The twin deficits

For several years the UK economic debate has been fixated by the state deficit and borrowing requirement, and has largely ignored the balance of payments deficit. I presume this is because of official adherence to all EU rules and guidance, so they have been trying to get our budget deficit back down to Maastricht compliance levels at under 3% of GDP. There is celebration this month because at last we have got there thanks to a further surge in tax revenues that outperform the usual Treasury pessimistic forecasts that delight in getting it wrong.

I have not been worried about the state deficit for sometime, ever since Mr Brown found out that the UK state can literally print money to pay its bills. Mr Osborne, originally a critic of this in opposition, then discovered its charms in office as well. It turned out to have no adverse consequences on shop price inflation, though of course it caused massive price inflation in government bonds, because it was accompanied by severe pressure against bank lending to the private sector to avoid an inflationary blow off. I always adjust the outstanding debt by the £435 bn the state has bought up, as this is in no sense a debt we owe. So our government borrowing level (excluding future state pensions which some here worry about and which have always been pay as you go out of taxation) is modest by world standards at around 65% of GDP, and at current interest rates is affordable.

Most of the state debt we owe to each other anyway. The government owes it to taxpayers who own the debt in their pension funds and insurance policies. The state can always raise enough money to pay the donestic bills backed by the huge powers to tax, and as we have just seen when credit expansion and inflation are low it can also use liquidity created by the monetary authorities.

The deficit I worry about much more is our external deficit. That is the one where we have to buy foreign currencies to pay for it. It is the reason why we keep selling some of our best property and business assets to foreigners, and why we have to borrow abroad. Running at around 5% of GDP it is high by world standards, and means we gradually get into more debt or sell more assets to keep up with it. When you owe money to foreigners they may not accept money created to pay them off but will need real assets.

One quarter of the payments deficit is the government’s payments abroad for EU contributions and overseas aid. Stopping the EU payments halves that, and spending more of our overseas aid on the refugees who come to the UK here in the UK would help as well. Under overseas aid rules you can include the first year costs of refugees and migrants in your own country, and supplies and capital items you need to provide aid abroad. So lets make sure where appropriate we do spend the aid money at home or in the country we are helping, rather than buying imports from other advanced countries with it. One of the big wins from Brexit should be the opportunity to slash the big deficit in fish and food which is an important part of the burden of this overseas drag on our finances. I want the Treasury to take the balance of payments deficit more seriously and to act as a counter to those who want us to give more money away to the EU to perpetuate this large imbalance.


  1. Lifelogic
    March 5, 2018

    You say “it was accompanied by severe pressure against bank lending to the private sector” Indeed the banks are being restricted and regulated in absurd ways and the lack of lending to the private sector is hugely damaging to UK growth, productivity and our ability to compete in the world. It also damages our balance of trade.

    The surge in tax receipts is not sustainable, much of it comes from people drawing pensions early (just bringing forwards tax receipts by a few years and then reducing receipts a few years hence). Other idiotic taxes like high levels of stamp duty turnover tax and taxing landlords on profits they have not even made will just slowly strangle the sector and the tax receipts will die. Only taxes on profits that at likely to continue are sustainable.

    The balance of trade position will sort itself out in the end as the pound will float as needed to make imports and exports less or more competitive.

    What is desperately needed (apart from an economically literate chancellor & PM) is lower taxes on the productive sector, a bonfire of red tape, cheap reliable on demand energy, a huge contraction of the largely parasitic and appallingly incompetent state sector, a clean real BREXIT and a move to early hire and fire. This combined with real freedom choice in health care, education & housing.

    Alas we have daft socialists in charge and even dafter ones waiting in the wings.

    1. Lifelogic
      March 5, 2018

      “easy” hire and fire.

    2. IC
      March 7, 2018

      Now we can get back to living in the real world rather than right wing fantasy!

  2. Lifelogic
    March 5, 2018

    The usually sound Charles Moore in the Telegraph today admits to having voted to stay in the “Common Market” when he was 18. I was a bit too young to vote but I found the leave proponents far more convincing even in my youth.

    1. Anonymous
      March 5, 2018

      People such as my self were too young to have voted the first time around but are now being told that we’re too old to have voted this time around.

      Prices went through the roof when we went decimal, if I recall.

      1. William Neziac
        March 6, 2018

        “Prices went through the roof when we went decimal, if I recall”: Any proof of that?

        1. R.T.G.
          March 6, 2018

          @ William Neziac
          ““Prices went through the roof when we went decimal, if I recall”: Any proof of that?”

          Unfortunately, the proof is limited to those who know where to discover the correct information.

          You could try asking a roofer?

    2. Man of Kent
      March 5, 2018

      I also voted to stay but that was when I believed politicians would not lie .

      I could not believe that a Conservative PM would lie about a matter like sovereignty.
      Now I take nothing for granted and go to the source material if possible .

      What is essential now is to prepare the backstop position of WTO rules just in case the preferred position does not happen . There was some prevarication on this at the Mansion House .

    3. Hope
      March 5, 2018

      In the papers today the UK is bound by regulatory alignment for an undefined period, but if it ever decides to diverge from EU regulations in the future there will be a huge cost. What is the cost and why?

      Moreover why is May so intent on wasting our taxes on the EU when we voted leave and there was meant to be a saving. So is she using the contribution money to spend on the EU in other ways? The £100 billion she has agreed to give the EU for nothing in return is about 8 years of contritions. Why? And have you taken this vast sum into account in your alleged 5%?

      We also read May took retainer Cameron’s advice in her last capitulation speech! Again, JR, if she has publicly stated she will not go to WTO or walk away where is her bargaining chip when the EU responds and how does this equate to her claim no deal is better than a bad deal? She has already discounted it!

    4. Richard1
      March 5, 2018

      I remember the campaign but couldn’t vote. I handed round leaflets and stickers for Britain in Europe. I was in favour of joining but I remember thinking to myself that I didn’t understand at all what it was about. I was well under 16 but have always opposed votes for children since, remembering my own unpreparedness in 1975.

    5. Bob
      March 5, 2018

      “I was a bit too young to vote but I found the leave proponents far more convincing even in my youth.”

      Me too. I had a gut feeling that it wouldn’t be limited to a common market, even though most politicians, the press and the broadcast media told us that it would not lead to political union or loss of sovereignty.

      I was right not to trust them.

    6. David Price
      March 6, 2018

      The 1975 referendum was the first time I voted and I voted “no” – with much of family and friends in the commonwealth I was concerned our government would abandon then and barriers would go up.

      I was right then and the focus of the eupilics and government for the needs of the EU rather than for us has only reinforced that view.

  3. Mark B
    March 5, 2018

    Good morning

    What the government has done through money printing, is reduce the spending power of people and place the burden upon them. It has also all but destroyed the pension industry and savings, hitting some of the most vulnerable in society.

    The country will not only benefit from cheaper imports but, the government will be able to keep its VAT receipts which it currently sends to the EU.

    It would be very interest to know exactly how much the EU gets in one form or another (including fines for being successful) from the UK’s membership and, where HMG will in effect receive a windfall ? It would also be nice is such a windfall did not go into governmental department black holes (eg NHS), but instead went into tax reductions, particularly for SME’s, where it can be used to create wealth and more jobs. We could then look at other areas where the UK might improve on, such as cheaper and more reliable domestic energy resources and easier regulation of our internal market. This would make the UK a better place for investment, development, innovation and hopefully, increase our export sales.

    Sadly all this is being undone by those who wish to remain in the EU by stealth. History will look back upon this time as a golden opportunity lost.

  4. Spratt
    March 5, 2018

    This may be a naive question but why does the government borrow from abroad when it could create some decent paying National Savings products for U.K. resident tax payers? There are lots of people who don’t have occupational pensions of any magnitude and whose savings aren’t of an order to justify expensive management fees but who would leap at the chance to get a 3 or 4% return.

    Reply The governmebnt does not usually borrow abroad. The private sector has to borrow from abroad or sell assets to foreigners to get the for ex to pay for the imports

  5. Caterpillar
    March 5, 2018


    I = S + (T – G) + (M – X)

    The UK might need to increase saving to move investment forward if the current account position is ‘improved’.

    1. Rien Huizer
      March 5, 2018


      1. Caterpillar
        March 5, 2018

        Exactly, there might have been ‘good’ reason to ignore the current account. Whether improving the current account will lead to saving or whether, now that the BoE believes full capacity is being reached, that ironically future interest moves will help the long run is to be seen.

    2. Lifelogic
      March 5, 2018

      It is not really improving very much. Much of the tax has just been brought forwards (for example by people drawing pensions early and paying tax on them early). Also you cannot keep taxing landlords on profits they have not made for very long, what has the treasury got against Tenants?

      Hammond with his 15% Stamp duty, his IHT threshold ratting, his attacks on oversees investors in the UK and his muggings of private pension pots and landlords and tenants is an economic illiterate. He even want to retain all the absurd constraints of the EU after we have “left” and think HS2 is an “investment” what a Donkey he is.

      Meanwhile May is to tell off developers for taking too long and land banking. Clearly she is either just totally deluded about how property developers work or she is just pathetically being a politician even though she know they are not really to blame.

      The reasons for any delay are usually because of planning, absurd OTT planning requirements, over taxation and OTT building controls often making it not cost effective to develop at that time. Or banking restriction on development lending and capacity limits on finding suitable builders and workers. Will someone explain this to the very silly (or appallingly cynical, dishonest/two faced – it is clearly one or the other) Theresa May.

      Developers are not charities dear. They cannot help themselves to money from other people’s pockets as this government endlessly does!

    3. acorn
      March 5, 2018

      Caterpillar, to aid understanding of that equation, it is worth rearranging the equation so. (I -S) + (G – T) + ( X – M) = 0 This allows the separation of the elements that add spending power into the economy and the elements that subtract spending power.

      “I” = private sector investment, plus “G” = government expenditure, plus “X” = export sales revenue; all add spending power into the domestic economy.

      “S” = private sector savings, plus “T” = taxes, plus “M” = imports; extract spending power from the domestic economy.

      Remember that the government’s so called “national debt”, is mirrored to the penny as the non-government sectors’ “savings”. The government will get back all its spending eventually by taxes and other charges on private sector spending. The government is not bothered if it gets it back this year or in decades time. It is never going to run out of its own fiat currency.

  6. Andy
    March 5, 2018

    David Willetts spells it out today.

    The baby boomers have economically raped our country.

    There is no other word to describe the behaviour of this awful generation.

    1. Not so old timer
      March 5, 2018


      In fact it’s your generation that went credit bingeing and demanded fully furnished first homes and meals out twice a week.

      YOURS caused the Credit Crunch.( If you’ve ever held credit to buy anything other than your house then you are guilty. )

      The boomer generation bought a first house at 30 with icycles on the insides of the windows in winter – threadbear furnishings, no central heating, no foreign holidays and saw 15% interest rates when John Major tried to align our currency with the Deutchmark.

      A Vesta curry and a bottle of Blue Nun was considered a treat.

      Unlike your financially incontinent generation we still keep money in jars and don’t spend more than we have.

      My music was multicultural Ska by the way, not the swinging 50s jive that you seem to think it was.

      etc ed

    2. Ian wragg
      March 5, 2018

      What a bitter sad person you are. I spent 9 years at sea and 30 years in the bush and desert. I paid National Insurance the whole time and invested my money in Britain.
      Whenever possible I spent my maintenance budget with UK companies.
      What have you achieved.

    3. Edward2
      March 5, 2018

      They have paid the most tax of any previous generation.
      Your anger needs to be targeted on governments who wasted that money.
      Like the years of Blair and Brown.

    4. Wessexboy
      March 5, 2018

      Good review of his book in the Guardian(!) Surprisingly it does not share your conclusion Andy…

    5. graham1946
      March 5, 2018

      There is still money to be made if you get off your backside and make the effort.

      Maybe you should give it a try rather than wasting your time ranting on here. I know when I was in business I had no time for such fripperies, I worked 7 days a week.

    6. L Jones
      March 5, 2018

      So, Andy – it’s expedient to forget that your despised ”baby boomers” generally worked and paid tax all their lives in order to provide for their retirements, is it? I take it you are one of the present ”snowflake generation” who resent the fact that you can’t have it all on a plate NOW and see those people who had to work and wait as ”this awful generation”, who actually added to the wealth of this country. The behaviour that you so denigrate is the baby boomers spending what they themselves worked for, and, in the process, giving employment to countless others. What sort of lifestyle would YOU choose for them?
      If it is wrong to insult people because of colour, or religion, or sexual proclivity, then perhaps it should be equally reprehensible to cast aspersions upon tens of thousands of people because of their age.

    7. eeyore
      March 5, 2018

      Andy – console yourself that a live baby boomer is but cash on the hoof for the young. Soon we evil elderly will be dead. You and your generation stand to bag the lot (unless we disinherit you in sorrow at your unworthiness and leave it all to a cats’ home).

    8. Hope
      March 5, 2018

      Andy, You are quite disgusting.

      If you rely on anything Willets says you are an absolute fool. The same man happy to give free university tuition to EU students in this country while giving a lifetime of debt to English students. He was never fit of the office he held.

      The govt holds the purse strings and laws (which are allowed by the EU), look to it to blame for any economic failures.

    9. Lifelogic
      March 5, 2018

      This is and utter complete drivel. Two brains (perhaps) Willetts has no real understanding of reality. He has it totally wrong – as do the BBC and Labour who often push this total drivel. In my day you could not even buy a mobile phone let alone a smart one that now cost almost nothing. Even an LP about 4 hours work! Houses in many areas are not at all expensive either.

      It is true that lots of the young have foolish spent £50K on virtually worthless degrees though.

      When I bought my first flat in London it cost a fortune. Even then we needed two salaries and some part time work and a lodger to pay for it. We even had to suffer the appalling John Major and his up to 17% mortgage rates too.

    10. Anonymous
      March 5, 2018

      I think that boomers were to blame only in that they were far too tolerant and weak in the face of cultural Marxism – and the EU.

    11. nhsgp
      March 5, 2018

      Wrong. Politicians have.

      The baby boomers have been ripped off. If their NI had been invested Mr Average would have had 1.3 million in the bank. Add in his income from that he the expected money by the time he died, 2 million

      The state offers 430K of state debts, most is pensions, and 115K of state pension.

      Mr Average baby boomer has lost over 2 million

      So what about the young? The inherit 430K of debt, a debt they can’t pay. The clever ones can’t pay 50K of student loans.

      But now look at John’s post. Why do you think he keeps pushing the only debt is borrowing angle?

      It’s simple. If people received an annual statement from HMRC with their share of the debt, all the current politicians would be out and more likely in the clink for the rest of their lives.

    12. rose
      March 5, 2018

      The incitement of hatred against old people is as dangerous and unpleasant as the incitement against European men and their descendants in other parts of the world.

    13. Richard1
      March 5, 2018

      Has David Willetts really said something so utterly meaningless and dim? I imagine you are putting words in his mouth. It makes no more sense to damn a ‘generation’ – whatever that is, given people are born the whole time not in generational blocks – than it does to damn everyone of a certain skin colour.

    14. Bob
      March 5, 2018

      Willets should save it for the man who raided the pension funds and sold the gold.

    15. Eh?
      March 5, 2018

      Who is he?

      1. Dennis Zoff
        March 6, 2018

        David Willetts studied Philosophy, Politics and Economics (PPE) at Christ Church, Oxford ….enough said!


    16. libertarian
      March 5, 2018


      This awful generation…. lol

      That will be the generation that invented all the technology you now use, the generation that have given you the highest standard of living, the healthiest and longest lived lifespan in human history…

      Tell you what young Andy, go away, start a business , employ some people, trade overseas then get back to us and tell us all about it….. You muppet

      1. Edward2
        March 5, 2018

        It needed saying.
        Thank you Libertarian

    17. libertarian
      March 5, 2018

      Oh and Andy another thing.

      Maybe if millennials weren’t so dumb and naive they would stop voting for “free stuff” they would stop believing socialist politicians ( all main parties are social democrats) and your generation actually tried working for a living, and voting for people that will actually stop manipulating interest rates , stop borrowing trillions of pounds and let the market provide decent affordable housing , you might get on a bit better. In the meantime I’m going to retire to my estate in the country and laugh at you….

      1. libertarian
        March 5, 2018


        It is true though what you say, the Boomers made a big big mistake that made life more difficult than it need be.

        Back in 75 when most Boomers were just able to vote for the first time, we made a dreadful error. We voted to join the EEC. Thankfully in order to make your life better we’ve now rectified that .

    18. Lifelogic
      March 5, 2018

      “The time has come when we boomers are going to have reach into our own pockets,” say two brains Willetts.

      What on earth does he think 15% stamp duty, 45% income tax, council taxes, rates, 20% vat, 40% IHT, 12% IPT, fuel tax, planning gains tax, green crap taxes, 28% CGT tax (without even indexation), alcohol tax plus all the rest already do? We are taxed to the hilt already mate. Incentives to work or save have largely been destroyed by government for most people. Many of the rich and hard working are sensibly leaving.

      The way forwards is to cut the size of this bloated, inept and wasteful government a get people to start to provide for themselves more – for health and education for example. He wants everyone sucking on the nipple of the state like all socialists – it would be a disaster (indeed already is). The nipple would run out of milk, there would be a five year waiting list for it and if you did get any milk it would be foul & rancid too.

    19. Mark
      March 5, 2018

      Willetts just wants to pinch everything. It is he who thinks it a brilliant idea to put our youth deeply in debt with no hope of paying it off. Then he complains about the consequences.

    20. L Jones
      March 6, 2018

      Andy – I may be a little late in adding this, but I’ve just been reading all the other replies to your very silly post.
      I notice that there was no further comment from you. Is this because you were forced to admit you had it wrong, or because you were moderated into the ether?

  7. duncan
    March 5, 2018

    Our obligations to the EU will pale into insignificance if the British people choose to elect a collectivist Labour government at the next GE. Such a government will politicise the nation and its people and collectivise huge swathes of the British economy.

    Our obligations to the state will explode as collectivist Labour raise huge amounts of debt to carry out their plan of placing under political and trades union control many areas of private sector activity

    Yes, we must take back full control but having foreign interests own UK based assets does offer an insurance policy against a hard left Labour government.

    Should the grotesques do get into power they will forcibly nationalise what they can, foreign shareholders will fight back, we will see a run on sterling and Labour will drive up interest rates to protect sterling from the inevitable collapse trashing the economy, personal debt repayments and the housing market

    I would like to see this government take all the steps they can to protect us all against a collectivist government

    I believe hard left Labour will attack the freedom of the press, our own freedoms, they will politicise society and impose all sorts of restrictions in all areas of life

    It’s time for the Tories to get real here. The Labour party we see today is the most extreme political party I have ever seen come so close to power

    The EU threat is minor compared to what Corbyn, McDonnell and McCluskey have in store for the UK should these three occupy No.10

  8. Bryan Harris
    March 5, 2018

    Sensible …

    I recall Harold Wilson coming on tv every month telling us how much we were in trouble with our balance of payments deficit … it was always very cosy, pipe, and fireside chats…
    But, at least it was a focus on what was happening in the real world.

    More focus should certainly be put onto this subject…otherwise it gets ignored, as most commentators have thier heads in the sand

    1. Peter
      March 5, 2018

      All parties at the time were concerned with the balance of payments.

      However, I don’t accept Mr. Redwood’s claim ‘it is the reason why we keep selling some of our best property and business assets to foreigners ‘ Doctrinaire free trade notions are a more likely excuse. It is notable that our European neighbours would not countenance this. If Cadbury had been French or German say, there is no way their government would have allowed it to be sold to American asset strippers who shifted production abroad at the earliest opportunity. The foreign ownership of expensive property in a nations capital(as a sort of overseas cash deposit box) would not be allowed to get out of hand in Europe either.

      1. W.A. Laugh
        March 7, 2018

        Interesting comment. JR seems to have forgotten what he did as adviser to Thatcher, then as minister, and shadow: “Who me? I have never let foreign companies strip British assets, or if I did, I was young and didn’t know what I was doing. Can’t you see I am innocent of all these things? Trust me, I have only been chairman of various exporting companies”.

    2. Rien Huizer
      March 5, 2018

      And this was in the days of exchange control and no hedge funds..

    3. Lifelogic
      March 5, 2018

      Balance of payment deficits sort themselves out by currency devaluation! What is needed is some competitive industry. Get the government off their backs, cut red tape, go for cheap energy, sort out some competitive banking, get out of the EU and they will be competitive. Government is the problem (Hammond’s idiotic over taxation and waste in particular).

  9. alan jutson
    March 5, 2018

    I agree about the balance of payments deficit, I also remember the Wilson Government being fixated by it!
    Seems it is only in the last couple of decades that the media and politicians seem to have ignored it.

    Why are the Government negotiating to accept EU rules on standards John, I would have thought the whole idea of leaving the EU was to get rid of such detail.

    Yes of course companies wishing to sell their products to the EU need to make them to EU standards, but then that is the case with USA standards, Canadian standards, Chinese standards and the rest of the World, why shackle all those who only make for the UK market, and do not export at all.

    Or is it that the EU want use to have their standards, so that their goods can be made exactly the same as in the EU without change, and thus are automatically approved in the UK.

    Thus the benefit is to the EU not the UK !

    1. Denis Cooper
      March 5, 2018

      A balance of payments deficit becomes a less critical problem when you have given up trying to hold a fixed exchange rate for your currency. Or perhaps it would be better to say that it can become a chronic rather than an acute condition.

    2. gregL
      March 5, 2018

      alan jutson..Don’t worry about standards with the EU for the future..the standards we’ll eventually have to meet will be according to WTO rules. Things are in a state of flux, Trump is starting a tariffs war it seems..things will probably have to go to the WTO for decisions..all of this will take the meantime we will be making deals with our new trading partners overseas free from the no need to be concerned about EU standards

    3. Peter Wood
      March 5, 2018

      In her recent interview, Mrs. May mentioned the EU has accepted mutual approval of product standards in some FTA’s. so your point is reasonable; why not agree, in our FTA, mutual approval of most if not all products. Reason, that would be giving us a ‘good deal’ and the EU bureaucrats cannot allow that.
      When will May wake up! We will only be offered a deal that is worse than WTO terms, so the UK must prepare for WTO now.

    4. Hope
      March 5, 2018

      Alan, it is to make sure the UK is not more competitive than the EU. Secondly, it is reported regulatory alignment will continue for an undefined period and if the UK does wish to diverge, let alone leave, there will be a huge cost. Apparently May accepted and acknowledged this!

      1. Hope
        March 5, 2018

        In short she is allowing 27 EU countries to dictate the UK trade policy without the UK having a voice whatsoever! Who could agree to this? Still no mention what the EU compromised or gave away, despite her speech (or EU co authored speech).

        1. gregL
          March 6, 2018

          Hope.. We’re leaving and probably going to WTO rules for trading worldwide..we might eventually end up with a Canada style agreement with them for some things but it will take years to negotiate. So better forget about the EU, we’re leaving March 2019 as per A50 and as was confirmed by the PM in the House yesterday. All these talks going on at the moment are only a smokescreen to wind things down and now especially after the anti populist vote in Italy the EU side will be running scared and will only make things much tougher for us, so there will be no agreement along the lines the PM outlined..not a hope

        2. gregL
          March 6, 2018

          corr’n..Anti establishment vote in Italy

    5. L Jones
      March 5, 2018

      Nothing new there, then, Alan!

    6. NickC
      March 5, 2018

      Alan, You are correct about standards. In a very small way I exported goods to the EU. Whether I made the parts myself, or bought in and modified, there was no independent or government check that I complied to EU technical standards. Indeed, the chief of the HMRC stated that they only physically inspect 0.5% of imports from outside the EU; the bulk being pre-cleared electronically.

  10. Nig l
    March 5, 2018

    I see a Cambridge University paper has branded the Treasury economic reports on the effects of Brexit as cavalier. More downright dishonest, I would say.

  11. Anonymous
    March 5, 2018

    “I have not been worried about the state deficit for sometime, ever since Mr Brown found out that the UK state can literally print money to pay its bills.”

    As you correctly report later foreign creditors doubt your currency and come after your assets instead. To treat the twin deficits as separate issues is mistaken. One morphs into the other.

    It’s all a worry and it’s all increased whilst in the EU and long before the referendum – no matter how much Remainers bang on about open borders contributing to growth.

    Growth in borrowing is all I see.

    Why isn’t NHS treatment for arrivees who refuse to pay not deducted from the aid contributions to their home countries ? Surely this must count as foreign aid ???

    1. David Price
      March 6, 2018

      Your last point is a good idea though I would at least double the charge against the aid to account for the opportunity cost of the facility/resource not being available to a UK taxpayer.

  12. Alan
    March 5, 2018

    I agree with much of this article up to the last paragraph which seems to be perpetuating the fantasy that leaving the EU will make us wealthier, when it is much more likely to make us poorer (by about £100 billion per year) than we would be if we stayed in the EU. Also we will be continuing to pay for those EU agencies that we wish to use, probably at greater rates than we currently pay and with no rebate or off-setting payments for agencies within the UK. As for getting cheaper food, we don’t yet know to what extent we will move away from importing from the EU. That depends on the nature of the trade agreement which we haven’t even started to negotiate.

    1. Anonymous
      March 5, 2018

      The wealth that the EU ‘provides’ is illusory.

      A clue is in the subject of this post – debt upon debt.

      Built up on ever increasing demand for housing. If May’s house building plans are a success the economy will collapse.

    2. L Jones
      March 6, 2018

      Alan – most of us who wish to see a quick and clean Brexit are not only concerned with our own personal finances. We have already been told many times, by many experts, that the UK will NOT be poorer. Most of us can work this out for ourselves. Even if we as individuals suffer a little loss at the beginning – we don’t mind! It is far more important that our country should be independent and free.

  13. Denis Cooper
    March 5, 2018

    Our trade deficit with the rest of the EU is now about 4% of GDP, and has been trending upwards, and is only partly countered by a surplus with the rest of the world which has also been trending upwards – page 5 in the House of Commons Library report here:

    The obvious conclusion is that we should terminate our unprofitable trade with the other EU countries and concentrate on our profitable trade with the rest of the world, and the deplorable way that the EU has been behaving since the referendum makes it increasingly likely that the final outcome will be at least heading on that direction.

    I repeat that when Theresa May talks about “access to each other’s markets” possibly being reduced she has it right, while those who translate that into one-sided reduced access just for the UK have got it wrong:

    Just as they have been getting it wrong for all of my adult life …

  14. Iain Moore
    March 5, 2018

    It would be better if we stopped this vastly expensive virtue signalling exercise of our political classes , called Aid, all together, a policy which in the 60 years of its implementation has failed in pretty much every thing it was tasked to do.

    We are forced to spend £13 billion by a political class who are trapped by their own rhetoric and moralising .

  15. Original Richard
    March 5, 2018

    Mr. Redwood is right to be worried about our external deficit or balance of payments as it used to be called before politicians decided that this figure no longer mattered and only GDP growth counted for a nation’s financial health.

    It used to be believed that “turnover is vanity and profit is sanity”.

    Mr. Trump realises this and this is why he wants to see a level playing field with the EU and to correct the imbalance in car tariffs where the EU charges 10% duty on imported US cars and the US only charges 2.5% duty on imported EU cars.

    In our case, we are paying £20bn/year gross (control lost over £15bn/year) to be members of the SM/CU for the “benefit” of a trade deal which causes us to have a trading deficit of £100bn/year in addition to subsidising inefficient EU farmers to sell us more expensive food than we could purchase on the world market without the EU’s protective and high tariff barriers.

  16. Denis Cooper
    March 5, 2018

    Off-topic, I read here:

    “European Union negotiators will this week offer a Canada-style trade deal … ”

    I hope their offer will be accompanied by a note explaining how this would avoid the need for any controls on the Irish border.

    1. Denis Cooper
      March 5, 2018

      Related to this, from the Tory MP Craig Mackinlay:

      “Evidence to the Brexit Select Committee last week from Dr Pinar Artiran, Assistant Professor at Bilgi University, Istanbul and Pascal Lamy, former Director General of the WTO, on the reality of Turkey’s participation in the EU’s Customs Union was enlightening.

      Pascal Lamy said: “It’s a bit of an awkward situation… an arrangement that nobody’s happy about, not least because de facto Turkey has lost control of its trade policy.”

      Dr Artiran outlined the deficiencies even more clearly on delays at the Bulgarian border:

      “Depending on the nature of the product, especially if it is a product that is related to the sanitary and phytosanitary standards, it might be checked… Sometimes, they said they are stuck at the border for a couple of days.”

      In summary, customs union membership leads to a total loss of international trade policy. It does not offer the solution for frictionless trade as Single Market standardisation rules offer a further excuse for compliance inspections. It offers those wishing to disregard the referendum a further excuse for de facto EU membership that after the Customs Union, total compliance with Single Market rules are the next essential to ensure frictionless trade, presumably followed by full acceptance of the writ of the European Court of Justice.”

      1. Denis Cooper
        March 5, 2018

        And Labour MP Mary Creagh has just admitted that it would not be enough for the UK to stay in the/a customs union to avoid problems at the Irish border, it would be necessary to also stay in the EU Single Market.

      2. Rien Huizer
        March 6, 2018

        Multinationals are not too unhappy about the Turkey arrangement and that is what counts.

        1. Denis Cooper
          March 6, 2018

          A strange comment, and I doubt that it is correct.

  17. Bert Young
    March 5, 2018

    The whole attitude to debt is irresponsible , it pervades across the population and results in a “why should I bother ” attitude in response . Gone are the days when people saved for what they wanted and took pride in ownership afterwards . Today the approach seems to be ” I want it so I’ll get it ” – relying on the credit card organisations to support . Automotive companies encourage the market to take up 3 year rolling agreements in order to maintain their volume share of the markets ; everywhere one sees new cars and massive numbers on the roads .

    Producing a major change of our economic scene has to come from the Government ; leadership is at the bottom of it all together with the relevant wisdom of those at the top . I do not think it will come from Hammond .

  18. Peter Martin
    March 5, 2018

    The external deficit is inevitable so long as the pound is allowed to genuinely float.

    Most countries manage their exchange rates to keep their trade in, or close to, the black. But everything has to sum to zero. This means that those who don’t manage their currencies, and do let them freely float, especially the credit worthy countries like the USA, the UK, Canada and Australia, will likely end up with trade deficits.

    By the principle of sectoral balances, or the laws of arithmetic, these translate into Government budget deficits too.

  19. hans christian ivers
    March 5, 2018


    is right both deficits are significant and important.
    Too much EQ could have an effect on the value of the Pound, if, it is all bought by the BoE.
    The trade deficit will continue to be a challenge as the EU contribution is only 0.5% of GDP and trade through WTO rules with the US will not solve the issue as they keep putting tariffs on steel, washing machines, solar panels and what will be next?

  20. Iago
    March 5, 2018


  21. Rien Huizer
    March 5, 2018

    I completely agree that the external deficit deserves more attention. I am not so sure what could be done by the UK government to reduce it.

    I disagree that the fiscal deficit is less important. The combination of those deficits plus uncertainty over how the UK economy will behave after the actual exit -especially how it will adapt to any new circumstances and how sudden that adaptation would have to take place- will be the focus of extreme market scrutiny. That applies not only to the extarnal value of the GBP, but also to the market for government and government related securityes (take for instance RBS’ marketable liabilities and of course, in the wake of all those “primary” asset classes, derivatives. Events like trade bloc entry and exit (the markets have a lot more experience with entry, usually associated with “convergence” trade opportunities) are a prime challence to monetary stability and orderly markets. Imo the main mission of the Bank of England is to assure monetary stability, if necessary to compensate for government policy likely to cause overall macroeconomic instability.

    But yes, concern would be good. Appropriate policy even better..

    1. Anonymous
      March 5, 2018

      Debt built up whilst in the EU and because of it.

      1. Rien Huizer
        March 7, 2018

        Some of that debt is from WWI, but that is beside the point, but just to show rthat there is gvt debt from the days when there was no EU. The other point does not make sense. EU contributions (and negative “contributions”, subsidies ) are funded from general revenue and debt is, unless earmarked or not central government, used to fund whatever shortfall there is between expenditure and non-debt funds raised by the Treasury.

        It is impossible to say what portion of debt arose because of what expenditure category. It is also impossible to say to what extent debt would have been higher or lower should the UK not have been an EU member. Just looking at the contributions and saying, “if we had not spent that money on the EU, debt would have been less” ignores direct and indirect effects on the UK economy that could have influenced general revenue or financial markets conditions more or less favourable to UK fund raising.

  22. Epikouros
    March 5, 2018

    A trade deficit does not quite have the adverse effects that you attribute to it. Government does not have to borrow to finance it as it just a money merry go round. We buy goods and services from abroad and the the money is returned either to buy our goods and services or gilts/bonds or is invested in property and businesses. So in fact a zero sum exercise and the UK is not made the poorer because of it. The EU contribution and the foreign aid budget is quite another thing that does entail tax revenue or borrowing to pay for them as very little of value is returned for those expenses. Brexit should she see the end of the former and we will be better off for it.

    The latter is not needed at all if we trade freely with poorer countries, which means leaving the EU customs union, as that simple act improves their standard of living far better than foreign aid ever does. The foreign aid budget does more to line corrupt politicians and officials pockets than it does to alleviate the suffering of the poor as it is mismanaged and badly targeted. In other words mostly wasted.

  23. formula57
    March 5, 2018

    The myopic vision of Corbyn and McDonnell is shown up by your remarks for you make clear we can spend what we like so long as we have a Chancellor willing to print free money.

    Consequently, rather than see deterioration in the balance of payments through buying myself a Mercedes-Benz, I will soon call upon my own MP to ask Chancellor Hammond to buy me a Bentley Continental which I shall expect to receive well before having to decide how to vote in the next election. Thank you!

  24. Denis Cooper
    March 5, 2018

    Off-topic, the Times is taking a passage in Theresa May’s interview with Andrew Marr and trying to make mischief with it:

    “Brexit: Brussels will have role in setting migration system, says Theresa May”

    I hope that is a distortion of what she said, pages 12 and 13 here:

    and I hope that Tory MPs will question her and make sure that when she said:

    “Businesses will want – well, that’s what we will be negotiating. We’ll be setting out our immigration rules; we’ll negotiate with the EU. Because obviously we want to look at what
    happens to UK citizens as well as what happens to EU citizens.”

    she did not mean the EU will still have some control over our immigration policy.

    I read that she will be making a Commons statement this afternoon so that could be an opportunity to clear up this and other uncertainties.

  25. Adam
    March 5, 2018

    A sensible family household maintains quality standards, enabling good behaviour, health & fitness, financial well-being, & ability to help others.

    Sensible Govts would not lower their standards.

  26. BOF
    March 5, 2018

    At the rate we are going with this transition, which IMHO is completely bogus and not in our interests, we will be paying in to the EU coffers for a long time, so no benefit there anytime soon.

    I must disagree with our host on Foreign Aid and I think that this proposal is tinkering around the edges. We already have a benefits system which is far too generous. They will not pay for health and education nor housing. The way forward is to abolish this legislation and go back to providing aid where urgently needed and in times of crisis. Legislating .7% of GDP was and is a ghastly mistake that has turned the big charities into big business. Instead we should be removing the barriers to trade with 3rd world countries and reducing or abandoning tariffs. I would go further and offer inducements to British business to grow trade with these countries.

    However, when was the last time that Parliament removed bad legislation from the statute book?

  27. acorn
    March 5, 2018

    The Mastricht stability and growth pact along with a 3% deficit and a 60% public debt limit are a piece of neo-liberal nonsense, that needs scrapping.

    My self assessment tax bill has increased due to foreign currency earnings translated into depreciated Sterling.

    The way to stop worrying about government bond prices is to stop issuing them to mach government spending (there is no rationale for the “full funding rule”). Government bonds do not fund government spending.

    “… debt by the £435 bn the state has bought up”. The state did not buy the debt, it just swapped it back into the “reserves” (the currency issuing Treasury’s “units of account”), that the government spent into existence originally; the reserves that were used to buy the government bonds.

    When the BMW dealer comes to the UK currency area to sell, he gets paid in Pounds Sterling. He has to find something to do with all those Pounds. Hence, every year he buys up more and more Sterling denominated assets. Before long your sovereign country belongs to foreigners and the phrase “taking back control” needs qualifying somewhat.

    The really big worry is Food Brexit. The UK imports about 31% (by value) of all its food from other EU Member States according to Uni Sussex. It also says that 40% of all EU legislation concerns food. DEFRA is going to be busy

  28. stred
    March 5, 2018

    Off subject.

    This list of reasons for banning orders on landlords has so many offences that it will be possible to ban them for oversights of the many and increasing regulations. The one about allowing the misuse of drugs, presumably by tenants, is the most mind boggling. This May government seems to be more ant-landlord than any in hostory. Who needs the Marx Brothers when we already have a PM that wears feminist …… wrist band at Tory conferences?

  29. Robert Betteridge
    March 5, 2018

    Question: “EU borrowing is only permitted to finance loans to countries. The EU cannot borrow to finance its budget.” The EU is facing a 1/5 cut in it’s budget from Brexit. Sterling is running a deficit, from paying the EU contribution, its overseas aid, purchases from abroad and sending money abroad. We balance that with inward investment and loans to smooth out the bumps. Faced with this large black hole of €28billion what is to stop the Euro changing the rules and offering bonds in the same way as it’s composite countries do?

  30. Billy Elliot
    March 5, 2018

    Lets see if The Guardian had corect info. According to the newspaper free access of our fishing industry is linked to EU fishing on UK waters. So in order to gain free acces to EU market, EU will demand EU fishing boats to have exactly the same access to our fishing waters as present. So the great idea of taking back our waters might not happen? Guardian might of course have incorrect information and will we accept those conditins is totally another story. On Tuesday we will know more.

    1. Dennis Zoff
      March 6, 2018

      Billy Elliot

      Fishermen go where the fish is most abundant? Clue, all European fishermen wish to continue fishing in British waters!

      Europe can keep their fishing grounds….in any case, given half a chance, Dutch fishing boats will kill fishing grounds with their “pulse trawling”

      Britain needs to keep the worst European “uncontrolled” industrial trawlers out of our fishing territories if we wish to maintain and sustain a fishing industry!

  31. David
    March 5, 2018

    “spending more of our overseas aid on the refugees who come to the UK here in the UK would help as well.”
    True but we can help a lot more people abroad than we can here for the same amount of money and they do not add to the housing crisis.

  32. Iain Gill
    March 5, 2018

    Re “Most of the state debt we owe to each other anyway” not that simple. As those with the means can choose to move abroad at any point, and then that debt is not all within the UK.

  33. Hope
    March 5, 2018

    No, it would help if May kept to her word and cut immigration to tens of thousands. Today she seeks to blame developers and builders for her failures of cutting immigration. Last week we saw first hand there was not enough energy and had to buy from industry, roads could not be cleared, people without food supplies. Our public services are overwhelmed but May is intent on making it worse. Then she comes up with the line: I want to be straight to you! Untrustworthy and underhand stating she wants to be straight with the public when she has allowed a false argument to exist over the Irish border and the Peace agreement, nothing between the two. No need for a hard border instead of being a weakness in the EU hand because Ireland is dependent on UK trade, May has allowed it to become her weak position! In her speech she seems to think leavers who won the vote should somehow accept compromises, does this apply to all and every election! may needs to be ousted.

  34. LenD
    March 5, 2018

    With no passporting rights for our financial services in to the EU into the future as well as everything else going to WTO rules trading we had better get a grip on our spending to drive down our deficits and fecklesss government waste..tighten the belt so to speak

    1. David Price
      March 6, 2018

      If our financial services are denied passports for the EU single market, why should the greater number of passports in to the UK single market be granted to EU entities?

  35. Ed Mahony
    March 5, 2018

    Lastly, i’m not dishing Mrs Thatcher’s reputation. She did a great job for this country. And for that we can all be greatly grateful.

    But she wasn’t god. She was imperfect. And her imperfection was that she was too focused on seeing everything through the prism of being anti-socialism.

    However, Mrs Thatcher was far less ‘Thatcherite’ than some of her followers. It’s time the Tory government ditched Thatcherism. And focused on being more objectively and pragmatically capitalist. Focusing on soft and creative investments in helping to build up the high tech industry in this country. The rewards would be enormous. And ironically by doing that, we would be building our economy, enough, perhaps to be able to leave the EU one day!

    But that will take time, money, patience, creativity, planning and hard work,

  36. forthurst
    March 5, 2018

    Dollar value and percentages of world exports of frozen fish during 2016:

    4. Norway: $1.4 billion (6.5%)
    7. Netherlands: $872.4 million (4%)
    8. Spain: $791.1 million (3.7%)
    11. Denmark: $443.8 million (2.1%)
    27. United Kingdom $202.7 million (0.9%)

    Memo to Mrs May: Norway is not in the EU and neither will we be come March 29th 2019. Stop the blather and do it.

    1. forthurst
      March 5, 2018

      The Daily Mail: “Britain’s military must stop being used as a ‘cash cow’ for overseas aid missions, the ex-Armed Forces minister says today.
      Sir Mike Penning warns operations such as the Royal Navy’s task of rescuing migrants in the Mediterranean are ‘draining military capabilities’.”

      Yes, why is the Royal Navy being tasked with people smuggling on behalf of the Brussels Regime? The RN should already be training to deal with the problem of piracy in the North Sea etc which will exist next year.

    2. Rien Huizer
      March 6, 2018

      And why is that the case? Is it worrisome? If it should change, who should do that? Hint: lack of fish processing businesses? The Norwegians are ouside and arguably, export their own fish. But Denmark, Holland and Spain play on the same level playing field as UK fishermen and fish processors, Are the Danes etc to blame for something? Or are perhaps the British not interested in the seafood business?

      1. forthurst
        March 6, 2018

        “Or are perhaps the British not interested in the seafood business?”

        How dare you insult our fishermen whose livelihoods you have stolen.

        1. W.A. Laugh
          March 7, 2018

          What is the fishing’s fraction of GDP? How much of British catch has to be exported as Brits generally prefer cod (essentially fished out of British waters, more likely from Norwegian ones) to what is available from British waters? How many British fishermen were happy to sell their vessels to get EU money as part of the CFP?
          After Brexit, what domain will be fished by British vessels? Up to 12 miles, up to 200 miles?

  37. nhsgp
    March 5, 2018

    I have not been worried about the state deficit for sometime, ever since Mr Brown found out that the UK state can literally print money to pay its bills

    So why not introduce the Voucher. MPs get paid in Vouchers, and the best thing about Vouchers is you can never run out of them.

    Of course, you’ve got that problem, how do you turn vouchers into goods and services.

    Just because the numpties in Labour believe in a magic money tree there’s no reason why you should.

    Second you have 10 trillion pounds of pension debts hidden off the books. That’s inflation linked debt.

    You can’t print to create inflation to get yourself out of inflation linked debts. It doesn’t work

    modest by world standards at around 65% of GDP,

    Again the confusion between what the state owes and your assumption its just borrowing.

    Pensions for the plebs eh who cares.

    In summary, the estimates in the new supplementary table indicate a total Government pension obligation, at the end of December 2010, of £5.01 trillion, or 342 per cent of GDP

    Since 2010, that number has doubled.

    How do you get out of paying state and civil service pensions?

    As it stands now, 205 bn a year is spent on the debts.

    excluding future state pensions which some here worry about and which have always been pay as you go out of taxation

    So is the borrowing. Look you could work a street corner selling sex. How you earn your money doesn’t mean you do or you don’t owe people.

    So try this. Go and see your bank manager and say, I don’t owe you any money for my mortgage because I work as an MP. I’m sure its been tried, it’s irrelevant.

    When you owe money to foreigners they may not accept money created to pay them off but will need real assets.

    When you have inflation linked debts you need real assets too. That’s 10 trillion pounds of pension.

    PFI deals have the right to convert to inflation linked.

    Insurance contracts are inflation linked

    Nuclear clean up is effectively inflation linked.

    Inflation linked debts are inflation linked

    If you cannot deliver purchasing power you have defaulted. To do that you need to tax. You can’t print vouchers.

  38. Prigger
    March 5, 2018

    I see after Mrs May’s blast on behalf of tenants, landlord lender Paragon Group ( ticker PAG.L ) is 1.17% up. Always the best bellwether of whether the market believes a jot about government helping tenants at the possible expense of landlords. As with Osborne’s “attack” on landlords loan merchants and spivs, local and international, NOTHING!!!
    Can Mrs May be therefore taken seriously on anything else? Probably not

  39. Eh?
    March 5, 2018

    On BBC Daily Politics I see MPs Burghart and Raab had difficulty controlling their laughter when Wakefield’s Labour MP Mary Creagh suggested Italy had very stable governments since the war.
    She says she believes Corbyn with come round to her idea on not having A customs union but THE Customs Union.It still surprises how his MPs violate Party policy immediately after he makes it. Admittedly he makes a new one every other day except on Che’s birthday. He’s certainly an easy act to follow.

  40. mancunius
    March 5, 2018

    Supporting home-grown food production and fishing is therefore vital to mitigate imports.
    So why is Theresa May discussing EU fishing rights for the post-brexit deal (i.e. for after any transition period)? We should not be even contemplating the lease or sale of any part of our fishing rights at this stage.

    1. BartD
      March 6, 2018

      mancunius.. because prior to 1973 our fishing rights extended out to 12 miles only from a baseline around our coast. Since the the EEC fisheries policy limits were pushed out to 200 miles in the early 1980’s. If we want to get a slice of these EU waters then we will have to negotiate with them, otherwise we will get back what we started with.

      1. mancunius
        March 7, 2018

        Not so. The 200 mile limits weren’t decided by the EEC, but by the UN, which allocated a 200-mile limit for every sovereign coastal state, in the
        UN Law of the Sea Convention – to which the UK is a signatory; according to that Convention’s Part V (Art. 55ff) once we have left the EU, the 200 nautical mile limit becomes our coastal waters, not ‘EU waters’. We do have the duty to conserve marine species within the zone, and to define the total allowable catch we would make within the 200 mile coastal zone, and to be reasonable about sharing – but that is a matter for discussion (not EU dictation, but genuine discussion.)

        And before you mention it: yes, I know Norway has an agreement with the EU to let other EU countries fish inside its exclusive zone, but Norway is in the EEA, and it has a very large fishing zone and a population of only 5.23 million to feed. Our population is 13 times larger, and we cannot afford to be over-generous with precious food resources. And fish as a nutritional source is more precious than ever.

        1. mancunius
          March 7, 2018

          P.S. – Art. 62 of the UN Convention makes it clear that our own UK legislation would decide what quantity, kind, size, age etc of fish,what fishing seasons we would stipulate, and what kinds and numbers of fishing vessels and types of fishing gear we would specify for other countries we allowed (allowed!!) to fish within our 200-mile zone. That’s all in Art. 62(4) (a)-(k).
          We can even put observers onboard their fishing vessels, to check they’re being law-abiding, and we can legislate to specify if and where they are allowed to land their catch within our territory.

  41. Iago
    March 5, 2018

    I see that yesterday Mrs May suggested to Marr that the EU will still have a say in what immigration we have into this country after we leave the EU, this will be after the unending transition, implementation or delay period during which free movement plus relatives will continue. A part of the unprecedented deep and special relationship she wants, but the majority of the country never asked for.

    In the speech she uttered on Friday it was not quite clear to me what she meant by “our people”. Did she mean the citizens of the UK or did she mean as well the peoples of the other countries in the EU? We are being buried in the European Union.

  42. Iago
    March 5, 2018

    How much longer must we endure this long drawn out betrayal!

  43. Grant
    March 5, 2018

    Maybe if we become a vassal state of the US instead president Trump might
    give us special deal after we leave the EU?

    1. Dennis Zoff
      March 6, 2018


      Worth a punt? Europe has thus far been an utter disaster for the UK!

    2. Mitchel
      March 7, 2018

      We are already a vassal state of the USA;but serving one master rather than two might be more efficient.

  44. rose
    March 5, 2018

    Where do our fisheries fit into this?

    Another two worrying answers from Mrs May today:

    “…a fairer allocation…”


    “…we will be a member of a body…”

    In other words they will indeed be a shared stock, over which we will not have sovereign control. How on earth is this coming about? Drip by drip we are being told she has bartered them away – again.

    1. rose
      March 5, 2018

      The second answer was to Richard Drax.

      1. rose
        March 5, 2018

        PS I never find George Eustice worrying to listen to as I do Mrs May.

  45. NickC
    March 5, 2018

    Prigger, One of the many advantages of leaving the EU is that we will be no longer a party to the EU’s exploitation of third world countries. Trade is better than Aid.

    And the supermarket I have just visited demonstrated that: fruit and vegetables from Morocco, India, Kenya, USA, Chile. The only produce from the EU (apart from the UK) was from Spain.

    So we should stop aiding the EU, as well as closing DfID. Some of the money saved should go to the Armed forces for emergency aid (earthquakes etc) and to the FCO to expand our trade efforts.

    1. Prigger
      March 5, 2018

      I don’t know where my supermarket stuff comes from. Why people pay twice the price for unwashed vegetables with “Organic” on them. I guess they like politeness and don’t mind cleaning them

  46. Vabadus
    March 5, 2018

    Dr Redwood’s sanguine attitude towards the deficit has surprised me. Am I correct to think he has discovered Modern Monetary Theory?

    Not only is it an interesting analysis of the true function of money and taxation in the modern economy in the abstract, I am especially curious about the insights it might have for those of us on the Right.

    Perhaps Dr Redwood could write a more detailed follow-up on this issue.

    1. Dennis Zoff
      March 6, 2018


      John is most probably ignoring MMT…as do many!

      The post-Keynesian economist Thomas Palley argues that MMT is largely a restatement of elementary Keynesian economics, but prone to “over-simplistic analysis” and understating the risks of its policy implications?

      1. Vabadus
        March 6, 2018

        I’m sorry, but Redwood is making the exact same observations that MMTers do. Indeed, this very blog post has just been picked up by tax campaigner and Corbynista Richard Murphy, so surprising is Redwood’s admission: John Redwood admits it: there never was a reason for austerity

        This merits a further response from Dr Redwood.

        Reply I was defending the current level of borrowing and debt, not saying we could have borrowed lots more!

        1. Vabadus
          March 6, 2018

          It isn’t the borrowing that caught my eye. You admit in your blogpost that government cannot go bankrupt because it can print the money to pay its debts at will. This is exactly the insight of Modern Money Theory (although it is really an analysis of how economies with a fiat currency work in practice, rather than an economic theory).

          Would you be willing to respond to Richard Murphy’s post?

  47. Jack
    March 5, 2018

    External deficit, if anything, is a good thing. Imports are real benefits and exports are real costs.

    If other countries want to accumulate £GBP, and send us real stuff in return, then that’s great! Ultimately it’s just numbers on a spreadsheet for them, and tangible goods/services for us.

    Keep the budget deficit large enough for full employment and at least 10% GDP growth per annum, and then try to optimise real terms of trade. That’s how we maximise prosperity. MMT.

  48. Anonymous
    March 5, 2018

    BBC going mad about Bradley Wiggins taking cough syrup. Not much about the anti EU movement in Italy.

  49. John
    March 5, 2018

    Yes about these large imbalance of payments. I find myself agreeing with Trump on his support of Obama’s tariffs on Chinese Steel.

    Trump is taking it to the natural next step, there are holes on Chinese steel dumping and he just wants to close much of those to protect his own voters. I understand that.

    The EU responds, who has a huge trade surplus with the US, with a trade war?

    I think I know who will win. Fine by me I think we have a big opportunity here, not to try and prevent the trade war, but to be the trading conduit.

    1. Wheelie Clever
      March 5, 2018

      One man’s dumping is another man’s good economic production and talented selling. We in the West love selling to poor people who lack economic infrastructure and mass production techniques. When they finally build an even rounder wheel we start making ours square-shaped and insist they pay in dollars.

  50. Ed Mahony
    March 5, 2018

    Instead of Trump going for the creative and strategic way of building up America’s economy by clever, soft capitalist investment and building of skills etc he goes for tariffs and trade war with the rest of the world.

    His capitalism is hard-nosed, clunky and old-fashioned. That might work if you’re a hard-nosed property investor in New York. But you can’t base the economy of the USA and the world around that. Plus his politics is dangerously populist.

    Trump and his brand of capitalism and politics is bad for America. Bad for the UK. And bad for the world. How Hard Brexiters think they can depend on Trump for a great trade deal and over Brexit is beyond me. Except that Trump is only going to threaten our own economy (directly and indirectly through trade with with the outside world) making us that bit poorer to be able to pay for Brexit.

    1. Dennis Zoff
      March 6, 2018

      Ed Mahony

      ….Hard Brexiters think they can depend on Trump for a great trade deal and over Brexit “is beyond me” Clearly!

      1. W.A. Laugh
        March 7, 2018

        “Clearly!” What a brilliant intelligent and well argued rebuke. Muppety muppety muppety fool.

        1. Dennis Zoff
          March 9, 2018

          Thank you…you have proved your own foolishness…again!

  51. Tomahawk
    March 5, 2018

    We should all be allowed to pay our debts off by printing money.

  52. Billy Elliot
    March 5, 2018

    2% of Chinese steels goes to USA so it is not so serious for China. But with this move Donny boy punishes his allies…. logic…

  53. Ed Mahony
    March 6, 2018

    Developing the high tech sector, particularly in the north, would also help to resolve the serious housing shortage in the south, so dependent on London and its financial services.

    We need to get more people moving to the north, away from the south which is saturated. Young people can’t buy houses. And this is causing serious inter-generational problems. Problems which Hard Brexit is only going to increase greatly.

  54. Dennis Zoff
    March 6, 2018

    Hello Andy

    Have you enjoyed your immature “daily fix” trying to irritate the more mature and decidedly more intelligent generation on this blog!

    I’m rather surprised people take you seriously and bother to respond….other than perhaps as a teacher would respond to a naive adolescent?

    1. NewTimer
      March 6, 2018

      That people respond to his posts as they do doesn’t surprise me at all, Dennis. Our good host here could suppress all of Andy’s posts at any time, should he wish to do so – but he won’t do that because they invariably stir up a hornet’s nest of infuriated regulars, all falling over themselves to be the first to shout him down.

      In short, Andy generates interest – indeed, I suspect he’s pretty much the only reason that quite a few people visit this blog at all. Apart from evoking a good laugh at all the apoplectic reactions to his contributions, there aren’t all that many people who want to read page after page of posts from a few dozen erudite (for the most part) but frankly rather boring contributors, almost all of whom are agreeing with one another. To keep the show on the road you need to throw a bogeyman into the mix – and in the absence of Jeremy Corbyn himself, Andy has been so good as to offer his services in this regard. I’m guessing you won’t be thanking him for that, but I don’t imagine this will bother him unduly.

      1. W.A. Laugh
        March 7, 2018

        Brilliant analysis … possibly out of reach of the above “erudite”.

      2. Dennis Zoff
        March 8, 2018


        An interesting take, though I am fairly confident the predominant “regulars” will be rather dismissive of your comment with regards to their opinions/comments/in-depth contributions, including the mildly derogatory dissection?

        Indeed, Andy brings an amusing light relief from the somewhat Brexit echo chamber, which I myself subscribe to, though at times he is rather hard to understand and his anti-Brexit sentiments can be somewhat rancorous. Then quite inexplicably appears to join the Brexit echo chamber by offering up a rather surprisingly good comment?

        Regarding your opinion on John’s position, based on my own experience, I must concur with yours. I believe John likes the mix as you say, as it brings a flavour to the discussion. However, sometimes I am surprised what can be said by some contributors, which can be quite antagonistic at times. Then have one’s own comments moderated, when they seem quite inoffensive? However, John is the kind host and therefore it is his prerogative!

        Regarding What A Laugh’s comment, I must assume he likes the word erudite?

        1. NewTimer
          March 8, 2018

          Oh, I’ve no doubt you’re right inasmuch as the “regulars” would be as dismissive as you suggest (and indeed, I was half-expecting to get flamed for even daring to express such a view). However, I’ve been around long enough now to know what I believe and what I don’t believe, and no amount of having “if you won’t accept what I’m telling you then you’re obviously an idiot” hurled at me is going to persuade me otherwise. Whenever I find myself in a discussion that descends to that level I just walk away, because attempting to continue is a) time-consuming, b) exhausting and c) pointless – and unfortunately the entire Brexit debate descends to that level with monotonous regularity.

          I believe it’s been said that if you want to keep your friends, avoid talking about politics, money and religion. All are subjects about which people hold very deeply-rooted beliefs, so an assault on one or more of them is perceived as a personal attack and is responded to in kind. Brexit fits all too well into at least the first two of those categories, and for the real die-hards the subject evokes all the fervour of the third – so I’m not expecting to see any truce on this subject any time soon.

          Funnily enough, I was originally going to make exactly the same point that you’ve made about Andy’s posts, but I cut it in the interests of brevity. I’m keeping an open mind about the possibility of there being two “Andy”s here – the original, and a more recent one. John noted about a week ago in response to somebody who complained that he’d been “cloned” that he’s unable to prevent contributors from using the same pseudonym – so maybe that’s what’s happening here. If so, perhaps the original “Andy” might like to comment (if he’s still around).

  55. Peter Martin
    March 6, 2018

    We are now supposedly have Government spending back into the black. Is this supposed to be a good thing? The next move, we are told, is to “reduce the debt”. I think they might mean the so-called National Debt.

    Why reduce it? I’ve got quite a few Premium bonds. I won £175 last month! Not bad eh? So, I hold Government debt. If the Government reduces it enough I’ll have to hand over my Premium bonds for cash and I’ll have no chance of a big win 🙂

    Is it a bad thing for anyone to have Premium Bonds, National Savings Certificates or Government Bonds. (Gilts)? If we are saying the debt is too high and we want to reduce it, or even eliminate it, then that is exactly what we are saying!

  56. Dennis Zoff
    March 6, 2018


    Speaking of Government finances, governance and treachery…..

    Sadly, Chancellor Hammond is merely a theatrical clown of the first order. Could anybody be more treacherous against its citizens – Theresa May perhaps? Hammond is wholly in league with his Brussels cronies; to the disgraceful detriment of the UK!

  57. Darren Searle
    March 6, 2018

    Right. So austerity was completely unnecessary. Well we knew that didn’t we, but nice to see a Tory finally admit it.

  58. Andrew M
    March 11, 2018


    “It turned out to have no adverse consequences on shop price inflation”

    A little too early too call is it not? Interest rates are yet to normalise.



    1. Ken Moore
      March 12, 2018

      It will filter through eventually…as it did with asset prices. No free lunch.

  59. Ken Moore
    March 12, 2018

    So John Redwood it seems has his head firmly stuck in the sand although I understand the lure of denial that MMT offers him. I presume he follows Hammonds mantra that debt should be measured as a percentage of GDP…ignoring the fact that GDP is itself inflated by borrowing and government spending. The logic of ‘pulling yourself up by your own bootstraps’. JR seems to think that the treasury creating 400bn of new money is somehow free..well why doesn’t it cancel all of the debt if it is that easy ?.

    The passengers ,us, suspect the ship has sprung a leak but here comes Captain Redwood to reassure us nothing is wrong. Prosperity is in decline and either a recession or further financial shock can’t be too far away. An economy skewed towards the speculative route to wealth generation and activities that can loosely be described as ‘taking in each others washing’ isn’t healthy. There is far too little of what we do that is internationally marketable output needed to pay our way in the world

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