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Unemployment, and that 'Plan B'

Stephanie Flanders | 13:50 UK time, Wednesday, 15 December 2010

For some time, the UK labour market has been "Exhibit A" in the government's defence of its budget cuts. When anyone questioned whether the economy could absorb an estimated 330,000 in public-sector job losses, ministers would point out that an extra 350,000 jobs had been created in Britain since April.

People walking past Job Centre

It would have been astonishing if the economy had continued to create jobs at such a rapid pace. It has not.

Today's figures show employment falling by 33,000 over the three months to October. That was largely due to a falling public-sector job count: the private sector workforce remained broadly unchanged. The broad, ILO measure of unemployment went up, for the first time since April.

You can see shift in momentum, from public to private sector, in the divergent fortunes of men and women. In the year to October, the number of men out of work has fallen by 71,000, but joblessness among women has risen by 89,000. That is an increase of more than 9%.

The figures are disappointing, but - to repeat the point - the bigger surprise would have been if we had seen another massive rise in the number of jobs, at a time when many employers still have doubts about the future of the recovery. Even with the new data, employment has risen by 264,000 since the start of the year.

For those who worry about the government's tough approach to the budget deficit, these figures will underscore the need for a "Plan B" - something that has been much discussed in Westminster in the past 24 hours. Supposedly, the Cabinet Secretary, Gus O'Donnell, has drafted a memo outlining what could be done if the economy got knocked off track [subscription required].

On Tuesday's Ten O'Clock news, the shadow chancellor, Alan Johnson, said the existence of the memo showed that the government was getting "very nervous"... that its"huge gamble" on the economy was not going to pay off.

With all respect to Mr Johnson, I don't think most economists would see it that way. But perhaps it depends on what you mean by a plan B.

In political terms, "Plan B" is shorthand for "rethinking budget cuts because the economy is tanking". In the past day I have talked to a range of senior officials about the cabinet secretary's memo, including some who have been nervous about the scale of the government's budget cuts. None considered the memo to be that kind of plan B.

The paper is a description of the options that would available to the authorities, in the event of a major shock. The big shock that everyone serious is worried about in the first part of the year is not a sudden weakening of the UK economy, per se, but a sudden drying up of bank funding in the UK and across Europe, either as a result of the ongoing crisis in the eurozone, or worries about US banks related to the still declining US housing market.

That is why the emphasis, in the memo, is on possible ways to lend directly to the corporate sector - either through bigger Bank purchases of corporate bonds, or through some form of direct lending programme to British companies, financed by the Bank but underwritten by the Treasury. In such circumstances, you would be thinking about how to keep the corporate sector growing without the help of banks.

How should fiscal policy respond? The official answer has long been that "the automatic stabilisers would be permitted to operate". In other words, if the economy weakened, borrowing would rise automatically, as a result of higher social-security spending and weaker tax revenues. The government would not seek to offset that with cuts elsewhere. Since the government's deficit target is the cyclically adjusted figure for borrowing, that would not technically require any change in the government's strategy at all.

In other words - the government would say that none of this is plan B. It is plan A, subclause (b).

At which point, you might think this is all getting rather silly. And you would be right. But there is a serious distinction here, important to both sides.

Allowing the automatic stabilisers to operate means spending money on things you'd rather not spend money on, because the economy is not as strong as you had hoped. That, for Labour, is the big downside of the government's approach. If you are going to end up having to borrow the money anyway, they would say, isn't it better to spend it on valuable things like roads and education - than to cut those programmes, but end up spending more on unemployment benefit instead?

That, in a nutshell, is the Labour argument on this entire issue. But the government has a response, which is equally central to their way of looking at the world.

George Osborne would say that it is a false choice, because the government would only be able to let the automatic stabilisers operate (ie to let borrowing go up again in response to a shock) because of the credibility it has built up since May.

If Labour had stayed in power, and stuck with its spending plans, Mr Osborne likes to say that Britain would now be on the same list, in the financial markets, as Portugal, Spain and the rest. That might be an exaggeration. But we would probably have less room for manoeuvre, in the face of another downturn.

Of course, if you're on Labour's side you might say the cuts themselves have made a downturn more likely. But arguably, the state of the world economy - and global financial markets - will play a larger role in Britain's recovery than the government's tough spending plans. (After all, they would have been fairly tough under Labour as well).

That is probably the key change in this debate, relative to six months ago. There is still plenty to worry about. But the gravest risks hanging over the recovery these days look more foreign than domestic. It will be interesting to see how long that lasts.

Comments

Page 1 of 3

  • Comment number 1.

    SF wrote:...the big shock that everyone serious is worried about in the first part of the year is not a sudden weakening of the UK economy, per se, but a sudden drying up of bank funding in the UK and across Europe as a result of the ongoing crisis in the eurozone - or, perhaps, worries about US banks after another downturn in the domestic housing market.
    --------------------------------------------------------------

    As I posted elsewhere earlier, but is quite relevant here, "what about the few hundred billion that our UK banks are meant to find by early in the new year for balance sheet and support repayment purposes?
    Surely we are not immune to the 2011 meltdown potential?"

  • Comment number 2.

    The tories inherited record economic growth.

    (no credit to labour, it was just the upturn after global recession)

    The tories ideologically motivated cuts have, at minimum, slowed the growth and possibly reversed it.

    Well done.

    At least they can still content themselves that their 'once in a generation opportunity' to trash the public sector is still underway.

  • Comment number 3.

    Who are these 'most economists' mentioned above? Here is Brad Delong, 'The Humiliation of Britain' 27 Oct 2010, "Today, another split is occurring, this time between those countries that are continuing to muddle through and Great Britain. Even though the British government’s credit is still solid gold, Prime Minister David Cameron’s administration is about to embark on what may be the largest sustained fiscal contraction ever: a plan to shrink the government budget deficit by 9% of GDP over the next four years."
    When will the BBC accept that its duty is not only to reflect Labour and the Coaltition's economic position, but also that of the phalanx of economists who argue that this is a liquidity trap problem?

  • Comment number 4.

    I see, the Tories are already lining up their excuses for when the economy nosedives under the weight of unemployment and plummeting demand. It'll be evil forces from outside. Oh really.

  • Comment number 5.

    "For those who worry about the government's tough approach to the budget deficit, these figures will underscore the need for a "Plan B" - something that has been much discussed in Westminster in the past 24 hours. Supposedly, the Cabinet Secretary, Gus O'Donnell, has drafted a memo outlining what could be done if the economy got knocked off track

    On Tuesday's Ten O'Clock news, the shadow chancellor, Alan Johnson, said the existence of the memo showed that the government was getting "very nervous"... that its"huge gamble" on the economy was not going to pay off.

    With all respect to Mr Johnson, I don't think most economists would see it that way. But perhaps it depends on what you mean by a plan B."

    ____________________________________________________________________

    Ooh. I am going to have fun throwing that one back at economists when Plan B, and lets be clear, I mean the need for a fiscal, and before everyone starts, that a fiscal stimulus, becomes necessary because you are right that is exactly what 'economists' think.

  • Comment number 6.

    As ever, a balanced and elegant 'expose' of where we are right now and well done Ms Flanders for that. The truth is that none of us know what the eventual 'outcome' will be and the 'struggle' of people of particular political views to say that 'their way is better' matter not at all.

    In a sense, whether the current Government is a Coalition or was Conservative, LibDem or Labour would make no difference at all, the 'World' and its economy is 'on the move' but not to any particular destination, it is just moving on because the past 'model' no longer fits the 'frame' and therefore in a global economy, no Government and this includes China and India, have any control over future events.

    Whilst this may make forward planning difficult for Governments and Global Companies, may I suggest that for us ordinary people, isn't that in a way 'comforting' in the sense that these "Superior Beings" are no better than us and just like us, merely 'clinging to the wreckage'.

  • Comment number 7.

    "But the gravest risks hanging over the recovery these days look more foreign than domestic"

    Manna to the coalition. You've got to be kidding, right?

    GC

  • Comment number 8.

    Economic forecasting is as unpredictable as forecasting the weather. For every economist who says cutting public spending will lead to a further downturn there are others who say not dealing with the deficit will lead to reduced confidence and higher interest rates. I would venture as John Haynes above that in a global economy no government can have full control over future events and having options up their sleeve, so to speak would be a sensible precaution. Unemployment will go up and down over the next few years as we rebalance the economy from public sector to private sector. Still quite a few diversity,equality and outreach officers on the public sector payroll so I think we have a way to go.

  • Comment number 9.

    jon112dk wrote:
    The tories inherited record economic growth.

    (no credit to labour, it was just the upturn after global recession)

    The tories ideologically motivated cuts have, at minimum, slowed the growth and possibly reversed it.

    Well done.

    At least they can still content themselves that their 'once in a generation opportunity' to trash the public sector is still underway.
    -------------------------------------------------------------------

    Ok, I laughed. Labour, who inherited the longest sustained period of economic growth that I can remember, are solely to blame for where we are today. The public sector exploded into uncontrolled growth, leading to "prudence" Brown accruing huge debts on the never-never and gambling on the city spivs to get him out of trouble (or the electorate). The only thing that might save Labours reputation in this fiasco is that the rest of the world were doing the same stupid things, which covered up their responsibility in the veneer of a "global crisis". We were going down this road if the world followed or not. I for one will be pleased to see the public sector cut and limited so that it can never again employ more than 25% of the population.

  • Comment number 10.

    5. At 3:42pm on 15 Dec 2010, EconomicsStudent

    I don't think they are close to admitting the long term failure of moneterism yet. Too many reputations and careers at stake.

  • Comment number 11.

    They will only do the right thing after they have tried everything else.
    The current economic policy is to protect the wealth of wealth. Unfortunately, that does nothing for the economy. The option that remains to clean up the criminal gambling of those who own the banks is governmental funding of jobs. Jobs provide money...money is used to buy things...buying things requires suppliers and sales and transport, etc. The middle class provides at least 70% of the economy. The money given to the banks is gone...just a power move..reality is not always pleasant. What was called the stimulus is just starting to create jobs, something needs to be done about streamlining bureaucracies. Create infrastructure jobs in the same manner that has been done after wars....modernize the nation. Transition government jobs to newly private sector created jobs..provides some incentive for the bureaucracies to cooperate. The public debts are growing so if this is the path they have chosen the debt should benefit the public.

  • Comment number 12.

    8. At 4:01pm on 15 Dec 2010, juliet50

    Seems most open Diversity Officer positions appear to be with banks these days.

  • Comment number 13.

    "If you are going to end up having to borrow the money anyway, they would say, isn't it better to spend it on valuable things like roads and education"

    Sovereign governments don't have to borrow or tax to spend. That being said, yes, education, roads (and healthcare) are really good places to spend to improve the lives of the population you serve. Creating jobs in the process.

  • Comment number 14.

    Browns record boom was based on record debt around the world and the SPIVS making profit on these trade. Now all that has gone away. Brown sent us swimming with no trunks on and the tide has gone out.

    Their will be no exprot lead boom as the PIIGS are very deep in debt and have no money to spend.

    The only place is USA,Inida and China if we can vastly increase our exports to them big ask that.

    So we have to cut our cloth to suit the circumstances.

    Each UK national should think were they buy thier good from.

    Each UK national shoud ask are their jobs in the UK that I could be doing rather than an overseas national that were the trouble will start.

    The failed imigration policy of blair and brown coming home to roost

  • Comment number 15.

    May I make a suggestion for cuts. How about the economists that keep getting it wrong. It is obvious that ordinary people seem to have a better understanding of economics than the overpaid idiots that pass as economists. Any time anything happens outside their "model" they seem surprised. Higher unemployment is not surprise to the rest of us. Sack the lot!

  • Comment number 16.

    Plan ‘A’

    Currently the government’s presumption for the future is:
    Industry will make more ‘things’ and the service sector will do more ‘things’.
    Households will increase debt and buy more ‘things’
    Tax receipts will increase and Government will reduce its debt
    And all will be well.

    H.M. Treasury predicts the following:
    Tax receipts will rise from £519.8bn in 2009/10 to £735bn in 2015/16
    And
    The Office for Budgetary Responsibility predicts a 25% increase in household debt over the next 5 years.

    Unfortunately nobody seems to have told households that they should be increasing their debt, or if they have told them, they’re not doing it. Because households are increasing debt by only 0.8% per annum (source Credit Action).

    Naughty households, how dare they defy The Office for Budgetary Resurrectability.

    Ok then Plan ‘B’
    Lots of political rhetoric and trumpet blowing from Westminster.
    Mr King launches QE2.
    And we all get poorer.

    I wonder what Plan ‘C’ will be?

  • Comment number 17.

    Whether the government's plans are working or not is debatable, but the "Plan B" disclosure is a complete red herring. It would be irresponsible if they were not planning a number of alternative scenarios. The USA had a speech ready for deaths of the Apollo astronauts. It didn't mean they were expecting it, just being prepared.

  • Comment number 18.

    11. At 4:22pm on 15 Dec 2010, ghostofsichuan wrote:
    'They will only do the right thing after they have tried everything else.'

    I like that one.
    Sentence of the week.


  • Comment number 19.

    Some interesting points here, especially while I have an old economics text book open at the section that deals with the Phillips Curve - the one that classical economists suggest shows that there is a direct trade off between rates of inflation and unemployment. Considering that from February 2009 to November 2009 RPI inflation was negative, while unemployment went up sharply, the Phillips Curve seemed to hold for that period. So how to explain continuing rises in the inflation measures - up to anywhere between 3% and 5% depending on what index you use - together with no fall in unemployment? So far as I can tell the government's plan 'A' appears to be fiscal tightening - hence all the public spending cuts - combined with a shot of monetarist quantitative easing.

    Now if I've read my textbook right this is based on the hope that cutting public spending will translate into greater private sector investment and, as a consequence, private sector jobs, while the quantitative easing, well, even monetarists will say that, while it may produce some short term increases in economic activity - a few bankers putting their bonus into an extension and pool, perhaps - it will, in the long run, just affect the prices of output, in the form of inflation, not the quantity of output and, consequently, the number of people with jobs.

    Then there's this thing called the 'long run Phillips curve' which, given the recent performance of the UK economy, would suggest it lies at something like 6 or 7 percent unemployment no matter what the rate of inflation. Indeed, with the rise in VAT and other cost push inflationary pressures, together with fiscal tightening and associated public sector job losses, it is possible that next year might see inflation rise higher and unemployment remain high, too.

    This all suggests that, just as the Phillips Curve isn't of much use in explaining everything that happens in the real economy and, as a consequence, shouldn't be the sole theoretical tool guiding economic policy, just pursuing a rigid plan 'A' might be an economic fetter that one might come to regret.

  • Comment number 20.

    All this twaddle about 'Plan B', 'automatic stabilizers' and the rest of the nonsense issued to reassure the public. Let's face it, nobody has a clue what the next 6 months will deliver.

    If our economic data sources are so reliable and published statistics are to be accepted without question - how come we got into this mess in the first place?

    I'll trust my own judgement, thanks.

  • Comment number 21.

    If the previous administration hadn't squandered so much money on creating another million public sector jobs ( many of them PC non jobs ) we wouldn't be in the mess we are in. Keep the nurses, policemen and care assistants but get rid of the tick box managers and the 'diversity managers' etc and services will actually improve but cost less. My experience of working in the NHS has shown that it is stuffed with officers at the expense of foot soldiers and I am sure that this situation would be mirrored in most public services.

  • Comment number 22.

    This ConDem Coalition doesn't know what they're doing - simply listen to how they respond to any tough questions!! Its like listening to a parrot, they keep repeating the same annoying party line "we inherited this deficit"!! Ask them about Education, Royal Wedding, Public Sector, Wikileaks, War, Public Sector, Worldcup 2018 bid, etc, and their response will be "we inherited this deficit"!! I wonder how long they will keep using this "party line" - it really is getting annoying!!

    You don't have to be an economist or a so called expert to understand that when such vast (ideological) cuts are being made and so quickly that it will only damage the country both in the short and long term!! The ConDem can keep repeating the "IMF and (some) Economist" are supportive, but the truth is that this is a perfect opportunity for them to privatise large section of the public sector!!

  • Comment number 23.

    Have Labour got a Plan A yet or is it still a blank page?

  • Comment number 24.

    "We must stand atogether against the darkness. Only by working together can we defeat the powers that now threaten our city. Together we are strong. Together we can overcome the darkness and bring new light to this great city." (Mayor is cheered by assembled workers...until the generator breaks down again.)
    (With apologies to Bill Murray and City of Ember)

  • Comment number 25.

    18. At 4:45pm on 15 Dec 2010, Dempster wrote:

    11. At 4:22pm on 15 Dec 2010, ghostofsichuan wrote:
    'They will only do the right thing after they have tried everything else.'

    I like that one.
    ~~~~~~~~~~~~~~~~
    I liked it too, until I realised that even after they have tried everything else, they will probably not do the "right thing" by the electorate.

  • Comment number 26.

    If you want a glimpse of Christmas future look no further than across the Irish sea. Destroying private and public sector jobs is only offering a sacrifice to the insatiable god of Micawber moneynomics.

  • Comment number 27.

    When will this totally discredited unelected shower of know nothings realise that to carry on in their present inane direction the country will be in a worse financial state than Zimbabwe. The cuts with a sharpened knife that are taking place now will leave us all on the breadline and 20 million unemployed. Since its inception government has been run by people who have no idea how the vast majority survive but as long as they are comfortably off then they actually beleive that the rest of us are in the same position. Lets have another election now so that the people can actually have their say. THE CURRENT ENCUMBENTS WERE NOT ELECTED!!!!

  • Comment number 28.

    What a load of garbage. The meoliberal conservatives decide to slash state spending in total subservience to the markets (aka bankers and pro-US investors), and then we are told

    "Oh no, look what we have here! Unemployment! Now how on earth did that happen."

  • Comment number 29.

    Unemployment - my daughter doesn't want to go to University and rack up loads of debt - she wants to get a job - very sensible I encouraged her.

    Unfortunately to date she can't get a job and therefore is now looking at going to University in the hope that when she leaves in 3 years time she will be more employable and perhaps things will be better.

    Of course while she is at University she will not class as being unemployed along with all the other thousands of students who would also have preferred a job than a degree.

    This is just another demonsration of how the published statistics do not really demonstrate reality - in the Govt's books I bet all student debt is classed as recoverable and hence not Govt spending at all but 'investment' in our countries future - in actual fact it is 'investment' in making the unemployment figures look better.

    For those blaming this govt or the last govt you really need to look around you at the rest of the world - it does not matter what the govt is the problem is debt.

    I think I am right in saying that Germany did not have goodt imes like us in the late 90's and naughties (how well named they have turned out to be)and were much more cautious with tax and spending - they are now reaping the rewards comparatively - but rather like the pensioner with their savings they are finding their prudence affected by the profligacy of those around them.

  • Comment number 30.

    johndon46 wrote:
    When will this totally discredited unelected shower of know nothings realise that to carry on in their present inane direction the country will be in a worse financial state than Zimbabwe. The cuts with a sharpened knife that are taking place now will leave us all on the breadline and 20 million unemployed. Since its inception government has been run by people who have no idea how the vast majority survive but as long as they are comfortably off then they actually beleive that the rest of us are in the same position. Lets have another election now so that the people can actually have their say. THE CURRENT ENCUMBENTS WERE NOT ELECTED!!!!
    --------------------------------------------------------
    I pretty much remember there being an election, which returned more Tory MPs than any other party, and the election of a fair few Liberals who bit the bullet and decided to bring a stable government. If I remember rightly too, since Labour have gerrymandered the constituancies, the Tories need twice the number of votes to return an MP than Labour, and somewhat more for the Lib-Dems. Coupled with Labours social engineering and population replacement on a scale not seen since the Anglo-Saxons arrived, I would say they have a pretty damn large mandate to govern.

  • Comment number 31.

    Stephanie, Your final paragraph sums it up well. I do hope some your commentors read it. In particular the last sentence.
    We have merely scratched the surface of being skint. We could invest any magic money in our infrastructure but alas it always ends in the intrastructure and trousered by the chosen ones (Plan A, B....). I note that the only export growth will be in jobs. Xmas may be a long way off for some.

  • Comment number 32.

    #30 post of the week.

  • Comment number 33.

    I was told by an economist who was teaching us economics a long time ago, that economics was an art and a great chancellor was one who guessed right. He was also somewhat doubtful about running a deficit for any length of time.
    There are some obvious issues with Plan A. Fistly to deliberately reduce the spending power of pensioners (8% over the next four years) and public sector employees is going to cut their spending so the growth in the private sector is not going to happen, revenue will be down as VAT and Income tax dry up and there will be more unemployed.

  • Comment number 34.

    A wikileak please about how much toxic assets the banks really have still. Any further withdrawal of lending will raise suspicions further. If the Bank of England steps in to render the commercial banks redundant what can be lost by dragging out the facts.

  • Comment number 35.

    #30 thanks for putting that silly post into the long grass. That unelected stuff is really tedious.

  • Comment number 36.

    In the coming months, unlike many previous downturns, the contraction will be led by the public sector. It will spread into the private sector as well, but we know that the public sector will shed labour and this should lead. This being the case, someone in the civil service made redundant, instead of being paid say £25K, will receive a much smaller amount of money from the state. Thus, this time round, the state's outgoings will reduce. If that person had been in the private sector, the state's outgoings would have increased. As I see it, the automatic stabilisers work for a non-government sector downturn, but not for a government sector downturn. Therefore, the economy will only start to pick up once public sector job shedding has ceased and the non-government sector has shed enough jobs to allow for the now much reduced demand. We have a long way down to go, and we won't even start back up until the 4 year austerity plan has finished. The damage done will be immense and we will all be the poorer for this ill-conceived policy. The sooner they realise that government spending in the correct way is the only way back the better.

    Or have I misunderstood? Where is my logic wrong?

  • Comment number 37.

    What was so good about 30 compared to 27 - looks like slightly less dubious use of figures, laced with an anti-Labour rather than an anti-Tory flavour.

    Stephanie says that govt spending is less to do with recovery than say global conditions - hmmm, just like what got us in this position in the first place then - more global than the extra Labour spending that people like to get on their high horse about. For extra backing to this, check out hm-treasury.gov.uk public finance databank, especially where things started in 1997. Try taking off the deficits for each year there was one from the current overall debt up to 2007-08. It wont make much of a dent.

    I really hope the Torylition does have a Plan B because if it doesn't then we really will be in trouble if things dont work out the way Osborne thinks they will.

    Another stat for those who think we are borrowing so much cheaper than under Labour. 15 year gilt start 2010 gross redemption yield 4.45%, its 4.12% today - thank goodness George was around to save us those 33 basis points.

  • Comment number 38.

    #36 that what got us here in the first place DEBT, its not going to get us out WE have to get the debt sorted out, many in the public sector are vastly over paid thats why they want a labour governemt to keep the private sector rolling them along, but the game is up. public sector should be less than 25% of the work force , all the immigrants doing UK national jobs should be sent home and the 9m on benifit made to do there work instead then we will get out of this mess labour landed use with

  • Comment number 39.

    How about this for a novel idea, give every household a 5000GBP tax credit and get them to go out and kick start the UK economy by spending it on consumer durables. Businesses would love it sales would pick up and everything would start moving again.
    Instead we give it to banks who basically stock pile it and every thing freezes up because they are so nervous about getting hit with more defaults. Take the tax burden off consumers reduce public sector employment and transfer these workers into the private sector. Help businesses by increasing there sales not cash handouts to keep them ticking over.
    Families want help to weather the storm otherwise you will have more riots and civil unrest.

  • Comment number 40.

    9. At 4:03pm on 15 Dec 2010, TurnipCruncher

    Feel free to have a knock at labour - I'm not a supporter.

    You need to understand that alongside the half million public sector jobs going will be half a million 'private sector' jobs lost directly due to government contracts being cut. As all those people lose their income they will stop spending and for every one of them that actually loses their job another ten will stop spending due to fear of losing their job - creating yet more private sector job losses.

    I sincerely hope that one of the jobs lost is yours.

  • Comment number 41.

    This country cannot afford the huge amount of economic immigrants, many of whom after being given free housing and benefits packages earn more than the British born tax payers who are expected to pay for them.End any further immigration and use the money to train our own young people.

  • Comment number 42.

    It's disgusting that our Harrier fleet is to go but aid to other countries is ringfenced.Those countries would not give us a penny.

  • Comment number 43.

    #37 what kept the debt down in the 1997-2010 period was the taxes from the spiv in the city WHICH was all bogus that was the problem. they were taxes from the future , that future arrived around 2006 but it has only taken the world to get it into view because of the lag, then the many govs also wnet on a spending spree adding to the problem. It was a open loop system with positive feedback that ran away to the debt bubble that we have.

    House prices were unsustainable back in 2002 but what was done about it , nothing , who was in charge ? BROWN was.


    it like increasing the BBC liecence fee , somebody has to pay for it
    which means the money is diverted from other economic activity to over paid celebs. Some then choose to donate this too policital parties

  • Comment number 44.

    Well done John Haynes #6 for simply stating how it is.

    If more people thought like that perhaps we could actually have a proper democracy.

    The only thing I would add is that 'ordinary people' will suffer more than the ruling classes even when the ruling classes can't predict any better than the rest of us. Perhaps 'ordinary people' should seek alliances and band together to resist economic oppression.

  • Comment number 45.

    Turnip Cruncher

    Clearly a wannabe Tory M P who should stand at the next election if they think they would actually get a vote with their minimal understndng of politics.

  • Comment number 46.

    Manufacturing our own goods is the only way forward.We led the world ,now we buy from it?We can and must compete ,whatever happened to "Buy British".The French and Germans have kept their industry,it was madness to surrender ours and rely on service industries.

  • Comment number 47.

    jon112dk wrote:
    9. At 4:03pm on 15 Dec 2010, TurnipCruncher

    Feel free to have a knock at labour - I'm not a supporter.

    You need to understand that alongside the half million public sector jobs going will be half a million 'private sector' jobs lost directly due to government contracts being cut. As all those people lose their income they will stop spending and for every one of them that actually loses their job another ten will stop spending due to fear of losing their job - creating yet more private sector job losses.

    I sincerely hope that one of the jobs lost is yours.
    -------------------------------------------------------------
    Why can't you understand that "private" sector jobs reliant on government spending are not contributing to the economy? They are in fact public sector jobs with a fancy logo. Good riddance to them. In fact, they are worse than the actual government jobs in that public money lands in the pockets of private companies in the form of profit and share dividends. Do you really want taxpayers money paying profits to corporations and dividends to foreign shareholders? And congratulations on peddling Red Millibands "talk the economy into recession" line.

    As for your final, peurile parting shot. I hope that you get through unscathed and prosper in the future in the private sector. That is all.

  • Comment number 48.

    [[[36. At 6:38pm on 15 Dec 2010, SleepyDormouse wrote:]]]
    Hi SleepyDoormouse.
    If someone earning 25K from the public purse is made redundant there are a few additional costs not least of which is redundancy pay, and related (I am not sure how long term pension comittments could impact public sector costs). Also they then no longer pay tax and NI so goverment revenues reduce. If they were doing a real job then their work has to be taken over by someone else, public or private. If they were genuinely the victim of efficiency savings then those savings will be more than just the labour costs and have to be taken into account! So all I am saying is that its not as simple nor as dramatic as it looks in purely financial terms. I haven't done the maths but I am sure some other blogger will provide the detail.
    Also you have to take into account a reduction in the value of sterling which will have both positive and negative affects but should enable exports to increase and so related employment. I suspect there will be employment growth but we will have a dip before the rise.
    Finally as with all things economic there will be a social cost; so some people will benefit and others will lose out. Regretably in whatever system you chose to live such things will happen.

  • Comment number 49.

    max2100 at 41

    Any numbers to back this up? I'm guessin no. Its not a cut and paste job from dailymail.mince.uk is it?

    I reckon a nice, flexible labour market with maximum access to resources and skills is probably best to help put us back on track a bit.

  • Comment number 50.

    No 43 - IR35

    I think you are blaming loose regulation which helped to lead a top-end driven asset bubble. I agree that is part of the problem and I also agree that Labour should have done something about this, but bottled out. However I think we need to go back much further to the 80s when Messrs Reagan and Thatcher were instrumental in the last bit of the regulate/deregulate cycle which has been going on for 100 years (for avoidance of doubt - they were in the deregulate camp surprise surprise). The next bit of the cycle is regulate, difficult with banking kicking and squealing at every turn.

  • Comment number 51.

    The western politicians have never learned the lesson from the Roman Empire,immigration killed that empire.Grow weak and die from within.

  • Comment number 52.

    I went to my grandsons Christmas school play today, packed with my 4 year old camcorder, a smile and my £18 Asda pay as you go phone. I do not live in a wealthy area (rented far out weighs bought and unemployment is high with higher than average free school meal allocation). In front of me was a mom and dad that I know are unemployed and that their 2 children receive free school meals and was shocked to see: a brand new HD camcorder, more gold than ‘me’, newer clothes than me and a modern slim mobile phone. So I started looking around and guess what they were not in the minority, it was me who was in the minority?

    Can someone point me in the direction of the poor, up’s sorry I’m here because the wife and I both work

    So:

    Grimupnorth – let her be unemployed, there is still a few years left before it is shuttered up

    KnaveOfHaerts - Xmas may be a long way off for those who work for the benefit of themselves and others

    Oblivion – it pays to be unemployed and it is here now. Well in some areas

    Johndon46 & Messi44LFC et al – thanks but no thanks for the last 13 years

    Sorry but I need a moan. We as a family have worked hard for what we have got (college/university etc) and were reaping the benefits until new labour came along and took off us to give to the poor only in the end they ended up taking from the poor to give to the rich! Talk to the butcher, the baker and the shop keepers, the publicans, the barbers and they all say the same ‘thanks new labour but no thanks for the last 13 years’ and it will take another 6 years to correct it like it did 79 to 85, it may take even longer this time due to the greater depth of incompetence.

    Good well balanced blog Steph: both sides of the main players position given equal weight but both yours and Mr P’s blog seem to have bought some divisions to the surface


  • Comment number 53.

    Nice of the mods to delay my comment so that the context will be lost in the thread of conversation...

  • Comment number 54.

    #35 Ben

    "That unelected stuff is really tedious." BUT TRUE.

    #30 TurnipCruncher,

    I think that you may find that Labour's boundary changes were supposed to rectify the inequalities established by former Tory administrations e.g. the free ride in The Shires. But then when did any government act ultruistically!

    BTW I too, like jon112dk, am not a Labour supporter. But, unlike jon112dk I do not wish that you lose your job. Argument and debate should be rampant but there is a limit.

  • Comment number 55.

    Are you still trying to make sense of what is going on? If so, just try this exercise.

    Just stand in front of a mirror, and check the image:-

    Do you lack a discernible hairline?
    Is your whole head in fact covered with a coarse grey/brown hair?
    Do your eyes slope inwards towards your nose?
    Are they shrouded by rather heavy eyelids?
    Are your teeth somewhat longer than normal?

    While you contemplate these matters, ask yourself the following:-

    Are you susceptible to moments of immobility?
    Do you have an unhealthy appetite for carrots?
    When you chew, do your jaws move sideways?
    Do you enjoy trotting along beaches (preferably with a passenger on your back)?

    If you answered 'No' to all of the above, your confusion is easily explained.

    In the jargon of Economists, Financiers and Politicians, you are a 'Black Swan'. You are an aberration! As far as they are concerned, your sort is nothing to worry about. Everything is under control!!

  • Comment number 56.

    common_man @ 52

    You're clearly cheesed off and have every right to moan if thats the case. Watch out though cos you're new political masters reckon that folks like you, still in a job, "have never had it so good".

    Welfare spending as a % of GDP was pretty much the same at the end of Labour 2010 as it had been under Tories 92-97, 13.4% versus an average of 13.6%.

    You are annoyed and need someone to blame and for you just now its Labour and people you think are benefit scroungers. Like many things the Torylition would have us believe, the numbers dont back them up.

  • Comment number 57.

    What do they call the 'Black Swan' book in Australia where a large proportion of swans are black?

  • Comment number 58.

    Is everyone reading the same budgetary book, and can someone explain what happened to the index that was supposedly called Plan B?
    One thing is clear: There is no Plan B. It's just gone!
    Through the pages of the budgetary book, everybody seems to be saying something different:
    - The Office for Budget Responsibility – there will be no double-dip recession.
    - Chancellor of the Exchequer George Osborne - “This is an uncertain world but the British recovery is on track.”
    - Labour Party – We need more moderate pace of tightening; the recovery is still too fragile.
    - OBR Chairman Robert Chote - The economy will continue to recover, but at a slower pace than in the previous three recessions.
    - OBR Chairman Robert Chote - About 330,000 government jobs will be axed by 2015, 160,000 fewer than thought in June, and the loss will be more than offset by the creation of about 1.5 million private-sector jobs. (That's nice and who exactly delivered this message to the private sector and got it on board; or what leads Mr. Chote to believe so heartily in the private sector?)
    - Cameron - hot to trot to find 7 billion pounds of welfare cuts and allocate the money to departments appears to be talking to himself.
    - The OBR raised its 2010 economic growth forecast to 1.8% from 1.2% after a growth spurt in the second and third quarters, though it said the pace of expansion was "unsustainable". (That doesn't make sense, does it?)
    - The Labour opposition and economists said the forecasts rely too heavily on exports, which the OBR predicts will grow faster than imports in each of the next four years. Why does Labour and why do forecasters believe that? Is there a current trend that supports that?
    - Simon Kirby, an Economist at the National Institute for Economic and Social Research: We think the projection for GDP growth next year is still too strong given the weak prospects for Europe…
    - The OBR calculates the chance of the economy contracting next year is around 1 in 10.
    - National Institute for Economic and Social Research: We think the chance of the economy contracting is 1 in 6.”
    - Labour - downward revision to growth prospects showed the government’s 81 billion pounds of spending cuts and a planned increase in value-added tax in January will sap economic confidence.
    - Labour Party Treasury affairs spokesman Alan Johnson: Osborne is taking an “unprecedented gamble with people’s livelihoods and the future.
    Wow, now the foregoing is a hodge-podge of conflicting information and rather a mess on which to run a country, don't you think?

  • Comment number 59.

    57. At 8:03pm on 15 Dec 2010, AnotherEngineer wrote:

    What do they call the 'Black Swan' book in Australia where a large proportion of swans are black?

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

    Blimey - that's a fair point!

    How about "Why others think we are odd!'

  • Comment number 60.

    SF Editorial:


    "That is probably the key change in this debate, relative to six months ago. There is still plenty to worry about. But the gravest risks hanging over the recovery these days look more foreign than domestic. It will be interesting to see how long that lasts."

    Agreed! But why relative to six months ago? Greece and Ireland were already reeling and needed bail-outs,Frau Markel was demanding more central control of eurozone delinquents which included Portugal,Spain and Italy.In Britain,fiscal and monetary measures had avoided catastrophe after the banking crisis,weak growth began in the last quarter of 2009.It was clear an incoming conservative government would put the policy into reverse.

    On any rational calculation,the conditions for a crisis were already in place.So Mr.Osborne`s reversal of previous policies by cuts in public spending can only be justified in the context of an ideological crusade for a smaller state,-and blind ignorance.As Mervyin King observed,Cameron and Osborne are more interested in politics than economics! (Source wikileaks 2010)

  • Comment number 61.

    I only see two things happening in the not so distant future: economic Depression and Class War. We will be then entering an epoch of social revolution.

    http://libcom.org/library/what-is-anarchism-alexander-berkman

  • Comment number 62.

    If I were the Conservatives I'd say that I'm going to wreck the economy with an axe. If I were Labour I'd say that I'm going to wreck the economy with a hammer. Many economists are saying that the economy tomorrow may be similar to the economy today.

    Couldn't we hear the opinions of someone with a clue.

  • Comment number 63.

    48. At 7:29pm on 15 Dec 2010, ObserverinMonmouth wrote:

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

    Many thanks your response to my post; it is appreciated. I do understand it is not as simple as I stated, but I was trying to get to the core of the situation as I believe the factors you mention tend to be peripheral and do not really alter the main issue about which I am puzzled.

    However, I must query with your remark "If they were doing a real job then their work has to be taken over by someone else, public or private." I suspect the intent is that they are not going to be done, or if they are, we will have to pay ourselves. Many in the public sector, in my opinion, do a real job; but I accept that many may not. It may not be producing 'nuts and bolts', 'writing software' type of job, but many are essential to the smooth running of the economy. They enable the private sector to get on with their job. My concern is that the cuts will be arbitary / haphazard in nature and many good jobs will be shed along with the bad. We will see what happens to justify my views, but by the middle of next year, I am expecting there to be news reports of services considered to be important to many of us being in decline with things not happening as fast as in the past if they happen at all.

    You also comment on sterling; I agree it will have an effect, but we need it to sink a fair way for our costs to rival that of other countries; so little help there then!

    I agree there is going to be a dip, probably a significant one, but I am not so sure that there will be a rise of any significance until the state starts spending again and unemployment is reduced to give industry the confidence to invest and get a return. The external sector won't help us overall, the private sector won't invest and employ people, it only leaves the government to pull us out of the hole we seem to be in [unless we build an export market with the men in the moon!]

  • Comment number 64.

    In the dark night
    under the clouded city sky,
    he walks to the trees
    and there while all else have died or moved away
    they stand, waiting for the spring,
    whence they will start growing
    again.

    For whose seed shall be sown to grow again
    to be the trees in five hundred years
    and what puny person matters unless he
    keeps the love alive that protects these trees.
    We are only people, and we may chop them down,
    but whether or not we do, we will be all gone
    if they are all gone.

    There is the one, the child,
    grown in these twenty years,
    bigger but not yet big enough to
    reach through time and spawn for eternity.
    What with this?
    Should he measure it, and would it grow faster?
    Should he theorise on its growth,
    or whether it is shrinking?
    Could he even sit by it every hour of the day
    every day of the year,
    every year of the century
    until it grows big enough?

    No, he cannot do these things,
    and he cannot even reach through time
    to love its future,
    so what can he do
    but write the poetry of the beauty
    of the every minute that it lives
    and grows
    despite all of us
    despite all of us hurtling about
    in machines that spew noise
    while we wonder at our
    jobs, our futures, our bank accounts.
    There is a hole in economics
    where there should be a soul.

    Merry Christmas.

  • Comment number 65.

    47. At 7:21pm on 15 Dec 2010, TurnipCruncher

    Many of the jobs in the so called 'private sector' are supported by public spending - that's (obviously) why I put it in inverted commas.

    The bit you still don't seem to understand is that when all those people ('private' or 'public' sector) stop spending, businesses without customers will fail and what people like you bizarrely think are 'real' jobs will also be lost.

    For my part I do not wish you well. You are clearly a tory. Anyone who wishes other people, decent people who with families to support, to be put out of work is worthy only of contempt.

  • Comment number 66.

    Am I in time for the mindless ranting thread. I hope I haven't missed it.

    I'm not too late? Oh great..

    I hate those Tory hatchet men. No I don't. I hate those Labour scroungers. No I don't. I hate this thread.

  • Comment number 67.


    no country has ever failed from over production, or being over educated, invest in our nation, put the people to work, put the youth into university, and let the rest take of it's self.

  • Comment number 68.


    Plan B ?

    Why would an ideologically driven rabble want a Plan B.

    Plan A seems to be working well...for them.

  • Comment number 69.

    @58 BluesBerry illustrates very well that the fallout from the Financial Crises has caused us to get lost deep in the woods. Nobody seems to know where we are; let alone which way we should go.

    But as Alice discovered when she asked the Cheshire Cat. If you just want to get out of here then any path will do.

    Take Household Debt, for example (@16 Dempster ) Is it the fault of the borrowers or lenders, or both that the level of debt is not increasing. How far does Bank Rate have to drop, for heaven's sake?

    Many of us believe "the system" is fatally wounded.

  • Comment number 70.

    SLEEPYDORMOUSE,

    I believe you would be correct in recessions past in your assertion of growth not returning until the austerity ends. However, this is not a recession like anything we've had in living memory.

    We will face decades of basic commodities taking ever more of our income and hence the number of people with disposable income and the amount of that disposable income is set to reduce quite drastically. So discretionary expenditure on "stuff" is going to shrink rapidly.

    This can only mean that our very specialised economy will see huge reductions in demand and hence jobs. Without cheap energy we can not sustain a growing world population and growing per capita consumption.\

    The substitutes being offered as magic bullets to step in for oil such as electric cars are a non starter. They are too expensive and will not become practical due to constraints of mineral supply, net energy yields, and infra structure capital.

    Get out of debt if you can and learn to live as a community with your neighbours and family is my advice.

    Good luck to us all.

  • Comment number 71.

    The ONS figures show unemployment rising by 35,000. But the sampling variability is plus or minus 85,000 according to the report. That means that the change in unemployment is somewhere between a rise of 120,000 and a decrease of 50,000 (to 95% confidence). I haven't seen a single news report that mentions this, including any on the BBC. I find it depressing that we have headlines bemoaning increases in unemployment when there is in fact quite limited confidence that the number has even increased and not decreased. Surely reporting the confidence in the numbers is in the public interest?

  • Comment number 72.

    66. At 8:33pm on 15 Dec 2010, Hacky The Hufrex wrote:

    Am I in time for the mindless ranting thread. I hope I haven't missed it.

    I'm not too late? Oh great..

    I hate those Tory hatchet men. No I don't. I hate those Labour scroungers. No I don't. I hate this thread.

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

    Then why, you poor fellow, are you reading it!

    For goodness sake, GET A GRIP!

  • Comment number 73.

    70. At 8:53pm on 15 Dec 2010, Sage_of_Cromerarrh wrote:

    SLEEPYDORMOUSE,

    I believe you would be correct in recessions past in your assertion of growth not returning until the austerity ends. However, this is not a recession like anything we've had in living memory.

    and ...

    Get out of debt if you can and learn to live as a community with your neighbours and family is my advice.

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

    Best advice I've heard in a long time!

    Anyway, that's my philosophy.

  • Comment number 74.

    It would be wise, at this point, to reflect on the fact that the people and organisations making these dire economic predictions did not predict the greatest economic event of the last 70 years. This includes numerous economic jouralists (who could have reported the emerging problem) or the organisations such as the FSA and Bank of England (who could have made some attempt at promoting effective self regulation of bank lending.) Furthermore, public sector unemployment may well rise. The Coalition Government has a stated priority to out-source as much of the public sector as it can. Why be surprised when this appears is the statistics?
    This together with other Coalition policies are likely to take money out of the economy (eg the rise in VAT) and may result in a deflationary spiral. So why be surprised when it actually happens?

  • Comment number 75.

    But surely we were not supposed to have 33,000 public servants out of work and no take up by the private sector? HMG told us that the private sector would take up the slack so we did not end up with an extra 330,000 unemployed. So what has happened? We are told exports are up, recession is over, manufacturing is getting loads of orders so why no extra jobs?
    Seriously, HMG must have their heads in the clouds if they think the private sector is going to take on thousands of public sector workers - neither of them wants to work with or for the other, the culture is all wrong

  • Comment number 76.

    56. At 7:57pm on 15 Dec 2010, TheGingerF

    Was it that obvious LOL!

    Seriously this isn’t a today thing with me, I have two pet hates

    1. what the previous government as got away with (I still call spin, lies). I taught at a 6 form College and saw funding removed and reinstated into a different area and called new money. I saw our NVQ System devalued, as much that a level 2 is not even worth loo paper, Maybe to enable the increase in class sizes because of the introduction of level 2 Classroom assistants.
    2. Banks and (b)ankers (all encompassing). Securitisation – how many mortgage payers out there know that their mortgage was split in 2, with the provider holding the rights but not any rights to the money owed? i.e. they sold it on. To enable this to happen G Brown (chancellor) deferred registration long enough for this to happen. Who as given them permission, not I and it wasn’t in my contract! This as happened with ordinary loans as well. What about the bank reserve, who allowed it to be wavered?

    I have said it before (many years ago) the worst pm (TB) and chan (GB) in history only to be proceeded by the worst pm (GB) and chan (AD) in history, Come back in 20 years time and tell me what history says.

  • Comment number 77.

    #30, 32 and 35
    Having a mandate to govern is not just about the number of people who voted for you, it's about what you told them they would be voting for.

    The Tories did not win a majority on their own, and the Lib Dems led us to believe (prior to the election) that they broadly agreed with Labour's position on the deficit. (How naive we were...)

    The coalition may have a mandate to do many things, but draconian public service cuts are not among them. Nor for that matter is "yet another top-down reorganisation of the NHS." Now who was it that warned against that? And who is it that is implementing such a reorganisation without having even included it in THEIR OWN manifesto?!

    (Slightly off topic but the blood is boiling a little less now...)

  • Comment number 78.

    As I understand it, a prime justification for moving economic activity from the public to private sector is to benefit from a competitive environment. Unfortunately this hasn't happened in the past, so I see no reason why we should expect it to occur this time around. Instead we will see yet more legally privileged private monopolies appointed as sole service providers, taking money from the public both directly and via government subsidies, with the only efficiency savings being in the reduction of their corporate and private tax payments.

  • Comment number 79.

    #76 common_man_123

    "I have said it before (many years ago) the worst pm (TB) and chan (GB) in history only to be proceeded by the worst pm (GB) and chan (AD) in history, Come back in 20 years time and tell me what history says."

    Hopefully the ramifications of the true damage caused by Thatcher and her corhort of chancellors will show them to be truly the worst PM and Chancellors.

  • Comment number 80.


    70.At 8:53pm on 15 Dec 2010, Sage_of_Cromerarrh wrote:
    *-*-*-*-*-*

    Many thanks for your response to my initial post. We largely agree and I believe your assertion that this recession is like no other. This recession has started in the heart of the capitalist system, the financial sector. I find it intensely frustrating and frankly unbelievable that the financial sector appear to have largely brought this on themselves and our governments collectively did little/nothing to fend it off. But we are where we are and solutions are needed.

    The non-government sector owes a vast amount of money [individuals and companies] and an unknown mount will never be repaid. Foreclosuregate in the US just adds a complicating dimension for them. What property do they have that can be bought and sold with confidence. Only that which is owned outright and has not had a mortgage on it for say 20 years. I wonder what percentage of the total that will be then? I'll bet its small. This creates a huge problem for them that will be fought through the courts and will cause the US infinite problems. It is still a superpower, just, but it is waning fast.

    How can the non-government sector get out of debt?; this is the most important thing that needs to happen. People and companies need to work and pay off their debt. No work = no debt paid off; what a useless recipe for the future. We don't have any other way to do it. Government policy worldwide needs to be seeking to build trade and employment to allow this to happen. That means jobs and spending. The spending then provides the income for paying off the debt.

    But who is going to spend? The non-government sector is now on its knees [or heading that way] in many of the UK's traditional markets. In the UK the government policy is for austerity and job cuts so there will be less spending. [LESS SPENDING=LOWER INCOME] This is exactly the opposite of what is needed. While there is capacity in the economy [unemployed and underemployed] there is room for more government spending [and in my view we should by-pass the markets and just spend the money, not borrow it] Now I hear the cry,'that's printing money and will cause inflation' It doesn't have to. Traditionally over the last 20 or more years only interest rates have been used to control inflation – a very blunt and useless weapon, but beloved by the few financiers it benefits for the economic power this gives them. Fiscal policy, ie taxes, need to be targeted to control inflation and used as and when necessary, not just once a year.

    We need the derivatives and bond markets to be put in their place; the former is totally out of control. Some derivatives do serve a useful purpose, most do not. The bond markets are at the heart of our savings and investment industry providing pensions etc; they do deserve consideration.

    Austerity cannot, I believe, be the correct way forward. Reducing output will not help pay off the debt, so in my simple logic, its wrong. The government should be concentrating on ensuring we have the means to build much needed productive capacity in the economy, not dragging it down to the level of Ireland's.

    If we follow our current path then the prediction at #70 may well be an all too real prediction of our future.

  • Comment number 81.

    79. At 10:33pm on 15 Dec 2010, foredeckdave wrote:

    "Hopefully the ramifications of the true damage caused by Thatcher and her corhort of chancellors will show them to be truly the worst PM and Chancellors."
    -------------------------------------

    Margaret and her cohorts changed attitudes to a destructive way forward. This was far more important than her policies, per se. Into this gap, the neoliberals have jumped and they continue to advance.

    We need to reverse the trend. Sadly, ED Miliband is not likely to be the saviour in my view.

  • Comment number 82.


    Not enough attention is paid to unemployment rates amongst the younger generation pretty close to 20%.

    Nor to the quality (or lack) of jobs created by the private sector; part-time and poorly paid.

    Add tuition fees to the mix and the very poor supply of affordable housing available and you have a very potent cocktail indeed.

    Talking of 'cocktails' (of the Molatov kind) is it not deplorable the way the students behave in Greece.

    Fortunately this cannot happen here as we are privileged to have a bunch of politicians who 'lay out their wares during an election campaign' and then can be relied upon to be true to their word once in office.

    Truly we are blessed.

  • Comment number 83.

    SLEEPY good question. How can the private sector get out of debt? The reality will be inflation and/or partial debt write-offs. Creditors will have to accept that the money they get back is less than the value they lent in the first place. Many such institutions (banks) will have to go bust and be nationalised so that we can concentrate on far more government controlled investment in the future in areas we desperately need such as energy development and national employment.

    The longer we delay on this the worse our fall in living standards will be. Unfortunately it could take between 1 and 5 years for our leaders and the media to realise we are in a totally new era as far as economics and human society is concerned.

  • Comment number 84.

    'But the gravest risks hanging over the recovery these days look more foreign than domestic. It will be interesting to see how long that lasts.'

    !!!!

    The risks have always been foreign. It started in the US and it has to end in the US. There is no sign of it ending in the US at the moment. The US looks like a jobless 'recovery' and the US housing looks problematic with a reported 41 percent of mortgaged householders considering throwing the keys in due to negative equity. In the US due to 30s law there is no comeback for doing this. A tanking of the US housing market looks entirely possible.

    Bush did a better job on the US than a man living in a cave somewhere that Bush claims is the number one threat to the US.

    The grave risk is a jobless recovery here.

    'It will be interesting to see how long that lasts.' Answer some years until things pick up in the US.

  • Comment number 85.

    81. At 10:48pm on 15 Dec 2010, SleepyDormouse wrote:
    We need to reverse the trend. Sadly, ED Miliband is not likely to be the saviour in my view.

    *********************************************************

    And how would you propose to do that.

    Without exception every Tory administration since WW2 (and before) have been very consistent and diligent in looking after their own.

    Without exception every Labour administration since WW2 has been innefectual.


  • Comment number 86.

    re #2 - It's not just Steffie who is getting silly...

    The Iron Lady was/is a neoliberal {previous Blog

    Now the Tories inherited record economic growth

    Yer 'aving a larff!

    Leave it ahht!!

  • Comment number 87.

    28 Oblivion:

    'What a load of garbage. The meoliberal conservatives decide to slash state spending in total subservience to the markets (aka bankers and pro-US investors), and then we are told

    "Oh no, look what we have here! Unemployment! Now how on earth did that happen."..'

    Hmm. And who would the biggest buyer of Western bonds be - why the one country holding the biggest surplus. Some did say that WW3 would be economic.

  • Comment number 88.

    84. At 11:08pm on 15 Dec 2010, Not Buzz Windrip wrote:

    'It will be interesting to see how long that lasts.' Answer some years until things pick up in the US.

    *******************************

    Very true. America sneezes and the Brits get Bird Flu or something like that.

    But why. Presumably the US are not importing UK goods, but they don't have a problem importing German goods.

    Perhaps the stuff we export is more discretionary.

  • Comment number 89.

    re #79
    Think you may have got AB:GB and GB:AD in the wrong order but what about JM:NnL? MT:GH was OK from 1984-86 but they did start Big Bang. MT:NgL was a disaster because he did not have the guts to stand up to her for one Budget. Hardly a fair run for a full assessment.

    No. My candidates for worst ever might be Heath and Barber. Had they not got it so appallingly wrong we might have been in a very different place today.

    That said, what a record! We can list more than a handful of poor to dreadful PM:Chancellor combos in only forty years! Auughh!

    Make that fifty? HW:RJ? Auuuggghhh! Aaaaaaauuuuuuggggggghhhhhhhhhhhh!!!

    No wonder people leave the country ...

  • Comment number 90.

    jon112dk wrote:

    47. At 7:21pm on 15 Dec 2010, TurnipCruncher
    Blah blah blah,
    For my part I do not wish you well. You are clearly a tory. Anyone who wishes other people, decent people who with families to support, to be put out of work is worthy only of contempt.

    jon112dk wrote:

    9. At 4:03pm on 15 Dec 2010, TurnipCruncher
    Blah blah blah,
    I sincerely hope that one of the jobs lost is yours.
    ----------------------------------------------------------------

    And it is this, pathetic and spiteful bile why nobody cares what the left thinks. "We lost the election! Baaaawwwww! Democracy sucks!"

    I do not wish anyone out of work. I wish their work to cease being subsidised by mine, and to become gainful and profitable. You on the other hand, would have everybody who disagrees with you punished with no care for their families. A very, very sad man.

  • Comment number 91.

    Let's look at what this means ........ reduced public sector employment will result in reduced public spending, which will reduce the deficit if the economy does not shrink, which will guarantee continued low rates for government borrowing.
    Which is quite good if it does not cause a recession.
    Maybe a bit risky if we slump into a depressive spiral.
    Or very lucky and astute if we all cheer up and go to our bankers for a loan to build the extension .......
    BUT A SHAME WE HAD TO LOSE ALL THE NICE THINGS WE WERE DOING TO HELP PEOPLE RECENTLY.
    So let's give credit where it is due.....Gordon was right, we do need economic growth and we really did need QE....it saved our bacon.
    And much as he gives me the creeps,George Osborne was right in that we do need to keep the sovereign debt raters happy in order to keep borrowing rates cheap.The annual deficit had to come down, though it was coming down anyway.

    THE TORIES HAD TO BADMOUTH BRITAIN UNDER BROWN TO GET IN, THOUGH BROWN WAS DOING A GOOD JOB SHOOTING HIMSELF IN THE FOOT ANYWAY, WHEN HE WASN'T BEING SHOT AT BY HIS OWN SIDE.
    But that was then and this is now.

    And seeing students legitimately protesting, but getting the blame for idots in a Roller driving into a riot scene, is not cheering.
    I like Charles and Camilla, they are amusing relics.I am glad they are unharmed and sorry they were frightened, it was not their fault.
    Who on earth was minding them and what on earth were they thinking?

    We are all in a National Downer at the moment.
    And it affects everything.

    To avoid a recession we need a booming economy and a return to a sustainable 5-7%pa property price-rise over the next decade.

    Now what is holding us back is reduced mortgage lending .....partly because the main lenders are either government-owned, part government owned ,or stingy and overcautious survivors....... otherwise they would not have survived.

    So this duopoly of the zombie banks and the calcified stingemongers are now united in ensuring that prospective purchasers are given:
    (a) low house valuations,
    (b) low multiples of income for lending,
    (c) low loan-to valuation mortgages,with
    (d) high in real term mortgage rates.
    (e) high premiums over base rates.

    Those already owning a home are reluctant to sell it for fear of losing a good mortgage rate if they are on a tracker.
    And if they have purchased recently they could be put into the position of having a much higher loan to valuation percentage now than when they bought their home, therby disqualifying themselves from a good deal if they want to move up the housing ladder.
    So they stay put.

    Anyone who is self-employed is assumed to be an Arfur Daley conman.
    And anyone who wants to buy land or develop a building is regarded as a dangerous nutter.

    Everyone in the media blames bankers for over-exuberance.
    But it is under-exuberance which is killing the market today.

    This doom and gloom is not sustainable, it is completely unrealistic and depressing.
    Making banks have a higher percentage of assets in liquid form only compounds this problem.
    So we need to re-appraise the rich and successful and not blame them , and we need also to stop blaming the poor for our woes too.
    Regarding anyone down on their luck as a benefit scrounger is degrading and depressing and disempowers those looking for a job.
    Regarding public services as a burden rather than an asset is also wrong-headed.
    So David Cameron, if you want to change Big Society, you are also going to have to change your own mindset. A big think is what is needed.

    My banker told me today it is mortgage demand which is really reduced at the moment rather than the lenders' funds, but the criteria applied to lending are over-rigid..


    So we have to do a bit of a U-turn.


    We actually need big banker bonuses.Let's make them in the form of share purchases in nationalised banks to dilute the government holding in order to free up lending, as banks could then return to being businesses able and willing to take risks and raise funds again in the open market.
    We need freer lending and less controls on banks.
    Anbd we need to make sure that those banks too big too fail are not simply shrunk and then made to fail.
    We do need public spending.
    And we actually need wage inflation!

    And water-cannoning our kids is not the answer.
    The public are much too smart not to know this.
    Gut instincts tell us that the students are quite right to protest.
    The whole business stinks.
    Could all this public unrest we are seeing be an unintended way of stirring up industrial action to inflate us out of trouble?

    And we need to abandon our xenophobia.
    We need more non-doms.
    We need more immigrants.
    We need to stop and think about asylum seekers.Each one represents a 50k investment and if we kick them out now we are throwing away their skills and determination.
    Amnerica and Australia and New Zealand and Canada and Hong Kong and Singapore and even, let's face it,London, were made great by immigrants, not by natives, great as they are.

    And where does the daft idea that educating young people is a burden best avoided,come from? Is it not just a tad bonkers?
    When actually we need more university funding to keep our young off the streets and to help them to learn useful skills.

    My dad worked in a pub and had five kids ,now all graduates and all doing well, all thanks to university grants, which meant we did not have to have to go out to work at sixteen, nor did we have to spend too many hours in menial jobs rather than studying,(though we did a bit and worked in the summers and it was good for us) .....in other words we were helped to escape the working-class trap of not getting tertiary education.
    He was a failed businessman but a great father.
    And our country gave his kids a chance.
    So let's help young people study without worrying about future debt.
    And when they qualify let's help them save up deposits or give them a handy tax rebate on their first flat for the first couple of years.
    And quite frankly, why a young couple cannot get a 95% mortgage is ridiculous.
    Should MIRAS be reinstated for a few years?
    Is it not time also to look at what really caused the crunch in 2007-9 in UK, .....it wasn't just the lax lending ,it was the overkill by the Bank of England in raising rates and not bringing them down enough until it was too late that had a hand in it too, but nobody is writing about this, yet anyone who had a mortgage noticed their payments double .
    And the failure of the central bankers to prop up the banks during their cashflow problems before it was too late is also a big issue much neglected.
    We are all blinded by the glare of seeing it all as being due to exuberance, fraud and lack of caution in the boom ...... rather than a result of blind panic in the crunch.
    It was the failure to help wholesale lenders and mortgage bundlers to reassert the true value of the assets they held, by unrealistically condemning them as worthless,which was as much to blame.
    Yes a lot of the loans were silly but probably 99% were actually quite sensible.
    And there was a failure by the media to appreciate the hard work, restraint and vision of the vast majority of those working in the financial sector, especially in those very banks we now condemn as monsters.
    We were better off with Fred than without him!

    Yes, Robert Peston let us know what was going wrong, but in the process, what was going right was ignored and wrongfully abandoned.
    And we are still doing it, condemning successful bankers who are paying half of the extra tax which is keeping us out of trouble.

    On a lighter note ,I actually think the country is going to do well in 2011.
    I think the economy is going to grow well and that unemployment will fall.
    I think the housing market is going to bounce back.
    And I am hoping that the Coalition will get off their soapboxes and start treating the poor, the young, and the unfortunate with decency.


    I have a niece who has mental health problems and is unemployed.
    She actually voted Tory because she thought the government were spending too much.
    Now she risks losing her housing benefit and is mentally under a lot o strain.
    Is she a scrounger?
    Her mum is able to work and pays £40k tax a year because not having the daughter in the house means she can leave the house and not worry about it being trashed by the daughter during the day.
    The mother was also quite sympathetic to the Tories.

    But that was then and this is now.

    For every Tory succeeder there is a wayward son or a dementing parent.
    And we cannot help but notice that the very fabric of the country is turning a bit nasty.
    Too much ying with Brown and too much yang with the Coalition.

    http://en.wikipedia.org/wiki/Yin_and_yang


    One of the reasons the electorate are so disgusted by the Libdems is that the very things they were valued for: their ambivalence, their combination of freethinking with a free conscience ...... have been abandoned.
    They have taken sides, for the sake of power, when it was their very lack of power which made them so attractive in the first place.

    How did we get here and how can we sort it out?

    The lady might not have been for turning but the country is!

    All of the people who voted for the coalition are looking like turkeys this Christmas!

  • Comment number 92.

    You read about the troubles of Dublin and then hear that the good restaurants are still mobbbed, the theatres are sold out , and there is still a huge amount of cash in the place.
    People still earns huge wads of dosh if they are still working.
    For a lot of people it has been a terrible time with job losses and negative equity, but for a lot of folk it is still a fantastic place to be.
    And that is happening herein Britain too.
    As our economy shrugs off the public sector it resembles Scandinavia less and America more.
    And I don't think that is what people voted for, is it?

    A big sock it to'em rather than a big society.

  • Comment number 93.

    80. At 10:43pm on 15 Dec 2010, SleepyDormouse wrote:

    How can the non-government sector get out of debt?; this is the most important thing that needs to happen. People and companies need to work and pay off their debt. No work = no debt paid off; what a useless recipe for the future. We don't have any other way to do it. Government policy worldwide needs to be seeking to build trade and employment to allow this to happen. That means jobs and spending. The spending then provides the income for paying off the debt.

    Since Lehmans collapsed I have followed the financial crisis and educated myself in all things economic, the financial instruments that caused the problems, the banks, the rating agencies, the Fed and the Government bailouts both in the US and the UK and the monetary systems. I can only say that after thousands of hours of reading I have no hope what so ever of there being an economic recovery.

    The only time GDP grows is when Governments, Companies and Individuals take on debt, so when they pay debt down GDP contracts. I know that sounds absurd but think about it, that is the reason we are in the situation we are in now, the financial crisis came and everyone is trying to clear their debts so they stop spending.

    Also, when you repay your loans or mortgage the money does not go back into the financial system, it just gets used to reduce the banks liability and then gets written off as it never existed in the first place. This is the dirty secret that the whole financial system is built on and the reason why this recession will only end in depression and the economic collapse of countries and currencies.

  • Comment number 94.

    [[[70. At 8:53pm on 15 Dec 2010, Sage_of_Cromerarrh wrote:]]]
    Well said Sage!
    It is amazing how many people including economists and politicians assume we can soon return to growth to solve our problems. It really should be blatantly obvious that consumerism which has fuelled growth for a long time cannot continue partly because of dwindling resources but also because of people in developing countries competing, more effectively in some cases, for those very same resources.
    We can join the competition in the medium term which requires reduced costs and by some mean far more productivity but in the longer term the physical resources are being exhausted and the more competition there is the quicker will be that depletion!
    It really does need more than the Big Society to address these issues. It needs some Big politicians with long term views.
    Meanwhile buy a bit of land if you can (or rent it) and learn how to grow things!

  • Comment number 95.

    [[[93. At 02:19am on 16 Dec 2010, stennylfc wrote:]]]__________________________________________________________________
    A rather negative view but there is truth in the fact that many people and countries are dangerously over borrowed and for them the solutions can only be austerity and a little inflation over an extended period. The danger of course is that austerity can lead to social unrest and its anybody’s guess where that will end. And of course austerity will lead to a drop in incomes and asset values which will mean, debt default and haircuts for some lenders. What other way is there? You could print even more money to inflate the debt to more manageable levels more quickly but as has been said by others the end result is bread costing £100 per loaf. Hardly a sensible solution in the medium term!
    On the positive side not everyone is over borrowed; some people and countries have accumulated assets, saving etc. These will be harmed by inflation so it’s up to them to make those assets work by investing rather than simply sitting on cash. But even if they do just save then someone else will probably use those saving to invest; oh I hear rumblings about those nasty bankers again! If they invest to stimulate economic activity new jobs will be created but if investment is in assets such as property that will simply fuel another bubble and another crash.
    The same is true for countries but the debtor nations have to maintain confidence so that that they can borrow to invest. I use the word invest advisedly as it’s always a dangerous game when politicians are involved! Investors must feel that one day they will get their money back hence the need for both people and countries to maintain sensible level s of debt and for those with excessive debt to reduce annual deficits. It’s all about confidence.
    There is an old saying which I paraphrase; neither a borrower nor lender be! Admittedly that would make life difficult so some form of credit and therefore debt is required to enable growth. Unfortunately we in the western world have had far too much credit for far too long and the time has arrived when it has to stop.
    Sorry.

  • Comment number 96.

    [[[92. At 01:21am on 16 Dec 2010, onward-ho wrote:]]]
    I suspect that will be to do with Ryanair flying people into Dublin from all over Europe. Good for the local economy I imagine.
    I went to Eire with my wife two years ago and was horrified at the price of everything! It was more expensive than France and that is saying something. Mind you there was a hell of a lot of empty property whereever we went and everything seemed to be for sale.
    I bet things are cheaper now.

  • Comment number 97.

    Latest comments on energy (the electricity for homes and businesses variety), experts and government warning that prices could rise by a much as 25% over the next decade.

    This is another massive under-etimate in what will happen to the price of generated electricity. It will be many times more than 25% higher in a decades time. Uranium is not plentiful and by the time new stations are built we will be approaching peak uranium which will be brought forward by more nuclear power stations. Well within a decade of new stations coming on line we will have hit peak uranium and it's price and availability will leave us with a load of albatross nuclear power stations that we won't be able to afford the electricity from.

    Government and it's advisors really do need to do some basic resource supply analysis and investigation. Too long they have relied (believed) the lies of despot governments as to how much oil they are going to be able to supply the world with. They are making the same mistake now with other sources of energy such as nuclear, battery technology for transport, biofuels, and wind generation.

  • Comment number 98.

    Onward-ho

    The Japs have been doing it for 20 years and the UK is in a similar situation. Why can't it be doom gloom and misery for the UK for 20 years too?

    Part of the problem is that the media keep re-iterating the word "recovery" as though the status quo as it was is something "recoverable". This is either monumental status quo bias to the point of delusion, or it is outright stupidity.

    The center of the world economic system was the USA, and still is, but it's on its way out. As Gore Vidal said, "It's over!".

    The real Plan B is a decade or two away, I think. Hang on to your jobs.

  • Comment number 99.

    Late last night I was struggling take in what appeared to be not one of Stephanie's finer pieces of writing and analysis.

    > SF: 'For some time, the UK labour market has been "Exhibit A" in the government's defence of its budget cuts. When anyone questioned whether the economy could absorb an estimated 330,000 in public-sector job losses, ministers would point out that an extra 350,000 jobs had been created in Britain since April.'
    -----------------------------------------------------------------------
    Perhaps if the politicians making that claim had been economists they would know that there are different sorts of jobs (seasonal, etc), a constant churn of jobs, (new created, others lost) and that it is the 'net' figure (the one New Labour and the Unions and, especially Gordon Brown lost sight of) is the thing that is most important.

    And that you need to look at that figure with inward/outward migration in mind.

  • Comment number 100.

    re #97
    Message from electricity customer to Government "There is no money left."

    Hey! Chris Huhne, be very careful out there today.

 

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