10 Countries, the next runner up is Japan with just over 600% of GDP, despite continued QE for the last twenty years.

    I fear that the Economy is a bit like Hampton Court Maze, inorder to get to the Centre we have to constantly turn away from the Centre. In a Credit Based System, if the Government sharply reduces it’s debt level now, the Private Sector will have to increase theirs, reducing consumption in the future.

    I totally agree that increased Government Borrowing now increases Taxation in the Future, but our economy is Credit Based. So somebody always has to be in Debt.

    PLAN D:
    Steve Keen has suggested a Debt Jubilee – everyone (Borrowers and Savers) receive money (or commerical bank money), with the proviso that they must pay off debts first. The UK Financial Sector has a debt to GDP of OVER 600% (more than Japan’s entire economy). There has been interest shown in this proposal by other Politicians. This could be the one chance we have before a Tidal Wave of Bankruptcies hit, sending the Economy into an uncontrollable nose dive.
    (This would alleviate the Problem for another decade or two but not fix the problem for our Children and Grandchildren – presuming that we care about them).

    PLAN E:
    PositiveMoney and New Economics Foundation as well as the Monetary Reform Party, have proposed a Draft Bill to put Money Creation back with the Government (under an independent body who implements Government Policy). This would create a long term solution.

    Interest Payments on our debt are set to increase to £53 billion by 2015 unless we change the way money is created.

    We need PLAN D & E, inorder to adopt PLANS A & B. No need for Plan C.

    • sm
      Posted August 26, 2012 at 10:15 pm | Permalink

      Sounds like a plan, but i would tweak the QE for the public after debt paydown, ensuring any spend is within the UK economy only or held only in UK assets.

      This would reduce the power and size of the banks. If you suspect that our laws & democracy have been voverly influenced or captured what situation will force a change of direction.

      I sincerely hope we have an epiphany before them.

  32. bob webster
    Posted August 23, 2012 at 1:46 pm | Permalink

    Get ready for plan D. Merkel and hollande have signalled that there is to be no more leeway for Greece, which will be out of the Eurozone shortly, followed, in all likelyhood by Spain, Portugal and maybe even Italy. The ensuing crisis will give Cleggy, Dave and Gideon the perfect excuse to put off eliminating the deficit until 2020, and create the conditions for large scale pre election bribes paid for with borrowed money and another 300 billion of QE.

    • Jerry
      Posted August 23, 2012 at 9:26 pm | Permalink

      @ Bob Webster: They have also said that they do not intend for the Euro to fail or for Greece to leave the Euro (and then possibly other stressed EZ countries), so far from a break up I suggest that you hold onto your hats for a shot-gun marriage and the creation of the USoE – with the UK rapidly holding a referendum (I suspect we will not be alone…)

  33. Iain Gill
    Posted August 23, 2012 at 3:36 pm | Permalink

    Meanwhile the intellectual property which this country relies on to generate future income is leaking abroad and out of our control and getting more and more like a flood every day.
    Meanwhile we have uncapped numbers of mainly Indian nationals coming in on ICT work visas, bringing their families.
    Meanwhile the education on our sink estates is stagnating or getting worse, destroying any hope of those folk ever contributing to the countries earnings.
    The ruling class really are letting the country down

  34. Iain Gill
    Posted August 23, 2012 at 3:45 pm | Permalink
  35. forthurst
    Posted August 23, 2012 at 3:54 pm | Permalink

    To what extent did any of these plans factor in demographic changes?
    There have been higher levels of Social Security payments and reduced levels of direct tax revenue. Allowing significant numbers of people in the country either to subsist on the public purse or to displace highly skilled and salaried English workers with lower skilled and remunerated (people from overseas-ed) so that the former also become a drain on the public purse, is bound to have an adverse effect on the public finances particularly at a time of low growth.

    We do not know precisely who did what or when at RBS, but what we do know is that a highly stable and successful support team was sacked in order for them to be replaced by cheaper staff. The debacle has cost RBS £125M and counting and reduced the profits on which tax will be rendered. In many areas of the public sector, competence is almost irrelevant; many of the most ‘successful’ politicians have left a trail of devastation in their wakes and many civil servants perform functions which they have either invented for themselves or been provided with by Brussels whose effect on the economy is negative in any case. On the other hand, competance in technical matters is vitally important. Incompetent IT workers can cause enormous clearup costs and reputational damage; doctors who are presented with a sick patient thirty times with symptoms of increasing severity before an emergency intervention becomes necessary to try and save a life, greatly increase expenditure on wasted effort whilst(even sometimes letting patients die-ed). Importing people on the basis that they come with an identical label to an English worker does not mean they will be able to achieve an identical level of performance.

    Has the government’s multiculturalisation agenda in order to create facts on the ground as soon as possible been allowed to override fiscal prudence? To be a first world country means that all functioning levels of society should be able to offer a first world level of performance.

    • forthurst
      Posted August 23, 2012 at 5:42 pm | Permalink

      Can we look forward to the “The Newspeak lexicon: a safe vocabulary for use in political discourse” by John Redwood D.Phil?

      reply: No. I just think there is no need to use pejorative words to describe people who visit or move here from another country.

      • forthurst
        Posted August 23, 2012 at 5:56 pm | Permalink

        …but what allegedly constitutes a pejoritive term changes more rapidly than some are capable of keeping up with.

  36. forthurst
    Posted August 23, 2012 at 4:16 pm | Permalink

    “So what Gove has done is abandon norm referencing (which means that the standards for a C grade are agreed and children who reach them get that grade) and returning to criteria based referencing (the government controlling the % of children who failed). This is utterly stupid.”

    I agree. One of the greatest tests of political skill is the SoS’ annual appearance on the telly to announce that more children had passed more exams at higher grades than ever before because the children had become more intelligent and diligent and their teachers more effective because of all the additional money the government had spent whilst at the same time our position in international league tables of child academic performance had significantly deterioriated. This advanced test of doublethink was clearly beyond the modest competance of the unfortunate Mr Gove and we should not have been at all surprised that he flunked it.

    • forthurst
      Posted August 23, 2012 at 4:57 pm | Permalink

      … in response to Rebecca’s daily Gove.

      • Mark
        Posted August 23, 2012 at 8:51 pm | Permalink

        The deficit in education standards is all off exam certificate…

  37. Brian Tomkinson
    Posted August 23, 2012 at 4:25 pm | Permalink

    Don’t worry, the BoE has stated that their £375billion of QE (fake money) has “boosted the value of households’ financial wealth held outside pension funds by about £600bn.” Wow! We can all relax. All we need them to do is print billions, or why not trillions, more and we will all be super rich!!!! What do you think John bearing in mind that your government is handing even more powers to these people?

    Reply: I think in a democracy the elected official has to be ultimately responsible. The Coalition government is not “my government”. I was elected as a Eurosceptic Conservative, and so I behave as one.

    • Brian Tomkinson
      Posted August 23, 2012 at 7:23 pm | Permalink

      I find this an intriguing statement. This is not “your government” but you sit on the government benches and to most people it remains in office partly due to your support. You were elected as a “Eurosceptic Conservative” but there is no such party. Do I detect the first hint that you are looking at adopting an even more independent role and distancing yourself from Cameron and his crew? We need some real political choice in this country, as the three main parties are virtually identical apart from their rhetoric.

      Reply: I do not vote for the Coalition when it proposes more EU powers or spending.

      • Brian Tomkinson
        Posted August 23, 2012 at 9:12 pm | Permalink

        Reply to reply,
        I suppose that means you do and will vote for the coalition on everything else. How disappointing, we need someone like you in a leadership role.

        Reply: I did not vote for Lords reform, nor the climate change legislation last Parliament. I exercise my judgement.

  38. Atlas
    Posted August 23, 2012 at 4:33 pm | Permalink

    John,

    We might get some growth if we were not facing energy price hikes of 9% because of the EU’s insane green energy policies- rammed through by their Quislings, the Lib-Dems. If you squander resources on waste-of-space projects like wind farms and solar panels then it is not surprising we are all getting poorer and poorer.

    I sat next to a Lib-Dems councellor at a meal recently and merely asked him had he considered the science behind Global Warming at all. The shocked look on his face said it all; to him Global Warming was an act of faith. We must not forget that hug-a-huskie Dave signed up to this idiocy as well – so much for the ‘economics’ section in Oxford’s PPE.

  39. Jon
    Posted August 23, 2012 at 5:40 pm | Permalink

    So the government are getting criticised for the cuts, as expected but are not making the cuts. Alienating the people who voted for them to make the cuts, alienating the credit rating agencies that help give us low interest on the debt. This is all going in the wrong direction.

    They will end up fighting the election on defending cuts that never happened. People will think it was the cuts that stopped growth so may look to Labour to increase spending. Its all gone a bit mad.

    How about, after the air time Britain has had over the Olympics, cut corporation tax to 10% and say to the world to come here. Tell the Chinese we will build the offshore airport, the cycle skyways and any other civil engineering projects they want to invest in.
    We are still sovereign, the EU doesn’t control our corporation tax so lets get the world to move their office and factory bases here. If there is that borrowing then lets use it to subsidise a massive corporation tax reduction for jobs.

    • uanime5
      Posted August 23, 2012 at 9:09 pm | Permalink

      Given that every company in the world hasn’t moved to Dubai, which has 0% corporation tax, why would they come to the UK if it has 10% corporation tax? Don’t forget that a low corporation tax didn’t prevent Ireland getting into trouble.

      Finally why would the Chinese want to invest in cycle skyways and other civil engineering projects in the UK? How will these projects benefit them?

  40. Jon
    Posted August 23, 2012 at 5:45 pm | Permalink

    ..also re invigorate the savings industry, new small premium regular saving plans like there used to be before Labour, industry needs to be awash with money from shareholders to grow, the banks aren’t lending.

  41. uanime5
    Posted August 23, 2012 at 6:53 pm | Permalink

    BBC interviewers think there have been large cuts in public spending because the Chancellor keeps telling everyone that there has been large cuts in public spending, such as reducing the rate at which he increases the deficit. Perhaps if he was more honest the BBC wouldn’t be so confused.

    Could it be that the borrowing and spending hasn’t produced growth because it’s being spent ineffectively. Examples of spending that hasn’t improved the economy would be ensuring the UK retains its triple A credit rating; buying gilts to keep borrowing costs low; the Work Programme; declaring that the disabled aren’t disabled and forcing them to accept a lower level of benefits (two third of appeals being upheld must be very expensive for the state); free schools (failed private schools bailed out with taxpayers money); privatising the NHS (thousands of GP groups are not cheaper than over 100 trusts); creating over 300 quangoes with a combined budget of hundred of billions of pounds; the Olympics, Paralympics, Royal Wedding, and Diamond Jubilee; and firing state employees, giving the redundancy packages, then rehiring them when the state realised that they did need that many employees.

    Spending money based on predicted growth is always a bad idea and in the case of the UK economy it has been disastrous because annual growth has been much lower than the predicted 2%. The Work Programme was also based on the assumption that the economy would grow, millions of jobs would be created, and the money saved by getting people into work and off benefits would more than pay for the whole programme. As a result of low growth and far fewer jobs being created the Government is likely to suffer the full £5 billion cost of the Work Programme without any reduction in benefits to offset it.

    • Conrad Jones (Cheam)
      Posted August 23, 2012 at 8:38 pm | Permalink

      All the BBC has to do is look at the figures.

      ukpublicspending.co.uk is a good place to start.

      If the BBC look at the ONS website (which IS confusing), they will be bombarded with an avalanche of data – mostly irrelevant; so it is possible for them to be confused. When I went to the ONS site, I too was confused and promptly gave up – which I think was the intention of the designers.

    • Lindsay McDougall
      Posted August 24, 2012 at 8:47 am | Permalink

      Who predicted 2% growth? I certainly didn’t. Given the size of the annual public sector deficit and the level of household debt, both inherited from Labour, it was unresonable to expect growth.

      The sun isn’t shining any more. We’ve got to fix the b____y roof.

      • uanime5
        Posted August 24, 2012 at 9:54 pm | Permalink

        The Conservatives predicted 2% growth or higher for 2011-2015. Their whole budget was based on having high growth and increased tax revenues.

        http://www.guardian.co.uk/uk/2010/jun/22/budget-2010-vat-rise-osborne

        While 2011-2012 failed to have 2% growth the Conservatives are still predicting 2% growth in 2013, 2.7% in 2014, and 3% in 2015 and 2016.

        http://www.bbc.co.uk/news/business-17459466

        • Lindsay McDougall
          Posted August 27, 2012 at 1:12 pm | Permalink

          The main cause of the coalition’s faltering has been reliance on unproven growth forecasts. Of course, the growth may resume next year. It had better, because an American induced recession is coming in 2014.

  42. Barbara Stevens
    Posted August 23, 2012 at 7:22 pm | Permalink

    Well we can assume and call it what we want, this government may mean well about helping businesses, but I have first hand knowledge this is a fallacy. Not all workers are on the gravy train. Example. My daughter in law has worked for 10 years for the same company, with time off sick 1 week only with flu. Now, the boss walked in just over a week ago and told them they were all on 90 days notice, and to go home. Since then no letters of official notification of 90 day notice, no consultation, nothing. No pay for the three weeks they have already done, and no official £23 50 guarenteed pay to which they are entitled to under the law. Some have other job offers in the pipeline but cannot accept because they don’t know if they are to be made redundant or not, one meeting was cancelled, a refusal to talk to the workers, and the whole saga removed to consultants, who are not available to consult. Job centre hopeless, no help there, why they are paid is a good question. Clegg was on telly saying how they would help all they can, it just shows how much he knows. Are these people to lose another job because the employer refuses to make contact, many cannot just leave has they are entitled to redundancy payments. The way things have been handled is disgusting, to people who have worked hard paid their dues and taxes, and no help forthcoming except by Acas on the phone, which is expensive if you’re out of work and watching costs. Has anyone ideas how to tackle this problem?

    • alan jutson
      Posted August 23, 2012 at 8:09 pm | Permalink

      Barbara

      I am certainly no expert, but I would suggest your Daughter MUST get something in writing, if not forthcoming from her employer, then she should write to the company direct at their registered address (recorded delivery) outlining her concerns and asking for an explanation and more information, at least she then has something on file, to which she can refer at a later date.

      In the meantime go to citizens advice, or if in a Union, then contact them immediately.

      I can perfectly understand that the job centre is a waste of time, anyone who I have ever known who goes to one of these establishments says the same, they are really simply Benefit centres in practice.

      Hope it turns out for the best.

    • uanime5
      Posted August 23, 2012 at 9:15 pm | Permalink

      Go to the Citizen’s Advice Bureau for free legal advice.

      Perhaps your daughter can get several people to pool together and mount a class action lawsuit against this company for illegally refusing to pay the employees the amount owed to them. You may also be able to get a lawyer to sue the company on a no win, no fee basis.

      Remember if an employer refused to negotiate you need to get the employment tribunal and the courts involved as soon as possible. Delaying just gives the employer more time to move the money out of the company before declaring bankruptcy and leaving the employees with nothing.

    • Alan Radfield
      Posted August 24, 2012 at 6:54 am | Permalink

      Maybe the company is losing money. Unlike the Government, it cannot ‘just carry on’. It’s face reality.

      • alan jutson
        Posted August 25, 2012 at 9:52 am | Permalink

        Alan

        In that case it should simply be honest and make them redundant immediately so they know where they stand, and can perhaps do somthing about it by signing on and searching for another job.

  43. manicbeancounter
    Posted August 23, 2012 at 9:10 pm | Permalink

    Mr Redwood

    Thank you for a thoughtful piece that shows the full perspective of the debt problem, and the Government’s softening policies.
    I have always taken a hard line towards structural deficits. It is like somebody who is obese and still putting on weight. To tackle requires serious dieting and a determined change in lifestyle. Token changes (lower fat crisps, sweeteners in tea, etc.) will do no good whilst the ratio of calories consumed to expended keeps increasing. They obese person will end up with deteriorating health and quality of life.
    With obesity, the earlier it is tackled, and the more determined the change in lifestyle, the better are the long term consequences, and the less difficult the change. A GP who advocated tokenism, or a diet of caffeine, alcohol with less exercise, would be failing in their duty of care, although short-term the patient would feel better. For the same reasons, I believe those who think you can spend your way out of recession, are failing in their duty of care, even though in the short-term the economic situation may appear better. The GP would get struck off, but the politicians would get elected.

    • uanime5
      Posted August 24, 2012 at 9:58 pm | Permalink

      It would be easier to tackle obesity if most products didn’t contain so much fat. I remember learning that 95% fat free biscuits were a con because most biscuits were 98% fat free. Now biscuits are 20-30% fat, much of it saturated fat.

      When you have chocolate bars that contain more calories than a meal consisting of baked potatoes and steak something has gone very wrong.

      Reply: Food labels tell you the composition of these products, so do not buy the high fat ones if you dislike them.

  44. Adam5x5
    Posted August 24, 2012 at 12:56 am | Permalink

    State borrowing is simply deferred taxation. It all has to be paid back, with interest, by taxpayers.

    Not necessarily true.
    Plenty of countries have defaulted before and gone on to become healthy economies.
    http://en.wikipedia.org/wiki/Sovereign_default#List_of_sovereign_debt_defaults_or_debt_restructuring

    Sure, there may be some short term effects, but in the end it is better to put your hands in the air and say “Sorry, money’s gone” than labour on for years trying to pay off debts you can’t afford.

  45. Alan Radfield
    Posted August 24, 2012 at 6:58 am | Permalink

    Government incompetence is easy to understand if you realise why politicians are in their jobs in the first place. The reason, with a very few honourable exceptions, is simply to do well for themselves. They have no interest whatsoever in you, your job, your life, the economy, or the country or anything else besides their own money, priviledges and benefits. Which are, of course, paid for by you. It’s that simple.

  46. bob webster
    Posted August 24, 2012 at 8:06 am | Permalink

    I don’t envision a total break up of the eurozone. Once the insolvent southern countries are gone, the remaining members, led by Germany and France, will push for political union very swiftly. Will we get a referendum on in/out if that occurs? I doubt it. We might have a chance to vote on “renegotiation”.

  47. Neil Craig
    Posted August 24, 2012 at 10:04 am | Permalink

    Meanwhile the non-EU portion of the world continues to grow at 6% – as ours would if those in charge were not actively preventing it.

    With 2 years of such growth we would now have the deficit down to the 3% of GNP that euro rules deem stable.

  48. Daniel
    Posted August 24, 2012 at 11:43 am | Permalink

    No doubt “2017” will turn into “2019”, and then “2012” and so on. Nonetheless, it seems likely that The Tories won’t be in office by 2017 anyway. This will actually do them some good, and give them time to figure out the direction in which they want to go, as they allow Labour to mess up again.

    • Daniel
      Posted August 24, 2012 at 11:44 am | Permalink

      “2012” should have been “2021”.

  49. Postal Vote
    Posted August 25, 2012 at 8:55 am | Permalink

    Please note that the BBC economics reporter Ms Flanders has (had personal relationships with. -ed)with Ed & Ed (Miliband and Balls) and hence is guaranteed unbiased in weighing the pros and cons of trying to borrow yourself out of a debt recession or assessing the amount of government spending (in July 5% higher than in the same month a year ago) when everyone is shouting the word “cuts”.

  • 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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