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The choreography of the emergency budget

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Paul Mason | 10:33 UK time, Monday, 7 June 2010

The fiscal dance steps between now and 22 June are choreographed with a precision worthy of Balanchine, starting with the David Cameron speech that has just concluded.

Two years ago a senior conservative businessman told me George Osborne planned to institute an emergency review of the public finances on coming to power; that it would probably find growth was not as predicted, and other unexpected line-items not quite right; and that therefore cuts would have to be bigger than expected. And so it will now come to pass.

However, in the intervening period two events have taken place that complicate matters for Mr Osborne.

First, the Greek fiscal crisis. This began with an incoming government, er, discovering that its predecessors had cooked the books; that the budget deficit would be bigger than expected and thus cuts needed to be much harsher.

Not un-noticed by the rest of the world, this then resulted in a debt-downgrade, followed by an emergency budget which nobody liked, and then another series of debt downgrades.

In the post-Greek situation any claim by a finance minister that "the books have been previously cooked and the deficit is worse than we thought" is in danger of rattling the markets.

I interpret the G20's strong signal for Britain to slash its deficit, together with other high deficit countries, as an attempt to bolster market confidence during the delicate unpicking of the Alistair Darling deficit reduction plan that will now take place.

Second, the need to govern in coalition with the Libdems.

I understand that, during the coalition negotiations during the weekend after the election, a key issue for the Libdems was to have both a voice inside HM Treasury and "eyes and ears".

Any process of discovering Budget 2010 to be, as George Osborne declared it in advance of the election "a work of fiction", had to be itself subject to scrutiny. On top of that, any further tightening on top of the Conservatives' proposed envelope of deficit reduction had to be done "non-ideologically". That is the narrative behind Nick Clegg's intervention on Sunday - that cuts will not be done in a "Thatcherite" way.

Mr Cameron's speech on Monday morning outlined the scale of the cuts they expect to impose: it will be used as an opportunity to completely re-think what services the public sector delivers.

On Tuesday, Mr Osborne will outline the mechanism for doing what Alistair Darling failed to do - a three-year spending review with departments finally getting their spending limits set: ie, turning the medium-term public spending projections into actual budget limits for minsters. There will be "consultation" but also a "star chamber" - ie repression.

Sometime in the days before 22 June, Sir Alan Budd will deliver his verdict on Alistair Darling's last budget. If he finds, as the man who appointed him believes, it is a "work of fiction" - I expect it to be in the following areas:

a) Growth. The Treasury's growth projection of 3.25% was seen as high by independent forecasters. However, one caveat: it is accepted by the Bank of England, on the basis that the £200bn of quantitative easing money has largely yet to filter through into demand.

b) The "housing and finance" component of deficit reduction: when it calculated how it would reduce the deficit by 90bn, the Labour-led Treasury assumed around 17bn would be regained through a revival of tax receipts from home sales and the finance industry. This is on top of any natural effects of returning growth. Many economists were sceptical about this.

c) Efficiency savings: despite the promise of efficiency savings becoming the AK-47 of the guerrilla warfare between parties before the election - ie the weapon of choice - there is no proof that efficiency savings ever work. The last attempt to measure Labour's efficiency savings found at least half had not been measurably delivered. If Budd's boffins find Labour's in-progress efficiency programme has not delivered they will add this to the pile of problems.

What we've learned form the Greek budget process is that governments start out with Plan A; then an emergency budget comes along in which they protect "the weakest" - in the Greek and Irish cases hammering public sector workers but maintaining services where possible. Finally, in the face of adverse market reaction, they pass budgets that actually slash services they said they would protect. If that doesn't work they lose sovereignty over their own budget to other countries or the IMF.

Mr Cameron is clearly trying to avoid this happening - but as he said in his speech, Greece is the warning.

The point about tightening the budget by close to 90bn a year is that it is certainly do-able. The big ideological discussion is whether you use tax or spending: interestingly during the stimulus phase, the spend/tax mixture was 2:1 globally. Britain's new government is pledged to achieve "the majority" of tightening through cuts - but this still leaves a lot of room for tax rises.

There are two questions though: first, is it doable without causing a double-dip recession? Since the Treasury under Mr Darling always factored its own spending plans into the growth projections, we should expect the emergency budget to come clean on this.

Second, does the "unexpected" size and nature of the new deficit projection cause one or both parties to say they can no longer stand by their manifesto commitments to ring-fence aspects of departmental spending (hospitals, schools and aid)?

If it comes to pass that, with heavy heart, they now have to slash the NHS budget, cancel Trident etc - it will be interesting to see if that can be choreographed.


  • Comment number 1.

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  • Comment number 2.

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  • Comment number 3.

    It seems as if no one is asking the question can you achieve real and £1 for £1 reduction in the deficit by reducing the budgets of central and local government. Direct and indirect and unintended consequences are hardly ever investigated. Make civil servants redundant and there are redundancy payments, benefits due and the negative 'multiplier' of reduced spending on private sector goods and services. Added to which has to be the question of timing. Slash a major capital project and the direct 'saving' may not materialise for several years when you may want to stimulate the economy. Add also the costs of breaking contracts with the private sector and there is no telling (unless it is comprehensive modelled) what the true effect on the deficit will be.

    One thing certain is that it will be the poor and sick who will take the real pain. Putting up VAT will exacerbate their plight. Alternatively introduce a wealth tax which even in its modest form the Lib Dems have dropped.

  • Comment number 4.

    I suspect David Miliband will be secretly delighted with the Lib/Con agenda for faster cuts and tougher austerity measures (although it does seem a bit like a 'good cop/bad cop' Govt double act at times). Remember that story just before the GE about Mervyn suggesting that which ever party that got into Govt next, they would probably be out of office for a generation there-after; such were the austerity measures required to rebalance the books. That certainly doesn't bode well for Cameron and Osborne!

  • Comment number 5.

    Paul, you say "I interpret the G20's strong signal for Britain to slash its deficit, together with other high deficit countries, as an attempt to bolster market confidence during the delicate unpicking of the Alistair Darling deficit reduction plan that will now take place."

    I dont quite read the tea-leaves in the same way. From the exuberant April 2009 G20 summit hailing trillions of dollars' worth of fiscal stimulii, there is now a sober realisation that the socialised losses and discretionary stimulii caused by banking pollution ( eg the Baroso European Recovery Plan) now need to be paid for. If not, another banking crisis and double dip is more,not less, likely.

    I agree with your point in QE bolstering growth projections when they are yet to filter through. Are you sure they will filter through given the state of banks and credit.

    Finally, the BoE warn that over the next 5 years UK banks will need to fundamentally restructure their funding. Implicitly, they say, this will increase funding costs and the costs of borrowing. Growth projections of the BoE follow the market implied interest rates : end of 2010 base rate at 0.6%; end of 2011 base rate at 1.7%; end of 2012 base rate at 2.8%. Even if these predictions were correct ( OECD say that rate increases should step up much more quickly) these rates will be dislocated from real borrowing costs - did I see Cheltenham & GLoucester increase their Standard Variable Rate from 2.5% to 3.99% a couple of days ago.

    We are back to banks ( sorry to repeat it again) and unfinished business.

  • Comment number 6.


    Quite afew of these aspects discussed by Paul today have some interesting opinion offered at the end of the last thread also, I reckon paul would be short of material were it not for us guys and gals :)

    Capital projects are getting hit, which is a mistake unles they are replaced with capital projects which moves us towards a sustainable economy (landmark projects like the severn barrage for example), another one I like is turning derelict land into free allotments for those willing and able to invest afew hours in reducing their sustainability footprint or investment in making the housing stock more energy efficient.

    This is just the beginning, in the construction industry (as usual) the double dip has already started here and will (as usual) feed on through to the rest of the economy in the coming months.

    Reducing on capital spending as a 'saving' is a myth and I dont just say that because that is the sector I work in. 44p of every £1 invested goes back via tax and the majority of materials and supply chain is UK based in construction, we export quite a lot of expertise and specialist materials as well.

    If you direct that dynamic away from investment in highways (to a lesser extent rail) and other sectors that are not directly plugged into a sustainable future into those that are, we have achance of coming out the other end of this being largely self sufficient in energy and food, which will be a good base line position to be in which ever way you look at it.

    I feel a degree of sympathy for this government with labour seemingly smirking from the sidelines with no responsibility for cleaning up their own mess.

  • Comment number 7.

    To lump the bank debt with the public debt then say public spending is the 'problem' is a massive deceit upon the public. The public do not understand why they should have 'pain' when its the banks debt? The banks are not in 'pain'. Neither is there any mention that if there is public pain now there should be public soothing when the banks are sold off?

    so why the emphasis on the language of cuts, pain, agony etc? Sounds like the Tories just enjoy using that kind of language as they attack their pet hates of the state?

    It is impossible to repay the bank debt through cuts. so why make a religion/dogma out of it? if taxes are necessary put them on the banks. its their debt? why should shareholders be getting dividends? Also set up a national bank that works not for profit but remains to keep the finance system going if the private banks go bust?

    A good government could point out that any who get pain now should get ease later because the debt is really nothing to do with them. The strident tory boy rhetoric is totally unnecessary.

  • Comment number 8.

    #7 jauntycyclist
    You might want to have a look through Andrew Haldane's ( Financial Stability supremo) speech entitled the '$100 Billion Question' at BoE. He coins the phrase 'banking pollution' and attempts to put some figures to the real costs to the UK economy.Its staggering and informative. I would add some more being : in addition to the £18bn added to the National Accounts measure of Public Sector Net Debt caused by losses on QE gilts bought by BoE ( Budget 2010) I see from the 2010 BoE accounts that the BoE charged interest of £626m to the Asset Purchase Fund for its QE ‘loan’ as well as a £5m ‘management fee’. I suppose the management fee is relative 'peanuts'.

  • Comment number 9.

    Quite simply there is not enough money to service the state as it currently stands so either taxes have to go up or budgets have to be cut.

    Either way this will contribute to a double dip recession. It is unavoidable so we should all be grown up, face the music and salute as the ship sinks slowly beneath the waves.

    What does amuse me are the various forms of denial going around.

    The one that always makes me laugh are the remarks predicated with the word `Thatcherite'. Whooh! The wicked witch of the west is coming back and all us little munchkins must be very afraid. Rubbish: the cuts are going to be far, far worse than any cut Mrs. Thatcher made. Poor old girl, she always gets cuts hung around her neck but public spending during her time in office continued to grow at an average of 1% a year. This suggests to me that the Thatcher days will eventually be remembered as a period of immense liberality compared with the coming days of the Mad Demon Osborne and his Fatal Axe.

    The reality that cuts will ensure a faster return to economic growth thna that offered by tax increases makes the case for most people out here in the real economy. I am sorry for anyone who loses their job - been there, got the T-shirt and written some of the book - but we live in changing times and in such situations you have to change as well.

    The one message that does need to be put across is that any cuts are the cuts that New Labour caused and should have made when in office rather than abdicate to their successor.

  • Comment number 10.

    9...there is not enough money to service the state..

    if it was just state debt there would be no problem. its the bank debt that is being serviced with cuts. why are people trying to hide that by calling it state/public debt? what agenda does that serve?

    i would agree gordon's market fundamentalism has been a disaster for the uk and that new labour have been the worst government in britsh modern history with two unnecessary unwinnable wars and the locking in of a market fundamentalism based upon false beliefs -that self interest is the only regulator necessary in society.

  • Comment number 11.


    Wherever the debt emanated from is immaterial: it is debt the state took on. It is the consequence of a political act.

    Now, there may have been a sound basis at the time for that action; however, there was then a policy failure of major proportions. This was the failure to bring the banks to heel, to enforce new behaviour and new structures onto the banks.

    Then when the income of the state dropped rapidly consequent to the failure of the banks to generate the tax revenue stream they had previously maintained no action was taken to amend budgets so that the state deficit grew to horrendous proportions. This was all perceivable at the time and remedial measures could have been taken.

    The simple truth is that now there is not enough money to sustain the state as it is currently constituted.

    The alternative is to put up taxes which is also unsustainable.

    Rock and a hard place, I am afraid. Absolute disaster! Double-dip recession? Probably, but I would rather call it a slump.

    What makes me angry is that a substantial portion of our manufacturing capability was ruined by the economic conditions created deliberately to humour the banks in the good days. Now we don't even have the means to get out of this mess quickly.

  • Comment number 12.


    ..Wherever the debt emanated from is immaterial..

    cameron is not saying its immaterial. he is making a big thing about the origin. he is claiming it is due to public spending on services? why the deceit?

    taxes can be put on the owners of the debt. e.g 70% tax on the no risk bank 'profits'.

    i hope no one will pretend the banking system works in anything other than a nationalised industry and start talking about reward for risk etc.

  • Comment number 13.

    Blimey!...the austerity measures have yet to be announced...and yet some already feel compelled to write comments such as this...

    Paul recently made a big deal on what the impact of Twitter would be on the ability to predict the outrcome of the GE.

    I just wonder what the impact of the internet will be on coordinated civil unrest in the coming 12 to 36 month period.

    That's if we haven't all had to cancel our ISP accounts due to the austerity measures.

    (I cancelled my Sky subscription today btw...only one month left ;o)

  • Comment number 14.


    are you able to cite any resources that confirm that bank debt makes up the majority of the deficit?

    Here is a graph from that shows the net debt as a percentage of GDP, with a plot excluding bailout costs, which clearly ramps up under Labour:

    Note - the above doesn't include PFI. Nice.

  • Comment number 15.

    Stalinc - totally agree. Mr Broooon: paint the roof when it's sunny (and don't ruin manufacturing when it's sunny or raining).

  • Comment number 16.

    Shireblogger - Mr A. Haldan's CV:

    Between 2003-05, headed the Bank’s work on Market Infrastructure, which included designing and implementing a new risk framework....
    Since 2005, headed the Bank’s Systemic Risk Assessment work...

    And now he's written a paper on how banks need regulating more. It takes a brass neck to make it to the top!

  • Comment number 17.

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  • Comment number 18.

    This is all very troubling.

    First there is an assumption that there is no money left and therefore we need cuts.
    Secondly, there is an assumption that the way to achieve a balanced budget is to force the general public to suffer.

    Sorry. There are mountains of money sloshing around. A very small number of people have most of it. According to Krugman, cuts are crazy ( He's predicting a Lost Decade ( much like Japan for the US. I reckon (though I'm no expert) that we are heading for the same. And according to Chomsky, most economists are arguing against them (

    Now, where on the credibility spectrum should we put these people? Krugman has a Nobel Prize in Economics. None of our current government have them (Does Boy George even have an A-Level in Economics? An O-Level then?) Chomsky, well it seems he's becoming very popular these past couple of years among the young Americans who are non-too chuffed with their governments and are packing out his lectures, has been awarded honorary degrees from over 30 universities is a member of numerous bodies such as the American Academy of Arts and Sciences, the National Academy of Sciences all topped off with a mantlepiece of awards - might not have the immense riches of those business leaders who signed petitions, but then.... riches and business leaders have been shown not necessarily to have the smarts they'd like to think they have because if they did... there would have been no need for the bail-out in the first place...

    Let's think about this. How much pain has been inflicted on Ireland because they've no money? If Ireland is broke, why hasn't Ryanair been paying corporate tax despite record sales of 3 billion Euros ( If the police and teachers are having their pay cut, why would Ryanair be taking free cleaning services along with the other freebies such as free 'marketing support'?

    If we are broke, why are we paying tax credits to bank tellers? Maybe the banks should just pay a decent wage for people to survive on rather than expecting the ever poorer public to subsidise the bank wage bill!

    Rather than privatising schools, uiversities, removing social workers, granny-carers, gardners, bin-men, teachers, teaching assistants, cutting police numbers etc, then we probably should simply take what we need from those who have it.

    We seem to be accepting all this while the vast amounts of money seem to disappear from these shores. All very strange...

  • Comment number 19.

    14. At 9:29pm on 07 Jun 2010, Ben

    How much of that is military spending? Does anyone know?

    Don't forget Labour spent a lot of money cutting hospital waiting lists etc, so not all of that spending/debt was 'silly'.

  • Comment number 20.

    I have to concur with #14 Ben and #11 stanilic.

    I have previously noted this analysis made by the BBC's Radio 4 PM programme...

    'Surprisingly, most of the structural deficit has not come about purely as a result of the bank bailouts, but is largely due to the drastic drop in a tax receipts resulting from the recession/depression.'

    Now whether it was the banks and laissez faire regulation that caused the recession/depression in the first place is one question...but whether they can also be held responsible for the subsequent huge increases in the budget deficit is another question.

  • Comment number 21.


    remember the psychology behind this. the problem is being able to raise money in the bond market. so the cuts are to show the bond market that the government is serious about its debts. without the bank debt sitting on the books that wouldn't be such a problem. as it is the bond market is saturated with central banks trying to raise money.

    this is not helped by the same banks backed by the state having massive exposure to other countries debt. Britain's banks have a combined exposure of £100bn to Greece, Portugal and Spain. So why lend to the uk when you can lend to australia or canada who through financial prudence dodged the bullet.

    so the whole point of this exercise is to avoid a downgrade and so put the cost of debt up.

    so normally during a recession if the tax take is down the govt can borrow but its bloated with debt from the banks which makes the uk a higher risk. some of the debt cameron is going on about is potential debt.

  • Comment number 22.

    Trace the path back to the root of the problem...

    Huge increase in goverment debt.
    Big fall in tax revenue.
    Financial crisis (credit crunch).
    Asset bubble (house prices, stockmarkets, commodities)

    Where is the economic model to explain why there has been an increase in asset prices (ficticious capital) that resulted in a financial crisis & recession?

    Why was there upward pressure on asset prices?

    Why were the financial institutions putting money into assets predominately rather than productive investments (actual capital accumulation, e.g. new factories producing commodities)?

    Could it be that investment returns from real investment were not sufficient to accomodate all funds controlled by the financial institutions?

    Do a lot of these funds originate from the huge US budget/trade deficit which has been permitted to continue due to the fiat currency regime & the dollar's role in the oil market?

    Could it be that profit rates throughout the world economy have been artifically supported by asset price increases?

    And these assets have been reflated by government borrowing which we (taxpayers) are now being asked to pay for?

    Could it be that the capitalist system is effectively bankrupt & the ordinary person is already to far stretched to bail it out?

  • Comment number 23.

    all this commenting on events past is a fascinating irrelevence. i think Stephanie pointed out last night that there is no vision attached to the ineviatable austerity to come.

    As the conservative guy said on NN last night...'our priority must be to restore growth'.

    The best humankind can come up with is to aspire to the lifestyle of 2005.

    if that truely is the casr then we are totally **********

  • Comment number 24.

    jauntycyclist - the markets want to see the deficit turned around. They are not expecting miracles ie deficit fixed and debt payed back. The banking bailout cost doesn't help, but it's not the majority of the cause.

    I'm struggling to find anything in that link that says the bank bailout cost is the main source of the problem. You use this to justify taxing banks to the hilt. Please can you point to the paragraph that says the bank bailout was the main cause? It is listed as a contributor but the graph clearly shows it's not the main factor.

    Given this, I have to say, "if taxes are necessary put them on the banks. its their debt?" - incorrect. Some of it is their debt. And some of that is "our" debt. Eg northern rock loans gone bad. Bankers didn't get all the cash from those loans.

    Please let's be sensible about this. The cuts are required or the money markets won't keep on loaning us cash each month to fill the gap. A bit of that is down to bailout costs, the majority because we spend more than we earn as a nation.

  • Comment number 25.

    There is evidence of a lot of bewilderment as to our predicament and this concern could easily lead to widespread public anger. This is why the government is trying to prepare the ground for bad news.

    There is no immediate solution to our collective indebtedness. This is a case for gritted teeth, clenched buttocks and tight shoulders. It is stressful and it will only get worse for the time being. This is why I say let's just get on with it, deal with it and move on.

    It is when we reach the latter point that the dynamic moment arrives. This is what we must prepare for, perhaps four or five years down the line from now. What do we want after the cuts have worked through and the recession has done its multiple dips? Do we want to return to the prevailing farce or do we want to eliminate debt from our future. I think the latter is the best option to pursue but first we need to get oursleves into the situation where that is possible.

    In my view if we can drive the money-changers from the temple not only will our prospects be brighter in the longer term, but the degree of control the money-changers have on our lives will be greatly diminished. They only consider themselves important and their position unassailable because for now we need them. If we didn't need them then the really important people such as dustmen and sewer-hands would be much better paid.

  • Comment number 26.

    #25 stanilic

    The financiers are not parasites that have attached themselves to capitalism, they are a integral part of it.

    We have finance capitalism not industrial capitalism.
    It is not possible to go back to industrial capitalism because of the size of capitalism today, e.g. a rich man in a top hat cannot finance the drilling of an oil well.

    If your argument is to contain finance capital to financing the real economy, herein lies the fundamental problem: the amount of capital (surplus value) seeking productive uses is too great compared to actual opportunities.
    Hence the resorting to 'investments' in assets such as property.

    To deny finance capital such 'investments' will only expose the fact that the rate of profit is close to zero, maybe even negative.
    This would force upon capital the required devaluation that capitalists are desperately trying to avoid.

    Some capitalists will need to suffer as well as the workers.

    For my part its a case of trying to explain to people just why we are suffering - capitalism, the ownership & control of the means of production by a few to whom the rest must sell their labour.

  • Comment number 27.


    For me it is not the existence of the banks and the services they provide it is simply their lack of broader accountability to anyone other than shareholders when it is clear the potential devastating effects their behaviour has on billions of peoples lives.

    If things had run a moral course after the crash all banks should have been nationalised, all bank stock value should have been frozen at pre-crash levels (if the tax payer had not intervened stock holders would have got nothing). All bank bonuses in all sectors would have been cancelled, all boards salaries would be frozen and in the case of effective bank insolvency substantially reduced. All bank profits would become property of the state all bank executives would have a punitive mandatory moral hazard clause written into their contracts.

    If banks take the irresponsible attitude that regulation is a hurdle to be examined, loopholes found in it and overcome in order to gain benefit for shareholders irrespective of any broader consequences then they should not be allowed to be managed independent of a democratically elected government.

    The service they provide is way too critical to the functioning of the global economy to leave it to a non elected body to determine our fate, simple as.

    We need to repatriate the wealth from the banks back to where it belongs but without compromising the banks essential function in society.

    Sure bankers can still be very well paid in line with other essential services to society such as doctors.

    The cartel of self interest has to be broken, tinkering with regulation will do nothing. There needs to be an internationally co-ordinated coup to wrest control of our destiny out of the hands of high finance and back into the hands of the people, but without compromising their function. Throw em in jail if they refuse to co-operate I doubt you would find many who would take issue with that if given the chance to vote on it.

    bankers should be our servants not our masters in the same way politicians should be.

    It would be nice to think that process could be managed sensibly as oppose to by force of general strikes, riots on the streets and a systemic collapse forcing the issue. These guys would rather see the whole system go down rather then give up their underserved power base it seems.

  • Comment number 28.

    If the NHS budget is going to be cut, I would bet that most people would want the starting point to be health tourists - did Obama's step mother really just happen to be here when she needed a new heart or whatever? How many people are using the NHS that way, when they are not entitled?

    Then there are those making a business of sending NHS free prescription drugs overseas (they are free if you know how to play it).

    And then those becoming long term expensive health problems through self inflicted means, not just through self abuse of smoking, booze and rubbish diets, but also vitamin D deficiency through covering from head to toe in a climate where sunshine is a premium anyway, with children also born as health problems, with heart and diabetes problems encouraged through spending lives sitting, inactive, indoors in said covered state; and birth defects from marrying cousins, another long term expense for both the NHS and the education system.

    I sympathise with those that dont want to work in a rubbish job just to support capitalism that rewards rich bankers, but just being a long term health problem is not an act of political resistance. And that is not the circumstance for many, paying to be brought into the country, so they can spend their lives sitting, collecting benefits, and being a health cost.

    And of course stop this expensive and pointless war, which has never been adequately reasoned, to which there is general national opposition, and which is also a very big health issue; not only are many young people dying, but others are being maimed and mentally affected - again long term health costs to the national system, in addition to the deep personal costs - and the gargantuan defence costs.

    The public is being blackmailed into supporting forces out of loyalty, and the members of the forces themselves have to believe that they are fighting and losing comrades and limbs for a good reason. But let's cut the bluff. The terrorists are here - and this is where such issues should be sorted definitively. End the war now.

    Or send UK Moslems to fight - as they would be much more welcomed there. If the UK government will not consider this because it might actually exacerbate terrorism, that shows the problem is here.

  • Comment number 29.

    #27 Jericoa

    "We need to repatriate the wealth from the banks back to where it belongs but without compromising the banks essential function in society."

    And doesn't the wealth belong to society?
    That's the key point, wealth needs to be democratically controlled - socialised - not left in private hands.

    If the Labour Party was really socialist it would have nationalised all the banks without any shareholder compensation, wrote-off everyone's mortgage, loan & credit card debt & given everyone the same amount in their bank accounts.

    But they preferred to 'save' capitalism.

  • Comment number 30.

    #25 stanilic and #27 that's what I call fighting talk!

    There's fighting talk at the FCIC in the US as well with regard to the banks responsibility to the wider society...

    Goldman Sachs accused of disrupting FCIC's probe into financial crisis

    The timing of the oil spill in the Gulf was just a bit too convenient for my liking...and now all we hear is that Obama 'seeks ass to kick' over BP oil spill.

    Just could it all be a deliberate distraction?

    ...#26 duvinrouge wrote...

    'The financiers are not parasites that have attached themselves to capitalism, they are a integral part of it.'


    'Some capitalists will need to suffer as well as the workers.'

    Spoken like a true free-market anarchist speculator. You must therefore have a lot to lose if the capitalist system breaks down!

    Please explain exactly why all of the workers must suffer.

  • Comment number 31.

    26 duvinrouge

    We have arrived at this point by different roads so our perspectives will not be the same.

    You perceive these matters as a function of capitalism whereas I see them as a function of humanity in that individuals allow themselves to be corrupted by status and money. Perhaps your perspective is more merciful as it blames system and process whereas I will always call the individual to a personal and moral accounting.

    Economically I am a pragmatist. There is a form of relationship between capital and labour which need not be exploitative in which the proprietor sees themselves as a facilitator rather than just the owner. Such understanding derives from a moral perspective adopted by the proprietor seeking to endow his business with value, quality and hopefully perpetuity. The issue to me is finding work, food and a future for the common folk from which other fellowships and common values can evolve.

    No doubt you will not agree with some of this but I would rather start changing society from the bottom up than rely upon a philosophical synthesis, however well argued. This is our difference but to my mind it is small.

    Conflict in human relationships arise from the disempowerment of people due to the pecking order of hierarchy. This necessarily means that hierarchy is dysfunctional of itself.

    I have no doubt that we can agree that the abuse of money brings power to the rich and the abuse of power brings money to the powerful but to go back to the start I say this is because the rich and powerful have gained the world only to lose their humanity. To be in that condition is worse than being in prison as even a prisoner can get released.

    I expect that the rich and powerful have fabricated a suitable mythology to explain the current state of affairs but that can only ever be a temporary arrangement for the simple reason they need the workers to do the work as without the workers or the work their myth will collapse along with their edifices.

  • Comment number 32.


    Some good points in there, I reckon if Mohammed came down and saw how much of his teachings, which were very useful to humanity at the time and in the context in which they were created, are now being used totally out of that context and causing unecesarry human suffering as a result, the very thing his teachnigs were designed to reduce.

    I reckon he would have a few words to say about it along the lines of 'what are you playing at, this was never meant for here..isnt that obvious'?

    Education is a wonderful thing, with time the realisation will come and for many it already has through a degree of integration, but these things run deep and it takes both time and sensitivity to overcome them.

    Not everone is aware that their cultural programming is exactly that, they mistake it for divine reality when it is closer to the truth that cultural programming is sub-set of an all encompassing devine reality which stretches accross all religions philosophies and lifestyles be you a banker or one of Vincent van Goughs 'potato Eaters'.. how could it be any other way?

    There should be no blame attached to these things, we are where we are and we are what we are. That is not to say that we should not strive to manage that in order to reduce the quantum of suffering.

    I fancy Argentina to win the world cup by the way.

  • Comment number 33.

    By the way has anyone else noticed the cultural and economic comic irony associated with the sea of £1.99 red and white flags adorning the carriages, pubs, window ledges, roadside burger vans all all other such work places of this fair land.

    All neatly stamped with the subtext ''Made in China''

    Well... I think it is funny anyway.

    C'mon England!!!!

  • Comment number 34.

    #31 stanilic

    "...I would rather start changing society from the bottom up than rely upon a philosophical synthesis, however well argued."

    This sentence interests me because I'm all for changing society from the bottom up in the sense of workers taking control rather than a party taking control of the state & directing everyone.

    Perhaps you like the idea of the social forum movement bringing together people who regard themselves as anti-capitalists to exchange ideas?

    I'm all for people forming their own communes & trying to live a sharing life rather than a materially aspiring lifestyle.
    They give us glimpses of a post-capitalist society.

    However, the element in the sentence which to me shows a misunderstanding of the communist position is the point about a philosophical synthesis.
    Does this mean that you think communism is about trying to present an accurate understanding of what's happening to society & producing a blueprint solution to which we have to convince everyone its the best idea?

    Communism is not idealistic.
    It is not a battle of ideas (although there is an element of that).
    It's not the battle for utopia.
    It is about real forces - economic forces - that lead people to act a particular way & not always consciously.
    Peasants supported the Bolsheviks because they promised them peace, bread & land - they never wanted communism.

    Some homeless people turn to the church, not because they believe in God, but because they feed them & sometimes provide shelter - they can offer an improvement to their lives.

    Similarly, when capitalism is in full crisis, fascism offers people an improvement, or seem to.
    Only temporarily because fascism must lead to war because of its geographical limits, in the sense that they must take resources & defend resources otherwise rejoin the market economy.

    So in summary.
    Capitalism cannot provide a solution to its own contradiction of eternal growth with finite resources.
    Fascism only leads to war.
    Individual action, such as communes, provide good examples to the rest of us & at times of crisis may provide a solution copied widely, that is, may become socialism from the bottom up.
    This would be far more preferable to a socialist/communist party taking over at Westminster & imposing socialism.

    There were a good many communists who knew that the Soviet Union from the outset was headed in the wrong direction, e.g. Otto Ruhl & Rosa Luxemburg.

    Many have now learnt the lesson.

    Those who haven't just sound the same as fascists.

  • Comment number 35.

    #24 Ben - thank you for your CV summary of Mr Haldane.

    If you read my posts you will see I dont pull my punches on the quality of regulators and the performance of the Tripartite Authority in failing to head-off the crisis. That said, the BoE Financial Stability report of 2006 did flag up the risks which ultimately led to the 2008 debacle.There has been no publication of the Tripatite Authority minutes to show who did what and said what to whom. Who knows, Mr Haldane could have given warnings, ignored by others.This is why I want a public inquiry.

    I think you are too dismissive of the costs attributable to banking pollution and I suggest you do read Mr Haldane's analysis. Whilst I accept that for many bad lending decisions there are feckless borrowers, you cannot shrug off the main causal relationship between the financial collapse and the recession following in the real economy. Perhaps you are looking for a direct fiscal cost of bank bailouts in the UK. Mr Haldane puts it somewhere below £20bn.I have seen higher figures -The National Audit Office's report of December 2009 found that the Treasury's net cash outlay for purchases of shares in banks and lending to the banking sector will amount to in the region of £117billions.The costs of the emergency funding attracted interest borne by the Exchequer. But, this is not the only measure we need to consider. There is a lost output component that has obviously hit tax revenues. There are consequential costs arising from QE - £18bn added to PSND for example. I am sure a component of government debt interest factors in the fact that HM Govt are now directly subsidizing liquidity lifeboats and insurance policies for bank balance sheets and toxic assets yet to emerge of massive proportions. This is aside from the armies of civil servants,lawyers, accountants and City advisers used to frame the aftermath of recapitalisation.

    Whilst I do recognise that the former Labour government allowed public borrowing to drift higher over time when things were better ( structural deficit becoming embedded), the banking collapse is a critical component ( not yet fully quantified) of the costs we now have to start absorbing over an extended period of time.I agree with other posters who say that Mr Cameron should not seek to hide that fact in his rhetoric, which falls over itself to lump blame on predecessors at every available opportunity as if its all down to them.

  • Comment number 36.

    34 duvinrouge

    Perhaps I should explain where I am coming from so that you can at least be assured of my good will.

    I started out with anarchist-communism: Bakunin to be exact which brought me into all the conflicts between Bakunin and Marx. Both had their good points and errors. I later mellowed into Kropotkin who used to castigate Vladimir Ilyich for being a liar. I still hold to his views on mutual aid and have built on his arguments as to the organisation of the fields, factories and workshops although I never shared his views on Russian nationalism.

    I would argue that the peasants did not support the Bolsheviks as it was the other way round: the peasants had siezed the landed estates before the October Revolution. If anything it was the `intellecny' in the peasant Soviets who later obstructed the peasants from taking that revolution through to its logical conclusion. This is the problem with revolutionary `vanguardism' which you rightly identify as a potential precursor for fascism.

    I have continued in my life to draw broader conclusions as to the human condition. I deplore political violence as it is nothing more than a statement of intellectual and moral bankruptcy. I am a collectivist in that human affairs are best resolved through working through the problems on the basis of equality. Whereas I dislike the state, hierarchy and elites and always will for the simple reason that they cause illusion and delusion. One must always be aware as to what is happening around and about so that local matters can be seen to fit into the broader picture.

    Probably I am mellowing further into the deeper aspects of human psychology or even, as I watch wildlife like Prince Piotr Kropotkin, the psychology of sentient beings. Increasingly I see little difference between the positive philosophies of human life as opposed to the destructive horrors of nationalism and the state. Is there such a thing as anarcho-Jungianism?

    You are not the first Luxemburg-ist I have come across in life. I really liked a couple of them so in my view you cause no offence. We will just have to agree on some things and disagree on others.

  • Comment number 37.

    All this media discussion of the emergency budget still dodges more fundamental issues:

    The austerity measures are treating the symptoms not the causes of the crisis.

    The cause is the financialisation of the economy.

    The voices of warning vary from the fringes of heterodox economics (Marx, Soddy, Minsky to name just a few), but there is clear evidence of dissent from within the stablishment too.

    There is much empirical evidence that we have been storing up trouble for at least a decade. State interventions (such as lowering interest rates and facilitating easy credit) have masked the problems that the 2000 dot com bubble signalled.

    Others claim that the problems have been masked for longer, such as Mr Haldane, if you take the view that central Bank interventions have successively ratched-up implicit state guarantees of the finance sector (see Banking on the State). A view which is not too dissimilar to the late Hyman Minsky.

    P.S. For those who want to scratch beneath the surface of our current predicament, yesterday's Keiser Report with Michael Hudson is worth 25 minutes out of anyone's day:

  • Comment number 38.

    Economic rape and STDs:

    Coming to a nation near you?

  • Comment number 39.

    #36 stanilic

    "the peasants had siezed the landed estates before the October Revolution."

    An interesting take on the Russian Revolution.
    I will bear this in mind.

    Kropotkin - any weblinks worth reading?

    I can see why communism can be seen as an optimistic perspective on the human condition.
    It could be that once we have collective control of the means of production via direct democracy that we still destroy the planet.
    But at least we will have tried to excercise collective will for the common good rather than just perish under the barbarism of capitalism that denies us any ability to act in a collectively conscious way.

    I will read your posts with added interest from now on.

  • Comment number 40.

    39 duvinrouge

    I was researching Nestor Makhno's mutiny against the Soviet state when I came across the reference to the peasants. Orlando Figes has reported the same when he is not writing criticisms about other historians. Sadly, Nestor Makhno whilst he is an interesting character was not much removed from being a hooligan himself. A great disappointment: a bit like Tom Rainsborough, strong and idealistic in the Putney Debates but earlier a looter of western Ireland.

    I do not know of any weblinks for Piotr Kropotkin as all my work on him was done before weblinks existed. He was a Russian scientist and aristrocrat who researched Darwinian theories in Siberia. He pops up in all sorts of histories of the late nineteenth century but his great work was `Mutual Aid' which landed him in a Russian prison. He lived over here for many years, founded anarchist-communist journals and debated with the Social Darwinians. He returned to Russia after the Revolution and died in the early Twenties very unhappy with Lenin.

    It is easy to be dystopian as to the prevailing human condition. There are too many people, too much grasping and greed, and probably there is an adjustment of some sort some time ahead but I remain optimistic about humanity itself even though I have recently learned that 2% of my DNA is actually neanderthal. There is hope and as the elegant Margery Kemp would say `all will be well'.

  • Comment number 41.


    Interesting piece in the link.

    It basically supports what JJ/statist was writing on these blogs somewhile ago.

    In the article it states...'To put it another way, the criminal oligarchic parasites hypnotize a nation to sleep, bend it over, strip it of its clothes, and then rape it.'

    I think JJ/statist used to put it rather more sccinctly...'soft-soaped and shafted!'

  • Comment number 42.


    You're very welcome. I also just noticed that imitation is the sincerest form of flattery ;-)

    Nice editing work and for getting that in at #2 on Peston's blog:

    I was struggling yesterday to find the link to an article I read a few weeks back which supports the main thrust of post # 37 (masking the problems that the 2000 dot com bubble signalled):

    "Double bubble, toil and trouble"

    Just ordered Carlota Perez's book as it nicely weaves in technology bubbles and financial bubbles (a la Minsky).

    Since about the 1970s the West has dodged full-on depressions (debt deflations to purge mis-priced assets and misallocated funds) through two mechanisms; Government stimuls and Central Bank intervention (lender of last resort to prop up zombie asset prices and mask underlying profitability problems) - just reading Minsky on this and he nailed it back in the 80s. Ms Perez just puts the icing on the cake.

    If you take the view that all previous economic booms in the 19th / 20th Century (along with their associated bubbles) were based upon dramatic improvements in energy extraction (ability to do REAL work), then you can see why the booms since the 1970s (mainly information technology) did not (will not) provide energy production leaps (they are instead net energy consumers):

  • Comment number 43.

    42 Hawkeye_Pierce

    hands up!....i'm glad you noticed.

    unfortunately, i don't have too much time to be original (full time job and family and an 18hr/week commute)....and that post was too good to be just posted on this rather obscure blog (apologies paul)...and also...english language is certainly not a strong point of mine...maybe i'm a bit autistic!

    btw over the last two to three years, i've found i've especially been drawn to the posts of:

    statist (jaded-jean)
    juantycyclist (bookhimdanno)
    and of course

    I admit to plagiarising 3 of them (posts) for expediency...but hey, the war on Irag was started on a similar premise!

    i have noticed key phrases from the above posters being commonly used btw


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