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The activist Mr Brown

Stephanie Flanders | 17:19 UK time, Wednesday, 10 March 2010

When it comes to the government's budget plans, we know that Gordon Brown does not always tell it entirely straight. Remember last summer, when he was still refusing to utter the word "cut"? But listening to him today, you have to say he's consistent.

Gordon BrownIn today's interview with Nick Robinson, the prime minister once again clung to the thought that Labour was continuing the stimulus this year - even as retailers count the cost of the recent rise in VAT, accountants across the country lick their lips at the thought of the tax rises coming in a few weeks' time. He said:

"We have got to decide whether to continue the stimulus until the recovery is fully sustained, or whether we go back to the old days of just letting things take their course."

For an activist like Gordon Brown, to accuse someone of "letting things take their course" is a grave insult indeed. But in these still perilous times, he does think there is something worse than inaction.

"In a situation where growth is uncertain... you cannot afford to withdraw this stimulus and therefore return yourself to a position where you're not able to say you're fighting for growth..."

 
"Withdraw the stimulus now, withdraw it completely as the Conservatives would do, and then you would find yourself in a position not to be able to secure growth for the future."

It's stirring stuff - as Nick says, all designed to take us back to Gordon Brown's "save the world" moments in the autumn of 2008 and the G20 Summit a year ago.

There's just one problem. In just a few weeks' time, Gordon Brown's government will have withdrawn the stimulus as well. It is withdrawing it "completely". To all intents and purposes, it is an ex-stimulus. It has ceased to be.

This will not be news to readers of Stephanomics. But let me quickly run through the facts.

Since the 2008 Budget, the government has announced several stimulus measures, on both tax and spending, designed to boost the economy. According to the IFS, these changes - the temporary VAT cut, for example - had the effect of raising borrowing by £9bn in fiscal year 2008-9, and £23bn in 2009/10.

You may or may not believe that these steps kept unemployment down, or limited the number the repossessions, or whatever else the government claims to have achieved with them. But they did constitute a bona fide economic stimulus, worth about 1.6% of GDP in 2009.

What is the stimulus in 2010, to "secure growth" in this fragile and uncertain year? The answer is zero. There is none. Almost alone among G20 economies, we have no discretionary stimulus planned for 2010 at all.

You might say the government was "letting things take their course". Certainly, it is letting the other parts of spending take their course - like the higher cost of debt interest, and previously agreed pay rises in the public sector. That is why spending is still going up in 2010/11, and why the deficit may also rise, albeit very slightly.

But, when it comes to direct policy measures, the government is tightening fiscal policy by 1.6% of GDP. That's VAT going back up. That's the new 50p rate of income tax. That's the £1.2bn rise in fuel duty coming in April.

Don't expect the Conservatives to make too much of this. They're got enough trouble on their hands explaining how, exactly, they would tighten further in 2010. But the next time you hear Gordon Brown or the chancellor talking about the folly of withdrawing the stimulus, it could be helpful to bear these figures in mind.

PS. Let me also point out that the "£3bn" that the prime minister claimed would be saved from the public sector pay freeze he re-announced today does not seem to allow for the fact that these workers will paying less income tax as a result. Taking those losses into account, the IFS has previously said the net savings would be more like £2.1bn.

Comments

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  • Comment number 1.

    The folly of socialists (if anyone in the Labour Party knows the meaning of the word now) taking power & trying to run a capitalist economy!

    First we had "no more boom & bust" - did Brown really think he had found a way of eliminating the trade cycle?

    Then we get a Labour government saving the bankers.

    Of course they do all these things for the workers!

  • Comment number 2.

    I have to contradict Mr. Brown as he is letting things take their course. Where is the banking reform we so badly need?

    The problem we have in this country is that unless the deficit is cut then we will have economic problems but if we don't cut the deficit we will have economic problems as well.

    The choice seems to be about what sort of economic problems do you want?

  • Comment number 3.

    Excellent to see this balanced article

    Maybe a stealth tax on smoke and mirrors

    Gordon Brown could clear the defecit with just a few speeches

    Slightly off track, can I please ask if I am being incredibly stupid here

    From a moral, philosophical and ethical perspective is the non-dom status of Lords Paul/Ashcroft, really more offensive than the West Lothian question?

    I just wanted to get the views of others

  • Comment number 4.

    The scariest aspect of all such pronouncements that are the opposite of what the Treasury is actually doing under the other Prime Minister, is that Mr Brown seems to believe wholeheartedly that he is telling the truth. The 'Son of the Manse' becomes visibly angry if challenged not on technicalities but on whether or not he is telling the truth.

  • Comment number 5.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 6.

    "Gordon Brown does not always tell it entirely straight" must be a candidate for understatement of the year.

    By almost every measure things are worse since 1997 and the Brown years so how this clunking lump can possibly think he is the right person to get us out of the mess beggars belief.

    Stephanie, if things are bad and I borrow on my credit card am i any better off? No worse off, but according to how the GDP is calculated it measures as an increase in GDP! Just look at the government's share of GDP it has increased hugely, if you think this can bring prosperity then we should all quickly become government employees or just hand out stimulus funds to all.

    Our North Sea oil and gas riches have been squandered instead of properly invested in the infrastructure, a sovereign wealth fund, eliminating employers NI for engineers....

    Gordon can't even bring himself to admit big cuts are needed the same as Greece and Ireland but waffles on with his mixed metaphors about choppy seas and crossroads. I'd say he's consistently wrong.

    How there can be any possibility of keeping this government is completely beyond me.

  • Comment number 7.

    I'm impressed: this blog makes some entirely valid points.

    Brown's rhetoric is clearing misleading and duplicitious and it's about time he was pulled up on this.

    Trust Mark Easton, that well known hater of politicians using dodgy figures to make their case, will also blog accordingly on the £3 bn point. I'm sure the Office for National Statistics will have something useful to say on the matter!!

  • Comment number 8.

    Ah, good old Gordon, used to be so good at announcing pledges to spend £Xm, on whatever, and then announce, a few months later, £Xm on the same whatever ..... which turned out to be the same £Xm although the inference was that it was a whole new £Xm.

    Now he's telling us about his £Xbn that will continue to stimulate HIS recovery from HIS recession which is, it turns out, the equivalant of X billion Norwegian Blue parrots.

    Methinks it is time for Gordon to disappear into the sunset to the tune of 'always look on the bright side of life' while the rest of us dig ourselves out of the ***te side of life that he has left us in.

  • Comment number 9.

    Stephanie - is this a sharpening of the knife I hear?

    Interesting post. Just the one comment 'we know that Gordon Brown does not always tell it entirely straight'....er how about delusional misrepresentation to the point of asylum admittance?

    Otherwise comments are indeed timely. I think we will find that all of fiscal stimulus was designed to get to 1st week in May where there appears to ba an election - so nothing too short-termist or self-serving there.

    Yes - your point about the lack of stimulus as opposed to most other countries is very correct. The fact that we can't afford anymore stimulus is a key point in itself.

    Without it, hard too see how we can possibly avoid a double dip recession (though we've not reallly technically left it).

    The cupboard is pretty bare. As always with desperate people, time is finally running out for GB and his motley crew and the clock has ticked poast 12.............Time to pick up the pieces.

  • Comment number 10.

    What is the stimulus in 2010, to "secure growth" in this fragile and uncertain year? The answer is zero. There is none. Almost alone among G20 economies, we have no discretionary stimulus planned for 2010 at all.

    You might say the government was "letting things take their course".


    So are we going to hear you saying this on the BBC news Stephanie? Or are your words vetted when broadcast?

  • Comment number 11.

    Does it matter what he says ??

    Remember "The Boy who cried wolf" !!

  • Comment number 12.

    You are taking a chance writing such an unbiased article, you could well be joining the ranks of the unemployed if you continue in this manner.

    At last a BBC reporter with a backbone.

  • Comment number 13.

    Gordon Brown was asked today whether he would use the extra windfall from the bankers bonus tax to reduce the deficit.

    His response all but suggested that he would not.

    We have set out our plan to halve the deficit over 4 years and we will not move away from the measures we have set out to achieve that.

    We will not remove the stimulus until recovery and growth are embedded.

    Does this not suggest that actually the windfall will in all liklyhood, go towards a further stimulus.

    Would it be possible to defer the 1% increase in National Insurance for a period of say 6 months?

    Long enough to get us past the election, so voters do not feel the hit just as they are about to cast their vote, but not at such an expense as deferring it for a full year.

    Justified as further stimulus, with the Tories challenged to say they would remove the stimulus immediately.

    Having a change in NI part way through the year would be messy for those not on PAYE. But electoral imperative may mean that this is ignored, under the cover of short term stimulus.


  • Comment number 14.

    Stephanie

    Surely you are not accusing the Dear Leader of being economical with the truth. Are there anymore of Gordon's little white lies you want to let us in on.

  • Comment number 15.

    Governments, being governments, means that the stimulus money will eventually find its way to actual projects. Most of the funds are in some bureaucratic limbo awaiting approval or permits or whatever paperwork approval, or simply used to secure existing governments jobs. The rationale that saving the banks was necessary to save the economy seems much more questionable as time goes by. It is hard to see the acceptance of bad banking loans and placing them under the future taxes of citizens as an act of courage. The regulation of the banking and financial industry is the most important thing that can be done and that has not happened and the arrogant bankers, awash in profits, pay themselves obscene bonuses while everyone else lives with insecurity. Until the issue of the relationship of governments with banking and big business is addressed the future will remain uncertain. I anticipate that the banks will do it all again as they have in the past, as nothing has changed except the reduction in personal wealth of citizens and a long term public debt. These are the issues and without addressing them all will remain hostages to the banks. The Queen is in the palace but the Court is held at the banks.

  • Comment number 16.

    The best idea I've heard to free us from the debt mountain is a tax on texts. 2p per text message and the deficit will be gone in a year, and the best part is it will be the kids that pay, after all it will be their debt so its in their interests to start paying it off asap.

  • Comment number 17.

    The Budget (Sneak Preview!!!!)

    My betting (but I'll not actually be putting any money on it!) is that the budget on 24th March will nick an idea or two from the Tories - for no ideological reason, but just to spike their guns! Although quite how the Labour party will present putting up inheritance tax thresholds I don't know! (Perhaps by increasing the tax rate at the same time!)

    Somehow our economy managers' need to engineer a graceful debt deflation in both public and private sector without too much inflation - I am not sure how, but it needs to be done! Unless this is an aim of policy we will have a long depression as is predicted by history - and no Mr Brown you did not abolish boom and bust! - perhaps the silliest hostage to fortune I have heard in a long time.

    A private sector pay policy is perhaps essential if the civil service is not to cause strike havoc. So we might see that too. (I won't bang on about a National Maximum Wage - but that would help too!)

    You must also increase the benefit of saving to the private sector as part of the debt deflation package - only way to do this is by making it more worthwhile - so abolish tax on savings might be a good idea as this increases the benefit of savings without increasing interest rates - although there is only a 10% band now - so little headroom - so perhaps a negative tax (up to a limit) would be a good idea - after all QE + zero interest rates is an effective negative interest rate so the schemes that were seen to be silly a year or so back are not so today!

  • Comment number 18.

    BTW

    Any reason why this story disappeared very quickly from the main BBC News pages and is now not even on any if the business stories featured?

    Bank stress tests to be harsher, says FSA

    'Further stress-testing of UK banks will take place to ensure they can survive a 'double-dip' recession, the Financial Services Authority (FSA) has said.'

    see http://news.bbc.co.uk/1/hi/business/8560734.stm

    At least this one just made it (on the quiet):

    UK industrial output falls 0.4% in January
    Output fell by 0.4% compared with December, the Office for National Statistics (ONS) said. Analysts had expected a rise of 0.3%.

    see http://news.bbc.co.uk/1/hi/business/8559389.stm

    Cold weather again apparently........

    Wow - the noise is becoming deafining. I hear the sound of pennies dropping all over........

  • Comment number 19.

    Economic policy doesn't make any sense when 'in theory' you can do whatever you want. But if the seargent has only one key to the ammunition boxes then the troops get cut down in the queue. I started by criticising communication skills in general next I think I will criticise organiseation skills.

    The argument about aeroplanes is a perfect example to start with. When we started planning to build planes did we include plans for decommissioning them and re using the materials? But then maybe we decided not to do that because of something else and something else happened and now we are here.

  • Comment number 20.

    Well said Stephanie! I really hope this is the start of a new era of realistic journalism in place of the government directed propaganda that we're all sick to death of.

    At last something to be optimistic about.

    Recognition and coming to terms with a problem is the first step to rectification and recovery.

    The truth will out.

  • Comment number 21.

    'For an activist like Gordon Brown, to accuse someone of "letting things take their course" is a grave insult indeed'

    Well he certainly hasn't just let things take their course for the last 13 years has he. He inherited a 'golden legacy' from the Tories and look at the state of the economy now.

    Not a bad article on the whole but when oh when are you going to point out that the main cause of the debt crisis is the excessive and wreckless spending under Gordon Brown over the last 10 years.

  • Comment number 22.

    Steph,
    The Government (and a number of letter-writing economists) say Govt spending has to be maintained to avoid strangling the recovery. It worries me that they don't seem to be bothered what the money is spent on. If it is true that the deficit can be cut without harming front-line services, we are clearly spending a lot on inessentials.
    It can't be sensible to just spend all this money wastefully in the name of "stimulus". If this stimulus really is needed, why not provide it through tax cuts to businesses and individuals?

  • Comment number 23.

    Economy for dummies over and over again:

    Option A Continued "Stimulus": Everything will be fine

    Option B Withdrawal of Stimulus: Disaster

    What Steph and Gordon don't tell you: Option A is meant to further inflate the bubble of credit and house prices, to create INFLATION and DESRTROY anyone with savings. To bail out those who are responsible for the whole MESS! To continue the SAME MESS of the past decade, with the UK being a CREDIT ADDICT and the rest of the world pumping cheap money into it! To ensure London City bankers will have there little bonuses at the expense of EVERYBODY ELSE!

    THERE IS NO WAY THIS WILL WORK! THE GAME IS OVER!

  • Comment number 24.

    Having heard Mr Brown at the Iraq Inquiry redefine the reason for us going to war - ie to defend international law ( not WMD or essential self defence),blaming the French- I suppose he would say 'stimulus' means not just 'temporary' measures eg VAT and scrappage but full operation of stabilisers,the various benefits and employment initiatives and capital investment expenditures brought forward.

    Its this play with language that erodes trust. You are right to highlight this.

  • Comment number 25.

    122. At 11:20am on 10 Mar 2010, jonearle wrote: On a previous post

    I need cheering up today. Can someone (Onward-ho perhaps) remind me of any significant announcement by a large scale technology/manufacturing company of investment and commitment to employment growth in the UK, made over the last 6 months?

    ========================================================================

    The Mission impossible team announces the production of a Goodon Broon lookalike doll which will answer any question put to it with:

    "Global Recession" "Began in the US" "I saved the World" "I saved the banking system" "We need Global regulation" " It's not my fault" "Borrow for investment" "I have ended the Boom and left you with Bust"

    "Who put that last one in, was it Lord Ashcroft" "I will get him back by keep mentioning his name until I win the Election" "Lord Ashcroft" "Lord Ashcroft" "Lord Ashcroft" "Lord Ascroft" 5 "Lord Ascroft" 4 "Lord Aschcroft" 3 "Lord Ashcroft" 2 "Lord Ashcroft" 1 "Lord Ash--

    The Brown stuff hits the fan

    The Company expects mega sales resulting in many jobs and the Global World rejoices

  • Comment number 26.

    See http://news.bbc.co.uk/1/hi/uk_politics/8558821.stm

    "Prime Minister Gordon Brown has warned Britain of economic 'bumps in the road" ahead but vowed 'we will weather the storm together'. "

    That has to be understatement of the year (so far). The bumps in the road are very deep potholes at the very least. And someone has nicked the fresh tarmac meant for the repairs.

    Still, what a nice man he is. Let's have a group hug - The PM, The Bankers and Us.

  • Comment number 27.

    I do not understand how most of our politicians still think that we have any respect for them or their utterances - either they are failing to answer the question or are giving us a load of old moody such as GB today . It comes across as condescending claptrap, if they actually believe what they say ,or promise, then perhaps the men in white coats should be summoned as most of it can be discredited by a five year old, let alone by any thinking person. I actually find the fact that they expect us to believe their mealy mouthed blather to be insulting - do I really look that silly ?

  • Comment number 28.

    JFH #17

    Here's my prediction. It will be a soak the rich budget designed purely and simply for the purpose of maximising Gordon Brown's chances of clinging onto power, regardless of the long term damage to the country.

    Alistair Darling will make a half hearted effort pre-budget to resist such a shamefull strategy but will cave in because he's as spinless as his fellow cabinet ministers.

  • Comment number 29.

    18

    Mmmm

    Wonder who the 'experts' predicting growth were?

    Mr Deluded & Mrs Fantasy perhaps

    If the election is on 6th May, and the Q1 figures shortlt before show a drop, how can Brown possibly squirm through that?

  • Comment number 30.

    Abolish bust and boom? Well he seems to have got 50% right!

    Brown economic stimulus horizons are proscibed by his monetarist convictions

  • Comment number 31.

    Rugbyprof #18

    'Cold weather again apparently........'

    Either that or Gordon Brown's dodgy eye which is their other favourite excuse. I suppose, in this context, cold weather is the more plausible of the two.

  • Comment number 32.

    Plenty of hate being spewed at Gordon Brown in these comments, but isn't the basic truth that neither the government or any potential successor has much wriggle-room to make fiscal policy.
    Whoever is in will be swept along on the tide of events, doing what they can whilst claiming they are purposefully steering the ship. This is what we get for having a stupid press that reports politics in such a lightweight way.
    It would be refreshing to think that a politician might one day treat us as adults and sit down to tell us that the world is a mess, the economy is a mess, taxation will be going up, services are going to be underfunded and our lives will be a little more uncomfortable than before. They can't do it though because any admission of weakness or doubt is leapt upon by a ravenous press, who will make it as good as an abdication.
    So doublespeak we get, and doublespeak is what we deserve. Any of the Brown-haters who have commented here who honestly believe there will be less weasel words with a change of personal are quite frankly deluded.
    People should vote for the party who is likely to make their lives less horrid, the best tasting flavour of worse. If you are rich or about to inherit millions that'll be the Tories, but if you rely on public services, are not rich, have kids in education, think the minimum wage is a good thing etc, then best stick to Labour or the Liberals.
    The economy might be good for rhetoric, but it won't be philosophical differences on the economy for which the next parliament will be remembered, it'll be how Government spending policy directly affects our lives. Remember Thatcherism, it did wonders for the economy and yet she became reviled, why do you think that was?

  • Comment number 33.

    #Acknowledging kb #29

    #31 jg

    The statement was made tongue-in-cheekly though difficult to do in text.

    Notice how every statement made at the moment re business or economic news containing 'adverse' information includes the words 'analysts or experts (but never named), the word 'surprise', the phrase 'cold weather' etc. Get the picture?

    Ask yourself - who is putting out these statements?

    The trail I largely suspect leads back to No 10 press office. I also suspect that the BBC are doing the bare minimum in a political sense.

    Perhaps someone from the BBC could clarify?

    There's certainly scrutiny going on with constant change of article titles, disappearing articles and quietly published articles (which I gave examples of up above). Whose pulling the strings?

    If I didn't know any better I reckon BBC are currently a reincarnation of the old soviet TASS agency ( http://en.wikipedia.org/wiki/Telegraph_Agency_of_the_Soviet_Union )

    .....

  • Comment number 34.

    People think govt rules and regs that business' complain raise their costs don't touch the rest of us. But what about the impact of the Town and Country Planning Act. My home would cost 80k to build. But it's worth 200k. Thats 120k for land with planning permission for a house.
    Planning permission is a govt imposed costs. For a mortgage on my house at 5% it's costing an extra £701 per month, Or an extra 18 years of paying the mortgage.
    For more expensive homes the proportion of value accounted by the cost of planning permission can be 5 to 6 x the cost of building the home.

    If gordon wants a free stimulus, changing the planning laws to reduce the cost of residential property and put money in peoples pockets.

  • Comment number 35.

    33

    In the land of the blind, the one eyed man is king

    Unfortunately, in the land of the UK the one eyed man is Prime Minister

  • Comment number 36.

    #28. Alistair Darling will make a half-hearted effort pre-budget to resist such a shameful strategy but will cave in because he's as spineless as his fellow cabinet ministers.

    You can be pretty sure that Darling knows he should announce a rise to 19%/20% VAT from January 2011, but anything he can delay announcing will be delayed.

    You know how bad things are when Ed Balls says "They will be required to save 0.9 per cent of the overall schools budget – over the next three years" and then "My concern is that there will be some heads – particularly primary heads – who haven’t got the capacity to find these savings without a lot of extra support".

    http://www.telegraph.co.uk/education/educationnews/7377672/Ed-Balls-issues-warning-over-school-cuts.html

    What country does this guy live in? One that in one year is borrowing over £170 Billion (way more than twice our entire VAT take for the year), and he is pontificating about the problem head teachers may have making less than 1% cuts.

    1% cuts!

    Just so utterly deluded I am lost for words. And to think its Balls who is one of Brown's remaining friends.

    At least the day has ended with the realisation that Stephanie now at least wants to be remembered as a journalist who defied her organisation to tell it how it is.

  • Comment number 37.

    He said "I will not let you down!" Do you trust him?

  • Comment number 38.

    Sorry Steph

    I understand from BBC that Peston's in charge of business content. Also have found the FSA article but change of title didn't make it obvious.

    In case of those who wonder if I'm going doolally - Looking at the current main business page there are top stories referred to top right page and then 'more from business' (secondary) down below.

    Note under 'more from business' is Brown's delusional article.
    However, if you return to the main news page note how Brown's article is prominent in top three news articles.....mmmmmmmmmmmmmmm

    Where's Woodward and Bernstein when you need them?

  • Comment number 39.

    #32 Your point exactly?

  • Comment number 40.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 41.

    Ian

    I don't think you get it....The economy is a mess largely because of Brown..this is an economics blog, and most of those who think the above hate what Brown has done, rather than hating him

    George Osbourne told it like it was...

    You said....

    People should vote for the party who is likely to make their lives less horrid, the best tasting flavour of worse. If you are rich or about to inherit millions that'll be the Tories, but if you rely on public services, are not rich, have kids in education, think the minimum wage is a good thing etc, then best stick to Labour or the Liberals.

    Not sure of two things...why only the Conservatives if you are rich?~If the economy is better managed, everyone wins

    Irrespective of who wins the election, there will be big cuts in the public sector...Do you not see this? The Conservatives will not abolish the minimum wage

    You are very much entitled to have whatever bopinions you like, yet in view of the fact you criticised the media for their lightweight way, I find your oversimplistic, inaccurate way rather ironic

    Margaret Thatcher is not revlied by everyone, mainly her political opponents

  • Comment number 42.

    Personally I really hope for a coalition come the election. That way at least the poor sods who have to clear up this heinous mess won't get quite the level of blame and revile that Thatcher did.

    pooper-scoopers at the ready....

  • Comment number 43.

    34

    I take your point entirely, and sympathise with it, although not so sure with your sums

    In your example you have not allowed for the profit margin, which some of the £120K would be

  • Comment number 44.

    @34. At 9:50pm on 10 Mar 2010, sizzler


    nice idea, that should concrete over most of our green and pleasant land with little boxes for our newly arrived UK citizens.

    let's trash one of our last remaining treasures, the land itself.

  • Comment number 45.

    #32 Ian

    Life is so unfair. To think that our beloved McBruin is being criticized for borrowing more money than we will be able to afford to start to pay off in the next 10 years to make our lives better now.

    Precisely the reason the next government will be put in a strait jacket is because of Labour's GBH on the economy. The conservatives may have spent less on education and the NHS than Labour have done over the last 13 years if they had been in power. However, this will all be undone by the increased costs of servicing the extra debt that McBust has brought down on all of us.

    All politicians are economical with the truth, but few are as sanctimonious as GBH.

    #25 NGSH

    You can add
    'a weak currency is a sign of a weak economy which is a sign of a weak government', 'light touch regulation', 'that sounds like it was dreamed up on the playing fields of Eton'

  • Comment number 46.

    28

    I think Alistair Darling is reminiscent of Geoffrey Howe, in as much that he might possibly be thought of boring, which can often lead to a degree of being under-estimated

    One thing I respect about him, is he did say 'the worst recession for 70 years' when Brown wouldn't even do anything but bleat the 'world recession/we are best placed blah blah ' mantra

    There is the obvious political similarity as well

    The Budget will tell us if he is a man with a backbone or simply a man of straw after all

  • Comment number 47.

    Balls is allegedly the most despised politician in the Westminster Labour Party, which is going some!

  • Comment number 48.

    Thanks for the new update Stephanie and the reminder of our fiscal position. I was aware that Gordon Brown has a weak relationship with the truth and am pleased to see that you think so too. Of course it was his spending policies from 2002 onwards which leave us in a position that we cannot afford a stimulus this year.
    Having seen elsewhere an interesting and thought provoking analysis of Kate Barkers (an MPC members) speech this week on notayesmanseconomics web blog I was wondering what you thought of it and of course the poor industrial production figures. I was fascinated by the way her speech was dissected.

  • Comment number 49.

    Stephanie, decent and factual blog comment.

    Next will hopefully be questioning the dubious use of the term "investment" (in place of spending.

    Unfortunately, I expect it will be given minimal prominence in the main and even business news pages.

  • Comment number 50.

    #18 >>Wow - the noise is becoming deafining. I hear the sound of pennies dropping all over........

    Are you sure that's pennies dropping and not the pounding of bailiffs on the door even as Our Glorious Leader gears up to spend even more ??

  • Comment number 51.

    LOL

    regarding post #40

    I think all I said was that Stephanie is better at writing balanced and interesting blogs than people give her credit for. Good for you for exposing the Broon spin.

  • Comment number 52.

    # 32

    Perhaps it might also be worthwhile to take a longer term look and consider the future of society and the economy.

    Remember, the move towards full scale US style dumbing down and deceit has been a feature of Nu Labour and looking past the spin at Brown's record there is considerable culpability for our current economic plight.

    Without a solid economy, we can't afford unbridled spending on the services. etc you mention, unless we'e resigned to them only being available for a short time, before full scale economic collapse.

    The choice would seem to be between someone who helped to get us into this mess and fell asleep at the wheel, and someone else who may lack a bit of experience and potential gravitas and so we're not certain of.
    A choice between incompetent failure (masked by spin) and making a change for a bit of a mystery box.
    The question would seem to be, can Osborne and Cameron be any worse?
    (at least Ken Clarke's economic reputation, let's not mention the Europhile tendencies, is still intact; perhaps the Tories will have him back up Osborne to provide a bit more substance).

  • Comment number 53.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 54.

    Although this crippling economic depression is international, it is a fact that the labour party stripped the larder bare, did no maintenance, blew our savings and then took money from Peter (the military) to pay Paul (the NHS probably). I cannot think of a more odious, parasitic group of individuals, seeking to impose 'multiculturalism' on the electorate to 'spite the right', whilst overlooking the very electorate on whom they imposed this Stalinistic form of massive population transfer.
    They paid no attention to their old mantra of 'sustainable development'; some parts of the south have less water per population head than parts of the Sahara; peak oil looms, north sea gas and oil are almost over, and we have to feed an overcrowded island, the second most highly populated nation in Europe; we only grow between 60-80% of our basic food requirements, overlooking 'exogenous' categories/exotics such as rice, capsicums, plantain. As it stands the current government have nicely set this country up for civil strife over a dwindling food supply and energy system.
    The expenses bonanza enjoyed by these individuals at all levels is hopefully the straw that broke the camel's back, from a group of individuals who merit prosecution for gerrymandering on a scale that makes Shirley Porter's escapade seem insificant, in addition to the desperate situation in which we are likely to find ourselves, in respect of all forms of energy, including food. All for an immature multiculturists/cultural relativists dream.
    Small wonder that the working class, on whom these scurrilous traitors have turned their backs have turned to the BNP. Labour have abandoned them.

  • Comment number 55.

    Nice to see the government being criticised for being canny with cash and reducing the deficit on the sly.
    This is exactly what is needed .

  • Comment number 56.

    Every person here, including Stephanie, who says that the government HAS to cut spending is wrong. There are no hard and fast rules in this. The fact that we have got ourselves in such a tizzy over levels of debt is an indictment of how little the vast majority of us know about economics. And this is the real issue I would like to see addressed.

    When Evan Davis was blogging he had the economic picture covered masterfully - and he explained it so well that anyone could understand it (provided they were open-minded enough). However, he was clearly too uncontraversial for the BBC, his reports were more scientific than journalistic and so he has been moved on, and instead we get inane moralising over the finances from the public broadcaster that mirror those of the most basic tabloids.

    There are a few facts the public should be aware of and are simply not:

    1. The UK's net deficit (i.e. the total amount owed) is smaller than at least 6 of the other 7 top economies.

    2. The UK's current account deficit (i.e. the difference between yearly income and yearly expenditure) is at a record high of roughly 14%.

    3. The average UK household has higher assets than any other EU nation.

    4. The average UK household also has higher debts than any other EU nation.

    What conclusions can we draw from these facts - We ARE NOT in a bad situation as opposed to the rest of the developed world in terms of long-term indebtedness. Anyone who says different is simply lying. However, the short-term picture is very grim, we are currently amassing new debts very quickly, and in order to make sure the long-term picture does not deteriorate we should at some point address the current account shortfalls.

    Nevertheless there is no immediate danger, and we can afford a short-to-medium term stimulus.

    Ultimately, on this issue, Gordon Brown is right to stress the important downside risks of not continuing to support domestic demand. In Japan, in the 1990s, there was a major banking crisis, followed eventually by a weak recovery. But just as recovery started to materialise the state aggressively cut spending in order to repair the govt finances. The effect was a catastrophic decline in confidence and spending that drove Japan into a second recession, one that spanned the whole of the rest of the twentieth century and Japan's economy is still anaemic at best today. Economists refer to this period as "Japan's lost decade".

    Compared to this the risks of inflation and the rather disingenuous threat of downgrading the UK's credit status are very minor indeed. We must ensure a recovery before looking to balance the books. That is basic Keynesian economic stimulus, which we learned the very hard way in the 1930s.

    Finally, we have amassed all these debts by acquiring assets - we are not indebted because we've burnt money or flushed it down the plughole - all this indebtedness is the flipside to our buying valuable things. Provided short-term interest payments do not overcome our incomes we stand to gain a significant amount of wealth in the long-term. Those who say debt is bad do not understand how debt has allowed us to take short-cuts to get homes and businesses that will, with time, generate decent returns and ultimately greater prosperity.

    Debt is not in itself a good or bad thing. Being in debt without the means to meet the ongoing obligations of that debt is what we must guard against. And panic, and fear-mongering in the press can only serve to push us into the reckless decisions that got us into recession in the first place. In this blog, as in most others, fear rules. When we are guided by such primitive emotions, we can't possibly hope to see the woods for the trees.

    What is the real worry for the UK? That Stephanie's prophecy about stimulus being effectively withdrawn due to political pressure is right. The downside risks are much greater. That's why three times as many economists wrote in to support continued stimulus as opposed to the twenty that wrote in to the Times supporting cuts. That's why the rest of the world continues to spend. And that's why most academic economists refuse to even comment anymore. They simply get drowned out by the noise from the financial centres and the city businessmen who want cuts for their own agendas. And newspapers that support cuts often for ownership reasons, but also because of a culture of fear of financial ruin surrounding debt.

    I know this entire post is just a tiny fish swimming against a tidal wave. But it made me feel better to type it even if no one reads it. I will at least be able to say "I told you so" if it all goes tits up!

  • Comment number 57.

    When it comes to the government's budget plans, we know that Gordon Brown does not always tell it entirely straight. Remember last summer, when he was still refusing to utter the word "cut"? But listening to him today, you have to say he's consistent.
    ===========
    Note to myself, NEVER EVER scorn Steph.

  • Comment number 58.

    #32 >>It would be refreshing to think that a politician might one day treat us as adults and sit down to tell us that the world is a mess, the economy is a mess, taxation will be going up, services are going to be underfunded and our lives will be a little more uncomfortable than before.

    And, oh, look, there's Wing Commander Porky in the fly-pass !!

    >>So doublespeak we get, and doublespeak is what we deserve. Any of the Brown-haters who have commented here who honestly believe there will be less weasel words with a change of personal are quite frankly deluded.

    As I have said many a time before, we now have two and a half NuLabour parties. Take your pick. However, this still does not absolve Our Glorious Leader from his sins and to so arrogantly *TELL* us, that only *HE* can get us out of the mess *HE* put us in, is definitely beyond the Pale !!

    >>If you are rich or about to inherit millions that'll be the Tories,

    If I am rich or about to inherit millions, I'd vote with my business-class ticket to the nearest sunny, tax-friendly and less spend-thrift clime !!

    It's only us, less pecunious muggins, that are left behind and have to fight it out for a better life despite being lumbered with three generations-worth of debt !!

    >>Remember Thatcherism, it did wonders for the economy and yet she became reviled, why do you think that was?

    That's because the knives were out at the Ides of March before she finished her job of clearing up the fat cats after clearing up the unions. Without union interference, the fat cats had a clear field and this is the result !! Aided and abetted by a government that cared more about tax receipts and spending ever more than about the economic well-being of the nation !!

    And now, the Spender-in-chief wants 5 more years of Spend, Spend, Spend !! The future certainly looks rosy, possibly from fires burning in the inner cities !!

  • Comment number 59.

    #33 >>If I didn't know any better I reckon BBC are currently a reincarnation of the old soviet TASS agency

    TASS ?? No !! Never !! More like Pravda (Truth), as in the Ministry of Truth in "1984" by George Orwell !!

    Speaking of whom, if he was alive today, he'd be regarded as a prophet and a saint !! Truly a visionary and one without honour in his own country then !! One could even say he prophesied the MPs Expenses Scandal by his famous words "some animals are more equal than others" !!

  • Comment number 60.

    #36 >>Just so utterly deluded I am lost for words. And to think its Balls who is one of Brown's remaining friends.

    Well, Fat Goering stayed with Hitler right up to the end !!

  • Comment number 61.

    56

    The fact that we have got ourselves in such a tizzy over levels of debt is an indictment of how little the vast majority of us know about economics.

    You certainly seem to do rather well in missing the point entirely

    What is the real worry for the UK? That Stephanie's prophecy about stimulus being effectively withdrawn due to political pressure is right. The downside risks are much greater. That's why three times as many economists wrote in to support continued stimulus as opposed to the twenty that wrote in to the Times supporting cuts

    Stephanie did not prophecise...it has been removed...what political pressure?

    Numbers of economists mean nothing...it is who is right that matters

    I am not in fear...I am angry at the mismanagement of the economy

    Nobody is saying cut spending because of rules...It is because we will be spending £170bn more than our income this year, we need to balance the books..not sure why you think this is wrong

    Do you spend money you don't have year on year, and just say..it will be ok..

    I prefer Stephanies blogs myself, especially if the gloves are off

  • Comment number 62.

    #55 onward-ho wrote:
    "Nice to see the government being criticised for being canny with cash and reducing the deficit on the sly.
    This is exactly what is needed ."


    True - its what's needed
    False - its not what this government are doing, they're managing to INCREASE the deficit without providing any additional stimulus.

    Now, actual investment, to improve our future economic competitiveness, while also stimulating demand, I could understand, but spending for spending's sake and actually embedding that spending so its much more difficult to remove it as things improve... not great thinking, especially when our balance of trade figures indicate that a significant proportion of that spending "leaks" from the economy.

    So we borrow, to spend money we don't have, to do nothing to provide a future payback and rather than those funds just being redistributed within our economy while hopefully encouraging activity i.e. the velocity of money a significant proportion exits the "system" with each cycle.

    So the debts we're building up,, to avoid facing reality now, are actually helping finance the growth of actual export economies.

  • Comment number 63.

    # 56. TheWalrusandtheNasriator wrote:

    "3. The average UK household has higher assets than any other EU nation."

    Define "assets" and please exclude the speculative bubble element re house prices.
    If its just the notional wealth in the housing stock, the value could be seen more as what those houses can be sold for now, with everything on the market (the realisable value) and even then there will be a speculative element there.

  • Comment number 64.

    #56 >>1. The UK's net deficit (i.e. the total amount owed) is smaller than at least 6 of the other 7 top economies.

    The population of the UK is also smaller that ALL 7 of the top economies. Therefore, the UK has the highest per capita debt !!

    >>3. The average UK household has higher assets than any other EU nation.

    The majority of that valuation being the home that is at a massively inflated price. Strip away that inflation and the UK household assets will look more pathetic !! Most Europeans have far higher personal savings than the average Brit !!

    >>In Japan, in the 1990s, there was a major banking crisis, followed eventually by a weak recovery. But just as recovery started to materialise the state aggressively cut spending in order to repair the govt finances. The effect was a catastrophic decline in confidence and spending that drove Japan into a second recession, one that spanned the whole of the rest of the twentieth century and Japan's economy is still anaemic at best today. Economists refer to this period as "Japan's lost decade".

    It is very disingenuous to selectively mention facts about the Japanese economic situation.

    (1) The Japanese have not had an adverse balance of trade in the last 40 years !!

    (2) The Japanese have one of the highest per capita personal savings in the world !!

    (3) Japan's "lost decade" was only "lost" to those greedy manipulators who wanted changes (volatility) in order to make more money out of thin air !!

    Can we say the same of Britain ?? Compare apples to apples, not oranges !!

    >>We must ensure a recovery before looking to balance the books.

    And how will we "ensure recovery" when the cupboard is totally and absolutely bare ?? Borrow some more ?? Fudge the books with Goldman Sachs and make Greece look like the paragon of economic virtue ?? Where will the "recovery" come from when we have nothing much that others want to buy ??

    >>That is basic Keynesian economic stimulus, which we learned the very hard way in the 1930s.

    In the 1930s, we had an empire to loot. What have we now ?? Keynesian economics is a busted flush !!

    >>Finally, we have amassed all these debts by acquiring assets - we are not indebted because we've burnt money or flushed it down the plughole - all this indebtedness is the flipside to our buying valuable things.

    Who will buy over-priced UK properties because much of the indebtedness went into that ?? Also, much of the "VALUABLE ASSETS" are now in landfill sites !!

    >>Those who say debt is bad do not understand how debt has allowed us to take short-cuts to get homes and businesses that will, with time, generate decent returns and ultimately greater prosperity.

    Anyone who thinks that they can use their home to generate ultimate prosperity has been asleep these last four years !!

    >>When we are guided by such primitive emotions, we can't possibly hope to see the woods for the trees.

    What you mean is that this government, in cold, clear, deliberate and bloody-minded calculations, got us into this mess !! No fear or panic involved !! So good to know this !!

    >>That's why three times as many economists wrote in to support continued stimulus as opposed to the twenty that wrote in to the Times supporting cuts.

    And just how many of these "three times as many economists" predicted the credit crunch and warned of it ?? Are we to believe these "experts" now ?? Everyone had 20/20 hindsight; it's foresight that's sadly lacking !!

    >>And that's why most academic economists refuse to even comment anymore. They simply get drowned out by the noise from the financial centres and the city businessmen who want cuts for their own agendas. And newspapers that support cuts often for ownership reasons, but also because of a culture of fear of financial ruin surrounding debt.

    Or could it be that they have been proved wrong time and again and no one is paying them the least bit of attention !!

  • Comment number 65.

    #56. TheWalrusandtheNasriator wrote:

    Every person here, including Stephanie, who says that the government HAS to cut spending is wrong....1. The UK's net deficit (i.e. the total amount owed) is smaller than at least 6 of the other 7 top economies....What conclusions can we draw from these facts - We ARE NOT in a bad situation as opposed to the rest of the developed world in terms of long-term indebtedness. Anyone who says different is simply lying. However, the short-term picture is very grim, we are currently amassing new debts very quickly, and in order to make sure the long-term picture does not deteriorate we should at some point address the current account shortfalls.


    This position has a fundamental flaw. Nations that have had high total debt long term have for years prepared yearly budgets with the debt servicing costs an accepted factor.

    During these last years while the UK has had lower debt, the debt interest "savings" we have had compared to our G7/G20 friends has enabled us to spend more on Nurses and Teachers etc.

    So it is in fact the yearly current deficit that is the issue at hand. Because our deficit is massive, and only reducing slowly to a still massive amount in 5 years time, we will now have to find the increased debt interest payment out of the same income (well, less, as we are in recession).

    So we will now have to loose the extra Nurses and Teachers that we previously could afford and now cannot.

  • Comment number 66.

    Congratulations Stephanie, you've finally worked out how economics work in this country, the politicians tell porky's about fiscal stimulus and other such rubbish while planning tax hikes to pay for it all. Whichever government takes the reigns of this battered old horse called Britain, everyone will need to take the strain, from the street sweeper to the MD, and when we plummet into the inevitable double dip, you can bet your high heels the politicians will have their backsides well and truly covered. The truly tragic consequence of all this not too distant upheaval will be the human and social cost which will eclipse any ideas economists can come up with, Obama knows this and so too do the neocons who oppose him. Question is, will the old economic models prevail at the point of a sword, or will we find a better way to balance the books which may perhaps lead to a less conflicted world. Time to rethink the capitalist model ?

  • Comment number 67.

    # 56. TheWalrusandtheNasriator wrote:
    "Every person here, including Stephanie, who says that the government HAS to cut spending is wrong. There are no hard and fast rules in this. The fact that we have got ourselves in such a tizzy over levels of debt is an indictment of how little the vast majority of us know about economics. And this is the real issue I would like to see addressed. "

    And when we paying the interest on the debt we accumulate leaves us needing to pay higher and higher taxes for lower and lower public services, until all we're paying for is to service the debt?
    (okay extreme scenario)
    I guess we can always print money to pay for it, with the resultant runaway inflation and crystallisation of reduced standards of living.

    To assume living off debt, when that debt is accumulated due to financial mismanagement and profligate spending rather than a real beneficial investment in the future, is anything but a bad thing is naive.
    We've been partying now and stealing from the future to fund it.

    The issue comes when people decide you might look to inflate your way out of debt or might be unable to repay them and the supply of funds stop; then how do we as a country pay for food, energy etc.?
    Especially if major businesses have relocated to avoid being taxed to the hilt to pay for people being able to "own their own home" (at whatever inflated price, seeking money for nothing from a speculative gain as the bubble is pumped up again ad again) and have the latest large plasma TV and so we generate less and less real wealth.

  • Comment number 68.

    The fact that we have got ourselves in such a tizzy over levels of debt is an indictment of how little the vast majority of us know about economics. And this is the real issue I would like to see addressed.

    Now can you, off the top of your head tell me what the debt situation is?

    I can tell you without looking up anything that the government have committed to borrowing at least another £600 billion over the next 5 years, which will take the total debt to something like £1.4Tn.

    Now to put this in context, the total VAT income for a year is in the region of £70Bn.

    Now do you honestly not get into a tizzy over thinking about a government so out of its depth that its already committed to borrowing an extra 8.5 years worth of VAT over the next few years?

    And this is based on the assumption of 2% growth this year (yeah, right) and 3.25% growth in each of the next 4 years afterwards. Tell me ONE economist that actually believes those growth figures.

  • Comment number 69.

    I still can't quite believe George Orwell's real name was Blair

    1984 is tooooooooooooooo spoooooooooooooky for comfort

  • Comment number 70.

    Unfortunately, its all talk and 'lessons learnt' from Brown and his government.

    Brown is idling his way towards the election on the mistaken self belief that pushing more cash at the banks and that trying to reduce his government spending extravaganza as little as possible is some kind of an economic strategy and can be fobbed off as competent economic management of the nation's finances.

    The things that should be happening:
    reducing the debt and deficit and making real investment in rebalancing the economy so that the UK has a stronger and better balanced domestic/internal economy AND a better export capability - is not happening.

    Brown's economic strategy is do do nothing in terms of a new economic strategy for the UK and with the expectation that a global and eurozone 'recovery' will somehow 'drag the UK along' at a faster pace. This is not happening and I think that the apparent 'global recovery' is more in the internal and regional markets in e.g. Asia/ North America as these countries are very careful what is selected as foreign imports (a form of protectionism?) and the UK has very little if anything to offer that these countries at prices that these countries actually need most right now. Some of this 'global recovery' is also relating to the arms trade and which is should, of course, also be of concern.

    Empty words once more from a tired PM but the fork tongued spin is still there and will fool some, no doubt, but Brown now has a shocking economic record and is a total liability for the UK.

    The good news is that if Brown stays in power we will probably see a more austere UK as the economy implodes with debt and economic mayhem and eventually when we have no fuel and other commodities and we may yet be travelling up and down the M1 in horse drawn vehicles yet and have our own troughs - for the horses to drink, of course! How quaint!

    Brown is out of his depth and should be removed before he finally Wilsonates us all before he finally 'does a runner'.

  • Comment number 71.

    Those who participated and watched the Chilcot enquiry, could have nailed Brown there and on the spot. The enquiry failed to ask the right questions and let him slip through. A pity and a great opportunity missed. The appalling blunders he made should be an insurance he never serves in office ever again. I hope the electorate can see this bloke is a total charlatan to our armed forces.The US knew to well the ground situation, and yet Brown makes out a totally opposite field event.

  • Comment number 72.

    We decided to let things take their course when we allowed the second Blair government to renew their crimes with a mandate given by only 22% of the electorate.

    We, 78% of the voters in this country, are guilty of gross neglect.

    We are complicit in the murder of millions in the Middle East, the treasonable donation of our sovereignty to the EU, the criminalisation of MPs with their expenses scam, the wrecking of our economy, the destruction of our institutions and the betrayal of our children to feed our greed.

    We deserve all we are going to get.

  • Comment number 73.

    The problem with Gordon Brown is that he still believes that the City, the Generals and the Admirals have good intentions. He still believes that without them we are ruined.. and they know this. The question is: If we had no MoD and no City.. How bad would life be

    Now compare that to having No Social services... No NHS, No State Pensions, no state schools, no social security..

    The City has lost us over 6% of GDP and almost 1 million jobs. It has also squandered £85billion of bail out funds which it has used to prop up the price of oil rather than loaning it to Uk businesses and prospective home owners. It has also used the credit crisis to collude on margins without the threat of falling foul of competition rules. The greatest robbery of all time..

    The city is powerful.. It is Protected by the MoD.. Gordon and Co cannot step away from this reality.

    Now when the conservatives come to power.. The City will have another ally.. but they will underestimate the power the "plebs"...

    Expect a revolution... History says that we have been here before

  • Comment number 74.

    The stimulus in the recession includes cut in VAT, which now rises and makes retailers count the cost. Will it have more profits if retailers open door into night?

    For high-speed rail network, will the investment also come partly from private investing companies so as to save the government budget? If the big private sector companies are invited to invest in the national scaled large infrastructure construction or industry exploration, it will increase the employment, raising companies borrowing, and stimulate economy, as well as save the government budget on bearing the burden of promoting the economy alone. I am not sure what will be the gaining or losing points if big investors from foreign countries are also absorbed into the Britain economy recovery projects set up.

    If the projects are to be made to help Britain or foreign countries with infrastructure construction and bonds are issued to private companies, foreign countries’ investors and government, and publics, how can profits or benefits be returned promptly?

    The markets in some small towns are quiet, makes me wonder how much potential has not been fully explored from the rich natural resources and human resources and labour.

    If public sector makes more contribution to the people’s reemployment, flooding control, agriculture development, it will find itself more involved in economy recovery.

  • Comment number 75.

    Good to see fellow appreciators of Orwell here.

    Anybody spot the parallel with announced 'monthly production figures that were without any relation to reality'?

    Yes - 1984 is far closer to current reality than people think. In fact one could surmise that it appears the basis of the current government's actions in a number of ways.

    I think it speaks volumes when we are praising Steph for being more balanced and actually critical in some manner about the PM's behaviour and doublespeak ('It is impossible to see reality except by looking through the eyes of the Party').....

    'WAR IS PEACE
    FREEDOM IS SLAVERY
    IGNORANCE IS STRENGTH'

    chant repeatedly......Thoughtpolice should be here any minute. Rather chilling.

    Winston

  • Comment number 76.

    And Gordon says "we must continue with our economic stimulus packages!" There is only one thing wrong with that statement, the BoE, who were the main driving force in the delivery of the stimulus, in the form of Quantitative easing, stop a little while ago. And now we are being told that the benefits have not yet kicked in or materialised. So that begs the question why the BoE stopped? And why does Gordon want to carry on spending? Could it be the first now knows that this tactic has not worked, as it did not work for Japan. And latter needs us to believe that what he has done is working, if he is to have any chance to hold onto power.

    As far as economists are concerned, there is one thing we all should have learned and that is, we need to open our minds. All too often we follow the doctrine of our predecessors, as if it is the word of God. We should all remember that they created solutions that were fit for purpose for the issues of the day. We have become very lazy, following like sheep these doctrines when we should be looking to create solutions that meet the current issues. These differ from what happened during the depression and other recessions throughout resent history. There is now truly a global economy and the balance of power has changed from being a small number of countries influencing to any number. Macro economics now has become a thing of wonder. How do you influence other nations to take pain on behalf of others. More so, when they themselves are not fully developed and need to maintain their growth to enable them to move from being undeveloped to being a developed nation. The two main countries we keep talking about India and China fall into this category. However there are any number waiting in the wings who also meet this criteria. Yes, there needs to be activity on the global stage to try and combat activities that endanger us all. However, we as a country need to be concentrating on taking action that will aid our economy. It was very interesting that yesterday Gordon Brown mainlined his speech on the theme of tackling Global issues rather than those of the home economy. It is unlikely that we can just sit back and ride on the coat tails of our established trading partners recovery. As this is just not happening. Europe and the USA are posting very concerning figures while China announces extraordinary growth.

    What we need to do now, is start thinking outside the box and just stop following what has worked in the past. Yes, there may be elements that we can embody into our proposed solutions but I feel along with many others that as we have entered into uncharted waters, hence we need to be looking at the horizon rather than our wake.

  • Comment number 77.

    "How can I help seeing what is in front of my eyes? Two and two are four."
    "Sometimes, Winston. Sometimes they are five. Sometimes they are three. Sometimes they are all of them at once. You must try harder. It is not easy to become sane."

  • Comment number 78.

    It seems clear to me that he regards not making cuts and running a massive deficit of £170 billion a year as a stimulus, in which case he has been stimulating for a decade to the tune of of £0.5 trillion.

    Somebody should have a word with Mr Prudence

  • Comment number 79.

    I sometimes wonder what planet Gordon Brown is on? For some reason he holds on to the ridiculous idea that government spending somehow leads to recovery and therefore to growth wheras the truth is that governments are the worst spenders of money. After all, what sane person would pay people to do nothing, spend billions on a computer system that doesn't work or subsidise foreign car manufacturers? At least when the private sector goes into debt, they buy houses that they want. To actually believe that borrowing money and then wasting it is a route to recovery is the economics of the madhouse. Does anyone actually believe this stuff?

  • Comment number 80.

    Same usual political tosh from the usual suspects. EG kevinb and the spoof Rugbyprof et al). What they always forget is this is an economics blog. But they are forever wanting to hijack the blog and peddle their right wing rantings.

    Take (#3 Kevinb). (#12 (JQ)
    Typical slurs. Wild allegations against Stephanie. They have never produced anything that has stood up to anything. They peddle their anti BBC poison. Well if you don’t like it here why don’t you post on the Murdoch blog or is that even to left wing for your extreme views?
    Spoof Rugbyprof (yawn), looks for conspiracies all over the place, including the website. Gosh I’ve read that he even claims to be setting the news agenda on this blog. Is he a fantasist?

    Now a comment directed at the economics.

    One thing the article should have mentioned was that stimulus can come from 3 sources:
    1) discretionary govt action (eg action taken to counter the risk of depression and banking failure)
    2) automatically through the automatic stabilisers (eg lower income taxes and higher spending on unemployment benefit which is automatically induced by the economic slow down).
    3) Automatically through market forces (exports and investment rise as slowdown raises competitiveness)

    The article related only to the first.

    The other two have a part to play. Don’t think that all governments would allow automatic stabilisers to operate. Thatcher’s govt sought to reduce spending (and raise taxes) to offset any rise in public deficit caused by any downturn. This is the voodoo economics we may suffer from again. Anyway, it shouldn't take too long, even for the right wingers on here to work out that this causes the economy to spiral downwards.

    The third route for a stimulus is probably very weak at the moment. For example, if one was expecting to see earnings falling, then you will be disappointed in the short term. Average earnings in the private sector are forecast to rise for 2010. Much of the pay deals in the public sector will face a freeze, or 1% growth, the private sector pay reviews are expected to produce settlements around 2.5%-3.0%.

    Now that doesn’t suggest the private sector is leading the economy out of the troubles…


  • Comment number 81.

    The issue is where growth is going to come from.

    Labour thinks that by taxing people to the hilt and using that money to spend on public projects will revive the wealth creating private sector but it won't.Too little of it finds it's way to the private sector,it just gets swallowed up with needless public sector bureaucracy.

    Only the private sector can create the wealth but it is being hampered by over regulation which forces up it's costs and makes our industries uncompetitive with the rest of the world.Hence our massive balance of payments deficit announced this week.

    We need a fresh broom to clear the way for a regeneration of the private sector and an incentive for the real wealth creators and entrepreneurs to stay in this country.

  • Comment number 82.

    In short GB is borrowing to the hilt before the Election and there will be no credit left for whoever takes over!

    And as mentioned on numerous posts, the Keynesian approach to overinflating our economy seems to be doing it's job..... Scrappage and general Trade Deficit showing a good chunk of the money (if it did reach as far down as the general public) was spent on foreign goods.... with a bit left over to support Unaffordable Housing.... and all this with the ink hardly dry on the Knighthoods dished out to Bankers and Financial Services bods

    They left it in a mess in 79 .... Déjà vu anybody?

  • Comment number 83.

    Gordon Brown’s political method of bombarding us all with good statistics whilst not mentioning the bad has effectively allowed a style of politics to develop where it is acceptable to continually mislead the public with ambiguous and incorrect figures and data without the press (including the BBC) having the ability to hold politicians to account.

    This isn’t a criticism of the press, so much as an acknowledgement that politicians have figured out it is effectively impossible to challenge anything which comes out of their mouth when practically any statistic can be used (mostly out of context, if not even entirely unrelated to the topic of discussion) to bamboozle the public for the purpose of making themselves look good.

    What disappoints me most is that this also has the effect of lessening the impact of statistics and data which are being used correctly because everybody naturally assumes that there is a huge element of spin involved in what they are being told.

    Gordon has been getting away with continual double accounting and deception tactics since labour got into power in 1997, isn’t it about time that politicians “Parliamentary Privilege” was redefined so all politicians can be censured for deliberately misleading the public to suit their own political agenda?

    Remember what Vic Reeves said; - “97.2% of all statistics are made up on the spot”.

  • Comment number 84.

    I see FTM's (see #80) begun the chanting already (see #75)........

  • Comment number 85.

    72

    Bill

    See where you are coming from, although two points I would like to make

    In the last election MORE people in England voted Conservative than Labour

    So did they get the Government they deserved or wanted?

    If the millions who went on the 'not in my name' marches were ignored, if the sad 'suicide'..yeah right..of David Kelly....if those of us (many on here) who said the stealth taxes would destroy the pensions industry....if those of us that have been calling for a review of the role of state provision........if those who said pfi was 'slick' accountancy at best/pseudo-fraudulent reporting at worst....if any of those people deserve what they get, then that is not correct

    In my view, it all went wrong when John Major won the election in 1992. He wasn't supposed to, it upset the natural rythm...the Conservatives were tired, they frankly did not deserve to get elected.Kinnock held that ridiculous rally in Sheffield, and the public thought that is arrogant, and 'taking a good hard look' they didn't like what they saw

    It was widely reported at the time that if John Major lost, he would be the shortest serving Prime Minister on record. He was viewed as being a normal, good bloke, and that also had an impact.

    We know that the Government he then presided over was a disaster.It did contain errant individuals, but was not of itself corrupt, merely inept, significantly past it's sell by date

    John Smith, a decent man, then became leader of the Labour Party, and we all know what happened in 1994 with Brown and Blair trying to carve up our country like a cheap cake.How ridiculous!

    Not as ridiculous, though, as 'us' letting them do it

    Then, post 2002 election, Brown got more spending decisions, somehow convinced people that we was prudent(it seems almost unbelievable now that he got away with it) and like a 7 year old in a sweet shop, lost control and we now see the results

    The balance needs to be restored.

    I don't think that Osbourne has all the answers.I don't necessarily think he has all the questions, although he did have the political courage to make the Austerity speech, which was/is right on the money

    I have never seen Cameron as angry as PMQ yesterday, and quite rightly too

    Hague is impressive, Clarke, Gove, Lansley

    For me, these guys 'deserve' a chance

    The spin of the New Labour is not the same as political play, and very much is 1984 speak...new labour speak v newspeak

    Cameron/Osbourne must come clean NOW, must have the political courage to do that, in order to gain the trust needed to get a majority, to put things 'back on some sort of even keel'

    If they lack that, we lose, in my view, the only hope we have of starting to make the changes needed to correct our faulty system

    The Conservatives are far, very far from being perfect, thankfully they are also even further from being Blu Labour (My term...wish I could copyright it)

    I appreciate armageddon tomes/fdd and gang, will quote US debt at me, tell me I am a nutter etc...do I not realise that US debt is x-trillion...has a shorter medium term of around 5 yrs, therefore a higher percentage needs rolling over, same for Deutchland around 6 years...yet ours is over maybe 13/14 yrs

    Some almost want the 'end of the world'

    I guess during the Plague years, WW2, Roman Occupation, it looked just a wee bit worse than now

    I retain hope, as without that, may as well just give up

    So, despite warts/faults I prefer almost anything to 5 more yeas of Brown, who is going to have one almighty personal psychological crisis to come through if he gets what he deserves come polling day

    If he loses, I want to see what private sector work he gets offered

    Anyway...sorry Bill

    You got me going

    So thanks for the interesting post!

  • Comment number 86.

    1. At 5:41pm on 10 Mar 2010, duvinrouge

    Where have you been? - since you've been away on those 'alternative blogs' the world has moved to the left (although many of them don't recognise it yet) - the market supporters are smashed, they have no excuses left. Everything has come run to form, the crises are coming thick and fast and the people are starting to show their anger by refusing to work.

    The contradictions between state, finance and class are creating fissures in our social fabric. There can be only one result from this. It's a shame this wasn't all predicted by someone about 100 years ago - that would have been very useful if it had....

    It looks like what we don't won't matter anyway - the worlds 'only' customer is about to start cutting back...

    http://news.bbc.co.uk/1/hi/business/8561381.stm

    The Chinese can get away with state Capitalism because they have the authority to do so - that's not going to wash in the west where people are much more used to being 'free'.

    I hope you have you list for the wall ready....

  • Comment number 87.

    Unfortunately beyond the article that heads this blog almost the entire rest of the content is either Tory party propaganda or Brown-bashing, which is the only lucid plank of the Tory election campaign.
    When you see Brown being blamed for city deregulation policies that were implemented under the Tories you know how low they have sunk. Why is Brown held in relatively high regard in the rest of the world for his handling of the crisis caused by the abuse of laissez faire regulation of financial markets globally and affected, by Tory supporters, to be so despised at home?
    When all of our excess indebtedness is caused by bailing out the banks, why are tired old Tories bashing out the same tired old stories about excessive public spending? If your beloved Thatcher and the nonentity that followed her had spent the ill-gotten gains of North Sea oil on rebuilding the country's infrastructure for the benefit of the many rather than lining the pockets of their rich mates then there would not have been the need for the massive rebuilding program that Labour has undertaken. Their crime in public spending is to use PFI / PPP which means that the assets we have paid to build we have to pay private companies to use - but that's another blog.

  • Comment number 88.

    81. At 09:21am on 11 Mar 2010, Andy wrote:

    "We need a fresh broom to clear the way for a regeneration of the private sector and an incentive for the real wealth creators and entrepreneurs to stay in this country."

    ....so we get into this mess because banks were unable to regulate themselves. Preferring to gamble on high returns than regulate themselves to prudence.

    ...and your solution is to regulate them less?

    With these wealth creators - can you explain how they create wealth?

    Does an entrepenuer need a workforce to 'make wealth' - surely he / she can do it on their own?

    Strangely you won't find a profitable business in the world that does not have an underlying workforce to exploit.

    ....or could you provide an example to prove me wrong?

  • Comment number 89.

    Stephanie,

    As with many others I found this blog very interesting and yet more disturbing than all others recently. It strikes me as GB is someone going through the motions of leadership and electioneering at a time when he is probably most likely to be forming som kind of government in a couple of months time. Your bloggers can knock things about in the ether, whether sensible, half baked or far fetched.

    My big fear is that GB nor any of our other many party leaders know what to do at the moment, the run up to the election reminds me of old schooldays when you had a go slow race on your bike where the winner lost. This will definitely get the vultures (speculators) circling the carcass of the UK (debt) while the hyenas are already fighting for it already. Whilst disagreeing with GB's approach and ideas I thought he'd show strong leadership - very sombering.

  • Comment number 90.

    80

    Interesting use of the English language...you are creative, if nothing else

    How can my saying 'a well balanced article' be a wild accusation against Stephanie? Perhaps you an tell me where I have posted anything anti-BBC?

    The truth is you can't, because I haven't

    I also take much offence at being called an extremist, by someone who can't even control their emotions (or the English Language)

    Mind you, I have never been called an extremist before, so maybe it's a good thing

    You insult me, rather inaccurately, then point out it is an economics blog

    Perhaps you could cut-out the personal attacks in future..

    No...

    In your very DNA to abuse rather than take the time to read what is written

  • Comment number 91.

    81

    I think the primary question, is why do we assume there will be growth?

  • Comment number 92.

    The issue is where is the growth going to come from.

    Brown seems to think that increasing taxes and then spending it on public projects will generate growth in the private sector,but this is terribly inefficient as so much money gets consumed with needless and time consuming public sector bureaucracy.

    Wealth creation can only come from the private sector but it has been hampered by over regulation notably from Brussels which forces up their costs and makes their goods and services overpriced compared to the rest of the world.Which is why we have such a massive trade deficit.

    This country needs a clean broom to sweep away needless regulation and free the private sector up to generate wealth with incentives for them to operate in this country.

  • Comment number 93.

    Well thats nothing new - how many times have we had a headline from Brown and then discovered small details with huge impacts in the small print
    This is no different - the reality is that we have to cut spending and the argument over how much and when is a matter of a percentage point and months .. what they need to do is really have an adult conversation with the electorate - not just blast sound bites at us

  • Comment number 94.

    Gordons only mistake was giving £85billion directly to the City.. He should have given each tax payer £50k. The latter could then decide whether to invest in oil options or pay off the mortgage and other debt. Either way the city would have still got the money but at least they would have many more depositers who could sue them for maladiminstration..

    Sorry, Gordon made two mistakes.. he also backed the war in Iraq.. But he had too.. The Generals and Admirals would have crucified him .. and we all don't want to be messing with those dudes

  • Comment number 95.

    87

    Barn Owl

    You must try some facts, to go with mice in your diet

    Brown split the regulation of Financial Services into three elements in 1997, meaning we had a left hand/right hand middle hand...nobody in control

    I keep saying, the enforcement of whichever regulation is in place, is almost more important than the level of regulation itself

    Blaming Thatcher for the mess in 2010, when she has been out of office for almost 20 years, smacks of desperation

    Had she not loosened the grip of red tape, we would have just continued with the mess of the 1970s

    You seem to think Brown is separate from the financial crisis, as opposed to being complicit

    He couldn't have been more toadying to the City...yet now adopts an 'it wasn't anything to do with me' approach

    These are not political points I make, these are factual observations!!!!

    Your final paragraph.....

    When all of our excess indebtedness is caused by bailing out the banks, why are tired old Tories bashing out the same tired old stories about excessive public spending? If your beloved Thatcher and the nonentity that followed her had spent the ill-gotten gains of North Sea oil on rebuilding the country's infrastructure for the benefit of the many rather than lining the pockets of their rich mates then there would not have been the need for the massive rebuilding program that Labour has undertaken. Their crime in public spending is to use PFI / PPP which means that the assets we have paid to build we have to pay private companies to use - but that's another blog.

    This is very unreflective of the truth...please try and tear yourself away from your political views, and look into the numbers

    If only all of the excess indebtedness was caused by the banking crisis...it isn't
    It is not about excessive public spending...this is just illusionary. It is about spending more than we have got, which is utterly, utterly different

    That is not my view, it is there in black and white

    There is no such thing as public spending, only tax paid by taxpayers, spent on taxpayers

    I just want my share spent on services etc, as opposed to paying interest on money Gordon Borowin, has been borrowing.

    The crime with PFI is NOT that the money goes to private companies...you really must stop being so partisan

    The crime is that it costs all of us (that would be taxpayers) far, far more to buy a school/hospital etc than it should

    It represents dreadful value for money for the taxpayer

    When you buy your food, go for a meal, go to the cinema, these are all 'private' companies

    Real people work in them, to feed their families etc

    Do you despise these 'private companies' too?

  • Comment number 96.

    80. At 09:16am on 11 Mar 2010, Free_the_Monkey wrote:

    One thing the article should have mentioned was that stimulus can come from 3 sources:
    1) discretionary govt action (eg action taken to counter the risk of depression and banking failure)
    2) automatically through the automatic stabilisers (eg lower income taxes and higher spending on unemployment benefit which is automatically induced by the economic slow down).
    3) Automatically through market forces (exports and investment rise as slowdown raises competitiveness)

    Re the above :-
    1. The discretionary action as you put it can be split into a number of actions.
    A. Propping up the banks. Firstly on this, why letting one or two institutions go down would have been no bad thing. The financial institutions are now almost invincible. No matter what they do Gordon has to support them. He talks of bringing in strict controls however we see little in the way of legislation being drafted let alone being tabled. Did the world stop for the US when the big "L" crashed. No! Would the world have stopped if Northern Rock was allowed to fail. No! In fact we would have seen more being done by the rest to get their houses in order. What we have at present is a banking industry who have learned nothing from resent events and in fact are rushing to get back to the good old days and practices.
    B. Stimulus packages. These to date have not delivered as has been agreed by ministers and the BoE alike. In resent years a number of economies have tried this. japan being the one that is most quoted. All their efforts resulted in an economy that languished for a decade. A number of commentators quote the Keynesian actions of the great depression. However it has been widely agreed that it was the advent of the second world war that turned the US economy. You would be correct to say that it delivered on a sociological level but not on an economic one.

    Both of these have and will raise public borrowing.

    2. Surely these are pointing to less private spending rather than more. As most of the economically active who have lost their jobs will reduce spending as benefits are much less than they were earning. If not then we are big trouble. Also lower taxes mean less revenue coming into the government's coffers. Hence as is happening at present public borrowing balloons.
    3. A good point if we alone were in recession. However all our markets are in the same boat so are taking very similar action as we should be. As we have become more of a service nation than a manufacturing one then we are always going to be vulnerable. First in last out it used to be said.

    As I have said above we need to be thinking outside the box instead of just looking back to what was done in the past.

  • Comment number 97.

    89

    If you think Brown is most likely to form the next Government, you might like to put a wager on it..it will make you a good return if you are right...not the I advocate gambling

  • Comment number 98.

    Can you please help me - did anyone count how many time Gordon Brown said GLOBAL in yesterdays speech?

  • Comment number 99.

    #66
    "Time to rethink the capitalist model ?"

    ======================================================

    Been done.
    Its called a Social Market Economy and is currently being successful rolled out in the EU.

    Private enterprise by all means but within a framework of social responsibility.

    Incidentally Britain can leave the EU and still trade with the EU (like Switzerland).

    BUT (VERY BIG BUT) countries that trade with EU (whether EU members or not) have to adhere to requirements (rules) laid down by Brussels - ask any Swiss cheese maker.

    The Anglo Saxon model is severely discredited within Europe - one very good thing to come out of the 'credit crunch'.

  • Comment number 100.

    #92
    "The issue is where is the growth going to come from"

    =========================================================

    Indeed this is the big question.

    We can always bring back 'boom n bust', print lots of money, etc. :)

    Or export our cutting edge artefacts to all and sundry - oops, forgot, we don't make any.

    Double-dip here we come.

 

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