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The Office for Brutal Realism

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Stephanie Flanders | 08:22 UK time, Friday, 11 June 2010

I can't remember a time when a single set of economic forecasts has inspired such interest, or such dread. Let alone forecasts that expire in eight days.

However, in a summer of firsts, Monday's publication of the first report from the new Office for Budget Responsibility will be one of the more important.

The document will contain baseline forecasts for economic growth, public borrowing and debt, based on the assumption of no change in government policies. It will therefore shape the terrain on which the government's Budget decisions on 22 June will be based. With those decisions, the OBR forecasts will change again.

Say, for example, that Chancellor Osborne decides he needs to eliminate the structural deficit by 2015-16. Under the new system that he has introduced, it's the OBR that's going to tell him how much he needs to cut spending or raise taxes to have a fair chance of reaching that goal. The OBR reckons the cost - the ministers get to decide how to pay it.

Sir Alan BuddWhat can we expect? The honest answer is we don't know. But it's interesting to consider the complex trick that Sir Alan Budd - the chairman - and his colleagues have been asked to pull off.

With this one set of figures, both the government and the OBR need this new body to demonstrate its independence. That is more difficult than it sounds.

The running assumption, often repeated by the government, is that Alistair Darling and (especially) Gordon Brown forced the nice Treasury civil servants into making hugely overoptimistic forecasts. Now those same officials have been set free - and remember, it is basically the same officials writing these forecasts, though this time with guidance from Sir Alan's team - everyone seems to think the picture will be a lot worse.

If that happens, ministers will say this demonstrates the importance of taking politics out of official forecasts. But if you were being mischievous you could say it proves no such thing. After all, who gains most from a confirmation that the books were cooked under Labour than the new government? And who will benefit more than the current chancellor, if these new forecasts turn out to have been too gloomy after all? The OBR is supposed to be independent of all politicians, not just the politicians of the old regime.

So much for the politics. What about the economics?

There's been a lot of talk about next year's growth forecast being revised down. That may well happen. But that would be less of a seismic event than many seem to think.

The borrowing numbers are currently tied to a forecast of 3% growth in 2011, whereas the current average of independent forecasts is 2.2%.

Imagine the OBR decides that growth will be 2.25% in 2011. Other things equal, this would add around £7bn to the overall deficit for 2011-12. But as usual, other things aren't equal: the old forecasts for 2010-11 were also based on an expectation that the deficit this year would be £167bn. In the event, it was £156bn.

The OBR will have to decide how much of that good news was structural - and how much was a one-off (for example, higher revenues due to high earners bringing forward income to avoid the new 50p rate). No-one can know for sure, even inside the Treasury. But, for what it's worth, the experts I've spoken to reckon that at least half of that £11bn improvement is permanent.

That would mean it more or less cancelled out the impact of lower growth next year, leaving the headline borrowing numbers not much changed - and, crucially, the structural deficit somewhat lower.

If that is what happens, that would seem to back up what some Treasury officials have said privately all along (see my previous post Gotcha); that they had "Gordon-proofed" the borrowing numbers, by assuming that the higher 2009 forecast they were prodded into would make a smaller than usual contribution to cutting the deficit. Remember - the March 2009 estimate of the deficit for 2009-10 was £175bn.

However, that is only talking about 2010 and 2011. The growth forecast for 2012 onwards could also be revised down from 3.25% a year, meaning that the overall borrowing numbers are higher, even if the structural deficit is unchanged.

In theory, that needn't concern the chancellor since he's focused on the structural deficit. But he might conclude, given his concern about the financial markets' appetite for large deficits, that structural borrowing needed to come down quicker than before.

But there are two much more important numbers, which could make the OBR report a 'game-changer' after all. The first is the estimate for the UK's long-term potential growth rate - now 2.5%. The second is the estimate of the permanent loss of output due to the financial crisis - which the Darling Treasury reckoned to be 5.25%.

It's quite possible to be gloomier, on both counts. With an ageing population, and lower immigration, you might agree with the OECD that our potential growth is closer to 1.75% a year. You might also say the permanent loss to output was more like 7.5%.

As it happens, that was what economists at Barclays Wealth thought when they collaborated at with the IFS on its Green Budget earlier this year. On that basis, they forecast then that the structural deficit in 2015-16 would be £53bn higher than the forecast in the PBR - ie that the overall "hole" to fill wasn't around £70bn, but nearly £125bn.

As we've seen, the borrowing numbers have got better since then: but with these different assumptions, you'd still be looking at spending cuts or tax rises worth around £110bn to fill the hole, not the roughly £70bn that figured in the election.

That would be a radical change from the estimates that these same officials produced (albeit with some help from Mr Darling) just three months ago. I'd be surprised to see it on Monday. But it's quite plausible that Sir Alan will leave the permanent loss of output unchanged, yet revise down the estimate of trend growth to 2.25% a year.

Even allowing for the recent improvement in revenues, that could leave the forecast for structural borrowing in 2015-16 some £20-30bn higher than in the last Budget. That would be bad news, but - by recent standards - not quite a cataclysm.

Sir Alan Budd is a distinguished public servant: I am confident that he is, first and foremost, seeking the truth. But the prime minister has rather prejudged the OBR's conclusions by asserting, without offering a lot of evidence, that the public finances are much worse than we had thought.

If Sir Alan only wanted to demonstrate his independence on Monday, he would surely be tempted to stand up and say Alistair Darling's forecasts were spot on. I suspect that is not what is going to happen. But his conclusions may be less dire than many predict.

Comments

  • Comment number 1.

    OK can someone answer this
    1. Does it matter if the total economy grows or shrinks? Surely what people 'feel' is the GDP per capita, and that figure, inflation adjusted, was the same in Q4 2009 as it was in Q1 2004. Immigration has had no multiplier effect on the economy , only at best an additive effect and growth was achieved simply because there were more people.
    2. If 'growth' of the past few years was public sector based ie the last government borrowed money to create jobs in the public sector, many of which seem to produce little benefit to the wider public, and that 'growth' disappears, then is it such a bad thing? Surely growth based solely on borrowing is unsustainable and the key thing is to get the productive part of the economy moving.

  • Comment number 2.

    Good to hear Treasury officials "Gordon-proofed" the borrowing figures. Pity they couldn't have done the same for the economy. Could that be a provocative remark?

  • Comment number 3.

    Didn't we have an admission from David Laws that he wasn't aware of any evidence that officials were told to fiddle the forecasts? Wasn't that on a Newsnight interview?

    Moving officials between a department and a quango seems silly to me. Economic forecasting is fraught with difficulties and small differences between predictions and outcomes can have large impacts. I can't help thinking that this accounts for many differences between forecasts. But, given that, shouldn't the forecasting be done by an organisation that is headed by a minister that can be called to account in Parliament?

  • Comment number 4.

    Not sure where you get all the dread from, Stephanie? We've been prepared for the bad news for some time and there have been recent faint glimmers of hope, like the 'not quite as bad as we thought' £11bn. This morning's bad news from Japan, I think, also provides a measure of strange comfort to us at this end of the globe.

    And a year ago, growth of 2.2% would have seemed wonderful. In fact 0.2% would have been reassuring back then.

  • Comment number 5.

    So Stephanie will there be some European body given the job of crawling over the OBR's work and the Government's subsequent budget?

  • Comment number 6.

    Stephanie,

    All these growth forecasts are a bit optimistic to me.

    The last decade saw people borrowing 6 or 7 times their fictional salary on 125% LTV mortgages, pensioners being hoodwinked into releasing equity in their homes to the tune of tens of thousands of pounds, every high street shop offered its own credit card. People were borrowing even more (debt consolidation) to pay of existing crippling debts.

    In America they were giving mortgages to anyone and everyone!

    These days are gone.

    Yet every year for these boom times, Gordon Brown consistently over-estimated tax receipts and economic growth.

    I can’t see where the 2.25% growth will come from. Not from exports, since all of the UK’s customers (US, Europe etc) are in the same sorry situation and our trade gap is still widening. Domestically we are up to our necks in debt and about to cull hundreds of thousands of public sector jobs. Combined with a recruitment freeze too, and the private sector on its knees, it is looking pretty dire for any growth prospects.

    That’s without mentioning the demographic time bomb of baby boomers now retiring and living to 99.

    This recession was always going to be ‘L’ shaped, (0.3% growth is bouncing along the bottom) and from history, the last time we were in this situation, it only ended when WWII began!

    Someone please tell me I’m completely wrong, and all will be fine and dandy!

    PS I would prepare for the worst case scenario, not the most likely scenario.

  • Comment number 7.

    The problem is we have to many OBD's staffed by people receiving nice saleries, thankyou, who are going to decide to cut the jobs of other people that we need, like the men who fill in the pot-holes and empty the bins. We need to get rid of people who think of work as pressing a few buttons and attending meetings. We need to stop paying ourselves more than this country makes or can afford. We need to stop our pleasant lifestyle carried on the backs of far eastern workers paid a pittance to make our clothes and electronics. We need to stop over feeding ourselves on the backs of lowly paid eastern european workers picking our fruit and veg that our own people are to lazy and indulged to do themselves.
    We need to make our kids understand that they really need education and not rely upon the state to give them handouts if they can't be bothered.
    We need to get real.

  • Comment number 8.

    I think Osborne has been excellent so far, and the OBR is going to need to be brutally honest at all times to maintain it's credibility, once that is, of course, established

    I would be astonished if it could endorse Darling's prediction, and eradicating the structural deficit is priority number one bar none

    Cameron was correct in allocating more money to counter IEDs yesterday as well, so a much healthier balance than under the previously inept government




  • Comment number 9.

    Ms Flanders wrote:

    'The Office for Brutal Realism'
    Love the description, love the dark humour.

  • Comment number 10.

    Assuming a long term average growth of somewhere between 2-2.5% seems pretty reasonable.

    Maybe we should also be bullish and say some 5% of GDP that the public sector spent in the last was solely due to the bank collapse and will not need to be repeated, that means that the non-bank related public sector spending was merely 48% of GDP.

    If we simply froze public sector spending then it would gradually reduce as a percentage of GDP but even after 7-8 years it would still be more than 40% of GDP. Over the last 50 years or so, public sector spending has varied from a low point of just under 35% of GDP in boom times to up to 43% of GDP in bad times with 3 exceptions (49% and 53% both under a labour govt and 46% under a Tory govt). So if we assume that in 8 years time the UK is in good times - which is an assumption we have to make because otherwise the number become truly horrible - public sector spending would still be 5% of GDP higher than the very long term trend or putting it in relative terms 14% higher than average (40/35 being roughly 1.14).

    No matter how you break down the numbers the simple fact is that over the last 3-5 years Labour govt overspent massively. I believe that public sector spending needs to be cut in the next 5 years by 20% from its current levels.

    Now I am sure other people will say we need to raise taxes by a lot to cover the shortfall. The overall tax take is already too high - last set of govt stats had it at 44% of GDP whereas the long term (ie over 50 years) average is that the tax take varies between 35-37% of GDP. Now admittedly one of the reasons that the tax take looks high is that the economy has shrunk but tax rates stayed the same, and a second reason is that with the announced tax rises there is a high chance that a lot of people brought income forward to beat the tax rises. Even taking those factors into account we need to reduce the burden of taxation on the population.

    The OBR could be a real assistance to both govt and commentators by publishing lots of unbiased stats and crucially historic analysis of the UK economy

  • Comment number 11.

    Good moaning,
    If the deficit is that bad, can the present administration not formulate a claim of mismanagement/dereliction of duty against Messrs Brown and Darling for their incompetence

  • Comment number 12.

    4. At 09:05am on 11 Jun 2010, Up2snuff wrote:

    'Not sure where you get all the dread from, Stephanie? We've been prepared for the bad news for some time and there have been recent faint glimmers of hope, like the 'not quite as bad as we thought' £11bn. This morning's bad news from Japan, I think, also provides a measure of strange comfort to us at this end of the globe.'

    I really wish I could be so optimistic.

    Reverisng the £156 Billion deficit will probably lead to a double dip. As for problems in other countries , this is not always good news. For example, General Motors financial problems could see Vauxhall dissapear. We are all connected. If Japan imploded, one by one, the dominoes would fall.

  • Comment number 13.



    With reference to the OBR...

    Given that economists have differed widely on Darlings predictions from understatement to over statement depending on political peruasion rather than impirisism. I can't help but feel that I would, as a politician say, choose the organisation that would most favour or was most in line with my aspirations and certainly different from the opposition's position. How then is an independent organisation proved to be either "on board" or otherwise by ourselves the public at large.

    With reference to Darling's predictions...

    I hear from this blog at a previous time that a half percentage point is is not really guageable and yet these fractional references are the only ones that are available. Given the above statement concerning economical variations in prediction, Stephanie is your statement about Darling in these matters because you believe he has had a tendancy to be right dispite his opposers?

  • Comment number 14.

    I am sure somebody will educate me on the matter but I thought you had to have inflation to encourage consumers to buy, as prices would not go up otherwise so stuff would not - all things being equal - be cheaper today than tomorrow. I am sure I read somewhere that inflation was growth in many cases, the two terms where interchangable in many economies. Futher that around 2 percent was seen as a jolly good figure, not to big and not too small. The 2 percent inflation figure (target) sounds strangely familiar. So is a forecast of 2.5 percent growth really 2.5 percent growth or is it 0.5 percent growth allowing for inflation being hoped to be 2 percent. This all looks rather like no growth to speak of. But I presume in the curved space of the economists mind anthing can happen, it just depends on the gravity of the situation.

  • Comment number 15.

    Lets fund any proposed budget deficit with QE cash.. simple.. NO more deficit.. problem solved. Has this been done before..???? Of course it has and while we are using Canada as the yard stick lets adopt their funding mechanism of the Pre-1974 era when the Bank of Canada printed all the cash that was required by government.

    Gordon was so close to getting rid of the full mountain of debt with QE. Another £30billion on top of the £285billion will be absolutely marvelous in this instance.. My estimate of the budget deficit is about £30billion unless of course it is politically driven to scare, in which case they will have a bail out provision of £120billion on top of that.

  • Comment number 16.

    One of many precis possible:
    The complex trick demonstrates the importance of taking politics out of official forecasts. Things aren't equal but with these different assumptions the prime minister has rather prejudged Sir Alan, his conclusions may be less dire than many predict.

  • Comment number 17.

    6

    SOME people had the 125% mortgage......you make it sound like it was commonplace, it was not

  • Comment number 18.

    The problem with forecasting growth now is that it is dependent on many factors outside the government's control. Global demand for UK products is key, and it looks like the world has adopted a negative approach much like that of the UK, which will undermine domestic demand and reduce the positive effects from exporting we might otherwise have expected.

    Secondly, our recovery is contingent on companies making the decision to invest now rather than later, and with the future so uncertain and taxes set to rise and spending set to fall many companies that may otherwise have invested will now wait and see.

    By being so negative on the debt outlook the Conservatives have achieved their political aim of preparing the nation for cuts. They have successfully painted Labour and Brown as the villains. But they have also undermined the public's confidence in the UK economy. And right now we are on the knife-edge between recovery and double-dip recession. The combination of lower forecasts, lower opinions and real public sector cuts could weaken demand to the extent that the government pushes us down the wrong path. The OBR has an impossible job. How can it possibly predict events accurately knowing that what it says has the potential to shape events? If it has the UK's best interests at heart it may well do what the previous organisation has been accused of doing and predict optimistically, in the hope that positive figures will encourage private sector spending now. In which case the outsourcing of the department will have proven to be a complete waste of money.

  • Comment number 19.

    If I remember correctly there are a lot of other rosy assumptions in the outgoing forecasts, you know that : credit will ease, QE will work, inflation will come down,interest rates will remain low,global stimulii will restore growth, low sterling boosts exports...let see what the OBR says about these.

  • Comment number 20.

    @ #3 Sean Broseley - it seems to me to be eminently sensible to put the forecasters into a quango, where (in theory) their forecasts cannot be influenced by political pressure. If they have a minister and are accountable to Parliament, the risk is that they will be held to account for the optimism or pessimism of their future forecasts, i.e. subjectively, rather than for the objective accuracy of their past ones.

    However, it does rather seem at odds with Mr Cameron's stated aim of destroying quangos. In fact, it gives the lie to his claim that they are all simply a waste of public resources.

    I suspect that this won't be the last time that Dave's words and deeds are seen to be at odds...

  • Comment number 21.

    "The Office for Brutal Realism"?

    Possibly or possibly not.

    There is tremendous pressure on anyone even remotely connected to Government to put the figures in a favourable light.

    I don't recall Alan Budd being particularly difficult for the last Tory Government so I would not expect him to be hostile to the new one.

    Indeed even though Margaret Thatcher's rule is often presented as on of cuts - actually the cuts did not work. Mostly there was a distribution of wealth for the poor to the rich which was continued by all Government of all colours ever since.

    The rhetoric of cuts was not (and will not be?) concordant with the outcome.

  • Comment number 22.

    Markets fear the debts, so the government reduces debt. Then the markets fear the lack of growth. It is a vicious circle. Structural debt has been with us for many decades and nobody really bothered too much. At the end of 2008 all governments had agreed that this time they will not let a recession turn into a depression. However, now it appears as if all governments seem hell-bent on doing just that. Reining in spending in a recession. Following and accelerating the economic cycle. This is bound to end in disaster.
    What we need is a new deal in which "markets" cannot hold democratically elected governments to ransom. This time, in a globalised world, the new deal would require at least a G20 agreement.

  • Comment number 23.

    I think that you are right Stephanie that Sir Alan Budd has a lot of responsibility on his shoulders and I hope that he does a good and thorough job. I notice that you are very concerned by the politics of this and hope that this blog returns to the economics of it.
    On the subject of economics we have hard (poor) figures for producer price inflation and also inflationary expectations today.According to the notayesmanseconomics web blog.
    "For example input price inflation has been in double figures for three months now indicating that there is further inflationary pressure at the beginning of the UK price chain." and "Now we see inflationary expectations as measured by Barclays Bank and the Bank of England itself rising. I think that you have to ask now, what would make our supposed inflation watchdog actually raise interest rates?"
    I would suspect that he is not the only person asking such a question. For those following such matters http://notayesmanseconomics.wordpress.com

  • Comment number 24.

    Growth? - from where?

    Lets look shall we?

    GDP = C + I + G + (X-M)
    GDP = Consumption + Investment + Government spending + (Exports - Imports)

    Consumption - is on a downward trend, demonstrated by the large increase in loan 'paybacks', reduced family income and about to be hit further with public sector cuts and looming strikes (yes, public sector workers also consume)
    This will be further exasperated by the expected 20% VAT rate.

    Investment - Private sector investment is quite low at the moment, it may pick up, but without the expectation of consumption and the reduced impact of exporting - plus the inflation rate, changing tax laws and the overall uncertainty - it doesn't really attract investment.
    Most investors will turn to China as that's where they see the growth coming, investors don't invest where there is uncertainty and no indication of profit.

    Government Spending - Well this is growth at the moment! but it's about to come to an abrupt end. It couldn't go on forever, but it simply isn't enough. It's clear that this area will be hugely reduced under the coalition fiscal plans.

    Imports - Sadly these seem relatively unchanged, which is dragging down any effect currency devaluation is having on exports. The US is in the same bind - and the most concerning part is the imported oil price on which we depend so much - is not measured in pounds. If the dollar rises - we'll get mullered.

    Exports - well they won't be growing because there are many other 'producers' out there who are devaluaing their currency as fast as we are and we don't really have any 'exclusive exports' i.e. goods and services other countries cannot produce.
    In addition to this - who are the customers? - are we not witnessing worldwide sovereign and personal record debt levels? (or did I dream that part). The only countries who don't have the problem (e.g. China) are focussing on their customers disappearing rather than starting to live the hubris lifestyle.
    As the only shopkeeper in the street who is still making any money, do you go and buy goods and services from the other shopkeepers in the street - or do you (sensibly) hold onto what you have to steel yourself for a future slowdown in custom?

    There is no growth (except Government sponsored growth) and there will be no growth for some time.

    I have read that some banks who struggled during the crisis won't be paying tax for up to 7 years - thanks to the ability to offset previous years losses against future profits.
    Word on the street is that Merril Lynch won't be paying tax again until 2025 in the states - and it could be a similar picture here too.

    Without those tax receipts the Governments ability to influence the growth through investment is much reduced. i.e. no more stimulus measures I'm afraid.

  • Comment number 25.

    15

    If you calculate the budget deficit to be £30bn, then can you lend me £1000

    I will pay you back £200

    Sounds like that would be ok in your eyes

  • Comment number 26.

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

  • Comment number 27.

    The Met Office would be next to useless to most of us if it can only forecast normal variation in temperature and raifall but is unable to forecast storms. Ditto for financial and economic forecasts.

  • Comment number 28.

    21. At 10:45am on 11 Jun 2010, John_from_Hendon wrote:

    'Indeed even though Margaret Thatcher's rule is often presented as on of cuts - actually the cuts did not work. Mostly there was a distribution of wealth for (from?) the poor to the rich which was continued by all Government of all colours ever since.'

    Lets run that one again ............'Mostly there was a distribution of wealth for (from?) the poor to the rich which was continued by all Government of all colours ever since.

    Okay - explain this then >

    'Household wealth in the UK has risen five-fold over the past 50 years, according to the Halifax.

    The total worth of households' property, savings and investments, was £6.3 trillion ($9 trillion) at the end of last year.

    It gives an average value per household of £237,000, three times the £73,000 in 1959 (at today's prices).

    The difference between household wealth and value per household is due to the rise in the number of homes since then.

    There were 16.7 million private addresses 50 years ago, compared with 26.6 million last year.'

    http://news.bbc.co.uk/1/hi/business/10118346.stm

  • Comment number 29.

    The budget deficit is small beer compared to the direction the govt has set for our economy in the last couple of days.

    I congratulate Willetts vision of the future of universities and would like to add "told you so".
    I congratulate Jeremy Hunt on his recognition that a national residential superfast broad band is vital to the UK's future. Once again "told you so".

    This future is an economy in which the home and immediate locality become the site of production for most of us. It promises lower costs for workers, firms and govt.

    There are 3 resulting outcomes that need mentioning.
    1/ Many will be able to work to the hours of their choosing. This has big implications for childcare, care of the elderly, and the size of future family homes.
    2/ A nation of net homeworkers and those servicing them don't need cities and mass transit systems.
    3/ GDP per capita will fall. But provided planning keeps up, living standards will rise.

    Are we seeing a paradigm shift, yes. The important thing is to make it work for everyone by facing down vested interests.

    As for the deficit. Make those in social housing pay private rent levels and cereate million of jobs by removing unnecessary business regs.

  • Comment number 30.

    I can't remember a time when a single set of economic forecasts has inspired such interest, or such dread. Let alone forecasts that expire in eight days.

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

    I sometimes think that Economist spend too much of their Working Day trying to Wake-Up, for to somehow after a long drip, drip effect into the mire of Fiscal Meltdown over the prevailing past 2 Years, we are today currently at best NOW collectively adding together all this past Bad-News bits and sleep-walking through the many cast asided Economic Forecast while pro-claiming, Oh' but for the dread of it ALL.

    Therefore, are we really only going through the motions of a collective delayed Shock of where we now find ourselves, or do we think that others are Acting their part in this, the Western Worlds Economic down - turn just waiting for the Producer to shout CUT... Ouch - that Hurts.

  • Comment number 31.

    Absolutely no doubt that growth forecasts must be revised down. If we are to shed 300-400,000 public sector jobs over this parliament, we should also expect to see net emmigration - as UK unemployed fight for new private sector jobs and foreign nationals leave. Retiring Brits may also find the next decade a great time to invest in Spain, Portugal or Greece as property prices collapse.

    The Government can start by ensuring all public sector workers, from cafeteria workers to directors are British nationals.

  • Comment number 32.

    19 Shireblogger

    Some good points there and some cause for optimism. The key thing for me with regard to the OBR is the level of disclosure on the basis on which they make their projections. Previously, we would get politically motivated estimates which in the case of AD turned out to be hopelessly optimistic, (especially at the start of the crisis in 2008) for which we were supposed to take as gospel.

  • Comment number 33.

    20 Tim
    “However, it does rather seem at odds with Mr Cameron's stated aim of destroying quangos. In fact, it gives the lie to his claim that they are all simply a waste of public resources.”

    There is no contradiction. There will be fewer quangos under this government than the last.

    Trying to take statements out of context to try and score cheap political points is not nice, and dim, Tim.

  • Comment number 34.

    ". At 09:51am on 11 Jun 2010, Kevinb wrote:
    I think Osborne has been excellent so far, "
    You'll probably insult me as usual, however, exactly what has he actually delivered so far that could be described as being "excellent"? I see nothing but talk and promises. The results of his actions will be the test.

  • Comment number 35.

    footnote to post number 28

    Here are the EU minimum wage rate with todays ECB currency rates.

    Monthly gross statutory minimum wage rates
    Full-time adult employees, aged 23+ [1]
    Country Minimum wage Currency code/Date effective
    Albania 18,000 lek ALL 01.05.2009
    Andorra 915.20 euros EUR 01.01.2009
    Austria 1,000.00 euros EUR 01.01.2009
    Belarus 229,000 Belrbls BYR 01.01.2009
    Belgium 1,440.67 euros EUR 01.10.2008
    Bulgaria 240 leva BGN 01.01.2009
    Croatia 2814.00 kunas HRK 01.06.2009
    Cyprus 840.00 euros EUR 29.04.2009
    Czech Republic 8,000 koruny CZK 01.01.2007
    Estonia 4,350 kroons EEK 01.01.2008
    France [6] 1,343.77 euros EUR 01.01.2010
    Greece [5] [9] 740.00 euros EUR 01.04.2009
    Hungary [10] 73,500 forints HUF 01.01.2010
    Iceland [13] 130,000 kronur ISK 01.03.2008
    Ireland 1,499.33 euros EUR 01.07.2007
    Isle of Man 1,039.80 IOM p IMP 01.10.2008
    Jersey 1053.87 Jersey JEP 01.04.2009
    Latvia 180 lats LVL 01.01.2009
    Lithuania 800 litai LTL 01.01.2008
    Luxembourg [3] 1,682.76 euros EUR 01.03.2009
    Malta [11] 634.75 euros EUR 01.01.2009
    Moldova 766.1 lei MDL 01.01.2007
    Montenegro 55.00 euros EUR 01.07.2007
    Netherlands 1,398.00 euros EUR 01.07.2009
    Poland 1,317 zlotys PLN 01.01.2010
    Portugal [5] 475.00 euros EUR 01.01.2010
    Romania [4] 600.00 new lei RON 01.01.2009
    Russian Fed 4,330 roubles RUB 01.01.2009
    Serbia 12,133.33 new dinars 01.01.2008
    Slovakia 307.70 euros EUR 01.01.2010
    Slovenia [14] 510.00 net euro EUR 01.03.2010
    Spain [5] 633.30 euros EUR 01.01.2010
    Turkey 729.00 new lira TRY 01.01.2010
    Ukraine [15] 884 hryvnias UAH 01.04.2010
    United Kingdom 1005.33 pounds GBP 01.10.2009

    1 € = 1.21 USD
    1 € = 1.96 BGN
    1 € = 25.70 CZK
    1 € = 7.44 DKK
    1 € = 15.65 EEK
    1 € = 0.83 GBP
    1 € = 279.60 HUF
    1 € = 3.45 LTL
    1 € = 0.71 LVL
    1 € = 4.09 PLN
    1 € = 4.22 RON
    1 € = 9.58 SEK
    1 € = 1.39 CHF
    1 € = 7.84 NOK
    1 € = 7.23 HRK
    1 € = 38.09 RUB
    1 € = 1.92 TRY

    The only thing pushing us down the table is currency devaluation. The UK is still very much well up the list. The concept of 'poor' is relative.

  • Comment number 36.

    One of the biggest concerns for our family is the upcoming potential increase by Conservatives of the Royals Civil List?

    Our family love our Queen and appreciate all the work she does that we never hear about.

    However, we sense something is afoot to increase tax payer funded benefits to Prince Charles and down the huge, long and sycophantic ladder and hangers on, while cuts are imposed on those who work just to pay basic bills like council tax, water, electricity and transport costs to work - while others have organic veg flown in courtesy of chopper?

  • Comment number 37.

    24. At 11:12am on 11 Jun 2010, writingsonthewall wrote:
    Growth? - from where?

    Lets look shall we?

    GDP = C + I + G + (X-M)
    GDP = Consumption + Investment + Government spending + (Exports - Imports)

    Consumption - is on a downward trend, demonstrated by the large increase in loan 'paybacks', reduced family income and about to be hit further with public sector cuts and looming strikes (yes, public sector workers also consume)
    This will be further exasperated by the expected 20% VAT rate.

    -------------------------------------------------------------
    Argos report bad figures.

    John Lewis have massive TVs walking out of their stores at two an hour or two a minute or something

    Tesco is full of World Cup branded 'stuff'

    Hope England get to the final, otherwise consumption will go thru' the floor!

    But how many days labour will be lost through absenteeism ... ?

  • Comment number 38.

    28. At 12:19pm on 11 Jun 2010, YellowBrickRoad wrote:
    21. At 10:45am on 11 Jun 2010, John_from_Hendon wrote:

    'Indeed even though Margaret Thatcher's rule is often presented as on of cuts - actually the cuts did not work. Mostly there was a distribution of wealth for (from?) the poor to the rich which was continued by all Government of all colours ever since.'

    Lets run that one again ............'Mostly there was a distribution of wealth for (from?) the poor to the rich which was continued by all Government of all colours ever since.

    Okay - explain this then >

    'Household wealth in the UK has risen five-fold over the past 50 years, according to the Halifax.'
    ------------------------------------------
    That would be an average, no doubt. Some have done worse than that, others have done better. Some have done a lot better. On what did the Halifax base their sums? And are they reliable folk to do the calculations when they have a reputation for consistently getting the housing market wrong.

    'The total worth of households' property, savings and investments, was £6.3 trillion ($9 trillion) at the end of last year.'
    ------------------------------------------------
    Mebbe

    'It gives an average value per household of £237,000, three times the £73,000 in 1959 (at today's prices).'
    -----------------------------------------
    Actually if you accept a figure of 30m households, it gives a value of £315,000 oer household - see your last point.

    'The difference between household wealth and value per household is due to the rise in the number of homes since then.'
    ---------------------------------------------
    Amongst other things, then yes, but the increase in homes also causes an increase in debt.

    'There were 16.7 million private addresses 50 years ago, compared with 26.6 million last year.'
    --------------------------
    Tories sold a lot of council houses, Labour sold some but less. Tories let a lot of people into UK, Labour let in even more.

    What about inflation?

  • Comment number 39.

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

  • Comment number 40.

    Kevinb says Osborne has been excellent so far. I disagree in relation to one aspect, the curious decision to ring fence the NHS from cuts. There is a good argument that at least half the structural deficit (£30-£40 billion)can be put down to Labour accelerating growth in health spending way (typically at 7-8% after 1999) above growth in Govt spending in general. Had they put in place a mechanism to pay for this increased NHS spending , which everyone but me seemed to want (and therefore would be happy to pay for -not sure I believe that!)things would have been less bad. However,recognising that, it now seems perverse of Osborne/Cameron to leave a flabby NHS (be clear that the staff of the NHS also took the opportunity to fill their boots -especially new GP and Consultant contracts) and impose much more swingeing cuts elsewhere -possibly taking some of these other areas of spending to lower levels of spending than in 1997. I also fear that although they talk tough the Conservatives will shy from cutting current spending (jobs you know!)as far as possible and cut capital programmes -one of the worst legacies of 1979 to 1997 was disastrously low capital spending -in case you don't remember it an era of falling down schools and crumbling hospitals.

  • Comment number 41.


    Jacko, like many, wants the productive part of the economy to grow. So far so good. But like many he assumes private sector = productive and public sector = nonproductive when just a moments reflection reveals what utter nonsense this is. Under this understanding, a NHS coronary care nurse would be unproductive whilst a pole dancer would be productive. The hidden assuempton is ofcourse that to be productive to be profitable: so building a new state school(unprofitable) is unproductive, whilst marketing the financial derivatives that nearly destroyed the world economy (highly profitable) is productive.
    It is ofcourse absolutely true that the public sector has plenty of unproductive areas and these should be tackled: but so does the private sector. We need to bring a lot more in the way of thoughful insight to the issue than these kind of banal generalities.

  • Comment number 42.

    34. At 1:52pm on 11 Jun 2010, Averagejoe wrote:
    ". At 09:51am on 11 Jun 2010, Kevinb wrote:
    I think Osborne has been excellent so far, "
    You'll probably insult me as usual, however, exactly what has he actually delivered so far that could be described as being "excellent"? I see nothing but talk and promises. The results of his actions will be the test.


    1.He has set up the Office of Budget Responsibility which will restore confidence in the statistics issued by the UK
    2.He has identified £6.2bn of in year cuts, which is as per the promise pre-election
    3.He has set the emergency budget for 22nd June
    4.He has answered questions well in HOC and has been honest about the fact that the cuts will be painful, as has Cameron, in complete contrast to the lies and denial of Brown

    It should be pointed out that Darling did say the cuts would be the biggest for a generation before the election, and now he suggest there should be none!

  • Comment number 43.

    Making any cuts now is pro-cyclical - so how can it possibly work!

    If you want an effective counter-cyclical policy for getting us out of this recession, implement a Job Guarantee scheme now.

    The Job Guarantee is a safety net for both people and the economy, and ensures that any person who can work and wants to work is able to access a socially-appropriate minimum wage at all times.

    For more information about the Job Guarantee policy proposed by Dr. W Mitchell University of Newcastle, Australia see: Job Guarantee

    Support full employment for all, and let's get out of this recession.

  • Comment number 44.

    I like the way you point out the OBR is largely staffed by the same people who where doing this data gathering and analysis beforehand. Am I not correct in asserting that the guestamations department has since 97' been more right than ever before?

    Clearly there is a structural deficit of around 3-4% now what that equates to in bn£'s I do not know, but surely we need to get some perspective, some spending needs to be cut and some taxes need to rise, but maybe of real value would be the OBR producing analysis on what our expected growth average would be with or without support for higher education and science which seems to be baring the brunt of expenditure cuts at the moment with local govt. and then do one with an increase in employers N.I contributions, or cuts to inheritance tax. Now that would be a revolution in how economic and budgetary policy was determined, not the what will please my chums down at the cricket pitch with Elderly parents with a lot of money or mates who run large food stores and will not have VAT applied to their products even if it is used to pay for feckless Tory-Liberal policies.

    Does anyone else here think the Conservative Liberal Coalition is going to start crumbling by budget time and Liberals will be faced with some of their MPs leaving the party whip because they cannot quite fulfil the compromise of political reform in exchange for Tory fiscal Power.

  • Comment number 45.

    31. At 1:27pm on 11 Jun 2010, Monjo wrote:

    "The Government can start by ensuring all public sector workers, from cafeteria workers to directors are British nationals."

    Personally, I want my public services run by the best person for the job, not the person from the correct country.

  • Comment number 46.


    33 - In Scotland the SNP promised to cut Quango’s and they did!

    However more people than ever are now employed in Quangos in Scotland.

    I suppose it was the Tory party who invented the Quango. These "laser beams" as I think Michael Hesaltine called them are a mixture of really useful things, some less so, and some that should never have been separated from core functions. I think there is however a failure in the message because there is no intellectual argument accompanying the cut Quangos message, it is all about rubbishing them and sacking the people within them. At least new labour tried to make sense of them and tried to get partnerships working and break the silo based system of governance. Just removing them does not actually work. Regional agencies are required, otherwise you just have a behemoth of an organisation that cannot respond.

  • Comment number 47.

    In answer to No 15, ARE YOU FOR REAL? OR IS YOUR NAME BROWN!

    PAUL.

  • Comment number 48.

    38 uptosnuff

    Its a BBC report about a Halifax report, I gave the link, you can look at the original report online I expect. There is inflation adjustment in the figs. This whole concept there has been a transfer of wealth from 'poor' to 'wealthy' in the UK is somewhat dubious and said far too casually. Wealth has clearly increased for most of the population and one age and class in particular. Where wealth has been transfered it probably has been from younger to older generations. Younger generations now having greater debt, ie negative wealth. That greater debt showing up in all figures and ending up with the now record personal debt total in the UK.

    This debt slide by an entire generation has removed disposable income from the economy.

    In the data of post 35 I have given the data for minimum wages in the UK relative to the rest of the EU. In the idea people in the UK are poor is a relative issue. I do not deny there is poverty. I am saying even in the EU this is a relative issue, let alone re the 3rd world. The UK is inevitably linked into what happens in Europe. Why do you think so many came here to work when there was work. Why do you think there are imports.

    The issue in the UK is the relative increased indebtedness of the younger generations and the relative increased wealth held by the older genrations. Simple as. Nothing much to do with the 'rich'.

    The transfer of wealth upwards to older genrations has several probably effects. The removal of disposable income from a generation(s), the winding down of the economy as a result. Those who gain either save the cash so it doesnt go back into velocity or they spend it on imported goods. The fact wealth is this wealth is due to be inherited is even built into socioeconomic planning. Unfortunately not everybody inherits equally which just builds more inequalities into the process.

    Housing is the poison of the UK economy. It runs on a boom bust cycle and when a flush of money flows from those who gain the supply side in the economy cannot respond fast enough so imports ram up, benefiting other countries exports. When a bust comes the supply side gets hammered again and contracts. Every time we go thru the loop more domestic contraction occurs.

    All political parties have played fast and loose for short term gain. The result is what you see around you. Those who gain in this game fight anything which may jeopardise their wealth, in particular house wealth. So you get a toxic mess of imbalances, record debt problems, employment problems, pressure not to have a viable housing market, interest rate subsidy (what else is 0.5 percent base rate).

    For this reason I nearly left the UK a few years ago. R D Laing said the only sane response in an insane world is insanity. I am sure there are saner places in the world than the UK with its economic narcisism and its lurking forces of violence yet to be unleashed on a under 25s generation that have been no part of the game. Unleashed by their parents essentially.

    But you believe what you wanna believe, makes no difference to me, as it says in the song.

  • Comment number 49.

    45. At 4:18pm on 11 Jun 2010, toni49 wrote:
    31. At 1:27pm on 11 Jun 2010, Monjo wrote:

    "The Government can start by ensuring all public sector workers, from cafeteria workers to directors are British nationals."

    Personally, I want my public services run by the best person for the job, not the person from the correct country.

    It is illegal anyway

  • Comment number 50.

    The Office for Brutal Realism

    Memo 1832/4 to Mr M. King

    Print more money, and print it quick
    Lest our debt mountain makes us sick

    Ignore the savers and fixed income pensioners to
    Just fire up the press, we want twenties in blue

    Because as each day passes we’re sinking further into the red
    And not even the prudent can sleep soundly in bed

    Tell us it’s and stimulus package and lie to us out-right
    But don’t leave us stranded in case the workers take fright

    We don’t want to see riots and pickets on the gate
    So print lots more money before it’s too late

  • Comment number 51.

    re #48
    No transfer of wealth, hmmmn? Well, thinking of the 25 yr olds (and 35 and up to 45 yrs olds), is not adding debts of £15K to £25K for a first degree a transfer of wealth from a little or no earner/taxpayer to a (possibly) wealthy/high earner and low taxpayer?

  • Comment number 52.

    #1 At 8.56am Jacko asked two questions which I’ve shortened and answered as follows:
    1. Does it matter if GDP per capita grows or shrinks?
    Growth in GDP means people can be employed for investment projects who would not be if growth were static: unemployed workers cost us in their forgone income tax revenues and our social security payments from our taxes. Moreover, our country’s growing numbers of pensioners have to be fed too: we need growth in company dividends and everyone’s taxes just to maintain their pensions. If we aim for static GDP, we’d each be progressively worse off.
    2. Did the growth of public sector mean we were not better off overall?
    Investment in public health and education ensures that future workers are productive enough to support our futures. True, the growth in public sector productivity has been difficult to measure (how is hospital and school outputs to be measured at all, or their changes over time?) but arguably ‘education’ keeps our future workers competitive. A cynical view might see benefit to current workers in allowing pensioners to die sooner rather than be kept healthy, but I’m sure none of us would want that!! As for the costs of military, public transport and protecting our property rights, these collective services also have benefits we need to pay for.
    Overall, we need GDP growth just to keep pace with the growth of our population – especially our pensioners. To achieve that growth we also need to invest in improving standards of education, health and other services that are more efficiently provided collectively. I hope this explanation helps.

  • Comment number 53.

    The UK private+public total debt is 200% of GDP.

    So, for the mathematicians out there, what level of 'growth' in GDP and what levels of debt interest rate are required in order to prevent the debt to GDP ratio increasing?

    What is the total absolute level of debt increase according to all the different types of interest rate, debt cancellation and debt creation, and what is total absolute level of increase in GDP?

    Finally, who cares about GDP growth and why?

  • Comment number 54.

    OBR: Are these guys going to publish their methodology?

  • Comment number 55.

    Stephanie hi -

    One thing that confuses me is this.

    How much is the increase in all this government debt linked with purchases of bank shares? Presumably these shares can be resold at a later stage? If so, a proportion of government debt is collateralised and the reduction in debt can be partly financed by privatisation or selling off of bank shares at a later stage presumably?

    I realise there is a structural deficit that needs to be sorted out but this question relates to our stock of debt and the extent to which some of this is collateralised. The media do not seem to cover this aspect very well (at all). Or am I very confused?

  • Comment number 56.

    53. At 6:53pm on 11 Jun 2010, Oblivion wrote:
    The UK private+public total debt is 200% of GDP.

    So, for the mathematicians out there, what level of 'growth' in GDP and what levels of debt interest rate are required in order to prevent the debt to GDP ratio increasing?

    What is the total absolute level of debt increase according to all the different types of interest rate, debt cancellation and debt creation, and what is total absolute level of increase in GDP?

    Finally, who cares about GDP growth and why?

    In view of your last point, why bother asking the first question?

  • Comment number 57.

    The term 'Gordon-proofing' is enlightening - it is the normal behaviour of a clever specialist providing advice when pushed to the wall. He knows the use to which his advice will be put and 'colours' it to prevent excess.

    But then we know that the Treasury officials deploy intellectual rigor (sorry rigour).

  • Comment number 58.

    We cannot always grow, as has already been said growth in the last decade was fueled by housing backed debt with growth comming from profits from taking a cut from retailing stuff made overseas and from taking a cut from lending the money. ie totally unsustainable reasons. I think the government of this country and others have realised this and hence the necessity to cut back deficit that otherwise can only be serviced by growth in GDP. We have to hope that someone in this world can think of a new way for people to live comfortably without the need for perpetual growth and the debt enslavement it entails. Perhaps we need to invest in debate on this issue or to save money have a Britains got talent for ideas. ( current reality must be the starting point ie cant rewind the clock! )

  • Comment number 59.

    It is unfortunate that the mathematicians and engineers point out that continuous growth is unsustainable. And there are too many of them to shoot the messenger.

    The only way to make a non-GDP-growth policy work is to allow the population to reduce now rather than when resources run out. The question is would a new disease or war now be more pleasant than something even worse ten years later?

    How many mathematicians and engineers did you say there were?

  • Comment number 60.

    59

    You need to take inflation into account

    Perpetual growth is very possible, and very likely, that is why deflation is hated

    Perpetual REAL growth is not so, and the dependence on this is risky

  • Comment number 61.

    46 Usually right

    "33 - In Scotland the SNP promised to cut Quango’s and they did!

    However more people than ever are now employed in Quangos in Scotland."

    What do the SNP have to do with the Tories. I wouldn't trust the SNP to organise a drunken gathering at a brewery? As with the rest of the public sector, Labour let the number of quangos increase without even considering whether we were getting value for money. A prime example is the coexistence of the Carbon and the Energy Saving Trusts.

    I can't really say if I agree or disagree with the rest of your post as it looks like over generalised NuLab gobbledegook to my untrained eye.

  • Comment number 62.

    Its no good to cut, cut, cut we need to trim, trim, trim.
    We need to expand our manufacturing base as the financial sector is finished, say Build electric/hydrogen cars here in th UK and fast.
    All the conservatives are doing is crashing the economy so the rich can hoover up all the assets and stay rich.
    The little side show of taking money from the kiddies benefits to fund the bankers is sick and I am in no doubt another election is only 6 months away.
    Although is it better to have boom and bust then to have never boomed at all.

  • Comment number 63.

    Ban the vuvuzela horns, I've had enough already

  • Comment number 64.

    62. At 8:54pm on 11 Jun 2010, Mammon1 wrote:
    Its no good to cut, cut, cut we need to trim, trim, trim.
    We need to expand our manufacturing base as the financial sector is finished, say Build electric/hydrogen cars here in th UK and fast.
    All the conservatives are doing is crashing the economy so the rich can hoover up all the assets and stay rich.
    The little side show of taking money from the kiddies benefits to fund the bankers is sick and I am in no doubt another election is only 6 months away.
    Although is it better to have boom and bust then to have never boomed at all.

    What a load of nonsense

  • Comment number 65.

    51 uptosnuff

    Why bring up the lower paid. The lower paid are protected by the minimum wage and working tax credits. So they are not the issue are they. I have posted information showing that the UK minimum wage is amongst the best in the EU, and that is after a 30 percent devaluation of the pound. Ed Balls repeatedly boasted that the UK was leading in this whole min wage tax credit area. Incidentally the support, however well intended has created a problem. Workers who want to do the minimum and get the top-up which gives a better hourly rate pro-rata. Their employer is HMG, in reality the person giving the payslip is simply an enabler of access to HMG support.

    The issue is wealth and debt imbalance which recently relates to the fact that the balance between saver and borrowers was allowed to be broken by the importing of very large inflows of money into the UK so debt ratios rose above deposits, look it up if you dont believe me, it will be on the internet. That money is considered to have flowed in to the UK housing market and has created imbalances. If historical lending criteria had been used this would not have happened. Why do you think a new rulebook on lending has been put in place by the FSA earlier this year. QED. This is the end point of decades of manipulation of the housing market. Brown being the worst by a long way.

    Note 'According to Bank of England figures, the gross foreign currency liabilities of British banks are around £4,400bn (having quadrupled over a decade). 'http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/01/faith_in_banks.html Not a terrible good link there are better but I am not looking.

    Re students - A lump sum towards study is of little consequence if there is no job at the end. No student funding changes the basis that those of the 'right' age ie older and class are substantially wealthier than 50 years ago. Or that those lower down the stack are in far greater debt than 50 years ago. Or that employment prospects are weaker the younger you are. That youth unemployment is considered a timebomb. That unemployment for more than 6 months very much has a history of turning into long term unemployment. These are all facts. There are reports on the BBC website, let alone elsewhere.

    As far as students and funding goes - The objective of HMG encouraging the sending so many to uni is to keep them off the unemployed register it would appear. Otherwise the uptake of courses would be subject to some sort of guidance and allocation and bursary enahncement in key areas of need, but so unPC. Just how many landscape gardeners do you need, or circus arts etc etc. Or another big fav, business studies. Perhaps you would like to look at the decline in industrial funding of serious - ie more than a few weeks - training and problem of vocational apprenticeships. Again reports about the failure of vocational apprenticeships have been made and referred to by HMG. Or maybe you would like to look at medics, take a look at the ratio of foreign to domestic student in that at the major unis. So the answer is apparently to send out recruitment programmes to the Indian subcontient for doctors. However we dont get the best Indian graduates because they can earn more in Indian than here. I'm not saying that, the Asian link recruitment doctor is saying it.

    I am not however giving link after link after link. It is up to you to look it up if you are bothered. Facts are such a drag arnt they. But I don't shoot from the lip I'm afraid.

    Like I say its up to you to believe what you want to believe.

  • Comment number 66.

    64 kevin b

    from a guy whose middle name is nonsense, keep on blogging toryboy

  • Comment number 67.

    As a retired chief financial officer of 16 years in local government you have provided an accurate description about the politics of assumptions and the role of offcials in making then realistic.

  • Comment number 68.

    66. At 9:38pm on 11 Jun 2010, Mammon1 wrote:
    64 kevin b

    from a guy whose middle name is nonsense, keep on blogging toryboy

    I will

    You can be the yin (nonsense and fabrication)

    I can be the yang (fact and truth)

  • Comment number 69.

    @ YellowBrickRoad RE: Post 28.

    I was pretty interested by those figures and thankyou for posting them. I was wondering if you knew what the change in average value per household was for say, the top 10% of earners over the same period? (I'll come clean, I don't know and haven't checked.)

    After all if the average value per household has trippled for most people but has gone up by ten times for the richest minority wouldn't that be sufficient evidence for a transfer of wealth from the poor to the rich?

    As I've said I don't know what the actual figures are but if the statement we're investigating is "Mostly there was a distribution of wealth [from] the poor to the rich." Then surely we have to look at both the average improvement in circumstances and the relative improvement by the two groups in question.

  • Comment number 70.

    At 3:49pm on 11 Jun 2010, Kevinb wrote:
    34. At 1:52pm on 11 Jun 2010, Averagejoe wrote:
    ". At 09:51am on 11 Jun 2010, Kevinb wrote:
    I think Osborne has been excellent so far, and the OBR is going to need to be brutally honest at all times to maintain it's credibility, once that is, of course, established

    I would be astonished if it could endorse Darling's prediction, and eradicating the structural deficit is priority number one bar none

    Cameron was correct in allocating more money to counter IEDs yesterday as well, so a much healthier balance than under the previously inept government
    -----------------------------------------------------
    You'll probably insult me as usual, however, exactly what has he actually delivered so far that could be described as being "excellent"? I see nothing but talk and promises. The results of his actions will be the test.
    -----------------------------------------------------

    1.He has set up the Office of Budget Responsibility which will restore confidence in the statistics issued by the UK
    2.He has identified £6.2bn of in year cuts, which is as per the promise pre-election
    3.He has set the emergency budget for 22nd June
    4.He has answered questions well in HOC and has been honest about the fact that the cuts will be painful, as has Cameron, in complete contrast to the lies and denial of Brown

    It should be pointed out that Darling did say the cuts would be the biggest for a generation before the election, and now he suggest there should be none!
    --------------------------------------------------------------------
    Averagejoe's comment is entirely reasonable as no evidence is given to back up the opinion expressed. There is an oblique reference to the OBR but again we have no evidence so far whether this new Quango will be useful or not. I would be 'astonished' if any of its estimations turned out to be right based on the known record of economic predictions. I note also that following GO's lead emphasis is switched to the (smaller) structural deficit rather than the (larger) overall deficit. Not all economists believe that separating the deficit into structual and non-structural elements is useful with some referring to it as unhelpful or as a 'myth'.
    The reply to Averagejoe is even more ridiculous as it just confirms, at some length, the comment he made. i.e. that GO hasn't done much and we are yet to find out if it is excellent or not. After all he has only been in office for four weeks! In short, point 1 is dealt with above, point 2 is more than outweighed already by spending increases committed to by the Coalition, point 3 is just silly since it is what is in the emergency budget and how it works out that will decide if it is excellent or not, and point 4 returns to assertions without justification which is what started the exchange originally.
    In fairness I may be doing this poster an injustice. Perhaps his answer was hurried and not well thought out. If he feels he has any convincing arguments I would be happy to discuss them.

  • Comment number 71.

    70

    Just because YOU aren't convinced it doesn't mean that the points I make aren't convincing

    Looking back at your previous posts you do not like George Osborne, and therefore it is not surprising that you are unconvinced

  • Comment number 72.

    #69 CuriousSteve. By definition any analysis of average wealth with produce misleading conclusions.

    As of 2007 the Joseph Rowntree foundation reported that wealth inequality had widened to a 40 year high.

    http://www.jrf.org.uk/media-centre/new-poverty-and-wealth-maps-britain-reveal-inequality-be-40-year-high

    The Office for National Statistics reported that as of 2003 the wealthiest 1% of the population owned 21% of all wealth, with the wealthiest 10% accounting for 53% of all wealth.

    The "financial crisis" has likely caused wealth inequality to widen further. In addition all statistics will mislead to the extent that techniques are available to the ultra wealthy to avoid ever appearing on any set of national books.

    For reporting purposes some individuals are not domiciled anywhere. Some individuals will have substantial undeclared wealth in tax havens, and some individuals will have complex trust arrangements making it difficult (impossible) to attribute ownership. Still others will have private and undeclared collections of art and so forth.

    Self evidently the research from the Halifax is misleading. If everyone has the amount of wealth implied by their research then how did they manage to go bankrupt when their principal lending activities were based in the UK. How was it possible for them to lose so much money that they also brought down Lloyds?

    There is a political motivation in clouding the picture as politicians like to tell us that "we are all in it together" Evidentially we are not all in it together and so enquiry is obstructed and "useful idiots" produce and publicise wholly misleading information.

  • Comment number 73.

    'It's quite possible to be gloomier, on both counts. With an ageing population, and lower immigration, you might agree with the OECD that our potential growth is closer to 1.75% a year. You might also say the permanent loss to output was more like 7.5%.'

    >>>>>>>>>>>>>>>>>>

    Yes! How does immigration impact on these figures ... there is no evidence that lower immigration is anything to be gloomy about.

    Far from it, without lower immigration, millions of British people will remain on the dole que and be economically inactive.

    The UK housing shortage with 5 millions now on the public sector hosuing list ... and 5 million immigrants admitted in the last 13 years and with 800,000 empty UK houses.

    Housing builders' company executives whining about 'nimby-ism' when they themselves build massive houses for themselves with security gated private roads and next to sites of special scientific interest so that no one else can build next to their 'back yards'.

    The British are quite capable of increasing our own UK population ... believe it or not... just build some factories instead of building houses ... you need a job in order to pay for and buy a house unless we're all to live in public sector housing with the government standing full housing costs for millions and millions.

    Why can't the UK produce steel, build ships, replacement nuclear weapons, a new electronic car road network, electronic vehicles, light bulbs, more advanced electronic rail networks, etc?

  • Comment number 74.

    Hello Jacko, why do you ask in this way? Surely what people feel (and especially in a country so "well stratified" as Britain) is a current income level of their decile - how well to do they are, their spouse, girlfriend, mum, dad, friends, colleagues at work... Immigration had an enthusiasm inducing/disillusion hampering effect that allowed the bubble to go on. GDP is what it is and one can argue that it should be combined with some basic statistics (houses built/capitally refurbished/demolished - again by deciles; household goods acquired/disposed of; miles travelled commuting etc.) GDP growth is a way of saying that the base of income pyramid still gets something (Adam Smith writes rather long on this one). Ability to manufacture goods is not our problem. Ability to create sustained distribution of manufactured product is. Innovation in manufacture was easy to implement by a "carousel of investment" - bankrupt and close a factory in one place while opening a next generation facility elsewhere - that's a quintessence of globalisation.
    #6 newblogger - always look at the bright side - for 30% of our houses demolition is the best thing to happen! And more seriously - I don't suppose there's anybody planning WWIII right now, and if there was it's not going to bear any remote resemblance of WWII. We have, as I guess, an exotic alliance of the top wealthy here and top power holders in most dynamic economies. They just haven't quite decided yet what to do with the spare labour force in the West (Surely we can be taught to drink cream teas...).

    #10 Justin150 try a kind of aggregate measure of deficit and tax take adjusted for income distribution. There are two legitimate functions of taxation. First is a classical conservative justification: there are activities that won't be carried out by private subjects: defence, policing and some more (if we are to stick to strict conservatism). Second is the liberal justification (Lloyd Gorge?) - the incomes of the poor are not sufficient to sustain them and for this reason some of the wealth generated should be redistributed. What I'm becoming less and less comfortable with is the notion that the taxes taken from the rich should only be working for the benefit of the rich... It's quite a different idea to have high local vs. low national taxation in the more or less homogenous population with rich and poor distributed more or less equally between communities and in a country of "post code lottery".

    #73 Nautioner - Placed on a certain rang of a social ladder I would endorse myself on any list possible. It's about creating effective demand. We do need millions of new affordable and built to a high standard houses. We need to create sustainable demand for them. We need an army of people who can afford to buy things, houses notwithstanding for their earned money, not on debt.

    Generally: this government seems to be setting a target of sustaining wealth of a part of society. The problem is that there is a widespread misunderstanding of what is and what isn't wealth. It is a common knowledge now that the amount of different claims and potential claims on wealth (Cash, shares, options, insurance, CDOs, CDSs etc.etc) is a high multiple of actual wealth to be had. Moreover, as this crisis proved better to many, any asset may well turn to be a cost inducing object - a liability with cost involved on any end either to turn profitable again or to dispose of. This is a task of squaring a circle. There are competing titles to a finite amount of wealth. One can think of an idea, where a slight excess in claims over underlying wealth leads to growth as having been proven. In short - people have to believe in it first. I can not think of a disproportion like a current one as being conducive to growth.

  • Comment number 75.

  • Comment number 76.

    72 armageddiontimes

    The definition of poverty is related back to the median in the population, it is percentage based, look it up. If the bottom stay where they are and the median moves up then the gap widens. Simple as. It is hardly unexpected that when wealth is about that the top percentile accumulate more. I have never said there is not a skew. I have said the problem is the growth in the indebtedness of an age group in parrallel with a gain in baby boomer group. What I have said is the problem is lower down the curve than many, including you, would like to admit. IN PARTICULAR THE YOUNG ARE GETTING A REAL BAD DEAL AND IT IS NOT LIKELY TO DO ANYBODY ANY GOOD IN THE LONGTERM, not even your son if he wants to move here from Germany. Comprehend. If you remove the convenient target of the 'rich / wealthy', the problem remains. And redressing this problem is mighty difficult as decades of effort have gone into this drift. The wealth in the UK and the debt in the UK, both of which have grown, is not accounted for by the holdings of the rich/wealthy, do the figures. In political terms the holding of wealth by a relatively large group to the detriment of another group is not striaghtforward to address due to the political influence of the wealth holding group, ie numbers of voters. Dealing with a very small group easily identified is politcally relatively easy, eg french revolution. Dealing with a large group usually involves systematic deconstruction, eg empire collapse, implosion, the two mechanism are quite different.

  • Comment number 77.

    #76 YellowBrickRoad. There are two forms of poverty absolute and relative. In the UK there is no absolute poverty, only relative poverty. There is no generally accepted definition of relative poverty - for the obvious reason that it is relative.

    Macro economic problems arise if a small group of people accumulate vast wealth because it adversely impinges on the velocity of money. This is known, understood and entirely non controversial.

    Manifestly there is a problem with indebtedness. It is related to, but diferent from, the problem of wealth distribution.

    The particular problem that you allude to has to do with domestic property prices. They are at insane levels - and yet entire industries are devoted to seeking to rationalise this insanity. These industries are necessary as a consequence of vast swathes of the UK economy being underpinned by the notion of ever rising house prices.

    In the short term the segment that you identify will exert pressure to postpone the day of reckoning for so long as is possible.

    The problem here is the old adage of "that which cannot rise for ever will not rise for ever." When house prices fall further economic contraction will be triggered. Ultimately It has nothing to do with voters since they are unable to vote perpetual motion into existence.

    Falling house prices will likely trigger an implosion - if for no otehr reason than they have been held at artificially high prices for far too long. The means to mitigate this implosion will not be available since those means have long since been sequestrated by a small clique of ultra wealthy individuals.

    It is a perfect storm and the means of escape no longer exist.




  • Comment number 78.

    Osborne has done nothing so far; time will tell whether he is a good chancellor or an Old Etonian p**t who is in the Government only because he has something on Dave from their happy times in the Bullingdon Club.

    I cannot imagine why Cameron thinks Osborne will make a better Chancellor than Cable.

    Is it only me that wonders if Gideon Osborne arranged for the Telegraph to break the Laws story because Laws was looking too impressive for Osborne's comfort. I'm not defending laws at all; what he did was very wrong, and he deserved to go, but the timing of the Telegraph story was very convenient for Osborne.

    I am very impressed with Cameron so far (except when he described Laws as honourable which he clearly wasn't); not with Osborne.

  • Comment number 79.

    At 08:31am on 12 Jun 2010, Kevinb wrote:
    70

    Just because YOU aren't convinced it doesn't mean that the points I make aren't convincing

    Looking back at your previous posts you do not like George Osborne, and therefore it is not surprising that you are unconvinced
    ---------------------------------------------------------------
    You're getting there. I want to understand why you hold such extraordinary views. The thing is I can't detect the reasoning behind them so it's hard to be convinced. As you seem unwilling to give you reasons/arguments that seems to end the matter.
    As to George Osborne I'm sure he very nice chap who really would like to rescue us from a tricky situation. I think there is some room for worry that he may lack a little experience and be too idealogically driven but, as I said in my post, it wouldn't be fair to judge him so soon.
    To get back to the blog subject. There is in reality no great difference between the labour or coalition positions with relation to cutting the deficit. Timing will be everything allied to any the reaction to any, so far, unforseen developments in the global situation. Spending must be cut. Taxes will have to rise. Key is to nothing that will significantly cut those in jobs or to go for the easy target of those on benefits. Cut waste by all means although this is much more difficult than many assume, and pray that growth continues, however weakly, without interruption.


  • Comment number 80.

    77 armageddiontimes

    There are steps which can be taken to ease the situation back. The problem is they have to be done at slow speed ahead. Therefore there is vulnerbility to the process. The reorientation takes time. I see no reason why it cannot be achieved. The question is do those planning see the target. Because Brown did not seem to. I see no reason why those with wealth cannot pay along the way, that is their problem - if somebody has money however much they quickly find how hard it is to hang onto it. Other countries will have problems, some are surfacing already. You are not a great believer in interaction are you. Personally I find opportunites everwhere I look at present. Everytime I suggest a product concept I find somebody wanting it. It is just the value structure has shifted and evolution is in play. I think this is fundimentally your problem you cannot see opportunity. I do not think I have every read a post of yours where you have referred to opportunity. If you do not look for it you will not see it.

    BTW poverty, relative poverty in the UK has definitions. There are a number but the most usually referenced is 60 percent of the median simply because it is easy to measure. It is almost always referred to in studies. If aggregate wealth rises then the median rises and the inequality increases. Unfortunately we have median income families that to all intents and purposes have poverty under some of the social exclusion criteria because so much of their income has been tied up with debt servicing, which they have voluntarily entered on a long term commitment only to see short term problems which quite frankly were not explained to them at the point of taking the long term position.

    This is one of the reasons why Halifax etc etc have had problems, for some all elasticity has been removed from the system. Halifaxs business model was flawed, it was based on expansion mitigating risk.

    Since you dislike BP so much I will point out that any business that subcontracts a critical process is begging for trouble, you cannot subcontract responsibilty, so I see BPs model as flawed. But the reason I am doing what I am doing is because I got fed up with arguing across the table about technical responsibility and business strategy, usually with accountants who knew sweet FA. Behind virtually every disaster financial or otherwise you will find somebody who has not been listen to - like the guy who said dont launch the shuttle on a cold day the fuel seal has a high probability of failure. If due dilligence has not been undertaken in the face of contary advice then prosecution should follow. Then education may occur.


  • Comment number 81.

    57 rigor or rigor mortis

  • Comment number 82.

    #80 YellowBrickRoad. Of course opportunity continues to exist - but principally for thsoe who are self reliant and able to operate outside of the traditional system. That most likely means that they are already educated and have no net debt. Almost by definition that means that no opportunity exists for the great mass of people - as you yourself recognise when you talk about the plight of the young as a group.

    It is not just the Halifax business model that was flawed - it was pretty much the entirity of the financial system. Perpetual growth being the stated problem, but institutionalsed fraud being the actual problem. This problem has not gone away - and there will be consequences.

    The BP oil leak fits perfectly into the theory of peak cheap oil. This too will have consequences, and this leak has every chance of being remembered as the event that decisively ended the era of cheap energy.

    BP are not "cowboy" operators. Rather they are well run, experienced, and fully funded and yet they are unable to prevent oil flowing and will soon be unable to save themselves.

    Their engineers (either employed or contracted) will be world class, and yet due to the frontier nature of the enterprise they have, at least in the short term, reduced science and engineering to so much guess work.

    BP are obviously motivated to downplay the severity of the leak - and yet, until the last week or so, the media merely regurgitate BP press releases. Why?

    What is all this about BP being responsible? They are a company and can only be responsible for anything up until the point of their bankruptcy and liquidation. So who authorised BP to engage in these activities? Who monitored BP compliance of licences and permits? and who developed a plan to deal with the consequences of an accident in the event that BP were a fatality of the accident? Why are they not responsible? Why is no-one asking these questions?

    Answer more institutionaliised corruption. Look how the media are reporting events in a UK v US framework. Why are they not rooting out answers to questions such as those posed above. Why are they not explaining likely consequences?

    No system can function when the cornerstones are fraud and corruption. The means of escape no longer exist.



  • Comment number 83.

    On the subject of institutional fraud let's not forget this: http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/04/goldman_may_owe_british_taxpay.html

    Specifically the point about Abacus 2007-ACI.

  • Comment number 84.

    The Office of Brutal Realism is really the Office of Basic Repro.
    What The Coalition Government has effectively done is remove budgetary responsibility from the Treasury and away from itself. When the huge spending cuts come, Osborne can point to the OBR. He can talk about all the things The Coalition Governmnet wanted to do, but darn - the OBR says we just have to wait till the next spending cycle.
    If Osborne is operating on a tight leash, it's a leash measured by Osborne himself for his own purposes.
    Do we seriously expect forecasting to improve?
    Not going to happen!
    Treasury forecasts were usually wrong, but don’t bet your money that OBR forecasts will be any better. Forecasting cannot be exact; the conditions upon which forecasting depend change daily, even minute by minute.
    If you want a good forecast, ask the BoE. Cautious it is, but caution is the way to go. Banks forecast in unknowns – the greatest unknown being Government policy itself.
    I’d say Treasury forecasts tend to be more wrong because they tend to exaggerate the future success of government policy.
    The OBR, if I read this shift in responsibility correctly, is supposed to enter the budget exercise assuming that The Coalition Government has no policy - none at all.
    If this is not true, may the OBR please have a set of Coalition policies? How else is the OBR supposed to project costs?
    Also, the Head of the OBR, Sir Alan Budd, is an appointee. Why is this important? Because the OBR was a Conservative Party apparatus set up when the Conservatives were the Opposition. This is not the first time that a political party has moved one of its own creations into the official mechanism of state. Sir Alan Budd was the head of the Tories’ ‘shadow’ OBR. Say what you like about Treasury forecasts, but at least these bureaucrats didn’t have to worry about their "appointment".
    If you think the OBR is going to be anywhere “independent”, think again.
    Lastly, a Budget is due in under 50 days. There is no organization, taking on new responsibilities, that can complete a budgetary forecast (prelimininary in 8 days and final in 50 days), based on an assumption that the Government will have no policies.
    To tell you the truth, this whole OBR shift has caused me nothing but consternation.

  • Comment number 85.

    I have looked high and low in the internet to discover who the experts are who make up the OBR. Can anyone point me to a list of members, please? I might have more faith in their findings if I understood who they were.

  • Comment number 86.

    We are told that business confidence is in freefall.

    Could this be because of the threat of 50% capital gains tax.

    Why bust a gut when you have to give it away again.

    The game is no longer worth the candle.

 

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