Here’s to a better 2014 for the UK

 

                  2014 could be a good year for many in the UK.  The long shadow of the Credit Crunch, Labour’s spectacular boom/bust of the last decade, is receding at last. 2014 could see more people getting work, some rises in wages and even growth in living standards after a long period of squeeze.

                  The economy ends 2013 in much better shape than in recent years. People are more optimistic, with businesses now more inclined to invest in future products and capacity. The rate of new job creation has been good, and now more of those jobs are being taken by unemployed people already settled here rather than by recent arrivals.

                  Some already complain that we are sowing the seeds of the next bust. They complain that people are borrowing too much money. As the numbers living here expands, and as the numbers in work increases, so you would expect total private sector borrowing to rise. There is  nothing wrong with people borrowing against their incomes to buy a home or even a car. They need them to lead their lives and cannot afford the full cost or anything like it all in one go. It’s what has driven living standards higher in  past decades, and will do so again.

                  Of course individuals, companies and the state have to be careful not to overdo the borrowing. Businesses have overall cut their borrowings substantially and generated more cash in recent years. They can afford to borrow more if good investments present themselves. Many individuals have cut their credit card and other expensive borrowing. As home ownership expands again we should expect to see debt levels overall rise. Individuals and their mortgage advisers need to make sure they borrow amounts they can afford to service when interest rates rise again, as they will one day.

                        The state is the most exposed, as the state has built up its debt much more quickly in recent years. It has also benefitted greatly from buying in its own debt, keeping the interest charges low. This has come to an end and is unlikely to be revived, so it is even more important now that the state cuts its deficit and gets its debt to affordable levels.

                            I wish you all a happy and prosperous new year.

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70 Comments

  1. Arschloch
    Posted January 1, 2014 at 5:28 am | Permalink

    John no doubt Osborne will be thanking you for acting a s Pravda’s man at the Treasury. OK so the numbers in work on the surface look good. However how about casting a jewellers eyepiece at the rate of average hourly pay, number of hours worked, the number in part time work. Why are so many over sixties still working rather than putting their feet up with their grandchildren? When you look at all that you probably get an explanation as to why Debenham’s share fell like a rock yesterday and Georgie is expecting the consumer to carry on spending to bail him out until 2015? 2014 is going to see life get a little more harder for us who do not have the cosseted (and tax payer funded) life of an MP.

    Its nice to see also the new year get of to a good start with medals for the ethically compromised and bonuses for those who work at insolvent banks.

  2. alan jutson
    Posted January 1, 2014 at 7:27 am | Permalink

    Happy new Year John, and thanks for your daily postings and comments which make addictive and interesting reading.

    Yes interesting times ahead me thinks, especially as all Political parties will be setting themselves up for a general election in May 2015.

    So many things still to do, such little time left to do it:

    Immigration: Limits/No limits/Do nothing
    EU: In/Out/Renegotiation/Do nothing
    Taxes: Simplify/Reduce/Increase/No changes
    Spending: Reduce/Increase/Do nothing
    Benefits: Will new system rewarding work, work or bring Chaos
    NHS: Will it ever be as efficient as privately run organisations.

    Looking back, have the Government really made the best use of its three and a half years.
    Are the opposition anything other than opportunist mud slingers given their past record.

    Perhaps we get the government we deserve, given the vast majority of the people show little interest in politics and tend to tribal vote time after time after time, or will that change.

    Yes certainly interesting times ahead.

    Let us hope that this year will see some real growth, so that we can all share in a little of the benefits, otherwise what is the point !

  3. margaret brandreth-j
    Posted January 1, 2014 at 7:35 am | Permalink

    Happy New Year to all.
    I certainly hope all become prosperous, but alas in the NHS whilst we are getting poor quality Doctors for the sake of that qualification and experienced medically qualified nurses are being financially abused , there will be little change in the face of welfare: the biggest employer in our Country.The patients suffer and the system is brought to it’s knees as many examples demonstrate in 2013. We experienced staff brief Dr’s and managers on the problems and how we could handle them given the position ,but are arrogantly ignored.
    As far as credit is concerned, it is simply very obvious that non durables should not be purchased by a system which is staggered and then charged for the privilege of doing so when the good have been long gone and utilised. It is the mindset of fools.
    I hope the arrogant step down and do not continue to try and fool the nation with a few bits of paper as a substitute for experience and know how,otherwise these temporary measures will be tiny micro bubbles of light in a crumbling nation.

    • Franco
      Posted January 1, 2014 at 1:40 pm | Permalink

      What a load of tosh. That chip on your nurse’s shoulder gets bigger every week.

      • margaret brandreth-j
        Posted January 1, 2014 at 2:39 pm | Permalink

        That sounds a bit fishy to me!

      • margaret brandreth-j
        Posted January 1, 2014 at 3:00 pm | Permalink

        Don’t you like the attitude then?.. well just reflect on the origins!

      • Arschloch
        Posted January 1, 2014 at 3:06 pm | Permalink

        Franco the internet tough guy ….do not be so rude! If you had worked in the NHS you would know that medics do load of unpaid overtime with nurses being exploited more so than doctors.

  4. Richard1
    Posted January 1, 2014 at 7:40 am | Permalink

    It certainly is good news that recovery seems to be well underway, completely contrary to the predictions and arguments of Messrs Miliband and Balls and all those know-all Keynesian economists who have been given such prominence in the media, especially on the BBC.

    Recognizing that the liberal-left establishment has been proven so wrong so quickly on the economy, let 2014 also be a year in which there is real public debate on other important issues,in particular the UK’s relationship with the EU and all the green policies driven by global warming theory, which the actual out-turn of events is also now proving to be increasingly dubious.

    • Tad Davison
      Posted January 1, 2014 at 3:09 pm | Permalink

      Richard,

      I heard Max Keiser say recently that Paul Krugman should be ‘thrown out onto the kerb’ for his predictions. I think there’s a lot more whom that might equally apply to, and not just on the economy! I don’t doubt that certain sections will find ever more inventive ways of taxing us to suit their dubious agendas, but the emphasis is upon us to keep proving them wrong.

      Tad

      • Richard1
        Posted January 1, 2014 at 8:22 pm | Permalink

        It is amazing how these people continue to have a voice in the media, long after they have been proven wrong.

    • uanime5
      Posted January 1, 2014 at 6:01 pm | Permalink

      It certainly is good news that recovery seems to be well underway, completely contrary to the predictions and arguments of Messrs Miliband and Balls and all those know-all Keynesian economists who have been given such prominence in the media, especially on the BBC.

      The recovery only occurred because Osborne ended his austerity and adopted the Keynesian policy of pumping money into the economy (specifically the housing market). So the Keynesian economists were proven correct that austerity doesn’t produce growth (as demonstrated by the 3 years of stagnation and high borrowing due to Osborne’s austerity).

      • Edward2
        Posted January 1, 2014 at 7:59 pm | Permalink

        Make your mind up Uni.
        During 2013 you complained about the cuts and that even more should be spent by the Coalition funded by more taxes.
        Despite cut backs in spending and reduced taxes which you continually opposed, growth is now happening.
        Greatly different to your beloved EU where there is no growth, high unemployment and reduced standards of living.

      • Richard1
        Posted January 1, 2014 at 8:21 pm | Permalink

        The recovery has occurred completely in contradiction to the forecasts of leftists including Keynesian economists, one of whom (Blanchflower) forecast 5m unemployed. Too high as public spending remains,there has been continued downward pressure on public spending and on the deficit, contrary to the policies of leftists.

        Will you next be claiming that the reason global warming has stopped is the UK’s subsidies for wind farms and other green policies?

      • lifelogic
        Posted January 1, 2014 at 10:47 pm | Permalink

        Osborne never did much austerity certainly not in the state sector, had he done so the recovery would have been far stronger. This as the parasitic sector shrank & real productive jobs increased. What was (and still is) needed is state sector austerity and releasing the government noose on the private sector and cheaper energy to create more real lasting jobs.

    • Posted January 1, 2014 at 8:27 pm | Permalink

      Richard 1,

      Osborne has got you and most of the country fooled. While claiming to have stuck to his plan A (austerity) has actually adopted that horrendous Miliband / Balls / Keynesian Plan B.

      • Richard1
        Posted January 2, 2014 at 1:14 pm | Permalink

        Anyone who reads this website knows that public spending has risen both in cash and real terms through this Parliament. Confidence would have returned quicker had there been more effort to control spending, in particular in the most wasteful and destructive areas. So I have not been fooled. Nevertheless,high as public spending has been it has not been enough for Leftists / Keynesians, who have repeated asserted that there could be no growth unless the public sector borrowed and spent even more. My point is their predictions have proven completely wrong. Whilst this Govt is far from perfect, it is notable that the Left has been absolutely wrong-footed.

  5. colliemum
    Posted January 1, 2014 at 7:44 am | Permalink

    A Happy New Year to you, John, and to all who read and comment here.

    The economic horizon may look promising, but there are events of which we need to be aware.
    This is a year of elections which will be important. We have the elections to the EU Parliament in May, we have the Scottish Referendum – both events with influences so far incalculable.
    And then there are the Mid-Term elections in the USA. Who will have the majority in House and Senate will influence the economy over there, at the minimum. And we all know that it is still the case that when the USA sneezes, we get pneumonia.

    Given the 100- Year-Anniversary of the Great War, there’s one book I wholeheartedly recommend. It follows the various tangled strings in the countries involved, showing how the war came to be. It is “The Sleepwalkers: How Europe Went to War in 1914″, by
    Christopher Clark, and ought to remind us that vigilance – by us, the citizens, in regard to government – is the price we have to pay for our freedom.

  6. Mike Stallard
    Posted January 1, 2014 at 8:16 am | Permalink

    “(State borrowing and buying its own debt) has come to an end and is unlikely to be revived, so it is even more important now that the state cuts its deficit and gets its debt to affordable levels.”
    Yup – urgent.

    The conservatives are split right down the middle. Ukip are unelectable, true, but they will split the vote in half and let Labour back in. So EU and UKIP – urgent.

    A very happy and prosperous New Year to you too – and thank you for your excellent and thoughtful blog which is very much appreciated.

    • Livelogic
      Posted January 1, 2014 at 9:17 am | Permalink

      Indeed Cameron, it seems to me, has just given up on 2015 having throwing away the election in 2010.

      The economy does have real problems, mainly a huge lack of competitive advantage in most areas due to incompetent government and as a result we have a lack of real investment by industry.

      The solutions are simple and obvious:- cheap energy, far less and far better regulation, easier planning, less government waste, lower taxes, no silly subsidies, freer employment laws and a free trade only EU. But we are run by Libdems, Clegg and Cameron so cannot have it and then we have Miliband to not then either.

      I see we have a mainly woman honour’s list in absurd Cameron/BBC think mode, full of some dreadful choices and perhaps just 20% that are richly deserved. Might it not be better to do it on Merit?

  7. The PrangWizard
    Posted January 1, 2014 at 9:00 am | Permalink

    Happy New Year to you and yours. Thank you for your work and for giving us the opportunity to make our views known. Keep on Keepin’ on.

  8. 21stcnow
    Posted January 1, 2014 at 9:14 am | Permalink

    You mean the election has been brought forward? And we can rid the country of the Nasty Party? Whooppee!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  9. A different Simon
    Posted January 1, 2014 at 9:22 am | Permalink

    Can hardly call it a recovery . More of a return to business as usual ; a relapse .

    None of the structural problems have been solved . The system has been frigged yet again to give the bankers free reign because it’s all about ensuring the health of the banks , not the wider economy .

    I’m regretting that I wasted my vote for the Conservatives in 2010 . You’ve been better than Labour in many areas but in essence have only maintained the status quo and treated the symptoms rather than the cure .

    Your whole strategy seems to be based on targeting the dwindling number of those who have just about enough that they want to hang on to it at all costs by maintaining the status quo . It will all come crashing down and consign the Conservatives to a generation in opposition as they are gradually outnumbered by the have-nots .

    I hope the next bust comes soon and is terminal so we have no alternative except to start again from scratch rather than pretend and extend .

    Happy New Year anyway .

  10. Brian Tomkinson
    Posted January 1, 2014 at 9:26 am | Permalink

    I know you must promote the good news story on behalf of the Conservative party. A story I’m sure which will be repeated by your colleagues. However, may I refer you to this extract from the Guardian (and other papers had the same story) on 28 December:
    “Mortgage rise will plunge a million homeowners into ‘perilous debt’
    High prices leave borrowers exposed as it emerges that 13 million people paid for Christmas on credit…….Far from being resolved, Britain’s personal debt problem remains a cause for real concern. While record low interest rates have reduced current repayment costs, fewer people than we hoped have used this breathing space to pay off their debts.”
    There is too much private debt and, of course, too much government debt. It seems to me that the Conservative led coalition is trying to inflate the former even further and, of course, intends to keep increasing the latter as it has done for almost 4 years.
    Happy New Year!

    Reply I do not promote good news on behalf of anyone. I write as I see it. It’s not all dire today, but there remain many issues to resolve or improve, as this site never fails to point out.

    • forthurst
      Posted January 1, 2014 at 4:56 pm | Permalink

      “Reply I do not promote good news on behalf of anyone. I write as I see it.”

      The Conservative party is conserving what is bad, the inheritance of New Labour, whilst failing to conserve what is good. The Conservative party under Cameron has promoted what is ‘geener’, more multicultural, more ‘inclusive’, more neoconservative, more of what New Labour did cynically to promote the interests of foreign powers and foreigners who wish to come here against the express wishes of the English people. The Conservative Party is trying to change human nature whilst failing to address the consequences of changing technology and world trade.

      However, JR should be congratulated for his relentless optimism and unflagging good humour with which he graces his excellent blog. I wish him every good fortune and success in the New Year.

  11. ian wragg
    Posted January 1, 2014 at 9:57 am | Permalink

    Morning John. Happy New Year. Now I’m 68 and still working as the return on my significant savings has been trashed. My power bill has gone up about 40% and the real cost of living makes it harder to retire fully.
    Today as thousands of immigrants arrive from you know where, wages will be driven even lower. Osborne will be telling us in 12 months that there is a record 31 million in work and still he has less tax revenue.
    No need to invest in productivity or training for the global companies, lets just wait ’till the Turks join in the party.
    Allis not well in the camp John. Morale is very low.

    • bigneil
      Posted January 1, 2014 at 4:00 pm | Permalink

      happy new year john and all – -though after reading in the Mail of a Romanian woman with four kids getting £28k a year – for no contribution -and me getting zilch after 45 years contribution – -I hope you now see the why so many are coming here to live on benefits (words left out ed) – I hope you read and understand it john – -you are now witnessing the deliberate and planned downfall of the once great british nation – -I hope all the MPs are happy – -how on earth can IDS justify a system that doles out this sort of cash to people who have done NOTHING. – -an attempt at an explanation will presumably be greeted with some very amusing replies

      I Hope the govt has plenty of taxpayers cash – after all – this woman is getting 28x a year in handouts -for nothing – - – - than I got for a year – -only mine stopped – -hers wont – - -if govt cannot honestly see the outcome nthen theyn should not be in the job – -but nI don’t believe they are that stupid – - that’s why ni say DELIBERATE planned downfall.

  12. Posted January 1, 2014 at 10:29 am | Permalink

    A Happy New Year to everyone, and may it be better than the past year.

    I’ve been trying to think of exactly what the government has achieved during this past year, and regretfully I can think of very little. OK, the economy is said to be improving, but many might put it down to luck rather than any specific government action. Indeed, most actions taken by the government seem to have been of the “fire fighting” type, forced on them by circumstances rather than choice.
    What’s happened to the “Bonfire of Quangos”? They all still seem to exist, and those that don’t were effectively either merged with another or brought back into a government department. Where are the cuts? The deficit is still rising, and cuts aren’t so much cuts as reductions in planned increases. Even so, almost every week, there is an announcement that the government has “found” a few millions to spend on this, that or the other, usually desirable but not essential expenditure.
    More people, especially pensioners like myself, are spending their savings, partly to make ends meet, but also to get something for their money in a time of inflation and minimal interest rates. It seems likely that this could have helped the economy, but will obviously come to an end as savings run out.
    In fact, the only thing the government action that seems to have been taken from choice, rather than necessity, was the introduction of “Gay Marriage”, which is hardly likely to be a vote winner amongst Conservatives.
    And as for the EU, all we get are “if”s, “when”s and promises. “When” we renegotiate, “if” negotiations are successful, we are then “promised” a referendum” in which Cameron will campaign to stay in. I’m sorry, but that is not enough to dissuade me from voting for UKIP, something which I fully accept could land us with a Labour government.

    • Tad Davison
      Posted January 1, 2014 at 4:08 pm | Permalink

      ‘ I’m sorry, but that is not enough to dissuade me from voting for UKIP, something which I fully accept could land us with a Labour government.’

      A lot of traditional Tory voters are in a similar position EP, and rightly feel betrayed. It’s up to Cameron to change his position to win back the large section of the Tory party’s core support that has ebbed away to UKIP, but that’s not likely to happen. He wants us to remain loyal to the party we used to identify with, but we can’t do that because we have belatedly come to see that party has changed out of all recognition thanks to the pro-EU Heathites like Clarke, Major, and Heseltine. That is despite the danger of getting a Labour government by default next time.

      The Tory party leadership knew they had very loyal supporters, and used that to push through some of the most underhanded EU policies we have yet seen, which in my view, was downright duplicitous if not contemptuous of the grass roots. As we steadily woke up to the deception, we switched our allegiance, but that just let in another load of shysters. And we’re not likely to come back to the fold until the pro-EU people have been purged, if we come back at all.

      If we look at the political makeup of the voting public, it seems there is a majority of centre-right minded people, but their loyalties are divided on party lines. To keep Labour out, we need to bring those together preferably under one party, rather than have them effectively voting against each other and cancelling each other out.

      Many have suggested that a deal has to be cut between the Tories and UKIP, and that does seem to have a certain attractiveness about it. Hopefully, UKIP will do well in the coming Euro elections and thereby show the depth of the antithesis towards the EU, and if that happens, they will enhance their credibility. If at the subsequent General Election, UKIP only fielded candidates against pro-EU federalists of whichever party they emanate from, we could get rid of a whole bunch of them, and it would effectively do the long overdue job of purging the Tories of the Heathites once and for all.

      Lots of ‘ifs’ and ‘buts’ in that little lot, but something’s got to be done soon to avoid splitting the predominant centre-right vote. That would be undemocratic, and the possibility of another Labour government where they are once again at liberty to destroy the economy, is just too big a nightmare to contemplate.

      So how can a left-leaning pro-EU person ever change his political stance enough to persuade us that he’s the one to vote for in Britain’s best national interest?

      I’ll leave it hanging there.

      Tad

      • lifelogic
        Posted January 1, 2014 at 10:52 pm | Permalink

        “So how can a left-leaning pro-EU person ever change his political stance enough to persuade us that he’s the one to vote for in Britain’s best national interest?”

        Good question – also one who could not even win the last sitting duck election due to his duff judgement and a compass out be 180 degrees.

  13. Denis Cooper
    Posted January 1, 2014 at 10:54 am | Permalink

    And a Happy New Year to the Latvians, I suppose, who from today no longer have their own national currency under their own national control but instead have become the eighteenth country to adopt the EU’s currency under EU control.

    Even though apparently 60% of them didn’t want that to happen.

    http://euobserver.com/tickers/122600

    Like the Estonians, Latvians were not asked in a referendum whether Latvia should join the euro, because in 2003 they had a referendum on whether to join the EU, and part of that was the treaty commitment to join the euro which Major agreed would be imposed on all new EU member states.

    Another one bites the dust; that “outer ring” of non-euro EU member states that the Tory leaders like to talk about is now diminished by one, while the “inner core” of euro states is increased by one, and it will be increasingly federalised and increasingly lined up against us as a bloc dominated by Germany.

    Just another fruit of the insane, some might even say traitorous, foreign policy of this UK government; and it will not be the last by any means, as the UK and Denmark are the only two EU member states with treaty opt-outs from ever having to join the euro.

    • Tad Davison
      Posted January 1, 2014 at 4:23 pm | Permalink

      ITMA as the old radio programme was called, only to me it stands for It’s That Major Again!

      Tad

    • lifelogic
      Posted January 1, 2014 at 10:54 pm | Permalink

      Indeed

  14. Bert Young
    Posted January 1, 2014 at 11:21 am | Permalink

    I congratulate you on producing a blog today ; your ability to produce something when , I suspect , most of us are bleary eyed and wishing we had been more constrained , is highly commendable . Having said that , I have to say that I felt sickened when reading the news of the Bulgarian and Romanian influx . The activities of those agencies advertising assistance to claim benefits on a commission basis was , I considered deplorable and , probably , illegal ; I sincerely trust this will be pursued and the guilty organisations exposed , shamed and prosecuted . 2014 heralds the usual warning signs of constraint in the economy and the foolishness of debt ; for those of us more senior it points to better returns for our savings and good expectations for our stockmarket investments . I wish you in particular JR and everyone else good health and fortune .

    • forthurst
      Posted January 1, 2014 at 5:14 pm | Permalink

      “The activities of those agencies advertising assistance to claim benefits on a commission basis was , I considered deplorable and , probably , illegal”

      I cannot see what is legally improper with assisting people to claim their legal entitlements, as with lawyers who assist aliens to remain in our country; I think you are blaming the wrong people, Bert.

  15. peter davies
    Posted January 1, 2014 at 11:35 am | Permalink

    Yep sure, some interesting times ahead. Our politics is full of contradictions with regards to many govt policy areas – penny pinch in many areas then stupid pointless things like wind turbines and HS2 – a consequence in part I suppose to having a coalition and kow-towing to the EU.

    The UK is doing well considering the mess on most of mainland Europe which should lead even the dimmest politicians to conclude that the UK needs nothing more than a free trade/no quota relationship with the EU.

    The “opportunist mud slinger” description in a previous comment sums up the opposition well in my view. They have little to offer, their Keynesian theories have been proved wrong notwithstanding the fact that Keynesian economics depend on having put money aside with no deficit in the good times TO FUND A DOWNTURN which Labour did not do.

    We also know that UKIP in themselves are in no way electable – they have an excellent leader but little behind him and yet may well have a role in helping make a government majority were they to win 20-30 seats. I they do to prop up a Tory govt in order to keep them honest with regards to any referendum.

    My fear though is that they will do no more than let Labour in by default then where will we end up?

    Happy New Year and do keep the engaging and informative posts. Your insights have given me a far better perspective of whats going on when I watch the news.

    More people would do well to read blogs like this rather than take in much of the tripe spouted by many news organisations and tabloids.

    • ian wragg
      Posted January 1, 2014 at 3:06 pm | Permalink

      “UKIP are not electable” well the people behind Farage are just as good (or bad ) as the rest of Westminster. People like Roger Helmer for instance does a lot of research and writes some very good stuff. UKIP have at least got policies that are in tune with most of the electorate not like the bunch of treacherous B******ds
      in power and opposition at the moment.

    • uanime5
      Posted January 1, 2014 at 6:10 pm | Permalink

      The UK is doing well considering the mess on most of mainland Europe which should lead even the dimmest politicians to conclude that the UK needs nothing more than a free trade/no quota relationship with the EU.

      No we’re not. Compared to most European countries we’re doing very badly because almost all of them have recovered more of their pre-2008 GDP than the UK.

      They have little to offer, their Keynesian theories have been proved wrong notwithstanding the fact that Keynesian economics depend on having put money aside with no deficit in the good times TO FUND A DOWNTURN which Labour did not do.

      You do realise that Osborne’s plan of pumping money into the housing market is a form of Keynesian stimulus. Given that this resulted in growth it proves that the Keynesians were right, while those who promoted austerity were wrong.

      • Edward2
        Posted January 1, 2014 at 8:05 pm | Permalink

        You do realise the stimulus of the domestic property market has already been stopped do you Uni?

      • peter davies
        Posted January 2, 2014 at 9:50 am | Permalink

        “Compared to most European countries we’re doing very badly” – Last time I looked its only the Northern part of the EU (Germany, Holland, Denmark etc) that is doing ok – France and all the Southern states are struggling.

        So are you saying that the housing market recovery is down to Osborne’s money pumping? I doubt it, otherwise the market would be buoyant throughout the UK which it is not. The housing market is being driven by demand mainly in the South East and success is patchy in other parts of the UK – in other words, it would have happened without the stimulus.

  16. Posted January 1, 2014 at 11:49 am | Permalink

    This is the blog of the year for me and long may it continue!

    Happy New Year to you John and fellow contributors & readers.

  17. M Davis
    Posted January 1, 2014 at 11:56 am | Permalink

    John, “Blwyddyn Newydd Dda”, and thank you for your prodigious output!

    And also, a “Happy New Year” to the regulars.

  18. Posted January 1, 2014 at 12:36 pm | Permalink

    My post today was a take of 1100 words following your item on 30 December on the subject of interest rates. My guess is that we are in for a rough ride in 2014.

  19. Tad Davison
    Posted January 1, 2014 at 12:53 pm | Permalink

    A Very Happy New Year to Everyone! (and yes, I mean everyone!).

    My wish for this year, at least as far as this blog is concerned, is for all of us to get along a bit better, despite our obvious differences, and not to keep savaging each other. I’m probably as guilty as anyone else, but we can at least try.

    I don’t want to put a downer on everything, so I’ll be as brief and as light as I can be. Some analysts are predicting the markets will be very buoyant this year with the index reaching figures of around 7,000, and even 8,000 was mentioned by one. This is all about confidence, so they either know something we don’t, aren’t good at their jobs, or should stay off the bottle for a while.

    I would like to know what underpins their optimism, because if we get a bull market that is inflated by speculation and hot air, we have the potential for a crash and possibly a reversal back to the bad old days of boom and bust. Joseph P. Kennedy Sr. used to say, ‘It’s only a fool who holds out for the top dollar.’ and there’s an implicit warning in that message, so in keeping with John’s chosen topic, I’d very much like to solicit the opinions of everyone which I have come to value greatly.

    Tad Davison

    Cambridge

  20. Bazman
    Posted January 1, 2014 at 1:40 pm | Permalink

    Paying off your mortgage or as much as possible and avoiding paying a landlords mortgage off is a no brainer in 2014.

  21. Posted January 1, 2014 at 1:43 pm | Permalink

    The theme of borrowing and lending is prominent in John’s New year message, I’d hope that everyone would have some time give that theme some thought in the New Year. I’d just make the point that for every debtor there is a creditor , and vice versa, of course. So, the common assumption that everyone is in too much debt these days is somewhat questionable. Logically, it must follow that there must be at least one person who is in too much credit.
    Happy New Year to all.

  22. John B
    Posted January 1, 2014 at 1:48 pm | Permalink

    Happy New Year Mr Redwood.

    Thank you for your comments and insights.

  23. oldtimer
    Posted January 1, 2014 at 1:48 pm | Permalink

    A Happy and Prosperous New Year to you and all your readers – and thank you for your your daily and thoughtful blog posts. They are my first port of call on the www.

    I think it will be a turbulent year politically, for the reasons you gave in yesterday`s post. State debt remains a ball and chain and current state spending exceeds state income, holding everyone back economically. With a general election in the offing there is a lack of will to tackle this as decisively as is necessary because of the pressure to keep taxes high. The political class will continue to kick the can down the road both here as in the EZ. And the UK`s foolish energy policy will be the killer.

  24. Antisthenes
    Posted January 1, 2014 at 3:12 pm | Permalink

    Indeed there is every reason to be optimistic however the spectre of Labour forming the next government has to be the flip side of the coin. The markets especially the bond markets know how incompetent Labour is at running the country and will perceive the risk to be much higher and will act accordingly. Interest rates are inevitably going to rise but with Labour in government they will sky rocket and that will lead to more debt interest which will lead to a substantial fall in living standards falling especially on the poorest. RedEd is no Blair (all smiles and lies and no substance) that can charm the markets into believing all will be well with the economy with Labour in charge. No RedEd is very much Foot(far left) and Brown(incompetent Chancellor and Prime Minister) and we know their beliefs and what their policies will do for the UK. So optimism must be tempered by a certain amount of trepidation so rejoice not yet.

    • uanime5
      Posted January 1, 2014 at 6:13 pm | Permalink

      The markets especially the bond markets know how incompetent Labour is at running the country and will perceive the risk to be much higher and will act accordingly.

      Given that Labour produced 10 years of record growth, while the Conservatives have produced 3 years of stagnation the bond market is more likely to welcome Labour than shun them.

      • Edward2
        Posted January 1, 2014 at 8:07 pm | Permalink

        False growth funded by extreme levels of borrowing.

        • Bazman
          Posted January 2, 2014 at 12:00 pm | Permalink

          Not false growth if you borrowed from a good paying job that depended on borrowing across the world and used the money to buy a house thus securing your position for the future allowing you to tell employers and landlords/banks to ram it. In effect giving yourself a massive and permanent pay rise. Any chance of more of the same as need modernise and replace things in my house that have worn out in the last ten years.

          • Edward2
            Posted January 2, 2014 at 7:27 pm | Permalink

            But Brown didn’t borrow against assets already owned and paid for like you to buy something useful.
            He just borrowed hugely, taxed and spent and now has so little to show for it.
            If he had created more permanent assets I would be less critical of his disastrous premiership.

          • Bazman
            Posted January 2, 2014 at 8:41 pm | Permalink

            He tolled the financial industry to pay for infrastructure, not enough for sure, health education benefits, and what if he a had not? What would the average person have got from this boom? Not a lot as they off shored profits and paid out bonuses in their insider companies as they do now plundering and avoiding tolls where they can.

      • Chris S
        Posted January 1, 2014 at 10:18 pm | Permalink

        Uanime5, more than any of your previous posts here, this really must be a joke !

        Brown created 10 years of growth by overspending and allowing immigration to run out of control which forced down wages and caused the very cost of living crisis that Balls and Miliband are constantly going on about.

        Three years of stagnation was really only caused by Osborne attempting to bring the structural deficit under control while maintaining the confidence of the markets which was absolutely essential to keep the cost of borrowing under control.

        How you can possibly blame the Chancellor for the situation we are in beggars belief. You should be praising him for doing only just enough to maintain confidence rather than take a Canadian-style axe to public spending.

        The reality is that the wimpish LibDems have prevented a slashing of expenditure and as a result the total amount of borrowing is far higher than it need be

        As a result it will take all of the next parliament to reach an annual current account surplus. If the Conservatives are in power I hope they will reduce the size of the state to allow taxes to be slashed to levels at which the British economy can have some chance to compete with the rest of the world.

        We need VAT down to 10%, the reintroduction of taper relief with the current rates of CGT to encourage long term investment, much higher income tax thresholds and a maximum tax rate of 40%.

        Even better, a change to a flat tax of income tax incorporating NI.

        • Chris S
          Posted January 1, 2014 at 10:23 pm | Permalink

          And a single sensible rate of stamp duty for UK residents with a much higher one for overseas property investors.

        • Bazman
          Posted January 6, 2014 at 1:19 pm | Permalink

          Where do you start with this fantasy? You forgot to blame the poor, working poor and disabled in you rant. Had Brown not taxed The City what would have anyone got out this boom? Nothing. The cost of living crisis is due to immigrants lowering wages? So employers must be talking the cash then and Osborne holds no responsibility for the last three years? As if. The expenditure cuts lengthen and made worse the recession any serious economist will say the same. Where should these massive cut be made? Do tell though we can guess.
          The Biggest fantasy if the flat tax which would find the poorest and rich paying the least with the rest subsidising them. Russia is a wild country which ludicus ways of avoiding tax are used, so does work there, you are laughably going to tell us Russia is a good model for our tax system? Ram it.

      • peter davies
        Posted January 2, 2014 at 9:54 am | Permalink

        Labour had the stable economic platform for growth when they came into before their spending and regulatory incompetence led to them handing over a wreckage to the new government and you know it.

  25. Neil craig
    Posted January 1, 2014 at 4:08 pm | Permalink

    “Good” is relative. Even if we ignore the fact that this growth is based on house price rise rather than productivity (even in numbers of houses), the fact is that the world economy will grow at around the normal 4.8% & UK growth will be less than half that. We will end 2014 as a smaller and proportionately poorer part of the world, with politicians boasting of how well we are doing compared only to EU countries.

  26. David Hope
    Posted January 1, 2014 at 4:40 pm | Permalink

    Nothing wrong with debt in itself but recent stats suggest the level of individual debt is an issue still. We must be wary of people piling up too much to buy homes they can’t afford when rates rise and paying day to day bills using either savings or loans. Many problems e.g. shortages of homes and wages below inflation remain problems and need more than just a return of confidence to fix long term.

    Anyhow happy new year and keep up the excellent blog

    • acorn
      Posted January 1, 2014 at 6:23 pm | Permalink

      Have a look at the sector balances that Neil Wilson prepares. http://www.3spoken.co.uk/2013/12/uk-sectoral-balances-and-private-debt.html .

      In the five sector chart, you will see that the government’s Q3 deficit is going into the bank accounts of the non-financial corporations. See how in Q3 2009 (mouse over chart) the household sector gave up borrowing and started saving. Also at peak government budget deficit in Q4 2009, see how much of that money was going into the Financial (banksters and spiv traders) corporations.

      The “rest of the world” is imports with the likes of Samsung piling up loads of Pounds Stirling flogging us those 60 inch plasma TVs. They are probably using that cash to buy more London property in the £10 million plus “buy-to-let” market.

  27. Bob
    Posted January 1, 2014 at 4:58 pm | Permalink


    I wish you all a happy and prosperous new year.

    Indeed Mr Redwood, and perhaps we should spare a special thought for the passengers and crew aboard the MV “Akademik Shokalskiy” trapped by unpredictably thick sea ice in the Antarctic.

    Not forgetting the crews of the two ships that were sent to rescue them, and a third U.S. ship on the way.

    Reply Indeed. “We’re stuck in our own experiment”

    • peter davies
      Posted January 2, 2014 at 9:56 am | Permalink

      right in the middle of their summer as well

  28. uanime5
    Posted January 1, 2014 at 6:14 pm | Permalink

    The long shadow of the Credit Crunch, Labour’s spectacular boom/bust of the last decade, is receding at last.

    I’d say this was more to do with the global financial crisis than Labour. Also it only started to recede because Osborne abandoned his austerity plan and pumped money into the housing market (which may result in rising house prices).

    This has come to an end and is unlikely to be revived, so it is even more important now that the state cuts its deficit and gets its debt to affordable levels.

    Given that the current growth is occurring because the government is stimulating the housing market they’re not going to be able to cut this stimulus any time soon. Thus the deficit and debt will continue to grow.

    • Edward2
      Posted January 1, 2014 at 8:10 pm | Permalink

      You plainly are behind the times Uni, the stimulus of the property market has been stopped.
      Is this the only Keynesian stimulus you can go on and on about?

      • Bazman
        Posted January 2, 2014 at 12:03 pm | Permalink

        Maybe you could explain why house prices continue to rise then?

        • Edward2
          Posted January 2, 2014 at 7:30 pm | Permalink

          Huge increases in population.
          Lack of funds to buy without having to put down huge deposits.
          Planning process that takes years.

          • Bazman
            Posted January 2, 2014 at 8:44 pm | Permalink

            You would think these factors would reduce prices?

    • petermartin2001
      Posted January 2, 2014 at 12:01 am | Permalink

      uanime5,

      Gordon Brown was very foolish to proclaim that he’d “abolished boom and bust”. It is just not possible for a single country, especially a trading nation like the UK, to isolate itself from the world economy.
      There was a recession at the start of the millenium and if you look at at the sectoral graphs supplied by http://www.3spoken.co.uk/ you can see why. The UK government went strongly into surplus in the year 2000. In the USA the same thing happened under the last years of the Clinton government. The snag with government surpluses is that they also mean, arithmetically, that the private sector have go into deficit unless the trade balance is very strong , as in the case of Germany. The private sector deficit reached 6.21% in 2000 . See the orange curve on the graph.
      If you google (images) you can easily find the same thing for the US too.
      That recession was ‘fixed’ by drastically lowering interest rates, but that created a credit boom, especially in housing, on both sides of the Atlantic. The UK government looks to have handled things better than the Americans, in 2007 -2008, because the private sector wasn’t in deficit then but it was in America.
      This was unsustainable and triggered off the GFC on a worldwide scale. There is a good case for saying that the GFC actually started around the year 2000.
      This has all happened, so its no good playing the blame game – but yes that was partly the fault of the Labour government at the time.
      The important thing is to learn from past mistakes and not repeat them.

  29. Iain Gill
    Posted January 1, 2014 at 9:05 pm | Permalink

    I am afraid the political and journalistic class of the UK is just getting worse. It is pretty much pointless people like me engaging with the political process. I am ashamed to be British. I dont think there is any chance that I will see anything remotely like anything I would be able to support. Good wishes John but I think its a waste of time.

  30. Jennifer A
    Posted January 1, 2014 at 11:48 pm | Permalink

    We speak as though things are normal.

    Things are no longer ‘normal’ in this country and never will be in quite the same way again. We can discuss this and that but none of it makes any real sense as we have absolutely no control and no idea of what is going to happen next.

    Never mind. It will have to wait until tomorrow and – though it doesn’t feel like it – Happy New Year and thanks for the blog.

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  • About John Redwood

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