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The world moves Britain's way

Stephanie Flanders | 11:39 UK time, Monday, 7 June 2010

The world has moved - and it has moved in this government's direction. That was the message of this weekend's meeting of G20 finance ministers and central bank governors in Korea, and it felt like sweet vindication for George Osborne. Ever since Mr Osborne opposed fiscal stimulus in the autumn of 2008, Gordon Brown had said that the international community was on their side - and the Conservatives were "in a minority of one". Not any more.

George OsborneTruth be told, big new stimulus programmes have been off the agenda - almost everywhere - for quite a while. But as recently as April, these same men and women were talking about the need for most governments to sustain the support for the economy that they already had in place. But the statement agreed in Busan on Saturday focuses on the importance of "sustainable public finances" - and the need for countries to take "credible, growth-friendly measures" to achieve that.

The US and the IMF pushed hard for that reference to "growth-friendly". Both are worried about the real economic impact of everyone slashing their deficits in 2011. Looking at movements in world markets today, apparently investors are worried too.

But that was not George Osborne's primary concern as he flew back home. His main concern is, understandably, the tough decisions that he and the government have to make over the next few months - and how to sell them to an electorate that were not given much to go on, on this subject, during the election.

Seen in that context, the G20 statement was extremely helpful - especially the sentence welcoming "recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal institutions". In case you were wondering: that last bit means us.

The prime minister has just given us a flavour of what's to come - we'll have more tomorrow from Mr Osborne and Danny Alexander. What we know already is that this is going to look very different from the closed, Treasury-driven exercises to cut spending that we've seen in the past. As David Cameron said in answering questions - that shouldn't be a surprise. We haven't had an 11% of deficit before, either.

There'll be no more numbers this week. Today and tomorrow are all about process - the Canadian-style "star chamber" to decide on cuts, the structured public debate - on and offline, and the effort to involve as many people as possible in these tough decisions.

Experience elsewhere - not just in Canada but in Sweden and Ireland as well - shows that this is really the only way to do this. You never know, in some areas it could produce some bright ideas for cuts that actually make parts of our public services work better for people than they did before. (See my post "Efficiency swipes".)

But before we get too carried away - consider the the larger, global lesson, of the G20 meeting this weekend. Those ministers haven't stopped talking about fiscal stimulus because the global economy doesn't need it any more. In fact, as US Treasury Secretary Tim Geithner stressed in his remarks, the private-sector recovery in many countries still seems quite fragile - witness the recent figures out of the US.

No, They've stopped talking about stimulus because they don't think the global economy can afford it any more.

Rightly or wrongly, most in the G20 have drawn the lesson from recent bond market ructions in the eurozone that governments, as a group, need to cut borrowing faster than planned over the next few years. That's almost regardless of what happens to growth, although, naturally, the G20 expect the world's central banks to do their part to support the recovery. As I've indicated, the US doesn't quite agree, but given its own deficit numbers. Mr Geithner wasn't in a position to make much of a fuss about it this weekend - at least not in public.

So yes, the message of the G20 was that the world was moving the government's way. But the message was also that the finance ministers of the world's most important economies think that fiscal efforts to support the global economy - in effect - have now reached a dead end.

Given the the enormous weight of public and private debt weighing down on the world's countries, that may be an accurate statement of where we are. But it is a sobering thought for a country - and a government - which will need to rely more than most on strong growth beyond our shores.

Comments

Page 1 of 3

  • Comment number 1.

    Thanks Gordon, how you managed to get through your time as Chancellor and PM without ever making a mistake is beyond me.

    At least he can sleep easy in bed knowing that it isn't NewLabour that will have to sort out the mess.

    What a legacy for all our children.

  • Comment number 2.

    If all governments refused to borrow they would no longer be controlled by the lenders.
    There must be loads of problems with that statement.

  • Comment number 3.

    Stephanie says

    'No, They've stopped talking about stimulus because they don't think the global economy can afford it any more.'

    Its governments that can't afford it. They never could.

  • Comment number 4.

    Very sobering indeed! And what of the US austerity measures - that is when the proverbial will really hit the fan.

  • Comment number 5.

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

  • Comment number 6.

    Double dip recession here we come- caused by kowtowing to ephemeral market opinion.

  • Comment number 7.

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

  • Comment number 8.

    Stephanie,
    No one is learning the lessons from Argentina, Japan or anywhere else: reductions in public spending are compleely unnecessary. We no longer have a gold standard currency, we have a fiat one. Government spending does not need to be financed by loans or anything else, nor is it constrained by tax revenue. This does not mean the government can spend what it likes - it sill has to worry about the value of the currency on exchange markets, and inflation on imported goods.

    Governments have rigged their monetary and fiscal policies to emulate a Gold Standard currency, even though that is not what we have.

    Not being able to pay back government loans would seem, incorrectly, to be a risk, but if the economies around the world stop growing due to cuts, then how would that improve their miscalculated idea that governments need to finance debts with tax revenue or cuts - governments can spend what they like (albeit watching imported inflation) under a fiat system and simply pay loans back with the reserves which are automatically created whenever governments spend.

    Why are the media ignoring our fiat currency, along with the governments around the world. We hold onto our Gold Standard thinking like a security blanket, and it's time we threw that security blanket away and grew up.

  • Comment number 9.

    7. At 12:37pm on 07 Jun 2010, Caledonian Comment wrote:
    How much might have been saved if this meeting of G20 Finance Ministers and Bank Governors had been held via video link rather than them all attending a Korean junket ? Caledonian Comment

    -----------------------------------------------
    Ah, but global warming isn't a problem when it is politicians, civil servants, journalists and celebrities travelling and new taxes aren't at stake.

    You are wise to ask, anyway. Stephanie's Blog seems to contain an awful lot of padding to say that, broadly speaking, nothing much happened at the G20 summit.

  • Comment number 10.

    We need to move away from the 'Legacy for our children thinking' and take the hit ourselves so our chrildren can have a brighter future.

    We can't continue consuming resources and trying to bring the third world up to our level without using more resources than we have.

    Unfortuantely we have people that can't understand why we need a hosepipe ban when there's water still comming from their tap. This Government has the right opportunity to force change: A five year term, global consenus behind them and desperation appearing in the markets.
    Bring on the cuts, we're British, we'll moan about it for the next 30 years but whilst doing so we'll be in the best country on Earth.

  • Comment number 11.

    Maybe this is a naive question Stephanie, but if the old economy countries of the world who are in such financial trouble cut their borrowing substantially, what then happens to the people and countries they have been borrowing from? I for one would appreciate a clear explanation from someone as to where this borrowing currently comes from, and the knock-on effects of a substantial reduction in borrowing. In other words, if that money is no longer borrowed (from, say China) how will it then be used - investment (buying up bits of countries), aid - or what?

  • Comment number 12.

    Paul Krugman's excellent blog is a good way of sobering up:

    http://krugman.blogs.nytimes.com/

    From the June 7th post:

    "So wise policy, as defined by the G20 and like-minded others, consists of destroying economic recovery in order to satisfy hypothetical irrational demands from the markets — demands that economies suffer pointless pain to show their determination, demands that markets aren’t actually making, but which serious people, in their wisdom, believe that the markets will make one of these days.

    Awesome."

  • Comment number 13.

    #1 Skynine - Great comment. Ultimately all roads of responsibility lead back to Macavity Brown.

    Spoke to a fellow from Canada recently about the cuts there and he says most recognise it was the right way to go. In a way having the Liberals onboard makes this a whole lot easier since they are the soft and fluffy juxtaposition to the nasty party

  • Comment number 14.

    Complaints about legacy for our children

    Borrowing is not necessarily bad if it keeps you in home, health and work
    I'd rather pay to keep people in work than on the dole.
    Read your history. We've been here before and there are different ways of dealing with things.
    The problem is that the doomsayers will use the opportunity to return us to Depression economics and that may be an even worse legacy for our children
    Waht will we get. As the great man said "Private affluence and public squalor"
    The right wing economists message is really "Give up on democracy. Just ask the markets."

  • Comment number 15.

    "5. At 12:31pm on 07 Jun 2010, Laenis wrote:
    @ 1.

    ...What? Gordon Brown is barely mentioned in this blog, so you're continued insistence that everything that is wrong with the world is directly his fault is not only irrational, it's irrelevant.

    By the logic of the Brown-bashers, the PM is directly responsible for everything bad (though nothing good) that happens in the country they govern."

    Brown was in charge of the economy for over a decade. He has taxed, borrowed, spent and wasted in a manner which many would consider to be insane. He is a Financial Lunatic. How is this not his fault?

    His legacy is such that charging him with treason would not seem too extreme. ^^

  • Comment number 16.

    "...strengthen their fiscal institutions." as you quoted above, is how governments make their Fiat Currency emulate a Gold Standard currency. All this does is tie our hands. I predict years of Depresion ahead, till governments behave more like China and start spending as our currency system allows.

  • Comment number 17.

    @5

    I'm sorry but to presume that Gordon Brown has played no part in the current state of our economy and public finances is naive. It is Labour's persistent borrowing and overspending during an extraordinary period of growth and wealth that has meant that we are in the dire position of having no money to help us when we truly need it. This is very different to arguing that Gordon Brown and Labour caused the credit crunch. I would merely argue that they have left us in an appallingly weak position to tackle the credit crunch and it now left to everyone to pay for Labour's profligacy.

  • Comment number 18.

    The situation is indeed dire.
    The economy still needs stimulus but the country can no longer afford to pay it.
    In fact it's so much worse than that, because the cut backs required to stop the debt interest mountain growing exponentially out of control will prove to be yet another nail in the economy of a once Great Britain as more and more revenue will have to be diverted from key services...
    The only other problem is that the Tories and their new found electoral friends might do themselves out of long term government by repairing the damage done by Labour, opening the door for more Labour mismanagement in the coming years.

  • Comment number 19.


    We now face a situation which has not been experienced by government before. How will the modern generation react to a loss of financial freedom not conceived of by previous generations, if we are to believe
    George Osborne plan to slash the public deficit within three years. This will cripple the expectations of the
    young, once the reality of what the budget for 2011 BITES. The older generations had better standback and
    take cover, as we will blamed for ( and perhaps rightly).

  • Comment number 20.

    The United States and other advanced economies have spent billions on economic stimulus. With a broad consensus that a global economic recovery has begun, policymakers are debating how quickly to turn off stimulus spending.
    How about NOW?
    G-20 leaders are looking at a EU menu of policy proposals put forward by the European Union, the European Central Bank, and the International Monetary Fund. One item getting a lot of attention is a proposed tax on certain banking transactions to create a safety fund for future emergencies. The United States and several European partners support the idea. Canada and Australia are leading opposition to it. Canada and Australia say unlike the United States, they did not fund huge bank bailouts and should not be penalized.
    Personally, I don’t see the problem. Countries should be allowed to opt out IF they did not fund huge bank bailouts.
    A communique of recommendations is expected Saturday.
    What I would truly like to see is action on Free Trade; free trade has done more to damage economies than most ordinary people could possibly realize. Where are all the manufacturing jobs – free-traded to cheaper labour in Mexico, China & India? How come some countries just can’t seem to clean up their emissions? Because dirty jobs using dirty energy have been exported away from the well-manicured lawns of the western wealthy to eastern areas of the world, like India - never mind that this same exportation has created vast pools of unemployment in the west.
    I read that China doesn’t have enough labour for all its factories. Maybe we ought to free-trade the workers WITH the jobs?
    I hope one day the world (especially finance ministers) will take a closer look at what free trade has done and come up with something more economically feasible.

  • Comment number 21.

    Back to 1931?

  • Comment number 22.

    The banks were bailout on the assumption that they would provide growth funds in the economy, which they didn't. The governments now must cut spending and programs, further reducing demand. Only a few small actions have been taken to prevent the banks from doing this all again. Money trading money does not make an economy. Nations need to balance their own economies with the global economy to insure that citizens are more secure against the unethical and what should be illegal practices of the bankers and investment firms.

  • Comment number 23.

    It is not a question of blame Brown or Labour. All they did was follow the economic creed of the time. Free markets and deregulation was not only a blow to sound economics but to democracy as well. The markets convinced us as well as the politicians to believe that the essentials of an economy like manufacturing were irrelevant and finally to buy products that they rated themselves as AAA but were actually junk. The final ignominy is that we had to borrow money to bail them out and then they tell us that we are now a credit risk because we borrowed it.
    Our childrens future now do not rest on who they elect but on how gambling in derivatives and false financial products perform.

  • Comment number 24.

    If all the governments in the world are in debt then who exactly do we owe all the money to? Surely not the banks? All this money was spent to keep them afloat because of their shockingly bad mismanagement - how can we borrow money from them in order to spend it on them, and end up owing them billions!?

    So if not the banks, and not other governments, who?

  • Comment number 25.

    Cuts to keep the bond markets happy - How very Tory.

    Five years of the mantra "It was all the last governments fault"....YAWN !!!!

    Brace yourself Britain, try not to be ill, old, or young.

  • Comment number 26.

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

  • Comment number 27.

    No prime minister or chancellor is in charge of the economy. They just ride on its back.

  • Comment number 28.

    Halfawebsite: 'I for one would appreciate a clear explanation from someone as to where this borrowing currently comes from, and the knock-on effects of a substantial reduction in borrowing.'
    Government borrows money for its short run needs and its longer term requirements from the 'capital market'. It does this by 'auctioning' what in effect are promisory notes: Treasury Bills being promises to repay within anything less than one year, Treasury Bonds being promises to repay at some specified date in the future. The 'bidders' for these bills and bonds are mainly banks and other financial institutions (pension funds, investment houses) etc who want an investment that is essentially risk free. Once they have them they may hold them, sell them or convert them through a process called 'stripping' into bonds that just pay interest but do not repay capital, and bonds that repay capital (at then end of the bonds life) but do not pay interest.
    The majority of government debt (or as it is sometimes referred to as 'sovereign debt' finds itself in the hands of UK investors but some gets sold to overseas investors who again want a risk free home for their money. During the life of the bonds the government pays a fixed rate of interest (the coupon payment) and eventually will repay the original face value of the bond to the holder.
    What this government plans to do is to issue much less new debt (i.e., less bills and bonds) and as old bonds become due repay them but not create a new issue to replace them. There is only two ways it can do this: (i) cut spending or (ii) increase the amount of tax it takes. Essentially the current government prefers (i). The previous government sought to boost the level of economic growth (i.e, make the country wealthier) so that the same tax rates would produce more tax revenue and reduce its requirement to borrow. The Government argues that the growth that was being created was the wrong sort, i.e., it was growth in the public sector rather than growth in the private sector. However, the problem with this is that there is no hard and fast distinction: if a new policeman is hired (growth in the public sector), he needs a policecar which has to be purchased from the private sector and so on. Furthermore that policeman spends his salary on his mortgage, at the supermarket and the petrol station. Each of these businesses in their turn pay staff, buy goods and services etc all of which pay tax.
    What is currently frightening the markets is the thought of a double dip recession. That is the present government's frantic efforts to cut public spending will extinguish the weak growth which is now there in the economy. Unfortunately there is no simple solution: the government talks about cutting waste. The trouble is one person's waste is another person's job. A similar policy was pursued in the early 1980's (its true that with a less friendly face) and almost 20% of Britain's manufacturing economy was destroyed over the ensuing two years of deep recession. We were only rescued economically by a collapse in the value of sterling (we almost touched parity with the dollar). My concern is that we are very likely to endure the same again.

  • Comment number 29.

    ' But the message was also that the finance ministers of the world's most important economies think that fiscal efforts to support the global economy - in effect - have now reached a dead end.'

    So the rich and well connected have commandeered all of the lifeboats on this titanic that is the global economy and it is sink or swim time for the rest of us, bring your own waterwings.

  • Comment number 30.

    No.5 Laenis, surely you understand the law of cause and effect? If there is an unprecedented budget deficit, if public spending rose year after year closely matching or exceeding increases in GDP, then during a recession there will inevitably be a large deficit to be sorted by a new Government? Sometimes previous Governments do get blamed for things that they could not control however this is clearly not one of those occasions. However in terms of the theme of the blog, the pulling back of fiscal demand by the UK and other governments, whilst to me it is a truism that we should never have spent what we could not afford, it is hard not to see a huge deflationary spiral in front of us. The thinking of those such as no.8, ie. that government's can just spend money they don't have is mind boggling and is what got us into this mess in the first place. Government spending is REAL spending, and needs to be linked to REAL assets, wealth and production. So they could fool the electorate with false growth over the last 20 years based on an increased money supply with retail inflation checked by cheap overseas imports, but eventually we need to pay for this unsupported expansion. Has anyone else noticed that banks and mortgage owners are lambasted for borrowing more than they can afford, yet it has been the government all along that was setting the example?

  • Comment number 31.

    Synchronised belt-tightening in deficit countries... I can see George Osbourne taking some kudos and I see the Germans are going down the same route. What worries me is the banking sector. If Osbourne's Office of Budget Responsibility downgrades growth projections and radically changes the fiscal balance outlook, what then for banks. Wont there now arise the need to conduct new stress tests with more gloom-laden scenarios. If this points to higher capital needs, how will Osbourne handle that? He took the Opposition default mode in Autumn 2008 and left Darling take the flack. What will he do when its on his desk?

  • Comment number 32.

    16. At 1:10pm on 07 Jun 2010, Charles Jurcich wrote:

    "...strengthen their fiscal institutions." as you quoted above, is how governments make their Fiat Currency emulate a Gold Standard currency. All this does is tie our hands. I predict years of Depresion ahead, till governments behave more like China and start spending as our currency system allows.

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

    I fully agree with your sentiment.

    However, it is near sacrilege on these blogs to ever suggest that we need to behave more like China i.e. a statist country...or dare I suggest a national socialist state!

    Someone else, who used to post on here, used to suggest the same thing...and they were subsequently been banned - twice. It's all just too subversive for the western free-market anarchistic (libertarian) regimes.

    'He who cannot agree with his enemies is controlled by them.'

  • Comment number 33.

    2. At 12:14pm on 07 Jun 2010, Kit Green wrote:
    'If all governments refused to borrow they would no longer be controlled by the lenders.
    There must be loads of problems with that statement'


    There is a problem with it. It makes some sense.

    Cut public expenditure so that it equals tax receipts, Print £770 billion to satify the outstanding debt, and never pay interest again.

    Perhaps £5.00 will equal $1 this year.
    But in ten years time perhaps £1 = $5.

    Short term pain, for long term gain anyone?











  • Comment number 34.

    I have long suspected that the 'fiscal stimulus' strategy was ill conceived - a case of sending good money after bad.

    Logically, when there are many potential buyers, the approach has merit.

    But when most economically developed nations have hit the debt buffers bigtime, well...

  • Comment number 35.

    Does this mean that it is now official that there is not enough money in all the world to fill the hole of debt?

    I think this is the case so the illusions are now over. This isn't a recession; it is a slump.

    I always feel that the first task in solving any problem is to identify what is its true nature. Now we have it: there is no money and there is too much debt. So away with the fantasy economics; let's get down to the brass tacks.....

  • Comment number 36.

    That is one of the more rediculous headlines I have read in a while : the world is moving Britain's way... I remember just half a year back when Brown critizised the German and French leaders when they were less keen on his stimulus package ideas and suggested cutting spending. He blamed them for ruining the economic recovery by inhibiting growth with their deficit reduction plans...

    Now, that the anglo-american model of borrowing more and more to get out of debt has finally been revealed for what it is - unsustainable- the bbc claims the world is moving Britain's way.

    No, Britain has done a 180 degree turn and is now doing exactly the same as their much hated and rediculed EU partners have done and suggested months ago. If that's not hypocritical I don't know what is... Fine, cut the spending - I believe that's the only way forward and apart from the US most nations are now doing that - but don't claim it's a British idea... The EU has been there a long time ago and you have criticised and rediculed them for that for months....

  • Comment number 37.

    All this user's posts have been removed.Why?

  • Comment number 38.

    #18
    'The economy still needs stimulus'

    IMO, this is only true if you believe that the size of your GDP is what matters and that it matters more in the short term than the long.

    This might matter to the current male members of the various economic clubs who want to be top dogs at the top table but if that GDP is based on government borrowings based on government estimates of growth based on those borrowings no 'stimulus' is going to provide long term growth. In the end the debt costs as much to service as the stimulus once provided.

    If we are to have real growth it has to come from earning more as a nation

    I wouldn't mind stimulus if tax receipts existed to pay for it but we even had substantial borrowings in the so-called boom times.

    I don't even mind stimulus spent on capital assets that last for 40 years so long as someone has calculated the cost of maintenance and has put money aside.

    But right now tax receipts are being sqaundered on revenue items such as advertising (est one billion), the shortfall coming from borrowings.

    How can that, even if it is stimulus be right

    How could the previous reduction in VAT have been right. Estimates of 13 billion in lost revenue. For what? To enable those that could afford to spend to bring purchases forward.

    Government spending has to be totally re-thought.

    What we, as beneficiaries, get has to change.

    We have to accept that the state is not 'the bank of mum and dad' and start living within our means.

    If that means managing with less, so be it. We used to manage with far less and that might even be good for the environment and our waistlines. Which in turn might even be good for the NHS and government spending.




  • Comment number 39.

    Brown was a numpty

    Brown is a numpty

    Brown will always be a numpty

    Osborne was right, is right, and will obviously not always be right

    I said he would be a good chancellor, and he will be

    We need to cut the overspending, and David Laws was correct, government borrowing is future taxation, and we need to cut dramatically now, to avoid even more cuts later on

    By the way, Krugman is an idiot

    Nobel prize? So what

    Euro needs to go to solve the issues in the Eurozone

    The currency is part of the problem, not the solution

    If it doesn't, we will have Euro Dollar parity soon

    Roll on the 22nd June

    Brown was wrong on cutting VAT, wrong on overspending, and wrong on the international bank levy



  • Comment number 40.

    Two years too late and with billions of pounds of extra debt burdening future generations the world is going back to square one.

    Keynsian economics didn't work but who on earth ever thought they would.

    We are getting back to where we should have been in the beginning but with all the panic at the time no-one had a clue what to do.

    Had public spending been cut back then and certain banks been allowed to go down the pan it would have been really tough but for a much shorter period and at much less cost and suffering than we are in for in the years ahead.

  • Comment number 41.

    How very depressing. We are into stage two of the global economic crisis and this blog is headlined "World Moves Britain's way".

    A very parochial view of the outcomes of the G20 Meeting. Seems more like a political analysis than an economic one.

  • Comment number 42.

    'Stimulus' is the lazy option using more and more tax payer money .... the problem for finance ministers is that the taxpayers are demanding that enough is enough and are voting out spendaholic governments... as in the UK.

    Cutting and belt tightening is the first step of unravelling the inter-twined complex debt relationships arrangements that exist between countries/banks/investors/companies ... and until the major bad debts work their way through 'the system' and the failures and black holes are properly identified and the liabilities assessed in a globalised economy then ... how can a global recovery occur.

    Wow ... the penny has dropped at long last ... with some of these financial goons .... probably because their own jobs are at stake and the 'writing is on the wall'.

    I can't see any globalised growth wanting to grab the UK buy the scruff of its neck and drag it along ... for quite a while ... years and years.

  • Comment number 43.

    Well done George Osbourne, you have gone from the 'leader of financial incompetents' to 'leader of a huge number of financial incompetents'.

    Don't be surprised that Georgy boy's suggestions went down well - 3 weeks ago I wrote to the G20 suggesting that they 'solve the EU crisis' by announcing a super bailout and all wearing rubber chicken suits.

    They took up one of my suggestions at least - although it was just as stupid as the chicken suit idea - and it had about the same longevity (3 weeks)

    I am actually looking forward to the emergency budget - it's going to be the most interesting budget in history. How can the magicians pull a hat out of a rabbit?

    I had to laugh at this paragraph Stephanie:

    "So yes, the message of the G20 was that the world was moving the government's way. But the message was also that the finance ministers of the world's most important economies think that fiscal efforts to support the global economy - in effect - have now reached a dead end."

    It's like the BP oil spill, we try some stuff, it doesn't work, we try some more stuff, it still doesn't work, we try anything we can in the hope that it works - then we simply try anything, regardless of whether we have any belief in it working or not.

    The 'dead end' of fiscal stimulus was only reached because the amount of fiscal stimulus required was far in excess of what could be provided - not because it was a policy failure.

    The Europeans (especially) have got elections to win, they cannot afford to prop up any more institutions - so why not try the other method.

    Hammering it hasn't worked - so lets try chisleing it.

    Bad workmen all over.

  • Comment number 44.

    I am seriously concerned that this means the end for the Stepfords in their 4 by 4s, aka yummy mummies.

    Lets hope not.

  • Comment number 45.

    Public spending cuts are the economic equivalent of the use of leeches to drain blood in medicine in the 19th century. It never helped but simply weakened the patient. The same is true of public spending cuts.

    The Tories need to catch up with the 21st Century instead of repeating this same old policy that has never helped in the past.

  • Comment number 46.

    Stephanie

    With all this weight of public and private debt causing such gloom, it could be helpful if you could map out the corresponding creditors to whom we are all it seems in hock.

  • Comment number 47.

    re: 28 - Bob Ryan. Thank you Bob, I couldn't have hoped for a clearer answer to my question (Halfawebsite: 11). It also made clear what I thought but couldn't substantiate, that much of the Coalition's attack on the public sector is hooey. Obviously we need both, and Government's efforts should be targeted at making them work efficiently together. For example, the NHS has been responsible for huge advances in medicine.

    I would still welcome an explanation of the effect less borrowing by what I'd call the 'scaling down' countries, will have on the huge sums of money being generated by countries like China, which I thought, perhaps mistakenly, was currently being invested in the US and European countries through bonds, as well as via investment in infrastructure and resources in many African countries.

  • Comment number 48.

    The insistence that growth is required to solve economic problems is fundamentally flawed. There have been recent calls for strategy to be based on targeting zero growth and that does seem to be the long-term future.

    Wonder what would happen if the government announced that?

  • Comment number 49.

    "There is a problem with it. It makes some sense.

    Cut public expenditure so that it equals tax receipts, Print £770 billion to satify the outstanding debt, and never pay interest again."

    Only a little sense. If you cut public expenditure then you need private people to start borrowing (they can't), disinvesting (their skint), or exporting (whoops we destroyed our manufacturing sector). Otherwise we will have mass unemployment.

    With both the dollar and the euro on the rack we're in the perfect position to use direct purchase of underused labour as a way of getting the economy back on track - funded by the printing press.

    Unfortunately Cameron isn't Churchill...

  • Comment number 50.

    No matter how you cut the numbers up the simple fact is that based on historic norms, the UK is already overtaxed and public spending is massively out of control. If you assume that rescuing the banks has increased the deficit significantly (lets say by 5% of GDP) that means the structural deficit is only 7% of GDP, or to put it another way the govt is spending £1.20 for every £1 of taxes it received. These numbers match very closely the actual figures for taxes and public spending in 2007 (ie before the crash).

    What does this mean? Again putting it simply public spending is 15-20% too high.

    You can close this gap by cutting public spending by 20% - but does anyone believe politicians will have the guts to do that.

    You can close the gap by putting up taxes - but politicians have to recognise that based on UK taxation history, taxes as a percentage of GDP are already higher than the average the British population is willing to accept.

    Let inflation rip to make the deficit smaller - problem is public sector wages will also let rip.

    What will happen is a fudge and in 5-10 years we will still be in a big hole.

    What should happen is radical, tell the population that in 5 years time public sector spending will in real terms be 25% lower than now and start asking the public what they actually want govt to do and what they do not think is needed.

    Based on the weekend papers I particularly liked the local council job of "walking co-ordinator" where walking is not even a requirement of the job

  • Comment number 51.

    re: interesting comments 8 / 24
    Isn't it like BP? These guys were brilliant at managing a top class international company, no question, but then the oil spill, something completely out of their corporate thinking and they seemed to freeze up, and as smart as they were, they not be able to respond or, see it, or cope with it, or 'get it', the fact of the magnitude of it. The point being, the disaster is a game changer totally out of their way of thinking. I am not seeking to try to blame anyone for an awful disaster, but the world economy looks the same to me, normal management cannot fix things, time for a new system.
    Or can anyone tell me how increasing our debt by hundreds of millions each day is sustainable? especially when everyone else is? It is just like the oil pouring out of the pipe.

  • Comment number 52.


    Perhaps the solution to solving the worlds economic problems... is the solution that has always been used

    to rebuild economies. / industry and full employment ....... is........... l cannot bring myself to say the word.

    THERE MUST BE ANOTHER WAYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYY.

  • Comment number 53.

    tonbar,
    I am not an economist, but I have been researching this careflly. You wrote:
    "Government spending is REAL spending, and needs to be linked to REAL assets, wealth and production."

    My understanding of your term 'production' is you mean productive capacity, and if you don't mean that then you should, in my opinion. We have millions of people with producive capacity being under-utilized(unemployment). The value our spending can be anything up to the amount represented by FULL capacity before domestice inflation becomes a problem, because under a fiat currency system Productivity can only be fully utilized if the level of government spending is sufficient. This is called Fiscal Expansion. The economy simply cannot grow without government spending allowing it to.

    Goverment debt is not intrinsicly a problem because sovereign governments with a fiat currency CANNOT become insolvent. Their currency can devalue, to reflect their true position and this can cause imported inflation, but this can be managed through use of things like The Future Jobs Fund which was to help the UK export to offset imported inflation - this has been scrapped, so were being systematically pushed in to an unnecessarily enduring recession.

    If the current economic theories are so clever, WHERE IS THE GROWTH GOING TO COME FROM without government spending?

  • Comment number 54.

    It's interesting how the government is sticking all this at the door of labour and yet none of the blame is being pointed at those we and other countries bailed out...i.e. the banks. If it wasn't for the collapse of the financial markets we wouldn't be in anywhere near the amount of trouble we are currently in.

  • Comment number 55.

    33. At 2:09pm on 07 Jun 2010, Dempster wrote:
    2. At 12:14pm on 07 Jun 2010, Kit Green wrote:
    'If all governments refused to borrow they would no longer be controlled by the lenders.
    There must be loads of problems with that statement'


    There is a problem with it. It makes some sense.

    Cut public expenditure so that it equals tax receipts, Print £770 billion to satify the outstanding debt, and never pay interest again....
    -----------------------------------------------

    We keep being told that our debt has longer maturity than for example the southern Europeans so that printing would be over many years and could even be helped out by a surplus some time. Dream on.

  • Comment number 56.

    23. At 1:39pm on 07 Jun 2010, galbraithian wrote:
    "It is not a question of blame Brown or Labour. All they did was follow the economic creed of the time."

    There are several blogs like yours which purport to to say it wasn't Brown's fault - yes, he didn't create the situation where the world economy imploded through sub prime lending and the creation of sophisticated financial instruments, but he was in charge of the economy for over 10 years. The buck stops with him, whether it was the creed of our time or not - see Canada's approach to their economy and see what creed Brown should have followed.

    As another blogger CMZ noted while Brown was pontificating to the Europeans about how great he was the French and the Germans were trying to get other countries to reduce Government borrowing.

    The end result of this deporable economic mess is that yet again the Tories have to come in to balance our economy by what will be really savage cuts. If we don't we will be paying humungous sums in debt repayments at greater cost to our standard of living.

    As to some suggestions that we don't bother to pay back our borrowings - Sovereign Default - we will never recover from that stupidity. We have to take our medicine and for some it will be real hardship and for most it will be painful.

  • Comment number 57.

    Stephanie

    At what point does increasing tax take become counterproductive?

    There are at least two aspects to this eg increasing VAT may change peoples behaviour so they buy/spend less. Net result nothing like the increase in revenue expected and job losses ( and thus even further tax and NI losses)because of a decrease in demand for goods and services.

    Increasing CGT means people just hold onto assets. Again less revenue than expected and lower mobility and flexibility in capital for business ventures. Less new business, jobs and medium term tax.

    Increasing NI, roughly the same consequences.

    Its just that it seems to me that we have reached the point where almost any significant tax increases are counterproductive to getting market confidence, and thus investment and growth.

    The only real option is substantial cuts in central and local government revenue items, which are largely salaries and pensions. Keeping capital infrastructure projects going may be the lesser of two evils.

    A column on your view of where we are in this would be interesting I'm sure.

  • Comment number 58.

    We have a structural deficit over and above that which a government might reasonably run at times of recession. Put bluntly, we spend more than we earn so while cuts are going to painful if we don't have the money we can't spend it. And like any individual who runs out of lines of credit eventually we have to stop spending
    That Scottish barmpot never seemed to realise that and that is why he does not need to worry about his legacy - its secure, but we'll we paying for it for years to come.

  • Comment number 59.

    Cuts need to be smart. We should be cutting waste and structural deficit whilst increasing genuine investment. So:
    a. Cut public sector pay by reducing net differentials above the median by 15-20%.
    b. Have all public sector workers pay the real economic cost of their pensions.
    c. Allow transfers throughout the public sector without reduncancy pay.
    d. Cut all value-destroying public sector functions by at least 90% (eg there are 20k+ people in MOD Procurement).
    e. Raise the pension age by 4 months a year for at least the next 9 years.

    but invest heavily in things like

    f. National Citizens Service and other measures to get people off benefits/dependency and doing useful work.

    g. R&D, apprenticeships and top-flight universtities

  • Comment number 60.

    Some Analysis...
    (also see #5 of Peter Preston's blog today)

    The first thing that economists tend to do is to refuse to admit there is a problem. Then they try a bit of economic stimulus whilst there is either money available, or they can borrow the money. We are now approaching stage three.

    Admit there is a problem, as David Cameron has done today. The downside is that the people who we could have borrowed the money from get nervous. This inevitably pushes up the cost of borrowing - which in fact makes the problem worse. This is the button David Cameron has pushed today.

    Even today he hasn't actually admitted that the problem is as bad as it actually is, but that is quite politically understandable. The consequences of his action is that we can no longer keep a straight face when we try a Keynesian stimulus - even through this will be what is necessary in three to five years time (but not last year - as all that did was to make the problems worse!)

    My view of excess debt: unsecured debt can vanish almost instantly and all that is left is a sore lender, secured debt, that can't be repaid lasts till the borrower dies - generally, not instantly. Public sector debt is unsecured, however private sector debt is often secured. The consequence of this is that the bubble in asset prices will take a long time to deflate, but it will have to deflate for the economy to recover. (I am throughout discounting inflation / hyperinflation as a 'solution'.) These two different types of excess debt characterise the 1930s' and the 1870s' depressions. Decide for yourself which type of bubble we have now - hint - see house prices!

    In summary, whist I despise the man, Mervyn King's view that whoever wins the next election (the one we have just had) will be out of power for a generation properly describes the position. I will not bother to deride him and his 200 economists here, yet again - but my analysis remains unchanged as to his responsibility for creating the problem.

    We are facing a avalanche of problems - rapidly escalating debt in the younger generation (student debt), house prices that are unaffordable, almost no social housing and employers who need to pay salaries that are sufficient for their employees to live near-ish to their place of work. We have killed our global competitiveness through allowing excess borrowing to vanish into house prices. Death of the borrower is the only way for the secured assets to return to market as rational prices (half of present levels) and that will take several decades to work its way through the economy - just as it did in the 1870s! All of these factors were absolutely predictable, by any half competent economist - why are ours so incompetent?

    Aside: Interest rates need to (and will) return to rational levels too and that also exacerbates the problem of debt!

    Aside 2: the pensions crisis is a direct consequence of these same economic forces and will cause havoc for generations in both public and private sectors.

  • Comment number 61.

    The G20 reminds me of that Bernard Cribbins song "Right Said Fred".

    "And so we had a cup of tea and then we went home.."

    The policymakers have begun the process of throwing the towel in. But it is only the beginning so people are still going to say there are policy options. Keynes didn't work so we'll try Milton Friedman. Milton Freidman won't work (never did) so we'll try Oliver Cromwell and so on.

  • Comment number 62.

    The Banks created a huge financial void by speculations. Global stimulus packages began the futile process of filling that void by pulling value out one side and pouring it back in the other. In short, no solution to the banking crisis that relies on existing Banks can succeed. Much has been made of banks being too big to fail. The solution - which the banks will not like - is to restructure them so that they can fail.

    If they are too big to fail, make them smaller. If they are too complex make them simpler. In a Free Market - which banks and their ideologues claim we are in - businesses fail. It is, in fact, inevitable. The crisis is not, simplistically, about robust public finances but about robust private finances. There are none.

    The entire banking crisis is about future profits. The Banking System has realised that the future profits that were promised will not materialise. The cuts in public spending are all enabling activities to support future banking profit. Achieving this through cuts is possible, but it does not fix the problem. The total amount of cuts could be calculated by asking how big the difference between observed and expected profits are for banks. The process of cutting will need to both service that missing profit and the interest on that misssing profit to service the "public borrowing" required to keep the financial system afloat.

    Fundamentally, the global economy is sound. It is just banking - the "too big to fail" banks - that need radical, sustained and long term reform. Globally, that could be easily achieved by placing a 100% windfall profit tax on banks. A tax that could easily be avoided by reinvesting profits into the business. In effect: a non-tax. Why taxpayers are obliged to bail out businesses in a free market at the cost of vastly increasing day to day activities in other areas of the economy.

    Public employees still have both the market for their product and the means to deliver those products. The need of Banks for future profits is retarding that market in a fundamentally anticompetitive manner. The cuts being proposed are, effectively, the largest ever tax hike with the whole of the tax rise hypothecated to banking shareholders.

    What is needed is not "stimulus" which amounted to "propping up" but a root and branch review of banking and financial services. Some ruthless pruning of inefficient and loss making activities. Spinning them off into smaller businesses that can fail. Taking the larger, more profitable units and taxing them in order to ensure their growth is managed.

    There do need to be cuts. Huge cuts. But targeted, credible cuts that address the causes of the problem.

    The IMF put the global financial crisis at $7.1Tn That total is equivalent to around a fifth of the entire globe's annual economic output. It includes capital injections into banks in order to prevent them from collapse, toxic assets soak up costs, debt guarantees and liquidity from central banks. That is the stark choice for Governments: make $7.1Tn of "public spending" cuts or address the cause of the crisis.

  • Comment number 63.

    Borrowing - where the borrowing came from...

    The borrowing came from the fact that for the past 20 years we have been shipping bulk-carriers of useless electronic gizmos from China, and shipping IOUs in return. All this while we have been allowing retailers to kill off our manufacturing by buying products manufactured in China, which used to be perfectly affordably manufactured by our own industries, and taking the savings as profits for themselves.

    This has left us with no real wealth-creating power ourselves, forcing us to rely on financial services and bubbles, and disguising unemployment by growing the public sector. The bubbles have burst spectacularly, leaving us with nothing, except maybe the dregs of North-Sea oil and gas.

    Essentially, this has been a failure of globalisation and free-market fundamentalism, and none of this has been directly addressed by any of our politicians, so I wouldn't hold out for much hope of any real rescue by either the cutters or the spenders.

  • Comment number 64.

    The word 'pain' is often used along with the words 'short term'. I think the word pain should be replaced with agony.

    If Germany has just announced 80bn of austerity, and they are percieved to be in a much stronger position, how on earth are the UK going to introduce much needed and larger austerity measures - does not even bear thinking about!

    The game is up. I cannot see any way out of this. It's either make the cuts to the agony of the UK population, which will drag the recession on for years, add to this a sprinkling of civil unrest; or make a half attempt at reducing the deficit, to which the international markets will tear us to shreds, and probably end with us insolvent.

    This is an absolute disaster.

    Average working individuals below 50 may as well now accept retirement will be at age 70.

  • Comment number 65.

    30 said: The thinking of those such as no.8, ie. that government's can just spend money they don't have is mind boggling and is what got us into this mess in the first place.

    Well we all do don't we? Mortgages, credit cards, card loans for a start. And how about companies? They borrow too. What matters is the level of borrowing and the country's ability to finance and repay its debt. However, unlike companies governments do not have access to equity finance so they need to borrow and inevitably capital spending cannot be funded out of current taxation. What is a problem is when current spending cannot be matched by current taxation and that situation is unlikely to be corrected by the increased tax take brought about by economic growth.
    The last government maintained its spending plans in the face of a 6.5% reduction in GDP in 2008/9 - it did this to maintain activity in the economy, minimise unemployment and prevent wholesale corporate failures and house repossessions. The gamble paid off to a large extent and we are seeing a slow recovery in GDP and today we hear of a massive 20% increase in manufacturing output. However, they knew as well as anyone that the economy would have to be brought into balance.
    We cannot undo history of course but think of the altenative if the government had not maintained spending in the face of such a huge economic shock. Teachers, nurses, doctors, tax inspectors etc would not have been paid - there would have been massive layoffs as in the 1930's and the economy would have crashed. The last Government did the right thing but doing the right thing sometimes costs money and whoever had come to power would have had to manage the economy back onto an even keel.

  • Comment number 66.

    On numbers (all £ Bn)

    Debt = 770
    deficits to reduce to 50% deficit in 5 years (a parliament)
    2010 = 156
    2011 = 136
    2012 = 116
    2013 = 97
    2014 = 78
    Total= 1353
    Today's government statement total = 1400

    Conclusions

    1. As interest payments are said to be 70 at the end of the period then they MUST be assuming interets rates of 5%

    2. The differance between 1400 and 1353 implies either rounding or more worryingls a failure to reduce the deficit as planned? Or perhaps they have allowed for inflation and are working at current prices?

    All my analysis at constant 2010 prices.

  • Comment number 67.

    If you think Gordon Brown has not committed a 'crime' against future generations ponder this…

    "Tax Freedom Day isn't as rosy as it first seems...

    The Adam Smith Institute (ASI) has been working out the timing of Tax Freedom Day (TFD) since 1991. It calculates the number of days the average earner has had to work to pay for all direct and indirect taxes, and also National Insurance Contributions.

    This year, TFD fell last Sunday, on 30 May. That's later than ever before.

    In effect, every penny earned in the first 149 days of 2010 – three more days than in 2009 – by the UK's residents will be swallowed up by HM Revenue and Customs. Income tax bills alone have taken 41 days to pay, while funding National Insurance Contributions required almost a month's work. Paying VAT has taken the average Brit 21 days. Indeed, the VAT rise on 1 January accounted for 1½ days of 2010's three-day-later TFD.

    But here's where the story gets worse. The TFD is based only on tax receipts. It doesn't factor in the government's budget deficit – the annual amount the government spends in excess of what it receives in tax.

    And this makes the picture look more rose-tinted than it is. "Since all budget deficits eventually have to be financed, borrowing should be viewed as deferred taxation", says ASI's Tom Clougherty. "Our government relies so much on debt to fund spending that our traditional TFD measure makes it look more virtuous than it actually is. All it's doing is piling up obligations on future taxpayers".

    The ASI reckons that if all the UK government's 2010 spending were financed by taxes rather than by loans, TFD wouldn't come round until 8 July. That's 38 days later. It also means the average Brit is effectively working more than half the time for the state.

    The ASI points out what's gone so badly wrong in the last decade, with reckless Labour governments spending faster than the cost of living…

    In 2000/01, three years into the New Labour administration, state spending was £367bn. For 2010-11, the government is forecasting a £704bn total. That's almost twice as much.

    If public spending had grown in line with inflation since 2000, it would now be £441bn (instead of £704bn), i.e. £263bn less. The current £164bn deficit could be wiped out. So could NICs and inheritance tax.

    "It's really pretty galling", says the ASI's Dr Eamonn Butler. "If someone offered you a choice between today's public services, taxes, and government debt that will take generations to pay off, or 2000's public services, without debt and a massive tax cut, which one would you go for? Gordon Brown shouldn't just be remembered for his irresponsibility, but also for a decade of squandered opportunities.""

    Bah!


  • Comment number 68.

    45. At 2:57pm on 07 Jun 2010, skeptical wrote:
    Public spending cuts are the economic equivalent of the use of leeches to drain blood in medicine in the 19th century. It never helped but simply weakened the patient. The same is true of public spending cuts.

    The Tories need to catch up with the 21st Century instead of repeating this same old policy that has never helped in the past.

    Actually, it is you that needs to catch up

    Leeches are used in medicine from time to time, as they are very effective at cleaning up dead tissue

    Good analogy...

  • Comment number 69.

    There is a lot of talk about the Chinese model. I don't think people understand the Chinese model. Very cheap labor, no unions, little or no benefits, horrible living conditions for workers (dorms), slavery in the coal mines (literally), political corruption that determines who get contracts and transport, land taken from owners with little or no compensation, an undervalued currency, no courts that are not political and lastly the figures provided by the government are less accurate than those in the West. Complaining can end you up in jail. This is certainly the model admired by Western bankers and big business, but everyone else would suffer dearly.

  • Comment number 70.

    Blue chip companies will decide what happens next, not any 1 government, a G20 summit is all bravado...... and those companies want all your money.
    Why join in with pointless debate, you are nothing.

  • Comment number 71.

    Well, at it looks as if the Coalition is going to try and manage cuts the Irish way rather than the Greek way, as you point out, Stephanie, some rather good ideas are out there with the general public and not just the body politic. I await interesting developements. Regards, etc.

  • Comment number 72.

    Yes it's bad, but the conservatives love of de-regualtion would of put us in a far darker debt.

  • Comment number 73.

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

  • Comment number 74.

    *43 WOW

    Good post, it hadn't come up when I commented.

    Here is the thing - are we going to stand around the beech cussing and wondering about those few tar balls that we can see, ( that you and other notable commentators, even with different views, highlight ) or do we look at the big picture and what those tar balls portend - and this is the important thing - see what needs to positively happen??

  • Comment number 75.

    43. At 2:51pm on 07 Jun 2010, writingsonthewall wrote:

    "Well done George Osbourne, you have gone from the 'leader of financial incompetents' to 'leader of a huge number of financial incompetents'."


    It'd be funny if it weren't so true.

  • Comment number 76.

    The fairest way to reduce the deficit is higher taxes and NI. Nobody likes it but at least it spreads the pain over more people and those most able to afford it. The alternative of cutting spending makes a relatively fewer number of people redundant, destroying lives, sometimes marriages and generating long-term unemployment and sometimes unemployability as in the 90s. It also weakens the economy dramatically.

    Tax rises are a more sure way to cut the deficit, cutting off almost the headline amount raised. In contrast spending cuts dont save as much as the headline amount, because they turn tax-paying consumers into benefit claimants. Some have argued that redundancies actually increase public spending.

    The Conservatives have advocated an 80%-20% split between public spending cuts and tax rises.

    It should be the other way round but they have made a pre-election deal not to implement Labour's NI rise and other deals with the Lib-Dems to raise the tax paying threshold. Also, of course their hands are tied because their own right wing and the rich backers who funded their election campaign don't want tax rises.

    Please can we have Brown and Darling back?

  • Comment number 77.

    53

    The growth has to come from the private sector, to fund the public sector, and to help with the creation of real jobs

    Unfortunately Brown's stupid cut VAT and just spend as much as possible plan, to try and win the election has made a tough situation even tougher

    Liam Byrne's idiotic, yet revealing note, said it all

    We have run out of money

    Unfortunately there are still people who just don't get it, and think we can just keep spending money we don't have

    David Laws was right, government borrowing is just future taxation

    Thanks to Brown's incompetence we now have to raise taxes, and cut spending

    The other aspect, is that there is an unhealthy assumption that growth is inevitable and we will get growth whatever

    This is just not true, and the sooner people realise this the better

    One good thing, is that this means interest rates are likely to stay at 0.50% for the remainder of 2010, and probably 2011 as well

    At least we weren't stupid enough to join the Euro

    Until the Euro is restructured, the countries in the Eurozone will struggle even more than us, particularly Spain

    Even now there are people that think Brown did a good job

    How stupid can you get

    IF he had allowed NR to go bust, the banks would have learned a lesson and we would be in a better place

    It is going to be a tough few years, and we should ensure that we do not forget that the labour party put us in this mess

  • Comment number 78.

    Where have you been Stephanie? Inflation had 701 comments - is that a record? How many for this rather bland report of yours? It depends how long it takes you to write another one.

    Ideas for cutbacks etc:
    1. Sell the motorway network off and allow tolls but provide all pensioners with free passes for motorways
    2. Abolish vehicle tax and all civil servants dealing with it add any shortfall to fuel - in that way if you use lots of miles or have a gas guzzler you pay more
    3. Abolish incapacity benefit and all that goes with it and offer job seekers allowance only - why do disabled/poorly people cost more to keep, they need the same heat, the same food, the same TV. Abolish motability. It's inherently unfair. Or have you not checked out the cost of benefits lately? Is noone else fed up of seeing their neighbours behaving like able bodied people but doing nothing and enjoying a new car every three years?
    4. Pull out of Afghanistan NOW.
    5. Close our MoD outposts, Cyprus, Gibralter etc all cost more than they provide. We need to stop behaving like the World's police; we no longer have an empire.

    That should save a pretty penny and I think have just about everyone's support because strangely most people I know are fed up with scroungers, fed up with being in a war we can't win etc

    Ideas for growth:
    1. Exploit oil off the Falklands as quickly as we can. Probably help BP that one. Protect it with all of our might.

  • Comment number 79.

    67

    Too many Labour voters have been neglecting their eye tests, and will conveniently overlook all of this

  • Comment number 80.

    64. At 4:07pm on 07 Jun 2010, U13687591 wrote:

    "Average working individuals below 50 may as well now accept retirement will be at age 70."

    Some of us accepted that years ago when the birth rate dropped below 2 children per woman. State pensions are unsustainable as long as the life expectancy rises and birth rate does not. However, as long as I am fit and healthy, why shouldn't I work?

  • Comment number 81.

    By and large, civil servants do not know where the waste and excess in their departments is, nor how to find it, nor how to get rid of it. They can only cut back on items with obvious price tags and easy decision-making processes, whether it be a defence programme, a benefit offering or a headcount total. Sadly, a new Govt is suddenly going to make the civil service any more capable nor be any better at getting around their incompetency and obfuscation.

  • Comment number 82.

    #8
    ......Weimar Republic style hyper-inflation here we come if you follow that logic, most likely followed by a 3rd World War. Are you Gordon Brown under an alias?

  • Comment number 83.

    53 Charles, I am not an economist either however given where the economy is right now the value of an economist has surely gone down? In terms of money supply what you propose (paying off national debt with phoney money) is I suggest not just morally wrong, but would actually result in massive UK inflation, regardless of imported currency goods. You cannot count unutilised production capacity as real working capacity. With lots of money chasing reduced real capacity this must result in inflation. To the others on this blos suggesting that the public sector can stay untouched, you need a reality check. In the small villages of a new settlement at what point do the citizens decide to create a fund to support those in poverty, ill health etc? Only WHEN there is surplus production/wealth to share around. You have things the wrong way round.

  • Comment number 84.

    Come on everybody - get a grip. It's not as bad as that. Boy David has every reason to rubbish the economic performance of the past government - it's called politics. The UK is not in a mess - it is the 5th largest sovereign economy in the world. As a nation we pay our taxes, and our borrowing can be managed down by a combination of taxes, spending reduction and economic growth. Of course there are problems but all of the nonsense about debt downrating was started by the opposition and 'City' commentators whose political neutrality is highly suspect to say the least. There are a lot more counties in he firing line before the UK so lets just relax a bit and stop trying to outdo the tabloids in our warnings of disaster.

  • Comment number 85.

    68. At 4:22pm on 07 Jun 2010, Kevinb wrote:

    Actually, it is you that needs to catch up

    Leeches are used in medicine from time to time, as they are very effective at cleaning up dead tissue



    Aren't you mixing up leeches and maggots?
    My point stands.

  • Comment number 86.

    Cameron is wittering on about 'changes in everybody's way of life'. I beg to differ as the people who's lives are going to change are the poor who will become poorer and more disadvantaged as well as people who are just about managing a reasonable lifestyle now. Cameron and his rich cronies lives will go on as if nothing has happened. It's easy to make other people suffer for the bankers greed especially when those self same bankers are friends and cronies of those in power. As for Clegg and the Limp Dems, shame on them.

  • Comment number 87.

    Please Mr Bankers can we have our money back!!

  • Comment number 88.

    Ms Flanders

    I have decided in charge of our finances all over the world we have people with the common senses of fairly young and easily spooked younger than me. Let us not be mealy mouthed. Childish Corporal (Dad’s Army) Jones types.

    I heard one suggested background to the Euro fall today and over the last weekend and I wait to have it confirmed. But this version had it that it had allegedly been traced back to – no offence – a minor functionary in Hungary misspeaking and that misspeaking had spread to cause the Euro's fall against – well everything – allegedly.

    Because of fear of Hungary becoming the next economy – well – like Greece with regard to currency matters. The Euro fell? Okay but hmm.

    Hungary. Whose currency is – and I quote someone “ Of course, the Hungarian forint is the forint, not the Euro.” Unquote.

    May I suggest that the next crisis to hit various Money Markets – may be caused by a City immortal and his or her experiences in just one game of that popular past time – Monopoly. Woe betides us all if they lose it. Monopoly game - other board games are available. Does everything and anything panic these people. Get a grip! Ms Flanders – I await to hear the report on BBC News Channel today was in error but greatly fear it may be true.

  • Comment number 89.

    I heard that Chinese government told people that it would not cut infrastructure budget too deeply to prevent the double dip.

    In late March and early April, I found that the number of customers increased apparently in local department stores and there was an atmosphere of confidence among residents. But now there are fewer customers in the department stores in high street. Many people are worrying about the slip back of economy, and tend to be tight in their pocket money.

    Personally I was over confident that the economy could pick up steadily before April 2010, and I thought that the recession was one chain in economy life cycle, which might pop up every 9 to 10 years, which would grow up with the psychology of people and economy.

    When I watched TV news, I heard there was an economist or Minister from the former Labour government, who used to be regarded as the genius in economic policy for both Labour and Conservative government. I wonder if the new government could use him for further contribution to the further recovery of the economy.

    I remembered in one of the Stephanie Flanders’s blog months ago, she mentioned that the deficit in Britain was not very serious comparing to some historic or some national economic figures. I have not made any review or research on it. But other experts with different side of views to deep cut at this customers scaring point, might have done the research and hold the robust reasons similar with that of the Treasury Secretary Tim Geithner of the United States, which is one of the countries picks up assumingly from the recession.

    It makes me think of a scenario: when a depressed individual slacks at home alone losing heart to the rejuvenation of himself, should we give him a cup of coffee, or should we overstress the negative effect or risks of caffeine, which might lead him to become an addict? Can he really bear the pressure pushed upon him by invisible idiots everywhere without some stimulus or at least encouragement and opportunities?

  • Comment number 90.

    There is a glareing fallacy in a lot of the arguments posted above concerning the need for cuts.

    Very few posters appear to have asked themselves WHY we are cutting services and are able to identify WHAT services need to be cut.

    If you are propossing that cuts need to be made to reduce the defficit or (more generally) because we cannot afford them, you need to go further and articulate what the end result of these cuts are going to be ie in what ways will we actually be better-off? If the 'savings' are merely used to pay-off debt, how are you going to grow the economy? As the majority of posters have over the years criticised public services are you prepared to put-up with even poorer services e.g. education? There really does need to be a lot more joined-up thinking than is being promoted by the present government.

    If your thoughts fall into the catagorey of "we can't afford them", the please explain what the future costs are likely to be for the population if you remove or reduce them? Sure you can cut the level of service but how many more crimes go undetected? how many more houses burn down?, how much more polution goes undetected? etc etc. Cuts today will have consequences for the future.

    Personally, I feel more in-tune with what stanilic wrote in #35.

  • Comment number 91.

    78

    Tim wrote

    3. Abolish incapacity benefit and all that goes with it and offer job seekers allowance only - why do disabled/poorly people cost more to keep, they need the same heat, the same food, the same TV

    I am astonished that anyone could write this, least of yourself

    Disabled people vary hugely, depending on the disability

    In many cases, the cost of the things you mention is higher, due to the fact some cannot work, and are consequently at home more, meaning MORE heat, etc

    Motability is to help disabled people to actually get out some of the time

    In fact, you could always just follow Hitler's mantra, and kill all disabled people, especially at birth, to save money and strengthen the strain

  • Comment number 92.

    @KEVINB#68
    Re:"Leeches ciean up dead tissue"
    Surely you meant to say Maggots!
    Another good analogy---?

  • Comment number 93.

    A defence of Gordon.
    We would have had a fiscal crisis - every Western economy has had one - it is just that he made ours worse than others
    He was right not to have a panic reduction in Government spending in late 2008. If that had happened globally there could have been a depression. If we had followed Osbourne's ideas at the time it would have been a disaster. There was always going to be a time to cut when it would appear that Osbourne's policy was the correct one. The issue was always the timing not the actual policy.
    Now can we forget him?

    We've had 'the books are worse than we thought' speech we all knew was coming. I think this new openess should extend to having the books open in the six months before the end of a fixed term Parliament so that each party can make its spending plans public before we have to make a choice. At the moment it is like an investor having to decide whether to support a takeover when no one knows about the health of a company or what the future plans realisticly are.

  • Comment number 94.

    I'm new,there's a lot of posturing goes on,isn't there!
    Does anyone know how much is spent on Regional Assemblies and Quangos please ?

  • Comment number 95.

    84. At 5:27pm on 07 Jun 2010, Bob Ryan wrote:
    Come on everybody - get a grip. It's not as bad as that. Boy David has every reason to rubbish the economic performance of the past government - it's called politics. The UK is not in a mess - it is the 5th largest sovereign economy in the world. As a nation we pay our taxes, and our borrowing can be managed down by a combination of taxes, spending reduction and economic growth. Of course there are problems but all of the nonsense about debt downrating was started by the opposition and 'City' commentators whose political neutrality is highly suspect to say the least. There are a lot more counties in he firing line before the UK so lets just relax a bit and stop trying to outdo the tabloids in our warnings of disaster.

    You are in denial

    Also inaccurate

    We are not the 5th largest economy in the world

    Still, why ruin a rant with facts

  • Comment number 96.

    85. At 5:28pm on 07 Jun 2010, skeptical wrote:
    68. At 4:22pm on 07 Jun 2010, Kevinb wrote:

    Actually, it is you that needs to catch up

    Leeches are used in medicine from time to time, as they are very effective at cleaning up dead tissue



    Aren't you mixing up leeches and maggots?
    My point stands.

    Nope

    Leeches are used

    Google it if you don't believe me


  • Comment number 97.

    A few posts refer to the economic stimulus AKA QE. This is bizarre.. A true stimulus would have put money in peoples pockets to go and spend on cars, furniture houses etc. QE did nothing of the sort, it was just used to buy bonds AFAIK. How did that stimulate the ecomony? How was it supposed to? All it did was rescue private bond holders and let them unload all their debt at a good price. The "man in the street" saw nothing of this benefit.

  • Comment number 98.

    'The world has moved - and it has moved in this government's direction.'

    They all have no money left and know the upturn is going to be slow.

  • Comment number 99.

    86. At 5:31pm on 07 Jun 2010, weescottishlassie wrote:
    Cameron is wittering on about 'changes in everybody's way of life'. I beg to differ as the people who's lives are going to change are the poor who will become poorer and more disadvantaged as well as people who are just about managing a reasonable lifestyle now. Cameron and his rich cronies lives will go on as if nothing has happened. It's easy to make other people suffer for the bankers greed especially when those self same bankers are friends and cronies of those in power. As for Clegg and the Limp Dems, shame on them.

    You are just mistaken

    Anyone earning over £100K and paying into a pension, will be paying 25% more tax

    Sounds like a change to me

    The very rich will be ok whatever, as will the least well off

    Everyone else will feel some pain

  • Comment number 100.

    93

    I did not favour fixed parliaments, although I have been lobbying for fixed spending reviews

    Now we have one, we must have the other, as the delay in the full spending review has meant that the situation IS worse than feared, and only Labour had access to the full figures, and only Liam Byrne spoke the truth

    There is no money left

 

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