Debt and deficit

The August figures for UK public spending and borrowing show:

1. Current spending (excluding debt interest) rose by 4.4% for the month, and by 3.7% for the April to August period. This is well ahead of the stated inflation rate.

2. Debt interest payments fell, thanks to QE. Many will write about the slower increase in current spending including this effect. The rise is then 2.5% for the month.

3. Taxes on income and wealth fell by 3.5% for the April to August period, and by 1.1% for August alone.
National Insurance contributions rose by 5% for the April to August period, and by 6.5% for August alone.

4. Total gross public debt (including banks) stood at £3 228 238 million at the end of August (please note those who say the government does not publish the figures – they do. This does not include the state retirement pension which continues to be reported on a a pay as you go basis for reasons we have discussed, but can easily be adjusted for this)

5. The adjusted deficit for April to August was £59 billion (adding back the Post Office Pension item) compared to £48.4 billion in 2011.

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69 Comments

  1. Lord Blagger
    Posted September 21, 2012 at 3:52 pm | Permalink

    Debt interest payments fell, thanks to QE

    ==========

    No they didn’t. Borrowing costs might have fallen. Since you haven’t a clue as to what the debts are, you can’t make your claim.

    ==========

    Current spending (excluding debt interest) rose by 4.4% for the month, and by 3.7% for the April to August period. This is well ahead of the stated inflation rate.

    ==========

    So yet another failure. We’re going to cut back on spending to reduce the deficit. A big fail if spending increases above inflation.

    reply Stop being so grumpy. I know what the debts are, and have shown you the government tally and offered an adjustment for the way you wish to assess debts.

    • Disaffected
      Posted September 21, 2012 at 4:37 pm | Permalink

      Either way, the figures are monstrous and no sign of change. Mervyn King thinks that it will be okay to let the government slip on its target. I think this is another recognition that it is alright to fail and reward failure; we should also have sympathy for those not up to the job- I do not share this view. I seem to remember Cameron saying to Gordon Brown: if you are not up to the job step aside to let a party who could (sic). Accepting the premise of Cameron’s position, when is he and his under-performing side kick going to step aside??

    • Mark
      Posted September 21, 2012 at 9:05 pm | Permalink

      Debt interest is always low in August, as most gilt coupons are paid in March and September, or June and December, or May and November (for most indexed linked gilts). At present, total gilts outstanding amount to £1,230.86bn:

      http://www.dmo.gov.uk/reportView.aspx?rptCode=D1A&rptName=352136&reportpage=D1A

      The arithmetic on debt is clear: it is increasing. During 2012/13 there are scheduled to be £52.9bn of gilt redemptions (the next ones are the short dated gilts at the top of the linked report above: £34.5bn of 4.5% remains before next April, with £25.6bn of 5.25% redeemed in June and £0.2bn of 9% in August, which paid altogether £2.9bn interest p.a.). In total, allowing for a planned reduction of £1.9bn in treasury bills, the DMO aim to issue £164.4bn of new gilts during the year.

      http://www.dmo.gov.uk/documentview.aspx?docname=gilts/press/sa240412.pdf&page=Remit/full_details

      The interest on new gilts is at lower yields than the redeemed gilts. If we approximate from the remit and current redemption yields of about 1% for $50.4bn of shorts, 2% for £34.5bn of mediums, 3.5% for £38.2bn of longs and 0.5% for £41.3bn of index linked, we get an extra £2.74bn paid out – a very marginal saving over the redeemed issues. This is before we account for the purchases by the BEAPFF under QE.

      The history of the interest payments on gilts is here:

      http://www.dmo.gov.uk/reportView.aspx?rptCode=D5M&rptName=353440&reportpage=Debt_Interest

  2. Lindsay McDougall
    Posted September 21, 2012 at 3:59 pm | Permalink

    Ouch, especially 5). The best we can hope for in the rest of the FYR is that there will be some GDP growth and that income tax receipts will recover, giving the same deficit as last FYR but with the Post Office pension fund making it look £20 billion better. This emphasises the need for substantial public expenditure cuts in FYR 2013/14.

    Would somebody please explain why the PO pension fund assets are ON balance sheet but the Network Rail deficit (which is larger) is OFF balance sheet?

    • lifelogic
      Posted September 21, 2012 at 4:29 pm | Permalink

      “Would somebody please explain why the PO pension fund assets are ON balance sheet but the Network Rail deficit (which is larger) is OFF balance sheet?”

      It is called creative or selective accounting a bit like Enron, Equitable life and many of the banks. Accountants and accounting reporting standards have much to answer for.

    • Steven Whitfield
      Posted September 21, 2012 at 5:37 pm | Permalink

      The only sectors that are really growing are those fuelled by borrowed money. health , education, building projects etc. Spending £2.50 to get back £1.50’s worth of growth isn’t going to help.

      Income tax will continue to be depressed by taxes being too high to service the government debt and waste.

    • A different Simon
      Posted September 21, 2012 at 9:16 pm | Permalink

      Lindsay ,

      Why isn’t the amount people need to save to provide for their old age included in the inflation figures and other headline figures ?

      The Govt is happy to include the reduction in mortgage interest due to ZIRP but not the corresponding massive increase due to no growth .

      Lower annuity rates necessity a bigger fund which needs higher saving/investing because i) the fund needs to be bigger ii) growth is slower .

      Just so sick of being looked down on by the political and state sector .

  3. Roger Farmer
    Posted September 21, 2012 at 4:03 pm | Permalink

    Unrelated Question.
    Why do the BBC and ITV have no dedicated coverage of the UKIP Conference

    Reply: Main media outlets give little coverage to any party conference these days, but do give more to parties with a significant number of MPs, and especially to parties with government Ministers or the Shadow cabinet.

    • lifelogic
      Posted September 21, 2012 at 4:38 pm | Permalink

      To reply: The truth is because “BBC think” people do not like UKIP (as at the BBC they are pro EU big state, fake green, art graduates to a person) and often even try to brand them as mad racists. They ignore their true support (second in the MEP elections perhaps even first next time) and prefer to use numbers of MP’s (why rewards regional parties) to justify their absurd bias.

      Rod Liddle has described this BBC attitude in the past in some detail and he should know.

      • lifelogic
        Posted September 21, 2012 at 8:42 pm | Permalink

        Sorry “which rewards”

      • uanime5
        Posted September 21, 2012 at 8:59 pm | Permalink

        What’s the reason why ITV and Sky aren’t covering the conference?

        • zorro
          Posted September 22, 2012 at 12:54 pm | Permalink

          Maybe because they think that the public aren’t interested/commercial pressures. The BBC isn’t subject to the same commercial pressures, and professes to be a serious channel which should be informing viewers on things or people who they might be concerned with…..

          zorro

        • outsider
          Posted September 22, 2012 at 1:43 pm | Permalink

          Dear uanime5,
          You make a good point. The Establishment view, on this and many other matters, is not confined to the BBC.

      • Mark W
        Posted September 22, 2012 at 7:21 am | Permalink

        I wonder how the BBC restrains itself from gushing at the Green Party. The Greens are in my mind dangerous nutters like the BNP, but they get favourable coverage every time.

        UKIP share of vote is large and the other day they were on Daily Politics and had to share the sofa with some fringe ‘splitter’ no doubt to do them a disservice . I imagine this new party is merely a dupe to damage UKIP. Whilst UKIP is far from perfect it is the one united anti EU receptical.

    • Disaffected
      Posted September 21, 2012 at 4:40 pm | Permalink

      Or does it confirm the BBC is the state propaganda unit and is used to help form public opinion from its perspective rather than be an impartial broadcaster?

      • lifelogic
        Posted September 21, 2012 at 5:23 pm | Permalink

        Of course it does.

      • Bob
        Posted September 21, 2012 at 8:39 pm | Permalink

        @Disaffected
        “Or does it confirm the BBC is the state propaganda unit and is used to help form public opinion from its perspective rather than be an impartial broadcaster?”

        That is pretty much self evident.

      • JimF
        Posted September 21, 2012 at 9:16 pm | Permalink

        You can see the pecking order… equivocation about the police, who are on the one hand seen as authoritarian (bad) but on the other they are public servants (good). So a neutral approach is taken when Ian Tomlinson is shoved to the ground and dies a few hours later, but exceeding wrath towards a Tory when a minister berates a policeman for being a jobsworth.

      • APL
        Posted September 22, 2012 at 7:14 am | Permalink

        Disaffected: “Or does it confirm the BBC is the state propaganda unit .. ”

        Bingo!

        The Tories have done nothing about the BBC, it serves their purpose to pretend there is a democracy in the UK and having control of the biggest media operation ( in the world ? ) assists the party* in that goal.

        *notice how policy really hasn’t changed since the election.

        Everything is directed via the administrative layer of the EU, but it is useful to have the appearance of democracy in the UK.

        • lifelogic
          Posted September 23, 2012 at 6:44 am | Permalink

          “the appearance of democracy in the UK” indeed also the appearance of democracy at MEP level.

    • Roger Farmer
      Posted September 22, 2012 at 7:38 am | Permalink

      A weak apology for the BBC and ITV. The British public tend to support underdogs, especially ones that have not lied their way to power as have all three major, for the moment, political parties. It will be interesting to see how much coverage they give to the Lib/Dems who for sure are on borowed time, and the Conservatives who think politics is a PR exercise.

  4. David J Jarman
    Posted September 21, 2012 at 4:07 pm | Permalink

    Thanks for confirmation that we are going broke, just like most the planet, even if a littlre more slowly, as I have previously posted.
    Thanks for the honest post which I’m sure some will not thank you for.

  5. Brian Tomkinson
    Posted September 21, 2012 at 4:36 pm | Permalink

    Confirmation from the government’s own figures that they are not doing what they said they would do viz. reduce spending and the deficit. Yet they will keep on peddling the myth that they are. My blood boils whenever I hear Osborne and Cameron say, as they do repeatedly, that you cannot solve a debt problem by increasing debt when this is exactly what they have been doing, are doing and plan to continue doing. How can you keep supporting this mendacious incompetence?

    • APL
      Posted September 22, 2012 at 7:18 am | Permalink

      Brian Tomkinson: “How can you keep supporting this mendacious incompetence?”

      Party, it’s more important than country.

  6. Posted September 21, 2012 at 4:38 pm | Permalink

    This looks bad, Mr Redwood. What is your view of it, please?

    Reply: I think more action needs to be taken to control the deficit, as I have often urged. I have offered ideas on how to control spending better.

    • Jon Burgess
      Posted September 21, 2012 at 8:56 pm | Permalink

      So what is the point of this government then, which pledged to reduce spending and the deficit, fail to do what they said and ignore the advice of those who offer an alternative solution?

      The coalition has spectacularly failed to do what it took office to do – sort out spending and the public debt.

      Do we just sit back and twiddle out thumbs and wait for Millibean to breeze into power without having learned the lessons of his previous administration’s mistakes, and make matters
      a) no better,
      b) worse or
      c) much worse?

      Can’t you do something – you after all are elected to serve us, and we want spending and the public debt cut?

    • outsider
      Posted September 22, 2012 at 3:06 pm | Permalink

      In reply to Mr Redwood’s answer, I find it impossible to take deficit reduction seriously when at a stroke of a pen, the Treasury has raised net public spending by perhaps £1 billion a year and rising by its treatment of the Royal Mail pension fund. (By net, I mean after allowing for interest saving.)

      The OBR projects government spending on unfunded central government pensions to treble from £4.5 billion in 2010-11 to £13.5 billion in 2016-17. How can this be?

  7. Acorn
    Posted September 21, 2012 at 4:43 pm | Permalink

    Oh the beauty of public sector accounting, money goes out the back door as a debt, runs around the house; and comes in the front door as a profit!!!

    “The 2011/12 public sector net borrowing including the temporary effects of financial interventions is £90.9 billion which is £28.4 billion lower than the equivalent figure excluding the temporary effects of the financial interventions. The lower net borrowing for the measure including the temporary effects of the financial interventions is in large part due to the public sector banking groups, collectively, having a significant current budget surplus rather than a deficit. That is to say, under National Accounts recording rules, the public sector banking groups have an income in current receipts which is greater than their current expenditure.”

    “… having a significant current budget surplus … ” Now you know where the QE went.

    • Denis Cooper
      Posted September 21, 2012 at 5:57 pm | Permalink

      My interpretation of “the public sector banking groups have an income in current receipts which is greater than their current expenditure” is that they are making a profit on their operations, not that the government has been handing them QE money. They may well be receiving state aid in other ways, for example by the Bank of England lending them money at cheap rates which they lend on at higher rates, but is there anything in the accounts to show that the government has been giving them money?

      • Acorn
        Posted September 22, 2012 at 5:49 pm | Permalink

        Look at the “excess reserves” on the BoE Balance Sheet, that is where the QE has ended up. The BoE lent it to banks by increasing their reserve balances at the BoE, taking mostly their Treasury debt holdings as collateral. QE is all about lending money to commercial banks, it has no other purpose.

        • Denis Cooper
          Posted September 23, 2012 at 8:51 am | Permalink

          But that isn’t what is meant by “Quantitative Easing”, which involves the purchase of assets through the Asset Purchase Facility:

          http://www.bankofengland.co.uk/monetarypolicy/Pages/qe/default.aspx

          It is about using newly created money for purchases, not loans.

        • Denis Cooper
          Posted September 23, 2012 at 9:27 am | Permalink

          And here are the results for the Asset Purchase Facility:

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

          showing that almost all of the new money has been used to buy gilts.

          And as the Treasury has been selling new gilts to investors in parallel with the APF’s purchases of previously issued gilts from investors, the overall effect is that the Bank has been indirectly lending the money to the Treasury, not as you suggest directly lending it to banks.

          The chain is: Bank creates reserves and lends the money to its APF, the APF buys previously issued gilts from investors, investors buy new gilts from the Treasury.

          It would be simpler and clearer if the Bank lent new money direct to the Treasury, but not only would that be inconveniently transparent it would also contravene Article 123 TFEU in the EU treaties.

  8. Glenn Vaughan
    Posted September 21, 2012 at 4:59 pm | Permalink

    I think we should all be appreciative of the data that you provide so meticulously in your postings John, including the explanations of the data which you also provide.

    Have the figures in this posting actually been published by the government (as you stated) or have they been published by the Office for Budget Responsibility which I understand is independent of the government?

    Reply They are today’s publication of official borrowing and spending figures by ONS

  9. Steven Whitfield
    Posted September 21, 2012 at 5:18 pm | Permalink

    So much for ‘Austerity’.
    The state continues to devour unaffordable amounts of money like some kind of mad out of control monster. The severity of the problem has been concealed by politicians who prefer to perpetually pussyfoot around rather than tackle the problem.
    The can is always ‘kicked down the road’ pushing us closer to the day when debt interest will become an unaffordable burden. The terrible state of the nations finances is being concealed from the British People.

    Let me be clear in my view – there is NO CHANCE WHATSOEVER of the economy returning to anything like the real growth needed to cut back the deficit at anything like current spending levels.
    With state spending at nearly 50% GDP, the economy will never be competitive enough to generate the wealth needed. There is evidence already for this in the depressed tax revenues reported.

    So where will the growth come from ?
    Retail – disposable incomes are falling because of inflation, wage freezes and lack of consumer credit so little prospect of growth.
    Banking and finance – after the mess left by the 2008 crash unlikely
    Manufacturing – this sector has been neglected and allowed to declined too far to save us from this mess.
    Building & Construction – heavily reliant on borrowed money that has now dried up.

    The only real growth in the economy is in areas supported by tax and (borrowed) money – health, international development etc.

    What we need is a politician with the compassion & foresight needed to save us from a future of decline and bancruptcy and ultimately a FULL BLOWN ECONOMIC CRISIS

    Someone who will DEMAND as a matter of principle that public spending and regulation be cut back to sustainable and sane levels. Someone who will act to roll back the ‘entitlement culture’ that grew over the New Labour years. A politician who will put the country before short term electoral prospects. John Redwood where are you ?

  10. Bazman
    Posted September 21, 2012 at 5:47 pm | Permalink

    Funny to see the real face of the government coming out in the form of the chief whips comments Andrew (Thrasher) Mitchell calling the police ‘plebs’ and asking if peole know who I am? “Hey Sarge! We have a Gentleman here who does not know who he is and poses a security risk. Is the appropriate response to this question. The swearing most people could live with, but the plebs? Political suicide. Presumably he means anyone not a ‘Toff’ and especially anyone who went to a state run school.
    I have often observed in expensive parts of London the attitude of many guys like him and their verbal treatment of waiters and officials. This will not be his first offence for sure. Just the first time he has been caught. They usually go silent when fronted in my experience.

    • outsider
      Posted September 22, 2012 at 1:38 pm | Permalink

      Dear Bazman,
      I agree that name-calling can tell one a lot. Personally, I would object far more to being called a bigot, a term freely used by Messrs Brown, Clegg and Cameron about anyone who challenges their “enlightened”, or perhaps just electorally calculated, social/moral views. It would probably encompass most police officers.
      The most common term of abuse for ordinary people by the elite is “punters”, which is both patronising and contemptuous. No-one who really has any empathy with us would use that term.
      When people with short fuses lose their cool they do tend to come out with silly things that they may not really mean, but if Mr Mitchell puts down police officers one cannot help wondering what he thought of the beneficiaries of the UK aid he was dishing out over the past two years.

      • Narrow Shoulders
        Posted September 22, 2012 at 8:29 pm | Permalink

        I think you are being unfair. Granted Mr Mitchell is a boar and granted he has a sense of entitlement but these days so does everybody. It is not a “toff” trait. The cycling lobby, the immigrants, public sector workers, benefit recipients, X-factor contestants. They all think they are above the rules.

        Entitlement is rife throughout society. Ask not what your country can do for you…….

        Personally I just want to be left to not get in anyone else’s way. I wish government would cease legislating and certainly spending on anything outside of defense, education and health.

        • Bazman
          Posted September 23, 2012 at 8:08 pm | Permalink

          Whom is a ‘pleb’ in your opinion? First stone Etc. I’ll start as make no mistake as I will start. Plebs are the ones who are mortally wronged when their own moral rules are applied to themselves. The undeserving poor not matched by the undeserving rich, Fat middle classes putting forward rules they themselves could not live underfor seconds. Etc .Easy innit?

  11. Denis Cooper
    Posted September 21, 2012 at 6:05 pm | Permalink

    So what is Osborne going to do, apart from authorising the Bank of England to indirectly lend him another £50 billion of newly created money, without even bothering to ask MPs whether they agree with that being done?

    It really is long overdue for MPs to assert themselves on this: each additional tranche of QE should require a Commons motion, a debate and a vote.

  12. Steven Whitfield
    Posted September 21, 2012 at 6:06 pm | Permalink

    I am thankfull to John Redwood for publishing these figures but I believe they do not tell the whole story.
    Setting aside the the way in which the public sector funds it’s pensions on the basis of arguably a ‘ponzi scheme’ . …

    Public debt at around 3.2 Trillion doesn’t take into account private debt. like mortgages that amounts to another 1.2 trillin. PFI contracts are also excluded which add another 170 billions. Altogether the real figure for national debt has been reported to be around 5 trillion pounds or 340% of GDP or £143,000 for every man ,woman and child in Britain.

    This is much higher than so called ‘basket cases’ … country’s such as Greece, Spain and Italy and highlights the staggering incompetence of our elected leaders.

  13. zorro
    Posted September 21, 2012 at 6:21 pm | Permalink

    John,
    Do you mean £3.2 trillion (£3,228,238,000,000) for public debt….ouch!…I guess that you do!…..By the way, we are not paying that back.

    zorro

    • zorro
      Posted September 21, 2012 at 6:26 pm | Permalink

      and there is all the private debt on top of that……All they can do is get the budget back into balance and then let inflation erode debt repayments over time (unless they really default).

      zorro

  14. Jon
    Posted September 21, 2012 at 6:51 pm | Permalink

    Overall not good, taxes on income and wealth fell which as has been said by John raise taxes too much and you end up getting less.

    NI rose which may suggest to me that those who don’t have the means to tax mitigate are paying a greater proportion.

    Spending is up. I was a bit irked by Vince Cable’s comments recently about rejecting a reduction in the annual rate in rise of benefit payments. He said not a penny less and not a penny more. Well we quite clearly are spending more so on his own definition there needs to be more cuts.

    There are lots of noises though that the economy is changing for the better. Even if that is the case it won’t cancel out the underlying problem of spending inflation, we have a lot of future bills to pay.

  15. Caratacus
    Posted September 21, 2012 at 8:41 pm | Permalink

    Item 1 – the word ‘stated’ is the important one here. The officially declared inflation rate is a confection and bears little relation to what is actually occurring outside of the nebulous brains of the BoE and the ONS.

    I used to think that a wise man should be buying gold and silver, but even these markets are contrived. (Apparently the American government – through JP Morgan – has just spent the equivalent of two years production of Silver, 62.5 million ounces, in 20 minutes to knock the price down by 50 cents. I am so pleased that we are led by such intellectual giants). Now I’m beginning to wonder whether I would be better employed considering more .. usable .. commodities, like baked beans and candles!

  16. uanime5
    Posted September 21, 2012 at 8:58 pm | Permalink

    At present borrowing costs are more than 25% over the target and deficit hit a record high in August.

    http://www.telegraph.co.uk/finance/economics/9557329/UK-borrowing-running-more-that-25pc-over-target.html

    I also found an interesting post by Payguy in the comments for this article regarding why the UK is having these problems.

    Osborne and Cameron are organising a slump to increase unemployment and suppress wages – a price they consider worth paying – to increase profit margins for Tory donors and the interests of the super wealthy.

    We should certainly take no lessons from the current Government who are badly misleading the public about the economy in a way that is certainly (wrong-ed)

    Take a look at the following graphs –

    http://blogs.ft.com/martin-wolf-exchange/2011/12/05/understanding-sectoral-balances-for-the-uk/#axzz1upLum1Lt

    The private sector is deleveraging. Households, private sector companies and banks are all reducing economic activity and hoarding cash (£650 billion of it). In this circumstance the state has no choice but to make good the difference. It is not a choice. It is an accounting law. See the graph showing a perfect relationship between private sector surplus and public sector deficit (including trade deficits).

    Until Osborne puts in place policies that make the economy grow the deficit will continue. His fiscal policies of course will continue to cause depression and higher unemployment and lower living standards.

    Public sector debt is private sector income (by definition) and it matters not a jot. As MMT proves – higher public sector debt DECREASES gilt interest rates.

    The current governments policies will fail by definition – look at the graphs – public sector debt = private sector surplus + balance of payments ALWAYS.

    The sectorial balance graphs are also a great way to compare labour and conservative records on public sector spending. Look carefully and prior to 2008 you can clearly see labours record is better. 2008 was a world wide crash which effected every nation in the world.

    The Tories were pushing for further deregulation of banks in 2007!!-

    http://blogs.independent.co.uk/2011/06/01/john-redwoods-part-in-the-credit-bubble/

    The current government is dramatically reducing spending on useful activities such as education, health, transport. These are the deepest cuts since the 1930s and we are only an eighth into the planned program.

    But what we can clearly see is exactly what Modern Monetary Theory would predict. The deficit reduction program is and will fail. It has to by definition (see the graphs again showing public sector deficit equal private sector surplus ALWAYS).

    Osborne’s spending cuts will always be replaced with higher spending on housing benefit, unemployment benefit and lower tax revenue. All at the cost of lower growth and higher unemployment.

    And how’s the Tory plan working out for people in practice? The government has tried to reduce itself in size. The economy has tanked. Living standards have fallen. Government debt has increased as every pound no longer spent on employing a teacher, nurse or mending a road is more than compensated for by the extra costs of unemployment benefit, housing benefit etc. government tax revenues are down despite higher vat and income tax due to the stagnating economy.

    We are in a liquidity trap. I can’t say this often enough to austerians. Without QE the money supply has been contracting for three years.

    http://ftalphaville.ft.com/blog/2011/11/18/753971/on-misunderstanding-qe-and-uk-inflation/

    Banks are deleveraging and lending less money into the economy. Households are poorer so are spending less money in the economy. Now the government is trying to spend less money in the economy. Government fiscal tightening in a liquidity trap leads to a depression and a slump.

    The only thing saving us from falling into a free fall abyss is QE and automatic stabilisers such as unemployment benefit and housing benefit.

    If we did as the Telegraph and Cameron want and further reduce the size of the state, companies won’t have any customers for their goods as households will be poorer and more of them will be unemployed. There will be no aggregate demand for their products. Households are getting poorer due to the austerity, more people are unemployed.

    Pretty soon we enter the world of asset price deflation. This is the tipping point when an insane right wing government has sucked out so much demand from an economy that prices drop. Then the real fun begins as people hoard cash and goods as cash is worth more (prices are now dropping) if not spent and goods are more valuable than cash. This throws the economy into a vertical nose dive with hyperinflation as in Weimar Germany and rapidly rising unemployment. Firms lay people off to try and reduce costs.

    Reply: You are in fantasy land. The government does not wish to depress wages. The spending figures continue to show real growth in current public spending.

    • Bazman
      Posted September 22, 2012 at 1:10 pm | Permalink

      Wages have been pushed down for years. Even when a company is making large profits they bleat that they have no money for the workforce and in fact the workers should help the company by not asking for a pay rise and any new starts are put on less money than new starts ten years ago.

    • outsider
      Posted September 22, 2012 at 1:54 pm | Permalink

      Dear Uanime5, I agree that sectoral balances matter but your analysis does not seem to mention QE. So far as I know, the vast majority of the debt issued by the current Government to finance public sector deficits is held by, er.. the public sector. How does this affect your identity analysis?

    • uanime5
      Posted September 22, 2012 at 7:02 pm | Permalink

      The original post was written by Payguy. I thought it was interesting so I decided to post it here.

      Regarding depressing wages the Government has already depressed them by creating the apprentice wage, which is a third of an adult’s minimum wage. They’ve also introduced workfare, which forces people to work in private companies for months in exchange for their benefits. Both of these will result in wages falling because companies no longer have to pay minimum wage.

    • Richard
      Posted September 22, 2012 at 10:52 pm | Permalink

      uanime5, I would make two simple points to you, having read your long post,

      1. Your general theory is based on the incorrect belief that there is a finite amount of money and wealth in the UK economy.
      2. Your solution to the Uk’s economic problems seems to be, to have even more Government spending and this might work if we didnt have to borrow it all.

    • Lindsay McDougall
      Posted September 23, 2012 at 12:37 am | Permalink

      Barack Obama has been governing in accordance with your crazy principles for 4 years and America’s federal deficit exceeeds 100% of GDP. There is State debt and local debt totalling 30% of GDP on top of that. If he’s re-elected, there will be tax rises all over the place. The same will occur here if Labour is elected. Labour govrnments have form. As Ken Clarke put it “Sooner or later Labour governments always run out of money.”

      There is a an alternative if Labour is elected. They will print lots and lots of money to finance their deficit and blame everybody else for the resulting inflation.

      Please, no more idiotic neo-Keynsian rants.

  17. A different Simon
    Posted September 21, 2012 at 9:24 pm | Permalink

    Still no answer from DECC on resuming hydraulic fracturing for shale gas and oil .

    Here is a suggested saving .

    Get DECC to split themselves into DE and CC . This should be easy because jobs in the CC part are 3 grades higher on the pay scale thank jobs on the DE side .

    Then close the CC bit down , rescind the 2008 Climate Change Act and scrap the proposed 2012 Energy Bill .

    How many people is your Government planning to freeze to death this Winter ?

    • A different Simon
      Posted September 21, 2012 at 9:33 pm | Permalink

      Perhaps turning the gas heating off in Westminster and Whitehall the Winter might concentrate DECC’s minds a bit ?

      They could even lead by example by heating and lighting the place with solar and wind .

      • Mark W
        Posted September 22, 2012 at 4:03 pm | Permalink

        This is a class idea, I live near wind turbines and am one of few people who like the look of them and don’t mind the noise.

        But they are truly useless. They don’t seem to be turning too often. What a waste of money.

        • A different Simon
          Posted September 22, 2012 at 7:04 pm | Permalink

          I would feel like I had a ringside seat for the War of the World’s .

          Wouldn’t mind if they were situated so far offshore that people didn’t see them .

          I’m not discounting them and am sure that the energy storage solutions needed to take utilise them for a bigger part of the mix will be along in the next 10-20 years .

          Can’t argue that at the moment they are a waste of money – which we aren’t supposed to have .

          The capex on a wind turbine array is greater than nuclear .
          Consider even a smallish £200billion pound array at 6% interest and that’s £12 billion/year before you start paying any back . A meaningful array ten times that is two thirds of the deficit .

          Using gas to generate electricity is a bit of a waste of gas but the gas and capex is less than the interest on the wind turbines .

        • lifelogic
          Posted September 23, 2012 at 6:49 am | Permalink

          Indeed, my objection to them is that they simply do not work in economic or other terms.

  18. a-tracy
    Posted September 22, 2012 at 6:39 am | Permalink

    Point 3 Tax down, NI up is a confusing one, part time jobs under around £144 pw don’t pay NI and as it’s been well reported there is more job sharing this tax must be from the middle income earners but then they’d pay more tax too – so it would appear a lot of higher tax payers have decided to delay income this year.

    • sm
      Posted September 22, 2012 at 9:14 am | Permalink

      Or it could be the closure of ni avoidance or delaying schemes in the private and public sector – (disguised employment income as something else )

  19. Denis Cooper
    Posted September 22, 2012 at 11:41 am | Permalink

    Couple of my comments missed for moderation here, I have no idea why.

  20. Steven Whitfield
    Posted September 22, 2012 at 1:59 pm | Permalink

    This didn’t happen…. it’s good to dream sometimes of what might be…

    BREAKING NEWS…

    Respected veteran Conservative MP John Redwood sensationally resigned from his Wokingham seat today prompting an immeadiate by-election in a move that is certain to put pressure on David Cameron and George Osborne to change economic policy. The Coalition has come under fire by increasingly angry Conservative MP’s over it’s failure to tackle the mounting budget deficit.

    A clearly rattled David Cameron speaking from No 10 said ‘I’m saddened to hear of John Redwood’s departure, he is entitled to his views. The coalition remain committed to our credible deficit reduction plan…….

    At a press conference arranged by Mr Redwood’s followers, he spoke ‘for too long I have struggled to reconcile the differences between my own views and those of the Coalition leadership on economic matters . I have come to realise, with an increasing sense of alarm, that the path set out by the Coalition government will not lead us out of the economic difficulties we face . The soaring cost of government and the borrowing figures speak for themselves – we cannot go on like this’.

    ‘I have always wished to act in the best interests of the people of Wokingham and as a patriotic Englishman I have no other option than to resign from my party. A full blown economic crisis would be a disaster for this country and the people I directly serve’.

    ‘I therefore propose to stand before the people of Wokingham and ask to be elected as an Independent MP. My aim is to have an honest dialogue with the people about the state of the nations finances and what needs to be done’.

    ‘I’m not promising it will be easy, but the course I aim to set out will give my constituents and the rest of the UK hope for a better future. There are no easy fixes – some pain is inevitable but it can be lessened if the right actions are taken’.

    Reply: I am having that honest dialogue about the nation’s finances. Charging the public for a needless by election would not help.

    • Mark W
      Posted September 22, 2012 at 4:16 pm | Permalink

      I don’t see why a by election would be necessary. Mr Redwood was elected by name not party, as all MPs are.

      The difficulty would arrise at the time of re election. I know little of his constituency but if Mr Redwood became independent, or as many seem to wish, defected to UKIP there is a risk, very real risk that tribal Tories would loyally vote for the party candidate and those who place a higher value on Mr Redwood’s integrity would vote for him. A split. See Coventry South 1992, the labour vote split in a comparable way.

      Much as though I wish many Tories would jump ship I fear they won’t, and possibly they do have more influence than we give credit for. I will not vote for my Tory at the next election, but I would if I moved into a constituency with the right kind of Tory.

      • Steven Whitfield
        Posted September 22, 2012 at 5:51 pm | Permalink

        Mr Redwood would have the vote of a large number of loyal Conservatives who recognise in him a safe pair of hands who has been a good Mp. Disgruntled ex Conservative voters aswell as Labour/Lib dems that are concerned about the economy would also get his vote once he is free of the Tory brand name.

        Ofcourse he may miss out on establishment titles .. Lord Redwood etc. … but that shold be a badge of honour.

        Reply: If I resigned and did fight and win the by election little would have changed – I would still only have one vote in Parliament, and would still be exercising it the same way on EU matters as I currently do.I would no longer be able to go to all the Conservative and Coalition meetings of MPs, and Conservative Eurosceptics would be wary of working with me. Doesn’t sound like much of a plan.

        • Steven Whitfield
          Posted September 24, 2012 at 10:26 pm | Permalink

          Reply: If I resigned and did fight and win the by election little would have changed – I would still only have one vote in Parliament, and would still be exercising it the same way on EU matters as I currently do.I would no longer be able to go to all the Conservative and Coalition meetings of MPs, and Conservative Eurosceptics would be wary of working with me. Doesn’t sound like much of a plan.

          Mr Redwood,
          I speak as a supporter of you as one of the few men who could get us out of this mess. But despite a track record of consistently making the right calls your party has failed to heed your advice on many important issues.

          The alternative plan then would be to hold on tight and hope that the money printing experiment and holding record levels of national dept. (£5,000,000,000,000 and rising in public and private dept). doesn’t turn out too bad….

          I think you misunderestimate the impact of the resignation of an eloquent senior Conservative Mp. To deal with the problems of the economy requires a step change in political thinking. Your departure could be the catalyst to make that happen.

          Why not defect to UKIP and encourage like minded colleagues to leave the sinking Conservative ship with you ?.

          Staying with a party that has consistently steered to the left for the last 20 or so years and goes out of it’s way to scorn any notion of conservative thinking isn’t worth supporting anymore.

          What is the point in making representations in meetings if the views of overwhelmingly left leaning colleagues are automatically given more weight by the leadership…

          – The party were duped into supporting a leader that wished to be ‘the heir to Blair’. Events have shown that he meant this.
          – George Osborne matched New Labour spending plans
          – David Cameron didn’t rule out working with the Liberal Democrats
          – Massive reliance on money printing has gone almost unchallenged
          – Now in 2012 the coalition are spectacularly failing to tackle public spending and are considering a ‘mansion tax’…

          In your response you have not disagreed with my view that…

          – We are stuck in a high dept / low growth trap with current public spending and policy trends
          – The only sectors of the economy likely to show substantial growth are those supported by borrowed money. The productive side of the economy is overtaxed and regulated with little chance of reform with the current status quo.
          – Time is running out – if spending continues at unsustainable levels we face the risk of a FULL BLOWN ECONOMIC CRISIS as debt repayments become more unaffordable

          Criticism may not be agreeable, but it is necessary. It fulfils the same function as pain in the human body. It calls attention to an unhealthy state of things.
          Winston Churchill

          Reply: There are now at least 100 MPs I talk to regularly in the Conservative party who speak and vote for the UK’s right to self government. There are no UKIP MPs to work with.

  21. David Langley
    Posted September 22, 2012 at 2:39 pm | Permalink

    Is this government borrowing out of control John? Who exactly approves the issue of gilts and on whose orders. Can we have some names in the frame for this? Is this a corporate decision by cabinet or an unaccountable treasury civil servant. Do we have no control over borrowing or is it an act of god? Are all our MPs supine in the face of this economic overspending and over borrowing?

    • Denis Cooper
      Posted September 22, 2012 at 5:25 pm | Permalink

      http://www.dmo.gov.uk/index.aspx?page=Remit/Information

      “Before the end of each financial year HM Treasury sets an annual financing remit for the Debt Management Office for the following financial year. This usually coincides with the Budget each March. The remit specifies the annual total of gilt sales planned for the financial year and the breakdown between index-linked and conventional gilts (and within conventional gilts the maturity split between short, medium and long maturities). The remit is usually revised each November/December when the revised forecasts for the public finances are published. It can also be revised in April when the outturn of the Central Government Net Cash Requirement (CGNCR) for the previous financial year is published. Further information relating to the DMO’s current and previous remits appears below … “

  22. Steven Whitfield
    Posted September 22, 2012 at 2:40 pm | Permalink

    Thanks Mr Redwood for taking the time to write a reply …in this day and age it is much appreciated .

    The dialogue is there – it’s just a great pity that it is falling on deaf ears at Coalition HQ. I’m suggesting a way for you to turn up the volume. The publicity surrounding a by election fought on an economics reality platform would be very much greater than that generated by this blog.

    My view is that the cost of an election would be worth every single penny if the resulting publicity created a broader understanding of the distinction between debt and deficit.

    Until the public fully understands the depth of our economic problems , and shifts it’s behaviour more towards an acceptance of greater personal responsibility, the required action will never be acceptable.

    • Mark W
      Posted September 23, 2012 at 2:51 pm | Permalink

      I too am grateful for the reply.

      The problem of a one off by election is that it may not necessarily attract that much coverage. David Davis got little publicity and cost himself and us all a valuable voice in government.

      I have much sympathy with the proper conservative Tories. It’s a huge gamble. The only credible way would be a decisive high numbers split. A mass defection. I think this is unlikely too as how on earth would that be organised.

      If UKIP are strategic about which seats they don’t stand in they may be able to lose the Tories many seats. This will mean enduring another term of Labour. But would the Tories survive a catastrophic defeat and have gone 23 years without winning an election. Wouldn’t a new centre right party do better in the north? There’s an inbuilt dislike of the Tory brand in parts of this country and that is the broken crutch that keeps the Labour Party in existence too.

      Reply: If Eurosceptics just keep on trying to find ways of bringing each other down we will deserve our federalist end.

      • Mark W
        Posted September 23, 2012 at 8:09 pm | Permalink

        I don’t wish to find ways for euro sceptics to bring each other down. I hope UKIP will not stand against euro sceptic Tories. The voting record in the referendum bill is a good place to judge actions. Cameron appears to not be euro sceptic. I would go as far as to say I imagine he was relieved at failing to win a majority. He appears more comfortable with Lib Dems than his own back benches.

        But to me, euro sceptic Tories are preferable to pro Europeans. But I find the euro sceptic position odd. It is only a brake on integration. How could any renegotiation be safe long term. The only realistic relationship with the EU is to leave completely. Surely WTO agreements secure free trade, and there would be too much to lose either way for the EU to not wish to keep bilateral agreements in place with the UK as an independent nation.

        So whilst I except that the Tory split I would welcome, won’t happen. I still see a euro sceptic position as too unsafe to secure our independence.

      • Steven Whitfield
        Posted September 24, 2012 at 11:59 pm | Permalink

        David Davis was the chief whip on the hated Maastricht treaty so his Eurosceptic credentials are hardly cast iron. The civil liberties campaign he ran with was inconsistent and didn’t really have much resonance with the general public. He would still have been a better leader than David Cameron.

        John Redwood ,preferably joining with UKIP to run a local election campaign would be a in a different league if he opened up the debate on the economy above the childish babble. His integrity on the economy is rock solid and his move would be a hammer blow to those that believe we can spend or tax our way out of recession.

        I agree the eurosceptics need to unite as effectively as the left wingers do – John Redwood’s success would unite them behind a winning team for a change.

        Reply: David Davis was a whip, not the Chief Whip. Richard Ryder was Chief Whip.

  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
    Published and promoted by Thomas Puddy for John Redwood, both of 30 Rose Street Wokingham RG40 1XU
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