The responsibility of borrowing
Is Gordon Brown gambling on spending and borrowing to get us through a recession? That's certainly what he and his chancellor have led many people to believe. It is not, however, what the prime minister actually said this morning. Nor does it appear to be what the government's actually planning to do.
As so ever in politics, context is all. Last week saw the release of figures showing borrowing at a record high. For years political journalists have had fun watching and highlighting the moment in Brown budget speeches when he galloped through borrowing figures which were far higher than he'd projected.
This week will see Alastair Darling, the man he appointed to succeed him, finally being forced to admit in a speech that Brown's much vaunted fiscal rules have already been broken and will have to be torn up and replaced with a new fiscal framework. That's why ministers have spent the past few weeks making the case for borrowing as a virtue rather than a vice and it's why Gordon Brown said this morning:
"The responsible course of government is to invest at this time to speed up economic activity."
However, the prime minister also went on to say that:
"As economic activity rises, as tax revenues recover, then you would want borrowing to be a lower share of your national income."
That's because there is another part of the context - the reaction of the financial markets. The pound is on the slide and the Shadow Chancellor, George Osborne, is not the only one saying that that's because people are anxious about the state of the government's finances.
Borrowing, as any school student of economics knows, rises automatically in a recession since tax revenues shrink and benefit payments soar. In theory, governments could cut spending or raise taxes to avoid this. No serious economist or politician I know of is arguing for this. The Tories describe this as "a necessity not a virtue" - a consequence, in other words, of past failure, not a strategy for future success.
So far, Gordon Brown's argued that spending should be maintained not increased. So far, the Treasury's said it's looking at re-prioritising within existing spending totals and not re-writing those totals.
The unanswered question is whether they will go a bit further. After all, they had to borrow to pay for that £2.7bn tax cut to end the political crisis over scrapping the 10p tax rate. What, the argument might go, is a few more billion between friends? Wouldn't a little bit of extra borrowing put the Tories in the tricky position of either opposing an electorally popular goodie - a new handout here or the cancellation of a planned tax rise there - or simply saying that they would have done the same as Labour.
What ministers cannot afford to do is to appear reckless about borrowing or spending. Thus, they need to convince the markets that they have a plan to reduce it in the future. On this debate, the Tories are on firmer ground. They can fairly point out that they have argued for years that the government was living beyond its means and that they have come up with a big new idea - an office of budget responsibility - to keep spending under control in the future.
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Brown out now.
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Jonathon Freedland pointed out in his book 'Bring home the Revolution' that that the Americans are not keen on QUANGOs because they are fundamentally undemocratic.
I agree, and therefore cannot work up much enthusiasm for yet another QUANGO the mooted Office of Budget Responsibility.
Which part of 'democracy' do these politicians get?
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Is the BBC out to commit some form of ritual suicide in the event of a Tory election win. This headline, http://tiny.cc/FUZdh could equally well have been Mandelson admits to lie over original dates of Russian meeting. However it is not. Why does Osborne headline with Mandelson buried at the end of the article? I know what I think, I also believe that many thousands of others think the same.
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Is Gordon Brown gambling on spending and borrowing to get us through a recession? That's certainly what he and his chancellor have led many people to believe. It is not, however, what the prime minister actually said this morning. Nor does it appear to be what the government's actually planning to do.
No Nick, that's exactly what they're planning to do.
After all, they had to borrow to pay for that £2.7bn tax cut to end the political crisis over scrapping the 10p tax rate.
No Nick, they didn't end it. Get real.
What ministers cannot afford to do is to appear reckless about borrowing or spending.
No Nick, what ministers cannot afford to do is to BE reckless about borrowing and spending.
What has history taught us? Labour governments end in total carnage, every single time.
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However, the prime minister also went on to say that:
"As economic activity rises, as tax revenues recover, then you would want borrowing to be a lower share of your national income."
The PM also said 'no more boom and bust.'
Disgraceful.
And you Nick--- you've given up all pretense of impartiality. You ought to be sacked.
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"The responsible course is to borrow now to maintain growth and output, and to reduce borrowing as a proportion of GDP as the economy recovers and tax receipts rise again."
I may be cynical but to this Government if £100 billion is borrowed this year and £50 billion borrowed next then 'borrowing has reduced' - true but DEBT has risen. The Government should be saying that DEBT as a proportion of GDP should be reduced - if this does NOT happen then all that occurs is that there will be a new credit crisis when the Government, as opposed to the banks, can't service its debts.
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'What ministers cannot afford to do is appear reckless about borrowing or spending.'
(Chokes on biscuit and sprays mouthful of tea at monitor!)
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Brown's big plan for recession is the same big plan he's been running during the boom years - tax, borrow and spend. The same policy that helped us get into this mess in the first place. All the "hard pressed families" up and down the country will be dealing with their drop in disposable income by cutting back on spending, not maxing out their credit cards.
I fear that the taxpayer will be paying off this man's folly for generations to come.
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the prime minister is playing god with the future finances of this country this is typical of a megalomaniac that just cant help himself.
will he reduce the wage bill of mp's to help pay for his loan? no he will give himself a pay rise as always.
so when it all goes wrong we can only assume that income tax will increase, duty on tobacco,alcohol and fuel.
as beer sales drop in this country the governments income drops thus a raise in prices is to be expected.
we the people of this country will have to suffer and he will walk away scot free.
there is nothing we can do about it sadly but we will know its coming.
if his borrow and spend policy works he will be as big a hero as is possible and the country will survive and be better off, and still our taxes will rise to fund the next high risk plan.
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The Golden Rule was the symbol of everything the Chancellor of the day wanted himself to be projected as.
Along with no more boom and bust, the golden rule was the easy to grasp concept (if not easy to prove in actuality) that everyone 'knew' that G Brown knew his stuff.
But the reputation of G Brown is about to be officially buried by the current chancellor, along with his Golden Rule.
Where do I send flowers?
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The notion that there are still 'fiscal rules' to break, is laughable.
Brown bent the rules by constantly re-assessing the length of the 'economic cycle' to suit himself. He also put billions off the public balance sheet by duplicitous application of the debt in PFI schemes. Then he mortgaged tens of billions for Northern Rock and other bailouts. Then he announced an interest rate cut ahead of the 'independent' Bank of England, on whom he had already leaned in breach of his own legislation.
Just what do you think is left of the 'iron rules'? They aren't rules if you simply change them whenever something doesn't suit you. They are spin.
How is it countries like Australia and Canada have entered this recession with budget surpluses? They didn't seem to have lots of dazzling fiscal rules, but simply managed their economies better.
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Typical Labour shambles. Always ends the same: broke and taxed to death, with the cream of our up-and-coming emigrating to escape the despair.
Why anyone votes Labour is beyond me!
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Nick - I was expecting a scathing blog on Mandleson's actions today... will it be online later?
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Quote, Nick Robinson: "Is Gordon Brown gambling on spending and borrowing to get us through a recession? That's certainly what he and his chancellor have led many people to believe. It is not, however, what the prime minister actually said this morning. Nor does it appear to be what the government's actually planning to do."
Two words is all you need to understand on this matter: PETER MANDELSON.
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re: 2, JohnConstable
I agree, and therefore cannot work up much enthusiasm for yet another QUANGO the mooted Office of Budget Responsibility.
How ironic, the office of Budget Responsibility will end up costing the taxpayer a fortune. No doubt the directorship, probably with a five hundred grand a year (plus) salary will be a reward for political obedience ... I feel sick.
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I don't agree with all this borrowing, however if its spent on decent things its better than what the TORIES have always spent large borrowing on. (usually tax cuts for the wealthy), for over 18 years they pushed up borrowing one way or another while hospitals and schools crumbled and society DIED!
We might have fairly high debt now, but at least some of the money has been invested in the future of schools and hospitals etc.
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"power to the ppl"
3:40pm on 27 Oct 2008
However, the prime minister also went on to say that:
"As economic activity rises, as tax revenues recover, then you would want borrowing to be a lower share of your national income."
The PM also said 'no more boom and bust.'
Disgraceful.
And you Nick--- you've given up all pretense of impartiality. You ought to be sacked.
The responsibility of borrowing
3:37pm on 27 Oct 2008
Is Gordon Brown gambling on spending and borrowing to get us through a recession? That's certainly what he and his chancellor have led many people to believe. It is not, however, what the prime minister actually said this morning. Nor does it appear to be what the government's actually planning to do.
No Nick, that's exactly what they're planning to do.
After all, they had to borrow to pay for that £2.7bn tax cut to end the political crisis over scrapping the 10p tax rate.
No Nick, they didn't end it. Get real.
What ministers cannot afford to do is to appear reckless about borrowing or spending.
No Nick, what ministers cannot afford to do is to BE reckless about borrowing and spending.
What has history taught us? Labour governments end in total carnage, every single time.
.......................
One trick pony with nothing to say. This article is not in any way biased to of supportive of Brown. Find somewhere else to rant your ill-informed prejudices.
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Since 1997 and the rise of the Blair/Brown Axis of Evil regarding the welfare of the British Economy, few commentators talk abuot the 800,000 or so people we have added to the public payroll, are they still needed and who pays their wages and pensions.
The currency speculators and others in hedge funds look at sterling as a sure thing regards its spiral of decline.
Unless and until the British Government take hold and reign in the often useless and reckless Public spending on Officials who produce nothing but are on the payroll for life, with index linked pensions to follow, then international currency markets will not take stelring seriously and bet agianst it, just as Soros did to Major and Lamond.
I have been forecasting a run on sterling for three months to banking friends and advocated an all powerful dollar. ( The only reserve currency standing) They did not listen then, but may do when sterling hits 1.4 or less to the US Dollar. Should this economic and financial "Tsunami" continue to Christmas, then sterling may go back to 1;1 for a US Dollar and the IMF will be called in to see Mr Brown and his buffoon Chancellor.
Whilst savings and pensions in the Private Sector are being savaged and decimated, the Civil Servants with gold plated pensions smirk quietly in the background as their Champion Brown plays the by election game in Scotland. Those in the BBC should reflect on their own consciences, when they give Brown and his Cohorts such an easy ride. Sterling lost 10% last week against the dollar, shall we see another 10% this week before you start to hold this Government to task? Those who save, those who are honest, those we take responsibility for themselves and their families lives, are financially being wrecked by Brown and his final grab for the ultimate Socialist State
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I'm generally satisfied that taking a more investment and employment led policy is the best way forward whether that is paid for by reduced earnings or raised borrowings. The numbers are complex and leave that up to economics experts and vested interests to argue but I'm looking to where the puck is going to be. This is just a blip and anyone who gets too caught up in it only has themselves to blame.
I've been around enough companies that went bust and people who are now dead, and spent enough of my adult life kicking depression that I'm not going to lose my mind or fall down a hole now. I don't care whether it's business, personal life, or running an empire, the underlying mechanics is the same, and I don't just intent to survive but prevail.
By all accounts, this recession isn't going to anywhere near as long or deep as previous recessions. Plus, there's people around like, say, Philip Green who have the right idea. The retread economists and vested interests have had their day and are just procrastinating. Change and the challenges of change are here, today, and if they don't get with the programme we'll see who's left standing when it's done.
See you on the other side.
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re: 10, SimonGeorge
Where do I send flowers?
Where can I wee?
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Brown's plan for recession borrow a lot and spend a lot.Does he want us to all to do the same? Brown the Boom and Bust leader.
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10.
Gordon loved making rules when the economy was humming along; funny how everything falls apart like a pack of cards at the first sign of trouble.
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He keeps on about "investment".Can we talk about "spending" please.
ANd do chase Mandelson.He is in Moscow again!! Hopefully he has a visa this time
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ppl @ 5
And you Nick --- you've given up all pretense of impartiality. You ought to be sacked
What on earth is wrong with Nick's blog this time? - I can't, for the life of me, see that it's written with any trace of an anti BTP slant.
Seriously, help me out here ... what's your problem?
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"What ministers cannot afford to do is to appear reckless about borrowing or spending."
I assume you've been in a coma for eleven years and someone else has been pretending to be you all this time. I mean, are you serious?
The Taxpayers’ Alliance estimates that Labour wastes £81billion annually on useless projects and bureaucracy.
"Prudance Brown" has been rumbled and his days are numbered. He's on a complete scorched earth policy from now until polling day. He'll either (a) convince enough mugs to vote Labour with his "investing" or (b) leave nothing in the cupboards for the Conservatives. It's win-win for this cynical bunch.
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Roy Hattersley certainly thinks the government is going to borrow and spend its way out of a recession using 'good old fashioned Keynesian economics' (he used a similar phrase on BBC's Question Time last Thursday).
Is he mistaken?
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Rationalising public spending by changing priorities; 'helping' benefit claimants 'back' into a shrinking or non-existent job market; sounds faintly like a Tory policy.
(Perhaps they will be put to pouring concrete on some of those 'public projects').
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Nick,
There is no point trying to say nice things about the tories to make up for the blatant disregard for bias last week. The front page of the BBC news headline is " I made a mistake, admits Osborne". If you actually listened to the news at one, you will know that he continued to deny any wrongdoing, but said that it was a mistake to be in a position where people could think there was wrongdoing. He is not admitting culpability at all.
Mandelson, on the other hand, is refusing to disclose the extent of his meetings with Deripaska, but this somehow does not make the headline.
Are you now writing economic pieces in retaliation for Robert Peston's political pieces?
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I am now past being amused by the antics of the Browns Labour regime.
I note the use of the term "Gordon Brown gambling on spending and borrowing"
Actually he isn't gambling - We are. He, just like all in the political class is totally immune to the consequences of his actions.
It will not affect his income, it will not affect his gold plated diamond encrusted pension. So he happily sells the future of 60 million people just to try and prove that his 10 years of deceit.
I will take him seriously when he stakes his personal wealth on the outcome of his actions.
How about an announcement from The Cabinet saying if this does not work we will resign and forgo our payoffs and pensions
Ah, the sound of silence
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meltonmark - Maybe because, despite the best efforts of the Daily Mail mafia and their ilk as mewlingly displayed on here, people can still not bring themselves to trust the Tories. Ever thought that?
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Once again, the ignorance of these bloggers is astonishing to me. Thank god power_to_the_ppl and sweetsmellofsuccess will never get close to running this country.
power_to_the_ppl - you really don't understand the points that Nick's making, do you? The government cannot APPEAR reckless about corrowing for fear that the pound will devalue further. And as for every labour govt ending in fiasco, your writing style suggests you are too young to remember the end of the Thatcher/Major tory hegemony. Whilst I am no big supporter of Brown, your ill-informed rantings serve to lose you any vestige of credibility.
sweetsmellofsuccess - You cannot compare the UK to medium-sized economies such as Australia and Canada. What you should do is compare our levels of debt to economies such as the US, Japan, Germany and France. The UK's current level of debt as a proportion of GDP is lower than all of them.
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Nick,
I think this is a fair summary and treads carefully between both sides.
For my part, this pretence at now prudent borrowing is classic spin. Whatever happens with the economy collapsing, benefit costs rising, tax income (stamp duty, income, corporation, CGT) shrinking, clearly borrowing is spiralling massively already.
That's before any political bail-outs like 10p funded by more borrowing.
The FX markets aren't buying the spin and are worried the Govt is going to borrow even more than the existing in-built borrowing surge (ie borrowing all the way through a prolonged book) and the now fear there will be even more borrowing to try and buy some votes.
The extent of mistrust of the supposed UK strength is clearly shown by the crashing rate of GBP vs USD or JPY.
O/T why no mention of GB's latest u-turn and ditching a Britishness day. Is it in the bin with slogans like British jobs for British workers.
Simple as that.
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We are going to have to rely on Mandelson self destructing, as he inevitably will because it is not going to be reported here.
As for Brown's borrowing requirements, when is he going to address the oublic sector pensions?
My meagre pension pot is shrinking fast but my tax bill does not but I am expected to support all the civil servants who are cushioned from reality.
I understand that falling tax revenues and rising unemployment increase the borrowing requirement but companies are having to cut their cloth according to their means - why not councils?
The legacy of debt for the next government will limit their options for years.
I think the image of the iron chancellor is tarnishing fast.
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Pre-moderation - every single message is checked before it appears on the board. All of the BBC's children's message boards are supervised in this way.
Post-moderation - all messages appear on the board first and are checked afterwards. Most BBC message boards are supervised in this way.
Reactive moderation - messages are only checked if a complaint is made about them. This approach is only used on boards for adults.
So we are chlidren?
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#3, "Is the BBC out to commit some form of ritual suicide in the event of a Tory election win."
If the Tories win the next election they should be heaping praise on the BBC: after all, the BBC faithfully reports every Tory-derived scandal and prejudice as being rooted in reality, while every Government story is reported along with "David Cameron says..." or Osborne etc.
If I was a Lib Dem, Green, SNP etc I'd be mighty annoyed by this.
Suggestion to the BBC: do some research of your own on the Corfu Yacht affair: namely, is this meeting in Corfu unusual or quite normal. As others have said, government ministers (or possible future ones e.g. Osborne) have to meet major players in the business world. But the media's obsession with P Mandelson has made this one appear unusual. I suspect this meeting was no different from hundreds that happen (and need to happen) every year.
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Because Brown can't accept or admit that he is in the slightest bit to blame for our current predicament, when everyone knows he is (not solely to blame, but substantially - look at our currency plummet), he is unable to offer the right answer to it.
The answer is not to increase government spending save where it is a necessary consequence of the recession (e.g. on benefit payments). It is to cut interest rates and cut taxes on ordinary people to put more money into the economy.
Now that we can all see that his boasts about prudence, the end of boom and bust and golden rules were just rubbish. He has conned some of the people for some of the time, but now his poor management of our finances stands revealed.
I dread to think how he can make things worse. But he will manage it. Anything to try to cling to office.
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re: 16, correctopinion
We might have fairly high debt now, but at least some of the money has been invested in the future of schools and hospitals etc.
Spending's not the same as investment...!
re: 17, NHH
I eagerly await your explanation of why I'm wrong... somehow I don't think it will be forthcoming.
* * *
Every time you vote Labour a fluffy puppy dies. Vote for anyone other than Labour. Save the puppies.
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Its quite easy this NuLabour Chancellor job isnt it?
You tax, spend and squander during a boom and the during a recession you do even more of the same, you just have to borrow the short fall.
Ill run it by the wife tonight, see if she approves of doing the same with the family’s finances for the next 2 years.
Might not be able to print her reply though.
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@ 12
too true
its a shame these people cannot be brought to book for there actions.
thus they will wiegh the pro's and con's before the decide upon highly risky plans that will affect the nation as a whole.
may be one day it will happen we can only hope.
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Browns game plan is to claim he is bringing forward money from tomorrow to spend today, so overall borrowing will not increase - and claim he is doing it for the good of the economy.
Apparently the golden rule - balanced books over an economic cycle do not count in a downturn. So Darling will abandon them.
Brown as Chancellor only met the rule by manipulating the start and end date of the previous cycle. Now when massive borrowing is needed his government will abandon it.
Brown simply wants to win an election. He will borrow whatever is needed to do that and to hell with the economic legacy he will bequeath the country.
In his mind his measure of success is simply to be re-elected.
He will retire on a handsome pension, with lucrative book and speaking roles. His children will be well set up financially.
Neither he nor his children will need to worry about the National debt that his policies put the country in hock for.
That's socialism for you. Look after you and yours and to hell with everyone else in the future.
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GBs fiscal rules are blown to shreds & you say this puts the Tories in a tricky position. That's exactly what BBC commentators said at the Tory conference. Do you think if you say it enough times people might actually forget who caused the mess?
When will this institutionalised BBC rally around Brown end?
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They say it takes a lifetime to build a reputation and a foolish moment to ruin it. This is clearly the case here - for Mr Brown and shamefully for you Nick. This is not punchy journalism. This is pandering.
The whole idea of borrowing our way out of this is a disaster. We need to encourage business back into this country with tax cuts, but we also need to cut waste in all public services and scrap some of the large projects being mooted. Trident to start with, but also ID cards would be a massive start to getting public finances in order.
This crisis is lurching on in the economy, and we have wishywashy leadership and wishywashy journalism tackling the issues our government is raising. We should be screaming for an election - as should you Nick - before it is too late
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re: 24, sagamix
It's what's not said: there's not a single mention of Lord Mandelmort's wrongdoing. If Nick wants to plunge the knife into Osborne fine, but he should do the same to Mandelson, considering that Mandelson's involvement is a much bigger story.
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The New Deal failed because the CBI andtheir Tory pals didn't want it to work, and the 'senior economists' and Tories are opposing the governments investment led strategy by calling for tax cuts.
Government can't do everything on its own, and a little help from the likes of the CBI and their well heeled Tory pals would go some way to creating the innovation and support that's needed to get through this.
The government is correct to identify 'green technology' as a source of economic growth as well as a better world. Effort tends to follow focus so people would be bettter off paying attention than wallowing.
Haul ass, soldier.
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Re 31
In your excitement about bashing the tories, you claim that Major/Thatcher left a fiasco. Is this the same major as the one who left after five years of economic growth? Or is the one whose policies were so mad that Nulab promised to abide by their spending targets for two years. They left politically in a fiasco but the point made by all the other bloggers is that Labour always leaves a FINANCIAL mess to be cleaned up by the tories. This one will be no different.
You might care to recheck your borrowing figures once you add in Northern Rock, PFI, public sector pension liabilities, the current bail-outs. We shall see.
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re: 31
The government cannot APPEAR reckless about corrowing for fear that the pound will devalue further.
The best way not to appear reckless is not to be reckless. Simple enough eh?
And as for every labour govt ending in fiasco, your writing style suggests you are too young to remember the end of the Thatcher/Major tory hegemony.
Did I mention the Tories?
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Conman Dave and Giddy Garbage have no clue, I will never trust anyone who makes the same mistake 5 times in one weekend! hisTORY!
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What is it with yourself and the BBC and G. Osborne you just cant leave the story alone. Again Osborne is the headline and Mandelson lower down, you get an interview with D. Cameron and we all want to know his policies and you bang on about the Osborne affair again this time trying to bring Camerons judgement into question as well.
The only judgement in question is the BBC and yourself for not being impartial. Its not just me everyone is saying it, why is the BBC so bias.
As to your comments today they are more pro Labour, you do not point out that the total debt is massive because you lower borrowing in one year this does not get rid of the debt. Furthermore we all know that Brown wants borrowing to be seen as a good thing because its inevitable it will go up as unemployment rises he has no great schemes in mind at all.
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Brown and Mugabe - two men clinging on to power and bankrupting their respective countries!!
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If Brown couldn't borrow on the markets he would be doing a Hungary or Denis Healey............doffing his begging bowl at the IMF because the country is bankrupt!
It's time to live within our means whatever the consequences.
No more extra Gov't spending, no more taxes, no more borrowing.
Get interest rates down putting more money into peoples pockets. Take advantage of the low pound and "export" our way out of recession through hard work.
Brown got us into this mess by borrowing and spending far too much and saving absolutely nothing at all!
Only the "wealth creators" can get us out of this...............and that is private enterprise.
Set the entrepreneurs free!!!!!!!!!!
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So, this article is still biased towards Brown? Not the other way?
Come on, where are the positives? NR seems to be accepting the line that Labour have spent too much irresponsibly and wasted a lot of money, and that the Conservatives would prevent such irresponsibility in the future. I think the Government would certainly disagree with that.
Let's run through the key points:
Para 1 Gordon Brown is gambling (not really a positive word is it?)
Para 2 Brown has been borrowing more than he said he would over the past few years, causing him embarassment as Chancellor (again, is that positive?)
Para 3 The Government's fiscal rules have been broken and will have to be torn up and replaced. They would like people to believe this is a positive development
Para 4 George Osborne is correct when he says people are anxious about Government borrowing
Para 5 Borrowing is too high because of previous Government failure
Paras 6 & 7 Some advisers to the Government might be encouraging increasing spending (as opposed to keeping it constant as per current plans) as they think it will put the Tories in a difficult position
Paras 8 However, this view is reckless. The Conservatives are correct when they say the Government has lived beyond its means. They have a policy (Office of Budget Responsibility) to prevent spending getting out of control (like it has been under Labour)
Hmm. Mandelson must have wrote it
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""power to the ppl"" drooled:
re: 17, NHH
I eagerly await your explanation of why I'm wrong... somehow I don't think it will be forthcoming.
* * *
Every time you vote Labour a fluffy puppy dies. Vote for anyone other than Labour. Save the puppies.
....................................................
You are wrong because you cannot understand basic English. This story is reported in a way that is more favourable to the Tories than to Labour. Therefore, to accuse Nick of bias on the basis of this story reveals only the gross stupidity of the accuser.
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Yet again I have the uneasy feeling that the Government's policies are not designed for the good of the country. Instead policies appear calculated purely to try and outwit the Conservatives.
Saving Gordon Brown and Labour's skin has cost us billions so far.
I thought the 3 billion pound attempt to bribe Crewe and Nantwich was expensive - but that was just small fry compared.
We are going to be paying for these policies for years.
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Financehero: Nice try, but no cigar. The Thatcher/Major years destroyed our economy to the point where Britain was a laughing stock by 1992. Just because Major had a few years of growth before he was kicked out does not change his and Thatcher's chronic mismanagement of the economy (2 recessions in 12 years).
Clearly, once you hit bottom, things will improve - the same will be true here in 5 years' time, Brown or no Brown. But would you give Brown credit for it? Of course not.
In fact, it is Thatcher's deregulation that caused the current mess far more than anything Brown has done.
Re: the recent increase in borrowing through bailouts etc, these are the IMF's figures, not mine. Or are the IMF now part of the BBC save Brown conspiracy?
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The crux of this is that if Brown does borrow, then what does he spend that money on?
If he puts the money back into people's pockets then it could work (ie tax cuts), but if he uses it to create non-productive public jobs/work then it's doomed to failure and will lead us into a downward spiral which has already started.
He needs to be specific, and he needs to do it in the next few days, otherwise we're all finished. The downward spiral has started already, and he still doesn't realise it, and he still doesn't understand how economics works.
Either he needs to start listening to people/advisors who understand economics, or he needs to hold an election, and one of those 2 things needs to happen right now.
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Mr Robinson you said, "In theory, governments could cut spending or raise taxes to avoid this. No serious economist or politician I know of is arguing for this".
You must be kidding, surely?! As any fule kno, this government (according to the Taxpayers' Alliance) has masterminded the waste of a staggering £101 billion of taxpayers' hard-earned spondoolicks in the year 2007-08. Are you sure that "no serious economist or politician" is not now arguing that the government should be doing what I and millions of others like me are now faced with doing - that is, squeezing our budgets until the pips squeak? Let's call that "cutting spending".
Gordon Brown is treating this crisis as a golden opportunity to borrow and spend the country into destruction (he was well on his way to this before the current debacle). Remember, Brown's track record is one of a man who has a remarkable ability to filch banks' and taxpayers' cash (the latter deceitfully) and spend (waste) it on a galactic scale (the other side of the Flash Gordon coin). That's why we're in this unholy mess, and furthermore why the UK is in the most parlous state of virtually all the OECD countries. So much for the arrant nonsense (well, lies really) that the UK was well placed to weather the storm. How do they get away with such screaming, barefaced disingenuity?
As for the Tories' Office of Budget Responsibility idea - risible. I want an elected politician to be responsible for the public sector budget, ie the Chancellor of the Exchequer. And I want about 650 other politicians to hold him to account in Parliament. I do not want another quango or some other committee who can be blamed for yet another politician's incompetence as his budget crashes and burns around his ears. You can just imagine it, "It wasn't me guv, it was that lot in the Office of Budget Responsibility who cocked up ...".
What on earth has gone wrong with our political class? As this crisis gets deeper, my faith in politicians shrivels.
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Dear GHBRich,
You state - "You cannot compare the UK to medium-sized economies such as Australia and Canada". But why? Is there some structural reason why larger economies must run higher deficits?
Asfor your comparison with Japan, USA, Germany and France. Are you comparing like with like? Do any of these countries have PFI liabiities off balance-sheet?
Moreover, you seem to be forgeting that the Japanese deficit springs from their GVN's failed attempts to kick-start their economy with increases in public spending. The very policy that Brown wants to emulate.
One further point, if the UK economy is in such a great shape, when compared to Japan, Germany, America and the Euro zone - then why is Sterling falling through the floor, agianst all of their currencies? And don't repeat the GVN line that the markets are dicounting expected interest rate cuts, because similiar cuts are expected world-wide.
Good post though...
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On the topic of bias...
I accused the BBC of bias in their reporting of the Osborne affair, but I can see none in Nick's latest post.
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#46 power_to_the_people
Simple enough if you have no understanding of economics, yes. As Nick correctly says, every schoolboy economics student understands that spending must be increased in a recession. As governments found out to their cost in the 1930s, doing the opposite turns a recession into a depression. Like I say, thank god you are not in charge of our economy. Even Cameron accepts that spending should increase. But obviously you know better.
And no, you didn't mention the tories expressly, but if the point of your comment about labour govts ending in fiasco wasn't that tories do better, I'm struggling to understand what you were getting at. Explain pls?
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So this is Gordon's way of saying put all your debts together over a longer term and everything will be all right - you'll even have enough money left over to go on holiday.
Carol Vodermann does it better, and I don't believe her either.
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Nick,
during the good times the chancellor, as he was then, continually said that he was investing in the health service, or investing in education or investing in the railways, or anything you care to mention the mantra was investing.
"The responsible course of government is to invest at this time to speed up economic activity." That is his latest quote.
So, all the investment was to speed up economic activity was it all along. So, the wonderful Gordon has now admitted that all along it was not investment it was spending, now don't be fooled, he is not investing he is spending. I say he because he seeems to be both PM and chancellor.
The man is a complete idiot.
May I also quote the former leader Tony Blair from his speech to the labour party conference in 2001:
'Today conflicts rarely stay within national boundaries. Today a tremor in one financial market is repeated in the markets of the world. Today confidence is global...'
Now then Gordon are you trying to tell us that you were not listening to the speech of the previous great leader, or did not help to draft it, especially as the economy was your sole concern.
I'm sorry Gordon, you really should get somebody to give you good advice. Project Griffin continues to gather momentum.
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ceh @ 19
this recession isn't going to be anywhere near as long or deep as previous recessions
That's a big call, Charles, a very big call. We will see ... as the blind men said on hearing about the revolutionary new optic drug entering its final testing phase.
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"49. At 4:52pm on 27 Oct 2008, IDB123 wrote:
Brown and Mugabe - two men clinging on to power and bankrupting their respective countries!!"
I fear you may be right. Ten years sulking in the background whilst golden boy Tony kept on winning elections and getting all the glory. It seems that now the crown is on his head Gordon will do everything in his power to keep hold of it. How much debt burden will be loaded onto our children's future for one mans ego?
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ppl @ 43
It's what's not said: there's not a single mention of Lord Mandelmort's wrongdoing
Yes but the topic is government borrowing, isn't it?
Would be nice to namecheck Hart and Foy in every piece but it might look a bit, I dunno, funny.
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ppl @ 43
It's what's not said: there's not a single mention of Lord Mandelmort's wrongdoing
Yes but the topic is government borrowing, isn't it?
Would be nice to namecheck Hart and Foy in every piece but it might look a bit, I dunno, funny.
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The cupboard is bare Cameron notb know how to move on and explain his policy in further detail? He is sooo disappointing...
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re: 52
Therefore, to accuse Nick of bias on the basis of this story reveals only the gross stupidity of the accuser.
It appears that you cannot understand basic English. See 43. Yawn.
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Presumably you resisted pressure to write this piece Nick? Brown said: "The responsible course of government is to invest at this time to speed up economic activity."
Yet we are supposed to believe this means no increase in spending? So this will be just a reallocation from those "essential front line services" we keep being told cannot spare a penny whenever tax reduction is mooted. Come off it.
Who ever heard of a stimulus package funded from within existing spending plans? If this was your attempt to swap jobs with Peston I think you just talked yourself out of the job.
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northern @ 50
Only the "wealth creators" can get us out of this...............and that is private enterprise
Very much doubt that seeing as they got us into it.
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"The responsible course of government is to invest at this time to speed up economic activity."
Borrowing to pay unemployment benefit is not investing.
"As economic activity rises, as tax revenues recover, then you would want borrowing to be a lower share of your national income."
Sums the Brown philosophy.
Borrow loads in a recession, borrow during a period of growth.
When does he pay back some of the debt, he cannot sell radio spectrum every year?
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Does the BBC have any news on the Mandelson front yet Nick?
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This comment was removed because the moderators found it broke the House Rules.
gordon @ 55
If he puts the money back into people's pockets then it could work (ie tax cuts), but if he uses it to create non-productive public jobs/work then it's doomed to failure and will lead us into a downward spiral
I think the idea is to put it into productive public works. The risk with a tax cut is that people will be sensible and spend it on debt reduction.
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I've lost it. Once upon a time the BBC employed a Political Editor, a Business Editor and an Economics Editor. Now we have Robert Peston opining (with what ought to be viewed as career-halting bias) on shipping news from Corfu, Nick Robinson giving his views on public sector borrowing, tax rates and the like and Hugh Pym .... er, popping up on TV now and again and giving his imitation of that awfully sound chap from the Upper VI who has always done his prep.
Shouldn't cordwainers stick to their lasts? Or have Brown, Darling and the rest of them so fudged all aspects of modern life into such a single politico-economic commercial hash that it's all inter-changeable?
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Come on bloggers, let's push for 1000 posts on the previous entry!
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What are the Tories going to do? They have a big chance to put one over Labour and yet I hear nothing. Are they thinking that people will just vote for them because we are in a recession/depression (delete as appropriate)? People are fully aware that New Labour is a continuation of Thatcherism but with a social conscience. Does anyone seriously think that the Tories would have raised Interest Rates because house prices were too high, that people were using too much credit?
When I hear/read people discussing the economic crisis and I come across comments that blame Broon for the global crisis I just switch off. They're idiots!
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Don't know if people are aware but there's half a chance of getting up to 1000 posts on the previous blog ... just needs another little push and we're there!
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Keynes wrote his stuff when we had a manufacturing industry. Public Projects used to make work for British people who then spent in the economy - now it will only stop Polish builders going home (but not sending their money there) and suck in more imports.
Similarly a low pound used to help manufacturing industry to export - now it simply starves our companies of investment as no-one can invest in the UK and rising import prices drives inflation.
Lastly, low interest rates will encourage us to put our savings abroad, starving our banks of the funds they need.
New solutions required please!
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www.kontraband.com/videos/13991/The-Dark-Bailout/#show
Says it all .....
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Nick
So you finally acknowledge that
1) The the impression that Brown gives
and
2) What Brown says
and
3) What Brown does
Are not related.
The natural conclusion is that Brown is either a liar, or delusional.
Which do you think it is Nick?
Sorry to ask you to dis a close friend, but it is your job and what we are anually mugged to pay you for.
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The Tories decimated industry and left millions on the scrapheap while the infrastructure crumbled. Labour have brought things back to the stage where people have jobs, communities are being included, and the infrastructure is in rough shape. The Tory business plan is just more Thatcherism which would knock us back and nobody in their right mind wants that.
If there's one thing that annoys me it's that I can see some pluses in Tory governments and cut them some slack, but the Tories and their little helpers in here can't find that in themselves. At the most basic level that's ignorant and selfish, and doesn't hold water under the most cursory of analysis. It's certainly not a replacement for a proper sense of vision and it's not very people friendly.
I hear some folks suggesting Gordon Brown should put his pension plan on the line if his policies don't deliver. Here's a reality check: if Gordon Brown acted with a fraction of the maturity as they did the country would already be sunk. Any fool can mouth off from an armchair but making it happen is the only part that counts. If the "Brown Plan" works can we count on them donating their pensions to the Labour party?
The idea of freedom plays a key role in Plato's moral and political thought. In the Republic justice is shown to be beneficial because the just man alone is truly free. There are parallels here with modern discussions of freedom. The Laws argues that to be free a city must avoid the extremes of liberty and of authoritarianism. The legislator should rely on persuasion, not force, so that people willingly obey his laws. The underlying idea is that we are free if we willingly follow the demands of reason rather than being coerced by external forces or by unruly desires.
Abstract: Plato's Doctrine of Freedom, R F Stanley.
This outline is very Daoist in its reasoning insofar as it recognises realities and self-actualisation, and highlights the benefits of positive goals over mere punishment. I leave it to the reader to decide which of Gordon Brown and David Cameron lie closer to these ideals.
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62 Sagamix
I agree with you there.
In actual fact, I get the sense that there is nobody, neither in any party, or any economist anywhere who has got a clear vision or plan - which is worrying.
It seems to be a case of the blind leading the blind.
My central beef with our government are that we are so poorly prepared for a downturn. I think they genuinely believed their "we have ended Boom and Bust" hype and didn't prepare.
There is no way the government can get through the whole recession spinning that they will increase spending, without actually increasing spending.
If they just re-allocate and re-prioritise funding during the down turn, that won't fuel growth will it - surely? Because there will be no new money in the system.
I can only see one outcome - that because the government did't get debt down during the good times, they are going to have to hike debt up even further during the bad times. That is expensive
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Borrowing = future taxation.
We are all taxed to the hilt. Now he's going to tax us more.
Never mind. We can all claim tax credits. Fine (unless you are self-employed, in which case it is a nightmare)
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ngodinhdiem
I assume your "good post" comment is sarcastic, althogh I was rather proud of it.
Surely you are not suggesting that like-for-like comparisons are wrong?
The debt figures are the IMF's, not mine. And yes, I am sure that ours is not the only country to find ingenious ways of keep debt off the books. And the Japan example merely proves my point - the so-called lost decade was a direct result of the Japanese government not spending money quickly enough and prolonging a recession - a bit like the 30s in fact.
As for the devaluation of Sterling, please explain why I am not alloweed to advance the interest rate argument, despite the fact that you had no counter-argument to it. And how about the Australia? Their currency has plummeted far quicker than ours and has required govt intervention to prop it up. yet Australia is, according to you, an example for us to follow.
I do think yours was a well thought out and articulate post. Unfortunately you are about as well informed as Sarah Palin.
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54. "In fact, it is Thatcher's deregulation that caused the current mess far more than anything Brown has done."
Taking supervision of the banking sector away from the Bank of England has IMHO contributed greatly to this fiasco. As far as I can see, the FSA has been tasked with supervising the way in which financial products are sold. It should be tasked with supervising the types of product available and saying no to 100%+ mortgages. It should also be scrutinising the "rocket science" products to see if there is any real worth underpinning them. Generally, they're just gambles. Also, lenders should not be allowed to shift loans off their books, which leaves them free to lend again and again against their capital base, often with no responsibility for collecting the money owed by borrowers.
Yes, Thatcher deregulated, which enabled London to become a financial powerhouse, but it was Brown who effectively removed the supervision which is essential in any deregulated market.
We should also examine the role of the major shareholders. In their fairly understandable enthusiasm for large dividends for the pension funds, they were castigating any company that didn't produce double digit increases in profits - at a time of low single digit inflation. A total nonsense, but Brown's raid on the pension funds probably caused this attitude.
I really believe that Brown doesn't understand how the economy works, and that's scary.
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Nick
By the way - any update on Mandleson disclosing his diary?
I know he was in europe when we (the public) finally forced MP's to disclose their expenses... but surely he isn't so 'out of date' that he thinks secrecy is still 'the norm'.
You will be reminding him regularly wont you?
A week of headlines over osborne when there was no suggestion of illegality should justify... say a month of headlines about Mandleson refusing to disclose information?
Look forward to your coverage -- no rush, next blog will do.
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GHBRich,
Yes we all realize that GVN borrowing will increase in a recession, as welfare bills go up and tax recepits fall.
This is not why Brown is culpable. My gripe with GB is that he failed to significantly reduce GVN debt in the good years. He ran budget surpluses for Labour's first term (by ironicaly following Tory spending plans) but then he and Prudence got divorced :)
Remember, Brown claimed that 40% of GDP was the maximum that a GVN could prudently borrow, at any time in the economic cycle. But by running GVN borrowing so close to this limit in the good years (2001-7) he left cupboard bare for the recession to come. Perhaps, Brown had come to believe his own rhetoric that he had somehow abolished 'boom and bust'. So with the nation's credit card maxed-out and near (if not over) its limit, what will we do when the recession really bites?
Mt fear is that we might not be able to borrow more money. After all, who is financing this debt? How long before we go cap in hand to the IMF again? And trust me, they will only lend, if we agree to serious cuts in public spending...
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I reckon amongst taxpayers (in contrast to non-income-payers) 80 out of 100 would prefer any extra borrowing to result from ... TAX CUTS (something we used to experience under the Tories, but is now forgotten as a possibility).
Public Spending? Labour could not organise a beer-drinking gathering in a brewery. I reckon each £5 mn. of public spending adds 10 times more to public pension liabilities than to any useful output/outcome.
Incidentally it's so nice to have the nuances of Brown's policy explained by someone so close to those at the power table.
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Government can't force businesses to be innovative and look after their people, and workers to be realistic about pay and making dumb decisions. That's something that business and society have to learn for themselves.
Before this crisis blew up the feintest whiff of a slowdown saw famous name companies slashing R&D and loading up the hopper with P45s, and workers dashing for inflation busting payrises before the door shut.
Sure, the government has some responsibility and other folks may have been a bit greedy, but procrastinating just limits your own scope for developing success and ignores the fact that you're "other people" to someone else.
Funny thing, perspective.
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#85 pammyammy
The Conservatives would like to blame the impact of the financial crisis on the UK, on taking regulatory powers away from the BoE into a new organisation, the FSA.
Doesn't wash though. I understand why they say it though, as it is about the only comment they can make without sounding terribly hypocritical and totally lacking any credibility whatsoever.
The powers that the BoE would've had, sit in the FSA. The only conceivable impact of keeping the powers in the BoE would have been to improve coordination of A RESCUE after the crisis begun, and even that is debateable.
The ONLY thing that would have protected the UK was far stricter regulation. The Conservatives were SUGGESTING THE OPPOSITE before 2008, and are not advocating re-regulation now.
The State would have needed to get involved in:
* Dictating to banks who they can and cannot lend to (no, Mr Banker, you do not know best who you profitably lend to and which risks are too great for you. The Government does)
* Preventing banks from holding complicated (and risky) securities on their books (no, Mr Banker, you cannot hold that asset. We, the Government, think it is too risky for you, you do not know best)
* Intervening in banker renumeration packagers (no, Mr Banker, you cannot structure your bonus schemes like this - it'll give your staff the wrong incentives. The Government knows best, and we think you should structure your schemes like this)
A side-effect of unilateral tough regulation such as this would have been a massive flight of capital and firms from London to New York, Shanghai, Frankfurt etc.
I'm sure the Government would have been supported in taking this tough regulation by the Conservatives, even if it meant the flight of City firms from London. Really.
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#54
It's not deregulation that's the problem. but how a deregulated system is policed.
The FSA has enourmous powers at its disposal. These are set out in the Financial Services and Markets Act 2000. At the time the FSA was created those who worked in compliance in the the financial markets were actually quite spooked at what type of monster it was.
One central plank of the FSA's approach to regulation was/is to hold senior management responsible for the actions of their firms. There may be enforcement action in progress, although I've not heard of any.
It's the job of the FSA to police the system. However only a short while ago we heard that if they had done so they would have been charged with undermining the success of the financial system.
And then we hear from the head of the FSA that they're going to stop regulating on the cheap.
What we also know, is that after 9/11, the US economy was boosted by low interest rates and a rush to property - thus inflating property values and creating this bubble that was bound, at some point, to burst.
We also know that in creating the FSA, which commenced regulating on 1st December 2001, the sector specialists were disbanded. Gordon mentions this fact with some pride. It took ages for the FSA to properly understand all of the businesses within its remit - and even to understand it's own rule book. It turns out it never did really understand the banking system. Such regulation should probably have been left with the Bank of England, but if I recall correctly, the BofE's remit was removed through an act of revenge or something or other.
So, the problems we have today are all down to Thatcher, are they? Was the boom under Brown down to Thatcher too?
As I've said before, are all road deaths down to Henry Ford?
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Chuck_E_H..... @81,
Jeeez! Just how much tosh can one man write?
Anyway, I thought you were emigrating to Japan.... (As if they lack merchant bankers of their own).
All together now:
I think I'm turning Japanese
I think I'm turning Japanese
I really think so.
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I'm interested at the number of people on these and other blogs who are in some way scared of the Tories. Let's look at the last few times the government has changed hands. A the end of the 70s we had a general strike, inflation and interest rates wholly out of control, and unemployment heading up very very rapidly. When the Tory government who took over handed over power to the Labour party in 97 they handed over what is widely accepted to be the best economy handed from one government to the next in over 100 years. It was in fact so good that Gordon Brown agreed to follow the same plans for 3 years. Then after the 3 years were up he went on a programme of massive spending. Most of it on the army of 800,000 bureaucrats added to the government since then. The spending was funded by excessive borrowing, and stealth taxation. Taxing dividends on shares was a particularly clever move for example, since most people wouldn't notice it until they retire as paupers. Now troubled times hit (as they always do despite lies about no boom and bust), Britain is the worst placed economy in the world to cope (with the exception of a few like Iceland). We come out 4th on a list of amount borrowed in the country (total - personal, government and corporate) compared to GDP. Iceland was top of the list. Switzerland and Netherlands are the 2nd and 3rd if I remember correctly. If Labour lose the next election they will hand over a wreck of an economy again, which the Tories will have to spend another 15 years trying to repair like they had to in 1979.
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Nick,
What can be witnessed by his handling of this crisis is that Gordon Brown is clearly out of his depth. He is clueless and I am very surprised that anyone with more than 1/2 a braincell would actually believe a word he says or even offer to put any amount of trust in his 'global plan.' All this nuLabour government has been good at is spending our money recklessly and employing good spin doctors. They clearly have no idea about economics and about how to deal with the crisis we are experiencing now.
As I keep stressing. The current credit crunch (banks not lending to each other) is not the cause of the problem we are experiencing. It is a result of the problem. Increasing spending and loosening 'fiscal policies' (like the reckless, irresponsible Greenspan Fed did, which was a major contributor to the current problem) is not the solution. You don't give a cocaine junkie more cocaine to solve his problem.
All our dear leaders and particularly GB who still can't see what damage Alan Greenspan has personally inflicted on the global economy, don't realise this, or have chosen to stick their heads in the sand.
There will be no lasting solution (merely band aids on the gaping wound) until they wake up and realise this.
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I agreed to the financing of the stupid banks but I do not agree with government borrowing to assist our failing economy. It is a bad example to those who have become used to living on others money rather than live within their own income. It is time the younger generation and middle aged woke up to the fact that bills have to be paid eventually and the longer you put off paying the interest you have to meet far exceeds the value of the item thought to be essential in the first place. Don't they teach economics at school any more or has that gone the same way as history lessons? I am and OAP I live within my income and live each day so that I can look every damn man in the face and tell him to go to hell. It is a nice feeling and one I reccommend - try it The "Jones" wont pay your bills why try to impress them?
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This is more like it
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ngodinhdiem
I agree with what you say and have a similar gripe with you about gordon brown - I am not a supporter, believe me!
What annoys me, though, is all this looking backwards. The prevailing view seems to be that Gordon Brown is to blame for this mess by borrowing too much in the good times (I largely agree), so the answer must be to reduce borrowing now. That doesn't follow and is basically the "my dog has four legs" line of reasoning.
Whatever the failures of Brown in the past (which is a worthwhile debate to be had when the economy starts growing again), the question is what do we do about it now.
IMHO, the answer is borrow more and increase spending to kick start the economy out of its moratorium. Some tough decisions will need to be made when the corner has been turned, but all this knee-jerk reaction stuff about tightening our belts and cutting spending now is EXACTLY what caused a depression in the 1930s.
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Brown needs to borrow to keep current spending up as the political price of not increasing spending is to be accused of making cuts in spending: not something a Labour leader wishes to do as his main client group relies on taxpayer funds for their lifestyle.
However, there is no forward plan. There never has been a forward plan other than to keep feeding the state sector with taxpayer pounds. There hasn't even been a plan to make the state sector more productive.
The simple reality is that government policy has to hold off doing anything more than keep the ship afloat until the economy hits the bottom. Only then will anyone know where we are and it will be grim.
Then we will have to consider Keynsian policies to pump prime the economy. I stress the economy and not the state sector.
Out of all this the state sector has to shrink to fit the economy we will have. Sure, we will need more regulatory supervision of the financial sector but since the financial sector is also going to shrink this need not involve much more cost than we are currently paying. But in what other areas can extra spending on regulation be justified? None as far as I can see.
As one of the old manufacturing sort I want to see a return to production in the UK economy as the value to be derived from such investment is more than any other return now possible. This can be done through pump priming and could initiate technical breakthroughs in fuel cell technology, renewable energy and pharmaceuticals to name a few.
The markets are currently crashing. They will or are overshooting. The consequential sort out will be tough, However, there is a future and we need to start thinking now as to how we will build that future.
Just sploshing taxpayer pounds to keep your client groups happy is just not acceptable. We are either in this all together or we lose everything: a bit like 1940 all over again but you can forget any talk about the `Dunkirk spirit'.
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For those of you still wondering exactly what Mandelson effects in politics, think of it this way - his return is akin to pouring concrete into the sewage system.
QED
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The credibility of the government is already shot. As well as a domestic recession, the pound has fallen like a stone, which will inevitably lead to much higher inflation and the poor will be hit the hardest. A fall of nearly 25% against the dollar in the last two months will be hugely inflationary, as the Chinese and many other currencies are linked to the dollar. A normal response to such 'stagflation' would be higher interest rates to improve the exchange rate and head off inflation, coupled with fiscal measures such as tax cuts. Instead, we are probably going to see more interest rate reductions, even though real rates are already negative, i.e. lower than inflation, and more public spending. If this does happen it will be the end of any pretense that the Bank of England is independent.
This is not an economically rational response, it is a purley political one to try to head off defeat at the next election and we are all going to pay the price for that. This is back to the 1970's.
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Neither you, Nick, nor Robert Peston have made the key point about this.
Brown has not balanced a budget since the financial year 2000-2001.
That's before Tony Blair won his first election as Prime Minister. That's seven straight years of spending exceeding income - all through a time when economic growth was positive and in some years, positively strong!
Now there is a need to increase borrowing, Brown assumes he can - but who is going to lend? Especially if interest rates fall?
Brown had added £250bn plus to national debt by the spring of 2008, another £100bn is going on debt this year and another £120bn next? Maybe more.
Put that in context. The total cash receipts to Government from 40 years of oil and gas production in the North sea add up to a smidgen under £151bn.
Brown's economic incompetence has been masked by a speculative bubble built on debt. He may not have been the only one guilty of the charge - Greenspan is also in the dock - but he is one of the main perpetrators of the economic crime on the 21st century.
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#86, You posted just before 6pm so I hope you saw the six oclock News where Robinson had a long piece showing Mandelson being hounded in Moscow.
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The pound is sliding because the markets do not take Browns view that Britain is all that well placed to ride the current global recession.
Funny that.
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Brown isn't attempting to borrow to spend our way out of recession - He's broorwing to try to create a feelgood factor in time for the general election.
Its the election stupid.
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I'm getting this mental image of a "bear in a china shop" (to use City parlance) whenever I think of Brown.
Thrashing around. smashing up the stock, throwing all the money in the till at anything that moves... meanwhile the customers are quietly leaving for the fire exit, if they can.
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Other posts above stressed the difference between public "investment" and public "spending".
When Brown first became Chancellor he improved the definitions so as to better distinguish the two - but this seems to have got lost.
The worst "spending" would be for the govt to simply employ people to ensure unemployment doesn't go up too much (though even that raises tax revenue).
"Investment" would be spending now on projects that will need to come anyway- road/rail investment, school modernizations etc which might even become cheaper if the contractors (not PFI please) are less busy
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Hey Balhamu
Just for you
I wonder how much borrowing we will have endure to fund jobs like these, perhaps, given your access to so many figures you can give us the total.
What a waste
I wonder how many private firms are making appointments like this at the moment.
Only in the public sector.
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Brown and Darling should be put up as an example at gamblers anonomous; how chucking good money after bad is stupid, and borrowing money to chuck after bad is even more stupid. Talk about drowning men clutching at straws, they are completely out of their depth. The time appears to have come to take responsibility for all fiscal decisions away from these two. Surely within the treasury there are economists who are capable of getting things right, if political interference is removed; if not then why are they employed in the first place ?
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jcook @ 82
I get the sense that there is nobody, neither in any party, or any economist anywhere who has got a clear vision or plan
The reason you're getting that sense, Jonathan, is probably because it happens to be true. There's no precedent for what we're seeing, is there? - a sudden shift from wildly excessive credit to near zero credit in an almost completely deregulated (and, of course, very global) capitalist economy.
My pessimistic side predicts an economic implosion (at least 15 pc aggregate contraction over the next 3 years) and my sunnier side can then glimpse a better way of doing things, provided we take our medicine and learn some lessons.
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moss @ 101
Greenspan is also in the dock
You're damn right he is. Has there ever been a more hapless and overrated individual? Brown's impact was tiny in comparison - funnily enough, I have a horrible feeling that the both of them are (were) driven more by misplaced personal vanity than anything else.
It's a shame, so it is.
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90. See 91. "It's not deregulation that's the problem. but how a deregulated system is policed."
Exactly the point I was trying to make, sorry it wasn't clear. The FSA doesn't police effectively, but probably doesn't have the correct powers to do so. I'm not arguing for more regulation, there's far too much of the wrong sort already. I do support effective supervision / policing, but the FSA rules are so extensive and complex that it's difficult to follow or enforce them. Fewer rules to make people stop and think might be better. Grey is often better than black and white tick boxes.
Extrapolate to everyday life: more and more laws to break, but little police presence to enforce them - thank goodness, or we'd all be in trouble for breaking laws we weren't even aware of!
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102 jonchr
"You posted just before 6pm so I hope you saw the six oclock News where Robinson had a long piece showing Mandelson being hounded in Moscow."
I didn't see him hounded, I did see him refusing to answer any questions. I would call in evasive but then what do you expect, has he got anything to hide. By all accounts he loves jetting around the world in someone else's private aircraft to holiday in their villa. How did he get to Corfu; I know that Ossy Osborne used Monarch.
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All this is, is history repeating itself. Labour overspends and gets the country into debt. They are voted out, in come the Tories. They sort the mess out; but become stale and are voted out by the electorate who want "a change" in the way they are governed. In come Labour they overspend and round and round we go. It is never any different - what we have at the moment is Labour self destructing in the most excrueating and painful way - wasting an awful lot of OUR money proping up the most useless bunch of ministers in this country`s recent history. They have not got a good idea between them and all that Gordon Brown can think of is to throw good money after bad. Is it not time those ACTUALLY working and paying for this debacle had a say in this matter?
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The last time I checked the Tories destroyed most working class jobs and actively shifted earnings from blue collar workers to the already well heeled.
The CBI and their Tory pals scream like little girls at the hint of a slowdown and start hacking and slashing like some wild eyed demon. That's not policy. It's habit.
There's a point where those who "get it" become fed up with procrastinators and get motoring. Gordon Brown is working this "tipping point" to encourage that trend.
Seize the day, etcetera.
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BBC -ow about you invite get Gordon Brown on Spendaholics
Would make an interesting programme.
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You occasionally come across these TV programmes where sorry individuals who have racked up enormous debts are taken aside by financial advisers and given advice on how to set up sensible budgets and control their spending. If they were advised to borrow more from their parents and were then advised to splurge that money on clothes, discos and holidays etc. they would be seen to be giving very poor advice indeed. How is it that we as a country are now being advised to build upon our enormous debt by spending and borrowing on a vast scale as a ploy to stimulate the economy? Fair enough if we were starting from a good position and could easily pay it back like the owners of Manchester United then it might work smoothly. I just don't get it. Perhaps someone could explain it to me in simple terms. Simply lowering taxes aint goin to work either because people will simply use the extra money in their pockets to either pay off their personal debts or invest in savings neither of which will do anything to stimulate the real economy. I think this approach is storing up trouble for the future and guess who likeky to have to pay for it in the long run. Certainly not me because I have decent savings, have paid off my mortgage, am not likely to want to move house and so am virtually untouched by the credit crunch unless inflation climbs to unprecedented heights.
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#96 Carrots,
It's this kind of thing that happens when you elect spendaholic left-wing politicians isn't it
(Really!)
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GHBRich,
Now you seem to have finished just slagging off anyone who disagrees with you, perhaps you'll find the time to go back and read what I actually said, rather than what you imagine I said.
My point concerned the 'fiscal rules' quoted so often by GB as evidence of his prudent and wise management of the economy. In case you forgot, that was the subject of Nick Robinson's blog.
Australia and Canada are parliamentary democracies who are modern, Western economies and have a welfare state similar to our own. I don't see why they aren't a valid comparison - much more so than Japan, for example. They have managed to control their public spending while growing their economies and investing in their future. Go to Melbourne or Montreal, and see if you think it's under-invested compared to Birmingham or Bradford.
They've done this without pathetic stunt 'rules' which fooled no-one, which were bent past the point of credibility in the past, and are now ignored completely. Why would anyone believe GB when he makes any assurances about public finances in the future (let alone lecturing other countries) when he cannot even stick to rules he invented for himself?
Do you think maybe the financial markets have reached the same conclusion?
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101 johnjcmoss
Now that is a very interesting perspective. I commend everyone to go back and read post 101.
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Crash Gordon isn't interested in the welfare of the people. He wants to save as many skins of all those Labour MP's facing the electoral gallows.
So he'll borrow mega bucks then throw it around pre-election as more spending (aka dependency) and tax cuts all packaged up as a "fiscal stimulus".
Cameron will inherit a financial scrorched earth and spend the first 5 years of his first term paying back Brown's borrowings.
We have to learn to live within our means. That means no more borrowing!!!!!!!!!!!!
There is no alternative. There really isn't.
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Borrow by all means but give the money to the poor. This is not as insane as one might think. For the poor tend to spend all the money they have on immediate consumption and thus will spend with retailers who in turn will buy from wholesalers etc.., etc..
However if you borrow and give the money to big business they will tend to hoard the money and spend it much slower than the poor and hence the multiplier effect is much less.
However, as all politicians are emotionally and financially far better connected to rich businessmen than the poor the money will go to big business. Even though it is a less efficient way of getting the economy going, but that is how the cookie crumbles!
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Nick,There are so many comments on your blog thst seem to ignore what is good for the people of this country.If it is required that funds be made available to make poeople have work who would otherwise being made to draw benefits, surely it is better to invest in the future using the benefit money that would oitherwise be wasted on benefit.I am one of the people who cannot work becaue I am classed as disabled, I wish I could find work, I have epileptic fits two or three times a week. If i could find an employer that would employ me not really knowing when I would be able to turn up to work ona regular basis I would love to work, but until emplyers wake up to the fact I can offer skills there is nothing I can do but rely on benefit.I just hope that other people have the chance to benefit from Government Spending on the infasturce spending that the government are planning on spending.I would ask peopel who criticise the government spending have some sympathey with others.
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Channel Four News at 7pm:
The EU did not investigate Peter Mandelson.
Now who was it who told us that Mandelson had been cleared by the EU?
Oh yes, Gordon Brown.
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#90
If the non-application of the FSA's rules was a matter of policy then I think such a fact will be of interest to anyone wishing to file a compensation claim.
As far as I recall, de-regulation proposed by the Tories has focused on the de-regulation associated with taxation and small business. I don't recall any proposal dealing with further de-regulation of financial services business.
I do recall Tony Blair chatising the FSA for an over-indulgence of its use of enforcement powers against smaller regulated businesses. The FSA at the time said such intervention was not helpful to regulation. Gordon agreed with Tony. Naturally.
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If Nick Robinson doesn't know any "serious economists" who are suggesting government spending and tax cuts then I think that says more about the kind of "serious economists" Nick Robinson knows, rather than the idea stated here that the government is on the right track with its current policy.
What I can say, is that any good economics student should know that if the government goes on a Keynesian fantasy trip of borrowing and spending, and a monetarist fantasy trip of fixing interest rates below their true market rates, compounded by a falling number of goods and services in the economy i.e. recession. We can all say hello to Mr. Hyper Inflation. Here's one question I'd like to ask Nick Robinson and his "serious economists", do you accept or reject Say's Law? I'd bet they all reject it.
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You say:
"After all, they had to borrow to pay for that £2.7bn tax cut to end the political crisis over scrapping the 10p tax rate."
In fact, about a million of us are still losing out by about £100 pa and the £2.7bn gave £120pa to a lot of people who did not lose out in the first place - not that I begrudge that!
In an email dated 3/10/08 HMRC stated "However, the Government does realise that this measure has not fully compensated everyone and that it needs to do more to help those on low incomes. This is why the Government has made clear that it will be returning to this issue at the Pre-Budget Report in the autumn."
Wonder if the current situation is the excuse not to do so!
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Dear Nick
I think you have erred too far to the right.
Surely the problem is with banking, not the management of the public finances?
Peter Kenyon
http://petergkenyon.typepad.com/
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#87 ngodinhdiem
...but then he and Prudence got divorced....
I think Prudence was sleeping round, Golom Brown clearly has not the faintest idea about her.
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110 Sagamix
Brown's impact isn't exactly tiny - he has left the nations finances in a parlous state.
The interesting perspective at post 101 is that Gordon's increase of our national debt is vast in comparison to 40 years of North Sea Oil and Gas tax receipts.
The question is, just how much has Gordon Brown cost this country? It is a very, very high number.
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"In theory, governments could cut spending or raise taxes to avoid this. No serious economist or politician I know of is arguing for this."
The Lib Dems advocate both.
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Even if more public spending was the correct policy for theses circumstances, would you trust any among this government of desperate people to spend your money responsibly?
These people in power have never been able to spend wisely.
Even in 'normal' budgeting they do not even seem to understand the difference between 'spending' and 'investing'.
Now, we can only expect waste on a grand scale.
Clearly, in their 'last chance saloon' mentality, there is a great deal of behind the scenes preparation for a snap election at the first favourable opinion poll
Poor old Britain, we really do deserve better government.
John C.
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#120 northernthatcherite
Interesting solution.
Economy entering recession.
Reduce government spending.
Increase taxes.
Demand reduced further.
Economy slumps further.
Interesting solution.
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I have to say, I have been watching and waiting for this for a while...
With so many jobs created in the public sector over the years, supported by more and more taxes and more and more debt, a couple of years ago I decided to leave the UK rather than sit and wait for the wind to blow and bring down the house of cards...
As for the new spending plans, the government needs to take action to support the creation of productive jobs, but I am sure they will continue to spend the money on non-productive jobs (and too much money will continue to leak out of the country to buy exports for things the UK doesnt/can't make).
Sooner or later the government spending bubble has to burst. I am so glad I am out of it now.
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Why are so many silly Tory bloggers still traumatised by the Osborne donations saga. He has recognised himself that he made a mistake. Issue over.
On borrowing a measured approach is required. Brown knew he had to calm the markets and the rally in the FTSE at the end of the day's trading reflects that the city must have understood the message.
In the coming months the government is going to announce increased borrowing on strategic public works to try and stimulate demand in the economy. I suspect though that this will be coupled with a programme of cost cutting measures aimed at public bureacracy. Bernard Donoghue suggested exactly this when interviewed by Andrew Neil a week or so ago.
Only the most blinkered supporter of Labour would suggest there is no room for savings here. The culture of "elf and safety", management consultancy and yes quangos has become overblown. However, I suspect GB knows this and we will see change here very shortly.
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Test
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it may be we are all wrong and the man we all voted in as our leader oh wait a moment scrap that we never voted for the leader did we thus we have a dictator ah it makes sense now with a dictator they always know whats best and the rest of us are idiots.
when blair stepped down there shouyld have been a general election soon after but we are still awaiting untill then we are under a dictatorship and have no say what they do.
so if they decide we have to borrow to spend and keep spending we should all do the same, if we cant keep up payments we can blame the government for guiding us down this road.
im off to get a big loan and waste it on something silly like shares.
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#124 Terry
As far as I recall, de-regulation proposed by the Tories has focused on the de-regulation associated with taxation and small business. I don't recall any proposal dealing with further de-regulation of financial services
You are so wrong Terry - whether by accident or design.
Recall this for example?
Clearly embarassed by this inconvenient truth, the Conservative have removed the link to this speech from their archive of David Cameron's speech. I had to go back to a previous post I made on this subject to find it. Scandalous!
Search the speech archive on the Conservative website - no sign of any speech by Cameron on the 22nd June 2006
Who's Stalinist again?
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The only thing Gordon Brown is good at is 'leading us down the garden path', with what he says you have to study, analyze and read between the lines before you can believe him.
What is going to happen sooner or later, there will be no mention now but there will after the election someone is gonna have 'honor' the debt.. think about it, this needs 'doing that needs doing it's gonna cost money and things aren't going to get cheaper so taxes will have to rise or are they that stupid they are gonna borrow more until they go for bust like the banks - jobs and trade are hemorrhaging like the clappers - bad businesses goes bust and so should the banks after all we can keep throwing money at losers.
Brown is that prudent they never saw this coming even after being warned about it, at least I doubt if he'll be mentioning 'prudence' for a very long time.
What we will end up with is a bust with the debt rising... busted on debts, busted on manufacturing, busted on exports and busted on jobs.... but they wanna build houses and they expect us to buy em' at this rate we'll be busted on banks
Gordon do us a favor just go... and don't bother fixing the pension fund you wrecked.
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Brown says:
"The responsible course of government is to invest at this time to speed up economic activity."
Economic activity includes lots of things which are plainly worthless, like digging holes and filling them in again. Or in the case of C21st Britain, the ID cards scheme.
It's a modern day Maginot Line, gobbling up computers and IT expertise instead of concrete and engineers. It will do nothing to protect people, indeed it will probably make the UK more vulnerable to terrorism and crime, just as the Maginot Line hopelessly weakened France.
The best IT people will end up cocooned from any economic hardship, working on this fantastical wedding cake. Meanwhile, in the real world, small and medium businesses will face increased IT costs and reduced quality, as resources and talent are drained away for use on the cards.
Furthermore, the cream of the IT crop will have their entrepreneurial drive withered by their long dependence on government employment. Forget any chance of a British Google. Most likely they'll start suggesting further taxpayer-funded schemes 'to keep the economy going'.
Bottom line is, this isn't going to work. A public sector bubble is perhaps the most dangerous and destructive of all.
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Post 132 Balhamu
Can you read?
Where in my post do I advocate as you put it "reduce Government spending"??? Please quote me.
Where in my post do I advocate as you put it "increase taxes"??? Please quote me.
Your posting has no foundation. It seems more like an emotional rant related to my name rather than my words.
All I say is that we need to live within our means and that means no more extra Brown borrowing mortgaging us all up to the hilt for the next 20 years. Enough is enough.
Anyway, other than wasting your time making things up about other bloggers comments, have you set aside a few minutes to consider what you own views are on the matter of borrowing? If you have I would love to hear them. Don't worry about expressing yourself as if I don't agree I will point out the failures of your arguments. Or maybe you are just one of those moaning minnies who carp on about (and invent) other peoples opinions but don't have any of their own on the subject?
I can't wait to hear your crystal clear views on the matter............
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ball and u 8:48
yes, you are very testing. The level of your posting makes me wonder if you are a donor or a dolly.
My money would be on the latter.
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It is amusing to read all these diehard freemarket conservatives coming on here frothing at the mouth about Brown and Blair and Labour.
Since you are apparently so invincibly ignorant as not to have noticed, perhaps I need to break the news to you. Your beloved extreme laissez faire capitalism, founded in its modern incarnation by your beloved leader Margaret, has just completely collapsed in utter incoherence. It has proven a disaster and will never be resurrected. Thatcher's reputation is completely trashed.
Repeat after me with a straight face your old mantras: 'the government should keep out of business'; 'markets and the financial sector are self regulating'; 'untrammeled pursuit of the profit motive guarantees propsperity'....
No wonder you are all frothing at the mouth.
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#141 northernthatcherite
I refer you to your post #120
"We have to learn to live within our means. That means no more borrowing!!!!!!!!!!!!
There is no alternative. There really isn't."
Now. How do we reduce borrowing if we don't increase tax and/or decrease spending?
Oh yeah, we sell off lots of state assets. That worked in the 1980s to facilitate £320 billion of borrowing to invest in unemployment, social breakdown and taxcuts for the wealthy.
Care to find some assets to sell? Maybe privatise schools? Or hospitals? Maybe privatise the roads and charge tolls for people to drive on them?
Or, alternatively, you were suggesting that taxes are increased or spending decreased?
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I think Brown as usual is just playing with words.
If public expenditure is held steady then it rises as a percentage of the economy or as a percentage of government income. As the economy recovers, strange word to chose - admits a problem even if indirectly, must be a first - then if it is held at the same level it will reduce.
Looks like the usual Brown non-event, trying to make something outta nothing. Virturous fellow, telling us he is doing something other than telling the world how to sort things out.
It is like his innovation with housing repossession. The big intervention is to ask the banks to look at repackaging, up to them, or to ask the courts to check that it has happened. Nothing to deal with negative equity which is the real problem for 2 million households and locks the property market up, lets just wait 5 years and that might go away. Maybe.
Taxation reduce - most unlikely, back in the mid nineties Ken Clarke said that in all the EU countries overall taxation, the total of direct and indirect, had to be between 43 and 46 pence in the pound (from memory, but somebody will correct I am sure) as that is what was needed to supply the levels of healthcare and social services demanded by the public. It will be fudge as usual.
I still consider that two factors drove the bubble and the dramatic government revenues that resulted from it. 1, an electorate which feels bubble wealthy is a happy electorate, and 2, a war needed to be paid for, if possible without very obviously raising taxation rates.
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#127
"I think you have erred too far to the right.
Surely the problem is with banking, not the management of the public finances?"
CEH often comments on the lack of attention to creative developments within industry sectors and short sighted management. Funnily, I don't disagree.
The problem is to ensure that the creative urge is encouraged within an appropriate framework.
For centuries, finance was taken seriously. (OK, there were some stupid things that happened). But on the whole banks looked after other people's money, lent to organisations who were set up to pursue various objectives, and limited their own risks by checking what their borrowers wanted to do with the money.
Recently, finance houses themselves have wanted to be creative, developing "innovative product".
Governments were supposed to regulate their actions. That failed very badly in the US - and here.
I find it hard to believe that the FSA had no idea what risks the banks were taking, by peddling toxic "assets" to each other.
Except that I doubt that many senior finance house executives genuinely understood the junk their bright young people were inventing.
Dick Fuld told Congress that his management team was not aware of the true problem at Lehman's. So they paid him US$300MIL, NOT to know what was going on? The real problem was him. If management in any company doesn't know what's the reality of his business, he's either a crook or an idiot.
It's been a bit like pass the parcel. You pop a plastic whistle inside a coloured paper. First time round, it has some value. Then you add another layer, get some agency to give it a AAA rating, flog it, the buyer gets insurance to ensure he's not exposed. Then he adds another plastic ring, re-wraps everything, etc, etc. By the time the music stops, you've got a couple of 10p items wrapped up in a couple of pounds worth of paper. But someone seems to accept that this bundle in the bottom of a desk represents real value, so the banks can carry on lending, because they've got those "assets" safely put away.
Madness.
I'd guess that the US credit rating agencies will be out of business soon. And a proper regulatory framework will be demanded. Quite right, too.
We can blame the banks for doing stupid things, governmemnts for not regulating properly.
But, Brown has too often talked about investment when he means "cost of doing business". We have had a credit driven "growth", with a significant rise in public service costs.
I've no real issue with PFI/PPP. As long as deals are properly and fiercely negotiated (which many have not been). And the infrastructure elements are properly recognised as public debt. We have to pay that back. The on-going maintenance/ service aspects are purely cost-of-doing business.
It's the sheer obfuscation that makes this government seem so appalling.
"Green" and lean technology development is something that the UK could do and has done in the past. But where's the government R&D budget? Has it grown at the same rate as general expenditure?
Like heck.
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The markets (free or otherwise) are now discredited, unable to cope with the 'global meltdown' are we entering a new era?
I just don't really believe any of it, I smell a big fat smelly rat.
This is an excuse to write-off huge frauds, thefts and embezzlements related to global pensions mismanagement, e-commerce and ID theft.
The Credit Crunch has no clothes.
Save nothing, borrow as much as you can, spend it all and never pay it back!
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#134
"Why are so many silly Tory bloggers still traumatised by the Osborne donations saga. He has recognised himself that he made a mistake. Issue over."
Agreed and in other circumstances we could and should let it rest. Osborne was clearly naive to get sucked up into this mess. But he's at least now had the grace to admit it was a mistake, unlike a certain other party.
But not all those outraged by the coverage were Tories - me included, I'm way to the left - and for many of us it is symptomatic of a much wider crisis of confidence in the BBC's impartiality.
And notice that it's the lead on the BBC UK News website again today, despite the world economy being in the mire, the pound in freefall, a week to the US Presidential election, and news of a US border incursion into Syria which looks very smelly. The issue of Mandelson's relationship with Deripaska is given much less attention.
It's no use to say all the media jumped on the story, after the way the BBC hyped it up they had little choice.
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117. balhamu
You need to pay attention.
Im anti squander and I dont just limit myself to anti labour squander, though they are well ahead in my poll on this.
Oh look some more from today
And this from a force complaining of lack of funds to deal with excessive immigration.
Good old public sector. well I guess we have to spend it somewhere.
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Nick,
Cut taxes and interest rates - people will increase spending immediately and we start pulling out of the mess now.
Increase public spending - and money will find its way into the economy only after budgeting processes, political turf wars, the planning system, public enquiries, civil service inefficiency, EU tendering processes, etc, etc...
Labour ideological incompetence trumps common sense every time...
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#138.
My central point is that policing of the regulatory regime is key. If the regulator is incapable of policing financial sevices then we're all lost - along with our pensions.
As it goes, the FSA does seek to be less prescriptive than other regulators (ie less regulation). This is fine. What it does have are a set of principles (in conjunction with a hefty rule book).
An approved person can be subject to disciplinary action of a breach of the principles of good regulation.
The FSA has already said that it's done regulation on the cheap. It's also complained about political interference.
At the end of the day, it's all about policing; about freedom to do certain things but within parameters.
#143. Novoludo. What's collapsed is an economic model followed by Brown. Maybe Brown is a closet Thatcherite, if indeed it is her polices he has been following.
But whether it's regulation or Thatcher, has Brown attributed his success story - and subsequent failure - to her legacy?
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After 10 years or more of Browns great redistribution of wealth, (taking from the productive to give to the unproductive) Browns last roll of the dice can only be seen as a scorched earth policy leaving the next Goverment with a near bankrupt country.
PS. Nick are you sure you have not been wearing rose tinted spectacles the last 10 years.
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The only thing I want for Xmas is a chance to vote Labour out of office.
How much more damage are we going to let these idiots do to the country before we have to march en masse to the houses of parliament?
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Post 144. Balhamu
Well I gave you a chance and you had time to submit something well thought out and enlightening.
1. You did not give your own view on "borrowing" but resorted once again to the role of the moaning minnie.
2. Again you failed to quote me accurately. I said ......no MORE borrowing. That means additional borrowing! I have never said as you imply tax increases and reduced spending.
I think you should give up on blogging as you are quite rubbish at it!
Alternatively as I am a generous person especially with people who clearly cannot read I will give you a second chance.
Please quote me on any previous post on this topic where I have said.........to quote you...."reduce Govt spending and increase taxes"?
And secondly once you have realised that you can't actually do that, please can you outline your OWN thoughts on Government borrowing...............
I await a considered response devioid of emotional rants!
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132. balhamu
Your interesting solution:
Seems to be to continue to support a party that promised:
People are cynical about politics and distrustful of political promises. That is hardly surprising. There have been few more gross breaches of faith than when the Conservatives. We will be whiter than white. We will clean up politics.
The myth that the solution to every problem is increased spending has been comprehensively dispelled under the Conservatives
New Labour will be wise spenders, not big spenders
The increase in taxes under the Conservatives is the most dramatic evidence of economic failure. Since 1992 the typical family has paid more than £2,000 in extra taxes - the biggest tax hike in peacetime history, breaking every promise made by John Major at the last election. The tragedy is that those hardest hit are least able to pay
New Labour will establish a new trust on tax with the British people.
We will enforce the 'golden rule' of public spending - over the economic cycle, we will only borrow to invest and not to fund current expenditure.
We will be tough on crime and tough on the causes of crime.
We will reject the boom and bust policies which caused the collapse of the housing market.
Education, Edukation, Edukashun. (well ok they didnt spell it quit like that, but that’s what they delivered)
All quotes from the 1997 party manifesto
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quote of the week tonight on newsnight:
tony macnulty, employment minister answering a question on gordon brown's excessive borrowing -
".... and who are these 16 so called financial experts who sent a letter, what do they know about finance?"
quality tony, at least you try to argue for your side bless, the interview ended with ken clarke openly laughing at gordon brown's borrowing plans and tony macnulty having no reply.
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153. "How much more damage are we going to let these idiots do to the country before we have to march en masse to the houses of parliament?"
I didn't march as a student in the 60s, but now? Just tell me where and when.
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#154 northernthatcherite
So he'll borrow mega bucks then throw it around pre-election as more spending (aka dependency) and tax cuts all packaged up as a "fiscal stimulus".
Cameron will inherit a financial scrorched earth and spend the first 5 years of his first term paying back Brown's borrowings.
We have to learn to live within our means. That means no more borrowing
I understand the amount of borrowing to be the level of the national debt.
When you say "no more borrowing", I understood that to mean that "the national debt should not increase".
To achieve that additional borrowing will need to be reduced to zero i.e. either spending will have to be cut significantly, taxes raised significantly or a significant (and rapidly implemented) privatisation programme.
Maybe I inferred the wrong thing from what you said though.
When you say "no more borrowing", could you mean additional borrowing each year should remain the same (i.e. increasing national debt, but keep the rate of increase the same). Even that would imply restricting spending or increasing taxes, as spending naturally rises (e.g. unemployment benefits) and tax revenue naturally falls (e.g. less people paying income tax) in a recession.
Maybe by "no more borrowing" you meant that borrowing should increase significantly, but only as much as it would if the Government made no fiscal policy changes.
If the latter, I'm sorry I misunderstood you. But can you see why I would not naturally take the inference that by saying "no more borrowing" you meant "borrowing should increase significantly"?
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Has nobody else noticed the movement in the useless Dow Jones Industrial Index. This is getting dangerous, you cannot have such volatility. It is no wonder that people don't trust the market any more, its busted.
It would seem that at last people are beginning to understand that you can be invested in the right stock but the wrong market.
What everybody seems to have forgotten is the idea of contingent liability. Yes you may be in profit but there is an obligation which may exceed your profit. I am afraid to say that this is becoming almost meltdown.
You sell into a rising market and buy in a falling one, perverse logic I know, but historically it has worked. Only this time it is different there is no bottom.
The problem is that the same mistakes are being made. Asset prices must be allowed to fall, that means wages, as well as fixed assets. From an economic perspective people are no different, you are all wage slaves.
In his programme on class Prescott doesn't get it, there are the classes and then there is the underclass, be afraid, very afraid.
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Post 158. Balhamu
Are you Neil Kinnock? What a load of welsh windbag style pontifications!
We up north are straight to the point.
No MORE borrowing means no MORE borrowing! End of!
We need to live within our means.
It's a simple proposition and one that if we had followed since 1997 would have lead to one hell of a Budget surplus and thus a war chest of such proportions that taxes could have been cut just at the time people need those extra pounds that they have earned back in their pockets.
Socialists don't understand that wealth is created by hard working individuals. The state consumes the wealth and should also conserve the wealth in the good times for the country's needs in the bad times.
Brown has failed to do this.
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Still waiting for some coverage of mandlesons refusal to answer questions...
Osborne, being a decent bloke has done the decent thing.
Now he gets more (relatively) negative press, and mandleson gets off scot free?
You keep saying how many times you have asked people things...
You asked osborne three times if he had any discussion of contributions with anyone at all.
You asked cameron three times what lessons he had learned.
Have you asked mandleson anything? how many times did you ask him?
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#160 northernthatcherite
Thanks for all the insults. Really.
No MORE borrowing means no MORE borrowing! End of!
We need to live within our means.
Right. That's what I thought you said to start with.
So we should stop borrowing money - i.e. cut spending and increases taxes. Keep the National Debt the same, at worst. Is that what you are saying?
In which case, what is wrong with my post #132 as a representation of what you think? Why did you get all upset?
Keeping fiscal policy the same as it is at the moment will mean accelerating borrowing as we enter recession (more expenditure on benefits, less tax revenue).
If you think this is undesirable, by definition, either taxes need to increase or spending needs to be reduced (or we need to get selling state assets really quickly). Without any fiscal policy changes to do this, borrowing will accelerate and we will continue to 'live beyond or means' as you put it.
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#160 northernthatcherite
And I forgot to add - what on earth happened to the £350 billion+ proceeds of privatisation during the Thatcher/Major years?
If your hero had followed your 'simple proposition' there would have been no national debt in 1997. If, in addition, North Sea Oil reserves had not been squandered, we'd have had a nice little nest egg of a sovereign fund to draw upon now.
So, no lectures from Thatcherites about 'living within our means', please.
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jcook @ 129
Gordon's increase of our national debt is vast in comparison to 40 years of North Sea Oil and Gas tax receipts
Eyecatching but not that illuminating. Our government debt, as a pc of GDP, is not particularly high compared to others. I think everyone accepts that. It's not particularly low either (GB hasn't been as prudent as he often makes out) but, still, it's a fact that it's not massively high.
The problem that's quite peculiar to the UK (i.e. leaving aside the global issues for a second) is not so much in the public sector but in the private sector - both personal and corporate debt is way higher than in just about any other country in the developed world. Course, GB presided over the private sector excess, as Chancellor, so he can't escape at least some of the responsibility. He pretended that he knew what he was doing while the economy seemed to be doing well (e.g. "no more boom and bust") so he can hardly squeal too much if he gets a lot of the blame, now that it's all gone so horribly wrong.
But please be in no doubt about the main cause of the slump which we're about to enter (along with the whole of the developed world, and perhaps the emerging economies too) because it has NOTHING to do with Gordon Brown.
The toxic fuel of Alan Greenspan's super low interest rates was sprayed liberally over the pyre ... the pyre constructed by Wall Street using a black magic mixture of reckless sub prime lending, securitisation, phoney ratings, massive greed, a fair amount of stupidity and a good dose of fraud. Just needed a match for it to blow, didn't it?
Well hello there US homeowner defaults and a crash in real estate! Bang, we're dead. Welcome to the funeral.
Just like so many other things - like MacDonalds, like Starbucks, like Blue Denim Jeans - this is global in that it's spread all over the place but it was, in the words of one of my favourite Americans, Born In The USA!
All this "we should be much better prepared" and "we should have fixed the roof while the sun was out" is on the margins of the problem - it's political point scoring more than anything else. Which is fine, so long as we recognise that and don't present it as being serious economic analysis.
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nt @ 160
Socialists don't understand that wealth is created by hard working individuals
No, you could not be more wrong - Socialists are the only people who truly understand this, as opposed to paying lip service to it. Capitalists think that wealth is created by rich people, sitting around and "investing".
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These economists are just an attempt to provide intellectual ballast to a failed ideology, and Ken Clarke's electioneering is just corrosive. If that's the best the right wing can do I'm glad they're not in power.
Quality products and markets tend to be an emergent property of skill and attitude, and by creating the right environment stuff "just happens". The smartest and most savvy companies know this.
I've found Cameron's speech, 'The new global economy', 2nd June 2006. But, it's full of ideological cliche. The thing reads like a box ticking exercise in Thatcherite economics. Zzzz.
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164 Sagamix
Needless to say I disagree with that. Unfortunately I need to leave the house in 2 minutes and I'm at a conference today - but I'm sure someone else will pick up the scale of Labour's culpability.
JC.
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164:
I think we established long ago that Gordon Brown is not to blame for The World Slump. That's a dead issue and a total red herring invented by The government to deflect attention away from its mishandling of The National Purse. I've lost track of the number of times that the words 'global crisis' have been used by Ministers in relation to what we have done and what we are doing about the present situation. Where he is culpable is the way in which he has left us so vulnerable to it because of his economically lax policies over the last 10 years. Not only that but we will all have to pay for his mistakes for years to come.
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# 167 jonathan_cook
"I'm sure someone else will pick up on the scale of Labour's culpability ...."
Sure. Take a look at my Post # 56.
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As individuals we are constantly being told that taking out a loan to consolidate your debts and THEN carry on racking up further debt is not a good idea.
Why then is Gordon Brown's government doing just this?
Surely some pain now is a small price to pay for protecting our children and granchildren's future.
But I can see Brown's devilish plan. Mortgage the country up to the hilt, which he can then use as a sledgehammer to batter Cameron with when the Tories are surely elected before very long.
Incompetent politicians along with incompetent banker and financiers have all wrecked GB Ltd.
I really do fear for the future.
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Nick may I suggest that you rename your blog the "secret diary of Daily Mail moaners and whingers"?
The posts on this subject reveal a lamentable lack of understanding of the global economic situation. Of course the Labour Party could sit on its hands and do nothing - is that really an option?
A further suggestion for you. Many posts are rambling on about Mandelson. The discussion theme is Responsibilty of Borrowing NOT NuCons looking for donations!! Please keep the discussions on track
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sicilian @ 168
I think we established long ago that Gordon Brown is not to blame for The World Slump. That's a dead issue and a total red herring invented by The government to deflect attention away from its mishandling of The National Purse.
Okay, that's good - I'll try not to mention it again.
But, as regards his mishandling of The National Purse, what about the point that our government debt is not particularly high when viewed as a percentage of GDP? That doesn't support you stating Brown has been wildly extravagant, does it?
I do like that phrase, btw ... the National Purse. I'm going to say that from now on, instead of Public Finances.
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Hello. Herb_igone here.
Another day, another problem. Can't respond to em e-mail, so can't activate my new ID. Thanks vm Mr Griggin.
Now, what do we find. Back to real politics, and the government swinging in the wind over their borrowing figures.
We all know they're bad, we all know why, we also all kow that the Government have effectively painted themselves in a corner due to their 11 years of mismamagement. Let's not forget, they've been doing this to us for 11 years, not just the past few weeks.
Now I don't want to re-open old wounds about what is or isn't a lie. In my opinion all politicians lie. They can't help themselves. As soon as they open their mouths, the lies start falling out. Now some people might say they've simply misunderstood the facts, or misunderstood the question, or are blatantly being misrepresented.
Either way, we deserve to be told the cold hard facts about how much borroowing is required, for all purposes including PFI, the Olympics, helping out Iceland, supporting the banks, and how long it's expected to take to pay it all back. After all, we are reasonable, intelligent adults, and WE will be paying for it.
Oh why bother, get rid of Brown and the rest of them, NOW.
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#5, No the PM didn't promise "an end to boom and bust", he promised an "end to TORY boom and bust".
So there you go.....
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171:
Here we go again. Gordon Brown is not being blamed for the World Slump and everyone bar a small group of economists agrees that he took the right decisions last week. These are NOT the issues!!! What on earth The Daily Mail has to do with it is beyond me.
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northern thatcherite @ 154
Alternatively as I am a generous person especially with people who clearly cannot read I will give you a second chance
You aren't a generous person. What you are is an ignorant, numerically challenged person who seems to think that the economy of a major industrialised country is exactly the same as a corner shop. Just because you don't understand something, that doesn't necessarily mean that it's not true.
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174:
Exactly so that's alright then as far as Gordon Brown is concerned. Splitting hairs over wording fools noone least of all The Electors.
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What makes me squirm is Brown trying to appear as the saviour of all when it was himself, Greenspan, Cowen et al who caused this bloomin mess in the first place with their awful monetary policies over the past 10 years. It's like being punched to the ground by the school bully only for him to put a hanky under your bleeding nose.
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#174 laughingblacksheep
Good as far as it goes, but once you start hair splitting, it never stops.
Theroetically once the tories were out of power in 1997, sorry out of office, that was the end of any tory boom or bust until such time as they regain power, or get voted back into office. So, job done on that front, tory boom and bust ended.
Now that suggests to me that all the boom and bust that has occurred since then is Labour boom and bust. We have enjoyed the boom, such as it was, and now we are paying for the bust, or rather just beginning to pay for it.
Now either El Gordo was mistaken, or wrong, or misrepresenting the facts to gain an advantage. Obviously he hasn't got rid of boom and bust and, being a novice at it, hasn't had any experience of managing a bust.
Surely, as he keeps reminding us, this is not a time for novices, and you need experience that he hasn't got.
Throw him out, now.
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herbigone @ 173
We all know they're bad, we all know why
Maybe not quite everyone knows why, herb, so perhaps you could say a little bit on the why front?
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The BoE's Financial Stability Report "points out that in 2001, UK customer lending was comparable to customer deposits.
But by the first half of 2008 the surplus of lending over deposits - "the customer funding gap" - was £700bn."
The "funding gap" was covered by the banks' borrowing.
During this period, what did Brown do to try and calm the general credit boom?
And what did the FSA do to try and ensure that the banks didn't go on a credit spree of their own?
That was a lack of UK self-control control and regulation over an extended period.
Brown fiddled about with individual saving schemes - and badly hit private pension funding. You could argue that he failed to support savings, in favour of rampant spending - which produces output that can be taxed.
You can't blame that fundamental policy on any global situation...
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156. denzil69
"quote of the week tonight on newsnight:
tony macnulty, employment minister answering a question on gordon brown's excessive borrowing -
".... and who are these 16 so called financial experts who sent a letter, what do they know about finance?" "
I remember the same McNulty on the Daily Politics discussing avian flu & saying "Well, in 1999 we were all scared about the Millenium Bug...but no-one died did they?"
Where do they get these people from?
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prod @ 178
What makes me squirm is Brown trying to appear as the saviour of all when it was himself, Greenspan, Cowen et al who caused this bloomin mess in the first place with their awful monetary policies over the past 10 years.
Yes but it was far more Greenspan (and Wall Street) than Brown, don't you agree?
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laughingblacksheep @174 wrote:
"#5, No the PM didn't promise "an end to boom and bust", he promised an "end to TORY boom and bust".
So there you go....."
Well, he certainly succeeded in putting an end to the Tory boom...
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Between Nick's blog, statements emanating from Downing Street, assorted other New Labour politicians/spin doctors, treasury officials and bank of England I am none the wiser what the current policy is.
The blog had many words in it but said very little that was new, more a reiteration of previous statements about spending (sorry investment) policy and the link with borrowing and omitting that nasty 4 letter word debt.
Downing Street and the assorted others have in the past few weeks hinted at making loans to small businesses easier and likewise easier mortgage terms and a lot of hot air about repossessions.
Then the Bank of England today has fired a shot across the bows of the banks to not lend irresponsibly! As if they needed that advice!
Is this simply a case of do as I do, and not do as I say? So, the political statements are for political manipulation but in reality there will be cutbacks on spending, jobs will be lost, repossessions will occur, companies will fail all without making the headlines. This happened before in one of the mini recessions in the 1990's - I worked for a large pensions company that made 600 people redundant. However it was done piecemeal over time, so did not generate news headlines. Just as the Blair and the spin team wanted!
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#180 sagamix
You ask why I state that Government figures on the borrowing figures are wrong.
Since he dreamed up the idea of PFI (private finance initiative) the figures about governemnt indebtedness have been cliudy, to say the least. Using PFI a lot of high profile construction projects have been undertaken, where the "finance" has come from the "private sector" under commercial terms. The private sector has taken collateral over the various finished projects, but is really dependant upon the implicit government guarantees about repayment of any debt involved. After all, if a PCT cannot pay for a hospital, the lenders don't want to take it over. Who they gonna sell it to?
These loans have always been kept out of the government's figures, despite criticism of this practice from various international bodies. If you think I'm wrong, please tell me.
Now we have NR costs, which is still being argued about, to be added to the public debt, and finally the magical package that the government put together to address the banking crisis.
As I have previously posted there are some significant numbers to understand here:
These data show the tax burden (personal and corporate) and national debt as a percentage of GDP. Samples are taken at 10 year intervals (snapshots, but the rolling averages are very close).
Year Tax Debt
1975/6 54% 43%
1985/6 44% 43%
1995/6 43% 38%
2005/6* 46% 40%
(Source: HM Treasury Public Finances Databank)
Now tell me, since 2005/6 has the government lowered the tax burden, left it the same, or increased it?
Also, since 2005/6 has government borrowing increased or decreased?
Tricky, isn't it?
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open @ 181
During this period, what did Brown do to try and calm the general credit boom?
Not much - and he should have done, of course, we see that now.
Still doesn't change the fact that this is primarily a private sector created crisis that has its roots in our slavish belief in ultra free market capitalism. This started in the eighties.
I'm not trying to blame Thatcher and Reagan for everything, I just think it's important to recognise the root cause if we want to make sure it doesn't happen again. To maintain that it's mainly a public sector problem caused by too much government borrowing is a dangerous delusion.
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The right wing have fallen for the "dumb and chummy" approach with their Real Ingerlander (TM) and "hard working famillies" pitch but it's just a hijack and people are beginning to see through it. I see a lot of comment like that off people who typically want to do an end run of reason and consensus.
Understanding and society are essentially open processes, and the slow squeeze approach of Labour is beggining to get traction as the need to develop a national plan arises and the Tory poll lead crumbles. It's only now that business and society is beginning to develop "self-enlightenment" that real change can unfold.
We're into "let a thousand flowers bloom territory", here, but once people get a clue that innovation and neighbourliness springs from themselves and they are masters of their own destiny, that the choices they make do count, Labour's approval ratings can only continue to rise. I continue to believe 50% is a target worth aiming for.
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188:
In your dreams Charles. In your dreams!
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186:
It's called tweaking the figures to suit your own ends!
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Sagamix 183
Brown is as guilty as the rest. They all conspired to allow a massive bubble of debt grow. They all claimed greatness, Brown still does, yet they all failed. It would have taken a real statesman to stand up and state the truth, that the great economic miracle was really a bubble that would burst and that the UK/USA/EU or whoever will no longer be allowing that bubble to grow. The fact is that no-one has the guts to stand up, they all let things get out of control and we are now facing the biggest financial disaster for 80 odd years. My point is that many in the media are fawning over Brown as some economic god when he is really a useless and gutless middleweight who failed to spot this coming, failed to stand up and be counted 3 or 4 years ago when he could have made a difference and is now demonstrating real Labour policies, ie tax and spend, boom and bust. Just like the Tories in the 90's it was the things he had no direct control over that got him. His failure, like the Tories was not spotting it was coming. 125% mortages etc should have sent a sign....
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herb @ 186
has government borrowing increased or decreased?
The figures seem to indicate that government debt, as a pc of GDP, is not particularly high as compared to other countries. Even with PFI taken into account, that is still the case, I believe. Course, that's before the stuff related to the current crisis - I'm sure that will boost the number significantly.
Don't get me wrong, I'm not saying there isn't an issue with government debt, I'm just of the view that the main problem lies in the private sector - there HAS been quite a borrowing binge there (both corporate and personal) and it's far worse in the UK than in other European countries. That is not the case with our government debt - PFI or no PFI.
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#9 talks mentions the ultimate oxymoron 'scot free'. Rather apt and poignant given the current economic disaster. I look forward to the next generation being choked by crippling debt while embarking on the national career path of claiming incapacity benefit (no doubt rebadged as national 'minimum unmeployment statisitic avoidance scheme'). They can then spend all of their waking hours engaging with hard to reach communities, filling in equality impact assessments, and wondering why their mothers and fathers left these sceptred isles to live on the other side of the world. Seriously though, I've had enough of this shower. As Mr T would say, get some nuts, and call an election Gordon. Like Tony, and unlike most of the rest of us, you'll never be poor.
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#174. laughingblacksheep
You are out of date on Browns Big Lie about Browns Big Bust.
Last interview I saw (bbc scotland?) he had changed his story again - he doesn't remember ever saying he would end 'boom and bust' (tory or otherwise), he now only remembers saying (something like) 'there would be no more 15% interest rates and no more 15% inflation'.
Blair - misleads by redefining the meaning of his words.
Mandleson - misleads by refusing to reveal any new facts - ever.
Brown - misleads by telling lies about the past.
Blair - seems to have got away with it.
Mandleson - head is on the line, and on his way out.
Brown - has no clothes, but the BBC still keep telling everyone that he does.
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prod @ 191
Very well said - apart from me being a fan of some of what you deride as "real Labour policies", I agree with all of that. Brown was way way overrated, wasn't he? Fairness alone now dictates that he go - otherwise what's the point, right?
But I want him to be replaced by a new Labour leader, rather than by David Cameron and his joke of a BTP party - the Eton mob are not fit for office, I'm afraid to say.
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Just to say Nick that I actually used to work for one of the merchant banks in the City. What people have to understand is that one of the 'pewrks' which went with the job was that I was allowed a mortgage of five, yes five, times salary at a fixed rate of 2.5% for the life of my employment. This was in the seventies and eighties so we know what the subsidy amounted to.
What I hope is that the same sort of benefits are not extended to any of those now working for banks or building societies which have hit financial trouble.
Finally, I hope that no money has been paid to Newcastle United, apparently sponsored by Northern Rock, since that institution had to be nationalised. As a supporter of a team in the westcountry I would wish that absolutely no taxpayers money is being spent on sponsorship, cheap loans to staff, mortgage subsidies and compensation payments to the very people who have caused the problem.
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I am not sure I follow this arguement about public finance and private sector. Lets just say public finance is really great. So what, that is like the captain of the titanic saying things are really good at the stern. There is just the small problem at the front called a hole in the private sector, they have been partying and the stewards haven't been doing their job. The man on watch didnt shout in time, did he shout at all. Oh, and the third class passengers are locked in by the negative equity shutters and cant get out. Should have bought a better ticket. Well, they couldnt because of the ticket touts pushing the price up, and those in the better berths pocketed the profit.
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#192 sagamix
There's a difference between private and public sector debt. If the private sector, and that includes you, me and all the other citizens of this fine country, borrows more than it can repay, then bankruptcy threatens, and should be allowed to take its course.
The problem comes when governments intervene, for whatever reason, and convert private sector debt to public sector debt.
Public sector debt has to be financed by either rasing taxes (yet again, you groan) or by borrowing. Borrowing has to be paid for, in terms of interest, and has to be repaid at some stage.
Lenders will provide the money if the price is right, and they are comfortable that the money has a chance of being repaid. NB it has been known for sovereign debt (as it is known) not to actually be repaid. Some borrowers have reneged on the deal. This hasn't happened recently, but it has happened.
Now, every country in the world has a borrowing requirement as a result of the current crisis. Collateral (as in the size of GDP for each country) has shrunk, and is shrinking. Lenders are under pressure to reduce the size of their loan book. Where does the government really think the lenders are going to appear from to fund the shortfall?
Remember Hungary and Ukraine have just been and raided the IMF's coffers, so they obviously don't have confidence in financiing themselves on the open market.
So we enter the negative spiral. We borrow more, pay more interest, this reduces the amount of the national pie that can be spent on other things so we raise taxes or borrow more.
We are already in recession. We will be in recession though most of next year. Even if oil prices remain in the $70-90 range, we won't get any benefit because the pound is lower, so the equivalent cost of the oil in sterling will not go down, and may well rise.
As consumption goes down, because we can't afford to buy anything, so the government's tax take goes down, increasing the hole in the government's bucket.
Either way we, the people, lose.
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134
"Why are so many silly Tory bloggers still traumatised by the Osborne donations saga. He has recognised himself that he made a mistake. Issue over."
Not quite. One might dismiss the Tories' more tender emotions, but not the issue. Sooner or later they are going to have to weigh up their own fitness to enter a general election and the public is going to have to weigh up their fitness to be elected. Is the leadership complacent? Would you, as the Telegraph put it, trust this man to look after your money? Once again they have a problem with themselves. The 'nasty party' label cast off, they could be starting to look like the 'silly party'. Your word actually. For one thing I doubt that the public really want to have to go on looking at photos of the Bullingdon club. Dear old Boris gets away with it in his unique and quirky appointment. Possibly the wider electorate will be less accepting of bumbling toffs in serious times.
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Thats funny - even the EU are calling for mandleson to release his diary.
http://www.timesonline.co.uk/tol/news/politics/article5020064.ece
What do you think Nick? Worth a comment on the building pressure?
Go on - if the osborne non-story is worth a week of headlines - this must be worth at least a fortnight?
I thought you were keen on pointing out when you through politicians were being evasive?
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#192 saga (additional)
I'm glad you're so sanguine about our levels of debt vis a vis other (unspecified) countries. Sounds like a standard labour line, like when suggesting our economy is better placed than others to withstand the pressures of the downturn.
Begs the question, those government ministers who were peddling that line all year, and who know what the actual number are, were they mistaken, misrepresenting the facts, or lying?
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Sagamix 195...
You are correct. Brown should go but....... Are the Tories ready? We don't know.. They might be, they might not. Is it the case that better the devil you know??? Politically, the danger for the Tories is that an upturn comes before the next election and the sheep vote Labour again due the Browns 'economic miracle' which he will claim. If Brown remains and the upturn doesn't come, Labour are finished for 10 years at least. The losers either way are the hard working people of the UK. Brown will have to raise taxes to fund his borrowing - painful. Osborne will probably raise taxes or cut spending to reduce the public debt - painful. Either way we are stuffed. The important thing is to realise what will happen. Under both parties jobs will go. Under both parties house prices will fall and then slowly recover. I believe it will make no difference in the short term who governs the UK. It is teh long term outlook which will change dependant on who is in power in 2010....
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tag @ 196
Finally, I hope that no money has been paid to Newcastle United, apparently sponsored by Northern Rock, since that institution had to be nationalised. As a supporter of a team in the westcountry I would wish that absolutely no taxpayers money is being spent on sponsorship, cheap loans to staff, mortgage subsidies and compensation payments to the very people who have caused the problem.
They're a rubbish team, sure enough, but I can't go as far as saying they caused the Credit Crunch.
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Herb_igone again.
Just been reading the lates output from the BofE, which estimates (yes, its a gues, but with some inside knowledge of the facts) that banks worldwide have lost $2.8 trillion in the current crisis, to date.
We are talking capital losses here, write downs of P/L accounts as a consequence of restating debt. These are the figures that the banks have been trying to recover, by getting new capital investments, from either exisiting shareholders or, in some cases, governments. Some portion of this is what our government has put into NR, Bradford and Bingley, and the new big 2 or 3 state banks.
That's not the end of the story though. The credit crunch is occurring because the banks are having to reduce their balance sheets by a multiple of that number, lets suggest a conservative 10 times (but its closer to 20). that means redcutions of overall credit to the tune of between $30-50 trillion.
This is backed up by the BofE itself announcing that banks will be required to reduce their lendings against their capital, in an effort to bring some stability to the sector.
Now, as I've stated before, this is the climate in which our government is seeking to raise finance and, once again I ask, who on earth do they think they're going to borrow from?
I'll be watch with interest (no pun intended) to see what rabbits they pull out of the hat.
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No160. I used to know a Northern Thatcherite living in a mining village in NE England. People would travel miles to view such strange creatures. Perhaps you would find time to tell your fellow bloggers ,why, if she was so good, the people that knew her best, Tory MPs, stabbed her in the back, booted her out, and stamped her out like a beetle.
I have just had a look at the list of those that attended The Bruges Group get together last night. It is a long time since such a large group of political nut cases assembled.
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glan @ 197
I am not sure I follow this argument about public finance and private sector.
It's about where the blame should lie for the economic mess we're in. Gordon Brown is directly responsible for government debt but is only indirectly responsible for debt in the private sector.
So, if the problem is mainly public sector, Brown is massively to blame, whereas if it's more the private sector, he's just a little bit to blame.
And it's clear to me that it's the latter which is the more accurate.
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201#
"Specified Countries"
USA
Japan
Italy
France
Germany
Spain
Country of comparison preferred by Tories
Sweden
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Brown is carrying out his purpose for us (HIM) as the water covers the sea - to paraphrase a hymn.
He has worked out with other world leaders how to socially engineer the whole lot of us and (arithmetic dyslexic as I am) in my view if borrowing is the only which way then it's a fait accompli.
We are into PHASE 2 now of New World Order (part of which is to help spread out wealth into the poorer countries whose leaders in some cases will squander it and keep it themselves, as it is in their culture, case in point Sadam) and Brown and he will go on crashing into the end when it will quite neatly dovetail into a General Election and the Conservatives will inherit one hell of a mess.
However, we may evolve as more resourceful, more frugal, and more grateful and considerate as in the post war years instead of being so materialistic and greedy.
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200#
No, You want it to be a "non-story", BUT every political journalist in the country realises that when the Shadow Chancellor with his Party Head of fund raising meets a foreign billionaaire to discuss donations (as admitted) when to take such a donation would be illegal THAT IS A STORY.
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prod @ 202
It is the long term outlook which will change dependant on who is in power in 2010
Yes, for sure. In my opinion, a big change is required - a break from the previous consensus rather like with the Wicked Witch in the eighties. In this case, however, it's a shift to the Left that has to happen.
Well it doesn't have to happen, I suppose, but I'm hoping that it does.
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I've been right enough so far.
Polly Toynbee's comment on developing vision and the continuing Tory poll slide is part of that trend.
I haven't heard anyone come up with better analysis.
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herb @ 198
There's a difference between private and public sector debt. If the private sector, and that includes you, me and all the other citizens of this fine country, borrows more than it can repay, then bankruptcy threatens, and should be allowed to take its course.
Indeed so. And the private sector (in particular the banking industry) taking its course ... the defaults, the asset deflation, the contraction in credit and in economic activity ... is the main cause of the problem (rather than too high government debt).
Which I think is where we came in, no?
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202:
Sadly I fear you may be right. Whichever way you look at we're stuffed but there will be no way out for Gordon Brown P.M. or not.
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203
Newcastle should be dustbinned as the risible Joey Barton has been reinstated.
All about poor judgement again.
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209:
And in your estimation your precious Lord Mandy is squeaky clean I suppose. We'll see.
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209
Do you not read current news, even the Guardian has dropped Osborne for Mandleson.
The EU have said that they were unaware of the length of time Many knew the Russian, and now want him to provide his diaries.
The whole story is news, but it looks like Osborne may only have a walk on part. Lord Peter of Fey, may have the lead role.
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I wonder if Gordon will take it on himself as the Prime Minister to say that for a democratic country to attack the inhabitants of another country is an act of aggression.
As we come to the 90th anniversary of the WWI armistice should we not forget why we went to war against Germany in 1914. It was because they invaded defenceless Belgium. Now I am ot comparing Belgium to Syria just to point out there does seem to be an awful lot of double standards about justice.
Furthermore, people talk again about Keynesian economics, please remember how he first made his name, it was about reparations and the claims that Germany should accept blame for WWI in the Versailles Treaty with reparations payments. I think that we about to be defeated both in Iraq and Afghanistan because we can't afford these wars, not without hiring out the army as aload of mercenaries anyway.
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If the Tories take power at the next election as seems likely, will they be taking lessons in how to make a decision without the benefit of hindsight.
Anyone can govern AFTER the event, like the clamour for greater regulation now but quite the opposite before.
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#206.
Doesn't the Government set the capital ratios for banks?
Doesn't the Government control private sector debt via the inflation target (which affects interest rates)?
Wasn't it the Government that introduced the so-called "insolvency-lite" regime, which led to the obscene adds on the telly, telling us we could write off up to 75% of our debts under a Government scheme?
Hasn't the writing on private sector debt been on the wall, and been crying out for action for years? A simple look at the Insolvency Service's count of defaulters is enough, surely?
http://www.insolvency.gov.uk/otherinformation/statistics/historicdata/IndividualInsolvencies.xls
Is it really just someone else's problem?
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flash @ 214
Newcastle should be dustbinned as the risible Joey Barton has been reinstated.
Mmmm, not sure that "risible" is quite the right word to describe Joey.
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Prod @ 191 and 202:
Would concur with both of these comments in their entirety. I think we're looking at The Vince Cable of this blog. Well said and all that!
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216#Harry
Following your advice I have just read the Guardian on line which covers both Osbourne's admission and apology and Mandleson's current ministerial visit to Russia.
Both in equal measure.
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@164 - sagamix
".... Just like so many other things - like MacDonalds, like Starbucks, like Blue Denim Jeans - this is global in that it's spread all over the place but it was, in the words of one of my favourite Americans, Born In The USA! "
as always a measured point of view sir, however i would have to disagree in part with your conclusion.
i accept that what started the ball rolling, was indeed the american sub prime, but i believe that this ws the spark that started the fire.
i agree also with your view
"The toxic fuel of Alan Greenspan's super low interest rates was sprayed liberally over the pyre ... the pyre constructed by Wall Street using a black magic mixture of reckless sub prime lending, securitisation, phoney ratings, massive greed, a fair amount of stupidity and a good dose of fraud. Just needed a match for it to blow, didn't it? "
what i cant get away from, is that gordon brown set up the FSA and gave it the powers from the Bank of England, to step in when banks were overstretching, forcing the bank to re finance itself via shareholders or options, etc, before it could increase its borrowing.
The FSA failed miserably to do this.
on its own (and with the benefit of hindsight) it could be said that "the regulator failed" - i could beleive this if it was not for one significant fact:
as we now know (apologies for yet more hindsight) the banks hid vast sums of its borrowing off its balance sheets, giving them cheaper borrowing, and increasing their profits.
gordon brown was taking exactly the same approach with the UK's finances.
his "off balance sheet" borrowing is well documented, northern rock, PFI's, etc, only for the UK's finances it appears it has been actioned this way to allow more borrowing from the IMF.
had brown come up with his master plan for the banks then gone to the IMF alone, he would have been refused extended borrowing. it would have been humiliating and he would have been finished as prime minister.
he instead announced all around europe about the need for change in the financial systems, and convinced our european neighbours to collectively call for "emergency help" with the IMF.
as the times reported, objection to this approach came from financiers inside france, the german government and others, who disagree with brown's "solution"
if gordon brown had not been applying a very similar approach to the banks, then it could be said that he and his government were not at fault and the regulator simply failed to do its job.
gordon brown hasnt even started answering questions about why the FSA didnt step in, he did promise us all that it was put in place to safeguard us from exactly this kind of thing. until he answers for this, he can spin as much as he likes.... i certainly wont believe him.
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215#
Well I'm not sure if he's squeeky clean or not.
What is the allegation, has one been made and by whom.
A clear allegation was made about Osbourne by "one of his own", a political ally rather than foe. That is why it was taken seriously by all the media.
But Tory Apologists cant stand scrutiny of their party, their policies or their hindsight based "decisions"
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Nice try of bringing up that Gordon Brown meme again but it's not working. Yes, I know it's "politics" but it's just empty and negative rhetoric that's trying to do an end run of peoples reason and tweak the primal fears in their monkey brain. It doesn't say anything or give anyone a reason to vote for the Tories.
Cameron has boxed himself in as a leader without a plan and with just a whiff of the uncaring about him. Unless the Tories decide to take on the CBI and make sure people lower down the ladder get their fair share in credible and sustainable terms he will continue to be squeezed.
The Tories may not be giving you a lobotomy or raping your children but it's no different in principle. This technqiue is indirect and below the radar but no different to some selfish authoritarian telling you to switch off your brain and give them your money. That sort dumb negativity is a mistake.
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#187 saga
"Me: During this period, what did Brown do to try and calm the general credit boom
You: Not much - and he should have done, of course, we see that now.
Still doesn't change the fact that this is primarily a private sector created crisis that has its roots in our slavish belief in ultra free market capitalism. This started in the eighties.
... I just think it's important to recognise the root cause if we want to make sure it doesn't happen again. To maintain that it's mainly a public sector problem caused by too much government borrowing is a dangerous delusion."
Well, it was pretty obvious years ago that just allowing borrowing to explode was stupid. If you've only "realised" it now, that's sad, but it's not a recent problem.
I had lots of issues with Thatcher. But when the "Big Bang" happened, there were reasonable regulations put in place. Brown eased those and changed the shape and authority of those intended to regulate financial services.
That's government responsibility.
Bankers and financial services companies have behave in a crass and unforgiveable way.
Had the UK government imposed limits on lending, house prices would have risen due to demand exceeding supply. But if you hose money into the market, you allow prices to soar. That's what Brown permitted.
I don't know too many people who really believe that "free-market" companies should be allowed to do whatever they want. Certainly not me.
Blair and Brown have peddled delusion since 1997. And Brown has been less than honest about the extent of the UK's forward tax burdens (i.e. requirement to pay for existing commitments) for years.
Banks have been stupid. So why give them money without hammering every executive who failed to keep his eye on the ball?
Lower-income citizens could not have predicted that Brown would take away their 10p tax break. That was Brown choice. Hardly a socially responsible attitude. And it would have been quite feasible to retain that "benefit" by adapting the way in which tax-bands are applied.
Brown chose, instead, to plough ahead as he could not accept that he simply screwed up. That issue has not been resolved.
I've no party axe to grind. Just don't like people who stuff the lower paid.
That's my beef.
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terry @ 219
Is it really just someone else's problem?
No, it's our problem I'm afraid. We are paying the penalty for slavishly following the laissez faire free market model for nigh on thirty years, and it's right that we suffer. I won't say I'm glad but I'm not heartbroken either - in the long run, I have every confidence that we'll emerge with a better way of doing things.
And I disagree with you saying the government control those various things - they don't. Influence, yes, but not control. The thing they do control is government debt but that is only on the margins of the problem. That's why I say that Brown, for all that he's a cynical, empty vessel of a politician, is only a little bit to blame for all of this.
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#218 Eaton,
But they have deleted all reference to reducing regulation of the City in the speech archives on their website (see my post #135 - Cameron made a speech about thie need for low regulation on the City on June 22nd 2006 which has now been deleted, while leaving all other June speeches on the site i.e. it was quite deliberate cleansing of inconvenient speeches)
This means it didn't happen - they never said these things. History only exists if there is a record!
And Brown is Stalinist?!
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#218
It isn't case of greater regulation. It really is not necessary.
Proper enforcement of current regulation would be enough.
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220 Saga
As always you are right. Delete risible insert Disgusting.
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222 ER
Righto, However, before I make any real call on who's who. I'll wait for the Story Epilouge, however. I think as this is perhaps the beginning of the end for one of them.
Ladies and Gentlemen place your bets.
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rifle @ 209 and 222:
But the balance of your original comment would lead us to believe that there is only one culprit in your view. You make no mention of the more important of these two individuals at all.
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rifle @224:
To be honest I'm sick of the whole affair. They've both been daft and what they have or have not done is irrelevant to our present predicament. I would predict that both will be gone by this time next year.
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#188
"Understanding and society are essentially open processes, and the slow squeeze approach of Labour is beggining to get traction as the need to develop a national plan arises and the Tory poll lead crumbles. It's only now that business and society is beginning to develop "self-enlightenment" that real change can unfold.
We're into "let a thousand flowers bloom territory", here, but once people get a clue that innovation and neighbourliness springs from themselves and they are masters of their own destiny, that the choices they make do count, Labour's approval ratings can only continue to rise."
Please, Charles, don't talk "National Plans". Been there, lived through that with Wilson / George Brown. Saw it crumble in the old USSR.
It's not really compatible with the "thousand flowers blooming".
We have a couple of million SMEs in the UK. If you want to help them, influence your friends to slash through the burden of regulations that inhibit their development.
Innovation needs a framework to translate into deliverable products and services. It doesn't just move from idea to sellable output without a bit of help.
(Unless you're a shyster like Damien Hirst, who admits that many of "his" paintings are by his staff. So I guess that even he needs help...)
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Fit for Office?
Sorry but, you know, worth a thousand words and all that ...
C'mon!
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FOM @ 226
Yes yes yes - we agree on quite a lot, that's obvious.
My main point (and I only bang on about it as a counterweight to what I believe is a wrong headed consensus on here) is that our current economic crisis has not been caused by a profligate public sector - it's been caused by a profigate private sector.
It's then moot as to how to allocate the blame for private sector excess across the main potential culprits of Brown, regulators, banks, the public. I blame the banks for most of it but that's probably just my prejudices talking.
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Well how about we try this one Gordy. Cut the gold plated pension of government layabouts slash the staffing of the over indulgent local councils. Do to the public sector what you forced the private sector to do to their employees. Harsh yes I work for a small company I did NOT get a pay rise this year I have no pension scheme at all my employer can not afford the contributions. So why should i fund the public sector, in fact why not turn the town halls over to the private sector we soon see the dross got rid of.
Tax and spend oh yes Gordy will as he knows come 2010 he's out of there he is not going to have to come up with a plan to to put it all right. Though it is probably a good plan to ensure your opposition are only in government for 5 yrs. The country will be in such '#*^ order that taxes will have to rise unemployment will go up and people will by then be really hacked off and the BBC and Nick Robinson will tell us see you were better off under Labour as they may have bankrupt the country let in millions but at least you did not have to work for a living you got your tax credits to stay at home.
And if you think the Tories will divulge their policies until Muppet Brown calls an election think again. You keep banging on how the Tories do not come up with alternative policies. Why should they only to have them nicked by Gordy and the libby rails.
Oh and Nick do me a favour try being as critical of Mandy as you are of George after all Mandy can make policy George can only try and influence it. Dodge Mandy makes the Kray Twins look Innocent.
Go David
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re: 73 sagamix
"I think the idea is to put it into productive public works. The risk with a tax cut is that people will be sensible and spend it on debt reduction."
There's no such thing as productive public works; it's a contradiction in terms economically speaking.
The only productive wealth generated from it would be for the private companies who get the corresponding government contracts, so it's a very inefficient way to get out of recession because most of the money just gets swallowed up in waste and by a handful of private companies; it has no real effect on the economy.
Whereas with a general tax cut, it has a massive psychological effect on the entire population and more of it will end up back in the real economy again.
Also, another benefit of tax cuts is that it gives people more incentive to better themselves or to improve their company, because you get to keep more of the money that you generate/earn.
Tax cuts would usually end up creating more public revenue in the medium term because it puts more money in people's pockets, which makes them want to spend and earn more; it's a positive growth spiral.
But borrowing private money to pump into deliberately bloating the non-productive public sector is economically destructive and doomed to disaster, and it's one of the reasons why we're currently in such a mess and one of the reasons why the recession is going to be so deep/long because the government have been using that approach for the last 11 years; they're putting twisted political ideology ahead of practical economics, with horrific consequences for everyone.
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Anyone watch Dispatches last night?
The politics and the blame game are interesting (for the record I'm in the Brown partially to blame camp) but what struck me watching that program was the "what have we done?" question.
We have got drunk on foreign holidays, cheap imported white goods and electronics bought with cheap and readily available credit, provided for us by an even drunker bunch of financial services executives.
I hope that our children and grandchildren faced with repaying massive levels of debt understand that we didn't foresee the consequences.
Or did we? Did we, the bankers and politicians have an ostrich approach to the boom?
If so, we should not be forgiven.
If the Dispatches analysis is correct this is not going to be a 12 month shallow recession - the palliative for the bank bail out.
Nick - get digging and present us with some real raw meat to chew on; not the current diet of 'lite bites'.
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#212 saga
Sorry, been a bit busy. I do have to work, sometimes.
Well not really, my whole point is that converting bank (private sector) debt to public (our newly nationalised industries) wasn't necessary to solve the problem.
It was Brown wot dunnit, take hime away.
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235 saga
School photos?
Should be on facebook surely?
Or is the class war still alive and kicking?
Got any old photo's of Fettes?
Which school folk went to doesn't phase me at all - whether they are any good at what they do is what rocks my boat.
By the way - brought up on a council estate, no Eton education for me.
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Sorry, but only just catching up with this thread.
In #99, JeremyP wrote that Mandelson's return to politics "is akin to pouring concrete into the sewage system". Might it not be more accurate to say that it is like pouring sewerage into the political system?
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gordon @ 238
There's no such thing as productive public works; it's a contradiction in terms economically speaking.
Totally disagree - if, say, the government builds a much needed ring road around a major city, why is that not productive? Why is it productive only if we pay a private company to do it? - sorry, don't follow.
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sicilian29 #232
Wrong Osbourn was stupid
Mandy mmmm lets see go's to see Russian Billionaire has dinner and hangs out with him (eased through customs with out the right papers) introduces lower aluminium taxes. Said Russian billionaire make tens of million of pounds. What just stupid? Ok withheld all the dates he met him when asked by the EU authorities ooopps sorry forgot about the earlier date!
Just as he forgot about Robinsons £375,000 large wen applying for a mortgage, that had been me I would of probably spent time at her Majes pleasure.
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denzil @ 223
his "off balance sheet" borrowing is well documented, northern rock, PFI's, etc, only for the UK's finances it appears it has been actioned this way to allow more borrowing from the IMF.
On the PFI ...
If two parties enter into a transaction and party A is driven mainly by cosmetic considerations (e.g. an accounting fiddle or a tax scam), then party B will almost always be able to reap excessive and unjustified profits from the deal.
I have some direct experience of PFI arrangements and saw nothing to make me think they're an exception to the above rule - party A being the government (i.e. us) getting ripped off left right and centre, and party B being the private contractors, forever feasting at the trough, generally gorging themselves at our expense.
However, I think I'm right in saying that PFI was a wheeze dreamt up by the last Tory administration and therefore it pre-dates big bad Gordon - that's correct, no?
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herb @ 240
my whole point is that converting bank (private sector) debt to public (our newly nationalised industries) wasn't necessary to solve the problem.
You would have gone for the pure market solution? - survival of the fittest and the rest go to the wall? - no public money for the banks?
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#163, at least Thatcherites can do basic sums...
The amount raised between 1979-1996 by privatization was around 70bn GBP, which is a bit less than twice the deficit for the last 12 months or around half a year of funding for the NHS.
The UK's current debt load is over 600bn GBP, so even if your fake figure was right you'd be wrong about no debt.
I guess Brown's habit of lying about figures has rubbed off on some of his supporters.
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#211 C_E_H
I read the Toynbee piece earlier. Wouldn't have mentioned it, but you introduced it.
To quote a key Polly extract:
"Gordon Brown seems unable to stop saying things so blindingly untrue that you wonder how he gets the words out."
So it seems a little masochistic to pray in aid a statement that reflects the worries of many voters.
He comes across rather like Blair... the approach that "If I said it, I must have believed it, and since I'm rather clever and believed it at the time, it must have been true."
God help us all.
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re: 243 sagamix
"if, say, the government builds a much needed ring road around a major city, why is that not productive? Why is it productive only if we pay a private company to do it? - sorry, don't follow."
In that example, it would potentially be productive in the sense that the private contractor would get some money and the existence of the new road could in theory slightly increase efficiency of some private companies who use the road.
But at the end of the day it's still largely economically unproductive because it's taking away private money (ie tax) from ordinary people and using it to buy something which has no real economically productive use.
I'm talking about economic productiveness here by the way, not social productiveness.
In the current climate it's economic productiveness which Brown needs to concentrate on.
Spending money on public services is by definition almost entirely economically non-productive and damaging to the ordinary tax payer because it's a net loss to the tax payer and doesn't bring in any extra money from the real economy.
Socially some public services obviously have to been maintained, but to blow all the private money on something that's not needed and not economically productive doesn't make sense, especially at the start of what could be a really bad recession.
The key thing to limiting the damage of a recession is putting hard-earned money back into the pockets of the people who earned it; there is no other way out.
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#54, i always wondered who was dumb enough to believe the NuLab BS about the economy under the Tories. I guess there is a reason Brown keeps harping on about interest rates in 1992...
Fact, Brown inherited an economy that had health REAL growth, low REAL inflation and government surplus.
What we have now is fake growth predicated on a deficit fuelled Ponzi scheme where the government simply pumps money into the public sector and keeps the interest rates artificially low to fuel an asset bubble.
The high interest rates was what it took to kill the previous asset bubble. Here is the real difference between Major and Brown. Major took deeply unpopular actions to stave off a deeper, nastier recession - he did this in the midst of a REAL global recession. Brown simply lies about the real state of the economy, presumably because people like you still believe him.
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#243 saga
"There's no such thing as productive public works; it's a contradiction in terms economically speaking."
"Totally disagree - if, say, the government builds a much needed ring road around a major city, why is that not productive? Why is it productive only if we pay a private company to do it? - sorry, don't follow."
Some of this stuff does get silly, doesn't it?
Governments collect taxes. Then decides how to try and use the money to deliver worthwhile infrastucture or services for the future benefit of all of us.
Road building money is channelled through private companies, who deliver the outcome (hopefully worthwhile).
The NHS is (essentially) a public service. It seems to deliver a productive outcome.
The issue seems to be whether governments get the people they need within public service to properly manage the huge cash sums they either deliver into publicly or privately employed people.
And enough Sir Humphrey's with a moral compass to tell Ministers when they are simply farting political claptrap.
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#211 C_E_H
I read the Toynbee piece earlier. Wouldn't have mentioned it, but you introduced it.
To quote a key Polly extract:
"Gordon Brown seems unable to stop saying things so blindingly untrue that you wonder how he gets the words out."
So it seems a little masochistic to pray in aid a statement that reflects the worries of many voters.
He comes across rather like Blair... the approach that "If I said it, I must have believed it, and since I'm rather clever and believed it at the time, it must have been true."
We're in trouble.
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Sorry, I may have repeated a comment.
Happy for the repetition to be deleted.
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re: 245, sagamix
However, I think I'm right in saying that PFI was a wheeze dreamt up by the last Tory administration and therefore it pre-dates big bad Gordon - that's correct, no?
Lots of problems existed before Brown, but I fail to see why that excuses Labour from not having done something about them during their 11 years in office. How can Labour ever speak about the long-term with straight faces? (Because they have no soul)
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fred @ 241
Or is the class war still alive and kicking?
Yes it is, thanks for asking ... but only as long as an unrepresentative group of upper class white men, drawn from a narrow and privileged elite, seek to rule over the rest of us.
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fred @ 239
If the Dispatches analysis is correct this is not going to be a 12 month shallow recession
It will be a short and shallow recession - in our dreams!
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Can someone please rate the accuracy of the data contained here:
http://www.howitends.co.uk/
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You're just being hyper-critical again - you jump on thngs too hard and lack perspective. Can't discuss anything with someone when they get like that.
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To GHBRICH #54
Major and Thatcher did not destroy our economy. The country was on it’s knees in 1979, she had to clear up Heath and Wilson’s mess.
Two recessions – the first one was as a result of the failed policies of the 70’s and the second was made much worse by our experiments with the ERM.
It was Brown’s deregulation and reckless borrowing that caused this mess – Thatcher built the vehicle and Brown modified it to make it dangerous and then drove in a wreckless manner.
Brown has massaged the borrowing figures just like the crime figures. This is the most dishonest and useless Governmnet of all time.
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#247
I'll chase your accuracy points later when I've time.
For now:
Current Budget Surplus 1979-1997 = -£320 billion (a deficit!)
Current Budget Surplus 1997-2008 = £0.6 billion (a surplus!)
(from HMT Public Finances databank).
One of these Government lived beyond its means to fund the day-to-day bills.
Are you telling me it was the one with the surplus? And the one with the deficit was prudent?
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#243, "productive" has a technical meaning in Economics. Since the public sector by definition can only consume income not "produce" it then by definition it cannot be productive.... Of course, whether this highly specific definition makes any sense in the real world is a different question!
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gordon @ 249
In that example, it would potentially be productive in the sense that the private contractor would get some money and the existence of the new road could in theory slightly increase efficiency of some private companies who use the road.
No I don't mean that - I'm thinking of where this is no private sector involvement. So, in this example, the whole of the project to build the road is in the public sector.
Aren't you rather confusing tax receipts with wealth generation? Surely whether an activity is economically productive or not depends on the nature of the activity, not whether it's public or private sector.
Like, say, if I buy and sell houses but do no improvements while I own them, I am not creating real wealth am I? I am being unproductive right? Conversely, if I plant an apple tree and nurture it through to fruition, I have been productive and I've created genuine wealth. Is that not the case?
Doesn't matter if I'm trading property, or growing apples, in the private or the public sector - the one is an economically productive activity and the other is not.
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magic @ 257
Can someone please rate the accuracy of the data contained here:
Yes, no problem ... I had a look through and can report that it is, on the whole, drivel.
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#260, the same HMT that recently magically declared debt load to be 37% not 40+?
However, they are very interesting figures. I searched the HMT website and i can't find them. I don't suppose you could post a link?
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263:
Probably about right. We won't know the ramifications of the recent financial interventions for at least a year or two. Let's hope for all our sakes that the prospects are not as grim as some are predicting.
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#264 blacksheep
Sure thing! See sheet A4 of the spreadsheet file of the Public Finances Databank
To calculate cumulative budget surpluses simply sum the figures in column C for the relevant years.
Just noticed a new update has been released since I last looked at the figures, so the figures are now in 07/08 prices rather than 06/07 prices, and the final 2007/08 figures are in, which alters their absolute numbers.
Current Budget Surplus 1979-1997= -£311.9 billion (i.e. a deficit)
Current Budget Surplus 1997-2008 = £1.9 billlion (i.e. a surplus)
I don't think IFS and other impartial sources question the statistics that HMT use on current surplus (though your point on quoted national debt being misleading through not taking into account PFI is correct)
I'll be back later to answer your point questioning the accuracy of the figures I quote re £350 billion proceeds of asset sales and North Sea Oil 1979-1997.
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#247 laughingblacksheep
#163, at least Thatcherites can do basic sums...
The amount raised between 1979-1996 by privatization was around 70bn GBP, which is a bit less than twice the deficit for the last 12 months or around half a year of funding for the NHS.
The UK's current debt load is over 600bn GBP, so even if your fake figure was right you'd be wrong about no debt.
I guess Brown's habit of lying about figures has rubbed off on some of his supporters.
Ok. I'll demonstrate it. Apologies for the technical explanation that follows. You will need to know a bit about inflation and GDP Deflators to understand the maths, as unfortunately most figures are not given in 2007/08 prices and I have to rescale them. Hopefully this won't detract from what follows, as such complexities can often do (which is an objective analysis I hope).
First we take the proceeds of privatisation of public corporations. I'm quoting from a pdf file of a research paper on this "A State Without Ownership: The Welfare Impact of British Privatisations" - Massimo Florio (Google it - the weblink won't work here).
On p3 he concludes that the proceeds of privatisation were £70 billion at 1997 prices. Adjusting for the 32% increase in prices since then (using GDP Deflators), this equates to £92 billion receipts from sales of public corporations 1979-1997 in 2007/08 prices
He also notes a range of estimates for the under-pricing of privatisation (i.e. direct transfer of resources from the state to people in the City) based on the increase in share price during initial trading of shares in newly privatised companies which centred at approximately 12-14% (and peaked at e.g. 33% for the privatisation of BT).
Second we take the proceeds of council house sales through Right to Buy. I take my information from House of Commons Research Paper 99/36 (30 March 1999) - again, I'm unable to link to a pdf file.
2.2 million council houses were sold between 1979 and the end of 1996 (p9).
It is more difficult to calculate the proceeds of these sales (the stats aren't great). The document I'm using does not even attempt to calculate a figure. I'll have to make some assumptions of my own.
The value of the average house sold under RTB in 1996/97 was £43,000 (p20). Applying this to the 2.2million houses sold gives a total loss to the council housing stock of £94.6 billion. The average discount was 50% of the value, which gives total receipts of £47 billion in 1996/97 prices. Adjusting for the increase in the price level 1997-2008 (32%) gives an estimate of £62 billion capital receipts from RTB 1979-1997
Third, and finally, we come to North Sea Oil Receipts. I use the Public Finances Databank for this (I link to this in an above post)
Sheet C1 gives North Sea Oil Revenues as a % of GDP in column H.
Calculating real GDP requires a bit of maths. Money GDP is given in sheet A1, column G. GDP Deflators (i.e. factors to adjust for inflation) are given in sheet A4, column F (the factor to scale figure up by is given by the ratio of the 2007/08 deflator - 100 - by the deflator for the year the figure is from). In this way, we can get a real GDP series (2007/08 prices).
Back to the North Sea Oil revenues. To calculate total revenues we multiply the % GDP figure in sheet C1 by the real GDP figure for the year.
Between 1979-1997, North Sea Oil Revenues totalled £144 billion (2007/08 prices)
[For completeness, between 1997-2008, North Sea Oil Revenues totalled £61 billion (2007/08 prices)]
Right, hope you follow me
So we have £92 billion receipts from sales of public corporations, £62 billion receipts from sales of council houses and £144 billion North Sea Oil receipts (all 07/08 prices) between 1979-1997. A total of £298 billion (ok, I was wrong about £350 billion)
We also have 12%*£92 billion = £11 billion transfers from the state to the City through under-pricing public corporations during privatisations, and £62 billion transfers from the state to council tenants under RTB. So, proceeds would have been £73 billion higher if there were no discounts offered.
Now we come to the impact on the National Debt if the Conservatives used this windfall to reduce it
The National Debt at March 1997 stood at £453 billion or 44% of GDP (calculated using the GDP deflators in A4 column F applied to the Public Sector Net Debt figures in A7 column B in the Public Finances Databank).
If proceeds from privatisation and North Sea Oil were used to reduce the National Debt 1979-1997, it would have been £155 billion, or 29% of GDP. The National Debt would have stood at only 34% of the level that Labour actually inherited in 1997
Does that convince you?
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Things could've been so different
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balhamu@268
I remember the 70s and the mess the country was in, mocked as "little England" and written off as a basket case. Working in the cold, shops lit with camping lanterns, steering clear of post boxes because they might explode, a truly wonderful time. And now that Labour's wrecked the economy yet again, the cold and dark may well come back. Money was needed to get the country back on its feet as Great Britain again. Benn's pipe has always produced good dreams, particularly when they're about the past.
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#269 pammyammy
What was the money spent on?
It wasn't invested, was it? It was sucked into unemployment and sickness benefits, and unfunded tax cuts for the wealthy.
I'm not denying that structural change in the economy was necessary.
But it didn't need to come with quite so much pain, which was deliberately inflicted as a matter of policy e.g an ideological attatchment to monetarism that didn't do much apart from force millions of people into long-term unemployment and destroy many communities throughout the country. Shock therapy has had long-term consequences which still reverberate today. It turns out "it wasn't a price worth paying".
Also, in what world is creating millions of long-term unemployed and long-term sick and needlessly destroying manufacturing industry with high interest rates not wrecking the economy?
re Benn - The point is more about Norway. Norway invested their oil reserves and now have no national debt and a massive sovereign fund. We squandered it
My broader point is that it's laughable that so many right-wingers come on here talking about the need to return to prudent management of the public finances. The Conservatives record 1979-1997 makes Brown seem true to his Scottish sterotype of being cautious with money.
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That's a credible and fair view.
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271. It is flattering that you take so much interest in our small island and its peoples from across the pond there.
We are indeed unique here in that so much of the world follows our politics. I am so proud of my heritage and country.
How are things in l'l ole America and Japan?
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dceilar
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dceilar @ 76 wrote:
'When I hear/read people discussing the economic crisis and I come across comments that blame Broon for the global crisis I just switch off. They're idiots!'
Quote me some instances where people have actually said 'Broon is responsible for The Global Crisis'. I in turn am sick to death of these red herrings!
I'm not going to bother saying what he is responsible for because it's well documented on here by bloggers far more erudite than myself.
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Charles @ 271wrote:
'My broader point is that it's laughable that so many right-wingers come on here talking about the need to return to prudent management of the public finances. The Conservatives record 1979-1997 makes Brown seem true to his Scottish sterotype of being cautious with money.'
It's not only right wingers who are advocating a return to more sensible Government spending and borrowing. The taxpayers have a vested interest in this as well because it's OUR money!
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balhamu@270 "The Conservatives record 1979-1997 makes Brown seem true to his Scottish sterotype of being cautious with money."
Which planet are you living on? Brown cautious with money? Well, heaven help us if he were profligate.
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Sicilian,
But the point is it would not be a return.
Labour have been more prudent with the finances than the Conservatives were.
When most people here (and Conservative politicians) talk about irresponsible management of the public finances, they refer to current spending.
They talk about the existence of a lot of 'useless' quangos, millions of pen-pushers, government involved in pointless tasks, sickness benefits being too high etc, and say that the reason borrowing is too high is because of this.
They do not say the Government has been imprudent by investing too much money. We shouldn't have built hospitals, schools or otherwise invested in infrastructure.
However, when you look at the current budget surplus of 1979-1997 and of 1997-2008, you see a £312 billion deficit for the former and a £2 billion surplus for the latter. I know which seems to be to be the most prudent with the current budget.
If people want to say this Government has not been prudent with the public finances, they need to be open that this means they think we should have invested less, built fewer new schools, fewer new hospitals, invested less in new medical equipment, invested less in new schools equipment etc. The Government has raised taxes to pay for current spending increases, hence the surplus on the current budget contrasting with the previous government
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balham @ 277
Just going to nick a bit of this to use on the other blog - will credit you.
Maybe you can put this stuff in a little web site so we can refer to it each time. Call it "No Brown Borrow Binge", something like that.
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balhamu@277
We haven't used current money to build hospitals and schools, we've used future money via very expensive PFI, which will be a millstone for the next 20 years or so.
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#279 pamyammy
The PFI point is a fair one - it's a matter of judgement. Do you think the decrease in risk to the state and improved efficiency from private-sector led investment is worth the additional premium on borrowing through PFI?
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257. magic_2010
An interesting site, will peruse at leisure.
I've been wondering what would have happened if inflation hadn't been kept artificially low. We might have had a series of peaks and troughs, rather than this massive meltdown, as market corrections took effect.
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#276 pammyammy
Note I didn't quite say "Brown was cautious" in the absolute sense (though balancing the current budget since 1997 would suggest he has not been profligate).
It was more in the relative sense. A current budget surplus of £2 billion (£0.2 billion/year 1997-2008) is surely less profligate than a current budget deficit of £310 million (£17.2 billion/year 1979-1997), isn't it?
Or do you disagree? Was it more prudent to have a bigger deficit on the current budget?
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It`s Labour all over again,spend spend spend Then the pound is devalued.Why will Brown not come clean stop telling lies to the public,who I think now have him taped. Please Gordon GOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO. NOW.
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Nick you say they mustn appear to be reckless ...Were you asleep in every budget than brown produced from 2003 onwards or what part of economics dont you understand.
Not only has been recklessly borrowing for the past 5 years but he has just about missed every borrowing target in very budget since..and amongst other you allowed him to get away with it.Once he abandoned Clarkes spending plans thinsg went wrong nearly right away.
You convinced yourself that here was a man who knew what he was doing.Many hundreds of us on the outside realised from internet blogs from 2002 onwards that he didnt and neither did the media.
Its about time that you started to earn you corn and take this government to task over the poor performance of managing the economy starting from July 1997 when they started to mess up with private pensions,through to the latest phase where he allowed borrwoing to get totally out of control and things will take years to straighten out.
No doubt in the ensueing years after 2010 you will be blaming the Tories for the sorry state of affairs,that is if they havent taken urgent steps to reduce taxation starting with the BBC licence fee.
regards malc
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Good evening all, got my name working now.
I've just been reading e-mails and that sensitive buddhist driveller has taken exception onc more about an inoccuous post.
So I vow no more responses to u know whon and no more being nice to left wing ranters.
Other than that, I've got the weekend to get ready for going back to work. Isn't life fun when you're newly poor?.
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285. herb_igone_ex_tuga
Looking forward to reading your comments under your new name - even if I can't pronounce it.
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balhamu@280
"Do you think the decrease in risk to the state and improved efficiency from private-sector led investment is worth the additional premium on borrowing through PFI?"
I'm not informed enough to comment in detail, but my impression is that the risk to the state has been reduced by passing responsibility for repayments(?) and contract servicing to local authorities (schools) and health authorities (hospitals).
But maybe I'm wrong?
And there hasn't been the joined up thinking that was promised. I know that there's a brand new maternity unit in ?Burnley, that cost £10 million and hasn't been used because maternity care was transferred to ?Blackburn. Local opinion is that this happened because there were more Labour voters in the area the service was transferred to. Meanwhile, all the expensive PFI contracts will have to be paid with no service for the local people.
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balhamu@282
Sorry, just catching up on this blog.
I'm not sure that it's worth investigating numbers, even if I were capable of it. Labour is the party caught out manipulating new money announcements early in their period of office, and most of the budget seems to be smoke and mirrors. I'm not convinced that any of their statistics can be trusted because they keep getting caught out massaging the numbers.
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Office of budget responsibility? Just another quango or jobs for yet more civil servants and more expense to the taxpayer. Forgive me but we need constructive ideas which will reduce the natioinal debt not increase it.
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note to Mr robinson not for publication. As former charman of the University Conservative Party, how do you square your task as an impartial reporter? Do you not think you committed an original sin (Better described as a "a Gerorge Osborne")by appearing upon "Have I got news for you. " Time your tail was tweeked I think, what does having the boot on the other foot feel like?
2past was brought to light?
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Gordon Brown's boast that Britain is well placed to weather the recession was dealt a serious blow last night.
A report by the influential Institute for Fiscal Studies claimed Government finances are in a far worse state than the Prime Minister admits.
It said the budget deficit is more than four times as high as under the Tories in the early 1990s.
Gordon Brown accompanied by Glenrothes by-election Labour candidate Lindsay Roy with Kristian Birks, 5, at Bowhill War Memorial Club in Cardenden
Labour is also heading into the downturn with a 'significantly higher' level of public debt than when the Tories were in charge, the IFS claimed.
Brown calls for fuel giants to cut petrol prices as he hits the campaign trail in Glenrothes
According to the IFS, the shortfall between tax revenues and public spending will be 4.4 per cent of economic output this year.
That compares with only 1 per cent at the start of the recession under John Major in 1990.
The IFS report suggests a decade of extravagant spending has left the Government with nothing to tackle the slump.
The National Debt measures the Government's total liabilities.
The deficit is the annual shortfall between the amount of cash coming into Treasury coffers and spending on public services.
Government debt is heading for 39.7 per cent of gross domestic product, the IFS calculated - or a record £592billion.
In the last recession, at the end of 1990, public debt was far lower at 26.2 per cent of economic output - or £151billion.
The IFS expects the deficit, meanwhile, to hit £64billion this year, or 4.4 per cent of output. In 1990-91 it was a mere 1 per cent of national output, or £5.8billion.
The IFS also found that the public finances are weak in comparison with many other countries.
Britain has the 11th highest debt burden of 28 leading countries, it said, and the second-biggest deficit of the G7 economies after the U.S..
This and the revelations that Gordon Brown and Alistair Darling knew about the problems of the Icelandic banks at least 6 months ago rather blows out of the water Balhamu's and CEH's defence of the prudent P.M. and his admirable fiscal record.
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