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Irish lessons for the UK

Stephanie Flanders | 12:29 UK time, Friday, 9 April 2010

We know we're in for some unpleasant medicine after the election, but exactly how bad will it be? That's the question none of the politicians really want to answer. But you can get some interesting clues by looking across the Irish Sea. There you find a small country that has been going through something colossal: not just the steepest recession of any developed country since the war, but one of the most ambitious programmes of budget cuts as well.

UK Treasury officials have been over in Dublin in recent weeks, looking for some lessons in how to cut spending here in the UK. That gave me an added reason to take a look myself.

In two days this week, I learned plenty about the practical realities of cutting borrowing, some of it highly relevant to the situation here. You could hear some of my interview with the finance minister, Brian Lenihan, on the Today programme this morning. He's gained a lot of admiration in Ireland for carrying on with this Herculean task, even after being diagnosed with pancreatic cancer late last year.

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Two interesting nuggets from that interview: he thinks the UK is probably expecting too much from the fall in the pound, and he thinks that whoever wins the next election will almost certainly have to cut popular benefits.

I also learned something about what it means to be a small country on the periphery of the eurozone, dependent on foreign investors for cash. Like Greece and the rest, Ireland still has some difficult adjustments in its future. But unlike them, it has bought itself a lot of credit in the markets with the drastic actions the government has taken in the past year. If there's an "I" in that infamous acronym, Pigs, investors no longer seem to think it stands for Ireland.

What kind of adjustments? Well, you remember the Conservatives have promised to have an emergency Budget if they win office? Ireland's had five in less than two years. All told, Mr Lenihan announced spending cuts and tax rises for 2009 worth 5% of GDP. For perspective, if you undertook that kind of tightening in the UK you'd be taking £65bn out of the economy, in a single year. That's roughly what the chancellor has said he will do by 2015-16. Mr Lenihan unveiled further cuts in December, of 2% of GDP in 2010.

Where's the money come from? The short answer is it has come from (almost) everyone. But public-sector workers have probably had it worst: many of them have seen a 20% cut in their net income.

There's a new pension levy on public-sector earnings, worth an average of 7% of pay - in effect a new tax, to pay for the cost of their generous pensions. I'm told the UK officials were looking especially hard at that. On top of that, public salaries were frozen - and then cut: by 5% for people earning less than 50,000 euros, 10% for salaries over that. The taoiseach (prime minister) has had his pay cut by 20%.

Let me highlight some big lessons, plus a few smaller ones.

Doubtless, the main parties here will each see something in Ireland's experience to support their point of view.

Labour and the Liberal Democrats will say it shows the importance of growth. Ireland's national income has shrunk by more than 20% since 2007 - and it's not growing yet. Economists agree that the recession has been made longer - and deeper - by the savagery of these cuts. And the weakness of the economy, in turn, has meant that, to some extent, the government is cutting to stand still.

The deficit was just over 11% of GDP last year, and even after all those cuts, it's going to be just over 11% of GDP in 2010 as well. That's because the economy is shrinking even faster than the budget. Whatever you think of the main parties' respective positions, we can probably all agree with Labour that that this is a situation it's better not to get into.

Brian LenihanThat''s why Mr Lenihan told me he would have liked to increase spending this time a year ago - when the G20 government were all talking about emergency stimulus. But the scale of the crisis in the public finances didn't give him a choice: any benefit from extra borrowing would have been more than wiped out by the loss of credibility in the markets.

In this kind of situation, there's a real risk of a deflationary spiral, with falling prices pushing up the real value of personal and public debts, and choking off the economy. The IMF raised this as a risk for Ireland last summer.

Prices did fall, economy-wide, last year - by more than 4%. And public debt has risen from 27% of GDP in 20006, to 78% now. But Mr Lenihan is adamant the risk has passed. Looking at the numbers, I'm less convinced, but bond traders who have more money riding on the judgement seem to agree with Mr Lenihan. The spread between German and Irish bond yields is a fraction of what it is in Greece.

Of course, that is where the Conservatives would come in: they'd say Ireland shows the importance of acting quickly to get on top of borrowing, before the markets force you to do things you don't want to do. The Conservatives think the UK is almost at that point right now. For the record, Mr Lenihan told me he thought the UK still had some room for manoeuvre, though it was shrinking.

So much for the big lessons. But there are some other interesting pointers for Britain today:

One was it helps to educate people about the nature of the challenge, before you wield the knife. Not an approach we seem to have adopted here. This time last year, the Irish government released all its budget papers for 2010 in advance - showing the kind of savings it needed to find. It then gave an independent commission to lead a national debate about what those cuts should be. It was asked to find two billion euros in savings. In the end it came up with more than double that amount, and the population knew what was coming before it was formally announced in December.

Ireland's experience also confirms that you need to spread the pain, with benefits a large part of the mix. Again, Mr Lenihan was quite clear on this point for the UK. He cut all benefits by 4% in his December budget, including child benefit and unemployment benefit. This, in a country where unemployment has risen from 4% to 13% in less than three years.

There is one group that even Mr Lenihan had to spare: pensioners. That is probably another lesson for the UK. In all this, the only measure Mr Lenihan's been forced to backtrack on was a measure which would have raised medical costs for pensioners.

Finally, Mr Lenihan thought we were taking false comfort from the fall in the pound. He would say that, you might think - they are one of the big losers from the UK's decision not to join the euro, and Irish companies have been hit by competition from across the border following the massive fall in the value of the pound. But he has absolutely no regrets about joining the euro.

We talk a lot about the dark tortured road that these countries on the periphery of the eurozone now have to walk. In Ireland's case it's not been pretty at all: prices are falling, but wages are falling faster. That's raising competitiveness the only way a country in the eurozone can. It's not much fun.

As Ireland shows, the debt dynamics of having that kind of collapse in national income can force a rise in national debt, as a share of the economy, which not every country could afford. But Ireland has the benefit of coming into this with a much smaller current account deficit than many of its "Club Med" friends. It might actually pull it off.

Small countries can do things that countries the size of Britain cannot do. But Ireland has bet the house on shock therapy to fix both their competitiveness problem - and their fiscal one. By comparison, here in the UK, even the Conservatives are looking at a more gradualist approach on the budget, and we're expecting a big depreciation to deliver growth.

Short term, Ireland's has been far more painful - for the economy and the Irish people. But it will be interesting to return to the comparison in a a few years' time. In the meantime, expect at least some of that Irish medicine to be making an appearance here.

Comments

Page 1 of 4

  • Comment number 1.

    Excellent comments Stephanie - thank you.

    No fan of this Irish administration me, but Brian Lenihan's approach to Ireland's current predicament has won him the support, admiration and respect of the broad majority of his people and international investors.

    It is to be hugely hoped he can carry out his reforms in spite of his illness. We wish him well.

    The problem you in the UK are equally as onerous. Our best wishes to whoever must address them post-election.

  • Comment number 2.

    I have been talking about this for well over a year, but as it is unpalatable, few want to listen - this will be the case now too (it is safe to predict).

    I think it is appropriate to consider the social consequence of across the board pay cuts vs job losses (and no pay cuts). In the first case, inequality is reduced, but in the latter inequality is increased - we can all guess which parties will support which method of cost reduction can't we!

  • Comment number 3.

    This all sounds like the remedy that the 'English patient' needs?

  • Comment number 4.

    Wht Britons need to heed from Ireland is that despite the harsh cuts and drastic measures they still had to bail their banks out a second time - and the markets are still increasing the cost of borrowing.

    The deep cuts simply are not deep enough for the markets.

    Also, the biggest difference with Ireland is when the jobs go - the Irsih simply emigrate and earnings abroad sent home become like a 'new export' and revive the economy.

    Britons don't emmigrate - only rich men who don't want to pay tax leave en masse.

  • Comment number 5.

    Stephanie is doing her bit for the establishment by pushing the line that we have all got to face up to cuts & a lower standard of living.

    But hold on a minute how much richer have the top x% (those who own enough capital to have a life of luxury) increased their wealth in the last decade or so?

    The rich get richer the poor get poorer & Stephanie attempts to justify it.

  • Comment number 6.

    Did you come across any Greek financial types on your visit?

  • Comment number 7.

    Yet another excellent blog.

    This really highlights the moral bankruptcy of Labour's leadership in the UK: Labour are desperately trying to hide the reality of their fiscal disaster. And what this will mean for all of us.

    After all, when have we ever had a Budget without proper departmental forecasts? Never. Their behaviour is a bankrupt disgrace.

  • Comment number 8.

    Ten year government bond yields:

    Greece 7.29%
    New Zealand 6.02%
    Australia 5.83%
    Ireland 4.50%
    Portugal 4.40%
    UK 4.02%
    Italy 3.89%
    US 3.88%
    Spain 3.87%
    Norway 3.77%
    Canada 3.67%
    France 3.44%
    Germany 3.13%
    Switzerland 1.93%
    Japan 1.40%

  • Comment number 9.

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

  • Comment number 10.

    5. At 1:35pm on 09 Apr 2010, duvinrouge wrote:

    "The rich get richer the poor get poorer & Stephanie attempts to justify it."

    ...and the self-flagelating possee all beg to have their services cut for the 'good of the nation' and for it to be done by those who help destroy their nation.

    What a bunch of numpties.

  • Comment number 11.

    4. At 1:27pm on 09 Apr 2010, writingsonthewall wrote:
    Wht Britons need to heed from Ireland is that despite the harsh cuts and drastic measures they still had to bail their banks out a second time - and the markets are still increasing the cost of borrowing.

    The deep cuts simply are not deep enough for the markets.

    Also, the biggest difference with Ireland is when the jobs go - the Irsih simply emigrate and earnings abroad sent home become like a 'new export' and revive the economy.

    Britons don't emmigrate - only rich men who don't want to pay tax leave en masse.
    >>>>>>>>>

    WOTW - sorry but your statements are a bit inaccurate. The main reason the Irish did so well was the huge infrastructure grants from the EU spurred the economy and that incentivised people to stay in Ireland rather than emigres sending money home - as a second generation Irish emigre myself I know that when they emigrate they tend to leave for good.

    By the way I would expect a revolution in Ireland any day now - all those cuts..........? Isn't there one? Oh well.

  • Comment number 12.

    @5 the rich get richer because they know how to manage their money, the poor get poorer because they don't.

    If you want to stop inequality then educate people as to why it's a good idea to invest and a bad idea to get that iPod on your credit card, or buy a house with a mortgage 5 times your salary.

    Too much blame has been put on the evil bankers who made the credit available to the masses and not enough has been done about the masses themselves. Fixing one side without the other dooms everyone to repeat this fiasco in another 20 years

  • Comment number 13.

    4. At 1:27pm on 09 Apr 2010, writingsonthewall wrote:

    'The deep cuts simply are not deep enough for the markets'

    That's only part of the problem. Ireland is the deficit hawk's real-time experiment and it has failed in every possible way. The Irish economy is still heading downhill fast. As the Stephanie reports 'Economists agree that the recession has been made longer - and deeper - by the savagery of these cuts.' This sounds like a depression and we risk the contagion spreading here if we adopt policies which by any reasonable measure have failed so badly.

    Roosevelt's famous warning that 'we have nothing to fear, but fear itself' has proven correct once again. The Irish government has panicked and the Republic is in for a long, long period of decline as a result.

  • Comment number 14.

    Here in my butcher’s shop in Smolensk, where today assistant Yuri is make some more of his excellent potato and beetroot moonshines – plenty aspirins is need after! – we are enjoy this story Stephanie. We are notice similarities between managed democracy of glorious Vlad Putin and Irish situations. In Russia, public sector workers was very protect under Communists. But by time of Yeltsin years we are realise they talentless pencils pushers, straight out Gogol story. Real abilities is with Russian entrepreneurs. They show initiative, get state issue shares off babushkas real cheap and buy up utilities giants. Then, like Sir Lord Cashcroft is keep monies offshore and be clever avoiding tax. They also provide better welfares system than state, with pay for schools and hospitals. They is only ask price of local protections monopoly in return. In small way peoples like me, who run good butcher’s shop, pay protections, occasionally help Big Oleg, local oligarch, with smuggle guns, is also example Russia economic miracle.

    But public sector workers, who is all delay and “come back tomorrow” and “sign these six forms please”, like Franz Kaftan nightmares, well it is right that they bear brunt of economics contractions and have pay freezes. Why, in Smolensk, where public sector pay is cut in half by bold Mayor, Big Oleg is arrange amazing rally in which public sector workers representatives is address crowd to ask for even less money.

    So Darling and Osborne is need be bold. Remember: real freeze is when temperature gets to zero. Perhaps, as is get fat pension, and do job in which all is do is answer phone and say “you are not entitles benefit, now go away”, public workers should do job for nothing, at least until deficit is clear.

  • Comment number 15.

    It is intriguing to see the results from your study of the situation in Ireland Stephanie so thank you for that. It is true that she has embarked on a brave programme of austerity with courage and that so far markets have backed her. However whilst you have blind faith in markets keeping the same view they have today, I remember that Greece was borrowing more cheaply than Ireland as recently as September last year so things can change relatively quickly.

    Also you do not appear to address the issue of Ireland's property market,NAMA, and the state of her banks. I saw a fascinating analysis of this on the notayesmanseconomics web blog last week which had implications not only for the future of Ireland but also gave an insight into the scale of the problem in the UK.Frankly I fail to see how you can draw any real conclusion as to the state of play in Ireland without even referring to these significant issues.

  • Comment number 16.

    Can you imagine what the unions will do if the government, tory or lab, try to cut public sector pay by 5 to 10% and impose a pension levy.

    The UK needs to swallow some tough medicine, but we don't like it, so we won't do it, after all is said and done, none of this was our fault, Gordon says its a global recession stupid, so why should we take the medicine.

  • Comment number 17.

    'it helps to educate people about the nature of the challenge, before you wield the knife. Not an approach we seem to have adopted here.'

    Don't expect any political party to either educate or be honest, it doesn't suit them to do that. The 2 main parties have far too many vested interests to look after!! The Tories will look after their rich backers and Labour will keep the unions sweet, the rest of us will get screwed whichever way.....

  • Comment number 18.

    " 7% of GDP in 20006, to 78% " I guess 2006?

  • Comment number 19.

    This is really interesting, this is the sort of analysis we should be having here in the
    UK. Now we see what should be happening here, the mere slogan: "We're all in this
    together." made flesh and blood by real inclusiveness. Will it happen here? I doubt
    it, the denizens of Westminster like to lord it (literally, in some cases) over us too
    much to let us in anything. Regards, etc.

  • Comment number 20.

    The overall message from Ireland appears to be that the Conservatives have got it right when they call for deeper and faster cuts in public spending. In fact if we were looking at the UK from the outside we would probably all agree with this.

    As you say, the Tories plans are less ambitous than those introduced (with success) in Ireland so, for Labour and Lib Dems to say these plans are unachieveable, is frankly laughable.

  • Comment number 21.

    Very interesting trip and observations. Pretty obvious that most public expenditure, of all types, will suffer cuts. I think most voters in the UK appreciate that too and it's about time we were treated like adults. Unfortunately this government is so used to its hoodwinking MO that no sensible debate along these lines can take place here.

    Intrigued as to how this consensus was achieved. First step is a government prepared to run the risk of being unpopular and by the sound of things adopting a raft of measures that reflect opinions across the political divide. However, what role did the unions play? Can't see any of our bloated public services giving up one penny, let alone benefit cutting etc etc

    It's good to see realism and courage on display. Wouldn't happen here as the other party would just hark on about it for time immemorial - Labour still droning on about what the Tories did even though they have had 13 years to set things straight.

    It'll be interesting to see when our lot start talking to us like adults. Nanny (states) find it impossible, so I don't see Gordon acknowledging that somebody else might have a good idea. Tories have shown that they want to, but one mention of 'austerity' and Labour cranks out the 'class war, nasty party' routine - I'll make my own mind up, thanks. Lib Dems have a whiff in their nostrils they haven't had for decades - they think it's power, but it's actually decay of a 1997 vintage.

    Somebody get a grip. We can take it ...

  • Comment number 22.

    'In the meantime, expect at least some of that Irish medicine to be making an appearance here'

    and who do you trust to administer the medicine ?

    the bunch of quack doctors that got the patient ill in the first place and that are promising to kick the patient in the teeth with their job destruction tax, or a party committed to doing everything they can to protect the electorate from worst ravages of Labour's incompetence.

  • Comment number 23.

    #15 >>I remember that Greece was borrowing more cheaply than Ireland as recently as September last year so things can change relatively quickly.

    Well, Greece was hiding a lot of stuff under the carpet until Goldman Sachs got caught out. When the dirt came to light, their rating fell.

    Now, it looks like the Four Horsemen of the Apocalipse, oops, sorry, I mean the honourable IMF, will be riding by to visit them !!

    http://news.bbc.co.uk/1/hi/business/8611188.stm

  • Comment number 24.

    'if you undertook that kind of tightening in the UK you'd be taking £65bn out of the economy, in a single year. That's roughly what the chancellor has said he will do by 2015-16'

    Another excellent blog Stephanie and I think your blogs are by far the most enlightening in this whole debate.

    One little suggestion, can you and your collegues throw the above quote back in the faces of Labour and the Lib Dems whenever they say the Tories can't achieve the modest savings they are proposing that equate to £1 in every £100.

  • Comment number 25.

    This is all about real power. The bankers caused all this and have not suffered much in the process, although many would contend they should be in jail rather than receive outrageous bonuses. The governments did nothing to prevent the crisis and the banking lobbyist made sure that any attempts to forestall the crisis were blocked. So who pays? the taxpayers, the masochistic public that seeks abuse and rewards those who abuse them. Before seeking solutions one should first identify the cause. Of course that has not been done. Niether the bankers nor the governments will admit to the schemes that they invented and how the greatest theft in history was a collusion on the part of the major banks and the governments unwillingness to prevent it from happening. The only real questions for this election are: How will you prevent the banks from doing this again (financial instruments that caused the problem are still in use), How will banks be taxed to share a higher propotion of the debt they created, and How much in contributions are you receiving from banking and financial services?
    Large national debt to bailout banks...to be taxpayer funded.
    Bad housing and commerical loans assumed by government..to be taxpayer funded.
    No new regulations to prevent banks from doing this again.
    Cuts in services to citizens to deal with all of the above.
    Banks give bonuses.
    Think carefully about voting as one good apple gets spoiled in a barrel full of rotten ones.

  • Comment number 26.

    ...i seem to recall that the public sector 'pay cuts' are not cuts at all - they are visible & negative adjustments on payslips that are suggestive of temporary and reversible reductions in pay.


    But then again, all this talk of single-digit cuts is piffle - when are we going to start addressing the real deep rooted liabilities here in the UK, of both visible UK debt (note not just 'deficit' overspend) and invisible, unspoken & unfunded state and public sector pension liabilities ?

    When will there be a realisation by the sub-40 year olds of this country that they will be paying forever for previous generation's largess of over-generous benefits and under-paid taxation, whilst in return suffering next-to-nil benefit, as a result of being the "last fools" in the giant Ponzi scheme that is the UK welfare system ?

  • Comment number 27.

    20. At 2:55pm on 09 Apr 2010, jobsagoodin wrote:

    'As you say, the Tories plans are less ambitous than those introduced (with success) in Ireland so...'

    'With success'!!! Which report were you reading? The ONLY 'success' is that the interest on Irish debt has dropped somewhat (still very expensive relatively) and that the Finance Minister 'believes' that the risk of further deflation (the beast that killed the Japanese economy for over a decade - perhaps you missed the recent Guardian report of shanty towns in Tokyo parks). Well I hope his faith is well founded (though Stephanie doesn't seem to think so), because everything else - the Irish economy falling off an endless series of cliffs and a banking system bailed out twice - seems the be the definition of what 'success' isn't!

  • Comment number 28.

    I don't think you can really look toward Ireland for inspiration when it comes to cutting benefits.

    Why? Well because, even with the cuts already implemented, the benefit regime in Ireland is markedly more generous than its counterpart in Britain. In fact, any attempt to impose British-style benefits in Ireland would probably lead to widespread revolt.

  • Comment number 29.

    4. WOTW

    Britons don't emigrate? Oh yes they jolly well do. Take a walk around the south of France, Italy, Spain or Portugal and you'll find them in droves.

    They are not 'rich' people, they're just like you or I, and they left the UK because it's simply a lousy place to live.

    Check out the Quality of Life survey: The UK comes well down the list and British kids especially are amongst the most miserable in the world. Why? because the only thing that matters in the UK is having boatloads of dosh and if you don't have the dosh you're nothing...

    Ireland was high on the list a couple of years ago. I wonder where they'll be next time around - now the banks have trashed their country.

  • Comment number 30.

    The Conservatives seem to be mismanaging the economy even before they take up office.

    According to Michael Amey of Pimco, the costs of insuring UK debt rose as a direct result of Osborne's cancelling of the NI increase. Markets want cuts not gimmicks. Cost of insuring UK debt against default now higher than Spain and Italy.

    At least Labour do have a plan to cut the deficit substantially over a parliament, all the Conservatives are focussed on are bribes and gimmicks. Must be an election.

  • Comment number 31.

    The only thing a low pound would do is drive up the cost of imports. We simply don't manufacture anything like enough to take advantage of the exchange rate and slash the trade deficit.

  • Comment number 32.

    Did nobody read this bit- "The deficit was just over 11% of GDP last year, and even after all those cuts, it's going to be just over 11% of GDP in 2010 as well. That's because the economy is shrinking even faster than the budget"

    Therefore if we can grow out of some of this debt, all the better, certainly we really want to avoid sucking loads of demand out of the economy. Massive instant cuts might be firstly futile and secondly reverse any prospective growth that the OECD seems to think is possible.

  • Comment number 33.

    #20
    "The overall message from Ireland appears to be that the Conservatives have got it right when they call for deeper and faster cuts in public spending"

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


    Conservatives have not called for 'deeper and faster cuts' for months. All we seem to hear from them are gimmicks and give-aways.

    Labour may be bad but this particular Conservative lot will be a disaster.

    Shallow and inexperienced.

  • Comment number 34.

    When you have the likes of our MP Nicholas Soames moaning to his electorate "I hope you're happy now" (his exact words) when he was told that he would have to commute from his home in his constituency (Mid-Sussex) and NOT have a house in London, the mortgage on which is paid for by US then you know that it STILL hasn't sunk in to those who wish to govern us that this is no longer a gravy train.

    Public sector pensions have got to be trimmed - and it has to be done soon. As someone who has funded my own pension entirely without ANY input from anyone else I resent that the tax I pay on my pension income goes to fund a much better one for public sector workers who haven't put half as much as I have into the kitty.

  • Comment number 35.

    Excellent blog - very useful and unbiased. Nice to see at least someone obeying the requirements on BBC to be impartial.

    It seems to me clear that making this level of cuts will make a rescession longer and deeper but after that 2 things are very unclear:

    1. If UK did the same cuts, would the fall in the pound help ease the effect of the cuts so that the economic effect would not be as long or as deep as Ireland?

    2. Will the bounce back, when it comes, be bigger and longer as a result of these cuts than it would be had we adopted the namby pamby approach to (non) cutting currently suggested by GB and DC.

    It seems to me that we are like a sick patient being offered two treatments by the doctors, one will involve an immediate operation, it will hurt a lot, we will struggle a lot for 12-18 months then be back to full fitness, the other option involves regular drugs which we will have to take for at least 5 or 6 years, it still will not put us back to full fitness and there is a reasonable chance of dying in the meantime but it will not hurt as much as option 1.

    Personally I would go for option 1 which is effectively what Ireland have done but hope that the fall in the pound acts as a form of pain killer. Then again as I am someone who has always worked and saved for what I bought I am not exactly representative of the UK population

  • Comment number 36.

    I thought we had come out of recession, according to that nice Mr Brown

    Apparently it is all down to some lady called Maggie?

    He also said he saved the world, so I am sure Ireland will be fine

  • Comment number 37.

    At the risk of incurring the wrath of the eurosceptics, it is the discipline of being part of the Eurozone, that has lorced the hand of Mr. Lenihan to take the drastic, and totally necessary action that he had to to ensure Ireland doesn't turn out like Greece.

    Not being in the Eurozone the UK is free, to a certain extent, to fudge and dodge the issue in the forlorn hope that a crash in sterling's value will save the day. Trouble is it won't, because we don't have a manufacturing industry - we've shipped it off to China, and turned the factory sites into B&Qs and Tescos.

    I for one, still think that if we were forced to take the medicine that Euro membership forces upon it's more responsible members (eg excluding Greece in that list) then we would, after much pain, be better for it.

  • Comment number 38.

    As normal # 25 ghostofsichuan shows a great deal of insight and commonsense. Perhaps missing fom his posting though is the reality that the real joker in the game is still hidden from view. Fact is that much of the impaired derivatives and other finacial instuments that lay behind the crisis are still locked away in offshore vehicles and still need to be unwound.It is this known unknown to coin a phrase that still threatens to bring the whole house of cards crashing down.At what point in time tax rises and spending cuts no longer represent sufficient solutions is anyones guess but it cannot be far away. I have said before that a new global financial model is the only way forward. Trying to make what is broken work again is totally fruitless. More brainpower needed, must try harder should be the main ambition of our leaders not meaningless soundbites as they lead us all to disaster. Shame on them all.

  • Comment number 39.

    By my reckoning the deficit will need cutting by £100 billion in the next few years, unless the 'boom times' of 2007 are exceeded and tax receipts shoot up. (Please look at the figures in detail Stephanie, they are fantasy.)
    To put that in context, that's 2 million public sector / government contractor jobs.
    Recovery my foot.

  • Comment number 40.

    Konnoslky - Big Olag is looking for you!!! :)

  • Comment number 41.

    I believe the Irish will come throught this.

    Their young people enter their working life better educated and they are not afraid of hard work and they have pride in their country.
    There was an embarrasing yuppie class that appeared over the last 10 years or so but hopefully they are now gone and the country can get back to basics.

    The UK has not even begun to feel the pain and continue to be fooled by, and even still hold respect for, the embarrassing political classes that are destroying this country.

    Wake up ! There is a reason why they come across as blithering idiots.

  • Comment number 42.

    “-All told, Mr Lenihan announced spending cuts and tax rises for 2009 worth 5% of GDP.”

    “-Ireland's national income has shrunk by more than 20% since 2007 - and it's not growing yet.”

    “-The deficit was just over 11% of GDP last year, and even after all those cuts, it's going to be just over 11% of GDP in 2010 as well. That's because the economy is shrinking even faster than the budget.”

    “-And public debt has risen from 27% of GDP in 20006, to 78% now.”

    Shades of Philip Snowden - who saw sense in the end.

  • Comment number 43.

    #37
    "At the risk of incurring the wrath of the eurosceptics, it is the discipline of being part of the Eurozone, that has lorced the hand of Mr. Lenihan to take the drastic, and totally necessary action that he had to to ensure Ireland doesn't turn out like Greece."

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

    Very true.

    UK membership of the Euro is inevitable - just a case of when.

    A large deficit, poor exporting ability and an unbalanced economy can only lead to decline in the long run.




  • Comment number 44.

    37

    That is just not correct

    If it were the other countries in the Euro would be taking similar action

    It should be true, although it just isn't

  • Comment number 45.

    Ireland has acted in Ireland's interests, and so far, so good, as Greece heads to the plug hole, with Portugal hanging on to the side of the bath....

    We in the UK need to be vigilant and take similar action to prevent similar later on

    WOTW told me there was a revolution happening in Ireland at the moment...hot that wrong too?

    Never mind

  • Comment number 46.

    Excellent comments from ghostofsichuan (25) Richard Dingle (30) and Dillo (32).

    Keynes the master
    So Keynes is proved right again. The Irish withdrew a large amount of purchasing power from their economy at a time when the private sector was unwilling or unable to invest and the Irish economy declined further leaving the deficit as a percentage of the economy unchanged. What a surprise. Vicious cycle indeed.

    If a similar austerity plan were attempted here, there would be proportionately fewer Brits migrating (as WOTW indicated) and unemployment and social unrest would be accordingly higher.

    The idea that the bankrupt private sector should be rewarded and its errors paid for by decimating the public services is astonishing. Cameron speaks about inequality being too high (whch it is) and says on R4 that he proposes to reduce it by cutting public sector salaries! Amazing. Nothing about the fortunes that the CEO of the major companies have awarded themselves being addressed. According to the Observer the captains of industry have increased their earnings (ie trousered the dosh from rip off Britain) to such an extent, that their pay is now over 80 times the national average! 80 times! A few years back it was 40 plus times the national average and that was unjustified, but 80 times national earnings is obscene.


    Not filling public sector vacancies
    Cameron’s idea that not filling public sector jobs as they become vacant is pure nonsense. An example might illustrate this. About 10%-20% of teachers in a local school may leave their jobs and move on or out of the profession per year. That means under the Cameron plan, the vacancies in your local school will not be filled and so in 5 years all or half the teaching posts will be left unfilled. Brilliant! A similar effect would happen in your local hospital. The umber of nurses on the ward would be halved in a few years. What does that mean? Pupils on 2 or 3 day weeks! Hospital beds removed? Wards closed.

    of course not everyone would eb affected. It is only state school pupils and those who rely on the NHS who would suffer as the public sector pays for the failure of private sector. Private schools (Eton included) and private hospitals would be allowed to thrive…

    National austerity plan
    If an austerity plan is truly needed, then let’s have a comprehensive one. One that includes an incomes policy covering dividends and salaries of the fat cats in the private sector. Let's have the likes of Johnny Diamond and Sir Fred the shred making a contribution. Let’ make it the austerit plan progressive. Those with the larger salaries pay proportionately more.

    Don’t give me any nonsense about losing talent, because there is no evidence that the private sector has any talent! If they had we would not be in this mess in the first place. And don’t worry about businesses relocating abroad because as owners of much of UK plc as taxpayers we would not approve any decision to relocate.

  • Comment number 47.

    as Richard Dingle states: 'shallow and inexperienced'
    perhaps once he's put down his copy of the guardian and actually realised that the wretched bunch of lyers in charge of our doomed country were also inexperienced when they duped us into voting for them with their wonderful teethy grins and spin machine orchestrated by the true dark lord.
    Our country is completely broken, and not just the economy. short sharp shock treatment is what is needed to cut the waste from every facet of society.
    great blog Stephanie, nice and impartial too. just one question: wasn't it gordon brown as chanceller who deregulated the banks and the city to enable them to lend and lend to people who could never repay it???

  • Comment number 48.

    #25 >>The bankers caused all this and have not suffered much in the process, although many would contend they should be in jail rather than receive outrageous bonuses.

    Err...just exactly *how* did the bankers cause the national deficit over the last 13 years ??

    The coffee is here; please smell it !!

  • Comment number 49.

    Steph

    we are spending £167 Billion more than we earn.

    Sometime soon we will have to move into the black.

    That will require cutting £167 Billion of spending or increasing £167 Billion of earnings.

    Due to the amount of debt it will be a log slow recovery so most of the strain will have to come from cuts.

    The Parties are arguing over £6 Billion and if this is achievable. If you can't cut £6 billion from £167 Billion then you are not fit to apply for the job.

    We should be talking about the cutting of £167 Billion of spending

  • Comment number 50.

    14 Konnolsky Please comment more often or start your own TV show.

  • Comment number 51.

    We should definately learn from the Irish experience and process and politicans here should be using this to illustrate the type of measures we have to accept in UK. At moment no party dare state the real truth, we were overspending in the boom, even before the crisis, instead of paying off national debt; now we have got to take even more painful cuts and adjustments.

  • Comment number 52.

    #43 >>UK membership of the Euro is inevitable

    It is not "inevitable" !! There's always the Wagnerian choice !! The Riechstag burning to the sounds of "The Ride of the Valkeries" !! Our Glorious Leader seems bent on just such an option !!

  • Comment number 53.

    #47 >>...short sharp shock treatment...

    Shades of Lord Tebbit !!

  • Comment number 54.

    #46 - wow - what a boatload of drivel.

    If you believe the private sector has no talent then we are truly scuppered - public sector does not create wealth directly. If we had an economy based purely around teachers and nurses (not that I am devaluing these professions - very important) then we would go bankrupt (clearly).

    No matter how talented a private sector, if you have a government that doesnt keep its spending under control then you are stuffed anyway.

  • Comment number 55.

    Most of the poor in this country are poor because they are low paid. Not because they have not invested and not because they do not work hard. The rich are rich because they are well paid and not because they work hard. This is one of the problems we have in this country. There is no real relationship between how hard a person works and how much they are paid.


  • Comment number 56.

    Very interesting to see what has happened in Ireland. I think a lot of their boom time was built on rising property prices.
    I asked the other day with regard to interest rates in the hope somebody could enlighten me, we currently have a very low interest rate set by the BoE, if interest rates rise internationally will our more or less have to follow? and if so what are the possible effects?

  • Comment number 57.

    Good article Stephanie with some interesting comments from correspondents in Ireland.Doesn't it seem ironic that after the swingring cuts the deficit remains the same due to lack of growth? We are still getting the 'if it isn't hurting it isn't working' response from the Right. Of course there needs to be economies but not at the expense of the blameless. Nurses, teachers and other public sector workers didn't get us into this mess but look like taking a hit. Meanwhile executive pay continues to grow as if nothing had happened.
    Oh, I forgot, these are the wealth creators and we might if we are lucky, get a crumb from their groaning tables.

  • Comment number 58.

    Great blog Stephanie!


    46 Free_The_Donkey

    "So Keynes is proved right again."

    I am not sure you have come to the correct conclusion if you have read Stephanie's article. Ireland have gone through difficult times for sure. The jury is still out on whether they have hit the bottom.

    Hey, it could be worse for them, they could be paying interest on their government debt of 7.29%, and be one step away from a downgrade to junk bond status and (to round off an excellent week) an IMF bailout.

    This Greek tragedy come come to a town near us if we don't get a grip on the deficit.


    "Not filling public sector vacancies
    Cameron’s idea that not filling public sector jobs as they become vacant is pure nonsense. An example might illustrate this. About 10%-20% of teachers in a local school may leave their jobs and move on or out of the profession per year. That means under the Cameron plan, the vacancies in your local school will not be filled and so in 5 years all or half the teaching posts will be left unfilled. Brilliant! A similar effect would happen in your local hospital. The umber of nurses on the ward would be halved in a few years. What does that mean? Pupils on 2 or 3 day weeks! Hospital beds removed? Wards closed."

    This is a great example of jumping on a sensible idea put forward to reduce the deficit. Well done. By taking anything anyone says literally and then twisting (spinning?) it to give the worst possible interpretation reduces the level of any debate to below the intelligence of the average Daily Mirror reader.

    I doubt there are many of them on this blog and so your (not so) subtle attempts to smear the Tories are a complete waste of effort and make you look foolish.

    Your argument about executive pay is completely irrelevant (and extremely boring) to the pay of public sector workers. CEOs pay tax (now at a dangerously uncompetitive 50%) which is used to pay the salaries of the public sector. Not the other way round. Capping CEO pay would achieve nothing in relation to the deficit.

  • Comment number 59.

    47. At 5:13pm on 09 Apr 2010, elsol wrote:
    "as chanceller who deregulated the banks and the city to enable them to lend and lend to people who could never repay it???"

    In the real world, financial liberation in the UK started with the abolition of exchnage controls in 1979 (under Thatcher) and then was reinforced by the Big Bang in 1986 (under er....Thatcher). But don't let the facts get in your way....

    54. At 6:13pm on 09 Apr 2010, EmKay wrote:
    "If you believe the private sector has no talent then we are truly scuppered - public sector does not create wealth directly."

    **
    The lie that wealth is created only by the private sector has been exploded many times before on this blog. Presumably you know very little about public services, wealth, economics and the universe...

  • Comment number 60.

    #44
    "If it were the other countries in the Euro would be taking similar action"

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

    Your logic is wrong here. Action is not mandatory (in the Eurozone) unless the deficit warrants it; they are not masochists.

    They are taking action in varying degrees. They do not all have huge deficits. Some are not taking any action because there is no need to.

    Greece and Portugal are special cases; they are also insignificant in terms of economic size compared to the Eurozone block as a whole. Also discipline (of any sort) does not sit well with national character.

    Spain's (deficit percentage of GDP) is smaller than the UK, as are Italy, France and Germany.

    Italy has a small deficit and a huge debt. Again a huge debt is not an issue so long as it can be serviced.


    The UK deficit will shortly be the worst in the EU and IMHO beyond the ability of any poltical party to sort out in the short term required by the 'markets'.

    Being in the Euro over the last 10 years (wanted by Blair, resisted by Brown) would have avoided the deficit we currently have. We are not Greece. We have a sophisticated tax system, institutions and discipline, we were just missing the Euro.

    The wrong handling of the deficit will reduce it in absolute terms but it will rise as a percentage of GDP - because GDP will fall.

    That is why the Conservative approach is dangerous.

    Obviously you are confident that the Conservatives can deal with the deficit but tell me this if they can't who will bailout the UK.

    Ansewer: the IMF.







  • Comment number 61.

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

  • Comment number 62.

    #61
    "So 10% may actually be quite feasible by 2013-14"

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

    Very feasible.

    So we need a healthy GDP as well as deficit reduction.

    That is the trick our political classes have to come up with; cutting the deficit without killing the patient.

    Those who believe the private sector will 'step up to the plate' are rather optimistic.

    Unfortunately, the Conservatives will fall short.

  • Comment number 63.

    #61
    "Want to know why the Tories want to start cutting now?"

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

    Do they.

    Conservative rhetoric over the past few weeks does not sit well with 'quicker and deeper'; it all seems rather contradictory and very shallow electioneering.

    For all there considerable faults (too many to list here) I still trust Labour more with the economy.

  • Comment number 64.

    61. At 7:34pm on 09 Apr 2010, Rugbyprof wrote:

    #46 & #59 Cage The Monkey/ Shoot The Donkey

    Your idiocy knows no bounds but I'm at least grateful for others in pointing out the absolute untreated sewage with which you continue to infest this blog with.

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

    You really are one vile elitist aren't you. I rarely post to the blogs, I'm usually just an avid reader trying to get an insight into public and professional opinion of current affairs but two of your post on recent blogs have been particularly offensive to the targets of your attacks and frankly I feel the need to vent my spleen.

    Who are you to tell people what they can and can't post on a public blog. This country still boasts freedom of expression so you should temper your bile against individuals you clearly disagree with (me included now I guess) and enter a civil debate. You remind me of a school bully I once knew who punched out when he heard things he didn't like or agree with.

    I read these blogs with interest and take the time to read every post (even yours) because if someone has made the effort to write it I will make the effort to read it. Some posts make me wince, angry, frustrated and even embarrassed by their content but I accept them as an opinion and formulate my own views as a consequence. Whether a poster is informed, ill-informed or uninformed is something I will deduce myself, I don't require you to impose your censorship on this blog on my behalf thanks very much. Stick to making your points - which you do very well - and lay off the malice, it raises your esteem no end you know.

    Oh and I don't care what you post in reply, I'll read it because you've taken the time to write it, but it won't bother me and I won't reply, my work is done here.

    Funny how it appears only to be the True Blues that get insulting isn't it!

  • Comment number 65.

    60

    I couldn't disagree more with your opinion, which you present like facts

    You state joining the Euro is inevitable, I don't think you will find this will be the case



  • Comment number 66.

    59

    Stick to bananas

    You know nothing about economics or politics, although I congratulate you on your consistency. Being able to demonstrate this every time you post must be some sort of record

    Well done

  • Comment number 67.

    Selling off the BBC would raise a bit of cash, especially if they cut the wages of the overpaid journos!

  • Comment number 68.

    Ishkandar:
    You asked "how" the bankers are to blame. The bankers devised an empty box to insure loans that they knew would fail. All the major banks did this, thus collusion or complete and utter stupidity. They continue to argue that the bonus system is to keep these great minds in banking. They must decide, are they criminals or overpaid incompetents. The governments were told in 2001 that these schemes would fail yet the banking lobbyist insisted on no change in regulations. So the governments were part of the collusion as well. The false bubble created by the banks supplied the governments with increased revenue and,I agree, it was spent and obligated as quick as it came in. The levels of governmental spending are questionable in many countries and that is because politicians like to get re-elected by providing things to interest groups. But you may have noticed that the banking bailout was by far the greatest governmental expenditure in history. The discussion has been turned away from the cause and to the effect. They propose different solutions to wiping the puss from the banking boil on everyones backside, when the boil should be lanced. Others on this page have pointed out other great flaws that endanger the deposits and returement accounts of working people that should be addressed. Without an overhaul of the global banking system the next scheme may be recoverable and some contend that the bottom of this one is not that far away. This is not so much about the politics of politics as it is about the corruption of politics.

  • Comment number 69.

    #RD

    At least we may have a fighting chance rather than sleepwalking into oblivion...

    Your point about the GDP reduction is of course correct.

    I made the point yesterday that potentially a number of sacred public sector cows (such as schools/universities etc for example) could be converted from public sector liability to private sector in a rerun of some of the 80s decisions not by choice but by necessity but this just needs to be embraced.

    This plus large governmental outsourcing could at least reduce the probability for IMF involvement. Of course its full of social issues that need to be addressed but they are not insurmountable (with the exception of pensions).

    It would be a sad irony for socialists to see the end of their grand plans being the catalyst for almost total privatisation by necessity.

    We just have to get the management right.....

  • Comment number 70.

    I would have thought Communists and Marxist would be too busy to play on the evil computers of the capitalist pigs

    Unfortunately not.....

    My drivel alarm should arrive soon, so it will warn me when they are here

    My personal view is that there will be so much happening with Greece and Portugal, and possibly the middle east, if Israel attacks Gaza/Iran, that there will be time for Cameron to win the election and produce the 50 day budget prior to any serious risk of UK downgrading

    It could happen, I hust don't think it will, certainly before the summer

    The price of oil is the greater short term risk to the economy

    Q1 GDP in two weeks...if it's gone minus, then bye bye Brown..so fingers crossed

  • Comment number 71.

    I think that Stephanie is over exercised by the deficit. Ireland along with the rest of the eurozone faces a period of stagnation or negative growth. This is inevitable given the spending cuts. Demand in the surplus countries (Germany, Netherlands) will not be stimulated to off set the lack of growth elsewhere.

    The UK is different.In the four years after the last two recessions, growth in the U.K. averaged 3.4 per cent and 3.7 per cent respectively. And if the perfectly credible growth predicted by the Treasury in the budget materializes (as supported by the OECD yesterday) , then the planned reduction in government borrowing, from 12 per cent of GDP this year to 4 per cent in 2014-15 should be achievable and the government debt-to-GDP ratio will stabilise at around 78 per cent, a perfectly reasonable level, leaving government finances in Britain slightly stronger than in Germany, France or America and much better than in Italy or Japan.

    Even lower growth rates will leave the deficit at perfectly respectable levels by international standards.

    Comparisons with Greece are wrong. It is only the current year deficit that bears comparison and even then only if you believe the Greek figures. The market does not hence the crisis. The accumulated deficit in the U.K. is of a much lower order than that of Greece.

    The current year deficit has been caused by a number of exceptional factors not the least of which is the behaviour of the banks. The cost of the bank bailout will be recompensed in due course further speeding the deficit reduction.

    Please let us keep a sense of proportion about this. Policies based on an over aggressive deficit reduction will be unnecessarily harmful.

  • Comment number 72.

    64

    You must be kidding!

    Have you been reading stuff posted by WOTW, Monkey boy? armageddon?

  • Comment number 73.

    At last, after more than a year of complaints by some of us regulars on this blog, we are seeing some excellent education by Stephanie and the media in general about the issue of the deficit.

    I'm not sure that the enormity of the situation has sunk in generally though. But at least its now a while since anyone has quoted that we started with lower national debt than our neighbours.

    The extra borrowing needed this year of £168 Billion, will need a yearly payment of £6.7 Billion in interest FOR EVER. {assuming current 4% bond rate}. So that is more than the debated N.I. rise alone.

    The proposed extra borrowing next year, 2011, will need a similar amount of extra yearly interest. Probably more, as its unlikely we'll keep the 4% rate for much longer.

    So next year, we will need another N.I. rise on top of the currently debated one. Or even more spending cuts.

    What about the next year after that, 2012? Well, on and on it goes, as the extra borrowing (deficit) is planned to reduce at such a low rate. Almost certainly the interest rate will be rising, so the interest payment is no less than previous years. So that's another £6 billion or so we need to raise through tax or reduced spendings, on top of those in 2011 and 2010.

    And remember, these accumulating extra lumps of £6 Billion interest PER YEAR are paid FOR EVER. As at the moment no one can even say what year we will have a budget surplus and start the reduction in total debt. Even with about 8 years of continuous growth at above average levels its unlikely. So "for ever" is the most likely outcome.

    I would really like a politician to explain to me what this country will be like to live in in 2014 or 2018. We know for a certainty that the national debt will be at least £1.4Trillion by 2014, with the total interest alone being between £60 and £100 billion. How many teachers, nurses and doctors less will we have by then? What about by 2018?

    And remember, these very gloomy figures are assuming we are coming out of recession and will have uninterrupted above average growth for ever more.

  • Comment number 74.

    #65
    "I couldn't disagree more with your opinion"

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

    You surprise me :)

    My belief that we will join the Euro is no more than an opinion; I believe I will be proved right.

    Even Thatcher was keen to join a currency block (ERM), why was this I wonder; unfortunately the then Conservatives messed it up by choosing a ridiculous parity with the DM.

    My comments about the various deficits of our 'EU friends' are facts.

  • Comment number 75.

    #64 NSH

    You seem to be a little selective in your memory and opinion NSH - see yesterday's blog for example.

    I'm sure FTM can respond on his own behalf as to whether he/she wants to add a grown-up informed opinion or continues to peddle uninformed and prejudiced rubbish. I did make the point yesterday - you seem to have forgotten that also.

    I note however that you haven't repsonded to the main thrust about the impending ballooning interest payments due on national debt and the logic to ignore this as advocated by Labour and now it sems the LibDems. It would be good if you could add to the debate....

    Also BTW - since you're a civil servant, can you confirm the existence of 'talent pools' and explain them to the readers of this blog. I'm sure they'll be interested to know the practicalities.....

  • Comment number 76.

    Was that an honest politician?
    I'd love to see more of that in UK.

    It's obvious we need some painful medicine but Lab and Con won't admit it during an election campaign because they know how economically dumb the average voter is. Let's just hope whoever we get can do it after the election.

    At least Con have committed to an emergency budget.

    I'm really not convinced Lab can run a tight economy, all their cronies and most of their voters depend on the public purse for a living. It's personal.

  • Comment number 77.

    #NSH

    As an addedum to my last comment - you should search FTM's previous blog comments - they're highly insulting (including a number towards me) and you may notice that the same thing is said over and over again with little insight or evidence - that's the problem. Despite informed debate and evidence after all of this time 'the song remains the same'.

    Its very tiresome. In fact I'm beginning to believe that FTM and Gordon Brown are one of the same because of their undying belief based on a sample of one....

  • Comment number 78.

    #70
    "Q1 GDP in two weeks...if it's gone minus, then bye bye Brown..so fingers crossed"

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

    The GDP Q1 figures due out on 23 April looks like being very good.

    As I posted previously the country will only stay with Brown if we are still up the creek.

    Good GDP figures and 'bye bye Brown' as the country will be demob happy and hungry for change and a fresh start. That is how it works. As I said previously the parallel is with the 1945 election; war is won don't need Churchill.

    So 'uncross your fingers' and invest in a primer in logic.

  • Comment number 79.

    ok, my last post was too depressing. So what do we do? Its clear that cuts like in Ireland will bring a second even deeper recession, which by killing off businesses already on the edge, creates a spiral into depression.

    At the moment you sense no impending disaster or urgency for action among the population. For many the rise in petrol is the only "hardship" they are experiencing in their budgets.

    Because of the size and diversity of our economy we are currently safe from the near implosion in Greece and Ireland and Co. But we only have a couple of years buffer, maximum.

    So we now urgently need a government that pulls out all the stops to help small businesses grow. That works with public sector unions to support modifying the public sector to fit what we can afford, rather than create even more obstacles to the changes needed. We need a picture of the options for the UK in 2014 and 2018 described clearly by our politicians with a strategy that unites us through the pains we will all need to suffer.

    At the moment all we have is a debate about a relatively trivial £6 billion of N.I. or cuts.

  • Comment number 80.

    This blog seems spot on and particularly relevant.
    Rugbyp. - Thanks for your comments which i generally agree with butnot your comment at the end.
    In our society of stakeholders there are many among us who fear for the future and are happy to remain in the comfort zone. There are others (as on this blog) who will exploit this stuation with their political dogma and agenda. I only wish that new labour had ditched Brown. I fear that only an honest labour grouping can deal with the problems that are starting. I certainly won't be voting for Brown.

  • Comment number 81.

    71

    Either this is a wind up, or you seem to be confusing the deficit with the debt

    Deficit=£168bn...how much more we will spend this year, than our income, it gets added to the national debt, which will be £1.4 trillion by the end of the next parliament....

    Interest payments alone £100bn+ when our income this year isn't even £600bn

    If you really think the deficit is being overstated, and you aren't confused, then you are in for one BIG shock when the penny drops

  • Comment number 82.

    78

    I remember you posting that view, I just think Brown is doomed whatever

    He seems to be realising that, and he will get so angry during the debates, thus enabling Cameron to completely demolish him

    His language is becoming more desperate

    I don't think he will cope very well with losing this election

    Millipede on standby....

  • Comment number 83.

    RugbyProf great post

    [i]
    'Last year I forecast that UK would eventually be paying c. 6% interest on its £1.4 trillion debt. This may be at the low end. Greece is currently at 7.5% whilst interbank money is at 0.5%. So 10% may actually be quite feasible by 2013-14.

    Thus: £1,400,000,000,000 x 10% EQUALS

    £140 BILLION INTEREST A YEAR ON THE NATIONAL DEBT IS QUITE SCARILY POSSIBLE.

    PLEASE SEND THE ANNUAL INVOICE TO GORDON BROWN PLUS LABOUR/LIB DEM SUPPORTERS.

    [/i]

    Its going to Greece, Spain and then the UK that falls.

    "No, we are not like the hot headed Latin countries with our English reserve" you might say, but the whole rulebook was thrown away when Blair took power assisted by Mandelbrot and Kampfbell.

    Blair made everyone realise that it was OK to lie. The electorate was too dumb to find you out. Now all management act as if immoral actions do not have consequences.

    Immediate consequences - that is.

    Now we are facing PAYBACK for these pernicious demons who usurped our public life and installed themselves as national parasites.

    And the biggest tapeworm of them all is Brown...


  • Comment number 84.

    #79 JE

    Sometimes we just to have to trust in the resilience of the people to face reality.

    As a nation we've had to survive war and the current finances and state of the economy resemble a post-war scenario so question is 'can people handle the truth'?

    Looking at the hysteria caused by the Conservative proposals to cut a mere £6 billion with a solid business case (i.e negating the planned NI rise) would suggest not. But one has to remain optimistic because somebody has to........

    What do you think would be the reaction if they said anything larger?

  • Comment number 85.

    80

    I think the Labour Party will decend into civil war following the election defeat, with retribution for the Blairites left, the Brownites with Old Labour returning once more

    It won't be pretty

    It took the Conservatives 15 years to recover from theirs

  • Comment number 86.

    #80 Thanks for acknowledging nhoj.

    Given your observations, you may be further interested in mine #84 (when its published) in crossover.

  • Comment number 87.

    stop the direct debit to europe for polish underground and serbian drains and pay down OUR debts.

  • Comment number 88.

    79

    Hence my strong recommendation to Cameron to have a 'come clean' 'spelling it out' budget within 50 days of being elected

    Ironically, Osborne did try to do this, yet the public reaction to even trying to raise it was rather 'in denial'

    Cameron will have two or three golden opportunities, he must take them

    1. Public expectation will be low generally, he must exceed that expectation
    2.With each new government comes some sort of honeymoon period, even a small one should be used constructively
    3.People want honesty and clarity from their politicians, so spell it out....clever thing to do would be NOT to blame Brown, and talk of 13 wasted years...boring, and those that will take note will connect the dots themselves


    I don't think your earlier blog was too depressing.....

    Too close to reality

    I would like to see him give a 2 year guarantee of no job losses through compulsory redundancy, in exchange for ideally a pay cut, at the very least freezing it

    We do have a chance, not for long though

  • Comment number 89.

    59. At 6:54pm on 09 Apr 2010, Free_the_Monkey wrote:
    47. At 5:13pm on 09 Apr 2010, elsol wrote:
    "as chanceller who deregulated the banks and the city to enable them to lend and lend to people who could never repay it???"

    In the real world, financial liberation in the UK started with the abolition of exchnage controls in 1979 (under Thatcher) and then was reinforced by the Big Bang in 1986 (under er....Thatcher). But don't let the facts get in your way....

    54. At 6:13pm on 09 Apr 2010, EmKay wrote:
    "If you believe the private sector has no talent then we are truly scuppered - public sector does not create wealth directly."

    **
    The lie that wealth is created only by the private sector has been exploded many times before on this blog. Presumably you know very little about public services, wealth, economics and the universe...

    >>>>>

    FTM - lets have a sensible debate. Wealth is created by growing things, processing things, manufacturing things and otherwise adding value.

    the public sector does NOT create immediate wealth but areas do add to the potential for wealth generation (health + education primarily) - BUT strictly speaking if the public sector created wealth then why would we NEED a private sector at all? Its because if you have an economy based entirely on public sector services you go bankrupt. If you cannot see this then I dont know how to convince you - if all we had was teachers and nurses (again no intended slight on these professions) then how would we pay for all the stuff we import from China?

    As for your last statement I have been a long time follower of this blog and I think the majority would side with my opinion. However... I don't think you will imagine that makes any difference..Hmmmm?

  • Comment number 90.

    84 I agree

    I posted a comparison on the previous blog, illustrating that £6bn from our 2011 spending, is like someone on £18K net, reducing their weekly outgoings by £3.64

    It is quite scary how many people, Richard Dingle being one, who call the NI move an election bribe, when it is nothing of the sort

    We are spending 129% of our income in 2011...frightening

  • Comment number 91.

    77. At 8:52pm on 09 Apr 2010, Rugbyprof wrote:

    #NSH

    As an addedum to my last comment - you should search FTM's previous blog comments - they're highly insulting (including a number towards me) and you may notice that the same thing is said over and over again with little insight or evidence - that's the problem. Despite informed debate and evidence after all of this time 'the song remains the same'.

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

    Point taken and acknowledged. I will offer my apologies for directing my fury solely at you my good fellow, as I previously said you do offer your opinions very well and I do actually enjoy reading your posts, some I agree with, some I don't but that's the case for most regular bloggers I have now become familiar with.

    However I have a particular dislike for dialogue awash with insults when it should be about content, diversity of opinon and construction, hell even the revolutionaries have a place in all this. Tit for tat slanging matches reduce the blogs to exchanges no more constructive than the politicians efforts the contributers profess to lack faith in. Unfortunately your last post before my outburst became the focal point of my anger, maybe I should have counted to ten first. This said, I still don't think there's a place for ridicule and insult on this blog, after all like music and art politics is a personal preference determined by an individuals ideology. Just because I listen to Motorhead doesn't mean you have to like them, but I don't expect you to tell me I can't listen to them.

    As for my comments on interest rates, talent pools etc, like I said previously I'm a reader of these blogs in the pursuit of knowledge, I will make very rare personal observations but I will not offer my opinions, not for fear of ridicule, it's simply that everyone else does it so much better than me.

    As the Black Night said in Monty Python's Holy Grail - "Lets call it a draw then."

  • Comment number 92.

    I've been following the Greek slow motion car crash this week, and been considering the involvement of the IMF. We all know that a condition of money from the IMF is always an austerity budget by the government.

    Now, surely, if there was a better way, and a less risky way, the IMF would propose it? How about loads of extra public spending, to support the economy in Keynesian fashion until the private sector could take over? Ever seen the IMF propose that?

    I think the answer is quite simple. The IMF have the attitude, if you want to waste your own money, fine. But you are not wasting ours, thanks very much.

  • Comment number 93.

    89

    I think you will be mindful of my views on the three 'delusionists' inc monkey boy

  • Comment number 94.

    Isnt fiscal adjustment of this scale an issue on which all parties should agree a common approach. Why cant the Queen intervene and order them to appoint an independent committee of leading lights (noone who gets a bonus) to decide what are the best options for UK.

    Is democracy self defeating & useless.

    I want party consensus on 3 points - deficit cutting, banking reforms, manufacturing growth reforms.

    Politicians, media, etc are all disappointing. Are we better governed than in the past...

  • Comment number 95.

    When we sent our manufacturing bases to China, did we not forget to send our workers there...we continued to pay benefits to them and started paying for importing chinese stuff - how is this sensible...can someone explain.

    What can be done to make the UK competitive in manufacturing again - any expert opinion?

    Bank bonuses should be linked to their efforts in growing manufacturig for next 5 years - by giving them loans and working on creating real value rather than gambling our pension funds.

  • Comment number 96.

    61. Rugbyprof wrote:
    Thus: £1,400,000,000,000 x 10% EQUALS
    £140 BILLION INTEREST A YEAR ON THE NATIONAL DEBT IS QUITE SCARILY POSSIBLE.


    I'm not an expert on the bond market. But I think you'll find that as each trance of bonds is sold off, its at a specific interest rate. So at the moment, the £200 billion sold over the last year or so has been at around 4%. In the coming years, in order to attract the buyers it is likely to rise. But it will only be the debt issued at that point that will have that higher rate.

    Most UK debt is long maturity. I'm not sure what the interest rate was on bonds from 10, 20 years ago. It is probably at higher interest rates than now, so when it matures and needs to be re-financed, it will be at a lower rate, so reducing the total interest.

    The problem Greece have is that €billions of bonds are maturing over the coming months, and currently would need re-financing at the crazy 7% plus market rate.

    Over the next parliament we know we have about £600 billion to raise in addition to re-financing any maturing debt. Other countries like Germany have massive amounts due for re-financing over this period too (on top of their deficit), so its looking like there will be a lot of upward pressure on rates over this period as everyone clamours for money from the markets.

  • Comment number 97.

    #61 Rugbyprof:

    "£140 BILLION INTEREST A YEAR ON THE NATIONAL DEBT IS QUITE SCARILY POSSIBLE."

    Unfortunately, your calculation is a little simplistic.

    The Nation predominantly borrows money with long dates like 25 years. So it is only new borrowing (and any old borrowing coming up for renewal from 25 years ago) that would attract your 10% rate. So if the deficit has been cut to £90 Billion, the additional interest cost for 2013/14 would only be £9 Billion at your 10% rate. In the years before that we would borrow larger amounts, but at lower interest rates, so those contributions would be smaller still. I understand the current interest bill is of the order of £40 Billion, so it is not going to get anywhere near your £140 Billion figure.

    Having said that, your 10% figure is not impossible and I agree we have a problem that needs to be dealt with.



  • Comment number 98.

    Why are we getting so ho under the collar about 'The Irish Experience'? There are just too many differences between the two economies, political balances, and cultures (leaving aside memebership of the Euro) for any comparison to be meaningful.

    Additionally we have to accept that the Irish 'cuts' may have pleased the markets but have done very little for the economy in the short term.

    If the UK is to make any meaningful decisions then the vested interests have to be set aside. Given the vitriol on the majority of these theads that would appear highly unlikely.

    The only real interest in this election is to see which party manages to convince enough turkeys to vote for Christmas. None of their 'policies' will work because they are not addressing the true problem.

  • Comment number 99.

    Wealth creation needs to be defined. You might say that the only wealth creation is that which brings money into the country. A lot of the Private Sector does not do that. So the divide is not between Public and Private but between internally consumed and exported.

    When people say that it would be OK to lose support staff in the NHS but not front line staff, how would they classify cleaners? Are the cleaners support staff but nurses are still nurses even if they have to do the cleaning because the cleaning staff have been made redundant. If the support person who arranges all the supplies for operations and the like is made redundant because they are support staff, would the surgeon still be frontline if he spent his time arranging supplies? Many support staff are lower paid than the frontline staff and, for this reason, it is more cost-effective to employ them to do certain kinds of work.

    The argument is not between Public and Private sectors. Both contain hard workers and lazy workers. The argument is about the distribution of wealth or, at present, the distribution in the 'reduction of wealth'. Firstly, those who have benefitted most over the last decade, should now contribute most. These are the bankers and the chief executives. Secondly, we need to relate earnings to hard work which means that no one should earn more than 5 times the minimum wage. I do not see any one person working 5 times harder than another. Those who do not work from choice, should not receive anything.


  • Comment number 100.

    #91 NSH

    No problem. Understand your rationale and acknowledge your appreciation.

    I think the 'put-downs' by various contributors sometimes add to the intensity of debate and quite often are funny though I'm sure maybe some take them too seriously.

    However, there is a difference between a put-down and a plain insult. I like to think where I occasionally they're used are the former rather than the latter but of course that is my opinion and open to question.....

 

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