Growth in government and financial services provides overall growth to UK


           Over the last quarter UK output fell by a small 0.2%. These preliminary figures are often revised upwards later. For the year as a whole the economy grew at just 0.8%.

           All this was well known and forecast. We have been talking here about the need for a stronger growth strategy for eighteen months, and clearly as the government recognises more needs to be done. What is far less well known is the fact that the government sector is still adding to the expansion, whilst industry and some private sector services are dragging the figures down.

            In the last quarter the  government sector was up 0.4%. Business and financial services were unchanged. Production and construction fell. For the year, government and other services were up 2.5%, business services and finance were up 2.1%, whilst production industries were down 2.6%.

           Perhaps all those who have been talking of the massive state cuts might like to explain how this results in a continued expansion of the state sector relative to manufacturing industry.

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.


  1. Atlas
    Posted January 25, 2012 at 10:22 am | Permalink

    So just to be clear John,

    I think you are telling us that the present growth is ‘bogus’ in so far as a Government spending printed money isn’t real growth at all?

    In mathematics there is the concept of Necessary and Sufficient. It is becoming clearer day-by-day that what Osborne is doing may possibly be Necessary but is not proving to be Sufficient to bring real growth.

    Osborne ought to look at the two Youtube entries on ‘Hayek Verses Keynes’ for real advice on growth & spending. I once got a Conservative supporter to watch them – and he spluttered into his tea as he thought the analysis was treating the matter too tritely – not enough gravitas. I pointed out to him that the analysis was spot-on and far better than I had heard in any Parlimantary dialogue-of-the-deaf debate.

    • Atlas
      Posted January 25, 2012 at 10:24 am | Permalink

      Oops, a typo:

      For Parliamantary read Parliamentary.

    • lifelogic
      Posted January 25, 2012 at 12:51 pm | Permalink

      Indeed it is quite simple if I have to add 50+ % to my prices (as I have to carry the state sector) in order to still sell my products at a profit then takers are surprise surprise few and far between. So I employ fewer, produce less in the UK and we all pay less tax.

    • uanime5
      Posted January 25, 2012 at 3:26 pm | Permalink

      I found the video of Hayek Verses Keynes. Here’s what I got from it:

      Keynes: if growth is low a Government stimulus is required to maintain growth and fix the problem.

      Hayek: if growth is low and unemployment is high the market will eventually fix everything and if it doesn’t that’s a price worth paying to have a free market. Also government planning will eventually lead to politicians becoming dictators.

      So let’s see how they work in real life. During the Great Depression in the USA Hoover followed policies similar to Hayek’s and did nothing; the result was the depression continued. Roosevelt followed policies similar to Keynes and introduced a Government stimulus; the economy recovered. It’s clear which one works in real life.

      • A different Simon
        Posted January 25, 2012 at 4:51 pm | Permalink

        You can’t take parts of a solution to a different problem in a different context and expect them to work today .

        That is just as ridiculous as Mervyn King saying “There is no reason to despair… All crises come to an end”

        Surely he is familiar with the small-print : “Past performance is no guarantee of future results” !

        Sooner or later classes of derivatives will have to be declared null and void . Some debt will have to be written off .

        The system is fundamentally broken beyond repair and needs to be dismantled so we can start again .

        Our politicians are also doing a great job of trying to tackle todays problems with yesterdays solutions .

        • uanime5
          Posted January 25, 2012 at 11:02 pm | Permalink

          So your saying that just because Hayek’s ideas didn’t work in the past doesn’t mean that they won’t work today? That’s like claiming that just because punching yourself in the face yesterday hurt doesn’t mean it will hurt today.

      • APL
        Posted January 25, 2012 at 4:54 pm | Permalink

        uanime5: “During the Great Depression in the USA Hoover followed policies similar to Hayek’s and did nothing; ”

        Not according to wiki

        Lets see, 63% tax, public works (AKA HS2 or TENs) and increased corporation taxes, yet these measures did not work .

        uanime5: “Roosevelt followed policies similar to Keynes and introduced a Government stimulus;”

        What do you think government stimulus is if it isn’t high taxes (or high borrowing – which have to be financed by high taxes), public works, and increased corporation taxes?

        • uanime5
          Posted January 25, 2012 at 10:56 pm | Permalink

          Fun fact in 1917 the US top tax rate was 67%, then it dropped to 25% in 1925, then rose to 63% in 1932. So 3 years after the Great Depression started and 1 year before elections Hoover raised taxes.

          Hoover had 3 years to reverse the Great Depression and failed. He didn’t want to introduce welfare as he felt it would be addictive, he didn’t want to run up a deficit to fund welfare programs, introduced the Smoot–Hawley Tariff Act to impose tariffs on non-US goods which resulted in the rest of the world putting tariffs on US goods, and expected that volunteers would help the poor resulting in shanty towns called Hoovervilles.

          By contrast Roosevelt started the New Deal, ran a deficit to fund welfare programs, and ended prohibition. As a result the US economy recovered, unemployment fell, and Roosevelt was hailed as one of the best American presidents of all time.

          In conclusion Keynes was right, while Hayek was wrong. If Hayek had been right then the New Deal would have failed because the market would have been less able to fix itself.

          • APL
            Posted January 26, 2012 at 4:17 pm | Permalink

            uanime5: “He didn’t want to introduce welfare as he felt it would be addictive ”

            Corroborated by our contemporary experience. The UK government has a thriving client underclass living on welfare. Ditto the US!

            Check one for Hoover.

            uanime5: “he didn’t want to run up a deficit to fund welfare programs,”

            Neither did Keynes, see later*.

            Compare and contrast the US deficit as a proportion of US GDP, looks like 1) the US is practically bankrupt, 2) Hoover was right again.

            Check 2 for Hoover.

            Uanime5: “the Smoot–Hawley Tariff Act to impose tariffs on non-US goods”

            Compare and contrast the US today, with its huge trade deficit with China where it has outsourced its manufacturing (in lower-ed) wage conditions, with then when most of US manufacturing was on shore.

            By the way, the US was even then one of the larger economies in the World. So much of its trade was within its borders.

            Check three for Hoover.

            uname5: “In conclusion Keynes was right, while Hayek was wrong.”

            Err no!

            The Great Depression was caused by excessive credit, exactly as is the case for this current depression. Keynes suggests that during the ‘fat’ years, surplus * should be accumulated to pay for the sort of thing you would like to see, public works, welfare etc,.

            Hayek, on the other hand says you simply shouldn’t allow the credit aggregates to get out of hand. Better to avoid a depression than to have to deal with a recession that has got out of hand.

            Either way, the fact is, so called ‘Keynesian’ are nothing of the sort, since all post war western governments claiming to be ‘Keynesian’ have engaged in permanent deficit spending there can be no ‘surplus’ to use during the depression years!

            Uanime5: ” and ended prohibition. ”

            OK, Roosevelt did something right.

            Check one for Roosevelt.

            More likely, what pulled the US out of depression was rearmament and preparation for WW2.

            After WW2 of course, Europe’s manufacturing had been smashed to smithereens whereas the US were in a peachy situation able to exploit to their advantage.

      • forthurst
        Posted January 25, 2012 at 5:07 pm | Permalink

        In the USA, the Depression was engineered by the bankster owned Fed in order to engineer the transfer of wealth from the productive sector to the banksters.
        In the UK, the bankster owned (as it was) BoE engineered a depression by a return to the pre-war (I) gold standard. In both cases, Keynes advised government borrowing and spending on capital works when the policies of the Central bank had caused private industry to be unable to afford to pay pre-existing wage levels.

        Keynes is falsely accuse of being a Keynsian; he was a pragmatist.

        • zorro
          Posted January 25, 2012 at 10:58 pm | Permalink

          Some would argue that the 2007-8 economic downturn was premeditated….. Either that or some very silly policy decisions were made……Now which would it be?

          Oh, I remember now, haven’t we (our dear representatives) bailed out the bankers in recent years and are now giving them free money to lend to us or not at usurious rates of interest?


        • uanime5
          Posted January 25, 2012 at 10:58 pm | Permalink

          So the banksters caused a large number of banks to go bankrupt and ruined the US economy so they could transfer the wealth they destroyed to the FED? Wouldn’t it have been easier just to ‘donate’ money to Congressmen and have them pass the laws the FED banksters needed?

          • APL
            Posted January 26, 2012 at 4:22 pm | Permalink

            uanime5: “Wouldn’t it have been easier just to ‘donate’ money to Congressmen and have them pass the laws the FED banksters needed?”

            They did that too.

            Obama, being a Chicago politician is (questionable-ed). Somewhere on the Web is a tally of International banks that have made political contributions to BOTH sides of the American political divide.

          • forthurst
            Posted January 26, 2012 at 10:30 pm | Permalink

            All the ‘special interests’ do that otherwise how on Earth are they to ensure continuity? What would be interesting would be an analysis of contributions as against the return on investment.

      • Michael Read
        Posted January 25, 2012 at 5:35 pm | Permalink

        Yup, and a chap with a moustache, a pair of jackboots and a booming voice came along, started a world war which solved the whole problem – although the UK spent a lot of nights in the dark for three or five years and ended up stony broke and exhausted at the end.

      • lifelogic
        Posted January 25, 2012 at 6:32 pm | Permalink

        This is an absurd simplification of the debate – some stimulus can sometimes be helpful in putting people to work and so not wasting their resource of labour.

        But just borrowing to waste on a relatively over paid state sector, often doing little of any use or worse just hitting the private sector over the head periodically is not very helpful. Nor is expensive green energy, pointless railways, daft employment legislation and over regulation & taxation or everything.

        As government are clearly so bad at choosing what to “invest” in (because they do not actually care anyway) then the best solution is to get state sector spending down hugely, but at the same time get the stimulus & finance to private industry, deregulate hugely, lower taxes and create an uplifting vision of a low tax, efficient, enterprise welcoming, economy.

        No much uplifting about Cameron, Huhne, Cable & Clegg so far alas.

      • zorro
        Posted January 25, 2012 at 11:02 pm | Permalink

        Here’s one for our resident history student Uanime5. This is Roosevelt’s Treasury Secretary talking…Why not listen to him

        [U.S. Treasury Secretary Henry Morgenthau, Jr.]: No, gentlemen, we have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong, as far as I am concerned, somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises…

        But why not let’s come to grips? And as I say, all I am interested in is to really see this country prosperous and this form of Government continue, because after eight years if we can’t make a success somebody else is going to claim the right to make it and he’s got the right to make the trial. I say after eight years of this Administration we have just as much unemployment as when we started.

        Mr. Doughton: And an enormous debt to boot!

        HMJr.: And an enormous debt to boot! We are just sitting here and fiddling and I am just wearing myself out and getting sick. Because why? I can’t see any daylight. I want it for my people, for my children, and your children. I want to see some daylight and I don’t see it…

        —Transcript of private meeting at the Treasury Department, May 9, 1939, F.D. Roosevelt Presidential Library


        • zorro
          Posted January 25, 2012 at 11:06 pm | Permalink

          Unemployment under the ‘New Deal’ hovered around 20% during the 1930’s. It was WW11 (and preparation for it) which stimulated the recovery…..


          • APL
            Posted January 26, 2012 at 4:30 pm | Permalink

            zorro: “It was WW11 (and preparation for it) which stimulated the recovery…..”


            By the way, as I said above, what is conventionally called ‘Keynesian’ really isn’t.

            Keynes advocated putting surplus funds aside during the boom years to use for such public works (make work) schemes, during recessionary times.

            If there were surplus funds, governments wouldn’t have to borrow to fund public works. Today, they’d probably be called ‘sovereign wealth funds’.

            No Western government in the post war period has engaged in Keynsian policies.

            They are all borrow & spend, deficit junkies!

          • zorro
            Posted January 26, 2012 at 10:29 pm | Permalink

            Absolutely, they only remember one side of the Keynes equation, and forget to put any money aside during the years of plenty in order to tide them through the years of drought.


      • Gary
        Posted January 26, 2012 at 8:08 am | Permalink

        This is not true. Hoover intervened massively in the economy after 1929, in a similar way to this govt, and he failed miserably.

  2. Robert K
    Posted January 25, 2012 at 10:26 am | Permalink

    I am increasingly cynical about the way that GDP figures are bandied about (no offence to JR). GDP is a crude measure of economic output and are a distraction from the underlying issues of competitiveness and the desperate the need in the UK for reforms that get the public sector off the back of the private sector, reduce tax rates and pare back the regulatory burden.
    The other day the headline story on the BBC News at 10 was about 10 minutes of squabbling over a historical GDP figure that had been +0.1% and had been revised down to -0.1%. Apparently, +0.1% was okay but -1% was enough to have the Beeb getting febrile quotes from Balls and rebuttals from who-knows-who. It’s tosh.
    As JR rightly points out, if the state spends and borrows more, that shows up as a rise in GDP, but it also increases the burden that the private sector has to cope with. I see that headline public sector debt increased to over GBP 1 trillion the other day. Let’s have some genuine reductions in government spending and call them what they are – not “cuts” but “private sector stimulus”.

    • uanime5
      Posted January 25, 2012 at 11:00 pm | Permalink

      Reducing government spending doesn’t stimulate the economy so ‘cuts’ is the correct term.

  3. StrongholdBaricades
    Posted January 25, 2012 at 10:28 am | Permalink

    So now will George realise that to get the investment to put more people into work, he may well have to cut those taxes which are discouraging investment?

    • lifelogic
      Posted January 25, 2012 at 12:43 pm | Permalink

      Not just tax:- also over regulation, the government’s borrow and waste policy, the expensive rigged energy policies. Just cut the (largely) parasitic sector that is killing the real economy – it is not rocket science.

      • Bazman
        Posted January 25, 2012 at 7:35 pm | Permalink

        This is fantasy. If the state sector were to be cut to the levels that where to make you happy then the private sector could never absorb that amount of people. They never could no matter how much of a free for all you made it. To say the public sector adds nothing to the economy is another one of you fundamental fantasies that you insist on repeating like a religious chant. The NHS contributes nothing? Nurses wages contribute nothing. The state funding a private company like a defence contractor contributes nothing? The list goes on. The ones put on the dole would not all “go and do something useful” as you say and so would need support from the state. There would not be enough jobs and the ones that would exist would be low paid. How can there ever be more cleaning jobs than cleaners in a particular area? A question you again will fail to answer. Maybe they could all just fend for themselves with no job or state support or subsistence levels. Further lowering wages as they become more desperate. Is this acceptable? What do you think would happen in real life if a large part of the population had no income and nowhere to live. Should they accept this in Britain? Should they accept it? Yes or no?
        The main point being that the private sector in a modern society will never be able to cover the amount of jobs or support needed for the population no matter how much you believe. Does anyone use state money directly or indirectly to buy your products or services? The answer must be yes.

        • JimF
          Posted January 25, 2012 at 10:22 pm | Permalink

          The state money you talk about is actually the sum of private money taken in taxes and recycled by bureaucrats + printed money which is a confiscation of money from those with it.
          It’s down to whether you think the money maker or nanny state thinks best. Do you think it’s really more efficient for the people earning the money to give it to someone else to take a cut and spend it, or choose how they spend it themselves?

          • Bazman
            Posted January 26, 2012 at 7:45 pm | Permalink

            Simplistic fantasy that doesn’t answer the question that private companies cannot provide enough work to pay for a sustainable lifestyle for the majority of the population and so must be supported by subsidies in the form of welfare or jobs. The financial industry was supposed to cover this gap and provide the wealth. What a con trick that turned out to be.
            If a person cannot find a job that pays for a sustainable lifestyle and their is no state support what are they supposed to do? Have nothing and be happy with it? Work for food? Just starve? Or be grateful for charity that allows them to stay alive at no expense to themselves. I suspect you want the latter. You can have it and I’ll tell them to ram it.

        • Electro-Kevin
          Posted January 25, 2012 at 11:48 pm | Permalink

          You speak as though there is a choice, Bazman.

        • lifelogic
          Posted January 26, 2012 at 6:01 am | Permalink

          Do you actually read what I say? You say “To say the public sector adds nothing to the economy is another one of you fundamental fantasies that you insist on repeating like a religious chant.”

          I have never said this let alone “chanted” it. Clearly the public sector does add something, but very inefficiently, and much of it does indeed add nothing (green energy subsidies for example) and much does indeed do actual positive harm. Shifting resources from the productive into insane activities and ones that harm useful ones also transferring resources from the productive to the feckless.

          • Bazman
            Posted January 26, 2012 at 7:59 pm | Permalink

            Will that be the feckless poor or the feckless rich who you seem to believe sagely invest their wealth ultimately for the greater good of humanity and because of this should pay homage to them for patronising our little island with their business which is no more than my ‘business’. Showing respect like serfs for these often pig ignorant beneficiaries of inheritance and running the whole show for their benefit hoping some of the change will fall out of their pockets into beggar Britain. Would Britain ever have advanced if this was the primary attitude of the majority?

        • backofanenvelope
          Posted January 26, 2012 at 7:47 am | Permalink

          My daughter-in-law is a school teacher and my daughter a health visitor. I imagine that most people would think they were necessary to the good working of our country. But they are both suffering, because above them is a towering edifice of bureaucracy. This edifice is constantly in motion, re-organising itself. It contributes nothing to the jobs these ladies do. That is what we have to tackle. I favour decimation myself.

          • lifelogic
            Posted January 26, 2012 at 7:51 pm | Permalink

            Exactly the from end of the state sector is often a victim too.

          • lifelogic
            Posted January 26, 2012 at 7:51 pm | Permalink

            sorry “front” end

          • Bazman
            Posted January 26, 2012 at 8:08 pm | Permalink

            Nobody can defend unnecessary regulations and bureaucracy. Easy target, but you can be sure it would be replaced with a bureaucracy of business concerns like scrounging subsidies from the state and tax evasion helping the rich to more and the poor to less. How much unnecessary bureaucracy is there in banking? A lot can’t be with those profits. Or does this bureaucracy create profits? Can’t have it both ways. There will be lot less teachers and health visitors freeing your relatives to go and do some useful work as lifelogic would say. You assume there is a bottom in this race to the bottom.

  4. Martin C
    Posted January 25, 2012 at 10:29 am | Permalink

    Given that the state sector does not earn money, it is paid for pretty much exclusively by taxation on the private sector. Given that the state sector is now some 53% of the economy as a whole, how much further can it go?
    The private sector of out economy has to compete internationally. If it fails to do so, then it will no longer be able to pay the tax revenues that keep the state afloat.
    The difference between what the state would like to spend, and what the state can raise in taxationcan be filled by borrowing, for now, but we are close to the limit of what it is possible to borrow.
    So; how much further can it go, before massive cuts in state expenditure become not just desirable but totally, bluntly, Greek-style necessary?

  5. oldtimer
    Posted January 25, 2012 at 10:49 am | Permalink

    This is no surprise given the government`s tax and spend policies. It will get worse as its energy policy adds inefficient renewable energy costs onto the consumer in the years ahead. It appears that the Chemistry Club has been very active in promoting this green agenda as revealed by Leo Hickman of the Guardian. The Guardian has helpfully provided a list of those attending, to be found here:

    • A different Simon
      Posted January 25, 2012 at 2:03 pm | Permalink

      Oldtimer ,

      One of the quotes in the Guardian is
      “The club charges senior executives from energy companies, consultancies and technology businesses between £1,300 and £1,800 per person for each event, but invite public sector to attend for free.”

      What I find revealing is that the members/attendees are mostly from big 5 consultancies , city law firms , city accountancy firms , Banks , Services companies , lobbyists and associated parasites which leach off the public purse .

      You get a handful of energy companies thrown in for good measure but in the main it’s parties which consider themselves “material in decisions of energy policy” rather than delivery of solutions .

      This is not the only such think-tank/quango , take a look at the Westminster Energy Forum .

      The higher echelons of the UK are rotten to the core with troughers .

      To quote from a Batman movie “Britain needs an enema” .

      • A different Simon
        Posted January 25, 2012 at 2:04 pm | Permalink

        Sorry , should read “material in PROVISION of energy policy”

      • Martyn
        Posted January 25, 2012 at 7:20 pm | Permalink

        The inclusion of public sector people to the Chemistry Club meetings enables those from the big 5 consultancies , city law firms , city accountancy firms , Banks , Services companies etc to lobby public service (ho! ho!) individuals who may well occupy a decision-making position within the civil service.

        Slightly dodgy arrangement, I would have thought?

      • lifelogic
        Posted January 26, 2012 at 6:05 am | Permalink

        Indeed to many parasites everywhere throughout the system, lobbyists and laws are clearly written for their direct benefit.

    • forthurst
      Posted January 25, 2012 at 4:20 pm | Permalink

      Charging people for burnishing their sense of self-importance seams a perfectly legitimate business model, but we don’t pay our civil servants for that.

  6. lifelogic
    Posted January 25, 2012 at 10:53 am | Permalink

    Indeed this is the crux of the real recovery problem. Construction and production are down due to the banks (government owned RBS/Natwest group in particular grabbing money back from the industry), lack of confidence, lack of reasonable finance, over regulation, over taxation and too big a state sector. Why work in the real economy when you can aspire to working in the state sector earning say £670K with huge pension and little risk, at say the BBC or as a consultant on HS2. Just for dripping nation in left wing pro EU propaganda or consulting on a nonsense train scheme.

    The real economy cannot ever compete when the state sector is so inefficient and so large relative to the real economy. When it clearly has money to burn on the Pigis, HS2, the EU, devolution, the Olympics, Windfarms, Photo Voltaic nonsense and all the rest.

    In the telegraph it is reported today:- Sir Mervyn King: no reason to despair over economy
    The Governor of the Bank of England, Sir Mervyn King, has urged against “despair” because “all crises come to an end” as official figures were expected to show that Britain is heading back to recession.

    He is absurdly complaisant what does he mean “all crises come to an end” they will not if the government and the bank continue with wrong headed ever larger state policies.

    • lifelogic
      Posted January 25, 2012 at 11:32 am | Permalink

      I see that the Court of Appeal rejected Energy Secretary Chris Huhne’s claim that he had the power to go ahead with the controversial scheme to cut the absurd PV subsidies.
      If allowed, the proposals would apparently put 29,000 jobs in the quack solar industry at risk. Good they are clearly pointless jobs anyway and will clearly cost far more real jobs to fund the subsidies.

      Even when Huhne finally does do something sensible he cannot do it competently and legally it seems. All subsidy should go as soon as is possible for wind, PV wave, tidal, hydro and the rest. They either make sense or they do not – without subsidy.

      Yet another area where the BBC constantly cheers on engineering and economic lunacy.

      • A different Simon
        Posted January 25, 2012 at 2:16 pm | Permalink

        Lifelogic ,

        The Govt encouraged people to invest their life savings and remortgage their houses to train and create solar panel installation companies .

        The Govt then abruptly changed policy leaving those people high and dry .

        What the Govt should have done , in many peoples opinion , was to reduce the subsidy to nothing gradually over 3 years so people could plan their exit or adapt given that panel prices are decreasing .

        Obviously shows why Govt should not try and pick winners on the basis of ideology or even at all given thats what the market does best (usually but not always) but that is a different matter .

        • A different Simon
          Posted January 25, 2012 at 2:29 pm | Permalink

          £50k or £100k might not sound like much to a civil servant or MP but solar installers will have ventured more money than they could afford to lose on this .

          All that Govt approved accreditation and associated bullshit must run to tens of thousands and thats before considering the opportunity cost and loss of earnings whilst doing it in your own self-employed time .

        • Mark
          Posted January 25, 2012 at 5:41 pm | Permalink

          I have little sympathy for those who failed to do their research into the real economics of solar, and how dependent it was on the absurd level of FiT at about TEN times the market price of wholesale electricity. Even such greenies as George Monbiot was shouting from the rooftops about it, and saying the scheme should be scrapped.

        • lifelogic
          Posted January 25, 2012 at 6:45 pm | Permalink

          What the government should have done was not put the absurd subsidies in place in the first place. Given we are alas where we are they should stop them as soon as they legally can.

          I do not have much sympathy for the companies. They must have known it was all engineering and economic nonsense and depended, totally, on silly government subsidies. The companies should not have gone ahead with it – since no one can trust government not to change its mind – especially when the subsidy it is clear nonsense.

          Just look at the history of pension taxation for example.

          • alan jutson
            Posted January 26, 2012 at 9:30 am | Permalink


            Agree with you comments.

            I was approached to see if I would be willing to get involved in a solar company start up.

            I did the figures, explained that it relied totally on the existing government subsidy to make money, and suggested it woud be a very short term business, thus I declined.

      • uanime5
        Posted January 25, 2012 at 3:34 pm | Permalink

        The Government lost this case because they were trying to retroactively cut the subsidies, which is illegal under UK law. Though he can reduce the subsidies for all new PV companies he cannot reduce it for the existing ones.

        • Mark
          Posted January 25, 2012 at 5:43 pm | Permalink

          Surely Parliament can make the law? On the other hand, perhaps it is now a toothless paper tiger.

          • uanime5
            Posted January 25, 2012 at 11:10 pm | Permalink

            Parliament cannot make laws then claim that they were in effect before these laws were made.

        • APL
          Posted January 25, 2012 at 5:51 pm | Permalink

          uanime5: “The Government lost this case because they were trying to retroactively cut the subsidies, which is illegal under UK law. ”

          That then, is a good thing.

          But it isn’t illegal, the Rubicon for retrospective legislation was crossed with the war criminals act. Not only did it encompass acts that occurred before the act was enacted, but it included acts that occurred outside British jurisdiction too.

          Blair of course.

        • lifelogic
          Posted January 25, 2012 at 6:47 pm | Permalink

          Well that is absurd if something is daft it is best to stop doing it as soon as possible – perhaps the companies deserve a little bit of compensation for being so naive as to trust Huhne.

          • Mark
            Posted January 25, 2012 at 11:47 pm | Permalink

            Actually it was Ed Miliband who set the silly FiT levels.

        • Bazman
          Posted January 25, 2012 at 7:13 pm | Permalink

          How did I know this was going to happen? This distrust is also one of the reasons for the low take up of LPG conversions on vehicles. The Price difference is getting smaller between petrol/diesel and LPG. Proving the prediction again.

          • alan jutson
            Posted January 26, 2012 at 9:34 am | Permalink



            10 years ago I looked into the possible conversion to LPG for my pick up truck, decided it would take at least 8 years to get my money back given the mileage Iexpected to cover.

            In adition I could not trust the government to keep the subsidised (low tax take) scheme going, thus I used the capital I would have spent investing in my business in another way.

          • A different Simon
            Posted January 26, 2012 at 11:59 am | Permalink

            Bazman ,

            Any idea why the Govt felt the need to push LPG over petrol/diesel ?

            Do you think it was their intention to maintain the price difference long term or was it just a short term thing to help a competing fuel get off the ground ?

        • lojolondon
          Posted January 25, 2012 at 8:08 pm | Permalink

          The subsidies should all be cut to nothing, why should all British taxpayers subsidise rich people’s electricity bills?? I thought you would be against this if anyone was!

          • uanime5
            Posted January 25, 2012 at 11:12 pm | Permalink

            I’m on the side of obeying the law. Why would I support the Government’s attempts to renegade on its commitments?

          • APL
            Posted January 26, 2012 at 8:59 am | Permalink

            uanime5: “Why would I support the Government’s attempts to renegade on its commitments?”

            Er, since the tariff regime was set up under the previous administration. This administration could abolish the whole ‘shooting match’ and not be contradicting itself.

            But then that might be what you’d expect if the whole damn show wasn’t just Punch and Judy theater, with the EU manipulating the marionettes.

      • Bazman
        Posted January 25, 2012 at 7:08 pm | Permalink

        How about nuclear this requires massive subsidies?

        • APL
          Posted January 26, 2012 at 9:02 am | Permalink

          Bazman: “How about nuclear this requires massive subsidies?”

          But at least you get a continious supply of high quality electricity for a known period of time – 25 – 35 years.

          And it only requires massive subsidies if you use the technology which we currently use because the politicians decided to build reactors that could be used to produce plutonium.

          The Thorium reactor runs at lower pressures, is intrinsically safe and is less likely to produce plutonium as a side reaction, thus it is over all much cheaper to build if all you want from a reactor is electricity and heat.

          • A different Simon
            Posted January 26, 2012 at 12:03 pm | Permalink

            What is the betting that we go for third generation plutonium reactors from Areva rather than fourth generation from Toshiba-Westinghouse ?

            A Thorium reactor can be made throttle controllable so could potentially provide the heat neccessary to power an aeroplane gas turbine .

        • sm
          Posted January 26, 2012 at 10:32 am | Permalink

          Nuclear not paid for via a regressive Feed in Tariff/tax. In absence of a Thorium reactor build, i support a combination of resources- zero to max-fast response gas turbine tech and keeping all old coal plants until the technologies mature.

  7. Gary
    Posted January 25, 2012 at 11:50 am | Permalink

    “All this was known and forecast”

    The coalition has been revising their forecasts down since they started. In the original growth forecast in early 2011, the Office for Budget Responsibility (OBR) had forecast 2.1% growth in 2011 and 2.6% in 2012. BTW : Darling’s budget in March 2010 predicted 2011 growth of between 3.25pc-3.75pc. What we actually achieved in 2011 was 0.9%.

    The growth for 2012(made in the March 2011 budget) was 2.5% , then revised down to 0.7% in Nov 2011 , and may yet be revised down again. Growth in 2013 was forecast to be 2.9% , now revised down to 2.1%. Watch this space for the next wave of rolling revisions.

    With forecasting like that they would have done just as well as throwing darts with a blindfold. At this rate they will never hit their debt reduction targets.

    • JimF
      Posted January 25, 2012 at 12:26 pm | Permalink

      They should be assuming nominal 0.8% growth through to 2015, then base their spending assessments on that.
      To make silly optimistic 2.something % predictions without a massive inflationary surge before then is fanciful. It just means they can carry on being nice to benefit scroungers/bankers.

    • uanime5
      Posted January 25, 2012 at 3:35 pm | Permalink

      Looks like the Government’s plan to have an export led recovery isn’t going to work, especially when most of our exports go to the EU and manufacturing is down.

      • Electro-Kevin
        Posted January 25, 2012 at 11:56 pm | Permalink

        Recovery from what exactly, Uanime5 ?

        13 years of Labour mis-rule perhaps ?

        • APL
          Posted January 28, 2012 at 8:56 am | Permalink

          Yes, he does seem to rather convienently forget we are only two years into a new government.

          Although with the red tinge of this government, it’s easy to mistake one for the other.

    • zorro
      Posted January 25, 2012 at 11:13 pm | Permalink

      The BoE has around a 95% failure rate in its predictions around interest rates. It would be far more advisable for them to put on blindfolds and chuck darts at a board….


      • lifelogic
        Posted January 26, 2012 at 7:58 pm | Permalink

        The BoE is not making “predictions” they are trying to keep borrowing costs down.

  8. Antisthenes
    Posted January 25, 2012 at 11:55 am | Permalink

    With damage inflicted by thirteen years of Labour, EU regulations, euro-zone instability and being in coalition with left wing loonies scope for growth is somewhat limited. Wont stop the Conservatives taking all the blame and allowing that other bunch of left wing loonies Labour to regain power. There wont be much left when they do but they will find a way to destroy that as well.

    • Bob
      Posted January 25, 2012 at 7:04 pm | Permalink

      Unless the Tories can figure out how UK voters have been brainwashed through the Common Purpose fifth column in the education establishment and the BBC into believing in creating a European Socialist Utopia.

      Not much chance of that seeing that Cleggy and Cameron both support Common Purpose.

      Google “David Cameron, Nick Clegg and Common Purpose “ then pick the Youtube clip in the results.

  9. Single Acts
    Posted January 25, 2012 at 12:17 pm | Permalink

    Useless, useless, useless. Utterly feeble.

    No answers, no clue and no results.

    Mainstream politics is dead, it died a failure and its corpse stinks up the country.

  10. lojolondon
    Posted January 25, 2012 at 12:32 pm | Permalink

    John, we need a ‘Thatcher’ move here now. Cut VAT to 10%, or cut fuel tax by 50% or cut something, because we need to free up the economy.

    Einstein said : “If you keep doing what you are doing then you will keep getting the results you are getting.”

    At the moment we have the same tax and spend conditions as we did under Labour and so we are not surprised we have the same results.

    • uanime5
      Posted January 25, 2012 at 3:36 pm | Permalink

      Given that Labour lowered unemployment it’s clear we’re not getting the same result.

      • APL
        Posted January 25, 2012 at 6:03 pm | Permalink

        uanime5: “Given that Labour lowered unemployment it’s clear we’re not getting the same result.”

        Labour paid for lower unemployment during their tenure by putting us out of work today.

      • lojolondon
        Posted January 25, 2012 at 8:16 pm | Permalink

        What a load of cobblers!
        Labour decreased unemployment by :
        – Renaming ‘Polytechnics’ as ‘universities’, lowering school standards so every fule can get ‘university entrance’, creating ‘degrees’ in media studies and basket weaving, increasing university entrance numbers from 200,000 to 2m people each year, paying them the dole and calling them ‘in permanent education’ – therefore not ‘unemployed’
        – Lowering the standard for sickness for the lame and the lazy, pay them the ‘dole plus’ and call them ‘permanently disabled’
        Massively expanding ”regional’ and ‘local’ government and ‘qangos’, paying taxpayer money to quangos to employ the unemployable, and counting on these helpless useless sheep for future votes.

        I guess you are one of these, Uanime5?

        • forthurst
          Posted January 25, 2012 at 10:57 pm | Permalink

          “Renaming ‘Polytechnics’ as ‘universities’”

          That was John Major ( reference to his O levels-ed), “Grammar School in every town”; they used to offer London external degrees in Science and Engineering.
          Afterwards, they could offer their own more rigorous degrees in more useful subjects.

        • Electro-Kevin
          Posted January 26, 2012 at 12:08 am | Permalink

          One wonders why Labour didn’t get re-elected then, Uanime5

          You think the people said “Y’know what ? We’ve got full employment. The economy’s going great, Gordon Brown’s doing a fantastic job but we’re bored with this lot. Let’s vote in those nasty Tories and drive things down a bit.”

          This happens EVERY time. Labour bankrupt us and then their supporters claim that the incoming party is the cause of the problem.

          Uanime5. The joke has worn thin. You really aren’t funny anymore.

        • uanime5
          Posted January 26, 2012 at 12:50 am | Permalink

          You can’t get the dole if you’re in permanent education as the dole is only for people actively looking for work and are able to start immediately. Consequently being on the dole makes it almost impossible to get training or additional skills.

          Also unless you repeatedly enrol on university courses sending people to university will only get them off the unemployed register for 3-4 years. So this will only reduce unemployment for 3-4 years then it will start to increase to the previous levels. As unemployment remained at low levels during the 17 years when Labour was in power it’s clear that this was not the cause of low unemployment.

          Can you name any examples of how standards were lowered so more people could be considered unable to work? I recall that the Coalition tried to declare the sick and disabled as healthy so they could pay them less benefits but over two thirds of these declarations were overturned on appeal because these people were actually too ill or disabled to work.

          Regarding your third point are you actually objecting to the Government creating jobs and reducing unemployment? Would you rather have these people sitting around doing nothing while claiming benefits?

          • backofanenvelope
            Posted January 26, 2012 at 9:51 am | Permalink

            Presumably nearly one third of the appeals failed? As we have something like 2.5 million disabled, this suggests 800,000 people are claiming benefits they are not entitled to.

          • A different Simon
            Posted January 26, 2012 at 12:14 pm | Permalink

            “Regarding your third point are you actually objecting to the Government creating jobs and reducing unemployment? Would you rather have these people sitting around doing nothing while claiming benefits?”

            If they were doing non-jobs then yes I’d rather they were claiming benefits because every non-job destroys multiple real jobs .

            I also think that if an organisation is overmanned then they should at least investigate the possibilities of job-sharing and moving people from full time to part time .

            FYI sweden found that every “green” job created through subsidies destroyed 7 real jobs .

      • Single Acts
        Posted January 26, 2012 at 7:32 am | Permalink

        Did they?

        What was unemployment in 1997 and when Brown left office?

        • Bazman
          Posted January 26, 2012 at 8:17 pm | Permalink

          Unemployment is the highest since 1992. The number of people on benefits needs to be reduced by higher wages not lower benefits and that does not mean lowering benefits by no increases. Incentivising the bottom. This seems to be the main factor for the wealthy so do not say that they will just do nothing. They have more to gain. If you think this argument is disingenuous, you are right. Ram it.

  11. JimF
    Posted January 25, 2012 at 12:33 pm | Permalink

    “For the year, government and other services were up 2.5%, business services and finance were up 2.1%, whilst production industries were down 2.6%.”

    It’s easy to see why. The system is tilted towards government growth, through higher taxation. That taxation goes not to encouraging or supporting productive industry, but legislating against it, imposing and monitoring taxes on it.
    Financial Services are neither here nor there in this schema. They are supported and regulated in much the same way as elsewhere, have a fortunate time-slot in London, and a fortunate language slot too.
    In contrast, my Singaporean manufacturing competitors have quite an easy run against us.

  12. Bernard Otway
    Posted January 25, 2012 at 1:53 pm | Permalink

    Listening to James O’brien on LBC this morning,this was treated as if a scientist had announced there was going to be a massive solar flare,which would take the entire planet back to the stone age.Obviously his programme is Trotskyite/Stalinist in it’s inclination BUT
    the replies to the question AS IT WAS WORDED were predictable,AS ARE THE BBC/GRUNIAD etc.Anyway where is it written in tablets of stone that GROWTH happens always,in my opinion the graph is cerrated upwards with minor corrections always,because we are all human and have the need to rest and draw breath,plus of course POLITICIANS
    completely bend any rules and borrow years ahead,in anticipation of said GROWTH at
    a given % which when it does NOT happen acts like sand in a gearbox.Which then has to be repaired,which takes more time and exacerbates the cerrations in the graph.

    • Bob
      Posted January 25, 2012 at 7:21 pm | Permalink

      I wish they’d bring back Clive Bull to LBC.

  13. A different Simon
    Posted January 25, 2012 at 2:19 pm | Permalink

    Joining the dots it looks like the Govt is spending more on financial services .

    Is there any evidence to refute that assertion ?

  14. Neil Craig
    Posted January 25, 2012 at 2:46 pm | Permalink

    It seems likely the US president next year will be Newt Gingrich who recognises thatther key to growth is economic freedom |+ cheap energy; that massive government and parasitic regulation suck the lifeblood out of countries; that X-Prizes are the best way of stimulating technological progress: and that we could and should be mining the Moon.

    Would that there were a single British politician with 1% as much gumption. or perhaps simply with 1% as much concern for the wellbeing of his country.

    • A different Simon
      Posted January 25, 2012 at 4:57 pm | Permalink

      The only candidate that interested me was Ron Paul .

    • uanime5
      Posted January 26, 2012 at 12:54 am | Permalink

      I can’t recall any technological progress being stimulated by X-Prizes. Usually it’s stimulated by a high number of companies competing for a finite market.

      Mining the moon is a pipe dream. What are we going to mine for , how are we going to pay to get all the mining equipment to the moon, and assuming there’s something worth mining how will we get it back to Earth?

      • sm
        Posted January 26, 2012 at 10:47 am | Permalink
        • Bazman
          Posted January 26, 2012 at 8:21 pm | Permalink

          The question that remains unanswered by Mr Armstrong is. Does the moon exist? Would you say the high speed rail network is a silly fantasy?

      • Neil Craig
        Posted January 26, 2012 at 1:33 pm | Permalink

        1 – The discovery of Australia has produced some technological progress, at least for Australians. Cooks voyage depended on being able to calculate longitude which was achieved through the British government’s Longitude prize. In fact, though such prizes are rare it is difficult to find any substantial prize which did not achieve some progress (& obvioulsy any that didn’t didn’t cost anything so even that would be no argument against).

        2 – Wateer, diamonds, titanium etc. The main initial use will be to create materials to build solar power satellites in orbit. Such satellites will be able to provide unlimited electricty down here with almost no running costs.

        3 – Getting back to Earth is relatively easy (as you can see by looking at the size difference btween the Apollo rocket and the Eagle). Downhill all the way is easier than uphill.

        • Bazman
          Posted January 26, 2012 at 8:28 pm | Permalink

          Not least going up the hill faster than the earths rotation. Could need a fair bit of power and presumably fuel, not to mention a good steering system and a map to my uneducated mind. Sounds like rocket science which is probably quite complicated and pricy.

          • Neil Craig
            Posted January 27, 2012 at 10:59 am | Permalink

            That reply appears to be uninteligible. I take it you do not feel able to dispute the truth of the points I made.

            You remind me of the gentleman who said, just before the Wright brothers took off, that aircraft could never fly, and shortly afterwards that – well OK it may fly but it will never be able to carry even 1 passenger or any cargo.

          • Bazman
            Posted January 27, 2012 at 6:58 pm | Permalink

            Comes down to the laws of physics in the end and gravity is expensive to overcome and the more you overcome it the more expensive it gets. Which means it cannot ever be cheap to get into space no matter what technology is invented. Don’t see many private planes do you? Where is my flying car? I’ve been waiting since I was a child watching the Jetsons.

  15. Jordan Newell
    Posted January 25, 2012 at 2:52 pm | Permalink

    This blog illustrates just one of the ways in which the Government’s current economic narrative is nonsensical. On the one hand, apparently George Osborne’s tough decisions are getting the deficit down and keeping interest rates low. On the other hand, the cuts are actually not that deep, and in fact state spending is largely being maintained. These two arguments, frequently heard in the same interview, are just not compatible – unless, of course, the real reason the bond markets are being kind to us is that they approve of continued state support for the anaemic economy.

    • Mark
      Posted January 25, 2012 at 5:49 pm | Permalink

      Bond markets are quite happy to sell gilts to the BoE at top prices. It is buying rather more gilts than the DMO is issuing to “finance” the deficit.

  16. James Reade
    Posted January 25, 2012 at 3:27 pm | Permalink

    Just wondering, since yet again you ask the question about those that talk of government cuts, whether you ever bothered to answer my questions put to you on this numerous times.

    First, what is the source of government growth? Is it because everything else is contracting and the size of the government is not shrinking quite so much? Is it because benefits payments are increasing since unemployment is increasing, and thus tax receipts are down?

    And why is it you still think expectations have no impact whatsoever on consumption, yet they have a tremendous impact on exchange rates?

    • Caterpillar
      Posted January 25, 2012 at 8:24 pm | Permalink


      As a member of the unititiated could you explain to me what you mean by:

      ” source of government growth? Is it because everything else is contracting and the size of the government is not shrinking quite so much?”

      I think I must be looking at the figures the wrong way. Having downloaded the ONS excel file which contains the annual and quarterly indices for GDP by gross value add (2008 base) I see for example

      Year Manufacturing Govt&other … etc
      2008 100 100
      2009 90.4 102.3
      2010 93.7 103.1
      2011 95.8 104.8

      Presumably weights of categories will change in totalling GDP in each year, but I had, I think INcorrectly assumed by your comment, that since the index was monotonically increasing in Govt&other, then this indicated that Govt&other was …well… increasing. Could you clarify how Govt&other increasing doesn’t mean Govt&other is actually increasing? Or are you just saying that JohnR should be giving the breakdown of Govt&other?

      Anyway I think you have confused me, though not as much as trying to locate data on the ONS website…(otherwise I would have looked at the breakdown).

  17. uanime5
    Posted January 25, 2012 at 3:41 pm | Permalink

    Hey John I have a question. Why did Cameron and Clegg claim that they can’t stop RBS bonuses when there’s nothing in any of the contacts requiring these executives to have a bonus and RBS is 83% owned by the tax payer? What happened to shareholders holding executives to account?

    Also why does the Government think a cap of £1 million for bonuses is reasonable when they’re trying to cap welfare at the median salary of £26,000?

    • Bazman
      Posted January 25, 2012 at 7:20 pm | Permalink

      It’s the difference between the have-not’s and the have-yachts. A government frightened of the feral rich and trying to remove thirteen quid from a family with an extra child in an expensive area as the problems with the economy are now their fault. Not acceptable and only the fantasists are accepting it.

      • JimF
        Posted January 25, 2012 at 10:34 pm | Permalink

        For once I agree with you. Brian Pitman at Lloyds in the 80s used to justify high salaries because the share price was the first, last and only indicator of success, and that was climbing into the startosphere. Now banks like Lloyds and RBS have share prices falling like a stone, the justification has to revert to “in line with the competition” and “well we already agreed the Contract”. So why wasn’t share price performance in the Contract? Share price halving means these guys should be paying back money, not taking it!

        A subject little discussed here.

        • A different Simon
          Posted January 26, 2012 at 12:24 pm | Permalink

          Another reason why the banks should have been left to go to the wall .

          Would have been a bit of a wake up call to the bankers to find out they were not preferential creditors .

          All those credit default swaps and other counter-party risk would have ceased to exist .

          Saving the banks has been the most collosal mistake .

          Although we’ve thrown a lot of good money at the banks , it’s time to cut our losses , unplug the life-support , harvest any salvageable organs and cremate the rest .

      • Electro-Kevin
        Posted January 26, 2012 at 12:30 am | Permalink

        Bazman – I’m scared of the feral rich too.

        I live among them.

        What a rude, arrogant, ungrateful, ignorant, thoughtless, careless, selfish and slovenly bunch they are too.

        I wouldn’t mind if they helped out with the charity work around here but they don’t.

        That’s left to the workers to do to.

        We don’t expect that this will cure the economy on its own. But we’re all in this together, right ?

        Otherwise the only people who will be paying for it all will be the workers. The majority earning less than many unemployed people take.

        Perhaps Mr Redwood would like to publish what the rich contribute in taxes.

        You obviously aren’t aware.

        • Bazman
          Posted January 28, 2012 at 4:42 pm | Permalink

          The economy does not exist because a few rich people in their generosity fund it. They are often the biggest benefactors from it and so if they want to leave and take their money out of the game then (lean back in your chair, fingers together) then this is their decision. The economy is made up of millions of people working and buying things on reasonable incomes. The idea that there are producers and parasites as expressed in the example above has become a core philosophy of conservatives. They claim that wealthy people “produce” and are rich because they “produce.” The rest of us are “parasites” who suck blood and energy from the productive rich, by taxing them. In this belief system, We, the People are basically just “the help” who are otherwise in the way, and taxing the producers to pay for our “entitlements.” We “take money” from the producers through taxes, which are “redistributed” to the parasites or as the rich see us just the help. Ram it.

    • JimF
      Posted January 25, 2012 at 7:32 pm | Permalink


    • JimF
      Posted January 25, 2012 at 7:39 pm | Permalink

      Remember one has to reward the excellent business sense of pulling the rug from established retailers like Peacock and putting thousands of workers into the support of taxpayers. Barclays and other banks might support this reckless lending, but at RBS we can’t afford to take these risks with taxpayers’ money.
      It all makes sense, you know.

      • zorro
        Posted January 25, 2012 at 11:19 pm | Permalink

        RBS….an utter disgrace, and Mr Hester getting a bonus for it….Do your work karma.


    • Electro-Kevin
      Posted January 26, 2012 at 12:21 am | Permalink

      Uanime5 – It’s not a cap at the median salary of £26k

      Someone earning £26k only takes home around £19k.

      £26 take home = £35k before tax. The cap is at £35k salary.

      There are people on benefits taking far higher than £35k at the moment. And as benefits and pensions form the highest of the Govt expenditures at a time of £1 trn debt this needs to be tackled hard.

      This rate of largesse (many abusing the system) has caused upward pressure on house prices (benefit finanaced landlords) and shop prices in areas where average incomes are low. There are many negatively impacted social issues involved too. Also the polls show that people are more exercised about this issue than banker bonuses.

      If Cameron loses on this one he loses the next general election.

      • alan jutson
        Posted January 26, 2012 at 9:49 am | Permalink



        I do not now how many people earn above the so called £35,000 per annum, but I guess that there are very more in mumber that earn less.

        Thus those on £26,000 benefits would be way above what the majority of workers takes home after taxes.

        Seems to me the currant proposed cap is still too high, as it still favours staying on benefits.

  18. Winston Smith
    Posted January 25, 2012 at 3:59 pm | Permalink

    John, perhaps you can explain why the Coalition is following so many New Labour strategies and policies. They are adding yet another layer of administration and bureaucracy by continuing Blair’s unpopular city mayor policy. Is this because Cameron has reappointed the Blairite and labour activist, Will Cavendish to the Downing Street policy unit? What is the point in voting Conservative?

    Reply: Elected Mayors have from time to time been Conservative policy too. Mr Heseltine was very keen on them as I remember.

    • Julian
      Posted January 25, 2012 at 5:25 pm | Permalink

      After the closer of the factories and the reduction of union power the left has adopted the public sector as it’s power base. Labour has created a huge public sector with high salaries and those in it have a vested interest in supporting labour. Therefore it is very difficult to reduce the public sector quickly – if the coaltion cuts it too radically it will be voted out next time. The rights and wrongs are irrelevant but we are stuck with millionaire GPs and all the other public sector excesses until it can be slowly whitled down.

    • Bob
      Posted January 25, 2012 at 7:16 pm | Permalink

      “What is the point in voting Conservative?”

      I’ve been asking the same question ever since they back stabbed Maggie.

      • backofanenvelope
        Posted January 26, 2012 at 7:06 am | Permalink

        Funny that – so have I!

      • APL
        Posted January 26, 2012 at 4:51 pm | Permalink

        Bob: “I’ve been asking the same question ever since they back stabbed Maggie.”

        People! You all need to realize that Thatcher was an aberration as far as the Tory party was concerned.

        The norm is people like Ken Clarke, Geoffery Howe, Edward Heath, Michael Portillo (made out to be hard right, but is one of the wettest drips around now).

  19. forthurst
    Posted January 25, 2012 at 4:36 pm | Permalink

    Such ‘growth’ that there is, is being fuelled by theft from those with savings. It is utterly disgraceful that after deliberately debauching the currency and holding BoE interest rates at high negative values, productive industry is still unable to fire up. We need a new Chancellor and a new direction.

    • Caterpillar
      Posted January 26, 2012 at 12:08 am | Permalink


      The ONS, ‘GDP and the Labour Market – 2011 Q4 – January GDP update’ actaully states that;

      “In the manufacturing sector … productivity on an output per hour basis has risen by 4.7 per cent over the past year and is now at record levels.”

      But the total number of hours worked (and employment) is actually down.

      Economists will no doubt see things differently but my guess would be this is as one would have expected for a private sector adjustment. Survival becomes more of an objective than profitability (- a going concern can not be assumed). This typically means a concentration on cashflow and efficiency rather than profit & revenues – there might not be any credit streams to rely on. If the BoE/MPC looses control inflation (and does not support Mr Darling’s original plan that some QE should be directed at private sector credit) then the subsequent price rises destroy the previously more reliable and understood domestic demand. It might be that terms of trade become more favourable for exporting but there are associated risks which cannot be readily taken due to the cash & credit problem. Evan an understood expansion might be a bit of a problem from a working capital point of view, giventight/unreliable credit supply.

      So in summary my guess is that the BoE/MPC inflation policy of destroying domestic consumer demand and gambling on exports, whilst not immediately giving credit support really does limit expansion even though productivity is increased. Both savings and currency are pointlessly destroyed.

      Still I’m only guessing and the economists and real experience business people on here may well see things very differently.

      • Caterpillar
        Posted January 26, 2012 at 12:10 am | Permalink

        “looses” – an understable typos given the subject? / loses.

        • Electro-Kevin
          Posted January 26, 2012 at 9:01 am | Permalink

          Caterpillar – It doesn’t help that you can’t view and edit before you post. Fear not. We all know what you mean.

  20. alan jutson
    Posted January 25, 2012 at 5:24 pm | Permalink

    If you keep in banging your head against a brick wall hoping to gain entry to your house, you give yourself brain damage, but never get in.

    If you stop and think of another option, like a window or door the chances are (even if they are locked) you may make more progress.

    Why does the governmet not stop and think.

    The two industries which make and build things, are slowing down because people do not have enough disposable income to purchase their products and keep them up to capacity.

    With tax rates at the present level, they will still be banging their heads against a wall.

    Lower taxes, lower spending, lower benefits, have smaller government, and let us get the correct balance back in the economy.

    • uanime5
      Posted January 26, 2012 at 12:59 am | Permalink

      Lower benefits means less money to purchase these products so it will reduce demand, not increase it.

      Lower taxes also are no guarantee of increased spending on construction and manufacture as people may use their tax breaks to purchase foreign products, lower their debts, spend it on another industry, or save the extra money.

      • alan jutson
        Posted January 26, 2012 at 9:53 am | Permalink


        I do not agree. As it is not just a simple arithmetic calculation of one against another, the overheads wasted in transfering the tax collected from one, to delivering of benefits to anotheralso have to be taken into account, as does the work ethic.

        Far better to increase the personal tax allowance for all individuals, this will then reward those in work, for working.

  21. Javelin
    Posted January 25, 2012 at 5:46 pm | Permalink

    Doesn’t this show that debt needs to be included in GDP – for that matter in accounts too. If you can add “good will” into your accounts you should be able to add bad debts (ie deficits)

    • sm
      Posted January 26, 2012 at 11:20 am | Permalink

      Yes we need a way of taking account growth in debt when looking at GDP growth. Maybe it should be GDP plus or minus debt change.

  22. Conrad Jones (Cheam)
    Posted January 25, 2012 at 6:43 pm | Permalink

    “Perhaps all those who have been talking of the massive state cuts might like to explain how this results in a continued expansion of the state sector RELATIVE to manufacturing industry.”

    UK debt passes 1 Trillion
    Official UK public sector debt passed £1 trillion for the first time. This is equivalent to 64% of GDP.

    * £1,004 billion.
    * or £1,004,000 million
    * or £1,004,000,000,000
    * or if you prefer 2 billion iPhone 4 costing £499

    I would take a guess and say that the increased amount of Interest Payments the Government is paying is drawing money away from the economy as a whole, which is reducing Private Sector Activity and confidence.

    Manufacturing pay has also not kept up with inflation – which further drains money out of the economy. Less Money – Less Spending – Less Private Sector growth.

    The Property Market is still overpriced, this means that First Time Buyers are not able to spend as much in the economy.

    There is a prospect of collapse in the Housing Market which further reduces confidence – so people are saving despite the negative interest rates. QE2 will be followed by QE3 to protect the high housing prices, or prevent a collapse.

    The word Relative is apt as the costs may be increasing but the value is decreasing.
    It gives me no pleasure to say that Government borrowing is probably the only way out of this recession, given our current debt money system. We are pushed into enforced Socialism and Central control through a shortage of real money, and lack of confidence due to continued Inflation which restricts the activities of Private Business as they are unable to plan ahead with confidence by investing in staff and equipment.

    We’re all holding our breath waiting to see if there is going to be another War, Financial Crisis or Property Collapse. There’s work to be done, there’s people willing and able to do it, the resources are available but there’s not enough money in the System.

    I’m sure a War in Iran will be great for Arms Manufacturers, Construction and Oil Companies, but that alone will not end the recession.

    We now owe £1 Trillion and counting … When will all our taxes be diverted into just servicing this debt ?

    What you are really saying is that David Cameron’s grand idea of Private Sector taking up the mantel has failed. Of course it did – because the foundations are made of sand.

    Give us sound money and the Private Sector will flourish – that is the lesson from History. Chris Grayling should know that – he did get a History Degree.

    Reduced Money = Reduced Activity.

    • Electro-Kevin
      Posted January 26, 2012 at 12:46 am | Permalink

      That house prices are so fundamental to our country’s value is worrying.

      It really is just a load of bluff ‘n’ fluff isn’t it ?

      • A different Simon
        Posted January 26, 2012 at 12:56 pm | Permalink

        We’ve sacrificed all saving for old age on the altar of ever higher house prices .

        Can’t for the life of me understand how anyone thought this was a good idea .

    • sm
      Posted January 26, 2012 at 11:47 am | Permalink

      A suggested solution by Steve Keen

      A Modern Jubilee would create fiat money in the same way as with Quantitative Easing, but would direct that money to the bank accounts of the public with the requirement that the first use of this money would be to reduce debt. Debtors whose debt exceeded their injection would have their debt reduced but not eliminated, while at the other extreme, recipients with no debt would receive a cash injection into their deposit accounts.

      • Conrad Jones (Cheam)
        Posted January 26, 2012 at 5:39 pm | Permalink

        There’s no place in this World for economists like Professor Steve Keen – unfortunately for him – he understands economics.

        He’s therefore very unpopular with mainstream media, especially when he predicted the Financial Crisis.

        Professor Steve Keen said:

        “For its entire history, macroeconomics has been dominated by mathematical models that ignore the existence of money, debt and banking, and that perceive the economy’s movement through time as transitions from one state of equilibrium to another.”

        Surely he cannot be right ? Is the economy affected by Money, Debt and Banking ? Surely not ?

        Does a State of Equilibrium (in mainstream economics) mean that most Economists think that Growth is unnecessary?

        He’s appeared once on ‘News 24’s HardTalk and BBC2 Newsnight.

        • sm
          Posted January 26, 2012 at 7:38 pm | Permalink

          He’s also been a guest on RT , Max Keiser show, a PC uncut version of events.

          Just drop it into Google, can you imagine the BBC running it and defending it. 22/12/11. Capitalism without capital

          JR may need to drop the link.

  23. Jon
    Posted January 25, 2012 at 6:47 pm | Permalink

    Atleast the rate of increase in government spending has come down. It was 37.6% in 1997 and was 45.4% in 2010. We can hope for an actual reduction next year but we are moving towards an aged population. We need more cuts to pay for that cost which will go up.

  24. Martyn
    Posted January 25, 2012 at 7:34 pm | Permalink

    Someone, somehow has to take an axe to the 53% of non-productive people employed by the government and paid for by taxing companies and individuals to the point of serious pain.

    How can the government be so blind as to not recognise that having 53% of the working population in government service, plus the untold number of others who depend on being subsidised by the State is in any way sustainable? Where has common-sense gone, has it fled the corridors of power?

    We would all be very much better off if we handed government, lock stock and barrel to the Women’s Institute, who probably know more about sound financial house-keeping than the government and civil service.

    • uanime5
      Posted January 26, 2012 at 1:03 am | Permalink

      What’s your source for 53% of the working age population working in the state sector? 15.9 million people in the public sector seems like a huge exaggeration.

      • Electro-Kevin
        Posted January 26, 2012 at 8:55 am | Permalink

        Let’s put it this way, Uanime5:

        Of my large circle of friends and associates I know only one who is involved in production and export – and that is for Proctor and Gamble (Americans) and his job is to set up production lines in Poland, Brazil, India and China.

        Of the others I know in work they are:

        – transport workers
        – teachers
        – policemen
        – builders/structural engineers
        – hairdressers
        – restaurant owners
        – BTL landlords

        Virtually all of their client base is: other workers in their own category, those on the state payroll, the unemployed, the retired.

        They may be categorised as private sector workers but to all intents and purposes they are paid by the state too.

        • A different Simon
          Posted January 26, 2012 at 12:58 pm | Permalink

          Excellent assessment .

  25. Martin
    Posted January 25, 2012 at 7:50 pm | Permalink

    I’m not surprised growth has stalled.

    1) The present government are busy re-organising health and education. Reorganise as we know from nu-labour days means spend loads of money for not a lot.

    2) The present government suppressed growth by banning private sector investment at the third Heathrow runway and is trying to supress the aviation sector with APD.

  • 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.

  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page