As a voter in a democracy, am I responsible for the debts of the state?


       Many people in the UK are alarmed at the rate of increase in state debt. We are worried because we fear that we will be responsible for paying the interest and repaying the capital one day. We do not want the state to 0verextend us, at the very time when the private sector has learned an expensive lesson and is reining back on its debts.

        We see amongst our European neighbours how a state can overextend its own credit with bad results. The people of Greece have elected successive governments that spent and borrowed too much and followed the wrong economic policies. They reached the point where they told the custodians of the state that they did not feel inclined to pay the bills for past debts. As a result to Greek state reneged on a big portion of its debts.

         We now see a similar battle in Cyprus, with the voters telling their representatives there are limits to how much they can put in to pay for past excesses. Elsewhere states renege on their debts in more gentle or devious ways. They cut the value of their currency, reducing the amount of money foreign lenders get back. They inflate their price level, cutting the real value of the money domestic lenders to the state get back. They raise taxes, taking more money off the people who have been lending to the state.

           The message from Greece and Cyprus is a harrowing and sobering one. The truth is that the debts incurred by the state are debts that we all collectively owe. If you stay in the country you pay. When it becomes clear a state has borrowed too much and will find it difficult to borrow more, the political choices all become unpleasant. They revolve around one simple issue – how do you share out the pain of paying. In Cyprus savers with deposits have seen the state simply help itself to some of their savings. In Greece the state has helped itself to an ever bigger proprotion of taxpayers’ incomes. In the UK the state is taxing more and more activities in a bid to stave off a worse financial positon born of the level of spending.



  1. Sue
    March 24, 2013

    If we were ACTUALLY in a democracy, it is unlikely we would be in debt at all. In a true democracy, we would have been consulted about expenditure and most of us would not have allowed the situation to get so out of control. It is YOU, the Governments who have taken the big spending decisions (like the EU, inane green policies, overseas aid, foreign wars, benefits for foreigners and high salaries/expenses for politicians) that have overspent, not us!

    1. Hope
      March 24, 2013

      No sane person in this country would support the Climate Change Act 2008. At the end of next week tax will make gas and coal fired power stations uneconomic and we pay increased energy bills for Clegg’s , Cameron, Davey,Alexander and Osborne’s stupidity. If we had a referendum it would not pass. Cameron should not blame energy companies to use as a scape goat, he should look in the mirror and accept he is putting millions of people into fuel poverty and making industry uncompetitive when the country can least afford it. Obligation to the environment on energy bills should be changed to paying for useless wind farms to creat jobs in Europe not the Uk.

      1. lifelogic
        March 24, 2013

        Indeed Huhne’s worse crime was his absurd position on the Climate religion together with Clegg, Cameron, Davey, Alexander, Osborne, Cable and all the rest of the believers in this patent drivel.

    2. Timaction
      March 24, 2013

      I think these comments are very valid. Even in these extreme austere times the mainstream parties/politicians do not have the ability to realise or their ego’s so large as to do much about their insane spending commitments. I’m afraid national imperatives/interest should be saying no more payments to the EU, foreign aid, immigration (benefits/public service costs), quangos and radical removal of some departments e.g. Climate change, energy policies.
      I feel we’re being driven over a cliff by people with NO knowledge or life experience.
      I simply could not have raised my family and have positive assets running my private affairs as successive Governments have. Its time for a serious change of direction and party.

    3. Leslie Singleton
      March 24, 2013

      Sue–I agree with you and have said here many times that more decisions by the people (by referenda) and fewer by politicians would be a very good idea. Looking at something like homosexual marriage, for instance, why on earth do we need politicians to make such a decision for us? More like (Greater) Switzerland (another of that poltroon’s hideously wrong judgements) would be fine with me.

      1. Vanessa
        March 24, 2013

        Leslie – homosexual marriage was implemented because the EU, or rather the Council of Europe when Cameron was its president thought it would be a good idea! France is equally aghast and I am sure many others are too. The EU lives on Mars and dreams up regulations as its pastime.

      2. lifelogic
        March 24, 2013

        Indeed what sort of fool would say he did not want to become a “greater Switzerland” but not give a single reason? I suppose the same sorts who talk of the great advantages of being in the EU, but cannot actual name any advantage other than the red herring ones of “a seat at the table” and “trade”.

        1. cosmic
          March 25, 2013

          Especially when much of the audience would find the idea of becoming a Greater Switzerland really quite attractive.

          He meant he didn’t like the idea. So what?

          One of the obvious advantages is that people like Blair and Cameron simply wouldn’t be very important any more.

    4. Anthony Harrison
      March 24, 2013

      Sue, I agree BUT it must be emphasised that an awful lot of our fellow citizens are more than happy for governments to overspend – on their behalf. Only very recently we were reminded that it’s close to a 50-50 split between those citizens who are net providers of wealth to the State – and those who are net consumers in the form of various benefits.
      Of course there are areas where this doesn’t really apply, such as our leaders’ bizarre compulsion to demonstrate supposedly “green” credentials by sacrificing our energy-generating capacity and loading us with anti-consumption taxes on fuel etc; but way too many of us seem to know nothing about basic economics, care nothing about indebtedness, and will continue to vote for anyone who promises them a free ride.
      I see no way out of this, without the sort of brave charismatic political leaders we require but do not have.

    5. Madmaison
      March 24, 2013

      Bravo Sue

    6. Ralph Musgrave
      March 24, 2013


      You claim we haven’t been consulted on “spending decisions”. Yes we have: the main different between the two parties at general election time is over the proportion of GDP to be allocated to public spending.

      What I think what you MEAN TO SAY was that we haven’t been consulted on the question as to by how much spending should exceed government income, i.e. on how much government should borrow.

      Unfortunately the general public and 99% of politicians, including John Redwood, have absolutely no grasp of this subject.

      Reply: The politicians should know exactly how much we are borrowing as a nation – I regularly tell my readers about it, so why do you suggest I do not know?

  2. Steve Cox
    March 24, 2013

    Some commentators have been saying since the start of this crisis – and every day more seem to be joining their ranks – that the only people with any spare money left are savers, so in the end they will have to pay for this crisis. The government has plenty of tools to achieve this end, and has had no qualms in deploying them all – ZIRP, QE, high inflation, a huge devaluation – and is giving Mr Carney even more ways to steal our money. You don’t have to leave the UK to avoid this, simply open a foreign currency account with whichever bank you favour and move your savings into a currency less prone to ruination by larcenous politicians. And do it soon, before Mr Carney introduces some form of personal capital controls. It’s coming, and you read it here first.

    1. Denis Cooper
      March 24, 2013

      There was a huge devaluation of sterling against other currencies during 2007 and 2008 – the sterling trade weighted index dropped 31% from an all-time high to an all-time low.

      But it would be a mistake to suppose that the government deliberately engineered that devaluation; on the contrary the government and the Bank of England could no more control the steep fall to the under-valued all-time low of 73.8 on December 30th 2008 than they could control the previous more gradual rise to the over-valued all-time high of 106.8 on January 23rd 2007.

      And in fact scrolling down through the numbers for the sterling trade weighted index since January 1990, here:

      it can be seen that there was a rather similar pattern during the previous major cycle of boom and bust, the cycle that Brown promised would never be repeated.

      With the sterling index reaching 102.5 in late August 1990 – a level which it didn’t see again until March 1998 – then dropping as low as 80.8 in February 1993 after the ejection of the pound from the ERM on September 16th 1992, following which there were oscillations around the 81’sh level for over three years before it started to climb back up.

      In this latest cycle the over-valuation of sterling became more extreme and the fall was greater to a more under-valued low, after which the index recovered to about the 80’sh level and has now been around there for the past four years – 79.8921 last Thursday – with no sign yet of that flat medium term trend breaking.

      I think the lesson is that when the UK economy is booming money will be sucked in and sterling will tend to become over-valued, and because of a reluctance to reduce the pace of economic growth when things seem to be going swimmingly well there is little that either the government or the Bank of England can do to prevent sterling first becoming over-valued and then rapidly falling.

      It has been pointed out that during the last boom very large sums of money were borrowed from abroad for Britons to buy houses at ever-rising prices – Brown even boasted about the rise in house prices, as if it was a good thing – and perhaps moderating the swings in the housing market would moderate the swings in the external value of sterling.

      1. zorro
        March 24, 2013

        ‘Brown even boasted about the rise in house prices, as if it was a good thing’…….He had, of course, promised when he became Chancellor that he would never allow another housing boom (and bust) like in the late 80’s/early 90’s. Fortunately, some of us knew not to put any reliance on his words……


      2. Man of Kent
        March 24, 2013

        DC-An interesting take on measuring the dangers -thanks.

        I’m concerned at the markets gradually giving up on sterling, turning a modest fall over some years into a rout .

        With an American wife an Irish son in law and Zimbabwean sister I have been only too well aware of fluctuating currencies and the effects on family finances.

        We are currently on the slide against the USD and that now is the adopted currency of Zimbabwe.

        In Ireland my son in law had a civil service pay cut of 6.25% followed a month or so later by a 6.25% levy on salary to guarantee his pension. This was then followed by a squeeze on allowances and other benefits ,with Union support ,on the understanding that there would be no further job cuts.

        Ireland has genuine light at the end of the tunnel having re-entered the bond market earlier this month.
        In the meantime many young Irish have emigrated.

        If we carry on borrowing £10 bn per month ,to live at a higher standard than we can afford, it may be that we will be sucked into the Euro as our currency plummets.
        A development that would take the BOE sterling graph into new territory.

        We have been told that the US wants us to remain in the EU so it seems the Euro is the logical outcome with present policies.

        Estonia ,Ireland and Iceland show debt can be overcome.

        Why O Why cannot the coalition do what’s right for the country ??

    2. Mark
      March 24, 2013

      Capital controls would apply especially to foreign currency. I still have my childhood passport with entries recording the £50 allowance per year that applied to ordinary travellers. Foreign currency accounts are also outside the deposit guarantee scheme.

    3. Mark W
      March 24, 2013

      Moving into foreign currency has crossed my mind but the sterling dollar rate is low now and the dollar could drop. It depends how much you trust a foreign country too. We’d be at the back of the queue in a further crisis. Holding foreign reserve here would be open to Cyprus style confiscation.

      The real rich have sports cars and fine art. The only below 5 figure goods I know that hold value and don’t require a degree in antiquities is guitars and related goods. Still a theft risk though.

  3. alan jutson
    March 24, 2013

    The answer in simple terms is that we are all responsible, because that is how the system has been set up and worked in the past.


    It is time to change the system and the method of accountability.

    As I posted yesterday, it is time for us to call a halt to Politicians (or indeed anyone else) to have the ability to borrow in the citizens names without penalty.

    For the past few decades in particular, and in recent historical terms, Governments of all kinds have wanted more and more and more money, to pay for decisions they have made, which have turned out to have been a financial disaster.
    Those decisions may have been made with good intentions, but have continued nevertheless with dire financial results.

    Very simple solution.
    No government should be able to borrow on the peoples behalf, and should run a balanced budget by law, failure to do so should result in a general election being automatically held within one month of the end of the financial year.

    We simply must make politicians and governments live within OUR MEANS TO PAY.

    Clearly that will mean a much smaller State, but if that is the case, so be it.

    We can no longer have Politicians making uncosted promises with pie in the sky ideas as to what is best for US.

    Of course the State needs to provide basic government and services, and for that it needs tax revenue, but the situation has now grown so out of control, with so little accountability, it is no longer fit for purpose in its present form.

    We have tinkered around the edges and tip toed about for too long, the solution now has to be drastic action, before we all end up down a very deep black hole.

    Politicians have to be made to be accountable for failure, and immediate loss of office seems the only solution that may work.

    1. uanime5
      March 24, 2013

      Your plan will be economically disastrous. During a recession that state need to stimulate the economy and become the buyer of last resort to ensure that businesses are able to survive until growth returns. For example Hoover tried your placed budget plan for several years and all he got was a deepening recession. Though he did do the opposite once an election was approaching.

      1. alan jutson
        March 24, 2013


        Get real we have had huge state expenditure for the last 15 years and look where it has got us.

        The idea that the State can spend and make the State grow for ever is simply insane.

        Perhaps you would like to give a working example of your solution in a so called free Country

        1. lifelogic
          March 24, 2013

          Indeed, even the Socialist Cameron no longer believes in the magic money tree now.

        2. uanime5
          March 25, 2013

          Well for most of the 13 years Labour was in power high state expenditure resulted in good growth. Then there was financial crisis and negative growth. After that growth returns until the Coalition took over and the UK started experiencing lower or negative growth.

          Also despite high borrowing Labour was paying down the debt that it inherited from the previous Conservative government and even after the financial crisis this debt was lower as a percentage of GDP than when Labour came to power.

          1. Lindsay McDougall
            March 27, 2013

            Your ‘good growth’ was a debt fuelled binge. By 2010, when Labour finally crawled out of office, the annual fiscal deficit was £159 billion (more in today’s money), the average household debt to income ratio was 160%, our industry was uncompetitive, two of our banks were on their knees, a vendetta was being pursued against a successful bank that had refused State aid, and the NHS killing machine had just been exposed. What part of this ‘growth’ was ‘good’.

      2. Disaffected
        March 24, 2013

        Social drivel as usual. Labour’s economic policy has not been too hot either.

        Swiss referendum system and right to recall to bring sanity back to politicians. They have truly lost the plot. PPE course to be scrapped ASAP.

        I hope Cyprus goes bankrupt and defaults like Iceland. No more dictatorship from the German dominated EU.

        1. lifelogic
          March 24, 2013

          Well either Cyprus default now or they kick it down the road again for another few months.

        2. uanime5
          March 25, 2013

          When Iceland defaulted if refused to guarantee the bank accounts of anyone who wasn’t Icelandic, which is why some English councils lost all their money. So if Cyprus defaults expect the same thing to happen to all the bank accounts of the English residents and soldiers.

      3. Edward2
        March 25, 2013

        Uni, you’ve missed out the part in Keynesian theory where he says the Government should follow a balanced budget policy in the long term.
        He said in the good times the surplus should be saved and used in the bad times to “stimulate the economy”
        We are a trillion in debt and have an annual deficit of £130 billion. How much more “stimulous” would you say was enough?

        1. uanime5
          March 25, 2013

          Getting into debt isn’t the same thing as a stimulus. So far the Government has done very little that helps companies or the unemployed.

          1. Edward2
            March 26, 2013

            But Uni, both require borrowing money over and above the current level.
            So how much more would you say was enough?

    2. wab
      March 24, 2013

      “No government should be able to borrow on the peoples behalf.”

      That is a very simplistic view of the world. Why should the government not be able to borrow? Just because you say so?

      “Of course the State needs to provide basic government and services.”

      Yes, well that is the problem. What is a “basic” service? No doubt any service you rely on you would consider to be “basic” and any service you do not rely on you would be happy to remove.

      For example, 97 billion goes on Education. Is that “basic”? Or do you want to go back to the “good old days” when only the rich were educated (either home schooled or in “public”, i.e. private, schools)?

      And 137 billion goes on Health. Do you want to change to the brilliant US style of health service where half the money on “health care “is hoovered up by insurance companies and many people are bankrupted trying to pay for treatment?

      And 220 billion goes on “Social protection”. Quite a bit of that goes on pensions. Should the UK stop paying State pensions? Well, you claim we need “drastic” action.


      Once you get past your simplistic slogans, you can see it is not as easy as you claim. Yes, you could completely remove overseas aid, and the other cherry picked areas people perpetually mention, but international aid in particular is a small part of the UK budget and it is not going to be removed as long as prime ministers have to strut on the international stage pretending to be good citizens of the world.

      1. alan jutson
        March 24, 2013


        Yes it is a very simplistic view.

        Pray tell me why should I pay for some elses profligate over spending, because they want to be popular. ?

        The problem is that Politicians and too many people think in complicated terms.
        It is now time for some clear and very precise talk and above all action.

        The present maddness cannot contuinue.

  4. JimF
    March 24, 2013

    So on the one hand it is down to electors to vote responsibly.

    But above all, politicians have lied and lied again about “halving the deficit”, and are still spending our money way beyond what they promised when they were elected. That is, politicians of Labour, LibDem and Tory. They have denied that immigration is a problem until the stable door has closed and the horse has bolted. So much for the UK giving the neighbours our cheque book if we ever joined the Euro…. we have given Brown, and now Osborne our cheque books.

  5. Mike Stallard
    March 24, 2013

    Oekonomia means how to manage your household.

    When I was in debt, I did three things. I tried hard to live off my income. I tried to get a job. I sat down and worked out what I could cut back on. I did not go to the opera, I did not go out to restaurants, I did not put down money I could not afford on a house. I did not even buy a paper!

    The State is not doing this. Lots of IOUs (QE). Lots more borrowing. Huge plans for better “housing infrastructure”. No attempt as far as I can see to cut back the major items of expenditure – Welfare and pensions, Education (we have just built two brand new schools in our area), the National Health Service.

    We really do need to do something fairly radical if we are not to end up like Cyprus. The debt is racing upwards as it does if you don’t fight it with everything you have got.

    1. Ralph Musgrave
      March 24, 2013

      The debts of an individual are microeconomics. The debts of a state are macroeconomics. The two are totally and completely different. One of the most common mistakes in economics is to apply microeconomic laws at the macroeconomic level.

      That means that your comment, like John Redwood’s article and most of the comments here are unfortunately complete and total nonsense.

      Reply: If you wish to disagree with my comments, try criticising them in detail instead of making an unfounded generalised remark.

  6. Peter van Leeuwen
    March 24, 2013

    I suppose that I’m co-responsible for the debts of my country, although my influence (ballot box) is very limited. At the same time it is very human to put off to the future. I was happy that the Netherlands had a mortgage tax rebate when I benefited even though it has now caused a private debt bubble and a sinking housing market. Biting the bullet while being aware of the people who are worst off seems the best course now.

    1. Robert Taggart
      March 24, 2013

      PvL, greetings me old Dutchy !
      Question, are you a burden or a benefit ? – to Blighty.

      1. Leslie Singleton
        March 24, 2013

        Disaffected–You will of course have noted that now it’s always “Brussels and Berlin” reckon this that and the other–Soon it will be the other way round and finally just “Berlin”

      2. Peter van Leeuwen
        March 24, 2013

        @Robert Taggart: So sorry if I’m a burden to you 🙂

        1. Leslie Singleton
          March 25, 2013

          Peter–Sorry, but Yes you are. You sound a reasonable enough chap but why should we be burdened by listening to you? You are a source of propaganda from a EUphile on the Continent. I don’t write to you about matters Dutch and I don’t see why you should write to me. You could be being paid by Brussels for all I know, (etc ed). Sorry to be churlish and extreme but that is what the EU has done to us and why so many of us want out. The Cyprus deal is a disgrace mainly in that the EU didn’t notice what was coming years earlier–Cyprus made not the slightest attempt to hide what it was doing.

  7. Electro-Kevin
    March 24, 2013

    As a voter in a democracy am I responsible for state debt ?

    Most certainly not. Not when most of us who vote Tory are pulling our hair out at the profligacy and the things being spent on that we disagree with strongly.

    If you want to know the real reason for censoring the press it’s not really about MPs’ expenses.

    It’s clearly because a majority think – without the tabloids telling us otherwise – that we wouldn’t notice the abject failure of their unmandated policies and we’d slip into suppine gratitude for the multi-culti Utopia they’ve created for us. That one day we may even learn to love our leaders.

    The (dis) proof in the pudding is in the awful economic figures the Coalition was left to deal with. These alone signal that the policies which brought them are utterly wrong and unsustainable.

  8. Nina Andreeva
    March 24, 2013

    No way am I responsible for the debts of the state. I pay a big slice of my hard earned wages out in income tax and NICs to support the non working class. My only “free money” ie child benefit disappeared this year. There is little chance of a state pension either with the current debt load. I have to educate my kids privately out of taxed income, not because of any snob value, but because catchment areas for decent primary schools run into hundreds of metres. The establishment also drank Bush’s “Kool Aid” and racked up a load debt on two dubious wars, and you can bet we are signed up for Iran and Syria too.

    What ever few conkers you have left get them out of sterling, and definitely out of the UK, before capital controls are reimposed here too. Keep in mind, as you saw from my post the other day about the Reserve Bank of New Zealand, its not just crappy Club Med countries where your savings will be taken to reduce a banks debts.

    1. Bazman
      March 24, 2013

      Who are the non working class that you support Nina? Most people who receive benefits work and thought you would be for the cutting of benefits to those who did not need it you for example on 2k a week. Why would you need another eighty quid a month? To pay for your satellite TV subscription?

      1. A different Simon
        March 24, 2013

        The Duke of Westminster and the land owning classes who were enclosing the commons as recently as 100 years ago ?

        About time we reversed that and made them work for a living so everyone can share in the dividends of monopolies like land isn’t it ?

        Jesus talked about becoming fishers of men , it seems that the economic rent collectors interpretted this as being a green light to farm people .

      2. Leslie Singleton
        March 24, 2013

        Bazman–I’d bet a cheap bottle of wine that most people on benefits have a satellite TV. I have seen with my own eyes, while working for a Government TfW scheme, as I wound down to retirement, a woman obtain a new cooker before buying a big shop with money from her parents who were as rich as Croesus. It disgusted me. I do not have a satellite TV BTW.

  9. Lifelogic
    March 24, 2013

    As you say if you do not leave the country you probably end up paying the debts of the state. Still you had the benefit of all that road blocking, red traffic lights, the motorist muggings and those wonderful hospitals, second rate school, the white elephant olympic stadia, transfers to the feckless and pointless wind turbines littering the countryside.

    In the UK the state is taxing more and more activities in a bid to stave off a worse financial position born of the level of spending – robbing and waste by the state. The result is less actual tax revenue, the rich leaving, no growth, no confidence and a spiral downwards due to positive feed back. The rich and money departing and the benefit tourist arriving.

    Positive feed back is not (usually) very positive, a concept the foolish John Major failed to understand with his damaging ERM fiasco (apology still awaited) “if it is not hurting it is not working” as they said.

    Of topic, I see Ken Clark was typically wet and badly wrong on the Falklands, what is this man doing in the Tory party let alone the government? Coldest spring since 1963 I read too, just a shame people cannot afford this expensive green religion energy, just to keep warm through it.

    How many hundreds of extra deaths will the department of energy climate change cause with this mad policy? “If it is not killing people with high fuel bills it is not working”, did I hear them say?

    1. APL
      March 24, 2013

      Lifelogic: ” what is this man [Ken Clark] doing in the Tory party let alone the government?”

      Glad to see someone else asking that question.

    2. uanime5
      March 24, 2013

      It is completely irrelevant whether the wealthy leave or not because most jobs are provided by companies which are capable of operating in the UK even if their owners are located abroad. So an exodus of the wealthiest, the majority of which use tax avoidance to pay as little in taxes as possible, will have little effect on the UK.

      1. Richard1
        March 24, 2013

        This is clearly absurd. A greater and greater share of tax revenues are provided by a relatively small number of high earners. Its a disaster if we get a 1970s style exodus.

        1. uanime5
          March 25, 2013

          Why was there an exodus in the 1970’s when the top rate of tax had been 90% or higher since the 1940’s? Let’s not forget that 750,000 people were paying the top rate of tax even when it was 98%.

          Reply And let’s not forget how many richer people left to avoid the tax, and how relatively poor the UK then was.

          1. Leslie Singleton
            March 26, 2013

            unanime–Difficult to see your point–Surely you are not disagreeing that the (talented and so high-earning) exiters went because of the high taxes?

      2. lifelogic
        March 24, 2013

        Well yes to a degree but they may well put their next investment somewhere other than the UK. They also then also take their expenditure with them their children and schooling often. Also it is still better to have your businesses close so you can keep an eye on then, where possible, I find.

        Staff have a habit of going off the rails if left alone.

      3. Edward2
        March 24, 2013

        Given the richest 1% pay over 26% of all income tax I hope they stay, Uni.

        1. uanime5
          March 25, 2013

          Unless they take their jobs with them it won’t matter if they go because someone else will do their job and pay the same amount in tax revenues.

          After all if it was easy to take you job to another country the wealthy would only live in tax havens.

          1. Edward2
            March 26, 2013

            Many rich people have portable skills or they own companies which supply to the world and they can control their affairs from other nations or redesignate their HQ country very easily.
            They do not leave their job behind.
            The very high tax rates you have often called for would lead to an exodus and to less overall tax revenues.
            I agree with Mr Redwood’s idea to carefully set tax rates at a level where revenues are maximised and therefore the rich pay more.
            I would have thought that idea would have your support.

      4. Monty
        March 24, 2013

        You obviously have no imagination or insight into the world of high flyers in the private sector. They are much more mobile than the rest of us, they aren’t tied to a shop floor, or a warehouse. They can work anywhere. I’m not even near their level, I’m a design engineer, and I do all my work online. My employer has no premises in this country.

        The other aspect that hasn’t dawned on you, is that as you go up the income scale, there are more and more self-employed folk in the private sector mix. They tend to be quite well secured financially. When the burden of tax reaches an unacceptable level, all they do is close down their operations and live off their stored wealth. End of income tax from them. End of income tax from any staff they employed. End of corporation tax from the business they were running. Big reduction in the amount of ultimate IHT from their estate as they gradually reduce their net wealth during their lifespan.
        This can have an enormous detrimental effect on the economy, employment, and treasury receipts. It is the small businesses which are the real engine of the economy, and they are most affected by the punitive tax and regulations burden you are so devoted to.
        Driving these people away, or out of the economy, is utterly stupid.

        Reply: Indeed – I have written here before about “entrepreneurs on strike” – the successful entrepreneurs who have sold a successful busienss and now do not want to reinvest their money in another UK job creating business, but go abroad or buy foreign investments.

        1. uanime5
          March 25, 2013

          Not all industries are as mobile as you claim. As most of the employees in the service industry are tied to a specific location their managers and executives also need to be in this location to oversee them.

          Multinational companies are also far stricter regarding where their staff can be based because they need executives to oversee the company in specific locations. So people working in these companies are far less mobile than those working in smaller companies.

          I’d say there are more self-employed people high up in the private sector because you can avoid a large amount of tax by having your employer pay your company the money, then having your salary paid to you in shares.

          Not sure why you’re assuming that income tax is the only tax the wealthy pay? As long as they’re in the UK they’ll have to pay council tax and VAT.

          I’m equally puzzled why you’re assuming that after they close their company their staff will not longer pay any income tax. Unless these people only have a very specific set of skill they should be able to get another job and resume paying income tax.

          You comments about the loss of corporation tax are equally baffling when any function this company used to perform will be performed by another company, which will pay corporation tax.

          It’s like you’re assuming that once a wealthy person closes their company all their employees will never work again and no one else will take over the activities that this company was doing. As long as someone is willing to pay someone else to do something there will be companies willing to do the work.

        2. Edward2
          March 25, 2013

          Monty, an excellent post, I agree with every word you say.
          A post which resonates with me and many of my friends who are coasting and enjoying life.

      5. Wonky Moral Compass
        March 25, 2013

        How come the top 1% of income tax payers contribute an (HMRC) estimated 24% of all income tax revenue then? What happens when they tire of being stigmatised and having their pockets picked?

        1. uanime5
          March 25, 2013

          Well if they can’t take their job to another country they’ll either have to continue paying their taxes, or leave their job and have someone else do the same job and pay the same amount of taxes. Either way the net result is the same amount of tax revenues.

          1. Edward2
            March 26, 2013

            Please see comments above Uni
            You are wrong on this.

    3. zorro
      March 24, 2013

      Well said, particularly on DECC……If it isn’t hurting, it is isn’t working…….I suppose that’s a slogan for Sir David Nicholson’s NHS too….


      1. Mark
        March 24, 2013

        I hope that Jeremy Hunt recognises that NHS failings are somewhat wider than excess deaths. There are other botched treatments, and it seems it’s getting difficult to even secure a GP appointment again.

        1. lifelogic
          March 24, 2013

          It would be less hard if they got £20 each time like a hair dresser.

  10. alan
    March 24, 2013

    I think Mr Redwood is quite right when he says that the issue becomes one of how do we share out the pain of paying (or of not being paid). I see one of the advantages of using the euro is that it forces a clear choice on the government that it cannot conceal from its voters, and one of the disadvantages of using sterling that it enables the government to go on building up debts in the expectation it will be able to use inflation to deal with the problem of repayment. In essence that means that everyone who holds the currency pays through the devaluation of their savings or income, but relatively few people seem to be conscious of this process. The UK government may well have removed more money from us through devaluation and inflation than the Cypriot government is proposing to take with its levy on bank deposits. The pound has fallen by about 25% compared to the euro – the same as the Cypriot government is now saying it will take from large depositors. One difference is that all holders of sterling have had to suffer this, not just those with over €100,000.

    I doubt that the UK will resolve its long term problems with its economy if we go on using sterling.

    I feel particularly sorry for those British people who have retired to Cyprus and have been hit by both the devaluation of sterling and now the levy on their savings in Cypriot banks.

    1. zorro
      March 24, 2013

      Theoretically, yes the Euro could be helpful in that respect……particularly if similar economies adopted a currency union…….Except that’s not what happened. You had disparate economies like Germany, Greece et al lumped in together on ridiculously elastic entry criteria. Nice try…….I think certain countries knew it would end like this. It’s like a drug dealer/junkie relationship. Give them them some free or cheap drugs, get them hooked, draw them in, and ten withdraw the supply or push up the price…..Then you own them.


    2. Denis Cooper
      March 24, 2013

      “I see one of the advantages of using the euro is that it forces a clear choice on the government that it cannot conceal from its voters.”

      Nice theory, but in practice the Greek government lied Greece into the euro, and then used that false badge of respectability to deceive not only the Greeks about the true state of the Greek economy but also international investors, and now the clear choice that the Greek government cannot conceal from its voters is between submitting to the rule of German politicians within the euro or enduring even greater hardship by leaving not only the euro but also the EU, being cast out into darkness and yet still at the mercy of German politicians who would determine what trade and other relations Greece would then be permitted.

      There were those who were never deceived about the true state of the Greek economy, unlike the Greek voters, and curiously enough German politicians were among those who knew perfectly well that Greek politicians were lying Greece into the euro but were willing to give them enough rope to hang the Greek voters.

      (Says modern Germany is seeking control over other EU states -ed)

      ((Goes on to describe Germany in unflattering terms-ed)

      1. zorro
        March 24, 2013

        Denis, experience has shown that one has to be more circumspect when speculating about German policy in Europe in order to get the point across……Well, at least that is what I try.


      2. Denis Cooper
        March 25, 2013

        In particular I described the German political elite in unflattering terms, which I believe may be what Nicholas Ridley also had in mind in 1990 when he described EMU as “a German racket designed to take over the whole of Europe”.

  11. Mike Stallard
    March 24, 2013

    “The message from Greece and Cyprus is a harrowing and sobering one. ”

    There are three ways to avoid the Cypriot experience.
    1. Cut back on the State expenditure.
    2. Gain more money through tax, but this demands expansion of exports in the teeth of the EU.
    3. Borrow and write lots and lots of IOUs (QE).

    2 and 3 lead to total ruin. Which is why the Labour Party is all in favour of both. And both mean that innocent people are forced to pay for the profligacy of other people. So, in answer to your original question:
    Am I responsible for the debts of the state?


    1. leads to “austerity” so nobody wants that as the election looms – despite it being the only answer.

    1. uanime5
      March 24, 2013

      The Cypriot experience was caused by their banks running up huge debts and needing a bailout, just like the UK banks did in 2008 and 2009. So it’s impossible for the UK to avoid this problem as it has already happened.

      Also 2 can be achieved by raising taxes, something you refuse to consider because it will harm you while option 1 will not. Option 1 also results in innocent people being punished to pay for the profligacy of other people.

      1. outsider
        March 24, 2013

        Dear uanime5,
        A couple of points:
        1) If you think that Mike Stallard is a profligate high earner, rather than someone who just cares about the country, you have not followed his regular comments, which predate yours or mine. I do not always agree with him but that is where he is coming from.
        2) You are right that taxes could be raised to correct the non-cyclical deficit. But have you calculated the implications. The OBR posits the non-cyclical deficit for 2013-14 at 2.8 per cent of GDP, roughly £45 billion. To meet this, using the HMRC ready reckoner, the Chancellor would need to raise the basic rate of income tax to 30 per cent, the higher rate to 50 per cent and the top rate to 60 per cent.
        Of course, there are alternatives. If we rule out VAT and National Insurance, raising the corporation tax to 30 per cent would roughly obviate the need to raise the 40 per cent rate and increases in basic and higher rate stamp duty could limit the rise in the basic rate of income tax to 28 per cent.
        If we make the heroic assumption that everyone thinks that these rises are strictly temporary and they have no effect on incentives, they would, I think, still have a tremendous impact on ordinary families and, incidentally, consumer demand. They would not help the economy to grow.
        The longer term implications for growth would also be negative. The economic reality is that the reduction in abnormally high foreign credit to UK consumers caused a step, non-cyclical, fall in UK GDP of, give or take, 4 per cent, as well as a cyclical downturn, In economic theory this is called a negative productivity shock. One way or another, as in the theory, it seems to me that we have to accommodate this in public spending as well as private living standards before we can all move forward.

    2. Michael Cawood
      March 24, 2013

      An extremely sensible posting. Labour, with its policy of “ending austerity” will simple end up by totally ruining Britain.

  12. Martin
    March 24, 2013

    Perhaps Mrs May’s welcome pack/test for immigrants should say “Hello welcome to your considerable ever increasing share of the national debt”!

  13. Mike Stallard
    March 24, 2013

    I do apologise for the double entry! I am not Mr life logic: the first one didn’t come up until I had finished the second and posted it…..

  14. Jon Burgess
    March 24, 2013

    We are we we are, but your party has singularly failed to oppose the tax & spend mantra of the left. And now the party of economic competence has a wafer between it and Ed Balls’.

    One answer is to pass a law to forbid the Government from borrowing and limit government spending to 80 percent of last years income, with any surplus paying off the debt.

    See how easy it could be?

    1. alan jutson
      March 24, 2013


      Are my posts of the last 2 years begining to strike a chord.

      Only spend 80% of last years known income.



      1. Jon Burgess
        March 24, 2013

        Well, at least the two of us can agree what needs to be done!

  15. lifelogic
    March 24, 2013

    As you say “In the UK the state is taxing more and more activities in a bid to stave off a worse financial position born of the level of spending.” This is clearly the problem, and entirely self defeating. Just halve the state sector. It is easy, they are 50% over paid and pensioned anyway. So 1/3 of overheads can go just by paying them the same as the private sector. Then only about half do anything remotely useful, and about 25% do things that are positively harmful, like the climate religion, energy certificates, daft regulation, the equality religion, barmy over complex tax laws ……..

    But then Cameron missed the open goal election and saddled us with the tax borrow and waste, pro EU, climate loons, the Libdems and clearly is one himself too.

  16. Brian Tomkinson
    March 24, 2013

    JR: “Many people in the UK are alarmed at the rate of increase in state debt.”
    Indeed, but do politicians care? When we voted Conservative we did so in the expectation that they were serious about resolving the country’s finances. That turned out to be a vain hope. Osborne and Cameron, turned out to be spending junkies just like Labour and LibDems, decided to try and reduce the deficit by taxation and inflate away the debt. One thing I have noticed whilst observing the harrowing scenes of Cypriots desperately worried about their future is that the people look worried and tired, unlike the politicians who show no facial signs of being under any stress whatsoever. The same over here; we are worried what the future will bring and see that not one main party in the Commons is capable of resolving the situation but all three are capable of making it a whole lot worse as we see on a daily basis.

  17. oldtimer
    March 24, 2013

    You are indeed responsible. But if you can cut a deal with the powers that be to invest in one of their madcap schemes with state-guaranteed returns for twenty years then you can mitigate your losses. Even better, if you are a foreign investor, then you are on a gravy train, courtesy of the UK taxpayer. DECC is an architect of some of these wheezes. They deserve wider public exposure.

  18. rick hamilton
    March 24, 2013

    Governments spend too much simply because there is nothing to stop them. Until there are laws in place to prevent governments taking more than 35% of GDP – or whatever the target is – they will continue to overspend, overtax, overborrow and in the worst case overprint money. The question is how do you get lawmakers to make laws controlling themselves? Quis custodiet ipsos custodes?

    1. lifelogic
      March 24, 2013

      Indeed the only check to stop the state sector spending money are MPs and Minsters. But they just behave like children, let loose in a sweet shop when elected. They are in on the racket of revolving job doors. Dropping all their lower tax (and IHT threshold) promises and start tax borrow and wasting in every single direction.

      (moves on to personal attacks on named former MPs-ed)

    2. lifelogic
      March 24, 2013

      35%? 20% tops – anyway how will you stop the powers that be changing the laws, to plunder the public’s assets yet again? Even in a democracy the risk is that one section of the public votes to help themselves to the assets of another section.

  19. Andyvan
    March 24, 2013

    As I understand it the law says you cannot be bound to a contract you did not sign and did not agree to.
    I signed no contract with the state nor it’s creditors. The debt was incurred by people I did not give my authority to, in ways I do not agree with, in pursuit of policies I do not agree with. I do not claim benefits nor use any government service where a choice is available. All I want is to be left alone by the state but that is not within my power as I am pursued for every bill they can dream up.
    Given all this why should I be responsible for any debt incurred by a government I regard as violent, coercive and unnecessary? The only way I am held to it is by violence from the state, which rather proves my point.

    1. lifelogic
      March 24, 2013

      Indeed and in the absence of any meaningful democracy you are quite right.

  20. margaret brandreth-j
    March 24, 2013

    The voters deceive themselves if a premise positied states that a vote in a general election denotes trust in a government to choose their public servants and take responsibility for public funds. Individual personnel whose philosophy is overdidden by the power of the majority in government ,who however may have managed affairs better ,all play a part in elections.
    I as an individual would have managed affairs better , so why should I pay for the mistakes of those managers who cannot manage?

  21. Iain Gill
    March 24, 2013

    No is the short answer.

    You can always emigrate and leave the UK debt behind.

    Indeed many UK voters are not even permanent residents here since we give all Commonwealth citizens the vote whatever visa they are here on, student visas and so on.

    1. lifelogic
      March 24, 2013

      Indeed better go now before they limit how much money you can take with you.

    2. rick hamilton
      March 25, 2013

      Are you aware Iain Gill that after 15 years residence abroad, the UK deprives its citizens of the vote? This happens even if you have worked all the time for a British company, promoting British exports. As an expat who has done just that for more than 25 years abroad, I have written to Cameron about this and received, as expected, an entirely unsatisfactory reply.
      There are at least 5 million British expats. I have no idea how many have lost the vote, but it must represent a significant number of potential votes. No other respectable country that I know of treats its citizens in this fashion.
      Sometimes British ‘leaders’ behave in the most perverse and baffling way, to say the least. The idea espoused by most of our competitors of ‘support the home team’ seems to be alien to them.

      1. Iain Gill
        March 25, 2013

        Indeed you can work abroad for a few years on a British payroll paying British tax and come back and not even be entitled to NHS because you have been out of the country too long. This country really knows who its friends are NOT

  22. Bob
    March 24, 2013

    “As a voter in a democracy, am I responsible for the debts of the state?”

    If you voted for the LibLabCon Party, then evidently yes.

  23. Gary
    March 24, 2013

    The debts are just one of the tyrannies of the state. The state is the biggest enemy of the people.To the extent that the 2nd amendment of the American Constitution recognised that and declared that the people should be able to arm themselves against the state. States have led to the murder of at least 250 million people in the 20th century alone.

    The state will one day, hopefully, be seen as a fairly recent and failed construct.

  24. Martyn G
    March 24, 2013

    “In the UK the state is taxing more and more activities in a bid to stave off a worse financial position born of the level of spending”. Indeed, but where will it stop – already we see that as additional tax is piled upon the people that the total tax-take is falling, with top rate tax payers emigrate to a more friendly country, petrol sales falling as people reduce their travels and so on. The golden goose is perilously close to having been plucked quite clean and we could soon start into a downward spiral of tax, borrow, print, waste and spend such as we have never seen before and the end to which would be something like that which is happening in Cyprus.
    OT but closely linked to national debt, we are closing our coal-fired power stations and bringing us ever closer to the lights going off in our homes and businesses, whilst Germany is constructing another 20+ and India 244 coal-fired power stations. At the same time our government is loading huge additional costs onto households by subsidising almost useless windmills and other madcap schemes such as loading so much carbon tax onto, for example, the Drax power station such that the only way it can stay in business is to change to burning wood chips imported from the USA. How mad is that? And as for windmills, according to the National Grid the existing 14,300 on 18 Feb 2013 were collectively producing 31MW, or 0.1% of total demand. Hoorah! Let us now build 10 times that number i.e. 143,000 so that if and when the winds blow at the required speed across the nation and its seas they will provide us with a whole 1% of demand!
    Those whom the gods would destroy they first make mad. Which about says it all

  25. Anoneumouse
    March 24, 2013

    Mr Redwood we live in a DiMocracy not a Democracy. In a real democracy we would never have been put in this position.

    Question:……….Have you ever herd of the Harrogate Agenda

    1. the people are sovereign: the sovereignty of the peoples of England, Wales, Scotland and Northern Ireland shall be recognised by the Crown and the government of our nations. The people in their collective form, by giving their consent, comprise the ultimate authority of their nations and the source of all political power;

    2. local democracy: the foundation of our democracy shall be the counties (or other local units as may be defined), which shall become constitutional bodies exercising under the control of their peoples all powers of legislation, taxation and administration not specifically granted by the people to the national government;

    3.elected prime ministers: to enable separation of power, prime ministers shall be elected by popular vote; they shall appoint their own ministers, with the approval of parliament, to assist in the exercise of such powers as may be granted to them by the sovereign people of England, Wales, Scotland and Northern Ireland; no prime ministers or their ministers shall be members of parliament or any legislative assembly;

    4. all legislation subject to consent: no legislation or treaty shall take effect without the direct consent of the majority of the people, by positive vote if so demanded, and that no legislation or treaty shall continue to have effect when that consent is withdrawn by the majority of the people;

    5. no taxes or spending without consent: no tax, charge or levy shall be imposed, nor any public spending authorised, nor any sum borrowed by any national or local government except with the express permission of the majority of the people, renewed annually on presentation of a properly authenticated budget which shall first have been approved by their respective legislatures;

    6. a constitutional convention: Parliament, once members of the executive are excluded, convenes a constitutional convention to draw up a definitive codified constitution for the people of England, Wales, Scotland and Northern Ireland, which shall recognise their sovereign status and their inherent, inalienable rights and which shall be subject to their approval.

  26. behindthefrogs
    March 24, 2013

    Yes we the electors have a responsibility BUT we expect you our representatives to be just that. There are numerous examples where MPs behave like little girls having tantrums rather than doing what they were elected to do.

    A typical example is the reduction in the number of MPs that was taken off the table in a fit of peek. A small example in terms of savings but one of very many where the interests of the country were ignored for personal reaons.

    At a time when the country has major economic problems the Tories have started making decisions not in the country’s interests but in order to increase their chances in the next general election. How else can anyone explain the beer tax reduction in the budget when action was required to reduce cheap alcohol sales. The money could have been used to encourage more apprenticeships by for example reducing employers’ NI for apprentices working for a formal appproved qualification.

    We have all the parties jockeying on the subject of immigration. Why? Not to reduce immigration but because they are scared of UKIP in the next general election.

    1. uanime5
      March 25, 2013

      A reduction in the number of MPs was removed because a certain party removed legislation regarding reducing the number of Lords and requiring them to be elected. So two examples of part politics preventing change.

      Reply The Coalitino deal was an AV referendum for fewer MPs. Conseravtives delivered the AV referendum. Lords reform was blocked by many interests, Crossbenchers and parties – Mr Clegg was unable to get an agreement which the Lords would vote for.

  27. Henry Curteis
    March 24, 2013

    A debt is only payable if the debtor can pay, and is willing to pay . Once enforcement is pointless, either the debtor is executed, or the debt is written off. The purpose of debt is to hand power from the debtor to the creditor. The creditor wants the position of power over the debtor to continue indefinitely. They can only achieve this if the debtor is willing or the debts can be enforced. As we live in a democracy, supposedly, we are able to decide to not pay the debts and see what type of enforcement is used against us. Seizure of assets is the only one that’s effective. Pensions. Houses. Shares. Bank balances. Gold. People will presumably take to the streets. Either we will all be gunned down, or the debts will finally be written off.

  28. Denis Cooper
    March 24, 2013

    The answer to the headline question has to be “yes”.

    If you live under a repressive totalitarian dictatorship and there is little or nothing that you can do to control or even influence the actions of the government, then arguably you can have little or no moral responsibility for what it does.

    But if you are a voter in a free democracy then you can be expected to accept at least some responsibility for the actions of your government, and if you constantly find that you don’t like the way your democratic system works and you don’t feel that you should be blamed for what your government does then you also have a responsibility to do whatever you can to get that democratic system improved.

    Not abandoned, as some including the eurofanatic enemies of democracy want and insidiously urge, but restored and improved.

    I do have some sympathy for people who were led astray by their own elected politicians and who now find themselves stuck in the eurozone and increasingly crushed beneath the heel of German politicians, as was always intended, and I do say “There but for the grace of God (or perhaps more accurately that of Sir James Goldsmith) go I”, but like us they should be more careful in their choice of those who are going to rule their country.

  29. HJ Blythe
    March 24, 2013

    It is interesting reading in these blogs, on-and-off over the months, that you are all so keen on a reduction in the state’s spending and have many radical and sensible ideas as to how to accomplish this. Whilst, in principle, I agree, you have to realise that it is simply not going to happen. As Bismarck remarked (a phrase later high-jacked by RA Butler) “politics is the art of the possible”. That means that any changes sufficiently radical to have a significant effect on the nation’s finances will need to have the approval of the British people, which in turn means that any political party that tried to implement any drastic reduction in spending would be voted out of office for at least a generation. Therefore, no political party has the integrity to do it; turkeys don’t vote for Christmas and 90% of politicians are interested primarily in their political survival.
    If the government, by some means or other, delivers collectively let’s say £10b to the population as a whole, it would be accepted thankfully, then six months later it would all be forgotten. If the government then somehow increased taxation by £10b to recoup this money, there would be literally hundreds of interest groups screaming about how they would be on the bread-line etc.
    So, let’s face the facts and resign ourselves to them: we are, as a nation, in line for continued, inexorable decline. At least, were we in the EU and since we are not such a basket-case as Cyprus, inflation would be checked and we shouldn’t have to face such continued, erosion of our savings. I am beginning to think that our mainly second-rate politicians have too much control over our national destiny. I would exclude JR from this last comment.

  30. cosmic
    March 24, 2013

    Were we voters in a democracy we would be responsible for the debts of the state.

    As we currently merely have elections every five years to put in place rival teams of managers setting out to do the same thing with a different gloss, the answer is no. Furthermore, their manifesto commitments are worth nothing, as the Wheeler case showed.

    Local democracy as in local elections, is even more of a joke.

  31. Pleb
    March 24, 2013

    Cut MP and council pay max to 50k
    Cap public sector pensions to 50k
    Scrap MP limos.
    Scrap Trident
    Scrap HS2
    If a small safe nuclear engine can drive a submarine why cant we use them to produce power?. Do it now and cut the bills.

    1. lifelogic
      March 24, 2013

      I agree (not sure about trident though, I have not studied the logic of it enough but all the rest).

  32. A different Simon
    March 24, 2013

    Let’s establish who we “owe” this money to , why we are paying interest on it , and whether the lender really had the money to lend in the first place or whether it was private money created by a keystroke operation .

    I’d hate to think we have a variation of the system in the US where it seems the Fed prints the money (when their written constitution states only the Govt can , not the Fed ) and the citizenry has to pay interest to the Fed .

    Before we commit our children to debt peonage trying to pay off the unpayable let’s firstly establish whether we really owe it and if we do , our ability to pay and insist creditors take a haircut on that which we don’t have an ability to pay .

    If people are expected to pay then there have to be social reforms like there were after WW2 . For a start , we have to stop paying money to the economic rentiers .

    Let’s implement a land value tax so that the dividends of the land accrue to all rather than just the bankers and land owning classes and allows reductions of taxes on industry and labour .

    Change the tax system that treats interest on business loans as 100% deductible to discourage leveraged buy outs and other sorts of financial engineering .

    So far there has been very little destruction of debt by bankruptcy . The bailouts have merely socialised bank debts .

    Another question you might have asked is whether the taxpayer in a democracy is responsible for the debts of a private bank ? Beyond the deposit guarantee scheme I don’t think so .

    I’ve got a feeling that if it is scrutinised we may find that a lot of this debt is mainly a confidence trick designed to enslave us .

  33. Glenn Vaughan
    March 24, 2013

    John; your third paragraph from: “Elsewhere states renege…” describes exactly what this government has been doing with the U.K.’s financial debt.

  34. Richard1
    March 24, 2013

    As a voter you are not responsible for the debts of the state but as a taxpayer you are.

    1. zorro
      March 24, 2013

      The taxpayer pays taxes for services, not to pay for profligacy. A taxpayer is not responsible for debts……the State may try and extract from you by force, but it does not make you responsible.


      1. Richard1
        March 24, 2013

        I agreed – there are 2 meanings of responsible here. Taxpayers are responsible in the sense that they pick up the tab. It is voters who are responsible for electing politicians who incur the debts on taxpayers’ behalf.

  35. Bernard Juby
    March 24, 2013

    For “State” read “Political Party in power”!
    If they had all behaved with Mr Micawber economics then we wouldn’t all be in this dreadful S/state.
    A great shame that we can’t put these overspenders into a Debtor’s prison. Why should we all suffer because of their profligacy?

  36. uanime5
    March 24, 2013

    While Greece was about huge state debts the problems in Cyprus are caused by the huge debts created by the banks. Also Cyprus is now only taxing savers with savings of over €100,000 because if the banks collapse these savers will lose all but €100,000 of their savings. Thus they’re more willing to accept a tax of 20% on their savings instead of a 100% loss.

    Given that the UK state has proven that it cannot even make minor cuts without severely hindering services the only viable option is tax rises to pay for them.

    1. zorro
      March 24, 2013

      ‘ it cannot even make minor cuts without severely hindering services’…..Nonsense, look at how much government spending has increased over the last 15 years. Do you call that efficient management of resources by (often) a monopoly buyer. There is huge government waste in (often) unsuccessful ‘project jobs’ which have been a waste of money (NHS computer systems, UKBA E-Borders/Raytheon contractor deal…..). There are so many examples of this….


      1. uanime5
        March 25, 2013

        Government spending increases every year because of inflation. With 5% inflation a rise in Government spending of 5% is a 0% increase in real terms.

        Government spending has also increased because more people are unemployed, more people who are working are claiming benefits, there’s an ageing population, and the Government is providing more services.

    2. Mark
      March 24, 2013

      The flaw with that plan?

      Income £20, expenditure £20=0=6d – result misery.

  37. A different Simon
    March 24, 2013

    John ,

    Your question is a worthy academic question but what about the practicalities which are :-

    – how much debt repayment will the citizenry “wear” before they say enough is enough ?
    – how much of the public domain can be privatised off to the lenders in a smash and grab raid before the citizenry is up in arms ?

    I worked out about a couple of years ago that I can’t win so took my foot off the gas and it won’t be long before the penny drops for the majority and they do the same .

    It’s not just about public spending as many on here seem to think .

    It’s about a financial system that sucks the life out of the real economy and lives off the backs of others .

    P.S. I notice that the army has been brought home from Germany .
    Is the establishment expecting them to help quell civil unrest ?

  38. zorro
    March 24, 2013

    Nice try John but as someone once said…..No, no, no…….I am not responsible in any way, shape, or form for the elected authorities inability to spend responsibly. They should be made liable for their spending decisions, and not just at the ballot box.

    I am not responsible for silly PC, expensive services which could be delivered far cheaper, more effectively and less bureaucratically. I am not responsible for adventurist wars, outrageous expenses or the rest of it.

    However, the authorities seek to make me pay for their profligacy through nefarious debasement, inflation, or excessive taxation. They take and I have to consent on pain of imprisonment. No, I am not responsible for state debt.


  39. forthurst
    March 24, 2013

    “As a voter in a democracy, am I responsible for the debts of the state?”

    …and the banks? What about the banks? How much of the accumulated debt is in consequence of our bailing out the banks?

    On the Keyser Report last night, a banking journalist stated that the City of London was perceived as the “Cayman Islands without such nice weather” and that it had a “supine jurisdiction in terms of regulation.” This is why much of the bad stuff took place in London and still does and why when the Wall Street banksers are on the prowl for victims, they did not and do rule out ourselves or our domestic banks. London is also the aspirational benefit seekers’ capital of the world. In other words, London is the visitors’ attraction for (people who want UK taxpayer money-ed)
    We had been inured to the idea that Labour was the tax, spend, borrow and waste party; but it comes as a shock to find that the true blue party should adopt the former’s prescription. With all the main parties committed to increasing the national debt and to spend in order to ‘get the economy moving’, its only a question of time before we find ourselves in the same predicament as Greece. Of course the other way of getting the economy moving accoriding to people like Vince Cable is to import more people, presumably along the lines promised by Cameron and Letwin. It’s all rather tragic but what can you do when what little remains of our industrial base is substantially foreign owned?

    Apart from being qite normal now for a Club Med bank to fail, it is not clear what has precipitated the present Cyriot crisis. What is unusual is to treat the depositors as the junior creditors without any other recourse, and it remains to be seen whether after this, banks can reopen as going concerns.

  40. Robert Taggart
    March 24, 2013

    Some are more responsible – for our debts – than others…
    Liebore voters – most of all !
    Scroungers, like moi – ? !
    Moi – having never voted Liebore our conscience be a little clearer !

  41. Chris Rickard
    March 24, 2013

    Its not just the huge increase in PSND that is of concern. 1) Its not being spent wisely – ring fencing aid, health & education and allowing welfare to mushroom to 13% of GDP is wholly irresponsible for a Gov borrowing more in 5 years than Labour did in 13; 2) propping up the overinflated property market whilst SME’s can’t get loans to expand is wholly the wrong priority and shows negligence in not developing alternative debt markets to the banks; 3) keeping real interest rates negative via QE etc is rewarding borrowers but penalising savers and those on fixed incomes like pensioners. Its the wrong priorities. Add the huge fiscal stimulus the Chancellor has injected into the economy which has failed to generate any economic growth at all and you have a recipe for both political and economic disaster.

  42. Neil Craig
    March 24, 2013

    The wealth of a nation is not its currency, that is just the accounting system, but its GNP. Where the debt is internal it is far more important that wealth is or is not being generated than that it is distributed in a certain way.

    The real crime against future generations is our political class’s deliberate programme of preventing growth.

    In a similar vein I object to the way politicians. particularly but not exclusively Labour ones, say that the recession is the fault of bankers and those who voted for useless and profligate parties share no respo9nsibulity for the results.

    On the other hand how much is it a matter of democracy. Do we live in a democracy. Very rarely in my life have I voted for a person or proposition that won (only in Scottish elections). In FPTP elections I have voted for parties that were effectively disenfranchised by what I regard as a corrupt electoral system. Am I in any way responsible for the results of their policies?

  43. Barbara
    March 24, 2013

    I think it’s a bit rich to say to any people you are responsible for paying the nation’s debts, when they have had no say in making the debts. Its like a daughter or son saying parents are responsible for their debts. Collectively we are responsible for electing those who don’t adhere to good financial behaviour, and we’ve seen a lot of that of late, but make no mistake its been happening for decades not just in the past 13 years. Wars we don’t want, I’d allow the Falkland war as that was an invasion of our terroritory, it had to be regained back. All wars since have been arrorgant wars from politicans who ‘think’ they have to interfere; they don’t, we don’t want them to but they do.
    Afganistan, Iraq, Mali, and now Syria, it all costs money; where are all the alies we’re supposed to have, where is their imput? I’m fed up of being told we have to have severe cuts here while we spend 12 billion on foreign aid, since when have we become the world’s benefactor?
    These men who proclaim we have a duty to spend this money, are wrong, some yes but it should be collectively what others spend not 7% of GDP each year while we have so much debt. It makes sense, I would not borrow money to give to my neighbour and be in debt myself. These MPs are supposed to be the best intelligent men and women we have, but they are failing us and themselves by these polices. Climate change is a farce; while we have families here freezing at home, we could drop bills by £80 per year if we dropped these policies.
    The fact is if MPs don’t drop them, WE will drop you, simple.

  44. muddyman
    March 24, 2013

    What Democracy?. A major problem is the uselessness of most MP’s, a group that have generally failed in their profession or business (which is why we have so many Lawyers in Parliament) and whose inabilities allow them to be transferred from department to department with little or no effect. They maintain their posts by answering the bribe patterns required by their electors – the poor ask for money to maintain their lifestyle and the rich to keep their money to maintain theirs – and that’s Politics!.

  45. Acorn
    March 24, 2013

    Don’t worry too much, 70 % of the government’s securities debt, we owe to ourselves. The rest we owe to foreigners and their central banks; and, we only pay out in pounds sterling; no worries. Of the £1320 billion in securities, the casino banks (including the BoE), have got £553 billion and insurance / pension funds another £336 billion.

  46. Dr Stephen Birch
    March 24, 2013

    There is, I believe a large budget set aside for overseas aid. If I recall correctly, Cyprus is overseas and also in need of aid. Why not use part of this budget to bail out a friendly government, who unlike the usual recipients are likely to be grateful and willing to pay a reasonable rate of interest? Who knows they might also look favourably on British oil and gas exploration companies later in the absence of help from Russia.

  47. Dennis
    March 24, 2013

    “They cut the value of their currency, reducing the amount of money foreign lenders get back. ”

    I can’t believe any lender would lend money without the condition that the borrower must pay back at the same value as the loan at that point (plus interest of course) no matter what the devaluation is.

    Are the lenders that stupid not to have that provision? Presumably interest rates are adjustable in line with the steady loss of value but if the value drops overnight then the borrower is quids in. Lovely jubbly.

  48. Pleb
    March 24, 2013

    Test for vanishing comments

  49. The PrangWizard
    March 24, 2013

    If governments did what they promise we should accept a shared responsibilty. But they don’t, and they do things they never mentioned. We need some democratic way round that. We should not have fixed term parliaments for example.

    And in government MPs and Ministers say one thing one day and the opposite the next. They say things they know to be untrue. They say things they know cannot be delivered. They say things to keep critics quiet.

    There are some very honourable exceptions and we must respect them and support them.

    In the current round it seems to be the savers in Cyprus who are being required to pay up the most. What is happening to the rest; benefit lifestylers here are hardly being touched in our situation, cynically and falsely being called ‘austerity’. Is the deficit still going down? If not the debt is out of control.

    What are those who work but don’t save being asked to contribute, in Cyprus are they being asked to pay additional one-off taxes? Why should they be exempted from additional taxes? Anywhere and here of course it could be argued they should pay more if they may have contributed to the problem by running up large debts, but in any event they are citizens too, although being old fashioned I prefer the word ‘subjects’ for England.

    I think we must fear and plan for the imposition of Exchange Controls again here. Why should we not protect our income and capital when there is a risk of its being stolen from us? Why should Cypriots respect any laws any more? We have not reached that stage here thankfully and I hope we don’t.

    What is a ‘mansion tax’ but a theft of capital, how is related to the ability to pay? A rate of 1% on £2m is equivalent to £20,000 pa, can everyone in a big house afford that especially year on year? But why apply it only to big houses, why not all if that’s a route worth going down?

    I am not envious of those who are wealthy. I would like to be wealthy, I would like my children to be wealthy and I will help them when I can, but although I own my own house it is only worth about £200,000.

    We need new leaders, those who have a strong sense of morality.

    1. A different Simon
      March 24, 2013

      PrangWizard ,

      A fee for exclusive use of the commons , i.e. for exclusive use of the land itself at a level dependent on the location seems the fairest .

      Charge the same for an empty plot , one with a mansion , one with a bungalow .

      I.E. establish the principle that the improvements are private but the that the land is not created by man and should thus be subject to communal ownership like mineral rights are .

      This is not a wealth tax and gets away from the concept of “someone else paying” as all should pay it .

      1. Mark
        March 24, 2013

        What about land that is created by man? Flevoland for example.

        1. A different Simon
          March 24, 2013

          The land was already there even if it was covered with water .

          The value of any land , reclaimed or otherwise , is largely dependent on it’s location i.e. it’s surroundings e.g. of the roads which serve it , nearby schools or stations which make it a good place to live .

          These things are essentially provided by the community so I still think it is reasonable for the community to share in the dividends from this piece of land .

          A tax on monopolies like land has got to be better than a tax on industry and labour hasn’t it ?

          1. A different Simon
            March 24, 2013

            Mark ,

            In most cases land ownership is only a right of conquest .

            Originally someone either put a fence around it , threw someone off it or bought it from someone else who had already done that .

            The state provides a legal framework and enforcement services which enshrine the concept of ownership of land/right to exclusive use of land .

            It is not unreasonable that the state should charge for this service on an ongoing basis .

  50. Paul
    March 24, 2013

    The UK government is of course wholly responsible for its failure to get a grip on spending and reducing the deficit. Those who voted Conservative, Labour or Lib Dems at the last election must also share some of the responsibility – if you elect a bunch of clueless graduates who have never run their own business or held a proper job what do you expect? The idea that Cameron and Osborne were going to be a roaring success who would save the country is laughable. They were always going to fail. College kids with no idea how the real world works. I don’t know how they get away with it. When we compare the background and credentials of people like JR with Osborne’s and Cameron’s (millionaires before they were even born) it is a travesty that the small amount of talent the Conservative Party has is being kept on the backbenches and career politicians are running the show.

  51. rd
    March 24, 2013

    “If you stay in the country you pay.” A whole lot of other things are wrong with this analysis of the Greek and Cypriot situation but I am sure JR is aware his ‘simplification’ amounts to being untruthful.

    Reply: What is wrong with the analysis? It seems quite clear that states with overarching debts like Ireland, Greece and Cyprus, do make their citizens pay if they stay.

  52. Nick
    March 24, 2013

    Very simply we are not responsible. You are. You spent the money. You made the decisions. You hide the information from people.

    For example, you’re repeated denials about the pensions debts spring large. Why would you want to hide from people how much debt you’ve accumulated there? It’s because you realize several things. First, you would have a problem under section 2 and 3 of the 2006 fraud act. That’s why there has been a hasty withdrawal of the recent 30 or 35 years letters sent out. It’s the first part of the fraud, misleading people that’s the issue.

    So, 7,000 bn of debts, 550 bn of tax and 700 bn of spend. It’s bankrupt.

    So I would start with the people at the top. MPs get jailed until the debt is paid. Pour encourage les autres. For your own protection of course . It won’t happen, so I expect in my life time (worse reactions to MPs-ed) After all you’ve been educating people that welfare is a human right, and when its not paid lots of people will conclude you’ve violated their rights. Doesn’t take many nutters to cause problems.

    It all goes back, you’ve treated people as ignorant and kept them in the dark. In spite of your promise here to publish the debts you didn’t.

    That’s why we’ve even had one poster here state spend spend spend as the cure. They are ignorant of your mess. You’re scared of the consequences.

    Hence your question, who should pay? Why have you left yourself off the list?

    Reply: I have not left myself off the list. I am planning to stay, and the tax rules apply to me as they apply to you. Do not carry on saying I do not tell the truth about pensions. I do. I have always explained it is a pay as you go scheme, and has been so ever since it was first established. The NHS is also a pay as you go scheme. I have also agreed that if you wish to ascribe a present capital value to this particular future liability it would be a large number.

  53. Daniel Thomas
    March 24, 2013

    ‘as a voter in a democracy’ am I responsible for the debts of the state?

    As everyone outside the Westminister bubble is painfully aware, the British people have been disenfranchised. This is government by the executive. The party elites choose or approve MP’S, the second chamber is appointed by the same elites.

    The civil service is politicised together with entire political establishment and Quangoland.

    The British people are the last people to be listened to.

    On everything from an EU referendum to traditional marriage, from overseas aid to ‘combating climate change’ the people are ignored at every turn.

    In short, no we are not responsible for the debts of the state, so don’t even think about stealing my savings.

  54. Bert Young
    March 24, 2013

    Sorry , I did not get to read today’s blog until very late . One of the problems in running and managing our economy is that it is governed by 5 year cycles ( election periods ) . Running an economy of our size is not a short term issue ( even more so if you take into account the initial learning curve and the run up to the next election ) ; a period of 10 + years is , probably , much more realistic and it ought to be planned for and managed in this sort of time scale . How this can be achieved without a drastic change in the time periods of governments is something I would appreciate other views on . Change it must .

  55. Chris Rose
    March 24, 2013

    I am appalled that the Government is taking such a casual view of our indebtedness. Indebtedness is a problem which must always be pursued with vigour and urgency. How can a responsible Chancellor sit back and watch the debt rise for years on end? The sooner action, painful action no doubt, is taken, the better it will be for all of us.

    It is time for another Cabinet reshuffle, or a general election, and an end to money-printing.

  56. Jon
    March 24, 2013

    I think Gordon Brown played on the assumption have it all today and who cares about the following generations. I heard today on TV that the Chinese policy is spend on things that will benefit the grandchildren. I think the Brown view was spend now for immediate gratification and let the grandchildren pay.

    1. Peter Davies
      March 25, 2013

      That was always his philosophy – Mandleson himself said this before they went into Govt – surprised he managed to keep the lid on this instinct for the 1st term

  57. Rods
    March 24, 2013

    I’m one of the rats leaving the sinking ship where I’m in the process of emigrating to a country outside of the EU.


    1. I want to live in a democracy again, where the politicians that are voted in make the laws. Not what is effectively a dictatorship, where 80% of our laws are decided by an ex-(left wing ed) Commission President and his 27 person Politburo. Where your job is to gold plate and rubber stamp them. This will get worse from January 2014 when under the Lisbon treaty far more decisions are made by qualified majority voting, by people the UK population did not vote for. What communism did to eastern Europe, the EU is doing to the west. If we stay in, we will end up a very poor country and the UK doesn’t have the luxury, like them, of growing enough to feed our population.

    2. Government spending and the deficit is out of control. Over the next 3 years you will be borrowing £174bn more than was planned in 2010. Taxes are much, much too high with the majority of them the wrong side of the Laffer curve. Fiscal drag means that income tax tax revenue will continue to rise. Your only hope of cutting the deficit is for taxes to increase from 43% of GDP to 49%.

    3. Business rules and regulations are far to onerous for the small businessperson. “In France the saying is that half the population work full time for the Government and the other half work hard, trying to avoid working full time for the Government.” With a French dominated EU it is no surprise that the same is applying more and more here. With large business, business regulation is a far smaller part of their overheads compared to small businesses. While we are part of the EU there will be no meaningful supply side reforms, just tinkering. UK energy policy alone shows that there will be no laissez-faire.

    4. Energy policy, I can’t run a business without electricity period and I’m not going to see all my profits disappear in having to regularly run a generator, when the wind is not blowing and paying much higher prices than my competitors when we do, as it seems to me inevitable with your current ‘plant food’ centric energy policies that this will happen. Where we are going to be increasingly reliant upon windmills that only work sometimes. Where the earth’s climate is largely dictated by the heat we receive from the sun and that is currently dropping, we are probably now heading for a cold period like with had in the 1870’s. CO2 is a trace atmospheric gas and their is very little evidence of the levels over long periods of time having any major effect on the earth’s temperature. I think you will find by far the biggest day-to-day effect is the amount of water vapour in the air and cloud formation. Everyday’s weather is a climate statistic.

    5. The items above have choked off any meaningful growth, so all we have got to look forward to is stagflation, stagflation and stagflation. Any growth in one area will be negated by high energy industries off-shoring through carbon taxes from the 1st of April and unrealistic energy prices. The deficit is unsustainable and we both know what Herbert Stein had to say about this. Labour caused the problem, you had a window of opportunity to correct it and have failed, that window is closing fast now debt to GDP ratio is over 90% (OECD) and I can’t see how the country can avoid a hard landing, probably through inflation as that is the easiest route for politicians.

    6. No, I was not guilty for the Labour mess as I didn’t vote for them and yes, I was guilty for the current Conservative failure, by voting for them at the last election. As much as any voter is culpable, where your sheets of lies, sorry manifestos, have no relationship to what you actually do. I expected a Conservative Government and we have got Labour Lite. But don’t worry I won’t be making this mistake again, where I will register to keep my vote for 10 years, before I move abroad and will vote for the only right wing party UKIP.

    No voter for the last 25 years, until now, has had a choice over our EU membership where the LibLabCons are all pro-EU. Many EU countries are in the same position, but as the EU gets more and more disliked that is changing.

    Finally, where you as a politician are trying to blame the voters, the real blame lies with the politicians, we elect you to be our bosses and run the country on our behalf, pay you handsomely to do so and as beneficially for the population as possible and we have been badly let down by you. As a politician you are better than most, but where you are trying to say it is collectively the voters fault, I would say, it is far more so collectively the politicians. When you were an opposition party the Conservatives never successfully challenged Labour’s excesses, but used terms like “sharing the proceeds of growth”.

    Being a boss or politician is much like being a sportsperson, you are either good enough to gets results or your not and there is nowhere to hide. If I was going to blame the electorate for something, it is we need more, better quality, politicians in politics and in the political parties, which means more of us should get involved.

  58. Gewyne
    March 24, 2013

    Get rid of income tax, National Insurance and VAT and instead everyone resident in the country a invoice for a per capita share of Government spending. Give them the option to pay by direct debit / or have it taken out their benefits –

    Then you will see people start to care – and Governments that can cut the amount of that invoiced amount would become more popular – and become more fiscally responsible by the fact no-one wants to hand over more than they deem fair.

    1. uanime5
      March 25, 2013

      Your plan will be more unpopular than the poll tax as if will mean the unemployed have to pay the same amount of tax as millionaires, even though the former has far less money than the latter.

  59. Teresa
    March 24, 2013

    Am I responsible for the debts of the state? That’s beside the point now, because like it or lump it I am going to have to tolerate the consequences of that debt. I can riot in the streets in protest and it won’t make a jot of difference. I do have one advantage: I grew up in a house with no central heating (it took a lot of courage to get out of bed in the morning), no television, no fridge, no washing machine, no dishwasher, no car, and very little food. Austerity holds no fears for me. (but I still get a gut churning fear if I hear the sound of a piston engine aeroplane at night, and the dried egg was awful!)

  60. Monty
    March 25, 2013

    Should we, as voters, be prepared to guarantee the governments overspending?

    Well first of all, since the introduction of widespread postal voting on demand, we can’t even be sure that the MP we get, is the one we voted for. So on that score, no.

    Second of all, once elected, we have no influence, let alone control, over our MP. They are at liberty to do exactly what their party leader and whips demand of them. There is no recall, therefore no answerability. So on that score, no.

    Third- there are external actors (the ECB) who can simply demand funds from our treasury, so on that score, no.

    Finally, we have no Constitution to restrict the power of governments. If we had, citizens would be able to petition the courts to curb the profligacy of the government. But we can’t. So no to that one.

    John, your leader is still utterly wedded to a bunch of daft ideas that he professes to be passionately committed to. Get rid of this vain self-regarding idiot and his passions and ideals, and find someone who will get serious about our perilous situation.

  61. Peter Davies
    March 25, 2013

    That’s a very good question. They say a country gets the govt it deserves – in 97′ we all know the history and we all know where it ended up. The problem is once a govt comes into power there is little any of us can do to stop the govt of the day from doing reckless things.

    I have always felt you elected a govt to run the country responsibly (socially and financially) and provide proper internal and external security

    Successive Govts have interpreted this as being able to:

    – rob you blind through any sort of taxation they can come up with

    – build up huge off and on book debts to lure your (client) constituents (incompetence)

    – worse of all signing away sovereignty and competences abroad without the permission of the people (treason)

    The above are types of behaviour that most people would face serious consequences for in their day to day lives or work environment. (To the credit of the Tories, there is now at least a legal referendum lock in place now for any new treaties should they be dreamt up by the EU).

    The simple fact is that the electorate has little control over what politicians get up to and having referendums every 5 minutes equally would not be practical

    – why not have some sort of Royal Charter backed up by law (that politicians cannot tinker with) accompanied by a defined set of requirements for politicians’ behaviour when in power with which they can be legally held to account for in future?

    Key requirements would be to

    -set limits on off and on balance debt and anything to do with signing treaties without without the implicit consent of the people via referenda.
    -no going to war without the legal authority of the UN.
    -no lying to parliament or constituents – you get locked up for lying to court, why not to parliament?

    Labour would love this……….. NOT I suspect.

  62. Lindsay McDougall
    March 25, 2013

    The answer is ‘Yes, you are’ but we are entitled to demand that the state stops adding to its debts, for example by not bailing out banks when shareholders should take the hit, and by not paying ridiculous prices for hospitals under PFI arrangements. I was told of a company employing only 14 people that made 100% per annum on capital invested; it was active in the PFI market. Government can do better.

  63. They Work for Us
    March 25, 2013

    The professional politicians have proved that they cannot be trusted to run the country and that they lack the competencies and experience needed (as UKIP said).

    Time for an American style constitution where the Prime Minister and the Executive is subject to large checks and balances so they cannot do what they like.

    Enshrine in this constitution the requirement for a balanced budget, referenda on all major issues and the right to recall MPs and fire them if they do not do as their electors want.

    1. uanime5
      March 25, 2013

      What checks and balances are the American president and executive subject to? Without this information it’s impossible to determine whether this change will be effective.

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