I oppose austerity


We have had too much austerity in this country – in the private sector in the period 2007-9. I opposed it at the time. I now support policies to give us private sector prosperity again. That’s more prosperity for every individual and family. I want to see more jobs, more better paid jobs, lower taxes and better living standards  for the many.

The absurd political debate between the parties of the left argues about austerity in the public sector. Look at the figures. Total managed public spending was just£629 billion in 2008-9, and was £732 billion in 2014-15. The severe cuts, the reductions in income and spending power, took place in the private sector, mainly between 2007 and 2010, thanks to Labour’s great recession. Real incomes fell, many people were thrown out of work and lost all their earned income, there were pay cuts, the end of bonuses and reduced overtime.

Why did this happen? Because a Labour government helped by the FSA, the banking regulator it set up, and by the Bank of England, put interest rates up too high, starved the banking system of cash, and forced the banks to lend less and slim their balance sheets. They did  this because in the preivous period they had allowed the banks to expand too much, lend too much, and had not required them to hold sufficient cash and capital. Their asterity policy was too extreme and too fast acting, so it brought several banks down, and with it private sector credit, jobs and incomes.

I urged them not to overexpand bank balance sheets and not to allow mega mergers on the way up, and urged them to be less severe and allow longer for adjustment on the way down. When the coaltion came into power they caried on for a bit with the extreme bank slimming policies for RBS andLloyds/HBos they inherited from Labour, which  kept the economy from growing. The economy started to perform much better when the government changed its approach to RBS after a couple of years, and started to build a decent UK bank that could help finance a good recovery.

The UK had too much austerity inflicted on it by Labiour at the end of the last decade. For the last couple of years we have seen growth resume, with many more people in jobs and with some growth in pay, overtime and bonuses. That is what we need. Tax cuts for the many will also help drive a rise in living standards and more jobs and activity.

Can the debate please concentrate on where we have suffered from austerity, and what are the best policies to banish austerity from the homes of the UK?Higher taxes and more public sector borrowing will not promote greater individual wealth and income.

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  1. Gary
    Posted April 5, 2015 at 5:26 am | Permalink

    translation: prosperity can be bought with a printing press. There are no consequences for too much debt that even more debt cannot solve. There is a free lunch , you just need to print it. This is a policy to enrich financiers and starve everyone else.

    Economist David Stockman sums up this mindset:

    ” The bottom line is therefore straight
    forward. The credit channel of monetary
    policy transmission is now broken and done.
    The impact of ZIRP and QE never leaves the
    canyons of Wall Street/(London) – meaning that it
    functions to inflate financial assets rather
    than main street wage and prices as it did
    during the era of inflation in one country.
    But that makes for both a considerable
    irony and an incendiary danger. Today’s
    clueless Keynesian central bankers
    essentially believe that they can keep the
    pedal-to-the-metal until a 1970’s style
    inflationary spiral arises. But none is coming
    because the worldwide central bank money
    printing spree of the last two decades has
    generated massive excessive capacity and
    malinvestment all around the planet. What is
    coming, therefore, is not their father’s
    inflationary spiral, but an unprecedented and
    epochal global deflation.”

    • Edward2
      Posted April 5, 2015 at 7:20 am | Permalink

      Your economist’s quote has one major error.
      Instead of saying:-“todays clueless Keynesian central bankers…….etc”
      It should say todays clueless Keýnesian politicians.

    • libertarian
      Posted April 5, 2015 at 9:50 am | Permalink


      Trouble is you sound like a tin foil hat wearer

      Try telling us what you would do, there’s a good lad.

      • gary
        Posted April 5, 2015 at 7:53 pm | Permalink


        a non-sequiter. You added nothing except an insult. As usual.

        but since you asked, I would restructure.

        when so much credit (claims on future production) is issued that it is physically impossible to produce to meet the credit obligations then you must restructure the credit/debt. There is no magic way out. Of course you may know otherwise

    • Denis Cooper
      Posted April 5, 2015 at 10:04 am | Permalink

      Gary, I’m not going to make any comment on what has happened with QE in the US because I’ve paid far less attention to that than to what has happened with QE in this country. I repeat that there is widespread misunderstanding about where the £375 billion of new money created by the Bank of England has gone and who has benefited from it, the inevitable and deplorable consequence of deliberate, and anti-democratic, obfuscation by two successive governments reinforced by poor and misleading commentary in the mass media.

      If you look at the summary of the results of the Bank of England’s Asset Purchase Facility, here:


      you will see that the Bank of England now owns gilts valued at £375 billion, and every one of those gilts says that the Treasury owes the Bank money.

      (To be precise, the Treasury owes the money to a wholly owned subsidiary of the Bank, which in turn owes it to the Bank itself, but that is by the by.)

      So as we can see that the Treasury now owes the Bank around £375 billion which it did not owe before the initiation of the QE programme(s), in other words the Treasury has indirectly borrowed £375 billion from the Bank through QE, the question arises “What has the Treasury done with that £375 billion?”, and the answer is “The Treasury has used it to help pay the government’s bills”.

      If I was to list the beneficiaries of QE I would put them in this order:

      1. The Labour party, which won 258 seats at the last general election when it would have won far fewer than that if Darling had not arranged for the Treasury to indirectly borrow £198 billion from the Bank and he had been forced to make drastic cuts in public spending in the year leading up to the election.

      2. All those who expected payments from the government, whether they were public sector employees or private sector contractors to the public sector or state pensioners and recipients of social security benefits, who got all their promised payments in full and on time because the Treasury had a captive gilts investor, the Bank of England, to indirectly lend it the necessary money and therefore did not have to ask increasingly reluctant normal gilts investors to increase the total volume of their lending to the Treasury first by that £198 billion under Labour and then by another £200 billion under the coalition.

      3. Those possessing assets which appreciated in market value thanks to the depression of interest rates by QE.

      4. The Tory and LibDem parties, because under the coalition government the Treasury borrowed another £175 billion from the Bank to make it easier for the government to fund its budget deficit and keep low interest rates at a time when the economic recovery was still uncertain and seemed to be faltering; whether this was strictly necessary or not, Osborne did it and no doubt that has helped those parties to have a better economic story to tell at this election.

      • Denis Cooper
        Posted April 5, 2015 at 10:07 am | Permalink

        That should be, “and then by another £175 billion under the coalition.”

      • Narrow Shoulders
        Posted April 5, 2015 at 6:46 pm | Permalink

        Dennis, that 375 billion is part of the 1500 billion overall debt isn’t it? It is not the best part of half a trillion on top?

        • Denis Cooper
          Posted April 6, 2015 at 7:48 am | Permalink

          Yes, the gilts owned by the Bank form part of the National Debt. They would do if they were still in the hands of normal investors, and they still do now they are in the hands of the Bank, which is a kind of captive investor.

      • Gary
        Posted April 6, 2015 at 4:40 am | Permalink


        So, you are saying that it is a pact between the govt/politicians and the bankers to mutually enrich their respective entities, ultimately paid for by the public ?

        • Denis Cooper
          Posted April 6, 2015 at 7:53 am | Permalink

          I’m mainly saying that the £198 billion that Darling got the Bank to create and indirectly lend to the Treasury probably prevented a Greek-style collapse of the economy, with real “austerity”, but because few people understood what was being done and why it was even more beneficial to the Labour party, while the second tranche of £200 billion has helped the economy to grow but has also been beneficial to the Tory and LibDem parties.

      • Jerry
        Posted April 6, 2015 at 5:12 pm | Permalink

        Denis Cooper; “you will see that the Bank of England now owns gilts valued at £375 billion, and every one of those gilts says that the Treasury owes the Bank money. (To be precise, the Treasury owes the money to a wholly owned subsidiary of the Bank, which in turn owes it to the Bank itself, but that is by the by.)”

        Talk about double speak, and far from “by the by”, someone is forgetting who actually owns the Bank…

        “the Treasury has indirectly borrowed £375 billion from the Bank through QE, the question arises “What has the Treasury done with that £375 billion?”, and the answer is “The Treasury has used it to help pay the government’s bills”.

        QE is a form of national currency devaluation by any other name, to enable -primarily- the Treasury to pay the government’s accumulated debts as cheaply as possible by way of monetising the debt, so just why you seem surprised by this Denis…. As for who benefited, I would say that the British people and British economy benefited, fiscal smoke and mirrors it might be but the alternatives would have been far worse.

        • Denis Cooper
          Posted April 7, 2015 at 3:27 pm | Permalink

          It is “by the by”, a technicality of no material importance.

          The Bank set up a wholly owned subsidiary, the Bank of England Asset Purchase Facility Fund Limited or BEAPFF:


          which conducted the actual gilts purchases using newly created money lent to it by the Bank itself.

          The BEAPFF owes that money to the Bank, which it is expected to repay using the money owed to it by the Treasury with respect to the gilts that it owns.

          In shorthand, therefore, “every one of those gilts says that the Treasury owes the Bank money”; and yes, I do know and have not forgotten who owns the Bank.

          “QE is a form of national currency devaluation by any other name”

          No, it isn’t.

          • Jerry
            Posted April 7, 2015 at 5:18 pm | Permalink

            @Denis Cooper; “and yes, I do know and have not forgotten who owns the Bank.”

            More double speak then, once again the world apart from Mr Denis Cooper has it all wrong, what ever…

          • Denis Cooper
            Posted April 8, 2015 at 8:35 am | Permalink

            Jerry, having wasted a lot of time in the past arguing with foolish people who had convinced themselves that the Bank of England is still a privately owned bank, in some secret and mysterious way, I’m not inclined to now waste more time on futile arguments with you about it.

          • Jerry
            Posted April 9, 2015 at 6:26 pm | Permalink

            Denis Cooper, “having wasted a lot of time in the past arguing with foolish people who had convinced themselves that the Bank of England is still a privately owned bank,”

            But that is the exact opposite to what I was suggesting, try actually reading and more importantly understand what others are saying.

            As owner of the BoE the Treasury (acting for the State) ultimately owes its self that £375 billion you suggest that the BoE has lent the Treasury, hence why I suggested that you were engaging in double speak.

            Oh and QE is a form of devaluation, unless far more prominent economists than you Denis have it all so wrong…

    • Tad Davison
      Posted April 5, 2015 at 10:16 am | Permalink


      Steve Keen says something very similar, and is well worth listening to.


      • petermartin2001
        Posted April 5, 2015 at 4:37 pm | Permalink


        I doubt Steve Keen would use the phrase “today’s clueless Keynesian central bankers” but I’d agree he is well worth listening to.

        His blog is titled debt deflation. But, the debt that’s causing the deflation, according to Steve, is not the public sector debt which we all hear so much about. It’s the much larger private sector debts that we hear very little about.

    • forthurst
      Posted April 5, 2015 at 2:36 pm | Permalink

      According to the DT, the Nationwide will be offering buy-to-letters, benefitting from Osbo’s pension freedom, mortgages, provided they are paid off by their 105th birthdays. This seems very reasonable and should help give a boost to the economy.

      • Mondeo Man
        Posted April 5, 2015 at 6:00 pm | Permalink

        Forthurst – Yet more competitors for our kids to battle against in their quest for affordable housing.

        Cash-cows for taxation and paying down greedy old gits’ mortgages is all they will be.

        • forthurst
          Posted April 5, 2015 at 10:49 pm | Permalink

          Mondeo – purely tongue in cheek, I assure you.

    • acorn
      Posted April 5, 2015 at 3:59 pm | Permalink

      Gary, every “supply side” economist and politician has been debunked in the last ten years. Stockman resigned from his role at the OMB less than 5 years into Reagan’s presidency. (The US economy went into recession and the budget deficit rose.)

      In that time, the gross federal debt level had nearly doubled. Unemployment had risen sharply, growth was slow in returning and all the predictions of the “supply-siders” were exposed for what they were, misplaced faith statements.

      The Conservative Party is stuffed full of “supply-siders” and you have witnessed over the last five years, just how much damage they can do to an economy.

      In the Atlantic Monthly interview, Stockman admitted that his plan to dramatically cut the federal budget: … boils down to a political question, not of budget policy or economic policy, but whether we can change the habits of the political system. He also exposed the agenda of the Reagan tax cuts as being a “Trojan horse to bring down the top rate”. Trickle-down was a lie.

      • Ted Monbiot
        Posted April 5, 2015 at 7:03 pm | Permalink

        …damage they can do to an economy….
        Like the highest growth rates of any developed economy in the world, record numbers in work, unemployment falling, reducing the deficit, continued record low interest rates etc.
        Yes this austerity ie increased State spending is terrible.

      • libertarian
        Posted April 5, 2015 at 9:25 pm | Permalink


        Stop, you’re making me laugh at you.

  2. Margaret Brandreth-J
    Posted April 5, 2015 at 5:57 am | Permalink

    We certainly need to see an end to wage freezes and loss of jobs in the private sector. We need to see better management of resources in the public sector. If organisations are having problems the past has taught us that if the directors call on expensive management companies they do so in the hope that it will help their position in life and not improve the lot of that organisation.
    The private sector would do better if it employed persons who understood that a management role is to give a good end product and in that journey facilitate good and pleasant working relations to empower the employee to do their best. We spend a third of our lives working and we don’t need someone faking problems and mistakes to get them what they want. It loses money in legal costs and makes the employees nervous and uncomfortable. Out with despots and control freaks and in with those who understand a happy worker makes a better product .
    At present we have empathetic austerity with the Brits .On Easter Sunday perhaps looking forward to kindness not only in the working place , but everywhere would not go amiss.. Let us not judge our standards by the tyrants out there , but by the way we know it should be.

  3. Lifelogic
    Posted April 5, 2015 at 6:26 am | Permalink

    True, but even now the banks are being hugely restricted in lending by absurd slotting rules, mortgage rules and similar. Banks should be looking at the real risks of lending and lending where these are acceptable instead they are working around misguided capital rules.

    RBS/Natwest even when owned by the government (and under the Coalition) behaved appallingly. They starved good customers of funds to finish ongoing projects, called in loans and hugely damaged perfectly sound businesses. Not only that, they even prevent people borrowing elsewhere by refusing to allow second charges or finding tiny breaches of terms then forcing full repayment of existing loans. Often making them abandon expansion plans and destroying confidence. This bank alone were probably the main reason for the slow recovery.

    What is needed is a huge slimming down of the state sector, they are 50% over remunerated (with pensions included) and there are 50% to many of them. they deliver very little indeed by way of useful value. Indeed much of the state sector’s activity inconveniences or misdirects the private sector. Reducing the efficiency of that sector hugely too. For example in the nonsense energy grants, the absurd employment laws, the over complex tax systems, attacks on landlords and very many other areas.

    Much of the state system prevent fair competition too by providing free healthcare, free schools, subsidised housing and the likes you kill far more efficient systems from competing.

    There is little wrong with the UK that could not be vastly improved by halving the size of the state sector, abandoning the greencrap religion, deregulating almost everything, having sensible point based worldwide immigration and lowering taxes. Release the vast number in the state sector that do nothing of any use to get a real job also release the similar number in the private sector who have pointless jobs complying with absurd regulations or doing stupid things like putting PV panel on cloudy roofs or installing uneconomic wind turbines.

    More engineers, scientists, business people, builders & medical men and fewer bureaucrats, HR experts and lawyer types.

    • Lifelogic
      Posted April 5, 2015 at 6:35 am | Permalink

      A reduction in the state sector but more than balanced by a huge release of the private sector. Cameron has done almost non of this. He has attacked private pensions, made 299+ tax increases, failed to cut the state sector and introduced yet more idiotic regulations all over the place such as his gender neutral annuities and pensions. He has not even kept his IHT promise of 6 years ago indeed in real terms he have increased it.

      He defends the appalling (and hugely deteriorating) NHS, he pisses money down the drain on damaging wars, HS2, the EU, soft loan to the IMF and PIGS, the insane greencrap expensive energy grants and endless other complete and utter lunacies.

      Valuable engineers and resources are deflected to do expensive but very stupid thing due to idiotic government religions and agendas.

    • Tad Davison
      Posted April 5, 2015 at 10:44 am | Permalink


      ‘What is needed is a huge slimming down of the state sector, they are 50% over remunerated (with pensions included) and there are 50% to many of them. they deliver very little indeed by way of useful value.’

      Amen to that!

      Despite what Labour might say about their present policies, the number of Labour politicians who still think that the way forward is to increase the size of the state is absolutely staggering! They would take us back to a system that failed to deliver and took us to the very edge of bankruptcy on numerous occasions.

      Employing people who receive a disproportionate amount of money for being the head of something, consumes wealth and tax-payer’s cash, it doesn’t generate it.

      Yet I still believe there’s something physically wrong with an information conduit that fails to get this message across to the wider public. Private sector competition is healthy. Public sector monopolies such as typified by the former British Leyland, are unhealthy.


      • Mike Stallard
        Posted April 5, 2015 at 3:25 pm | Permalink

        I am not sure you understand the underlying meaning of the word “Austerity!
        To a lot of people, the government provides money for really good causes – in our town £1,000,000 for art projects in the community. This, of course, demands a couple of artistic women to look after the way the money is spent. They are therefore employed and paid by the government.
        If some people come along and either do not renew the million quid, then the two women get the sack. They feel angry. They talk about austerity.
        The amount of art produced is neither here nor there.

    • outsider
      Posted April 5, 2015 at 12:37 pm | Permalink

      Yes Lifelogic, state-dominated RBS may have cut back loans to UK business but was able to make large loans to Kraft to help its 2010 takeover of Cadbury, apparently with the blessing of both the Labour and Conservative parties. Obviously a higher priority.

  4. Lifelogic
    Posted April 5, 2015 at 6:51 am | Permalink

    Osborne in the Telegraph is wittering on about getting more home ownership and helping people buy their first home with his silly tinkering schemes. This is the man who has given us 12% stamp duty on purchases. Thus preventing many people from moving or down sizing while continuing Gordon Browns mugging of private pensions and retaining absurdly high income tax, NI and VAT levels.

    If you want more and cheaper houses George then relax planning and all the green crap OTT building regulations, reduce over priced utility connections and go for cheap energy. That is the way to make houses cheaper get the state out of the way. Or just have lower levels of immigration, it is really quite simple George it is just supply and demand. How can anyone get a 2:1 from Oxford in Modern History without understanding supply and demand?

    • Lifelogic
      Posted April 5, 2015 at 6:52 am | Permalink

      Any new on your IHT promise of six years ago George?

    • Mondeo Man
      Posted April 5, 2015 at 5:15 pm | Permalink

      Lifelogic – If you want cheaper housing then break the cycle which makes buy-to-let investment the biggest thing in town.

      No matter how many houses are built my kids are going to have to compete with enough people already without having to contend with greedy people taking more than their share of property, ramping up the prices and then getting their strapped tenants to pay off their mortgages for them.

      Clearly it’s what the government likes as it does everything it can to keep the bubble going.

      Deflation is worth a mention here. Except oil (which is low for other reasons) why we have deflation in the UK is that people are spending too much on housing and are having to cut back where they can. Pound shops and Lidls are the stack ’em high and sell ’em cheap outlets which have enabled people to reject expensive goods. Otherwise key essentials are being kept out of the inflation figures.

      • Narrow Shoulders
        Posted April 5, 2015 at 7:12 pm | Permalink

        Poundland can be the most expensive shop on the high street by weight or volume. Just as Lidl can be. Your shop is cheaper but you can get less for each pound spent on than with the major retailers. It all comes down to sensible shopping and buyingthe amount you need.

        Deflation has arisen through canny shoppers, Poundland and Lidl just provided the competition that allows us to be more canny.

  5. alan jutson
    Posted April 5, 2015 at 7:11 am | Permalink

    “I oppose Austerity”

    Indeed any sensible person would if it were possible, but, and here we have a very large but.

    If you have got yourself into a big financial mess, where your spending is a lot more than your income, then you have to either balance the books by reducing spending or increasing income.
    This balancing can be done over a chosen period, but the penalty is higher interest charges, if a longer term is chosen as opposed to the shorter term.

    Governments are rather more fortunate than those with personal debt, because they can immediately increase income by increasing tax, they can also choose the length of period for balancing the books, because in most cases they do not have to worry about the bailiff calling or being made homeless.
    Hence the reason very often the can is kicked down the road, for hopefully someone else to resolve in the future.

    Eventually of course someone has to grasp the nettle otherwise you end up like Greece and are no longer in control, because you creditors turn off the supply of money, and then you have to react with massive and disruptive change.

    So the choice is short term pain for a quicker gain.

    Or rather less pain but for very much longer.

    The Coalition decided to go for the longer term option with rather less immediate pain, having talked through and promised the shorter term version.

    The result, the spend and borrow Parties who got us into trouble in the first place, are now finding fault with that decision because the turnaround has not been as quick as with the more pain shorter term option, but they still complain about the uncomfortable treatment.

    Afraid living within your means is not real austerity in World terms, indeed we are a million miles away from real austerity in this Country where we have the safety net of a Welfare system.

    • alan jutson
      Posted April 5, 2015 at 7:39 am | Permalink

      A friend of ours is a very long term Senior Welfare Advisor.

      For years they have visited many claimants who have got themselves into financial trouble (usually rent or utility arrears)

      The first step is to make a detailed assessment of their income, to make sure they are claiming all that they are entitled to under Benefit rules.

      The second step is to get them to complete a budgeting sheet to make them fully aware of their actual income and expenditure habits (few have ever bothered to do this before)

      Expenditure is then broken down for them into essential, and non essential, and this is where most of the problems seem to exist, as many claimants regard all expenditure as essential as some sort of right, (including drink, fags, gambling, drugs, etc)
      The third action if they actually have debt, (and many do) is to try and work on their behalf is to try and advise on sensible debt consolidation, or set aside after talking to the creditors.

      The whole irony of all of this, is that many of those that this Welfare Officer visits, are getting many thousands more in Benefits per year, than they are getting in gross pay salary.

      The reason they get into trouble is that they simply do not, will not, or cannot manage money, through choice or ignorance, so their solution is simply to moan like hell, and request more and more whilst pleading poverty.

      The Welfare professional attempts to advise such people on their spending choices, but is usually contacted 6 months down the line for a repeat exercise because they are behind with the rent or utilities (yet again) because they have ignored all of the advice given and have carried on as before.


      Sorry, but for some it really depends upon the priorities and the choices they make.

      • Kenneth R Moore
        Posted April 5, 2015 at 7:09 pm | Permalink

        A refreshing does of reality when all we hear about is that demand for ‘food banks’ is growing day by day to feed the poor ground under foot by the heartless tories blah blah etc. etc. Food banks are the yardstick used to measure something the left call ‘poverty’.

        The truth is that demand for food banks was growing under Labour ..not really surprising that if something for free is provided then demand will always outstrip supply.

        • Narrow Shoulders
          Posted April 6, 2015 at 8:31 pm | Permalink


          Build it and they will come.

          Pay for food and go without beer. Sky and fags or nip down to the foodbank. Difficult choice for those who have already decided that having someone else pay for your life is OK.

    • Qubus
      Posted April 5, 2015 at 6:42 pm | Permalink


  6. petermartin2001
    Posted April 5, 2015 at 8:28 am | Permalink


    You’ve got an election to win and I know you have to use phrases like “Labour’s great recession”. Yes, UK ‘s Labour made mistakes but the G in GFC stands for global. They weren’t the only ones. So did America’s Republicans. So did Ireland’s Fianna Fail, So did Iceland’s…. etc etc

    If you think the British Labour Party were its architects you, or one of your political researchers might like to correct the public record. There’s no mention at all of them on Wiki.

    But you’re right in saying “Tax cuts for the many will also help drive a rise in living standards and more jobs and activity.”

    That’s why the Labour Party were right to reduce VAT to 15% in the aftermath of the GFC and the Conservatives were totally wrong to later raise VAT to 20%. It’s never the right policy to raise taxes in the middle of a recession.

    That’s the argument of the economic ‘austerians’. They have somehow convinced themselves that the solution to the problems of lack of growth, recession and the resultant levels of high unemployment is to raise taxes and cut spending. The deficit then shrinks (according to this theory), investors become more confident that Government is getting its financial house in order and start to invest. Production then rises. Unemployment falls. Everyone sees the benefits of the new financial order. Government says it was sorry that so many people had to lose their jobs but it was necessary to fix the problem of economic malaise. That’s austerity economics.

    Except it doesn’t work. Fortunately the Coalition learned that lesson in 2012 before it was too late.

    Reply It was Labour’s bad regulation of the banks that caused the UK crash.

    • Jerry
      Posted April 5, 2015 at 11:09 pm | Permalink

      @JR reply; Perhaps but we all know which government started the deregulation ball rolling. it could be argued that whilst the Blair/Brown government were the custodians at the time the snowball got to big (and quite possibly could not have been stopped, by any party, without doing much the same economic damage as happened anyway) it was the Thatcher government who set the snowball rolling down the hill during the the 1980s.

      Reply. Quite wrong. Under Mrs T bank regulation of cash and capital was much tighter and the banks were in good order when Labour took over.

      • Jerry
        Posted April 6, 2015 at 10:32 am | Permalink

        @JR reply; Sorry, deregulation of the banking and investment markets etc. didn’t start under the Thatcher government, such services were still as stayed and risk-adverse in early 1997 as they were in early 1979?! I doubt anyone, and certainly not me, is suggesting that the mistakes made by and during the Blair/Brown years were the fault of the Conservatives per se, but without the wholesale changes -championed by the likes of the Thatcher and Reagan administrations- made to what have become known as the financial service industries it is very unlikely that those mistakes made post 1997 would have been considered an option, necessary, or even possible.

      • Narrow Shoulders
        Posted April 6, 2015 at 8:33 pm | Permalink

        A government running a substantial deficit in the goods times has few levers to pull when the good times turn bad whether banks were out of control or not.

        Had we been running a surplus in 2006/7 2007/8 we would not be where we are now.

      • petermartin2001
        Posted April 6, 2015 at 8:44 pm | Permalink

        @JR @Jerry,

        JR is right to say UK banks weren’t as well regulated as they should have been. If they’d been better regulated, like the Australian banks were well regulated, they wouldn’t have failed. But at the time the consensus, worldwide, was that the financial system didn’t need regulating. The idea was that the market was self-correcting and that financial crashes were a thing of the past. There was an feeling of “what can possibly go wrong”?

        But, there would have still been a crisis even had the UK not been a part of the world problem. JR has mentioned Australia. Australia wasn’t totally immune to the recession. The Australian Labor government were handing out $1000 cheques to all taxpayers in 2008/2009 which didn’t please the political right in Australia. They increased their deficit spending sharply, by spending on various schemes like school improvements to offset the effects of that recession. The Aussie dollar fell 40% in value.

        But, arguably, what really saved Australia was Chinese spending on coal and iron ore imports. Canada too benefitted in the same way.

        Reply UK banks were heavily regulated in the wrong way, with lots of new regulations from the Labour government and the EU. They just missed the main point, the high level of gearing.

  7. Aatif Ahmad
    Posted April 5, 2015 at 8:37 am | Permalink

    What a specious argument. Labour did not cause the recession. It was a global recession and are you seriously suggesting that we could have avoided the peak to trough 5% decline in GDP when every major industrial country underwent a similar recession? There are very good arguments against public spending but the one you are deploying weakens the case against public spending.

    Reply Yes we could have avoided the crash. CF Australia, Canada, China, India etc

    • Lifelogic
      Posted April 5, 2015 at 6:01 pm | Permalink

      Quite right is was perfectly avoidable had the banks not been allowed to be so over extended and geared.

    • Narrow Shoulders
      Posted April 6, 2015 at 8:33 pm | Permalink

      A government running a substantial deficit in the goods times has few levers to pull when the good times turn bad whether banks were out of control or not.

      Had we been running a surplus in 2006/7 2007/8 we would not be where we are now.

  8. Kenneth
    Posted April 5, 2015 at 9:00 am | Permalink

    You are right John to point to the real squeeze on the British people way back in the Labour years. However, at the time the BBC was not pushing the austerity line that it is now doing. That describes the problem perfectly.

    You ask for the terms of the debate to be changed. You have no power to do this. You do not have the cameras, studios, transmitters, web site and access to a massive propaganda budget.

    No. We have handed them over to the socialists.

  9. DaveM
    Posted April 5, 2015 at 9:06 am | Permalink

    “Can the debate please concentrate on where we have suffered from austerity”


  10. Brian Tomkinson
    Posted April 5, 2015 at 9:23 am | Permalink

    Didn’t you realise that to the ‘money tree’ believers, who we are told did so well in last week’s debate, austerity has just one meaning – less government spending. Part of the problem is that your own party has talked endlessly about ‘making tough decisions’ and given the impression that they have severely reduced their overall spending, when in fact, as you warned us back in 2010, the burden of deficit reduction was to fall entirely on increased taxation assisted by growth. If you did a survey and asked “is this government spending the same, more or less than the Labour government” very few would give you the correct answer. Of course in some areas budgets have been cut in order, for example, to give increased amounts of money in foreign aid – expenditure which is now, disgracefully, the only one enshrined in law and being increased by a further £1bn due to EU dictat.
    For 5 years it has been obvious to me that this debacle would ensue. Osborne has propagated a myth which was in Labour’s interest to feed. The chickens are now coming home to roost as you attempt to convince people that what your leaders have been telling them for so long wasn’t what was taking place.

    • backofanenvelope
      Posted April 5, 2015 at 4:15 pm | Permalink

      And every time the personal tax allowance is increased, more “money tree believers” are confirmed in their belief that the government does have a money tree in some secret inner courtyard of the Treasury.

    • petermartin2001
      Posted April 5, 2015 at 4:51 pm | Permalink

      This phrase “magic money tree” is curious. We do know that money doesn’t grow on trees, but , even if it did it would be more expensive for the government to employ someone to pick it from the money orchards than create it digitally in the usual way they currently do. Even the much maligned ‘printing press’ isn’t really needed any more.

      The reality is that all governments have “magic money trees”, if you like, of unlimited capacity to produce. But, whereas money isn’t the same thing as wealth, money creation is necessary to induce wealth creation. Not too much though, otherwise we create inflation rather than additional wealth.

      • acorn
        Posted April 6, 2015 at 4:22 pm | Permalink

        Peter, a lot of commenters on this site, are going to be so pissed, when they find out just how near to the “money tree” truth, they actually are. Ok, the current money tree is made of metal and plastic; has a lot of semi-conductors in it and lives in the Treasury. Last I knew, it had 1,235 branches, with a Fujitsu supplied keyboard at the end of each. Those keyboards have an unlimited capacity to create, out of thin air, and send, Pounds Sterling to millions of recipients at slightly less than the speed of light. And; each Pound Sterling costs the Treasury nothing bar the operating cost of the keyboard.

  11. petermartin2001
    Posted April 5, 2015 at 10:15 am | Permalink

    Higher taxes and more public sector borrowing will not promote greater individual wealth and income.

    No disagreement about higher taxes. But “more public borrowing” ? What does this mean? The government doesn’t have to borrow anything. It only borrows in the sense that a bank borrows when it accepts a deposit from a saver. The Govt sells gilts to satisfy a demand of savers to buy them. It doesn’t need to sell them. If it didn’t the pound would fall, our trade would balance, and our budget deficit would disappear too.

    If the government gives us a £10 tax rebate the governments deficit rises by exactly £10 and our deficit falls by the same amount. Or , if we are in personal surplus, our asset rises by the same £10. That’s true, to the penny, for whatever amount of money involved. It’s really down to the Govt whether it chooses to ‘borrow’ that £10.

    • Denis Cooper
      Posted April 5, 2015 at 4:48 pm | Permalink

      “The Govt sells gilts to satisfy a demand of savers to buy them.”

      That’s very obliging. But I’m not sure I want the government to deliberately run a massive budget deficit just so it has an excuse for selling gilts to savers.

      • petermartin2001
        Posted April 6, 2015 at 5:56 am | Permalink


        You’ve still not quite grasped how it works. If the government didn’t sell gilts, most of which are bought overseas, then the pound would fall. Right?

        Foreigners holding pounds wouldn’t get any interest, so the only thing they could do with them was buy stuff from us. They could I suppose hang on to them as ££ but they’d be much less likely to do that. Trade would have to move much closer to balance as they’d probably just spend them instead.

        Domestic savers wouldn’t get any interest either. So they either wouldn’t save or they ship their money overseas to get some interest. Again that would cause the £ to fall.

        So if no-one was saving, either domestically, or overseas then the Government budget would have to balance. Its has to because of the accounting relationships.

        Another way of looking at it is to say that all government spending has to come back as taxes unless that money is saved. It has to. Where else can it go?

        So if no-one is saving then the budget HAS TO balance!

        • Denis Cooper
          Posted April 6, 2015 at 7:56 am | Permalink

          I think I know how it works, Peter, it’s your picture of how it works which is up the creek.

        • petermartin2001
          Posted April 7, 2015 at 1:10 pm | Permalink


          If you think my picture is “up the creek” please elaborate. Provide some sample figures showing how it might be possible for Govt NOT to run a balanced budget when no-one was saving.

          • Denis Cooper
            Posted April 7, 2015 at 3:30 pm | Permalink

            Well, let’s start with your idea that the Treasury destroys all the money that it gets in as revenues. Crazy, or what?

          • petermartin2001
            Posted April 7, 2015 at 8:04 pm | Permalink

            Why crazy? The £ is an IOU of government, or the State if you prefer. So, what happens if you get back an IOU you’ve written? You tear it up right?

            So, not the Treasury, per se, but Government/the State as whole. You have to consider how money originates in the first instance.Logically it must follow that Government/the State first creates the currency by spending it in to the economy and taxes follow later to control inflation.

          • Edward2
            Posted April 8, 2015 at 8:06 am | Permalink

            By that logic Peter, if the government didn’t borrow there would be no need for any taxes….to “follow later to control inflation”

          • Denis Cooper
            Posted April 8, 2015 at 8:56 am | Permalink

            Peter, it is the Bank of England which issues the IOUs we use as currency, while the Treasury issues different IOUs, predominantly Treasury Bills and gilts. If you get back one of your own IOUs then you can indeed just tear it up, but through QE the Bank has not got back its own IOUs, it has acquired IOUs issued by the Treasury while the Bank’s IOUs which it used to buy the gilts have been spread around and gone into general circulation and are now mostly in private hands around the country and indeed the world. As I’ve said in the past, one way to understand what was done with QE was that it was a mechanism for two arms of the UK state, the Bank and the Treasury, to swap their respective IOUs, with the Bank getting the Treasury’s IOUs, gilts, and the Treasury getting the Bank’s IOUs, money, which it then used to help pay the government’s bills. As I’ve also said in the past, it’s no use turning up at the supermarket checkout and expecting them to accept gilts in payment for your groceries, they want to be paid in money, currency, pounds and pence, legal tender; or if your credit is good they will accept your promise that they will later be paid in the same, but not in gilts. Therefore for example pensioners would not have been happy if instead of their expected pensions being paid in full in money, Bank of England IOUs, the Treasury had to resort to paying their pensions partly in money and partly in gilts, the Treasury’s own IOUs.

          • petermartin2001
            Posted April 8, 2015 at 9:20 pm | Permalink


            The theory is that Government spends money (its IOUs) into existence and simultaneously imposes a tax obligation which it insists is paid in those IOUs. That then creates a demand for them and gives a value to the currency.


            Wouldn’t it be so much simpler if the Treasury and the BoE were merged? Then there wouldn’t have to be all these smoke and mirror machinations?

            If anyone owed me £10k I’d happily take gilts/bonds to the value of. (Banks do exactly the same thing between themselves). You’d just need to pay them in at the bank.

            The acceptability at a supermarket test can’t be definitive. That might fail may £50 notes in the UK and would certainly fail €500 euro notes in Europe.

          • Edward2
            Posted April 9, 2015 at 8:02 am | Permalink

            Please give some examples of the mechanism you describe actually happening.
            And explain how governments manage to borrow whist reducing taxes.

          • petermartin2001
            Posted April 9, 2015 at 6:41 pm | Permalink


            You don’t need to look beyond the actual UK economy for examples.

            em> And explain how governments manage to borrow..

            They don’t borrow. If we consider the pound to be an IOU of government, then we might ask how the government can”borrow” it back?

            If I borrow a bag of sugar from you I could give you an IOU for that bag of sugar. But if I needed to borrow another bag of sugar from someone else would it make sense to ask you if I could borrow that IOU back from you so I could give it to someone else? It wouldn’t. I would have to give you another IOU instead.

            I could just as well write out a new one. If I didn’t want to repay your IOU straightway, I could give you a new IOU promising that I’d give you two bags of sugar at some future time. That is really what government borrowing is too. It’s the replacement of one kind of IOU that doesn’t pay interest for another type of IOU that does.

            So why do they offer to pay interest when they needn’t? It’s part of the govts monetary policy to set those interest rates to be whatever they choose them to be. Essentially to encourage holders of UK IOUs (ie pounds) to not swap them for, say, US IOUs (dollars).

            It’s not directly connected to the level of taxation. Govt isn’t directly constrained in its spending by either receipts from bond issuance or taxation. Ask Denis about that!

      • acorn
        Posted April 6, 2015 at 11:42 am | Permalink

        Denis, the Treasury has adopted a voluntary constraint. It issues Treasury debt instruments (Gilts), to match its net spending (deficit) in a budget year. It does not have to do this, it chooses to do it still, long after the time we came off the Gold Standard; whence it was required to do it. The Treasury is the currency issuer, it does not have to borrow its own currency from anybody.

        The private sector has never been able to develop a “risk-free” investment that can be redeemed at face value, that didn’t come from a currency issuing government Treasury. Greenspan at the FED in 2001 tried to encourage private sector banks to prepare for the day when governments would not issue Treasury savings instruments (Gilts) anymore. He may have had more faith in banks than was warranted.

        The Treasury doesn’t owe the BoE anything. The original owners of the Gilts, bought them with money in their current account (which were balanced by reserves at the BoE), the government Treasury having previously spent that money into the economy. Selling those Gilts used up reserves and probably pushed up the Interbank rate of interest.


        • Denis Cooper
          Posted April 7, 2015 at 3:43 pm | Permalink

          Once again, the Treasury is NOT the currency issuer for sterling.

          It was a hundred years ago for Bradbury pounds, which were so called because they bore the signature of John Bradbury as Secretary to the Treasury, but sterling is issued by the Bank of England and the notes bear the signature of the Chief Cashier.

          I don’t know why this should be so difficult to understand.

          “The Treasury doesn’t owe the BoE anything.”

          Every one of the gilts owned by the Bank says that the Treasury owes it money, just as the gilts owned by an insurance company say that the Treasury owes it money. OK, so it’s through a wholly owned subsidiary of the Bank, but then it could also be through a wholly owned subsidiary of an insurance company, it makes no material difference.

          • acorn
            Posted April 7, 2015 at 4:54 pm | Permalink

            OK Denis I will try a different tack. Who issues, that is, “mints” the Coin of the Realm and prefers to sub-contract the issue of its, secondary paper currency, to its wholly owned Central Bank.

            If you want any more clues let me know.

          • Denis Cooper
            Posted April 8, 2015 at 9:28 am | Permalink

            As we know, the “Coin of the Realm” has long consisted of metal tokens of little intrinsic value, which are only legal tender for small sums. Therefore I’ve no idea why you should think that banknotes are a “secondary currency”, if anything was to be described in that way then it would be the coins not the notes. They are produced by Royal Mint Ltd, which I find is a government owned company but is not part of the government, now not even an executive agency of the government, which also produces coins for other countries, just as the companies which print our banknotes also print banknotes for other countries. In March 2009 Darling announced plans to privatise it, but that hasn’t yet happened.

          • acorn
            Posted April 8, 2015 at 4:39 pm | Permalink

            Denis. I think I have cracked it. Actually, another guy in Whitehall did. He is suggesting that you are confusing the “operational” role of the BoE, with the “strategic” currency issuer role of the Treasury.

            The Treasury does have an account at the BoE so it “operates” as a currency user for budget management. It also keeps “Tax and Loan” accounts at the clearing banks where it “operates” as a customer so that large tax payments by a particular clearing bank’s customers, do not add to major swings in overnight “reserves” movements between banks and movements in the BoE required policy rate of interest.

          • Denis Cooper
            Posted April 8, 2015 at 7:47 pm | Permalink

            I don’t think I’m confusing anything. Once again, look in your wallet and you will find that sterling banknotes are issued by the Bank of England, not by the Treasury. If you had looked a hundred years ago then you might well have found some Bradbury pound notes which were issued by the Treasury, so it certainly wouldn’t be impossible for the Treasury to do that again but the reality is that it doesn’t. Nor would there be any need for the Treasury to do it now, as the Bank of England is now publicly owned and it is possible for the Treasury to arrange for it to create more of the usual familiar money, and get money transferred from the Bank to the Treasury indirectly through the gilts market. As I have mentioned before there are EU treaty provisions which would forbid it being transferred directly, either by the Bank extending an overdraft to the Treasury or buying gilts direct from the Treasury, and that is one reason why it has to be done indirectly.

    • Edward2
      Posted April 5, 2015 at 5:25 pm | Permalink

      You are confusing the re distribution of that £10 to its rightful owner via the rebate with the Government borrowing £10.
      They are different things.
      Borrowing the £10 creates a debt.
      Interest may be charged and the issuer of the loan may well require that £10 back one day.

      • petermartin2001
        Posted April 5, 2015 at 8:53 pm | Permalink

        The owner of the £10 gilt WILL require it back one day. Probably when the gilt matures. So he has a matured £10 gilt. He can swap that for £10 in cash. What’s he going to do with it? Say he’s the Bank of China. He can buy a new GILT to get his 2-3% annual interest as before, or if the Chinese are buying more stuff from Britain than Britain buys from China at the time, he can use that £10 to fund Chinese import purchases ie British exports.

        It won’t be a problem. It never has been a problem

        • Edward2
          Posted April 6, 2015 at 9:01 am | Permalink

          We therefore agree.
          One ten pounds is owned and held by the individual.They have no debt.
          The other is owned by the lender not the holder and is a debt
          It will have to be paid back with interest too.
          As I said there is a difference.

          • petermartin2001
            Posted April 7, 2015 at 12:54 pm | Permalink

            Those who are owed a debt by a sovereign currency issuer will always have that debt repaid, with interest, unless there’s a default. But, for the issuer, there’s no reason for an involuntary default.
            Which simply means that an old debt can always be settled by the creation of a new debt.
            That’s the way it is. Total debt has always increased over time. Expressed as a percentage of GDP it may have fallen but not in terms of the number of ££ owed.
            Debt issued by the State isn’t like normal debt in that sense. Its more like the issuance of currency. The more that is issued the more financial assets the holders of that currency have but the more ‘debt’ that is held by the issuer.
            An issuer always has to be in debt.

            Reply Look at the record. After expensive wars the debt sometimes comes down in cash terms as well as a percentage. It was reducing in cash terms at the end of the last century – and this did not stop the UK economy growing!

          • Edward2
            Posted April 7, 2015 at 7:34 pm | Permalink

            Its still debt.
            Too much gets you in trouble.

          • petermartin2001
            Posted April 7, 2015 at 10:46 pm | Permalink


            After expensive wars the debt sometimes comes down in cash terms…. It was reducing in cash terms at the end of the last century

            Yes, that’s a fair point. But, it all depends on how we define debt. At the end of the last century Britain was on a gold standard, came off during WW1 and then back on afterwards. So it would be possible to increase the supply of money in the economy without increasing the debt if that was backed by gold and the asset value of the gold was used to offset the debt.

            As I understand it, the money supply, or the monetary base, is still not counted as debt even though there is no gold involved any longer. So, theoretically we could pay off our ND simply by printing extra cash. It’s probably more than just theoretical. The recent exercise in QE has illustrated that very problem. That doesn’t make much sense. Cash/money should be counted too.

            But on the other hand, if we could use gold to offset the debt in previous eras, why cannot government use other assets too? Like land, property etc. What matters in any business is the balance sheet total. The bottom line after all assets and liabilities have been calculated.

          • Edward2
            Posted April 8, 2015 at 8:09 am | Permalink

            This is effectively what happens.
            Lenders look at the UK or USA etc and consider the value of the assets in that nation versus their current level of debt.
            This forms the majority of their decision in lending.

  12. Denis Cooper
    Posted April 5, 2015 at 11:02 am | Permalink

    I realise that some people will reckon that I am callous and selfish, but I repeat that overall the UK has not experienced anything worthy of the name “austerity”. Yes, there have been and still are some instances of hardship, sometimes more through policy misjudgements on the part of the government rather than any deliberate intent, but overall if you want to see real “austerity” then you should go to some other countries, most notably at the moment Greece.

    I’m not going to blame my fellow citizens for failing to understand that in general they have got off comparatively lightly, and not appreciating just how much worse it could easily have been; I blame first of all the politicians of several parties who have been screaming “austerity”, and then the politicians of other parties who have failed to counter that charge – a failure which actually has its roots in the failure of the Tory party to explain the situation in readily comprehensible terms back in 2009 and going into 2010, a failure which more than anything else cost them the overall majority they should won at the last general election – and finally most of the mass media, which has not only allowed the false idea that we have been suffering “austerity” to take hold with the population but has actively reinforced and propagated that misconception.

    Oh, and I don’t think that your attempt at reformulating “austerity” today works as well as your previous repeated statements of the plain facts about public spending over the past five years, JR, not that your message has gained enough currency.

    Despite the claims made by some about the diminishing importance of the mass media and the much greater importance of social media, and blogs such as this, the reality is that if all the newspapers and broadcasters choose to ignore the truth and mislead the public then most of the public will be misled.

    Which I guess is why the anti-austerity message from Sturgeon during the leaders’ debate resonated so powerfully in England as well as in Scotland, her English audience was primed to agree with it. I see that today the Sunday Telegraph is running an article about how Scotland is in the grip of an unprecedented mass delusion:


    but it makes the mistake of starting with the sentence:

    “Last Thursday’s debate will have little impact in England.”

    when it is clear that Sturgeon touched a chord in England as well, or her performance would not have been so highly rated across the UK as a whole.

    • DaveM
      Posted April 5, 2015 at 3:27 pm | Permalink

      DC, ref your last couple of sentences: you’re right – Sturgeon has held out a lifeline to the Tories here I think. Although the assertion is that the SNP wants to break up the Union, realistically it won’t happen (if it ever does) for quite some time.

      The Tories just need to accept that Wales, Scotland and NI are lost causes, and although they will remain committed to a UK, they should just start being the English Party. A coalition of Con/SNP/Plaid/NI parties may sound far-fetched, but with Devo to all 4 countries (ie. using the Westminster MPs as devolved assemblies and doing away with the devolved assy’s in their current form but retaining First Ministers for all 4 countries) the SNP wouldn’t really care that much what happened in England as long as they could run their own affairs. Although the Tories will remain vehemently opposed to the principles and ideas of the SNP, I think they’re missing an opportunity here to appeal to the English vote and win in England whilst retaining the UK in something like its current form.

      Reading that back it seems a bit confusing! I’m sure you know what I mean though.

      • Denis Cooper
        Posted April 6, 2015 at 7:59 am | Permalink

        Oh, I thought that Sturgeon may have given people in England and Wales a little encouragement to vote Labour as the nearest thing to the SNP in terms of being anti-austerity and anti-Tory, while making reassuring noises about how the SNP would behave on the Union.

    • petermartin2001
      Posted April 5, 2015 at 5:14 pm | Permalink


      The article you reference also makes the mistake of ending with the sentence “Yet there is no sign of Scotland coming to its senses.”

      If we substitute the word England or Germany, for example, for Scotland we can then appreciate how silly and patronising this remark is. First it was the Tories who lost the bulk of their Scottish support and now it’s Labour’s turn.

      And that’s not the fault of the Tory or Labour Parties, it’s the fault of the “childish” and “delusional” Scots?

      This article is just lazy thinking at its laziest!

      • Denis Cooper
        Posted April 6, 2015 at 8:01 am | Permalink

        The Telegraph is routinely patronising towards the Scots, with occasional outbreaks of open contempt.

    • Qubus
      Posted April 5, 2015 at 6:53 pm | Permalink

      A large part of the problem is that the Tories banged on about the need for drastic cuts in expenditure, i.e. stringent austerity, and then, after all that fuss, failed to implement it. now it is too late for them.

  13. Lindsay McDougall
    Posted April 5, 2015 at 11:05 am | Permalink

    You have identified three years in which monetary policy was too tight. Fiscal policy has not been tight since the 1997 to 2001 parliament and the deficit has been cut too slowly in this parliament. Raising the lower income tax threshold without increasing the standard rate of income tax has undermined the yield from income tax.

    In the next parliament, it will be necessary for the Conservative Party to govern on its own, either as a majority or a minority government. The only parties likely to support the Conservative Party some of the time are the LibDems, UKIP and the DUP, which may be expected to return respectively 20, 4 and 6 MPs (order of magnitude). To operate as a minority government, the Conservative Party will need to have 315 MPs, which can only be delivered if we outpoll Labour by about 6%.

    This will not be easy to achieve. Personal attacks on Ed Miliband will not do the job – his lack of PM qualities is already reflected in the polls. It is also a fact that voters respond more to programme than to record, however unfair that may be. The Conservative Party needs to do two things. One is to toughen up on European and immigration policy. The other is to produce a logical narrative highlighting Labour’s economic mistakes in office and its voting record in opposition and its public spending agenda, to demonstrate that it could only govern by raising taxes on ORDINARY PEOPLE substantially. The Conservative Party needs to publish a document doing this about a week before polling day.

  14. Tony
    Posted April 5, 2015 at 11:11 am | Permalink

    What austerity? The Government is still spending more than it earns whereas the private sector has had to tighten its belt. The ones who supply the Government with their ready money are pulling back. This state of affairs cannot continue indefinitely because the debt pile will soon reach critical mass.

    Already we waste around £1 Billion each week on interest payments and that is while yields are at ultra low levels. There is nothing to prop up the pound but £Trillions of debt. It is only a matter of time before the markets decide to bail out of Gilts and International Government Bonds and then that mucky stuff will hit the global fan. An significant Fibonacci 34 years have passed since Nixon came off the Gold standard which heralded the extravagances of the West. It’s now pay-back time. Beware.

  15. Narrow Shoulders
    Posted April 5, 2015 at 12:12 pm | Permalink

    Forgive me if my recall is wrong but I thought you, like me, thought the banks should be allowed to go under. The FSCS would have protected most, bank share and bondholders would have picked up the tab rather than bonuses continuing under government bailouts.

    RBS was a zombie and should have been shot through the head. When did you start agreeing with socialised losses Mr Redwood?

    Reply I opposed the mega mergers that created RBSand argued for its break up under controlled administration when it went wrong.

    • Denis Cooper
      Posted April 5, 2015 at 4:37 pm | Permalink

      They were too big to be allowed to fail, that would have brought down the whole financial system. However their disorderly failure could have been prevented and then they could have been shut down or broken up in an orderly fashion.

    • acorn
      Posted April 7, 2015 at 4:09 pm | Permalink

      The gun was held to the governments head. The big banks told the government they would collapse the “payment; clearance and settlement” system, if the government did not bail them out. It was pure blackmail.

      The settlement system must be run by the Central Bank and totally disconnected from the Banksters. Then, the Banksters have no leverage over the government. That is where the regulation failed; and, that was a Conservative decision.

  16. bigneil
    Posted April 5, 2015 at 12:49 pm | Permalink

    With a govt who are desperate to give more and more away, and are even borrowing it – just to give it away – it doesn’t look like your party has any connection with real life. More and more born-and-bred English people having to use foodbanks, while seeing hundreds of thousands of foreign arrivals being handed housing, money, benefits and schooling – all for zero contribution, for ever.
    Also just seen that teachers are seeing “Victorian poverty” in the kids arriving at school, some teachers apparently taking in their own food for the kids. Shameful, but not surprising anymore.
    Someone’s preference is to ensure foreigners get their hugely expensive lifelong HIV treatment for free, while our own nation is only used as a cash cow to throw money we haven’t got, to the rest of the world. I assume that “Immigrants before the indigenous” is to be the Conservative Manifesto slogan. It’s more honest than whatever will be shown.

    • Brian Tomkinson
      Posted April 5, 2015 at 4:58 pm | Permalink

      Haven’t you heard, we wouldn’t have an NHS or much else if we didn’t have all that immigration. The indigenous population apparently do nothing, to listen to all the parties except UKIP.
      Within the last ten years a family friend, having being educated and trained as a doctor wished to elect for a career in surgery. During his surgical training he was told by the NHS that they couldn’t find him a job and he should emigrate! Can you believe it? Fortunately for the country, having provided his expensive education and training he is now a very hard working GP, despite the best efforts of the NHS to encourage him to go abroad.

      • APL
        Posted April 6, 2015 at 7:04 am | Permalink

        Brian Tomkinson: “During his surgical training he was told by the NHS that they couldn’t find him a job and he should emigrate!”

        Well well! Wouldn’t it be interesting if it emerged there is an NHS policy to discourage our ingenious talent?

        So, our home trained surgeons, doctors and nurses emigrate because, among other reasons they can’t get a position in the NHS. Then the government, which operates the NHS claims it can’t source home grown talent and recruits from overseas.


        • APL
          Posted April 6, 2015 at 7:06 am | Permalink

          “to discourage our ingenious talent?”

          indigenous was intended, but ingenious will do.

        • Brian Tomkinson
          Posted April 6, 2015 at 7:55 am | Permalink

          I am told that many of our home trained doctors are now emigrating particularly to Australia. Meannwhile 25% of GPs are over 55 and with pension changes many are deciding to retire early. Given opprobrium lavished on GPs by politicians and the media there is a crisis looming as our own trained and qualified doctors are reluctant to choose general practice.

  17. John S
    Posted April 5, 2015 at 12:59 pm | Permalink

    It’s a shame Cameron did not voice your views on Thursday night.

  18. outsider
    Posted April 5, 2015 at 1:15 pm | Permalink

    Dear Mr Redwood, I cannot help feeling that Mr Osborne has brought the charge of needless austerity upon the Government. Both before and after the 2010 election he kept trumpeting the need for austerity.
    This was an effective public relations exercise for the international financial markets, even though he never imposed overall austerity on spending and the twin deficits remain appallingly high compared to other countries.
    And in many areas, such as local government and defence, austerity has really been felt for several reasons:
    The Treasury ignored your own sensible advice, so vast sums were spent on redundancy payments instead of relying more on natural wastage and redeployment.
    Health and aid spending went on rising as before, forcing deep cuts elsewhere.
    Re-organisation of the NHS was more expensive and extensive than needed, including many new quangos, so that much of the extra money for health did not come through to the front line, at least until recently.
    The Government continued to make new spending commitments and undertake new spending programmes as if it were business as usual, so that other things have had to be squeezed more (eg alternative vote referendum, house purchase subsidies, free schools, Royal Mail pensions, HS2, school meals, more Spads).

    • outsider
      Posted April 5, 2015 at 3:38 pm | Permalink

      As a PS, Mr Redwood, the extra spending on Spads is obviously minor in the great scheme. It matters because it prevented the Government from imposing a 1-2 year freeze on recruitment or replacement (apart from front line staff). I recall Norman Tebbit saying that at the DTI he had only one Spad, who was unpaid. But he, like yourself, was a politician who knew his own mind.

    • Denis Cooper
      Posted April 5, 2015 at 4:34 pm | Permalink

      Mr Osborne may have trumpeted the need for “austerity”, but he never bothered to explain that need in terms which would have been readily comprehensible to the average voter. In fact no senior Tory did that, as far as I can recall, apart from Mr Clarke during an appearance on Question Time just a month before the last election. That was the edition when Ms Coren whined that she didn’t know what was meant by “budget deficit” – was it some kind of bank account, or what? – and Mr Clarke kindly explained that the government was spending four pounds for every three pounds of revenue and it couldn’t carry on borrowing the rest.

  19. acorn
    Posted April 5, 2015 at 1:55 pm | Permalink

    Most of us have associated “austerity” with fiscal policy, that is spending and taxing. You appear to have re-defined it as monetary policy, that is interest rates and liquidity; presumably, to attack the last Labout government. I don’t think it will catch on JR.

    Looking back through BoE “Bankstats” http://www.bankofengland.co.uk/statistics/Pages/bankstats/current/default.aspx it would be difficult to convict Labour for the crime of austerity. M2 / M4 lending to the private sector were going up nicely until the last election; been going down ever since! At the start of 2010 Mr Darling had the economy set for recovery and then Osborne killed it flat for three years.

    Mind you, Banks only wrote off £10 billion of loans last year; half of what it was in 2010!

    • outsider
      Posted April 5, 2015 at 3:08 pm | Permalink

      Don’t know about you Acorn but I still receive roughly two nuisance telephone calls a day from vultures urging me to claim back money (which I have never paid) from clearing banks as a result of rulings by the Financial Services Authority and also by the courts. Taken together, these drains on bank capital, apart from causing me a great deal of needless hassle, have probably cut the banks’ lending capacity by £70-100 billion a year. Whose side are the regulators on?

      • APL
        Posted April 6, 2015 at 6:55 am | Permalink

        outsider: “Taken together, these drains on bank capital, [..] have probably cut the banks’ lending capacity by £70-100 billion a year.”

        These fines are treated by the banks as an administrative cost of doing (sometimes dishonest ) business in the UK. The banks don’t pay the fines, the bank’s customers do.

        And it is particularly ludicrous to fine a State owned bank, paying the fine to another organ of the State.

        We don’t need ‘fines’ we need corporate officer prosecutions.

  20. behindthefrogs
    Posted April 5, 2015 at 3:43 pm | Permalink

    “The government needs to reduce austerity and the deficit”

    It needs to reflect this in its own actions.
    Take for example the recent changes in stamp duty. In setting the bands the deficit was increased by nearly £1billion. This was completely un-necessary and could have been avoided with just a little more care.

    Far too many changes are made for a single political end while with a little more care could also have been used to help meet other major objectives.

    How do we avoid more austerity? Simply by considering this as a major objective when reviewing all proposed changes. Thus for example we should be raising NI thresholds rather than income tax thresholds. Incorporating the winter fuel allowance into the old age pension. Combining the TV licence into the council tax etc.

    How do we reduce austerity? By reducing the number allowance by combining and taxing them with the major taxes and allowances. Thus making the overheads lower and the taxing of those who don’t need them automatic.

  21. ian wragg
    Posted April 5, 2015 at 3:50 pm | Permalink

    After the election there is going to be an almighty recession. the bond market is going to close and if the Government starts printing money to finance itself, then there will be a run on the pound.
    Many people who have been conned into buying property at todays inflated prices will get their fingers burned as interest rates rise to stabilise the £.
    I’m glad I am free of debt and not having to start on the property ladder today.
    We are being ruled by idiots and this looks set to continue after May 7th.

  22. ian
    Posted April 5, 2015 at 4:11 pm | Permalink

    The biggest increase in public spending in a five term of a government the parliament has ever seen, 103 billion and most of it going overseas and to people coming into the country, most of people living hear have not seen a penny of it they have seen food banks.

    • APL
      Posted April 6, 2015 at 6:48 am | Permalink

      “The biggest increase in public spending in a five term of a government the parliament has ever seen, …”

      I would be interested to plot the increases in public spending over the last fifty years on a graph. I wonder what the ‘doubling time’ would be?

      Do you think our politicians think public spending can be increased infinitely, for ever?

      Do you think our politicians think?

      • APL
        Posted April 6, 2015 at 7:39 am | Permalink

        “I wonder what the ‘doubling time’ would be?”

        Ten minutes with google and a spreadsheet, 13.4 years.

        UK government spending has doubled every thirteen years.

        • petermartin2001
          Posted April 8, 2015 at 11:03 pm | Permalink

          It’s quicker to use a calculator and divide the growth rate, or inflation rate or whatever, into 70.

          So if there’s a growth rate of 5% pa, say, which, incidentally, is also an exponential increase of 5%, then the doubling time = 70/5 years

          Or 14 years. (to a good approximation anyway)

  23. ian
    Posted April 5, 2015 at 4:21 pm | Permalink

    This is the biggest wasting government of all time.

  24. Ian wragg
    Posted April 5, 2015 at 5:57 pm | Permalink

    As we enjoy the spring sunshine the current demand on the electricity grid is 31.46 gigawatt. Wind is supplying 100 megawatt or 0.31%.
    Tell me John how many windmills will be needed to keep the lights on when the wind stops blowing as it frequently does when we have high atmospheric pressure.

  25. ian
    Posted April 5, 2015 at 11:29 pm | Permalink

    Also run up the biggest debt ever.

  26. Margaret Brandreth-J
    Posted April 6, 2015 at 12:53 am | Permalink

    I saw a bumble bee today.I am growing as much flowering and blossoming stuff as I can to attract the pollinators , thereby increasing the chances of better fruit production by providing an improved habitat for the worker bees.Of course the climate and the soil conditions have to be adequate and the blossoms which need crossing have to flower at the same time.We need these creatures and other pollinators to help us maintain balance, yet if we build and build to accommodate just one species and destroy what we have , then all will suffer.

    We can scrap about our stockpiles of honey .We can fight about how much is taken from one hive in order to keep others happy ,yet if we do not tend to what we have rather than looking for new to up tip the balance, all will be lost.

  27. Martin
    Posted April 6, 2015 at 12:56 am | Permalink

    If you oppose austerity then why has the government blocked a third Heathrow runway for five years? I guess if Mirabel Johnson gets elected in Uxbridge then then things get even worse.

    • Lifelogic
      Posted April 6, 2015 at 7:28 pm | Permalink

      Why indeed yet another moronic coalition decision. A 5 runway Heathwick hub is hugely needed and should have been started well over 5 years ago.

  • About John Redwood

    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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