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When and how to squeeze the budget

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Stephanie Flanders | 17:52 UK time, Tuesday, 17 November 2009

The next government has to decide how to squeeze the budget, but as we all know, there's also the crucial question of when. As I reveal in a second film for the news bulletins tonight, in our BBC poll we asked people about that too (see yesterday's post for the first part).

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Interestingly, 38% agreed with Labour and the Liberal Democrats that the economy was too weak to risk deeper cuts in spending next year. But more - 44% - agreed with the Conservatives, that not taking action posed even greater risks. An honest 18% said they didn't know. If asked, I suspect a lot of economists would be in that last camp as well.

On the question of timing, I suspect the difference in practice between a Labour and a Conservative government would be smaller than the difference in rhetoric suggests (see April's post "Spending slowing doing the work"). Both parties would expect to announce tough budget plans if elected - and both would tend to delay most of the pain until 2011 or 2012, when the economy is more firmly on the mend.

Geoffrey HoweBut if a new Conservative chancellor did want to act more quickly, he'd have to face the irony that it's hard to cut spending in a hurry - especially in a recession. As Geoffrey Howe discovered in 1981, the fastest way to cut borrowing is almost always to raise taxes.

The big moves in that famous - or infamous - budget were all tax rises. He froze personal allowances - a big tax rise with inflation running at more than 15% - and put a windfall tax on North Sea oil profits, and the banks. All told, he raised £4bn - around £12bn in today's money.

You might remember that 364 economists wrote to the Times protesting the Budget. I made a film about it for Newsnight in March 2006.

If you'd polled voters in advance, I doubt you'd have found many in favour of Howe's tax rises. And the same is true today.

As I revealed yesterday, a clear majority in our poll wanted spending cuts to take most of the burden. But 69% did say they would support the Liberal Democrat idea of a "mansion tax" on houses worth more than £1m. It didn't go down very well when Vince Cable announced it - to the surprise of many of his colleagues - at the Liberal Democrat party conference. But housing is relatively under-taxed in Britain today - Martin Wolf is one of several economists who have since supported Cable's idea.

The political downside of that kind of tax is you'd be handing a relatively small number of households - less than 250,000 - with a very large bill. The economic downside is that you wouldn't raise very much cash: the Liberal Democrats' initial estimate was that it would bring in £1.1bn, but there are a lot fewer £1m houses around than there were.

As the Howe example suggests, to raise a lot of money you have to raise a tax that lots of people pay or bring in something entirely new. Right now, that has some suggesting a carbon tax.

In our poll, 39% were willing to sign up to a carbon tax. The ABs were most keen, with 46% supporting the idea. Others were less keen, possibly because we reminded them that a carbon tax would raise the cost of heating and fuel.

Others, perhaps remembering Howe's first budget of 1979, tell us to expect the Conservatives to raise VAT, or, say, remove the zero-rating for books and newspapers, or the reduced rate for domestic fuel.

That was the least popular option in our poll. Only 31% would be willing to support a VAT rise to 20%, which would raise nearly £5bn a year. There was an interesting age difference here, with 37% of 16-24-year-olds in the poll coming out in favour, versus 29% of over-65s. If anything, you might have expected the reverse, given that VAT is the tax that younger people are most likely to pay.

As the Liberal Democrats have shown, the idea of a windfall tax on banks is unlikely to go away. Nor will the debate over the timing of deep budget cuts. But with borrowing so high, there aren't many either/ors. The answer may end up being "all of the above" - and a longer working life as well. But not quite yet.

Comments

  • Comment number 1.

    A schedule of higher rate progressive taxation starting at £100K rising to 75% marginal at half a million would be more effective especially allied with a military style crack down on tax avoidance and evasion would yield benefits. Rather than hit VAT a carbon tax is better with low paid/unemployed benefits tax thresholds adjusted to compensate.

    Cutting public services even if the NHS is protected makes no sense because not only will it affect the poor and vulnerable disproportionately but the associated loss of jobs will prolong the recession and expand the benefits dependency culture into new territories. The priority must be to stimulate the real economy to resume growth which is more likely to close the funding gap. Public opinion will rapidly change when people are confronted by the loss of public services across a wide front. The Government must campaign itself out of the short term 1930's balance sheet mentality and go for active economic management rather than relying on playing with interest rates.

  • Comment number 2.

    Its not a budgiet its par rot and its nailed to the perch pining for the scraaappage schemes and a new miraaage

  • Comment number 3.

    Tax rises aren't really the solution. If we're taxed more, we've got less to spend, so we buy less which either delays or reverses the economic recovery.

    We could start by stopping the child allowances paid to rich people. That's the sort of crazy Government spending that we need to remove from the budget.

    Then we could withdraw from Afghanistan, and save a small fortune...

  • Comment number 4.


    We need as a matter of urgency to cut out the bureacratic leadership/management that add no value and create all the waste/frustration at the front line.

    We need to systematically support front line workers to remove 40-80% of the time/resources tied up dealing with failure demand and carrying out non-value add activities, and re-invest their efforts into INCREASING, and CONTINUOUSLY IMPROVING the services provided.

    We do not need to 'cut' services (we can increase them), but we do need to radically change (and reduce dramatically) current 'leadership'/'management', create 21st century leadership and management and install 21st century management systems* (nb it's 180 degrees opposite to what we currently have - these systematically remove waste, whereas current systems systematically create it!).

    ... therein lies the challenge ... and therein lies the future ... other nations have done it ... take a look at http://poweromics.blogspot.com/2009/10/asking-questions-doing-things.html for instance ... but in the UK the toxic mixture of ignorance, arrogance, ineptitude and greed will mean the UK will avoid taking decisive action, wait until the last minute and have to try to pull itself from the brink of the abyss ...


    * 21st century management systems are decoded in http://books.google.co.uk/books?id=-8xAIgkewOUC&printsec=frontcover#v=onepage&q=&f=false for instance.

  • Comment number 5.

    Off the top of my head in no particular order

    Vat rather than carbon tax.( Vat will effectively tax exported pollution too.)
    Index link retirement ages to life expectency.
    scrap child allowance/taxcredit to middlecass
    Local income tax on every additional home not rented to tennants.
    Wealth tax ( as France)
    Scrap student loans, and reinstate means tested grants
    Increase taxes on alchohol too cover social cost of excess drinking
    Use death duties to recycle wealth through economy.
    Tax banks relative to risk underwritten by taxpaying community.
    Increase top level income tax.
    legalise and tax drugs

  • Comment number 6.

    The mansion tax is a promising idea, as is CGT on house sale profits. Fairer still would be a re-evaluation of council tax. Whilst this tax does not currently go to the central pot, there is a potential to do so... e.g. we have council tax to pay for the local council, plus a tax of 1% of property value for properties over £200,000, that goes to the central budget.
    A mortgage tax of 10% could also be brought in.

    However, in the main it is clear that benefits and pensions (state basic and age; public sector in its entirety) need the most reform.

  • Comment number 7.

    Leanomics would look to introduce a Land Value Tax to raise taxes, as it taxes the rich, they can't avoid it and they can't pass it on either ... for instance take a look at http://poweromics.blogspot.com/2009/08/land-of-free-but-whos-paying-for-it.html.

    IMHO a lot of solutions are already around us ... if we bother to look ... and look in the right places.

  • Comment number 8.

    Stephanie,

    ''But with borrowing so high, there aren't many either/ors. The answer may end up being "all of the above" - and a longer working life as well. But not quite yet.''

    Nice to see you have been reading yesterdays comments. I am not sure whether you should have used the term 'answer' in that sentence though.

    It will only be an 'answer' in the sense of balancing the books, i rather suspect the debate may be focussed on other more pressing matters once the reality of what those cuts will mean to the majority of peoples current perception of what is 'quality of life'.

    I think at some point we would actually be better off all around if we took along hard look at what 'quality of life' is ..and how much that would cost...maybe that would make the deficient go away too.

    We can dream.

  • Comment number 9.

    First, those in power will have no trouble finding an economist who will provide charts and graphs to justify whatever it is they decide to do. The fair thing to do, and of course that has no chance, is to look at the overall tax burden and see where it can be best applied with the least damage. Cuts are needed but politics makes this a process related more to bureaucratic power than what is needed. They generally end up with across the board cuts in the name of fairness, which of course it is not. Since the banks are underwritten by the taxpayer and they seem to be making money someone should suggest nationalizing the banks and let what would have been profits and bonuses replace tax dollars. This is a suggested coup as the bankers now have all the power. After all, they created the mess. It will be the same politics that got everyone into this. Start the presses, a recovery is on the way..if elected we will make everything better (sounds good).... except these are the very people who let it all fall down around them rather than offend their banker friends. When the governments spends most of its energy avoiding their own culpability in the financial crisis it is hard to believe that any solution coming from government will be any more than a continuance of aviodance of responsbility. No new structure...no solution.

  • Comment number 10.

    Interesting blog. Main thoughts:-

    Increase pension age more rapidly - relatively painless way of reducing outgoings without taxation - could start almost immediately.
    Definitely take away child benefit for those who dont need it - politically difficult but could start with a relatively high threshold and then progressively reduce the threshold once it had been 'accepted'.
    Not keen on Carbon tax- will just create more energy poor - Gas and electricity are high already. VAT instead ok but again it might hit the economy (going back up to 17.5%) or just make zero rated items vatable but not sure how much this would raise.
    The big problem with winnowing the public sector is of course the sudden large number of jobless. Would be good if we could start supporting start up business a little more and better incentives for manufacturers etc.
    Wealth tax is attractive but suspect the wealthy (the really wealthy) will just move their wealth abroad to avoid so mighe be self defeating.
    'Mansion tax?' - have said it before why not capital gains tax on all house sales - start it off at something like 5% and can have different tax rates for different levels. CUE HOWLS OF PROTEST. Will also have benefit of putting another tool in place for taking heat out of housing market.

  • Comment number 11.

    When will the UK public (and perhaps some mainstream journalists) finally wake up and smell the coffee:

    http://www.zerohedge.com/article/sobering-dose-reality-economist-steve-keen

    It's not just about balancing the books, it's about that whopping great credit card bill we have:

    "Steve Keen is a straight shooter who pulls no punches in his criticisms of other economists, political leaders, and central bankers all over the globe. The reason it is important to listen to him now is that he is still pounding the table about the debt overhang that is plaguing the Anglo-Saxon world."

    And a Carbon Tax is NOT the solution to our problems. I repeat NOT the answer. This is nothing more than free market fundamentalism that deceives every one of us into thinking we have freedom, when in fact most of us will get stripped of any fair allowance as we sell our carbon credits off at rock bottom prices to the greedy corporate controlled world in order that we can pay our monstrous personal taxes - those introduced to claw back the hideous debt burden of our post 1970s fictitious boom time, whilst the corporate tax world and private profiteers benefit from their tax immunity and enjoy a hyper-concentration of both money and authorisation to jet themselves around the world - all acquired legitimately and above board, of course!!

  • Comment number 12.

    The bond market will determine the timing; yields will increase when it proves more difficult to sell gilts. If investors fall out of favour with gilts, the government will be forced to get its finances under control.

    In the years preceding the French Revolution, over 40% of France's national income was being spent on paying the interest on government debt; it didn't leave much money for a welfare state.

    I favour taxes on spending (VAT) rather than taxes on income and wealth generation. Those on lower icomes will need support, as they have a higher propensity to consume, and will face a higher proportionate tax burden when VAT is increased.

  • Comment number 13.

    The problem to me is that the state is simply too big. We need public sector spending to be about 33% of GNP. These days, it is supposed to be nearly half. So raising taxes to close the gap misses the point. The state is SUCH a burden on the private sector that it cannot continue like this.

    What would I do? Disband every quango created by this government and fire their staff. Scrap Trident (can you imagine any circumstances in which a trident missile would be fired?) And yes - stop tax credits for the rich.

    This is by no means complete as a list, but a ruthless axe has to be taken to public expenditure. This includes fancy drugs that prolong life marginally and cost a great deal for little gain (except to their manufacturers who are very efficient at finding sob stories to sell their wares).

    This very day expenditure on stations has been announced. Why??? What does it do for us?

  • Comment number 14.

    Whoever gets elected : WHEN - the day after polling ; HOW - until the pips squeak. Caledonian Comment

  • Comment number 15.

    Grrrrr......! Carbon Tax..... The UK spends less on clean energy R&D than any of our competitors and when I say less I mean a lot, lot less.

    So I think we should absoluteley refuse to pay any carbon taxes until this Govt starts spending it to help build up a clean tech industry.

  • Comment number 16.

    Isn't it a pity when democracy turns into people voting for other people's tax rises - you should all be queuing up for the privelege of paying more tax to get us all out of this situation!

    But seriously, I would cut the taxes on employing people.

    I would cut the pay of anyone earning more than £30,000 in the public sector by 25%.

    Public sector pensions schemes should be wound up immediately and replaced by private sector equivalents (fully contributory).

    Bonuses should be made illegal - if you do well you get your pay, if you don't do well you are looking for another job.

    When someone goes on holiday, the rest of the people should really notice they are not there - if they don't, then maybe they don't need to come back to work.

    Nobody should pay any income tax below what is needed to live, about £10,000 a year. Above that, the tax goes up progressively, say 1% for the first £1000, 2% for the second £1000, and so on.

    All the rest should be taken as VAT - whatever is needed to balance the books. If they don't balance and the VAT percentage is too high, then you have to cut public expenditure to suit. A first step would be to cut the number of Government ministries and quangos.

    Will it happen? - No, bring back the IMF.

  • Comment number 17.

    Post 7 updated due to link in it not working (full stop at end of sentence added to the link).

    Leanomics would look to introduce a Land Value Tax to raise taxes, as it taxes the rich, they can't avoid it and they can't pass it on either ... for instance take a look at http://poweromics.blogspot.com/2009/08/land-of-free-but-whos-paying-for-it.html

    IMHO a lot of solutions are already around us ... if we bother to look ... and look in the right places.

  • Comment number 18.

    The RuinAAAsense in baaanking is now being followed by The inKing of the ntitlement until the big dydle Doe Doe QE'rs make their next quantum leap into the vortex and beyond the event hurryzone into another universe in search of the unenQuEueecumbird

  • Comment number 19.

    Oh what a conundrum! Who would be a ruling politician?
    Here we are having spent billions of future earnings and we would rather not have to start from here. But we are here.
    If we just had to pay back UK debt then we could just tax our way out. But no. We owe the money abroad. Or at least to multinationals that may just as well be abroad.
    So how do we get money to send abroad to settle debt?
    Do we really need to have a banking industry to attract foreign funds so that we can skim some off to repay our debts?
    In the absence of an exporting manufacturing industry we don't have much option.
    And of course we are busy sending money to foreign energy companies anyway.
    British Energy being owned by EDF. Npower being owned by the RWE. Etc.
    So we need financials. We need to create an atmosphere where they can flourish.
    Err hang on. Didn't we just do this since the 1980s?
    Look where that got us.
    But they are all we have got.
    We need to support the bankers. You know it makes sense. (That was irony BTW.)
    Who wants to be a politician?
    Ah, but of course - failed bankers, folk who cannot do anything constructive.
    It all starts to make sense.
    Here comes taxes and cuts for all except the bankers and political classes.
    Grin and bear it.

  • Comment number 20.


    Taxing larger homes isn't going to work because it would unduly hit people who have lived in the same place their entire life while at the same time making the homes less saleable, thereby taking away their potential "out".

    Taxing larger incomes isn't going to work because the very rich will simply move offshore and pay nothing where they currently pay something.

    The crucial thing we must do is get the size of the state under control. We don't need 5-a-day coordinates, diversity outreach managers, and their ilk. These are non-jobs that draw money away from productive ventures and squander it on a growing army of busybodies.

    We need to cut paperwork. What's the sense in a situation where low-paid worker pays tax on their income, then fill in a raft of forms to get some of it back in benefits and tax credits, then have another form to fill in because the benefits are taxable? Why not simply increase personal allowances and abolish tax credits? It's easier (and therefore cheaper) to administer, removes the fiasco of people being practically bankrupted because they were overpaid, and provides fewer opportunities for fraud.

    To be honest before the state takes another penny in tax it needs to get its house in order. Throwing ever-more money into a hole doesn't stop a leak. Let's get the leaks fixed first, then see what's actually needed to restore public finances. And to stop the leaks we have to finally answer the question many of us have been asking for years - we've paid ever-increasing taxes, so where has all the money gone?

  • Comment number 21.

    It always amazes me how bad BBC journalists are when they are paid so much money. Second paragraph begins with the word 'interestingly. Yes, it is interesting, because otherwise you wouldn't be writing about it, would you? Or do you need plead with us that it is interesting?

    'As I reveal'? Do us a favour. You are revealing nothing except the results of a highly questionable poll which probably has asked loaded questions (36 per cent in favour of a carbon tax!) of about four people you found in the BBC canteen.

  • Comment number 22.

    ''Average temperatures across the world are on course to rise by up to 6C without urgent action to curb CO2 emissions, according a new analysis.

    Emissions rose by 29% between 2000 and 2008, says the Global Carbon Project.

    All of that growth came in developing countries; but a quarter of it came through production of goods for consumption in industrialised nations.''

    http://news.bbc.co.uk/1/hi/sci/tech/8364926.stm

    ''Take your life in your own hands, and what happens? A terrible thing: no one to blame.'' Erica Jong

  • Comment number 23.

    " ... and to stop the leaks we have to finally answer the question many of us have been asking for years - we've paid ever-increasing taxes, so where has all the money gone?"

    It's difficult to completely answer your question, but a good starting point is the fact that the outdated target driven/bonus culture (introduced by this Government at the same as increasing spending) systematically generates between 40-90% wasted time/resources ... so they created waste incinerators to throw taxpayers money into ... and needed an army of managers/bureacrats to manage it ... they also created the most complicated tax system you could imagine, and recruited lots of paper pushers/accountants to manage it ... and the list goes on ...

    Brown/Blair were warned about throwing money in without reforming things first ... they did not reform things, but they did change things ... they moved from 20th century practices to 18th century practices (instead of 21st century practices) ... !!

    the ex Director General of the BBC (Greg Dyke) recently had a pop at this in relation to politics and the BBC too ... http://poweromics.blogspot.com/2009/09/bbc-part-of-conspiracy-preventing.html ...

  • Comment number 24.

    Increase the tax that I have to pay to the government and I will spend less in other areas.

    I will eat out less, go to the cinema less, buy fewer Christmas and birthday presents etc.

    All this I will do to pay this extra tax.

    What then of those who are in receipt of my spending that will no longer receive it?

  • Comment number 25.

    Post 24 - a good point well made - and that's why we need Land Value Tax (post 17) ... as it takes money from the rich, who don't really spend it, they just hoard more (and want more) ...

  • Comment number 26.

    As far as the country goes, more tax rises would be fatal, as many individuals and companies, (especially small ones) are teetering on the brink.
    As the report on the news today said that there was a rise in inflation because of fuel costs, perhaps the best way to help everyone would be to REDUCE tax and VAT on fuel, for logically, if fuel prices are driving inflation UP, then cutting these will bring it DOWN!!
    Also it would help more than any other measure to give a much needed boost to ALL sorts of people, industry included.
    As for cuts to services...where do you start?
    Perhaps scrapping all the quangoes set up since Labour came to office would help, also scrapping all government advertising telling us all not to smoke, how to lose weight, not to drink, et al would get rid of £2 to £3000 per minute it costs for the ads. (none of which are necessary unless you are fond of a Nanny State). Then we could sack all the incompetent officials that Digby Jones uncovered when he was asked to look at government. He did not like what he saw, and perhaps we could have a leaner meaner set of officials, more competent and less wedded to "officialese", where "looking" at a problem means £20,000,000 cost and two years of wasted time.
    There is a great deal of waste in government, central and local. Perhaps if a start was made on cutting it out we could balance the economies books in 12 months, who knows?

  • Comment number 27.

    Oh...Stephanie!

    I'm just been watching 'I'm a celebrity...' and you come up with the headline...'When and how to squeeze the budget'

    ...you are awful!

  • Comment number 28.

    How on earth did they get anyone to vote FOR a carbon tax? Are they Mad, insane?

    What sort of folk do I live beside!!!!!!!!!!!!!!!!!!!!

    You know what will happen, where do you live, where do you work? Ah, lets tax you another 2k / year on top of all those nice car taxes and so on.

    It's the dole queue for me, I've done my bit already.

  • Comment number 29.

    This all sounds very much like more jam today but only bread tomorrow on the basis that tomorrow never comes.

    Sorry, but nobody has been making the jam so we have been importing it from China and other places.

    If we don't give up our propensity for generous splats of jam then we might find ourselves with no viable means of exchange to buy either jam or bread.

    Our policy makers are trapped on the horns of a dilemma: cut state spending now and risk effecting demand in the economy in the immediate term or defer those cuts and risk undermining the economy at some yet to be specified point in the future.

    I know very well that our policy makers will adopt the Augustinian option that we become virtuous but not yet. Sadly, this is not good enough.

    Somehow we need to find a way of slashing state spending by some 25% without effecting the economy. Fat chance perhaps: but how did we get here in the first place?

    The simple truth is that our political culture revolves around the state, the patronage of the state, and inevitably the spending of the state. Turn off the spending tap and the state begins to wither.

    Now I am happy to see the state wither: it needs a diet and far more exercise. In my view an increase in productivity from the public sector is long overdue. Why, for example, does it take the newly reformed Court of Protection some 18 weeks to make a decision? I don't know and neither does the legal profession but this sort of thing is going on all over the place and getting in the way of people living their lives, or in this case doing their dying as decorously as possible.

    This is all just plain bureaucracy based on the simple principle that the man in Whitehall knows best and the general public are not be trusted because they break wind, both upwards and downwards and occasionally forget to wash.

    This country faces some very hard choices. To my mind we need to ween ourselves off the state and put our trust in each other. In simple terms we have to recognise that the dreamtime so promoted by Blair and Brown, the social-democratic fantasy where money grows on trees, was the outcome of protracted political onanism. No wonder they called it the Third Way!

    It is time we got our hands out of our trouser pockets and got some real work done. Cut spending; cut taxes; cut the state; separate retail banking from the casinos!

  • Comment number 30.

    #6,

    You are a nutter.................

  • Comment number 31.

    Even now there probably is enough cash/capital in the UK economy/ UK government/UK banks to pull the UK economy out of economic difficulty but the UK is restrained by layers of fiscal, legal and other barriers, EU and other trading agreements and our politicians and administrators have neither ability or the political will that would operate the right kind of protectionism that would 'get the UK going again'.

    e.g
    - buy British or pay a special purchase tax
    - employ a UK national or pay extra tax for employing a migrant
    - zero tax on any goods and services manufactured and sold within the UK
    - export criminals in jail to overseas trading partners
    - ban imports of certain goods and services - most food, armanents,
    - reintroduce conscription and national service
    - recreate enterprise zones
    - competitions for new inventions, patents
    - talent spotting at school - entrepreneurs
    - house exchange schemes for the elderly for properties without stairs and with suitable services
    - nationalise planning permissions
    - only give planning permission where ther are housing shortages
    - prioritise development where it is needed - West Midlands, Cumbrian coast etc
    - fuel rationing of imported fuel and investment in alternative fuels
    - remove all taxes on electric vehicles
    - build our own nuclear power stations
    - urgent UK investment programme on hydrogen cells
    - build Trident equivalent ourselves - 'need to know basis' of security
    - review all existing trade agreements
    - new national emaphsis on self starting, UK sustainable UK demand and output - all inputs and outputs tested on a self sufficiency economic trading model
    - end current government spending and procurement model and test all government spending about sustainable UK spending criteria

    ... the list is endless and very radical and for those that do not like too much change we can have wicked vulture bankers and politicians sleasing everywhere and still be a very successful nation, if only we have the right policies and do the right things now!

    The reason for this - this is ACTION - not just talking about shuffling money about and that is about all our politicians are now capable of doing.

    I don't expect many to agree with me but unless these kind of radical policies and actions are taken - yes things might get a bit better for a while due to trillions of notes in stimulus but at the end of the short term (next 2 years) and in the medium and long term the country will continue to drift weighted with debt, taxes, trading and other deficits, unemployment, paralysis by international correctness/bureacracy, like our current PM 'anxiously waiting' for the next G20 meeting before he dare say or do anything.

    So there is a choice - we can have the courage to be radical and do the right things for the UK and its citizen - or we can sink further into the bureaucratic, bloated, fiscal, mainstream internationalised government behavioural pattern - which has done the UK so much damage.

    I don't think people realise what is coming in terms of cuts, tax rises the whole job lot - it's not just a matter of the servicing the £80 + billion extra UK debt burden - everything is creaking in the UK in terms of UK private AND public infrastructure - housing, import deficit, armed forces, NHS, education, OAP care, prison service, police, fire, ambulances, crime control, energy supply and production, transport, manufacturing, GB pound currency and the rest = everything needs more money besides paying for what we do now because of massive population growth occurring.

    We are largely committed to the government fiscal bloat option because of the UK national debt crisis and unless there are radical changes the best the UK can do is just struggle on with about 25% of the UK population doing fairly well - and the rest struggling like hell!

    The politicians allergy to radical policies and the right kind of protectionism has got us destined for a prolonged and damaging economic struggle whether or not we are technically in or out of recession
    (another political 'red-herring').

    This is where the politicians get it wrong - its output and productivity that matter and not simply money - we have to make enough of what there is genuine strong demand for in the UK and sell most of thsi internally first and then sell the surplus overseas to achieve sustainability - this should be equal to or exceed our UK imports. If we cannot do this then the UK will continue to slide down every ranking possible.

    The other not so minimal problem is that none of the main stream political parties have anything near what needs to be done in their policies, to achieve this. The current political master-plans are essentially the same - to drift on in UK debt and deficit, just hoping for a global recovery.

    So it is not just a matter of 'squeezing the budget' and waiting for recovery - much better if we can squeeze, reorganise and protect what we have left - get it working and make it 'UKSS' (UK self-sustainable).

    The UK now needs 'SUSTA-NOMICS' and not more 'SHUFFLE-NOMICS' (in terms of national economic organisation, management and policy.)

    Take your pick!

  • Comment number 32.

    30. At 10:09pm on 17 Nov 2009, JavaMan1984 wrote:
    #6,

    You are a nutter.................
    -----------
    Every now and then one finds a gem in the BBC blogs, I believe this to be one.

  • Comment number 33.

    Dumbos Do'd0 conomics ,the elephant in the room that cant fly,butt is to big to fail, like Hughes "spruce goose"

  • Comment number 34.

    No cuts?

    We need cuts. The public sector is a millstone around the neck of this country. At some point the balance between keeping the people at work in the public sector and the damping effect it has on other economic activity must be evaluated properly. We are massively over-governed in the UK, ad even if this must be rectified slowly it must be rectified.

    There seems to be a universal horror of cutting "services". Frankly you could scrap th ID card scheme, the contact point system and the olympics for a start. I'm not sure what most of the rest of these services are, but I'm pretty sure that outside the obvious (NHS, Police, fire, schools and a few others) I wouldn't miss them.

  • Comment number 35.

    JavaMan1984 - yes I know. Inherently I am a small-statist who believes in having a very simple taxation system. A system with no tax credits or undue subsidies.
    I do, though, believe that tax must distribute wealth (earned and closeted). Putting natural brakes on house price inflation is no bad thing: CGT and mortgage taxes would rein in prices. Whilst taxing property by value (tricky perhaps to administer) would ensure people live in properties they can afford.

    The mortgage tax could be eliminated in 3 years' time as interest rates go up and the economy recovers.

  • Comment number 36.

    The Government sees the introduction of a carbon tax as a new way to raise revenue for the exchequer. If so, then it must be bad for the ordinary taxpayer who already pays too much!
    The real question that any Government must address (and is being ducked) is the security of supplies of basic essentials for life.
    Energy supplies have been allowed to decay for the last 30 years by successive Governments because the capital expenditure is large and the timescale is long (so anything that takes more than 5 years doesn't interest any Government). This must change or else the financial meltdown that we are going through will seem like a picnic.
    I do not agree with any of the green policies undertaken by this Government with assistance from the opposition.
    Wind Turbines are an expensive joke for which all energy users will have to pay with much higher bills (for no return).
    My proposals are for the UK Government to pay for new power stations to be built immediatly. Gas, nuclear, and coal stations (forget carbon capture as it cannot be made to work economically). We must have the first ones up and running before 2015 which rules out nuclear because of the long lead times for equipment to be built. Reverse the 80% CO2 cut decision and offer to provide a much smaller cut (which the energy user has to pay for don't forget).
    Bring under Government ownership power generation, water and sewerage,gas supplies, public transport and lease them out to foreign operators if necessary but retain ownership.
    This Government and the Conservatives before them have presided over the wholesale sell off to foreign companies of all of these industries which are essential to civilised life in the UK.
    If you don't agree then remember what it is like when you have a power cut for a couple of hours, your gas cooker still works, you can use candles, your tap still supplies water and you have enough to eat in the house. Now imagine that none of these supplies work or only work for short periods of time. That is what you face unless action is taken now!
    Where will the money come from, the same place as the money used to bail out the banks, borrowed from the future?

  • Comment number 37.

    ''More than a million children regularly go to bed hungry in the US, according to a government report that shows a startling increase in the number of families struggling to put food on the table.

    President Barack Obama, who pledged to eradicate childhood hunger, has described as "unsettling" the agriculture department survey, which says 50 million people in the US – one in six of the population – were unable to afford to buy sufficient food to stay healthy at some point last year, in large part because of escalating unemployment or poorly paid jobs. That is a rise of more than one-third on the year before and the highest number since the survey began in 1995.''

    http://www.guardian.co.uk/world/2009/nov/17/millions-hungry-households-us-report

    This is the wrong horizon - Talking about voluntariy trimming middle class expectations, as though that is going to happen. Yeah right the older generation have really done it so well so far havent they, they are the ones to take it forward. What a load of.

    Peak oil is here. Climate change is here. Low labour zones are affecting activity here. Pollution is everywhere and in growth. Extinction of species is in process. Capital structures are under stress. Food production problems are growing.

    Here - Effectively there has been financial cannibalism of the younger generation - encouraging them in debt to get the most for property owned by the older generation. A direct wealth transfer young to old. That has now moved to job cannibalism, as the financial cannibalism has just about finished so it has to move onto the wealth creation, jobs, the denial of jobs to the youngest workers in society, meanwhile older people hang on to jobs and lobby to extend retirement age. This has all the hallmarks of a game moving to an end game. Wealth for the older generation can only decline because they have shut off access to the young, disinherited them. Meanwhile there are bloggers talking about the impact of whether some double income types can afford subsidised nannies in a Nanny State. You couldnt make it up. Now the latest drive is to promise more help to the aging population, all very laudable, but. You have people blogging who imagine facts - eg I have never known anything other than rising taxes. The total tax take in the UK economy has been between 43 and 46 percent for decades, its on record. So the only way anybody pays more tax is if there possition improves in that enviornment. So what.

    Nope, solyent green economics are embedded here. A divide and rule political system where oppositions dont win elections, residing administraters lose them. And along the way politican cosy up to which ever voting block they think will help them whether they are economically active or not.

    Superman Obama can't even feed his population. His system is bust by any definition. Thisnisnthe staged collapsde of the crypto Roman Empire.

    Trad song - Row, row, row, your boat gently down the stream, merrily merrily life is just a dream. It's 'row your boat' not expect expect a ruddy gondola and a gondolier and ice cream and a song.

    But daydream on -

    'All men dream, but not equally. Those who dream by night in the dusty recesses of their minds, wake in the day to find that it was vanity: but the dreamers of the day are dangerous men, for they may act on their dreams with open eyes, to make them possible.' T. E. Lawrence

    So BBC economics - when are you going to open your eyes and discuss something that is not middle class. Just for a change. Talk about what is really going on. This is just yoghurt bacteria in a pot of milk of human kindness, or should that be unkindness. Once the milk is consumed then life stops, all is consumed. Meanwhile most of the debate appears to be about bubbles in the milk.

    And people will not act on the facts if they do not know them.

  • Comment number 38.

    I have the solution ! Hyper Inflation. 3 or 4 years of that will wipe out the debt. There will be side effects unfortunately. Pensions will be wiped out but Hey ! you cant please everyone.
    You then need to take the power to spend away from the numpties so they don't get us in to another fine mess.
    I suggest Vince and Steph have a dance off and the winner be crowned King or Queen of this green and pleasant land.
    Have you ever tried mushrooms from your back garden. Theyreeeeee Great !

  • Comment number 39.

    38,Have you ever tried mushrooms from your back garden. Theyreeeeee Great !
    ------------------------------------------------------------------------------------------

    Its important that the public knows the difference between mushrooms and toaaad stools[SHRINK WRAPPED AND KEPT OFF BALANCE SHEET]. before putting them in their pot


    The diferance is easy to reccognise ,IE IF YOUVE EATEN TOAAAD STOOLS YOU WILL DIE.

  • Comment number 40.

    "5. At 7:21pm on 17 Nov 2009, superiorsnapshot wrote:
    Off the top of my head in no particular order

    Vat rather than carbon tax.( Vat will effectively tax exported pollution too.)"

    The last Tory goverment introduce VAT on fuel, this was officially a fuel duty to reduce carbon and not a TAX grab. The Vat system was used instead of creating a new duty as it was the cheapest and quickest way to implement it, BUT due to the nature of Vat it only hit Small business and homes as big business could claim the vat back.

    It was widley unpopular abd NuLabour promised to abolish it on getting into power. Once in power Brown suddenly discovered that "under EU rules" he could not abolish it so he lowered it to 5% (was this his frist broken election pledge?)

  • Comment number 41.

    Why is the NHS off limits?

    Do we really need more then ONE manager per bed?
    Do we really need NHI newsletters sent to all households in the trusts area
    Do we really need our local NHS trust to rebrand/rename itself 4 times in 5 years?
    Do we really need to pay £234 + VAT to replace a light bulb under PHI
    Do we really need to pay PHI on wards that are not in use
    Do we really need two CAT scan machines which are used 6hours a week day, when we could have one manned 24/7hours a day?
    Do we really need Primary Health Trusts and there very expensive management teams AND regional goverment departments "managing" the Trusts
    Do we really need citizen committees over seeing the PHT?

    All PHI contracts should be re-nagociated, thouse financed by monies from the "Saved banks" like Northan Rock and RBS should be canceled and reverted back to UK PLC.

  • Comment number 42.

    "38. At 05:20am on 18 Nov 2009, rvaucbns wrote:
    I have the solution ! Hyper Inflation. 3 or 4 years of that will wipe out the debt. There will be side effects unfortunately. Pensions will be wiped out but Hey ! you cant please everyone."

    Just remember that the only pensions that will be wiped out of those in the private sector so at least 1/2 of the UK works will be pleased!

  • Comment number 43.

    One question about the pledge to half goverment debt in 4 years, what does the bill class as debt?

  • Comment number 44.

    They are promising to halve the deficit not the debt.
    There is a big difference. By their own figures Debt will rise to £1.3 trillion by 2014.
    Happy days

  • Comment number 45.

    Was thinking of buying a new house with a maximum mortgage, anyone got any advice?

  • Comment number 46.

    Max it up with a fixed rate. No charge !

  • Comment number 47.

    Half a pound of tuppenny rice,
    Half a pound of treacle.
    That’s the way the money goes,
    Pop goes the weasel.

    Up and down the City road,
    In and out the Eagle,
    That’s the way the money goes,
    Pop goes the weasel.

    Every night when I go out
    the monkey’s on the table.
    Take a stick and knock it off
    Pop goes the weasel.

    A penny for a ball of thread
    Another for a needle,
    That’s the way the money goes,
    pop goes the weasel.

    All around the cobblers bench
    the monkey chased the people;
    The donkey thought ’twas all in fun,
    pop goes the weasel.

  • Comment number 48.

    #44, they will halve the defict because nobody will lend us any more money until we start paying off our debt - two birds, one stone. But it will not be thrown by Gordon Brown, by then control of the UK will be out of our politicians' hands.

  • Comment number 49.

    46,

    Was thinking of going for 5x multiplier, is that a good idea? I was thinking inflashion is on the way.

  • Comment number 50.

    No.47. glanafon

    I see you've taken your weazel and stoat (coat) down the pop (pawnbrokers) again.

    "True individual freedom cannot exist without economic security and independence. People who are hungry and out of a job are the stuff of which dictatorships are made" - Franklin D Roosevelt.

  • Comment number 51.

    45 javaman

    Unless you need somewhere to live I wouldnt. House prices are held up where they are due to shortages related to neg equity and cheap mortgages / low interest rates. Houses are likley to follow negative equity decline with inflation. Just a guess. The forecast is -6 percent next year, then moderate growth of a couple of percent the year after. The big unknown is if inflation, ie high interest rates kick in. BoE forecasts low interest rates for years but they dont get it right all the time do they, err no. FSA rules putting full liability on banks if mortgages are not checked diligently will throttle the market. Course you could always live for today and worry about it tomorrow and hope tomorrow never comes. BTW I have no idea what the market is like in Trinil, Ngawi Regency.

  • Comment number 52.

    You can you increase the rate of taxation to over 50% of GDP.
    But will HMRC collect more or less money if you do?

    Assume you tax at the rate of 0% of GDP, clearly you will get no money in.
    Assume you tax at the rate of 100% of GDP, again you will get no money in.

    Why you may ask? Well, would you work all week to give all that you earned to the Government, and be unable pay for food, clothes or anything else for that matter.

    Consequently there must be a point between 0% and 100% tax rate of GDP where the Government tax receipts will start to fall if the overall rate of taxation is increased.

    Given that the simplest answer is usually the correct one, I can see no reason why this would not be 50% of GDP.

    I wonder how close we are to that point, and whether an overall increase in taxation will actually result in a greater tax take?

    For myself, if the Government increase the amount of tax I pay, I will quite simply spend less elsewhere. I will not be borrowing money to pay it, that’s a fact, and I suspect it may well apply to others in this country.

    They could have a go at savings, pensions and the like, or simply squeeze people enough that they spend their savings and assets to survive.

    Mind you they‘ve had a go at pensions already.

    Come on Mr King a measly £25 billion, you can print more than that, why not print a £500 billion, compulsory purchase all the gilts at 50% of their value and then write them off.

    After all investments can go up as well as down can’t they.

  • Comment number 53.

    #37. At 01:15am on 18 Nov 2009, glanafon

    --------------------

    glanny...were you on the 'sauce' last night when you wrote that one?
    (good post though btw)

    Spoke to a bloke in the pub last night and he told me that he had bought a pair of jeans from Tescos (approx. 2 weeks ago) for the princely sum of £3!
    He was actually wearing them and they looked just like any other pair of jeans to me.

    It will probably cost him more to wash them!

    What is the world coming to? (the 4 day week I hope!;o)

  • Comment number 54.

    I'm amazed at the creative energy being put into new ways of taxing "the rich", which in reality is anyone who earns more then you do. Apparently all rich people are undeserving and should have that which they have earned plundered by a government that has more right to the money than they do themselves. On the other hand, the 2.5 million claiming disability allowance, up from near zero twenty years ago, are not work shy scroungers but worthy of our deepest compassion and large amounts of taxpayers money.

    Its is this warped sense of entitlement that has got us in this mess. The only way out is economic growth, not wealth redistribution, which means cutting taxes to incentivise work while massively reducing the benefit bill.

  • Comment number 55.

    Here are a bunch of measures that could be applied to reduce costs, improve quality of life across the board and make this country competitive...

    1. Fire all politicians, put in a panel of experts to run the country whose overall earnings are based on long term performance. You'll be surprised how little you need to pay them, ask any academic scientist. We could have a small group, say 5 - 8 representatives keeping an eye on social issues/concerns from citizens.

    2. Councils can be downsized and wastage stopped. You wouldn't believe the amount of garbage I get through the post just because they can't think for themselves (have you changed your circumstances forms etc). At an average admin cost of say £50 per letter... Before I forget, contractually oblige councils to meet their objectives, i.e. maintain clean pavements (no leaves) or face budget reductions the forthcoming year (i.e. no increases allowed).

    3. Scrap personal tax, instead increase VAT to 35% or more. Those who spend lots pay more tax. Should also hopefully keep consumer overspending under control.

    4. Houses, are for living in, therefore first house should be nigh on tax exempt (human rights), 2nd, 3rd, 4th etc, should be taxed 60%+ and interest only mortgages outlawed. That should keep housing inflation under control.

    5. Health system, if you choose to go private, then you should get a NI rebate. However, if you are private and use a NHS facility, you pay for it through your insurance. Compulsory to use either one or the other, that way everyone should be covered.

    6. Education and student loans, lower the fees on science (physics, biology, chemistry, biomed), engineering and mathematical subjects. Ramp up the fees on arts, some languages, philosophy etc. We're here to compete against the world for revenue, we need to be technological leaders.

    7. I could be here all day dismissing the carbon tax etc...

    The main point of all this is, we need to do things quite differently to what has been done before here to effect any real positive change, socially and economically. We need to change attitudes towards thinking in the long term, level the playing field and get rid of the garbage (politicians).

  • Comment number 56.

    48 banking balls

    It is already out of the govmts hands. Total planned borrowing listed as 600+ billion. The 175 to 200 billion figure is for this year alone, 16 billion in Aug 2009, just one month. This is a zombi outfit. That debt has to be repaid by the private sector - so work out how much per head of private sector working population, factor in those who are on working tax credits and you will end up with a surprisingly low number expected to pay a surprisingly high number. We have autopilot and autopilot failure. This idea that it can be halved in 4 years is fun and can only be achieved by ruthless cuts. The idea there is debate about where the cuts are going to be is also laughable. Committee reports take a year, a green paper to white paper another one. They will just have to get on with it, or to be more correct Smooth Dave and Buoy George will. PS Major knew what was coming and let Labour co-work for 6 months beofre the election. So are Labour returning the favour.

    Anyway I have to go and do something in the real world.

  • Comment number 57.

    53 No, I just got a bit tetchy following getting my TV licence bill. Money for nuthin' and the chicks are free. Dire Straits

    50 Mr T

    Nope I popped somebodyelses coat, they won't miss it. Its the monkey in the room that worries me.

    Have to go.

  • Comment number 58.

    #54. At 11:01am on 18 Nov 2009, nicholas hoadley wrote:

    I'm amazed at the creative energy being put into new ways of taxing "the rich", which in reality is anyone who earns more then you do. Apparently all rich people are undeserving and should have that which they have earned plundered by a government that has more right to the money than they do themselves.

    -----------------------

    nick,

    It can sometimes be very frustrating being rich!
    http://www.telegraph.co.uk/news/6561915/Roman-Abramovich-frustrated-over-delays-to-superyacht-Eclipse.html

  • Comment number 59.

    53. At 10:57am on 18 Nov 2009, BankSlickerminustheR wrote:

    The four day week is coming, I think its already here.

    Do any of you work in the private sector, and if so, have you noticed things have been quieter since the start of November?

  • Comment number 60.

    Finance capital struggled to find productive returns on capital and via sub-prime mortgages, etc fueled an asset boom to maintain interest/profit rates.
    The debt-ladden consumers could take on no more debt - the asset bubble pops, house prices & stockmarkets fall.
    The banking system has to be rescued by government money.
    The government debt is borrowing from future generations.
    The stimulus fuels another asset boom and so banks' profits and bankers' bonuses.
    But the fundamental problem is unresolved, the profit rate on productive capital is supported by ficticious capital, i.e. rises in asset prices not genuine increases in the value of productive capital.
    But the problem is the government debt is reaching levels that are not sustainable.
    Just as the consumer became saturated in debt, so too now the government.
    Certainly in the UK and also probably in the US, the rate of return on government debt will have to increase, that is the rate of interest will need to go up.
    As desperately as they try to avoid the necessary capital devaluation they can't get away from it.
    Come the bursting of the next asset bubble the authorities can only print money and debase the currency.

  • Comment number 61.

    #59 Dempster

    Yes...I must spend at least one day a week reading all these blogs!

  • Comment number 62.

    Ah ha - so yesterday you convinced us all that the cuts are 'necessary' (because people polled said so) - and today you are expecting us to discuss when the best time for these cuts will be.

    So the media has made it's position clear over the last few weeks - they have 'moved on' from the greatest robbery of taxpayer money in history by the financial system and it roundly singing from the same hymnsheet as the Government.

    Well I say NO if you want to fill the 'black hole' in the public finances then I suggest you go and speak to those who created it in the first place will their gambles which required a bailout.

    If there are any decent taxpayers out there then please do not buy this lie by the state and media that you must go without services because they daren't ask the banks for the money back.

    I shall be fighting every cut at every corner, regardless of the amount - on a principled basis, something totally lacking in our media and political institutions.

    I shall not lie down and allow this 'mugging of the state' to occur without a fightback - and nor should any other decent taxpayer. If they do it this time then it will become the norm, simply allowing the private sector to make profit in cycles, but when the loss cycle comes around we must all bail them out? - not on my watch matey.

    In this battle you are either with the principled people, or you are in the slime pit with the sharks. The media has chosen it's side and now it's time for each individual out there to decide which side they will be choosing.

    I would also like to know how a poll of peoples opinions on when cuts should come (and indeed if they should come) when 50% of the people don't actually understand how the Economy works and take their 'view' from their national newspaper or TV news - and 50% is an underestimate because it's probably much more - how do I know? well if more than 50% knew how the Economy really worked then it would have been dismantled a long time ago.

    The latest polls onthis subject sound like a feedback loop for the media on their ability to influence public opinion to me - a test if you will.

  • Comment number 63.

    Well said Writings !
    It is probably time that taxpayers got properly organizized

  • Comment number 64.

    62. At 11:32am on 18 Nov 2009, writingsonthewall wrote:

    'Well I say NO if you want to fill the 'black hole' in the public finances then I suggest you go and speak to those who created it in the first place with their gambles which required a bailout'.

    Good point, after all they have managed to mis-sell us just about every financial product ever devised e.g.: endowment policies, personal equity plans, payment protection policies, pensions etc.


  • Comment number 65.

    #55 point 1 - a bit like the FSA looked after the Financial Sector?

  • Comment number 66.

    Merv, you took too long to man the presse, and the denominations they were small.

    My prediction, serious money printing to ensue.................

  • Comment number 67.

    64. At 11:45am on 18 Nov 2009, Dempster
    63. At 11:42am on 18 Nov 2009, rvaucbns

    The revolution starts here.

    All those who will stand beside the writings say 'aye'.

    Shoulder to shoulder as they say - only this time a stance made for principle and not an illegal act of war against a fictional enemy.

    When my services are cut - I shall stop paying my taxes. I would rather sit in prison than to be a passive bystander in the biggest robbery in history - as should anyone who actually works for their money (rather than simpy 'wins' it at the financial casino) - those who do not earn their money (or pay their taxes) will not be concerned with tax rises and public spending cuts - this will define those who are 'productive' in their own right and those who are simply parasites - along for a free ride.

    Stephanie - it's time you picked your side - you're either with us, or against us. I shall be asking Peston the same when I'm next over there.

    Your story tomorrow should start:

    ".....but why should we pay?"

  • Comment number 68.

    #62 WOTW

    Could not agree more.

    The 'soft-soaping' phase has been completed...now comes the shafting.

  • Comment number 69.

    62, good post and absolutely spot on.

  • Comment number 70.

    62 & 64, too true!!!

    The privatisation of the state (i.e. funneling of public money into private hands continues unabated).

  • Comment number 71.

    Governments need to prioritise the basic principles of efficient management above political posturing and rhetoric.
    An hour spent looking at the Public Accounts Committee website indicated that several hundred billion could have been saved this last decade by not doing projects which have delivered nothing at all. Cuts that would have made no impact whatsoever! Many other projects were delivered many years late and often not to the required standard which has its own cost beyond the financila implications such as dead soldiers, chinooks still sitting unused in hangers etc. In fact right across Whitehall underperformance by the Civil Service has cost this Nation dear. Add to that the costs of the cancerous Quangoland which seems to consume far more in resources and lards far more complexities onto others than it ever delivers in benefits and we have another huge opportunity to reduce costs and free enterprise from the suffocation of intrusive and largely unaccountable autocracies.

    Until government at all levels cuts itself down to a size that our productive activity can sustain(including the radical idea of firing civil servants in charge of projects that fail to meet their targets) then there is no prospect of balancing the books. Fiddling around with punitive tax measures on e.g. housing (which already has a value tax called the rates) for a minority, who are just the people who can most easily go elsewhere just isn't going to work. It's too small, is not related to ability to pay, doesn't address the fundamental issue of expenditure being beyond the nations capacity to sustain and is thus purely political window dressing. Taxation and benefits are already a far too complex a regime and need radical simplification to make them both efficient to collect and comprehensible. For example putting VAT up on a wide range of activities, perhaps even to 25% on luxuries would probably be a benefit if it meant that some other taxes and their costs of collection could be eliminated. Legalise most drugs and tax them. At least 4 million people every year are ignoring the law anyway and there is a huge amount of cash there that could better go to the government rather than criminals ( well I suppose that depends on your views of politicians but you know what I mean).

  • Comment number 72.

    I often wonder,

    Is it possible for a global fiat currency system to fail?

  • Comment number 73.

    Never in the field of finance and taxes, have so many, been truly stiffed by so few.

  • Comment number 74.

    #62 writingsonthewall

    Ah, good to see your usual level of sense coming through...

    Ignore the bailouts, they are but a distraction. The UK taxpayer cannot afford the massive public sector, nor should it have to. We don't need a network of mostly-useless security cameras, massive state surveillance databases and their associated ID cards, nor half the useless ****s in various sections of the civil service. It's been time for sweeping cuts for years.

    The fact that it is now urgent due to the financial sector falling over is good. It has brought the issue to a head. Frankly I would have preferred it addressed sensibly and in different circumstances, and preferred if we had let the banks sort themselves out (or fail). However I don't consider it pillaging the public sector to bail out the private, I consider it a well overdue rationalisation. Anything to cut down the giant, parasitic government we have here.

  • Comment number 75.

    The students will be with us but the nurses, council workers, teachers, dustmen, civil servants, politicians, tube drivers, postpeople, police, firemen, prison officers and the businesses that rely on public sector contracts may put up a fight.
    What about the army ?

  • Comment number 76.

    74. At 12:26pm on 18 Nov 2009, Gothnet wrote:

    "However I don't consider it pillaging the public sector to bail out the private, I consider it a well overdue rationalisation. Anything to cut down the giant, parasitic government we have here."

    ...and as you have said yourself in the same post - why is it only now this is being realised?

    As most people blinded by the reported waste of public sector - you are missing the huge private sector waste we are seeing right now because you can't see that the last 10 years of 'supreme private sector efficiency' was all a big con - and now the payback has come.

    Just because the waste comes in different forms (with the public sector it's written as pounds, shilling and pence) but the wasted resources, skills and labour in the private sector is not quantifiable by the idiot media.

    ...so the next time you decide to talk about public sector waste - consider the fact that the private sector wastes just as much (if not more) - but it can afford a better PR company to convince you it's actually really efficient. It also has the advantage of all it's waste coming at once (recession) which, as long as it comes up with a 'new reason for crisis' every time, people are too thick to realise it's the same problem happening over and over again

    Who is the parasite? is it the public sector - or actually the private one? I have worked in the private sector all my life and I certainly don't see the increased threat of loosing your job which the private sector promotes as contributing to indivudal or group efficiency.
    Say what you like about public sector waste, but I can guarantee that the public sector would have a procedure to ensure they did not buy CDO's - which may have appeared costly - but would now prove to be invaluable. The private sector over-wrote all it's procedures in the unrelenting pursuit of money.

    The public sector is marked by league tables and performance reviews - what rates the private sector - the market perhaps? - well we all now know the market can be easily manipulated by the clever packaging of debt instruments. If the market was able to accurately rank the efficiency of individual firms - then how do you explain the current crisis in finance? Surely the market would have indicated that the Northern Rock business model was a bad idea - long before it collapsed - and yet....it didn't.

    Ask yourself this opne question. Do you really think public sector waste amounts to 74 BILLION? - which is the latest estimate I can find for the bailout costs (not including the devaluation of the £ through QE)

    http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6497081/4350-per-family-to-bail-out-Britains-banks.html

    For that sort of money you could have run 2 'wasteful public sectors'.....and we haven't finished counting yet....

  • Comment number 77.

    At 11:54am on 18 Nov 2009, GRIMUPNORTH77 wrote:

    #55 point 1 - a bit like the FSA looked after the Financial Sector?

    That begs the question that you could possibly answer for me,

    What power did the FSA actually have without the gov't sticking its nose in?

    I imagine that if the FSA actually got tough, stopped banks being so reckless, the effect would be reduced "growth" -- el gordo would be banging on their door. That is the problem, corruptibility and/or stupidity.

    I think point 1 could work, but you would have to have a transparent system, hope the public would care enough, and have a big ol stick to aid the carrot.

  • Comment number 78.

    Why are the Banks immune?
    If the Banks created this global mess, why are we, the tax-payers picking up the bill.
    Why is the Government considering cuts instead of suing the financial institutions that have created this situation.

    Of course I am being rhetorical, I understand how a growth-driven ecconomy is supposed to work.

    If I ruled the world, I would do away with the stock market, and God.

  • Comment number 79.

    I'd be very careful about taxes on anything that isn't a cash transfer. Why should someone, on a low income, who was fortunate enough to buy a house years ago that has now inflated in value, have to pay a tax for it? The same goes for most ownership taxes. If the government wants to tax house values, it should be CGT. CGT on all house sales would be a good move. Base rate on the first house, higher on the second and punitive beyond that. Drop stamp duty.

    The same goes for carbon and 'green' taxes. Tax the fuel at sale, not the potential to consume it. And if UK gov has a green urge, it should offer some very carefully chosen incentives towards efficiency (no Milibandism).

    And 'taxing books', the very idea is an obscenity. They could take that one a step further with a 'spy in the eye' and tax us per word that we read. Just raise VAT on what we already pay VAT.

    On the saving side, we could be more restrained in participation in foreign military adventures. Our success rate suggests that the ROI is pretty small, well actually negative as we probably do more harm than good. Not sending troops is better than sending them ill-equipped. It's also better than what will happen: replacing the medical staff and patients in our hospitals with managers to control expenditure, not to mention doing the same with the teachers and pupils in our schools.

    After we raise and save 10 billion (US or UK?) per year, are we going to pay off the trillions in six months or sixty years? Should use scientific notation for these numbers, just to be clear about how many zeros we are looking for?

  • Comment number 80.

    67. At 12:04pm on 18 Nov 2009, writingsonthewall wrote:
    The revolution starts here.

    Faced by the bewilderment of my countrymen, by the disintegration of a government in thrall to the banks, by the fact that these institutions of my country are incapable, at the moment, of functioning, I, John Dempster, a self employed working Joe, realise that I now speak for the Land of the Britains. In the name of Britain, I make the following solemn declaration: It is the bounden duty of all the British irrespective of race or religion to

    The rest of this comment was removed by the moderator

  • Comment number 81.

    I as a 'normal' person (tax paying, working, educated, no additional income, 2 children, lots of debt, zero idea on finance) would like to voice the seriously logical argument - that saving on cost and wastage (i.e. to our public services) does/should not equate directly to job losses. Wastage is not just about head count and can be dealt with (leanomist - brilliant - couldn't agree more) by applying some modern principles. Bureaucracy and other paperwork-wastage is rife in these sectors and it drives me nuts to see that our country only ever has two options - tax the 'normals' more for everything, or lay people off. It really doesn't have to be like that - why as a country do we not have any more inspired thinking. Have we as people lost any idiosyncratic thought processes - must we always rehash/repeat the past? Wht do politicians only ever look at the macro (pounds) when the micro (pennies) will make all of the difference? Has anyone for example noticed how many letters you get from HMRC to tell you stuff you already know (postage costs, paper costs, admin costs) or letters from the council - same story. Has anyone ever tried to claim for tax credits for kids - now that is clearly a system designed to keep admin people in work if there ever was one. Why can't we just have a centralised tax deduction equating to the amount required as opposed to fill in a gazzilion forms that need processing, only to ever be useful based on the previous years income. They know what I am earning every month already - craziness!

    Anyway - I would like to create a new country where common sense, initiative and responsibility are key mantras of all citizens .. anyone in? :)

    S

  • Comment number 82.

    I'm not so sure the NHS should be excluded from budget cuts. Over the decade the NHS has been thrown bucket loads of money. Although it has made improvements in medical care, I think a disproportionate amount has gone on bureaucracy. I listened to one PCT employee yesterday give a talk about her job. Could she talk! She has a staff of about 100 just for our county and from what I could make out, their job was making sure that DoH edicts are carried out. I am sure that they are all very well paid and they are just paper pushers. One bureaucracy issues edicts and another checks to make sure they are done. This sort of thing gets repeated all over the NHS system.

  • Comment number 83.

    75. At 12:47pm on 18 Nov 2009, rvaucbns wrote:

    "What about the army ?"

    Oh do not worry, after returning from a pointless war in Afghanistan where the lack of funding ensured their job was more dangerous and as a result more of their colleagues were killed - then I'm certain most army personell will be extremely angry to find their taxation has gone up for them and their families in order to pay for the reckless gambling occuring while they were out fighting.

    You see - the Government is in big, big trouble - public sector cuts also includes defence and security - which will mean wages and jobs. It will be the same with the police - I mean I don't think many officers will be so keen to do their duty when in 2012 they haven't had a pay rise for 3 years and are doing twice as much work because half the staff have gone - would you?

    Oh the world does not realise the change that is now inevitable - we have half the world hoping it will turn out alright, and the other have convinced themselves it will be alright.

    ...and neither have a shred of evidence to point them in that direction, history, common sense and pure logic dictate this is likely to be a crisis of such proportions we will all have to change the way we live dramatically.

  • Comment number 84.

    Writings,

    '...and neither have a shred of evidence to point them in that direction, history, common sense and pure logic dictate this is likely to be a crisis of such proportions we will all have to change the way we live dramatically.'

    What do you mean by this? what evidence do you have to support this?

  • Comment number 85.

    82. At 1:39pm on 18 Nov 2009, Not_so_silent_majority

    Do you know why that is?

    It's the dry land effect

    What happens when dry land is hit with a torrential downpour? - most of the water runs off and does not feed the crops that need it.

    Labour did the same with the NHS - after years of under investment, to their credit they opened the floodgate - but didn't consider the lines to power the much needed investment to the roots were adequate.

    In the end it just became a huge waste of money - in fact the Beaurocracy was born by trying to 'control the huge flow of money into the system'.

    If the Government had a more cultured approach then it would ensure the stream was constant and steady throughout the years ensuring the areas that need investment actually receive it.

    It's so simple 100 monkeys in 100 days could see the problem - unfortunately our Government is not blessed with such intelligence.

  • Comment number 86.

    Raising Road Fuel Duty by 35% (which would make a litre of UNL = 127.9) would raise about 10bn each year and would encourage big trucks to move back to the railways and canals so we get a nice green glow for our money as well.

  • Comment number 87.

    PUBLIC SECTOR WAGES AND WELFARE BENEFITS SHOULD BE REDUCED ACCROSS THE BOARD BY 10%


    SIMPLE REALLY

  • Comment number 88.

    #87

    'PUBLIC SECTOR WAGES AND WELFARE BENEFITS SHOULD BE REDUCED ACCROSS THE BOARD BY 10%' for anybody earning over 40,000 P/A

  • Comment number 89.

    86

    Bulk haulage is now too large for the canal system. You couldn't get a sea container through the tunnels either.

    What is stopping more freight from going onto the railways is poor investment: nothing else. Perhaps if we abolished subsidies for rail commuters and invested the money in track and freight facilities we could do as you suggest. I can't see many votes in such a policy, though.

  • Comment number 90.

    84. At 2:25pm on 18 Nov 2009, JavaMan1984

    Depressions occur every 70 or so years - we don't know why but there seems to be a pattern. The last one was in 1930, so we're due one now.

    The great depression (1930's) was much more localised in the US - modern international capital movement has ensured this is now not the case.

    The level of public debt is now reaching war-time levels - and there isn't a War of the magnitude of WWII to blame for racking up our debts. We're into historic levels of QE - and we're breaking records every day.

    We have major corporations in panic mergers (BA / Iberia) in order to survive - and as the battered shareholders of Lloyds know that deals done under panic conditions often turn out to be a bad idea.

    We have a political tundra forming as we all sit around waiting for the next Government to come along - in the meantime the system is in limbo.

    The Government has been using QE to keep it's gilt rate artifically low - when this ends we're going to see the mother of all rises in interest rates. The only alternative is to keep rates artifically low - which will result in inflation problems through extended QE.

    The US is on a crash course - the Chinese won't put up with the Dollar much longer - and I suspect nor will the oil producers. The only solution the US have are threats of violence - as they no longer have the Economic power to command the rest of the world to do their bidding.

    The Gold price is through the roof - I have never seen a 'cash for gold' advert on TV before now - not even in the last recession. The investors seem to be 'running from the funny money' at an alarming rate.

    Our only 'modern model' is Japan, and they are bailing out JAL for the 4th time since 2001 - don't you think this is a sign of things to come for us? They had manufacturing and savings - we have very little of either - they lost a decade, how long do you think we'll loose?

    The Oil price is on a path upwards - albeit it in a staggered fashion - this is being mis-read by the BoE as 'inflation' as all goods and services are underpinned by oil prices - it's so dangerous to mis-read this as inflation.

    ...which links to the next point - all the stats and figures the experts are working from are debateable - making any solution a 'best guess'.

    All these unprecedented records and firsts are a sign that there is bug change afoot - ignore the signs at your peril - it might seem cute to be optimistic, but lying to yourself isn't going to help.

    Just remember - 14th feb 2009 - Baroness Verdana saw 'green shoots' in the Economy - we will reach a years anniversary soon and the only green shoots out there are the swathes of money being 'shot' out of the BoE printing machine!

    Ask yourself why you should believe politicians and city analysts when they say the Economy is going to be OK - when both parties have proven recently that a) they can't be trusted and b) they weren't actually sure what they were doing in the first place!

    ...is that enough - or do you want more?

    You don't have to believe me - I could be wrong, but looking at the track record from the field of experts and politicans - they're either useless - or they are lying to you for their own gain.

    We're now expected to place out trust in those who 'missed a tsunami' coming across the ocean and who are now advising us to tighten our belts and expect to pay more taxes - now that they have filled their boots.

  • Comment number 91.

    90. At 4:20pm on 18 Nov 2009, writingsonthewall

    Very well put, very well put indeed

  • Comment number 92.

    # 87. At 3:31pm on 18 Nov 2009, SpartacusmartyrAAAs
    # 88. At 3:50pm on 18 Nov 2009, BobRocket

    Sorry Lads,

    I fail to see how cutting public sector wages will prevent bankers gambling with resource allocation. You could cut 50% from public sector wages but you will find 2 things happen.

    1) The consumption revivial which sadly is our only way out of this mess will be stymed by the lack of public sector workers spending (yes they spend too!)
    2) The bankers will continue to gamble and in about 15 years time they will create another recession through their lack of self-control, morality or quest for wealth - what then? Cut public sector wages again?

    There may, or may not be a problem with public sector wages - but that would have been there anyway. To promote it now as a 'solution' to the current problems is absolute madness.
    I mean is it only when you loose your job do you start questioning why the missus has 400 pairs of shoes? - why didn't you notice while you were working?

    The Government are tricking you into thinking that the only solution is to cut public sector wages - and then they will cleverly change that to the grass roots level.

    I'm all for cutting public sector costs - lets start sensibly though, we can ditch 500 or so muppets in the Lords, and another 500 or so in the commons - Black rod and all the adminstration staff - the royals can go too, and every local coucil leader gets no pay and has to work on a voluntary basis (for which they will be rewarded with non-monetary honours).
    That should save a bit - however we have a long way to go to make up the 74 Billion we need (so far) - the only way they will achieve those sorts of savings is to cut grass roots services and the many low paid public sector workers.
    ....they're just not telling you that before they have their election campaign.

  • Comment number 93.


    We could massively simplify taxes and tax credits. In the US the way credits for children work is simple - you fill in a box saying how many you have, and you get something like a $3500 allowance for each one. That's it.

    Here it seems there's so much obsession with making sure "the rich" (whoever that is taken to mean today) doesn't benefit from anything we end up spending more in administration than it would cost to let "the rich" have the allowance as well. And then, for good measure, everything involves so many forms that some don't claim because they don't understand, some mess up the forms because they couldn't figure them out, and dozens of bureaucrats are required to sort through the forms.

  • Comment number 94.

    Almost all of the current deficit is caused by a huge decline in the profits and the tax payments of Banks. It's difficult to predict when UK Financial Institutions will re-start paying their Corporation Taxes. Nor when their high-paid dealers will be paying lots of tax and NIC on their big bonuses. Consequently, nobody knows when those tax revenues will rise to normal - or even what the new 'normal' will be.
    HM Treasury ought to be the best informed because it controls both HMRC and our new Financial Investment organisation that now controls Lloyds Group, Northern Rock and RBS. But it's not saying yet.
    Recovering the deficit might be why government priority appears to be getting banks back into profit and paying taxes. Rather than pushing them into making loans to business.
    Meantime, the extra debt taken on by UK government is easily matched by the amount of government debts the Bank of England has bought in the market. Which means that the interest on that debt is paid to the BoE that is wholly owned by government. So the net outflow of interest cash on that extra borrowing is almost nil. And presumably those Bonds could just be cancelled at some future date.
    Or have I misunderstood?

  • Comment number 95.

    An interesting article that I urge you all to read (that's if you haven't already)

    Fear of City turmoil if election delivers hung parliament
    http://www.telegraph.co.uk/news/newstopics/politics/6591063/Fear-of-City-turmoil-if-election-delivers-hung-parliament.html

  • Comment number 96.

    92 Writings. Firstly do you believe that it is easier for water to flow uphill than downhill?

    You remind me of a car boot saler that I met many years ago who observed "the only way you can make a profit is if you get the stuff for nothing "

    Your variation is "the only way we can make a profit is if we roll over to inkfinity and beyond the debt aquired to build an economy based on imports not paid for ie exchanged for funny money "

    If you wish to believe in the toothfairy in the room , fine!

  • Comment number 97.

    I seem to recall that Martin Wolf (of the FT) referred to the 'Mansion Tax' as a '...germ of a good idea' and then substantially modified the proposal. Here is the article link:

    FT.com / Columnists / Martin Wolf - Why Cable’s mansions tax is right. Available at: http://www.ft.com/cms/s/0/69351f18-a941-11de-9b7f-00144feabdc0.html [Accessed November 19, 2009].

  • Comment number 98.

    Nice to know that classical economics with all its fundamental flaws still has a slavish adherent in you, Stephanie. Specifically to your pointns about opinion polls and VAT rates. You delightfully assume that people have perfect information about how VAT impacts different age groups and hence how it impacts their age groups vis a vis other age groups. Then you go further and conclude that on the basis of this perfect information different age groups ought to act rationally or selfishly and therefore according to their age group's propensity to incur VAT penalties in their lives, they ought to be accordingly more or less favorable to VAT rates being increased or decreased. I failed my Economics A Level miserably. How on earth did you pass? Or have I ansaered my own question?

  • Comment number 99.

    The SQUEUEEEEEEASE is on ,the banksters who appeared before parliament should send four "letters" to Gordon followed by three from their front office of aaair trading.

 

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