Debt and deficit

 

There are still commentators who find it difficult to distinguish debt from deficit. The UK government itself sometimes says it has “paid down a quarter of the deficit”. Whilst this phrase does not say they have paid off any debt, it can mislead the unwary into thinking maybe they have. Polling shows that many think there have been big spending cuts in the UK  and that the debt is now falling.

The truth as many readers here will know is all too different. The UK is still running a deficit of over £100 billion a year. Current public spending  has been increased by this government.  That means that the UK state is still adding to our debts by more than  £100 billion again this year, or by nearly  £1700 for every man, woman and child in the country. Meanwhile total state debt exceeds £1000 billion, excluding the state banks’ debts, PFI, PPP and various pension items.  That’s nearly £17000 per person of debt already racked up.

All these debts have to be repaid one day. This generation is building up debt to live beyond our means, in the hope that our children will come along and be able to pay it back, or be able to refinance it at sensible  interest rates.

So far the Coalition has cut the deficit, which means they have cut the rate at which the debts increase, by around one quarter. Recent figures imply some backsliding even on this modest improvement. If all goes according to plan  this Parliament they will add around £600 billion to our state debt, or almost £10,000 extra borrowing for every man woman and child in the UK. The increase in the debt this Parliament will be more than the total official state debt ten years ago.

In summary, the UK state has a large mortgage, its big inherited debts, and is still running up ever bigger bills. Living so much beyond its means  requires it to keep increasing the mortgage.  The only good news is the last two years have seen a bit less added to the total debt than in 2009-2010.

There are some who seem to think increasing the debt like this is essential to growth. They have to answer why there have been two recessions at periods of very high borrowing. They may well say the borrowing goes up owing to the recession, but that still does not explain why such huge rises in debt failed to get the economy going again. They also need to answer why past recoveries have begun with  reductions in planned or actual public sepnding to bring the deficit down as part of the recovery plan.

 

 

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175 Comments

  1. Teresa
    Posted December 31, 2012 at 6:54 am | Permalink

    I have heard MPs including Ed Balls (!) use the words debt and deficit interchangeably. Ed must know, but it doesn’t surprise me if some MPs don’t understand. After all, they’re representative of the population of a whole, who clearly don’t have the foggiest. I assume that Ed Balls is merely exploiting this mass ignorance for his own political ends. I have long thought that the government should initiate a public service TV ad campaign to educate people on the meaning of these words. They should avoid allocating blame otherwise 40% of people would switch off!

    • Alan Wheatley
      Posted December 31, 2012 at 8:53 am | Permalink

      I agree.

      The advertising campaign on the meaning of words (and phrases) should also include “multi-cutural society” and “marriage”. The result may be viewers throwing the proverbial brick through the screen, but at least we would know them better for what they are.

      • Posted December 31, 2012 at 10:42 am | Permalink

        Agreed. Given that the word multiculturalism has several totally different meanings, listening to a discussion of the subject where the term is not defined is not better than listening to two dogs barking at each other. Personally I’ve found two dogs barking at each other much more instructive than 90% of discussions and articles on multiculturalism.

        • Alan Wheatley
          Posted December 31, 2012 at 12:48 pm | Permalink

          I see you are a fellow sufferer, Ralph!

          • forthurst
            Posted December 31, 2012 at 5:56 pm | Permalink

            Actually it’s extremely simple: multiculturalism is the process of destroying European civilisation by the introduction and its replacement by (different-ed) cultures.

            Those who propagate this philosophy did a pretty good job of convincing the world they had discovered a new economic paradigm with Bolshevism, so don’t expect them to come clean on their real purpose this time and don’t expect the congenital idiots who read the guardian, still no doubt mourning the loss of the Bolshevik apologist, Hobsbawn, to ever understand what’s going on.

    • lifelogic
      Posted December 31, 2012 at 9:16 am | Permalink

      “I assume that Ed Balls is merely exploiting this mass ignorance for his own political ends.”

      Well that indeed is they usual policy of the Labour Partly, exploit ignorance, stupidity, tax borrow and waste, the politics of envy and end with honours like – Dame Margaret Mary Beckett, DBE, MP. Mind you that is Cameron too it seems.

      • Jerry
        Posted December 31, 2012 at 10:43 am | Permalink

        Mrs Thatchers government was a master at this too, extolling the virtues of using credit when they actually meant debt

        • lifelogic
          Posted December 31, 2012 at 2:32 pm | Permalink

          Credit and Investment sound so much more positive than the reality of government – tax, borrow and waste – do they not?

          • Jerry
            Posted December 31, 2012 at 4:42 pm | Permalink

            @lifelogic: I was thinking more of domestic finances, obtaining a mortgage, Hire Purchase or a Credit Card account sounds oh so more positive than putting yourself in-debt for x number of weeks, months or years. In the same way having investments, shares or similar, sounds better than having a bet (gambling) on the fortunes of what ever you placed your hard earned money into – in fact so many people got the wrong idea about shares didn’t the Thatcher government have to have a publicity campaign, reminding those who had “Told Sid” (and the others), that shares can fall in value as well as increase?…

      • A different Simon
        Posted December 31, 2012 at 10:57 am | Permalink

        Ed Ball’s (will do many things to get into power- ed).

        There appea to be (few-ed)limits the man will not descend to in order for his personal view to prevail .

        I can’t think of a single redeeming quality .

        I would not insult other Labour MP’s by comparing them with this man .

        Reply Wanting to get into office by all legal means is part of democracy.

        • zorro
          Posted December 31, 2012 at 4:24 pm | Permalink

          Reply to reply – Indeed, just ask Adolf Hitler…….Er maybe not….

          zorro

          • Jerry
            Posted January 1, 2013 at 9:44 am | Permalink

            @Zorro: Except Adolf Hitler didn’t do so, it was just that he either made sure nothing could be proved against him (the time he did spend in prison taught him that valued lesson) or simply got his henchmen to murdered their way through his accusers.

          • zorro
            Posted January 1, 2013 at 10:18 pm | Permalink

            http://en.wikipedia.org/wiki/German_election,_1933

            It’s not who votes that counts, but who counts the votes…. :-)

            zorro

        • lifelogic
          Posted December 31, 2012 at 4:34 pm | Permalink

          “Wanting to get into office by all legal means is part of democracy.” Alas yes – so lying to the voters, promising them IHT threshold increases, or giving them fake cast iron guarantees, pretending to want less EU, or to cut regulation or anything at all – then moving the goal posts straight after the election is fine.

          Without some honesty of politicians what is the point of voting for the promised policies they will renege on anyway a few weeks later.

    • Jerry
      Posted December 31, 2012 at 9:26 am | Permalink

      Teresa, I’m also sure that Mr Osborne has got his words mixed up at times too… Also don’t forget that, unlike Osborne, Balls is often speaking without notes or from a preprepared speech in the heat of the moment.

      • Teresa
        Posted December 31, 2012 at 10:08 am | Permalink

        That would be fine if it was subsequently corrected. It never is.

        • Jerry
          Posted December 31, 2012 at 12:44 pm | Permalink

          Indeed, it would be nice is Mr Osborne correct his mistakes, if he did so we might have actually started to come out of repression rather than be at risk of a historic triple dip, industry might be creating jobs rather than still shedding them etc…

          • Jerry
            Posted December 31, 2012 at 4:10 pm | Permalink

            Oops! Not sure if that should be classed as a Freudian slip, I of course meant to say recession

      • libertarian
        Posted December 31, 2012 at 1:11 pm | Permalink

        Dear Jerry,

        I give speeches , talks and lectures without notes all the time. I do not and never have confused two distinctly different but closely related terms. Balls is a former Treasury minister an economics graduate and a candidate for future chancellor so I find your excuse for his inability to tell the difference totally implausible .

        Politicians repeatedly confuse these terms specifically to confuse the average person

    • Bob
      Posted December 31, 2012 at 11:49 am | Permalink

      Teresa
      “the government should initiate a public service TV ad campaign to educate people on the meaning of these words.”

      Isn’t that what the BBC is paid £3.5 billion pound a year for?

      “Inform and educate” rather than indoctrinate.

      • lifelogic
        Posted December 31, 2012 at 4:37 pm | Permalink

        The BBC role now under Lord Patten and before Patten is blatant indoctrination. Ever bigger tax and government, ever more regulation, ever more EU and ever more quack green energy is the clear agenda.

        • Jerry
          Posted January 1, 2013 at 9:52 am | Permalink

          @Lifelogic: I bet you would not be accusing the BBC of bias if its editorial line was that of FoxNews?

          Bias in in the eyes and ears of the beholder and all that, hence why the BBC gets accused of being biased to both the left and right simultaneously…

          • Bob
            Posted January 1, 2013 at 6:49 pm | Permalink

            @Jerry
            “Bias in in the eyes and ears of the beholder”

            In 2011 Mark Thompson, the then BBC Director General, wrote:
            “In the BBC I joined 30 years ago there was, in much of current affairs, in terms of people’s personal politics, which were quite vocal, a massive bias to the left.”

            And nothing much has changed since.

          • Jerry
            Posted January 1, 2013 at 9:51 pm | Permalink

            @Bob: How is that any different from the right-wing bias so often thinly disguised on Sky News (and other channels of and relayed by BSkyB)?

            Sorry Bob but you are so shallow in your hyperbolic bile, stop ranting on about the BBC unless you are prepared to denounce ALL bias. Your problem is that you only ever seem to see what you class as left-wing bias, on the other hand you seem to quite like the idea of having right-wing bias, as I said, if the BBC’s editorial line was a UK version of FoxNews you would be a champion of the TVL fee and shouting the praises of the BBC…

          • Bob
            Posted January 1, 2013 at 11:28 pm | Permalink

            @Jerry
            “you are so shallow in your hyperbolic bile”

            Do you have a mirror handy?

          • lifelogic
            Posted January 2, 2013 at 5:39 am | Permalink

            I do not watch Fox news but BBC bias is bias against science, logic, the private sector and sensible economics. It is not in the eye of the beholder. It is largely, as Osborne might put it – thinking with the heart rather than the brain and an indoctrination of the public using their money.

          • Jerry
            Posted January 2, 2013 at 10:07 am | Permalink

            @Bob: Yes, but I’m pointing it in your direction!

            Funny how you try and turn the tables on someone who has stated that he is against all bias (never mind being also very critical of the BBC in past blogs, wishing for the BBC to return to more pure PSB structure), why would anyone do that, unless what they actually want is their own flavour of biased reporting but not someone else’s…

            @Lifelogic: Yes indeed, the BBC is far to “Politically Correct”, it also tries to report what it thinks people want to hear (a fault of being told to compete for ratings and thus by definition be populist), not what they should be hearing.

          • Bob
            Posted January 3, 2013 at 12:23 pm | Permalink

            @Jerry
            “someone who has stated that he is against all bias”

            Against all bias?
            Do you not have any bias Jerry?
            For example, do you like both David Cameron and Tony Blair equally?

          • Jerry
            Posted January 3, 2013 at 3:27 pm | Permalink

            @Bob: Never having actually meet either David Cameron or Tony Blair personally I have no opinion – think about it…

          • Bob
            Posted January 3, 2013 at 8:04 pm | Permalink

            @Jerry
            You have no opinion on Tony Blair or David Cameron because you haven’t met them?

            Really?

            Let’s try another:

          • Bob
            Posted January 3, 2013 at 8:09 pm | Permalink

            @Jerry

            The BBC or Sky TV?

            Any preference?

          • Jerry
            Posted January 4, 2013 at 10:09 am | Permalink

            @Bob: Do you only post to right wing blogs, only read the Telegraph (or more likely, at your level of reading comprehension skills, The Sun or Daily Mail), when was the last time you read the Independent, the Morning Star, when was the last time you watched Russia Today, France 24 or Al jazeera etc etc?

            I have no views on either Mr Cameron or Mr Blair as people, if you actually meant to ask if I have views on their politics then of course I do but that is gained from their promises (manifestos) and their actual parliamentary records etc. – not on media tittle-tattle with their editorial lines and obsession with personalities etc.

            As for the BBC vs. Sky, no I actually have no preference, both are as good and as bad as each other in spinning the story…

          • Bob
            Posted January 5, 2013 at 3:00 pm | Permalink

            @Jerry

            “Do you only post to right wing blogs,”?

            No, but due to your obvious lefty bias you’ll be pleased to know that my comments are rarely published by CIF and suchlike.

            Unlike John Redwood, the anti-capitalist blogs toleration of dissent is on a par with North Korea, China, Cuba and the BBC.

          • Jerry
            Posted January 6, 2013 at 12:59 pm | Permalink

            @Bob: There you go again, name-calling people “Lefty” without any evidence [1], not forgetting yet another rant against the BBC, all goes to show just how politically bias, ignorant and shallow you really are – you must really hate (or fear…) democracy.

            [1] unlike you Bob some on these blogs are, like John himself, able to take a “Devils Advocate” position in a debate.

          • Bob
            Posted January 7, 2013 at 12:42 am | Permalink

            @Jerry

            Not “Devils Advocate” just a tedious gainsayer desperately trying to defend the indefensible.
            Do you have some kind of relationship with the BBC beyond being a License Fee payer?

          • Jerry
            Posted January 8, 2013 at 2:23 pm | Permalink

            Bob:, FFS try actually reading, and understanding, what you are replying to. But then, I guess, it is easier to throw the “Lefty” or “BBC Lackie” insults around than actually find such a clue! :(

          • Bob
            Posted January 8, 2013 at 10:22 pm | Permalink

            @Jerry
            “But then, I guess, it is easier to throw the “Lefty” or “BBC Lackie” insults around than actually find such a clue! “

            With grammar like that it’s no wonder we can’t understand what you’re on about.

            Anyway, I’ll try once more, do you have some kind of relationship with the BBC beyond being a License Fee payer?

      • Jerry
        Posted December 31, 2012 at 5:00 pm | Permalink

        @Bob: It would also be nice to be able to pay BSkyB for their sport (or what ever) but opt out paying for their ‘news’, never mind their relaying of FoxNews…

        • Bob
          Posted January 1, 2013 at 2:32 pm | Permalink

          @Jerry

          Did anyone ever go to prison for watching a BBC channel without a Sky subscription?

          Think about it.

          • Jerry
            Posted January 1, 2013 at 4:15 pm | Permalink

            @Bob: No, they got criminal records for watching TV without a licence, just as they might if they refused to get a licence for a shot gun, pay their VED, even a fishing licence (if I remember correctly) – sorry Bob, YOU think about it…

            Also no one has ever gone to prison for not watching TV in any case!

      • uanime5
        Posted December 31, 2012 at 5:16 pm | Permalink

        How exactly is the BBC going to encourage people to watch these programmes? Especially when certain people believe the BBC is some sort of communists conspiracy.

        • Jerry
          Posted January 1, 2013 at 10:00 am | Permalink

          @uanime5: Just because you can’t force a horse to drink the water doesn’t mean you should forget to provide the water.

          PSB and thus the BBC, should be providing what people need, not just what they want.

        • Bob
          Posted January 1, 2013 at 2:50 pm | Permalink

          @uanime5

          I believe that the BBC do still have some viewers.

          However, the fact remains that the BBC has an obligation to “educate and inform” under the terms of the Trust under which it is supposed to operate.

          The problem is that it has been hijacked by the left to be used as a tool for social conditioning. The fact that they allow politicians to muddle debt with deficit without correction is evidence that such a misnomer suits the political agenda that they’re not supposed to have.

    • Richard1
      Posted January 1, 2013 at 7:24 am | Permalink

      Many Labour MPs don’t understand the difference between debt and deficit. Alan Johnson, a decent guy but clearly not a financial mind, was recorded in an interview confusing the two, weeks before his appointment as shadow chancellor. No wonder we are in such a mess.

      A major problem is that many on the political left, Keynesian economists etc, think there is no problem with ever rising debt and make spurious comparisons with the 19th century. Debt interest must be serviced out of taxes and debt must be repaid when it matures, or re-financed. If the debt matures at a time when a sovereign borrower doesn’t have access to capital markets, insolvency and all it’s forced hardships follow. Look at Greece.

  2. Single Acts
    Posted December 31, 2012 at 7:26 am | Permalink

    It is now clear to anyone with rudimentary arithmetical skills how this will end. It will not be voluntary because our wise and prudent political masters have decided to pay down the national debt and stop QE.

    Far more probable I suggest, a gilt strike, much, more QE and inflation along with credit downgrades from the rating agencies. Thus an enforced reduction in spending rather than a choice.

    The failure of the political class in this whole affair is near total. There are lone voices (such as our host and very limited numbers of others) but those with their hands on the levers of power and their likely successors and predecessors have failed utterly.

    • oldtimer
      Posted December 31, 2012 at 10:30 am | Permalink

      Agreed.

      • Disaffected
        Posted December 31, 2012 at 11:19 am | Permalink

        Do not forget the narrative that ‘people are living longer’ which is not true. It should be there are more people living longer because the population is artificially increased through mass immigration.

        Good deception to prevent people from saying that the gilt and bond markets kept artificially low by government policy will devastate private pensions and that is why the government wants people to work longer so the government can continue to borrow and waste for another ten years ie EU contribution, overseas aid, wind farms for Africa and 5.2% pay rises for welfare all championed by the Lib Dems and welcomed by Cameron to modernise his party.

        The fact that pensioners and savers will be hit the most, as they have been for four years, is irrelevant to them. The squeezed middle are the only section of society to be hurt the rich and welfare are net beneficiaries. The strivers are being hit buy the Tory led coalition from the time they do well in school into their retirement. Also think about your electric and fuel bill the next time you come to vote. The Lib Dems, supported by Cameron, are making you pay through the nose for their green drivel which has no scientific basis and no benefit to the world, only mad EU ideology.

        • uanime5
          Posted December 31, 2012 at 5:21 pm | Permalink

          More immigrants don’t effect how long people live. The average lifespan is calculated by how old people are when they die, not the average age of the population.

          The strivers are also going to be hit by the Conservative plans on tax credits as this benefit can only be claimed by those who work in low paid jobs. So it will soon be better not to work than it is to work.

  3. lifelogic
    Posted December 31, 2012 at 7:29 am | Permalink

    It does not surprise me that “The UK government itself sometimes says it has “paid down a quarter of the deficit”. Lies (or being very economical with the truth as this very clearly is) is just their stock in trade. Could the advertising standard authority not intervene?

    While the ASA are at it, perhaps they could do something over the absurd adds that claim electric cars do 300MPG equivalent or something similar. In fact they are often rather worse than conventional cars, in their overall use of energy, and just have artificial tax/subsidy advantages (and doubtless those not for very long).

    They must know that, as you put it “past recoveries have begun with reductions in planned or actual public spending to bring the deficit down as part of the recovery plan.” They are not all that stupid, even if Osborne admits he “thinks” with his heart rather than his head (about the last thing you want of someone in his post). Something he said, rather bizarrely, while promoting “science” – clearly he does not even understand what science is. I assume he want some new “heart think” science like wind turbines, quack energy and borrowing your way out of debt.

    So the Cameron plan must be:

    The next election is lost but we have a good pension and probably won’t lose our safe seats (so who cares our career is what matters). We might as well leave as big a mess as possible for Labour and then we might get back sooner. Also by delaying the pain we might not lose too many Tory seats and so have hopefully about 250 MPs to try to recover with. Anyway the EU might reward us for our delivery of the end of the UK and deception of the voters on this issue with a nice low tax, high pension, EU job with plenty of travelling.

    No let me see what I can put in this EU speech, to trick the voters and MPs again this time, while leaving suitable hidden escape clauses of course. I must ring Lord Patten and Herman Van Rompuy for their suggestions.

    What a delight it is to have such “Right Honourable” Members leading the country to disaster.

    • lifelogic
      Posted December 31, 2012 at 9:20 am | Permalink

      Sad to hear of the death of Lord Rees-Mogg, aged 84. At least he has left us his son, one of the very few sensible MPs in the house.

      • Jerry
        Posted December 31, 2012 at 5:13 pm | Permalink

        Cough….

    • lifelogic
      Posted December 31, 2012 at 9:25 am | Permalink

      I see the prediction of the driest year ever and the barbecue summer have been changed to the wettest one ever. I assume the BBC, and the Libdems will still be telling up the temperatures in 100 years time with a straight face.

      • Peter Hutchinson
        Posted December 31, 2012 at 9:54 am | Permalink

        Climate is global, not local. Globally temperatures are rising. Try telling farmers in the US Mid West that rainfall is too high, they may be imagining the drought that is destroying crops.

        • Manof Kent
          Posted December 31, 2012 at 1:32 pm | Permalink

          The only temperatures that are rising globally are those that have been ‘adjusted’ by NASA and others covering the past 100 years to try and make it appear that things are far far worse than the actual situation.

          There has been no global warming for 16 years now.

          Tying in with comments on multiculturalism above I have difficulty in finding what is actually meant by ‘climate’ so that I can see what is changing and by how much.

          I thought it was the 30 year moving average of temp/rainfall/sun etc but the DECC website says it is ‘change over a considerable period of time’.
          It is quite convenient to have a non specific period to play with and then project into the future on the basis of failed computer models.

          I really can’t see the point in mentioning drought in the mid-West of the USA ,this is just local variability, just as my 900mm + of rain this year is the highest since I have kept records, compared with last year 2011 which was the lowest .

          Nature just seems to even things up over time rather like a roulette wheel.It is just as foolhardy to call next years weather ,but less expensive than putting a high stake on red when black has come up the last 10 times.

          Nonetheless as an optimist I am forecasting a real summer in 2013 to enjoy, even if it gives the alarmists the chance to scream the end of the world is nigh.

          • uanime5
            Posted December 31, 2012 at 5:26 pm | Permalink

            I recommend going to Wikipedia as they have a page about all the different climates in the world. Though NASA has a better explanation regarding how global warming is changing these climates.

        • lifelogic
          Posted December 31, 2012 at 2:59 pm | Permalink

          Globally temperatures have shown no, statistically significant, increase since about 1998 despite the increase in C02 concentrations.

          I think you will find drought and floods have been quite common throughout history, even before the steam engine was invented and c02 levels increased. Anyway hotter is likely to give more rain not less – if it does eventually get hotter.

          • uanime5
            Posted December 31, 2012 at 5:28 pm | Permalink

            According to NASA and every other scientific study average global temperatures have increased every decade.

            Also hotter doesn’t always mean less rain, as the tropics are both hot and wet (heat causes water to evaporate and become clouds, which then rain).

          • lifelogic
            Posted January 1, 2013 at 3:04 pm | Permalink

            As I say, directly above, hotter usually means more rain not less do you ever read before you reply?

        • Jerry
          Posted December 31, 2012 at 5:18 pm | Permalink

          Peter, you are mixing up weather and climate

          • lifelogic
            Posted January 1, 2013 at 3:07 pm | Permalink

            Climate is average weather – They are the same thing just over a longer time scale.

          • Jerry
            Posted January 1, 2013 at 4:26 pm | Permalink

            @Lifelogic: Exactly, but weather is also local (and sometimes very local), hence why I suggested that “PvR” is getting confused as he thinks a short term drought or flood in one locality proves worldwide AGW – It’s not as though the US Mid West has not suffered “Dust Bowl” years before, only to return to the average climate one or two years later, is it “PvR”?…

          • Jerry
            Posted January 1, 2013 at 6:49 pm | Permalink

            Sorry, wrong Peter!

      • Bazman
        Posted December 31, 2012 at 11:06 am | Permalink

        We are seeing more extreme weather conditions across the world and here. The long dry summers in Cambridgeshire seem to have gone.

        • lifelogic
          Posted December 31, 2012 at 4:45 pm | Permalink

          Were these the long dry summers and drought predicted by the BBC /Met experts and their “no hurricane in southern England” predictors?

        • Edward
          Posted December 31, 2012 at 5:21 pm | Permalink

          There isn’t more extreme weather in the world, its just we are better informed by 24-7 news TV, bringing us pictures from every corner of the Earth within seconds of an event happening.
          The long dry summers will return. You just need to pray to Mother Nature.

          • Bazman
            Posted January 1, 2013 at 10:24 am | Permalink

            Blaming the weather on the media? Now there’s a thing! This idea that it just cycles is another right wing fatalistic fantasy. Many areas of the world are seeing unprecedented weather conditions from droughts to flooding. As i have pointed out before with little response. An artificial self sustaining eco system even on a small scale has never been created. The idea that no matter what man does there will always be balance is clearly only for the religious fatalists of which right wing fantasy often goes hand in hand. Accusing the poorest members of society of being scroungers and cutting their income is another in the same vein.

          • lifelogic
            Posted January 1, 2013 at 3:08 pm | Permalink

            Indeed – buy praying to anyone will not help!

          • Jerry
            Posted January 1, 2013 at 4:36 pm | Permalink

            @Bazman: He is blaming how the weather/climate is being reported by the media, it is almost never put into a full historical context beyond the very recent records held by the Met Office (that usual only go back one to two hundred years at best, and sometimes less than one hundred years…). :(

          • Edward
            Posted January 1, 2013 at 4:55 pm | Permalink

            Calm down Baz.
            And thanks Jerry, I was not blaming the media at all.
            Its not a right wing plot any more than it is a left wing plot.
            But it is true to say that there are no more extreme weather incidents now than there were decades ago nor centuries ago, its just we are better informed.
            And there is a natural balancing climate system on this planet.
            The argument is about how much humans are affecting it and how much they can control it.

        • Jerry
          Posted December 31, 2012 at 5:23 pm | Permalink

          @Bazman: In general we are simply seeing weather cycles, why do you think Victorians for example, never mind our own (great-)grandparents generations left flood plains undeveloped even though they would have been -like now- the cheapest land to purchase and develop even though they would build in and around such areas.

          • Bazman
            Posted January 2, 2013 at 4:55 pm | Permalink

            You seem to be under the impression that past weather can be only be seen by past records of the last couple of centuries. Many other methods can show what the climate was like before records or man was around.

          • Jerry
            Posted January 3, 2013 at 3:35 pm | Permalink

            @Bazman: Why would I do as you suggest, when those records are looked at it actually disproved AGW! What you accuse me of is what the DECC, the BBC and the rest of the AGW pushing media do, they never ever talk about anything other than “Met Office” records…

        • Richard1
          Posted January 1, 2013 at 7:16 am | Permalink

          There is no evidence for this at all, though you are right that this assertion is repeateded constantly.

    • stred
      Posted December 31, 2012 at 9:36 am | Permalink

      David Cameron gave us his understanding of electric cars and greenery recently. Wind farms apparently are necessary to keep electric cars going. Unfortunately, the electricity will usually come from gas stations which cut in and out when the wind occasionally blows at the right speed. He has probably been fed the info on the DECC site, that electric cars battery storage matches the output of wind power and there is no other effective way of storing it. The necessity runs the other way round.

      There is even a proposal that cars could put power back into the grid. Perhaps it would be less expensive to just use the £5k subsidy to get people to buy the battery and keep it in the garden shed, while using an economical diesel car, which produces a similar or less CO2 than an electric chelsea tractor.

      • lifelogic
        Posted December 31, 2012 at 2:52 pm | Permalink

        Indeed green energy is hugely more expensive (and worth less, as it is not available on demand) if you then waste further sums by charging and discharging batteries it get absurdly expensive. Also if you have discharged the car

        A fuel tank costing just £200 might store about £200 of energy available to convert to electricity – batteries to store the same might cost £100,000 and not even work for very long. Does anyone in government do any sums? Anyway if you car has fed the nation grid all morning how do you drive it later?

        • Jerry
          Posted December 31, 2012 at 5:39 pm | Permalink

          The only technology that might work is KERS (Kinetic energy recovery system) as used in F1 racing, assuming it can be made to both work and be safe (under fault conditions), using the recovered energy to supplement the output energy of the IC engine during acceleration.

    • uanime5
      Posted December 31, 2012 at 5:24 pm | Permalink

      How exactly do you have a gallon of electricity?

      Could this claim be referring to hybrid cars which use petrol and electricity? As this car uses multiple fuels I wouldn’t be surprised if each gallon of petrol provided better mileage.

      • lifelogic
        Posted January 1, 2013 at 3:15 pm | Permalink

        A US gallon of diesel has 38KWH of energy. Rather less than half can be extracted into motive power or converted to electricity. So about 25 big conventional car batteries needed just to store the same as one gallon!

  4. Leslie Singleton
    Posted December 31, 2012 at 7:29 am | Permalink

    In his PR zeal to obfuscate the continuing increase in debt Cameron is as usual getting it all wrong. The man in the street doesn’t know the difference as you say but I cannot blame him because the Government has so badly ballsed up what they are trying to say with the consequence that they are wrongly tarred as slash and burn merchants. Average individual debt figures mean little to the less well off because they, rightly, do not see any likelihood of themselves having to pay. It might help a bit if schools still taught Arithmetic properly. Anyone doubting this last sentence should try looking at Arithmetic papers set for children 100 years ago.

    • lifelogic
      Posted December 31, 2012 at 9:22 am | Permalink

      Certainly right on Maths/Physics papers compare the old O levels to current GCSE papers.

  5. zorro
    Posted December 31, 2012 at 7:41 am | Permalink

    Well John, you have to admit that is hardly surprising when the dynamic duo seem to get muddled over the terms. I have lost count of the times that Gideon says that we are ‘paying down the debt’, when we are actually increasing it!

    zorro

    • Duyfken
      Posted December 31, 2012 at 10:06 am | Permalink

      A similar misnomer is “cuts”. It can be made to mean anything by the unscrupulous politician.

      • Jerry
        Posted January 1, 2013 at 4:41 pm | Permalink

        @Duyfken: As it can by unscrupulous internet bloggers or commentators, and often is…

    • lifelogic
      Posted December 31, 2012 at 3:02 pm | Permalink

      Indeed it cannot be an error every time – can it? Surely it is just a lie or is he really that daft?

      • zorro
        Posted December 31, 2012 at 4:46 pm | Permalink

        It could be a well meaning deceit so that not too many rush for the lifeboats on the Titanic. But let’s face it, would you buy a used car from him?……..Certainly not from Cameron, because he will have probably ruined a good car by putting an electric engine in it……

        zorro

        • lifelogic
          Posted January 1, 2013 at 3:18 pm | Permalink

          Perhaps a wind turbine on the roof to generate the power as it goes along too – science and logic are not his strong points – “thinking” with the heart seems to be their general approach.

  6. Brian Taylor
    Posted December 31, 2012 at 7:42 am | Permalink

    The dept continue to rise because no party before the last election had the guts to say what needed to done, such as cut all those in the public sector earning over £50,000 should have a 10% pay cut as those in Ireland did,Just Saying!!

    • Lord Blagger
      Posted December 31, 2012 at 9:23 am | Permalink

      They are spending 130% of tax receipts.

      How does 10% help?

  7. Alan
    Posted December 31, 2012 at 7:50 am | Permalink

    I think we cannot cut the deficit because it is just too painful. As I see it the government cannot find economies that are acceptable to everyone, nor can it increase taxes without encountering opposition that is too powerful for it to overcome. Mr Osborne’s room for manoeuvre seems to be limited: he can maintain or increase, the deficit, but he cannot reduce it.

    If we had joined the euro we would probably be forced to cut the deficit, but short of any move as drastic as joining the euro – in any case quite impossible in the near future – I think we will go on increasing the deficit and devaluing our currency.

    That’s the environment in which I think we have to live, and the best response, in my opinion, is to work out how to live with this, not to fight against it. I don’t like it either.

    • alan jutson
      Posted December 31, 2012 at 8:39 am | Permalink

      Alan

      How can you live with increasing debt each year, because at some stage you will be refused credit unless you simply lie.

      Then when you are eventually found out, things can change dramatically and you are no longer in charge of your life at all..

      • Alan
        Posted December 31, 2012 at 8:53 am | Permalink

        I think we simply allow the currency to devalue. We have been doing this since the 60s – indeed you can argue we have been doing it since the 30s (when the pound was worth more than $5, I think). You could call devaluation a lie, I suppose, since it means you pay back in a lower value currency than the one in which you borrowed, but everyone knows we are going to do this, so it isn’t really dishonest.

        I think you are probably right when you say it will have to end some time, but there seems no reason why we shouldn’t keep on doing it for now.

        I’m not saying this is a good thing.

      • Lord Blagger
        Posted December 31, 2012 at 9:20 am | Permalink

        They are refused credit.

        345 bn of 375 bn QE has gone on Gilts. Lending to the state.

        I bet you the rest is forced lending. Annuities, bank capital, insurance companies.

        No-one is voluntarily lending to Westminster

        • Denis Cooper
          Posted December 31, 2012 at 9:40 am | Permalink

          Actually it was £375 billion of £375 billion:

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

          Apart from a few tens of millions.

          • Lord Blagger
            Posted December 31, 2012 at 12:19 pm | Permalink

            Thanks. I’ll have to reread the latest updates.

            However, it just shows. No one is lending to the state.

            Those with the money have concluded they won’t pay it back.

          • zorro
            Posted December 31, 2012 at 4:50 pm | Permalink

            The question is, does it matter if no one is lending if they can QE in this fashion without high inflation….? (At least, that will be their argument)…….

            If you had been told in 2007 that we would create £400 billion QE in a couple of years and still have inflation under 3%, what would you have said?

            zorro

    • Lord Blagger
      Posted December 31, 2012 at 9:22 am | Permalink

      I agree, but you have to look at why the public think if we spend a bit more we would be alright.

      It’s because they haven’t got a statement as to their personal share of the debts.

      Imagine finding out they have spent all your pension money, and that you’re on the hook for 250,000 pounds if you are a tax payer (pensions included)

      Do you think there would be a demand for more spending? I suspect there would be a demand for jail time.

      The big debts are hidden off the books. They only admit to the borrowing. This is so people carry on paying in, when MPs know they can’t pay out. It’s a Ponzi scam. Section 2 of the 2006 fraud act.

      • Robert Christopher
        Posted December 31, 2012 at 11:57 pm | Permalink

        But we don’t have to ‘imagine finding out they have spent all [our] pension money, do we?

    • A different Simon
      Posted December 31, 2012 at 10:49 am | Permalink

      Alan ,

      “As I see it the government cannot find economies that are acceptable to everyone”

      It’s not the Govt’s job to seek popularity . They are meant to be doing the right thing – even if that upsets the majority let alone the minority .

      There is one approach you have not mentioned which our house flipping politicians are doing everything possible to avoid ; reducing the cost of living and hence benefits payments and making the UK more competitive at a stroke .

      To do this the Govt would have to create a surplus of housing to reduce accommodation costs and halt immigration .

      Everyone would benefit except the rent seekers .

      • zorro
        Posted December 31, 2012 at 4:51 pm | Permalink

        Indeed….

        zorro

  8. Bryan
    Posted December 31, 2012 at 8:11 am | Permalink

    Businessmen and women know the truth of what you are saying and have to run their Companies accordingly else they go under.

    Unfortunately the country is run by academics, economists and politicians.

    Of course economists are always right even when they are dreadfully wrong, and academics are not pragmatists. In politics a compromise is seemingly always better than doing what is actually needed.

    Have a happy New Year.

  9. Mark W
    Posted December 31, 2012 at 8:15 am | Permalink

    There is only one part of the whole debt/deficit equation that I do not understand and can’t find an answer anywhere.

    Part of the deficit is debt interest. Is any part of the deficit actually capital repayment of debt or not. So for example if our deficit this year is £100bn and the debt at the start of the year was £800bn, does that mean debt is now £900bn or was a part of it capital repayment. So the debt is possibly only (only) something like £894bn.

    Commentators are shocking at never covering these details. I’m genuinely interested.

    Reply. There is no debt repayment. Any debt that falls due for repayment is repaid from extra borrowing

    • Lord Blagger
      Posted December 31, 2012 at 9:18 am | Permalink

      None effectively.

      About 20bn of debt matures each year. That capital is repaid. However, they borrow the money to repay it, along with the interest.

      However, the telling part, who is lending money to the government to do this?

      The answer is no one.

      345 bn of QE (375bn) has gone on Gilts. Lent to the state to spend. No one has a clue how this is going to be repaid, and my guess is they just cancel the debt. Print it to you and me.

      So QE hasn’t been lent to the economy, its been lent to the profligate state.

      • Denis Cooper
        Posted December 31, 2012 at 9:59 am | Permalink

        But that £375 billion (not £345 billion) is in some ways the easiest part of the debt to deal with, because it is owed by one arm of the UK state – the Treasury – to another arm of the UK state – the Bank of England.

        So the Bank is a kind of captive creditor of the government, and it could easily be induced to accept rescheduling of the debt to defer payment far into the future, or as you say perhaps even the cancellation of some of the debt provided that the Bank didn’t go bust as a result.

        The debt owed to creditors who are not part of the UK state, private gilts investors, is another matter, because they may be less co-operative and may demand payment in cash on the due date and refuse to roll over the debt.

        And because the interest paid to those private investors makes up part of their private profits which belong to them and not to the Treasury, and so it cannot be reclaimed in the same way as the Treasury can reclaim interest paid to the Bank on its holdings of gilts.

        • peter davies
          Posted December 31, 2012 at 2:09 pm | Permalink

          I often wonder if the likes of the Chinese are playing a long game against the west.

          Sit on a huge pile of sovereign debt and one day call it in. Where would that leave the likes of the UK and US?

          • zorro
            Posted December 31, 2012 at 4:54 pm | Permalink

            Tricky game to play when that paper might be worth more in the bathroom……

            zorro

          • forthurst
            Posted December 31, 2012 at 8:49 pm | Permalink

            Bonds are all dated, except the undated ones. They can only be redeemed at maturity.

        • forthurst
          Posted December 31, 2012 at 4:31 pm | Permalink

          When interest rates go up, the value of the gilts goes down: the Bank of England Asset Purchase Facility Fund Limited would be hit, owing more to the BoE than its gilts were worth. At that stage, it could either go into voluntary liquidation in debt to the BoE, or conversely, set up an Investment Banking arm to recoup its losses via derivatives trading etc; perhaps Mr Kweku Adoboli’s services might by then be available, having been released from his current contractual obligations.

    • Mark W
      Posted December 31, 2012 at 10:34 am | Permalink

      Thank you for clearing that up, much appreicated. In my own mind that actually makes the situation worse but the figures are so large it’s not easy to comprehend the vastness of this problem.

  10. Pete the Bike
    Posted December 31, 2012 at 8:25 am | Permalink

    How is it that a Conservative led coalition has come to be as bad or worse than Labour for overspending? The Tory party were the party of sound finance once and now they are Brown-lite. The party does not stand up for Britain in Brussels or any where else much, it is eagerly destroying our currency and seems unable to face any tough decisions other than whether two people of the same sex should be able to marry each other. What is the point of David Cameron?

  11. alan jutson
    Posted December 31, 2012 at 8:36 am | Permalink

    As I have said many times John.

    Most reporters are presenters, they are NOT forensic journalists or interviewers.

    Many so called economic experts are nothing of the kind, they learned their so called trade from theorists, who were also taught by other theorists.

    Until you understand basic mathematics, the law of diminishing returns, and the results of compound interest, no one should be allowed to start/continue with an economics or business degree or lecture anyone else.

    As you rightly say, history also plays an important part here as well, why learn the same painful lesson over and over again.
    If you hit you hand with a hammer once you know it hurts, so you make sure you do all you can to avoid doing it again, unless of course you simply love pain.

    The real problem is that it is not the politicians who are feeling the pain, but it is they who have the hammer to hit us with.

    Thus lessons are never learned

    The simple fact is you cannot spend forever, more than you get in income and the sooner governments of all shades, and the population realise this, the better.

    The other simple fact is the Government has no money, it only has money which it takes from the population.

    Others will no doubt mention the population/State funded reports by most BBC presenters/so called experts !.

    • Alan Wheatley
      Posted December 31, 2012 at 9:07 am | Permalink

      Sad, isn’t it, but oh so true.

      The voters’ “hammer” is called a ballot paper.

      • Edward
        Posted December 31, 2012 at 11:55 am | Permalink

        The problem with the ballot box is that over 50% of voters rely on the generosity of the State for their standard of living.
        Either for all their income or a large part of it and they hear promises of large reductions in Government spending before election time as a threat to them and their family.
        Difficult to promise to be prudent and be popular enough to get elected as the modern professional politicians have quickly come to realise.

        • uanime5
          Posted December 31, 2012 at 7:00 pm | Permalink

          Well if salaries weren’t so low then fewer people would be dependent on the state.

          • Edward
            Posted January 1, 2013 at 11:34 am | Permalink

            It’s not low salaries.Its the number of people who work for the statein one form or other.

    • Gary
      Posted December 31, 2012 at 2:20 pm | Permalink

      oh the lessons are surely learned. If you are a usurer, the lesson always is lend as much as you can and lobby for a socialized underwriting. And do it as often as you can. That you necessarily have to lack any moral fibre is neither here nor there and the consequences to anyone else is their problem.

  12. Lord Blagger
    Posted December 31, 2012 at 9:10 am | Permalink

    There are still commentators who find it difficult to distinguish debt from deficit.

    ===========

    There are MPs like yourself who also think that debt means the same as borrowing.

    Nothing like hiding the big debts off the books.

    Want your state pension? It’s not the way it works I believe was your quote. What does that mean? It means you won’t get it.

    Just why is the state pension ‘contingent’, to use the civil service word. What’s contingent about it? We’ve paid in, you owe it. What conditions mean that it won’t be paid?

    Reply. It’s an unfounded scheme, just as the NHS and future defence is unfunded. The state taxes you to pay for current pensioners and current users of the NHS, with the promise that it will tax others when you need a pension and NHS treatment.

    • Bob
      Posted December 31, 2012 at 1:14 pm | Permalink

      “Reply. It’s an unfounded scheme, just as the NHS and future defence is unfunded. The state taxes you to pay for current pensioners and current users of the NHS, with the promise that it will tax others when you need a pension and NHS treatment.”

      Isn’t this what is commonly referred to as a “Ponzi Scheme”?

    • Alan Wheatley
      Posted December 31, 2012 at 1:17 pm | Permalink

      Is “funded pensions” inherently good?

      Surely it is only good as long as assets held by the pension fund are sufficient to meet liabilities. Obviously it is the job of the pension fund holder to ensure that assets do meet liabilities, but is it a practical possibility to guarantee a return over the very long timescale involved covering paying in to a fund and receiving the benefit from it?

      And surely the larger the percentage of all investments held in pension funds all trying to do much the same thing, the more likely they are to have an adverse effect on the things in which they invest: both when realising the capital and the return required on it.

      Could it be that some funded pensions is good, but when the money tied up in pensions becomes too large the effect on the economy as a whole becomes adverse?

      So, if government ran a funded state pension scheme, in addition to private pensions, could it make things worse?

      • Robert Christopher
        Posted January 1, 2013 at 12:21 am | Permalink

        A pension can be funded or unfunded (or partly funded, I suppose.)

        Which, do you think, would more likely meet its obligations of paying out a pension? A pension fund with no money, or one with some money?

        Also, an unfunded pension would have to be able to command payment from someone in the distant future; someone who, at the moment, has no idea that he has a future liability.

        Thank you grandchildren ! ! !

        Are you wondering where the accumulating funds of a fully funded pension could go and not be burden?

        They could be used, as they used be used, to fund profitable capital projects. Yes, there would be some risk, but it would be sustainable, unlike current public sector pensions and it used to work.

        It would also mean that the printing presses could be stopped and some sort of discipline could return to the financial system.

        I think that this would be simpler and less burdensome than having the underfunded pensions and pension-less pensioners that are expected to arise out of the current arrangements.

  13. Brian Tomkinson
    Posted December 31, 2012 at 9:20 am | Permalink

    The last election was fought on economic mangement(or mismanagement in the case of Labour). The coalition was formed we were told to put aside party iinterests and work to sort out the economic mess. We are continually told that you can’t borrow your way out of a debt crisis (a sentiment with which I am in total agreement). The result so far? The debt at the end of 2010 was £760billion and at the end of November 2012 was £1083billion! I make that an increase of 42.5% in two years. As you pointed out to us way back in 2010 the plan was to virtually double the debt in 5 years. This performance is not really any different to Labour despite all the silly rhetoric the political leaders like to indulge in to pretend that their “brand” would do things differently. Ultimately they are all spendthrifts and are leading us into economic ruin. As you point out, and it is a continuous source or irritation to me, they either don’t know the difference between deficit and debt or are just deliberately mendacious. I have to think it is the latter. They reward the profligate and reckless at the expense of the prudent and responsible. We are always hearing about cuts whilst government spending continues to rise. Do you have an analysis to show where the money goes? We know, for some inexplicable reason, that the overseas aid budget was not only ringfenced but has increased (how can that show a determination to get on top of our economic problems?) Where else is the money rising? In the NHS despite ringfencing we are continually hearing of money shortages. I fear that Cameron has been put to the test and been found woefully inadequate to the task.

    • Bazman
      Posted December 31, 2012 at 11:39 am | Permalink

      Who are the profligate and reckless and who are the prudent and responsible and where do you fit into this?

  14. Nigel
    Posted December 31, 2012 at 9:35 am | Permalink

    This is a clarification of the US debt that I recently received. I suspect that the UK figures show a similar picture.
    The US Federal Debt…Brilliantly Explained!

    It’s hard for the average person to comprehend the size of the US national debt. The numbers tossed about are billions and trillions of dollars. What if the terminology and comparative numbers were brought into a context of the average family household budget; something that can be more easily understood.

    Instead of these latest reported numbers:
    * U.S. Tax revenue: $ 2,170,000,000,000
    * Fed budget: $ 3,820,000,000,000
    * New debt: $ 1,650,000,000,000
    * National debt: $14,271,000,000,000
    * Recent budget cuts: $ 38,500,000,000

    Let’s remove 8 zeros from the above and pretend it’s a household budget. These numbers would now read:
    * Annual family income: $ 21,700
    * Money the family spent: $ 38,200
    * New debt on the credit card: $ 16,500
    * Outstanding balance on the credit card: $142,710
    * Total budget cuts so far: $ 38.50

    It’s probably fair to say that you wouldn’t want a congressman or senator anywhere near your family’s financial affairs.

    • a-tracy
      Posted December 31, 2012 at 10:04 am | Permalink

      Very effective, I wonder what the figures for the UK are in these terms.

      • Lord Blagger
        Posted December 31, 2012 at 12:22 pm | Permalink

        250,000 pounds of debt per taxpayer.

        Median wage, 26,000

    • matthu
      Posted December 31, 2012 at 10:07 am | Permalink

      The only conclusions one can draw from those US household budget numbers is that most of the annual income derives from state benefits – and the only solution is to get a proper job.

      Same applies in the UK.

      • Bazman
        Posted December 31, 2012 at 11:19 am | Permalink

        This is what millions are trying to do, but the ‘proper job’ has been turned into part time shared short term with a zero hours contract where you have to supply your own training and materials and in some cases as in internships, no money. The state then picks up the inevitable bill via the benefits and tax system.The idea that there can be no minimum income in this country is completely flawed. It is not possible even as a single person to survive in this country on less than £480 a month unless there is in some cases illegal multiple occupancy of a room or property and no amount of created desperation and hardship changes this fact.

        • Denis Cooper
          Posted December 31, 2012 at 11:29 am | Permalink

          “… unless there is in some cases illegal multiple occupancy of a room or property … ”

          I wonder which cases they would be.

        • Edward
          Posted December 31, 2012 at 2:52 pm | Permalink

          Baman “the idea that there can be no minimum income…is …flawed.”
          Yes you can have a minimum salary for all by law but what effect would this have on the actual standard of living of people.
          The ending of poverty by just pasing a laws creating a minimum salary is sadly an impossibility.
          You would need a forest of magic money trees to shake.
          Take it further and you are effectively saying you could go to Africa and remove poverty at a stroke by just passing a law.
          In the last century standards of living have improved dramatically but money is only a store of value and if the real value isnt there then when you went into a shop with your legislated minimum salary you would find a pint of milk now cost £2 and a loaf of bread £5.
          And you could be back where you started.

          • Bazman
            Posted December 31, 2012 at 5:10 pm | Permalink

            This is not Africa and the idea that the fourth largest economy is to have shanty towns outside the state is not acceptable. The welfare state upholds minimum standards even for those not claiming anything directly. A move towards a Dickensian Britain will not be tolerated and will have to be paid for in other ways such as more police and prisons.

          • uanime5
            Posted December 31, 2012 at 7:07 pm | Permalink

            Incorrect. Competition will prevent prices from rising at the same rate salaries have risen (companies that introduce the smallest rise will get additional customers, forcing other companies to lower their prices).

            Rent laws would also help.

          • Edward
            Posted January 1, 2013 at 11:40 am | Permalink

            OK Baz and Uni you’ve convinced me, let’s go for a min salary of £25,000 plus pro rate differentials for everyone and we can all be rich.

          • Bazman
            Posted January 2, 2013 at 10:22 am | Permalink

            Glad to see you realise there must be a minimum income.
            The minimum income per person cannot be less than 6k a year whether it is through work, crime or handouts from the state or relatives. The income being either cash, food, accommodation or a mixture of all three.

          • Edward
            Posted January 2, 2013 at 9:07 pm | Permalink

            What you are arguing for is a form of negative income tax that has been proposed by many (eg Frank Field) for many years.
            And there is some merit in it compared to todays complex system.
            Im not sure if I would be keen to work for £6k a year if the state were to pay that same amount for not working.
            And you wouldn’t be left with much for food and cash out of the £6k after rent was paid in any areas I know near me.

    • frank salmon
      Posted December 31, 2012 at 10:13 am | Permalink

      That’s fantastic Nigel. Can you do the same for UK household debt?

  15. stred
    Posted December 31, 2012 at 9:44 am | Permalink

    It would be interesting to know what the current debt per head of population is including PFI, PPP, state pensions etc. Do you have this?

    • Lord Blagger
      Posted December 31, 2012 at 12:23 pm | Permalink

      Total debt, including the hidden debts, 7,000 bn

      30 million taxpayers.

      • zorro
        Posted December 31, 2012 at 5:00 pm | Permalink

        a mere c.£250,000 per taxpayer……..time to write off the debt.

        zorro

  16. backofanenvelope
    Posted December 31, 2012 at 9:46 am | Permalink

    I often say, Mr Cameron doesn’t care what I think, and I don’t care what he says.

    The economy seems to be bumbling along and most people seem to be carrying on as normal. Perhaps they have all adopted my attitude and have stopped thinking about it. After all, there is nothing they can do about it, and the people in power are obviously not listening anyway.

    In today’s newspaper there is an article by the chap in charge of welfare complaining about fraud etc in claims for tax credits. He has been in his office for nearly three years. Why hasn’t he sorted it out?

    • uanime5
      Posted December 31, 2012 at 7:09 pm | Permalink

      I’ve believe it’s because tax credits are controlled by the treasury and somebody decided to reduce the HMRC staff, so there’s less people to calculate the tax credits.

  17. MajorFrustration
    Posted December 31, 2012 at 10:04 am | Permalink

    Thank you JR for sorting that out for me – I know understand the statements about cutting the deficit by so much %. Rather like the energy companys who talk of a tariffs being uplifted by so much % – takes some time to establish what this means in LSD.
    So with our current deficit running at £100b it would seem that we have reduced the Labour deficit by circa £25/30b – not a great deal for two years in Government given the various promises. And despite all this the dedt continues to rise.
    Has anybody actually got round to producing say some histogrammes showing annual deficits and total debt – just to show who actually is lying to us.

    • Denis Cooper
      Posted December 31, 2012 at 11:25 am | Permalink

      Roughly speaking, the government was having to borrow a quarter of all the money it was spending, and now it is having to borrow a fifth of all the money it is spending; a quarter = five twentieths, a fifth = four twentieths, and a reduction of one twenthieth out of five twentieths = the one quarter reduction claimed.

      • Denis Cooper
        Posted December 31, 2012 at 11:28 am | Permalink

        Not it doesn’t … I got distracted there … it’s only a one fifth reduction, less than the quarter claimed.

  18. Denis Cooper
    Posted December 31, 2012 at 10:31 am | Permalink

    I blame George Osborne for his failure as Shadow Chancellor and Tory election supremo during the year leading up the 2010 general election.

    He knew that the Labour government was having to borrow a quarter of all the money it was spending, but he failed to drive that basic fact home to the public in simple and readily understandable terms; he also knew that the Labour government could only borrow those vast sums by getting the Bank of England to create new money and use it to rig the gilts market, so that in effect the Treasury was borrowing from the Bank, but he let Labour off by failing to point that out and explain it to the public.

    As I said at the time, Labour’s resort to QE as a novel device to fund its excessive public spending would have not only economic but also political consequences; and so it has, with Labour merely being defeated at the election, rather than virtually annihilated as it should have been, and with the Tories failing to get an overall majority, and with far greater political difficulties for the coalition government in its efforts to get public spending and the budget deficit under control.

    Even now large sections of the population don’t fully understand the seriousness of the government’s financial position – it’s still having to borrow about a fifth of all the money it is spending – and it’s no surprise that more or less every attempt to deal with that problem arouses public opposition and makes the coalition government, and in particular the Tory part of it, even more unpopular.

    So it seems very unlikely that the Tories will win the next general election in 2015; the serious failings of George Osborne back in 2009 were instrumental in allowing the last Labour government off the hook, and through the knock-on effects they will probably help to instal the next Labour government in 2015.

    • Alan Wheatley
      Posted December 31, 2012 at 1:34 pm | Permalink

      Yes, indeed.

      I have often wondered what was the Osborn thinking.

      Was it that he understood the problem but did not know the solution?

      Or, perhaps, he knew a solution but did not want to upset a few people who would be significantly disadvantaged?

      Or, perhaps, he thought to be frank economically would be to loose the election?

      Or?

    • Bob
      Posted December 31, 2012 at 2:18 pm | Permalink

      “the serious failings of George Osborne back in 2009 were instrumental in allowing the last Labour government off the hook, and through the knock-on effects they will probably help to instal the next Labour government in 2015.”

      And after that it’ll be back to the Tories and then Labour and then Tories again and so on ad infinitum until the voters wake up to the fact that voting for the same parties each time is the problem, not the solution.

      Google The Collectivist Conspiracy

    • Gary
      Posted December 31, 2012 at 2:29 pm | Permalink

      Osbourne failed to point these things out because demonstrably he intended to do exactly the same.

    • zorro
      Posted December 31, 2012 at 5:04 pm | Permalink

      ‘it’s still having to borrow about a fifth of all the money it is spending’……..Well, actually it’s creating the money to enable it to carry on spending, and praying that it never has to pay it back and hope inflation does the job…..

      zorro

  19. Posted December 31, 2012 at 10:35 am | Permalink

    JR says “This generation is building up debt to live beyond our means…”. That is true of debt owed to foreigners but not true of debt we as UK citizens owe each other.

    • Lord Blagger
      Posted December 31, 2012 at 12:24 pm | Permalink

      Of course it is.

      How are you going to pay the state pensions when they are 4,700 billion?

      Add on the borrowing, 1,100 bn, PFI 400 bn, etc, and its 7,000 bn

      Taxes are 550 bn.

      Spending 730 bn.

      So why its it not true of debt owed inside the UK?

    • Gary
      Posted December 31, 2012 at 2:26 pm | Permalink

      You constantly ignore the cost of misappropriation of investment caused money printing. That cost is enormous. Most of it is opportunity cost, and statists can’t seem to fathom that. It is the distortion of prices by oversupply of credit, leading to distortion of actual scarcity and surplus that in turn causes malinvestment that is crippling to the economy.

  20. oldtimer
    Posted December 31, 2012 at 10:49 am | Permalink

    The other day, in a play on words, someone described Mr Cameron as the bland leading the bland. I think they should have stuck to the original – the blind leading the blind.

    This will all end badly. QE is the UK version of the EZ`s kicking the can down the road. The political class is either in denial or has not got a clue what to do next for fear of the electoral consequences. It does appear that Cameron and co are now in the business of pass the parcel of toxic debt onto the hapless, and hopeless, Ed Miliband.

    • Alan Wheatley
      Posted December 31, 2012 at 1:35 pm | Permalink

      I agree it is looking more and more like “pass the parcel”.

    • Bob
      Posted December 31, 2012 at 2:30 pm | Permalink

      ” The political class is either in denial or has not got a clue what to do next for fear of the electoral consequences.”

      They could always try telling the truth to the voters, it would pull the rug from under Balls’ and Clegg’s tax, borrow and spend plans.
      The welfare reforms might then be acknowledged as essential by the public instead of optional, and the country could move from dependence to independence.

      • alan jutson
        Posted December 31, 2012 at 5:28 pm | Permalink

        “they could always try telling the truth to the voters”

        Exactly.

        Cameron should have given a State of the Nation speech 3 months after gaining office.

        He could then have said:

        We have now had the chance to finally inspect the books, and I am afraid things are much worse that the last Government admitted.

        All of these figures come from a completely independent audit, carried out at our request.

        Not only did they leave a note saying we have spent all the money, but they have mortgaged our future as well.
        Our Country is effectively on a day to day basis, now bankrupt.
        As a consequense all government spending will have to be completely revised.
        I am afraid this will mean severe and real cutbacks in government employent and benefits.

        This is the last thing we wanted to do, but we are not reponsible for the present position, the last government was.

        Then show simple graphs and bar charts to hammer home the situation.

        Then he may have had a chance.

        Now it is too late, he has completely lost that opportunity to be truthful, has lost that chance, and completely blown it.

      • uanime5
        Posted December 31, 2012 at 7:14 pm | Permalink

        As long as people are dependent on welfare because salaries are so low and there’s a lack of jobs any attempts at welfare reform will be seen as attacking the poor so the wealthy don’t need to pay more taxes.

        Only in the world of right wing fantasy will the poor agree to additional poverty so the wealthy can maintain their privileges.

        • Edward
          Posted January 1, 2013 at 2:14 pm | Permalink

          Why make people on low salaries pay tax and NI in the first place?
          You can pay tax and NI even on minimum wage how silly is that?

  21. margaret brandreth-j
    Posted December 31, 2012 at 11:21 am | Permalink

    I will comment with a whiff of paranoia here. They all seem to be following my circumstances …. I got taken to the cleaners with debts incurred by criminals, had to pay off with my own assets , have suffered for their wrong doings for years , got penalised for their wrong doings for years , havn’t much of a future due to their wrong doings .. and I am one of the most prudent persons around. I won’t use credit cards as the mortgage itself was enough, seldom borrow for anything and build on solid foundations .. The why should I pay for the people who spend , spend , spend.?

    • alan jutson
      Posted December 31, 2012 at 5:37 pm | Permalink

      maraget

      “Why should I pay….. ”

      The simple answer is you should not have to.

      Unfortunately politicians for years have lied, and told people that never never land is real, have bribed them with their own money promising things that the Country could not afford, just to remain, or get into power.

      The problem is that now the cat is out of the bag, and we have found out that not only did they bribe people with their own money , but they borrowed on their behalf as well.

      As always the socialists spend and spend until they run out of other peoples money, then blame everyone else.

      We now have half of the population who rely upon thye state for all or part of their income, so the lies will continue until it turns the other way.

  22. Bazman
    Posted December 31, 2012 at 11:30 am | Permalink

    If this is the case then it comes down to austerity. Austerity for who? Not the people responsible for the financial mess and the idea that the lowest members society should take the hit might work for a while, but wait until the trickle up effect stops. The poorest spend all their money because they have to. There will be an inevitable rise in crime as poverty and crime is linked. Thatchers government suppressed a report on this. Wonder why? The mean smug middle classes will then be taking the second hit and will be listening to their own fantasy from the wealthy behind their gated houses.

    • alan jutson
      Posted December 31, 2012 at 5:38 pm | Permalink

      Bazman

      Very true comment.

  23. K E Sewards-Shaw
    Posted December 31, 2012 at 1:00 pm | Permalink

    Surely public understanding of the terms deficit and debt would be enhanced if it were mandatory to add the words budget and national to them so that they would always read budget deficit and national debt ?

  24. peter davies
    Posted December 31, 2012 at 2:00 pm | Permalink

    It would also help if Economic Journalists from our national broadcaster would stop moaning about austerity – most departments have had modest cuts at most apart from the MOD and police.

    If they want to see what austerity really means look to Ireland, Greece or Spain – the govt should have put in place cuts along these lines in 2010 when they came in – then ease off a bit going forward.

  25. Chris Rickard
    Posted December 31, 2012 at 2:16 pm | Permalink

    As the deficit is the excess of Gov spending over Gov income & this Gov is planning to borrow more in 5 years than Labour did in 13, PSND is growing at an alarming rate. To get the deficit down or eliminate it, this Gov needs to spend a lot less or raise a lot more or both. Raising more Gov money leads to the perennial discussion about whether it should just increase tax, leave tax unchanged & wait for growth or cut tax to help generate growth. The Chancellor unfortunately is more Gordon Brown than Geoffrey Howe – a tax & spend Chancellor. His original plan, which failed, was to cut infrastructure spend & wait for growth, his only policy for which was loose monetary policy. If he cut current spending he could cut taxes. He should do this but he won’t.

    The deficit is commonly expressed as a % of GDP. The OBR, which is usually overoptimistic on economic performance, today forecast that by the end of 2014 the deficit would still be higher than 6 % – not even halved from 2010, and at a level which would have breached Browns fiscal responsibility act if Osborne had not repealed it. Whichever way you look at it, we need radical cuts in Gov spend, more economic growth (and preferably a new Chancellor).

  26. Pleb
    Posted December 31, 2012 at 2:58 pm | Permalink

    (Cameron and co are now in the business of pass the parcel of toxic debt onto the hapless, and hopeless, Ed Miliband.)
    And Mr Ed will capitulate to the forth richt whilst Cameron and co will get new jobs in the new Europe.
    It is the end of politics as we knew it.

  27. waramess
    Posted December 31, 2012 at 3:36 pm | Permalink

    Governments fail to see how recessionary government spending is. The belief is that they are fostering growth but the opposite is the case.

    Not a very orthodox view these days but it can be seen more clearly if one is willing to accept that almost all taxes fall on the producers notwithstanding what the government cares to portray them as.

    Employees NHI is actually paid by the employer although it is portrayed as being paid by the employee. VAT is paid for by the producer of goods even though it is portrayed as a tax on the end user. Almost all taxes therefore fall into the category of sales, turnover or profit tax.

    Whenever the government raise taxes therefore they are collecting from the producers directly and consuming, not contriving demand. It is as if the producers are obliged to hand over a proportion of their wealth for government consumption in much the same way that a thief might rob a bank and spend the proceeds;an action that cannot be seen to foster growth in the economy however Keynesian one might be.

    Current Conservative policy of ramping up spending and hoping that future growth will come to their rescue is not going to happen however, what will happen is they will portray to the markets that they are incapable of handling the UK’s finances in a proper manner.

    The upshot of all this is that investors will start to leave the UK and the Bank of England’s ability to guarantee the convertability of the pound will fail.

    What then? The Socialists taking us into the Euro? A very fraught future unless they stop spending

  28. Antisthenes
    Posted December 31, 2012 at 4:10 pm | Permalink

    The UK for centuries since capitalism was introduced and absolutism was abolished has seen each generation become more prosperous and enjoying more freedoms than the last. That is now changing from now on the opposite will be true it only took a few decades for social democracy and the EU to undermine all that we have achieved and consign that gain to the dustbin of history. If we wish to avert our impending decline then the people need to wake up to the fact that lefties, greens, europhiles and the interfering righteous should be consigned to the dustbin instead.

  29. margaret brandreth-j
    Posted December 31, 2012 at 5:03 pm | Permalink

    A read from John Lanchester states that without a few tweaks , including deals with the
    Royal Mail, Bradford and Bingley and interest rates on QA the defecit in real terms would be worse at 4.9% . Those tweaks were in the governments favour and won’t be replicated.

  30. Barbara
    Posted December 31, 2012 at 6:32 pm | Permalink

    Debt, deficit, its all the same to many people, who don’t understand what either are, but MPs make sure we don’t really understand it we might learn to much. I’m so sick of them all, I never thought I’d see the day when I felt like that. We had nothing to do with the crisis, but bankers did, and appear to be out of the reckoning; we are told its benefits that as added to the crisis, this is not true. Benefits were given in good faith, may be havin benefits is debatable, but the point is they were given by all parties and they said nothing about where the money was coming from. People in such circumstances are more concerned with actual surviving each week to worry about where the money has come from; its either accept it or starve. I can remember well the period after the last war, things were grim then, no heating, hardly enough food and what we had was unsubstantial to nourish anyone. Life was hard, yet, we’d just fought a war of all wars, and our reward was freedom and a poor one at that. We have fought since to survive, get better off, and have medical care via the NHS. Yes, we worked, we had to and were glad to, but some employers didn’t like having to face up to the new modern world emerging, they still don’t. Without good employment law now we would revert back to the greed and 40 after one job, again. Is this really what we want? Both sides of society have to agree to go forward and be reasonable. However, the cuts in welfare taking place now, although needed, is being done cruelly and without one iota of care. It will of course back fire on the Tories who are renound for their greed, not all but many. Tax cuts of course are good when they money is reinvested into jobs and industry, but what I have seen over the years it goes into their pockets. I have no faith in any of them, Labour or Tories, history as taught me they all betray you once they have power. If you’ve lived through it you don’t forget.

  31. uanime5
    Posted December 31, 2012 at 7:19 pm | Permalink

    I’d have to say that increasing the debt didn’t result in more growth because the economy was being so badly managed that a double dip recession occurred. There simply wasn’t enough of a stimulus to improve the economy and many things were done that weakened it such as public sector job cuts, stopping construction in the public sector, high inflation reducing the salaries of the majority of the population, the Government wasting money on pet projects such as HS2 and academies, and so forth.

  32. Monty
    Posted December 31, 2012 at 8:56 pm | Permalink

    We are this evening watching the spectacle of the US Congress and the White House panicking to avoid falling over their “fiscal cliff”. An automatic negative feedback mechanism that acts as a limiter on the national debt. A can, that can’t be kicked down the lane.
    It strikes me that this is a good thing. I wish we had some kind of automatic system to force the Treasury, the Cabinet, and Parliament, to face the music, out in the open.

    In terms of family finances, I could imagine a housekeeping regime where at some point, before the month’s budget runs out, the household switches to porridge for breakfast, baked beans on toast for dinner, and everyone walks to work/school. Until the next payday. And everyone in the house knows why. No-one wants to go through that every month, so it creates an appetite for thrift, and a healthy suspicion of extravagance (What is this going to cost me down the line?). This only works as long as the burden is shared, and in this country that is far from the case. We need to end the benefits culture in this country.

  33. Jon
    Posted December 31, 2012 at 9:32 pm | Permalink

    There was that recent ComRes poll that showed 47 % of people think the government is cutting debt and 32 % who didn’t know. Thats a depressing 79% of the population (based on their sample) who don’t understand what must be the easiest part to understand.

    This has a lot to do with the media and also a number of politicians as well. After years of this problem being regularly highlighted its an atrocious reflection on the media and those who regularly appear commenting on it. If that record was translated to performance in any other area it would be regarded as totally inept.

    The BBC does have some good coverage but others are appalling. There is no consistent quality control, perhaps to do with this silo structure we keep hearing about. This doesn’t bode well for when these near 80% of the population are asked to cast a vote. I remember David Cameron saying in the early days in the lead up to the election that he felt people understood. I didn’t think it then and I don’t think it now. Atleast there are politicians who are trying like JR.

  34. Nigel
    Posted January 2, 2013 at 3:23 pm | Permalink

    Janet Daley’s recent article in the Telegraph sums it up nicely:

    http://www.telegraph.co.uk/news/politics/9762510/The-truth-is-that-politicians-are-telling-lies.html

  35. Lindsay McDougall
    Posted January 2, 2013 at 7:57 pm | Permalink

    Meanwhile, on the other side of the pond, the much feared and now avoided ‘fiscal cliff’ budget would have reduced the US annual deficit by $500 billion a year, roughly 36% of the existing annual deficit.

    In contrast, the grubby little compromise cobbled together by the President and the Senate and forced on the House of Representatives, will reduce it by only 6%.

    The forecast on the usgovernmentspending website is that total US government debt will flatline at 105% of GDP during a period when real GDP growth is forecast to grow at an average of 1.6% per annum. And if that growth doesn’t materialise?

    Inflation is forecast to rise in 2014 and 2015, ending at 3.5% per annum.

    So there you have the US strategy. Carry on bingeing and borrowing and repay creditors in clipped coinage. Ask the Chinese what they think of that.

    • Jerry
      Posted January 4, 2013 at 10:24 am | Permalink

      @Lindsay McDougall: The House of Representatives lapped it up, yes there was some grumblings amongst the right, but not because the deal would not pay down the deficit but because it didn’t protect the super-rich from paying more tax.

      As for the deficit, that will be revisited in March…

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  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
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