Taxes to fall and then rise
On Monday, the chancellor will admit, by implication, that the government's industrial policy of the past decade has been something of a disaster.
Actually to call it an industrial policy is a bit misleading - but what I mean is the Treasury's celebration over many years of the UK's growing economic dependence on the City of London and financial services.
The City contributed around a third of our economic growth in the recent past and about 10% of total output.
It also generated a huge slug, directly and indirectly, of the tax revenues that flowed into the Exchequer.
So here's part of the horrible news we'll get on Monday in the pre-Budget report.
The slump in the City has knocked around £40bn - yes £40bn! - from annual tax revenues.
That's made up of lower corporation tax (our banks and other financial services provided about £10bn of this), lower income tax (those controversial fat City bonuses, now gone, yielded a fair chunk of tax), and lower stamp duty (on share trading and property deals).
And much of that tax revenue has probably gone forever, or at least for as long as the time horizon of most sensible forecasts (viz, up to five years).
How so?
Well, quite apart from the mess our banks are in, which has sent them tumbling into losses (no good for the tax man), the City in general is being forced by regulators to become a place where fewer risks are taken.
Such was the unambiguous message of last weekend's statement by the leaders of the G20 leading and most dynamic economies.
You may think it's a good thing that there'll be fewer risky deals by banks, hedge funds, private equity firms and so on.
But fewer risky deals, less risky lending, also means much smaller banks and City firms, much less employment, much smaller revenues, and much diminished tax payments.
So part of the hole in the government's revenues to be unveiled after the weekend should be seen as permanent.
Which is why the chancellor will have to announce that taxes are going to rise at a specified date in the future, to fill the structural hole in the public finances.
To be clear, I am not talking about immediate tax rises.
Quite the reverse.
I am certain that on Monday the chancellor will also announce a significant package of measures to stimulate the economy.
These will include tax cuts and spending increases funded by extra borrowing, equivalent perhaps to as much as 2% of GDP.
And the bulk of the tax cuts will be directed at those on lowest incomes, partly because they have the highest propensity to spend - for the good of the economy - and also for reasons of social justice.
Alistair Darling will describe such a giveaway as vital to lessen the sharp and painful economic contraction we're experiencing.
But he will also announce deferred tax rises and deferred cuts in public spending - to kick in when the economy has recovered a bit.
When would that be? Maybe 2010, maybe 2011.
If he fails to announce such debt-reduction measures, there could be very strong downward pressure on sterling and a corresponding damaging rise in the cost for the government of borrowing.
And, to be clear, the incremental sums he'll announce he has to borrow over the next couple of years will be colossal - equivalent to at least 8% of GDP, possibly more, or well over £110bn per annum.
You have to go back to at least the 1970's for a time when public borrowing was spiralling up at such an alarming rate.
Such a rise in public borrowing would be unsustainable.
Which is why, to repeat, there will have to be deferred tax rises and deferred public spending reductions inked into the public accounts and announced by the chancellor.
All of that is inevitable.
So which taxes will rise?
Well my prediction is VAT.
For the sake of transparency I should say that I don't know that there will be a VAT rise.
But a deferred increase from 17.5% to 22.5% in the VAT rate would raise around £20bn.
And it's one of the few future tax rises which might actually stimulate a bit of increased economic activity ahead of its implementation, rather than encouraging us to save
To use the economic cliche of the moment, it would give us all quite a "nudge" to spend now, before the swingeing increase in VAT would kick in.
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Jam today and pain tomorrow. Tomorrow of course may be another government and thus beyond the planning (?) horizon...
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A rise in VAT from 17.5% to 22.5% would, of course, create havoc with the 'independent' B of E's inflation target when it happened. But then, with the Prime Minister telling the Bank when to change interest rates, and announcing it in Parliament before the Bank announces it, we all know that particular ship has sailed.
A shift away from the spurious and (in the long term) illusory economic growth from fiddling around with financial instruments, would be no bad thing. Heaven forbid we should actually invest in apprenticeships, and make things people want to buy. Germany has shown that it is possible to be a modern western state, and still have a high-skill manufacturing base.
But that would require more brains, and more long-term thinking, than a nation of estate agents and "City boys".
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Crikey - If Darling even thinks about raising VAT the economy will go into slump immediately.
Give him a ring before it's too late!
What he should do - and I am sure it would bring immediate benefit - is REDUCE VAT from 17.5% to 12.5%. VAT is the biggest Government-invented block to sales ever instrumented. The cash-economy will grow stronger too if he hints at raising it. He has no idea how strong that black sector is!
Mention repossessions 12% increase and foreclosures and no-one doing anything to stop it while you're on the line.
Just say 'if you want to win the election - stop the dispossession'.
GC
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So in other words lets bribe people with tax cuts today and defer tax rises till after the next General Election.
If Labour are still in power then they will worry about it then and if the Tories get in at least this should save a few more labour MP's from losing their seats.
Never in the field of financial planning have so few spent so much to try to con their way to a general election victory.
Boom and bust is here to stay!
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I think predictions that a future VAT rise to 22.5% will raise 20bn are pointless as they are based on too many assumptions on future consumer spending and confidence.
We should be worrying about how we can replace the money which was generated by through the City of London with something that generates sustainable and tangible value e.g. Engineering or Manufacturing
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What do you know? Tax and spend from a (New) Labour Government!
Welcome back to the 1970s...
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Does Darling Alistair really think he is going to fool us all and get the economy going again? No doubt, as usual, the BBC will be doing their bit to promote him, his boss and their policies but you can only fool some of the people some of the time etc........
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NOT a Great TAX "Vat" idea.
We'll all spend and then STOP once the 22.5% rate is increased!
So another type of mini Boom n Bust.
If that's the type of solution we can look forward to then we really are all doomed.
I think Cutting Government spending which is part of the problem would be a far better solution! If ever a pound was poorly spent it's by Government.
Make the savings by cutting down all Government spending.
But that will never happen noses in the trough and all that!
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I'm sorry, but am I missing something here. Surely if the tax cuts are directed at the lower classes (i.e. those most likely to spend it), are they not going to do this by using credit cards (adding to the debt that has brought all of this scenario about) and then drink/smoke the actual cash away? Even if they don't do this, the extra money will surely go straight into the coffers of the power generators (and back to the Government!) whose bills in January will be huge. Only they will default on the bills because they have frittered the money away on consumables, so adding to the bills of those who get the least help. I cannot see us getting out of this in one piece.
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Well if it is VAT, Sterling WILL fall.
Why?
Because it will be seen as highly deflationary.
HIGHLY.
It will knock future growth by 1-3% GDP.
In other words.. NO growth for 8 to 10 years?
Yes: a budget for jobs and growth...not..
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Good analysis - I am sure these forecasts are on the button.
But, if VAT is likely to rise sharply in the future, that will mean that businesses like mine will, more than ever, be major unpaid tax-collectors. Well, not me . I for one would not be prepared to operate under such conditions.
Therefore, if this forecast of future VAT rates is true, I shall either close my business or move it overseas, because the UK will be heading into a fiscal environment where running a company will no longer be worth the effort.
If others think as I do, where exactly will future tax revenues come from?
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So the Financial Service sector turns out to be one big creative accounting exercise, an asset fairy story, a total failure, bankrupt and bankrupted from top to bottom.
Not far behind is the retail sector all following the construction sector into the economic abyss.
Who now says that London is the key economic driver in the UK?
No one!
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VAT should never be increased, it should be cut to 12%, as it affects every one. It should be time to tax the supper rich, 60% on income above £1m and increase in inheritance tax above a certain limit say £1m per child and all loopholes closed.
Also it is time to look at benefits, benefits should be increased to the needy but for others who doesn't want to work it should be cut.
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So we're in this mess after a decade of spending too freely, and must now re-discover thrift.
But not just yet.
For now, hang on to your debts. Pull out your purse, and spend-spend-spend. Don't put money aside for your pension - the country can't afford a saving habit. Of course, the country won't be able to support you if you don't save either.
The final message of the Gordon Brown era seems likely to be Live Fast and Die Young - you know it makes sense.
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Quote Peston#
"And the bulk of the tax cuts will be directed at those on lowest incomes, partly because they have the highest propensity to spend - for the good of the economy - and also for reasons of social justice."
Not forgetting that they are also likely to be Labour voters. Election bribes have always been at the heart of labour taxation policy.
The problem for labour will be that they will pile up votes in safe Labour and loose the marginals in the South.
Add that to loosing Scottish seats and it could be a very different result to what they were expecting.
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You suggest we should be encouraged to spend rather than save. But surely a big increase in saving would increase the funding available to banks. Is it a serious suggestion that the correct response to a problem caused by debt-fuelled consumerism and property borrowing is now more consumerism.
Furthermore, a hike in VAT to "repay" the borrowing would be one of those temporary tax increases that never gets reduced.
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This is bonkers. How far can a country mortgage itself before this itself becomes a sub-prime debt? Is it at all possible that countries stop lending to the UK and we can't pay our doctors, teachers and police?
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Doubt they would nationalise the banks as the first thing a Tory government would do is privatise them.
So anyone vat registered benefits. Sounds like a cunning Tory plan.
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Incidentally, rather than planning to raise VAT to business-destroying levels, has AD considered reducing public spending. It is called "living within your means" - too much of a novel concept for this lot, I suppose!
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Income tax / National Insurance cuts paid for by VAT hikes would be a great idea.
Can't see why the Govt. should delay the VAT hikes though, bring it in now.
We need to put more pounds in people's pockets to pay for essentials such as utility bills, food and mortgage repayments, so taxes must come down...
We can't risk a currency attack, so it's got to be either Euro entry which might look like panic now (should have been done a while back) or tax hikes from somewhere, or maybe both (Euro later).
Surely the country already has enough pointless imported electronic gadgetry, designer clothes, 4X4 gas guzzlers, and other luxuries. This crisis ought to be a wake-up call to us all that these trinkets are mostly useless tat. We should enjoy the cheap and indeed free things in life, and be discouraged from wasting money on mainly imported dross.
TAX them with VAT at 30%, and abolish National Insurance- a tax on jobs. Heating fuel, and power, should be zero rated, however. Petrol VAT should be 20%, Diesel VAT should be cut to 10%.
We need to turn this mess into an opportunity to mend our consumerist ways, or we are doomed, doomed.
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How can the government think about increasing VAT and at the same time stimulate people to spend?
What needs to be sorted out is the following: -
1/. Confidence, government to public, bank to bank and bank to business. This can be achieved by government offering guarantees to banks who lend to business and grant mortgages at reasonable interest rates to secure borrowers e.g. re-mortgages
2/. Government support for mortgage payers, it is cheaper to keep people in their homes than re-posses and leave homeless to be housed by local authorities.
3/. Ending supermarket and essential service company cartels.
Tax cuts are a bribe and will not encourage people to spend and companies to invest, all that will happen is that people will save (even though rates are low) because they are afraid of loosing their jobs (Japan had the same experience).
The Chancellor is I am afraid out of touch with the 'common' citizen of the U.K. and this is why he is so far away from actually sorting out our economic problems.
Finally, when will you challenge the PM who continues to distance himself from blame for this crisis. U.K Government reducing the powers of the industry regulator is the REAL reason behind the madness of the past 10 years, not the failure of the USA sub-prime market.
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New Labour and the City?
Fools governing fools.
Result...disaster.
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Wow. Followed by ouch.
That is quite simply an outstanding, and outstandingly honest blog.
I suspect a Treasury briefing behind at least some of it to soften us (the beloved taxpaying public) up in advance of the horrible truth on Monday. Even so, well done for stating some very very hard hiting facts: the government's industrial policy has indeed been exposed as an utter sham. Please remember this as you comment on Labour and government policies going forward.
Reality is clearly going to hit home in a quite incrediably painful way. The admission of future tax rises and spending cuts blows Labour's recent damning of the Conservatives' critique and response far out into space: I hope Labour like humble pie. I suspect they are going to be eating a lot of it.
That said, I also respect the Chancellor and the Treasury for at last facing up to reality and, rather than simply politicking, admitting some very unpleasant truths. I actually have a little more confidence in them as a result.
However, given the already huge borrowing we are going to undertake as the 'automatic stabilisers' kick in, can we really afford a further fiscal stimulus right now? Q2 GDP evidence from the US indicates it will be costly, and short lived: ie a waste. Bottom line: I has suspected the Tories were right; now, I know they are. We simply can't afford to borrow further, and Darling and team should go the extra mile and recognise that.
Finally, and very simply, I think this is so bad it constitutes a resigning matter for the Prime Minister: he has steered this country's finances into crisiss. He needs to be hounded put of office in disgrace.
We need to reclaim reality and, how painful, deal with it.
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22.5% vat I would hate to be a pensioner when this hits, this budget is a disaster for the low paid in the future.
Someone needs to highlight just what this will mean to ppl.
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the less Taxes and the smaller the size of the Public payroll, the better for the Economy and for us taxpayers.
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It all seems so futile- raise VAT- reduce VAT- create mini booms and bust- surely this is exactly what is wrong in the first place- create a false economy-imaginery prices/profits then take them away all with a hefty price to pay by someone- as long as its not you.-each and every attempt seems to me from the "solutions cuboard" a short quick fix to a problem that is not going to go away without a lot of pain and suffering.
Anyone with a modicum of sense will be hunkering down and trying to get through this mess- not going out buying high ticket priced goods.
The hole system is flawed-the polititians/bankers all have their own agenda-and this does not include you.
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I'd thought for some time that when HMG needed a few bob that they might crank up VAT because at 17.5%, I believe it is a few percentage points below the EU average.
To pick up on another point that Robert made, it also seemed to me that the UK economy has been dangeroulsy unbalanced for the past decade or so with the unhealthy emphasis (and tax revenue streams) from 'financial services'.
For some reason, a comment, I believe attributed to a Rolls-Royce director, rattles around in my head:
"You either dig it up, or grow it and add value to it, the rest is just moving it around".
'Moving it around' does not seem to work for us anymore so maybe we ought to find a way of actually making things again.
But that will be easier said than done when most children apparently want to be 'a celebrity' when they leave school rather than be useful people such as technicians, engineers or scientists.
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"For the sake of transparency I should say that I don't know that there will be a VAT rise.
But a deferred increase from 17.5% to 22.5% in the VAT rate would raise around £20bn."
From that I think we can all read that Alistair Darling has already given you the lowdown on what he's planning and that this too shall come to pass.
Much like your blog a month or two ago where you said "This may be hubris, but I think the way to solve the problem would be for the Government to take large stakes in banks and be paid a very high rate of interest". And what do you know, a few days later this is what was announced.
Not foresight on your part - more like insider information. This blog seems to be the Government's new leak machine of choice, where future policy decisions are "suggested" by Robert to sound out opinion and get people used to the idea. Robert does this for reasons of hubris, as he can then claim he had the idea first, even though it's no such thing.
It's a little scary though - the Chancellor's way of raising tax is to raise sales tax just when sales may finally start picking up again. Sounds a bit like the circular reasoning of "people have borrowed too much, but let's carry on lending at 2007 levels anyway".
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We have to live within our means!
If I earn less then I have to spend less, not borrow more in the hope that I'll earn more in the future. That is the route to ruin.
We've all been living in a FALSE economy for a decade at least whihc has been pumped up on steroid like injections of Gov't borrowings and the Gov'ts tolerance of the boom in private debt too. Quite simply governance has been poor which is the real reason Brown will get booted out of number 10 with a massive kick when the time comes!
The last ten years has not been an economic miracle............the abolition of boom and bust.............the parting of the waves..............it has been a disaster in the making gathering momentum year by year.
The simple facts are that we need to live within our means at some point not keep putting off the day of reckoning by applying for yet another national credit card.
I keep saying and saying if Gordon Brown had followed Ken Clarke's strategy there would not be a need for any of this desparate scramble to shore up the public finances through mega borrowing because the public finances would be so SOUND by now and would possibly be in a substantial surplus.....like other counties.
In fact Robert.....hey Robert Peston if you are reading this please can you do an analysis of what would have happened to the British economy over the last 11 years if Labour had kept to Ken Clarke's spending, borrowing and tax plans for the entire duration. Would be be in surplus by now? And by how much? I daresay the results of that exercise would prove beyond doubt the need for a fiscally responsible Conservative Government for the next 10 years to get us out of this mess.
The fact is we have an overbearing and expensive non-producing state sector in the country and it time to let the wealth creating entrepreneurs free by reducing regulations and directives and business taxes. All the Gov'ts taxation reducing effort should be aimed at business...the engines of economic growth...........but I daresay this Gov't will borrow billions and spend it in completely the wrong areas in a sticking plaster fashion because they have not got and have never had an industrial and economic policy which seriously rewards hard work and the entrepreneurial spirit that lies within many of us. They do not understand human nature at all.
Darling will announce the final act of Browns 11 year march to national bankrupcy on Monday...........................
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No:5 "We should be worrying about how we can replace the money which was generated by through the City of London with something that generates sustainable and tangible value e.g. Engineering or Manufacturing".
An excellent point, but how is any British company going to catch up with German quality? It would take two working generations to come close.
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# 11
Not sure why you see an increase in VAT as an admin issue. Surely the admin headache is the tax paperwork generally, whether VAT is 2% or 20%. Collection is then simply a question of the amount. Higher VAT is actually good news for you, isn't it? Well, so long as you're on a cash-basis for VAT payments. That way don't you have had to have received the VAT before paying it over to HMRC? In which case you get use of it (and the interest) until you pay it over.
I'm basing all this on my experience in Ireland. I pay over VAT monthly via direct debit, but can adjust it each month, and hence effectively use the VAT for cash flow management. I only have to do one VAT return a year, and so long as I've paid at least 90% of what's due over the year, I don;t suffer interest/penalties. Is it vey different in the UK? Incidentally, VAT here has just been increased in the Budget (ie increased now!) from 21% to 21.5%.
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And here comes the final proof of the tired old adage, those who do not learn from history are doomed to repeat it.
Thanks, I'll get my billboard and ticket to the Grundig works ready.
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I have read this blog on several occasions and find that it's very good at pointing out what's wrong but never offers up any solutions.
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Perhaps now, all those who resent the fat city slickers with their big bonuses will have a re-think - we need their huge bonuses so we can milk them. Perhaps we can have a Bring Back The Fat Cats campaign?
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Just get Printing the notes....
Anyone who thinks we're going to get out of this another way is in LALA Land!
You know that is the ONLY option!
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Governments are there in principle to govern for the benefit of the country in conjunction with the ideology of the governing party.
The economic mess the country is now facing is due to the mismanagement of this government over the years. It is all very well for G.B stating it is a global problem. A wise and competent government anticipates well in advance the warning signs of a economic decline and takes the necessary precautionary measures to weather the storm. For the government to advocate that the crisis could not have been anticipated is tantamount to wonder whether to buy presents at Christmas for your love ones.The government is hoping that nobody will look at the root causes of the crisis but will only focus on the remedial action taken by the government to nullify the crisis and thus reap the benefit stemming from possible recovery. Good housekeeping or crafty politics.
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Whats required is
a 500% inflation rate- for the people with debt and appropriate pay rise.
Anyone with cash put it in a government bond paying inflation plus 1%.
Join the Euro.
Everones a winner
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The government needs to encourage new businesses - tax breaks for new traders and companies.
Also reduction of red tape - I run a small business and the increased bureaucracy is getting out of control.
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"I am certain that on Monday the chancellor will also announce a significant package of measures to stimulate the economy.
These will include tax cuts and spending increases funded by extra borrowing, equivalent perhaps to as much as 2% of GDP.
And the bulk of the tax cuts will be directed at those on lowest incomes, partly because they have the highest propensity to spend - for the good of the economy - and also for reasons of social justice. "
Is it just me or does anyone else smell an election coming up ?? At least, in the Philippines, they are more honest about it. They just hand out sheaves of Peso notes to the voters !!
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Sorry Robert, but as an indirect tax, doesn't VAT hurt those on lower incomes more than the rich? Doesn't sound like a good election clincher to me......................
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Adding extra VAT to the already crushing burden inflicted by Gordon Brown's layers of stealth tax would be a disaster. Excessive personal taxation is just one aspect of a business-hostile strategy which has eroded commercial diversity in Britain, exposing the economy to over-dependence on the financial sector, with predictable and inevitable consequences.
Successful parasites know when to stop feeding off their host, sucking harder is unlikely to bring a good result.
As a side-issue, what of the overarching aim to converge tax regimes across the EU? If VAT increases sharply, do France, Germany and Holland follow suit? - Thought not.
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Anyone else think it's disgusting that a political party (Labour) will risk our future, merely to stay in power? All the time they are kidding themselves that it's nothing to do with them, it's all someone else's fault. It just happens that they are brilliant and can solve the problem. That they had nothing to do with. Of course.
A voter: "Your house is on fire'"
A politician: "Ah - no, in fact it isn't"
A voter: "Yes it is, I can see flames and smoke coming out of the windows and roof"
A politician: "No in fact what you are seeing is not in fact a fire. What you are seeing is the negative impact of the house overheating through the continued use, by other people, of parts of the house, that is to say heating systems, that are not fit for purpose of maintaining a steady temprature at all times throughout the house. The excessive heat occuring at the moment, giving you the impression of a fire, is about to come under control, and I have here a thimble of water that is my solution to the problem, and one endorsed globally".
A voter: "It won't work. It's obviously not enough"
A politician: "What we need right now is an experienced hand holding this thimble. How could you want an inexperienced hand holding the thimble...blah blah blah....self serving rhetoric..."
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The return of the severely misguided ideas of Keynes is very troubling.
The idea that we can borrow this much and expect to just up taxes later is mindless! We need to allow the economy to adjust and stabilise, the best way to facilitate this is to cut taxes for ALL members of society.
Who do you think pays for the expensive services and products still produced in the UK? the low income earners? I think not....
The best thing government can do right now is shrink, but I fear we are setting up a situation where we could see massive devaluation of sterling (again good for people debt) just not the people who have been prudent (the very people who should be rewarded in these times!)
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There are some great posts on here. The overwhelming consensus seems to be that raising VAT in the future would be a very bad mistake; many believe that Labour policy has got us here; and many think that spending cuts would be a better way of restoring fiscal balance.
I hope that Robert will pass on the apparent consensus that this policy idea is a duffer. My feeling is that fiscal rebalancing should be shared equally between tax increases (which are ievitable) and spending cuts.
Another thought is that Robert seems to assume that economic recovery will begin about two years from now. Perhaps this is the government view as well.
But what if this is wrong? My own view is that we are in a situation comparable with the thirties, so recovery may be five or more years away. What happens to government debt and ongoing deficits if this is the case?
Even if a near-term cut in VAT makes sense, what happens if the lower rate needs to continue not for two years but for five or more years?
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It would be good if the Chancellor could be bold enough to scrap the 5% VAT on electricity and gas bills. They are high enough; but if he goes ahead and puts them up at the earliest opportunity, then there will be more poor than at present. Another point is that the "lower paid" pay very little tax anyway, and some not at all. I would not like to be in his shoes, and I'm sure neither does he!! So, he and the whole Cabinet will secretly be hoping that they are defeated at the next General Election, and can leg it for Spain there to live the Life of Reilly on their fat pensions.
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Jam today and baked beans tomorrow. The day after tomorrow, baked beans to be rationed and the day after that, the ration to be cut. Isn't that the picture?
£40bn of funding for the government's £600bn budget already gone, debt interest on all its borrowing may double if it keeps up, who knows how much more tax revenue will be lost from a million or two people losing their jobs, as they surely will even under conservative expectations.
How much will the Treasury lose from the loss of the builders? Wasn't the construction industry the second largest contributor after finance?
We are all quite capable of working out what will happen to taxation. The projected funding gap would swallow several ministries without leaving a crumb, and somehow we have to make up the difference or persuade foreign investors to give us a payday loan. And on top of that, the government wants to grow its spending. Madness.
Robert, sticking five percentage points onto VAT will not even compensate for consumer spending cutbacks and deflation. The true tax increase for remaining tax payers would shock even Scandinavians.
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31:
Good points, but I am not thinking in admin terms but, rather, considering overall incentives to business.
Consider every pound that a business generates in top-line revenue. First deduct VAT. Then corporation tax. Then income tax on the sums paid to the owners or shareholders of the business. A lot more than half of every pound goes in tax, even before the owner or shareholder spends his income (more tax there, of course).
Many businessmen are likely to feel that they are paying a lot more than half of top-line revenue to the government, whilst taking all of the risk (and stress) themselves. The worse this gets, the more the incentive to run a business diminishes, and the worse the risk/return equation becomes. We need to encourage business formation and growth, not deter enterprise.
My fear is that adding ANY further tax burden on business will destroy competitiveness and incentive. I believe that as a society we need to encourage, not deter, wealth creation.
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42 Highburyfan:
Brilliant post!
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drew_lg @ 30
I think it would take more than two generations to catch up with the Germans quality engineering.
In the mid-1950s, the BSA company was the biggest motorcycle manufacturer in the world.
However, the BSA motorcycle design and development engineers got hold of a new German NSU motorcycle and took it to bits (as recounted by designer Bert Hopwood in the book Whatever Happened to the British Motorcycle Industry).
They immediately saw that they were in big trouble because BSA was churning out ancient designs on machine tools that had been clapped out by WWII use, whilst the NSU was a brand new design crafted using new American machine tools (Marshall Plan funded).
The BSA management, including the notorious Dockers, refused to commit sufficient funds to design and develop new models.
BSA more-or-less went bust over the following decade.
If you couple that with the total failure of our politicians to develop the third 'technical' stream of education then you can maybe get a glimmer of understanding as to why we are where we are today.
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So, the poor benefit now with tax credits, I wonder who's going to pay those tax cuts back?
The Poor? Nope!
The Rich? Nope!
Muggins > 30k / per year? Alrighty then !!!!!
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hi Robert; you're probably right that there will be tax cuts now and tax rises later; deflation in '09 and hyper-inflation sometime later. Maybe we could make all this into a kind of Gaia Theory of Economics, where any action must lead to a bigger reaction. Which suggests that encouraging reckless lending and borrowing right now isn't the greatest plan, given that it's exactly what got us onto this rollercoaster ride.
But instead of speculating about little details like the future VAT rate and other short-term actions by our largely powerless politicians, could you use your connections to try to find out the causes of some of the big things that are happening today/this week and let us know? Honda have announced they're closing their Swindon plant for 2 months - what does that tell us? Citigroup are on the ropes in NY and might be gone by Monday - what does the market know about their toxic assets and other possible defaults and bankruptcies? It would be nice to get more analysis from the BBC instead of so much political gossip.
Since nobody seems to know what is going on, or if they do aren't willing to tell us, I've worked out my own index for predicting future economic trends, which I'm willing to share. My S&P500 is based on Somali Pirate activity. For instance, their ransom demand of $25m for a supertanker-load of oil indicates a continued sharp fall in the price, which seems a reasonable prediction. In fact their whole approach seems remarkably well informed. They have a good business model for tough times and seem fairly recession proof. They are not investing their earnings in bank accounts, equities or treasury bills but keeping their assets in US$, gold, silver and other real loot which they can bury on a beach and dig up later. And when on dry land they drive Toyota pick-ups rather than any of that rubbish built in Detroit.
Although many of us live in built-up areas away from the shipping lanes, we could do worse than learn some lessons from the SPs. Plan for tough times ahead and batten down the hatches. Watch out for a bargain. Be prepared to haggle but try not to hurt anybody to get what you want. And remember not to smoke on deck.
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8.5% of GDP equates to about £110 billion.
National debt is about 43%(less if you discount investments in Banks). National debt in all the other leading economies is higher that 43%, Germany's is about 63%. That means an increase in the national debt of 8% equates to 51% still well below all the other leading economies.
The maastricht criteria stipulates national debt must not exceed 60% of GDP.
Surely all this means we can afford the fiscal stimulus compared to the rest of the leading economies, especially the European ones?
Why is the UK perceived to be in such a poor position economically, is it just down to our pessimistic glass half empty mentality?
Fact: the UK is still the 8th largest exporter of goods and services in the world.
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#33 "I have read this blog on several occasions and find that it's very good at pointing out what's wrong but never offers up any solutions."
Far from it, Sir. Many have offered up the *real* solution !! Call another general election immediately !!
All that had been discussed are the symptoms. It's the disease that needs curing. And the cure is another general election !!
Having said that, will the operation be a success but the patient died ??
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29 - many public services are under staffed. How will services we expect be improved?
Don't forget the public sector is a massive customer for the private sector.
Maybe with financial services being brought down a peg or two other sectors will get more consideration in our national policies.
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Most of the UKs troubles stem from the money expansion policies of Alan Greenspan. The UK government, especially Gorden Brown, were happy to ride on the tide of funds sloshing around the system. The public accepted all the hype, no more boom and bust, easy credit fuelled personal debt and easy mortgages pushed up house prices into nonsensical values.
We are paying the price. Is this perhaps a good time to re-evaluate some of the basics of socialism. Bring them up to date certainly, but with a view to a more sane approach to finance, both at the personal level and nationally going forward.
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I can't see that handing more cash to the poor via tax credits will have any effect. The poor might be inclined to spend.... but on consumer goods? Apart from clothes almost everything is imported and will rise in price with the fall in sterling.
So it's my guess the recipients will spend it on booze and smokes - or, if they have any sense at all, save it for the day that VAT rises as it almost certainly will.
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Hmm. The government needs to cut spending and get its books in order? How about ending a few costly wars here and there. Cut government spending on Quangos and think tanks and get rid of all the government non-jobs.
Maybe charge a few windfall taxes on energy companies that are still charging through the nose, and posting record profits despite the fact that oil has dropped to 50 dollars a barrel.
Maybe auction off the Royal Family, clear out the palaces and the soon to be empty office buildings of Canary Wharf and convert them into shelters to deal with the hoards of homeless caused by all the repossessions.
Should help save a few quid.
Maybe scrap the TV license fee as well. The BBC seems to have become the PR machine of the government these dark days.
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If the purpose of tax reduction is to stimulate the economy we need to reduce VAT....any other tax reduction is likely to be saved, not spent.
Cunning plan...
VAT reduced to say 15% and then restored to its current level gradually over the next 18 months or so, each time the government pre-announcing when the rise will take place, thus creating extra demand prior to the increase.
You read it here first...
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oh and the scrap the Olympics before its too late. We'd be better off if we gave those to Iran.
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Good grief! If the actual PBR comes out like that the papers on Tuesday will make horrific reading. Interesting RP's line about how much tax was paid on those city bonuses, talk about killing the golden goose!
I wonder though if this is a disinformation exercise by HM Treasury, spin the "apocalyse now" line in advance so that the real PBR looks better as a result.
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The faescal stimulaaas is nothing more than a ploy buy our par lammentable buttocracy,to s it on the taxipayers at some point in the future ,when the systems con tractual scatological reverberations will be allowed to hit the fans of things can only get better .
Why not government refinance at low interest the first 5000 pounds of everybodys high interest credit cardit debt ,making them instantly solvent and chastened enough to purchace relevant items to survive the coming recession, thus stimulating the proper economy
It would only cost 100,000,000,000 pounds
Alas Labour will take us to palooooooooooooookahville and the Torys will have to make us pay for it
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Can you explain how this massive borrowing the government intends to do is going to attract investors when interest rates are say are at 1%?
Surely high PSBR = high interest rates ?
Just look at Iceland - interest rates at 18%!
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So Robert are you saying that the Tories are right? The planned growth in government spending for 2009, 10 & 11 has slow or even stop?
A 40bn shortfall.
That is only half the story
So up to 2011.. the tax shortfall is going to be a minimum of £120bn.
The growth in government spending can be found here.
http://www.ukpublicspending.co.uk
You can forget the GDP number, they are the stuff of fantasy.
Factoring the spending increases that were already set to grow faster than projected GDP growth for 2009-2011.
The current account deficit is going to be so much more. It's a lot, lot more..
And then factor in a massive £30bn yearly tax bribe... A bribe because it's going straight to Labour's core vote.
When you add it up. It's going to be 120+150+90 = £360bn!
THREE HUNDRED AND SIXTY BILLION POUNDS OF NEW BORROWING.
That puts us right back to Callaghan and Healey.
This is economic lunacy.
GOVERNMENT SPENDING HAS TO BE CUT.
NOT A BILLION HERE OR THERE, BUT TENS OF BILLIONS.
Tax revenues are in freefall, spending is out of control.
As for the tax hike afterwards to pay for it.
It's not just taxes that will go up. Medium term interest rates will be higher, Sterling will be lower, imports, raw materials, fuel, all priced higher than they should be.
Britannia is truly dead. No flowers please.
For the love of god Gordon, go and take your utterly useless government with you.
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Lets just face facts.
A Government that didn't realise that by abolishing the 10% Income Tax band a lot of very poor people would be significantly worse off cannot be trusted to run anything at all.
Furthermore any pretence at estimating the effects on the economy, or what's left of it after 11 years of tax and spend policies, of their soon to be revealed plans just cannot have any credibility.
The Prime Minister has been a Stalinist from his University days and AD hasn't got the b*lls to tell him where to take his plans. The rest of the PLP, with a very few honourable exceptions, are as equally challenged testicularly.
Tony Blair's economic advisor from 1997 - 2003 described GB's management of the public finances as an "utter shambles". Well at least they got one thing right.
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Dominance of high finance in a economy was always the road to nowhere. Stocks are shares should be invested in industry, natural resources and agriculture. Perhaps all those city folks who bought large estates in the country with their over-the-top bonuses, will now be sensible enough to put them to work... as organic farms, small business enterprise units, recycling areas... rare breeds farms, market gardening, low cost housing for local people, etc etc.
Let's put the UK back on track by replacing money grubbing with genuine enterprise.
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#52 "Why is the UK perceived to be in such a poor position economically, is it just down to our pessimistic glass half empty mentality?
Fact: the UK is still the 8th largest exporter of goods and services in the world."
You have the answers in your very own statements.
1) exporter of services - predominantly *financial* services. Now that every one treats bankers and their ilk like lepers, wherefore shall the services come from ??
2) Subtract the overwhelming contributions from services and UK's export of goods look pathetic !! And just at a time when we need it most !!
On the other hand, Mercedes and BMWs, not to mention VWs are still greatly in demand worldwide. So the Germans may have more debt, but they also have more ways of paying for their debts.
I'm sure the Chinese will gladly loan the Germans large wads of cash on the understanding that they will be paid for in quality cars and bikes; not to mention high speed mag-lev systems !!
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Help someone; I'm trying to explain to my 3 year old why she needs to start saving now.
She seems to have grasped the scale of the bank problem and spotted the mistakes (bless her, she's a cutie), she struggled a little with the international side of things though (not surprising as the only place she knows outside of the Yorkshire Dales is Balamory and TeleTubbie Land).
But we are now on taxation and why she is going to have to pay for the greed of our generation under Labour. I've told her it's partly because she isn't a voter yet but I'm struggling with the rest of it....
I'm putting some receipts in a time capsual that she can open when she's 21 as I know she won't believe me when I tell her VAT was only 17.5%, but does anyone know how I rephrase 'band-wagon riding, fiscally incompetent, head in the sand, vote chasing, good time Charlie' or should I just say 'Gordon Brown' and hope she looks it up on wikipedia when she's older?
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Now it has come to pass that an economy can not be based on a financial hub and service industry, I hope they have come up with some ideas as to what the UK is actually going to produce going forward.
We do not have assets the world want
We do not have the finance hub to support the economy
We will not have a viable service sector, which was well on its way to being transferred to India anyway
We do not have anything.
Gordon and Darling dolls just aint gonna sell enough to get us out of this.
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Amazing insight Robert - how do you get to know these things. Could it be linked to the fact that you're Brown's biographer ? Surely not a tame journalist for the Government, and a 'soft' way of leaking information ... ?
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it was obvious that there fiscal policy was a total disaster and unfortunately we will all have to pay again.
they are setting it up so if they are unelected whom so ever replaces them will suffer greatly.
this looks like a long term atempt by a corrupt government to damage any replacement thus allowing them an easy return.
this alone shows this government are so self interested they have forgotten that it was joe public that voted them in and its joe public that they are messing with. its joe public that will remove them if they continue to fail.
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Financial stringency surely means that we can no longer afford to maintain a bloated public sector that remains very inefficient. As public sector pay rises have been kept in line with inflation I assume it follows that public sector pay will reduce with deflationary pressures, as pay will inevitably do in the real economy. Also we must find immediate ways of removing the highly lucrative pension schemes that public employees enjoy. These payments are a massive drain on the exchequre and just cannot be sustained.
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Why should my future tax rises be given to those on benefits now? I'm only an average earner but it's my money, if you want to reduce taxes then why can't I keep it and spend it myself!!
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There are short term problems and long term problems.
The short term problem is that the goods and services people need are available, but people are not spending what entitlement to consume (money) they have, so the economy is grinding to a halt. Hence the fiscal stimulus.
The longer term problem is twofold. Firstly, if confidence returns, then there will be too much entitlement to consume in the system, so, to prevent inflation, taxes will have to rise to take money out of it. Keynes by the way favoured direct rather than indirect taxation to achieve this.
The second part of the long term problem is that the UK is no where near self-sufficiency, even on average. Therefore we either become much poorer relative to the rest of the world, or by manufacturing and innovation we create goods and services which the rest of the world wants. At the moment it seems highly unlikely that these services will be financial.
Also, education reforms since 1990 have significantly dumbed down maths and science education. (Of course, the government says results are better than ever.) And too many kids taking maths have seen accountancy as the peak of their aspiration.
As has been mentioned elsewhere on this page apprenticeships have also declined severely.
In conclusion, we need to do much more than tinker with our finances to ensure a long term future for the UK.
Perhaps a sort of European integration might help - we should just admit that we lost the peace and apply to become part of Germany.
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Does this situation bring to mind the images of paint and corners ??
Who was it who said -
Oh, what a tangled web we weave
when first we practice to deceive !!
Every "solution" proposed by the government so far have all the hallmarks of seagull management - fly in, flap about squawking loudly, defaecate on everyone and fly out !!
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#51
Of course RP is right - you seem to miss how these things work.
Mate at the treasury press office or AD himself calls to feed some morsels which HMG prefer to have people prepared for before Monday allowing some chance to fine tune following the press at the weekend or see if they can smoke Osborne out with a statement and counteract it - these are the certain things mentioned in the blog.
The background is added by RP from his research, he is a journalist after all.
VAT increase not certain means RP asked what taxes will it be VAT? and the voice on the other end did a Deep Throat (the watergate type).
Perhaps this what AD wants to see about will public accept VAT better than Income tax increase - it is also predictable that income has to left so technically Labour can say they are not increasing income tax like the Tories said.
Also the aim is to try to sell Osborne dummy and prepare a script in reply (you don;t seriously think replies in debate are off the cuff?) which is wrong in one key point. Hence you will see almost as published her but with one surprise element in Mondays speak. This is the MI5 side of party politics.
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A 5% hike in VAT is a great idea.
It would help to close the gap between rich and poor whilst permitting regressive income tax to remain low.
The conservatives would be unlikely to reverse it whilst perusing a policy of low taxation and smaller government and 22.5% would bring us closer to the EU average for VAT.
After the initial inflationary shock it would drop out of the picture after the first year of implementation.
Why not go a step further and increase the scope by applying VAT to bank charges and interest, presently exempt, which would make people more responsible when taking on debt whilst being broadly neutral for business.
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Lovely, VAT goes up again, and the rich are laughing, while pensioners suffer once more.
Instead of increasing VAT, just have flat rate VAT of 15% on ALL sales, with no ability for business to offset it on their purchases, made here or on imports. Then remove income tax and corporation tax, and simple, a huge increase in Govt. revenue, simpler collection and no more silly tax loopholes, also a vastly reduced number of specialist tax accountants and lawyers, and a smaller Tax collection agency.
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Robert
I do not often agree with your comments as you seem to be a bit pro Nulabour at times and quite keen to promote Busted Brown 's quest for international glory but I must admit that this time you are right on the button!
It is going to be pretty bad in the near time and getting worse medium term.
Fiscal stimulus or not there is no easy way out !! I think that Brown and darling have boxed themselves for a short term political advantage but the usual taxpayers are not going to swallow their incoherent policies for much longer !
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#62, you answered your own question. Brown and Darling's economic policies could see us borrow our way to 18% interest rates.
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Robert
Will anyone want to stay in Airstrip One ?
First ID cards then 22.5% VAT.
You also forgot that none of us will be able to live without buying the glorious new ID card (another Tax) unless of course we wish to become non-persons.
The other tax that will rise will be the Council Tax - after all those of us with no meaningful pensions (private sector) have to subsidize the council workers.
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VAT is not a bad idea. Our rate is lower than much of the EU. Plus lots of peoples bills that are going up (food, energy) are low or zero rated for VAT, so will not be affected much.
However a plain VAT increase would surely be a missed opportunity to start putting a price on carbon. We have got to do this at some stage.
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Robert
I think you have missed the plane on this one. The number one priority now is get the population trained in coping with higher taxes and goods.
A major part of the statement on Monday will pivot on a major project to ensure as many as the lower and middle classes are able to take a 1 week break in Zimbabwe between March - June next year.
Called acclimatisation credits, each family will be provided with 500 quid and asked to last the week without running out of ZBN Dollars.
It will support the beleaguered air industry as well as starting a major industry in television game shows tobe exported all over the world.
Shows include;
I'm a British National, get me out of here!
Family Fortunes De-leveraged
crack-a-jock
Universally challenged
A question of support
and
Break the Budget
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Robert has obviously been tipped the wink again. However, I am sure he has cunningly disguised the fact so that he only looks mostly right when it happens.
I think the minimum VAT rate under EU law is 15% [?] and that most EU states are 20%, or more. That probably gives the framework.
I therefore expect a temporary reduction of VAT to 15% then a deferred rise to 20%.
Blow cushioned, well done Robert. No probs, Al babes, glad to be of service.
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When will they ever learn? borrowing to spend money you dont have on things you dont need is what got us into this mess in the first place.
the first thing to do when ones income is reduced it cut your costs....the huge increase in public workers with their unfunded gold plated pensions has to stop, the biggest waster of money is the public sector, tighten up all controls, get rid of 300 MP's, for a start, why do we need so many? only politicians trying to hang on to their sinecures would advocate this mad spending spree. there are more savers than borrowers so cutting the rate has a negative effect...Put up interest rates to 12% and watch the money flow back into the economy...
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I think that the Labour's Mouthpiece (aka Peston's Blog) has been used for that ages old tactic of breaking the bad news before it is officially released - let the people get used to it, then there is less fuss when announced.
Still, I like the idea of a 22.5% VAT rate.
It will make the French happy - they have wanted the UK to come more into line with their rates (and, therefore, less able to compete with them) for ages. Should assure Brown of a senior role in Europe once his place in the UK becomes untenable (i.e. after 2010).
It will also kill off what is left of the UK manufacturing industry by making it even less able to compete with Chinese imports.
Finally, it will provide a further impetus for the 'black economy' - those enterprising plumbers, electricians and builders who work cash-in-hand will make a fortune and, given that the income cannot be declared, will hit the Treasury even harder.
Clever old Clown McBrown and his Puppet Chancellor have done themselves proud with this bit of thinking. It must have taken whole minutes of concentration for them to come up with this wheeze.
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Ha ha
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EU warns against car subsidy race - BBC headline
Now GM is sticking out the begging bowl to the Germans and the EU will allow subsidies for R&D *only* and *NOT* any other purpose.
GM subsidiaries Opel and Vauxhall may soon be sold to fund the US car unions !! They have already sold their stake in Suzuki.
Why do I get the feeling that the EU and some EU nations are in a "pikes out" position, ready to repel importuning invaders ??
Economic Darwinism will come to the fore and the weak and feeble-minded will fall by the wayside !!
BTW, in the photo of Darling, do I spy bags under his eyes ?? Has he not been sleeping well lately ?? Is he wondering who *else* he can contact to borrow loadsadosh from to fund the spend, spend, spend to get out of the recession ??
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71 Bishoplatimer:
Absolutely right. We need to consider the private/public balance because it is ultimately the former that pays for the latter.
If we shield public sector employees from the impact of recession, the entire burden will fall on private sector employees and employers. The danger here is that the burden will just be too great.
One very worrying thing is that none of the political parties has recognised the need to cut public sector spending - even the Conservatives are talking about slower growth, not outright retrenchment. The pensions issue in particular needs to be addressed, but I see little or no chance of any political party actually having the courage to tackle this.
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Small giveaway now , large giveaway in April, Election end May or early June with promises of more giveaway and threats of huge tax hikes if the Tories win. Typical Labour agenda. Giveaways aimed supposedly at the poor, and lower paid, or to put it another way, at the workshy who Brown hopes will give him a 4 million guaranteed vote to keep his abomination of a government in power.
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Love these blogs. Such an incite into how people think and most importantly their inability to read. It certainly explains how the press can con folks with distortions and why spin (by politicians and the press) is sooooooo important. It clearly works.
Rule1: Read RP's blogs carefully before replying. That would at least prevent weird and wonderful but totally incorrect conclusions.
Rule2: Read a history book, especially ones that go back beyond the point of the current economic theory (at least 1 change of government)which would mean going back to 1979. It normally requires a catastrophe before significant changes are implemented by any party.
Rule3: Try and prevent your "incite" being driven by hindsight. So many post event experts out there!
I have an interest on "alternate" subjects and it is quite astonishing how comparable folks distorted views are. Spookily so.
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Oh dear! Does the Chancellor understand the difference between regressive and progressive taxes? If it is prudent to stimulate spending, raise income tax allowances, and increase new higher rates for the really rich (like bankers!). Tax bonuses at 100%
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A rise in VAT would hurt the poorest most, still maybe that's what Labour want - give them benefits on the one hand and take them away on the other.
Meanwhile spend a fortune on public sector executives pay.
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Vat rises,will be used to stabilize prices in the coming maaassive deflation and the hint of it through one day to be Sir Robert Preston will encourage people to spend more of what they have not,now .
Soon the price of goods like the price of petrol will contain a massive taxi element,
thus ensuring that our MPerrors can purchase anew each day ,the latest transparrent fasion statement accessories provided by their slip streaming tailerrs so that we wont know weather to laugh or cry at their brazen balls flashed accross the nations media .....before they aaare publicly castigated for not being able to cover up the cover up covering the cover up with the latest economy of the truth.
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Please read post 213. sashaclarkson on the previous article and the response before it is removed. I cant stop laughing. That has got to be the funniest political joke of the current time.
Pulling myself together again
In response to RP and his predictions, VAT needs to be increased to a level that allows basic taxes to be reduced significantly enough to let people pay the bills and create an element of '' in built debt'' on purchases. 22.5% is not sufficient to do this.
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Evening All.
So its the pre budget speech DRIP DRIP.
This will be the TOXIC waste along with all
the other stuff to poison the next
Administration.
Classic tactics per OLD Labour from the 60's
& 70's.
BROWN/DARLING ?
Cut out the MIDDLE MAN.
Call the ELECTION.
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Must say the PICTURE of Darling is a DREAM.
Desperate or WHAT?
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#67 You may do all that but will you also consider the following:-
1) will she have a machine to look up wikipedia ??
and
2) will she have the energy to run that machine, if she has one ??
Perhaps you could teach her some useful skills to better prepare her for a life in the future. Skills like self-defence, knife fighting and basic cookery skills like how to kill, dress and roast an animal larger than she is !! After all, there's no telling who she may meet going down the street !!
A few handy skills like bartering with passing ships for items not available locally may not be amiss. Also a healthy dose of paranoia could be life-prolonging.
Hope this helps !!
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#89 "Giveaways aimed supposedly at the poor, and lower paid, or to put it another way, at the workshy"
Does the description "workshy" include those who work 12 hour shifts, for the minimum wage, in old peoples' homes cleaning up the incontinent and holding the hands of the dying? (As some of my friends do) Or those who, when most of us are still in bed, are already up collecting our rubbish?
The really poor often don't bother to vote anyway.
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#76 meet #77 !!
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"Which is why the chancellor will have to announce that taxes are going to rise at a specified date in the future, to fill the structural hole in the public finances."
Have to?
What do you mean "have to"?
Are you suggesting that it's completely impossible for the budget surpluses of the future to be generated by spending reductions rather than by tax increases?
What is behind this presupposition that public spending is something that cannot be ratcheted downwards? Is it economic? Is it financial?
Or is it just something that no Labour supporter can possibly utter - the very idea that it could be better making do with a State sector that is smaller than the absolute maximum size that it's possible for it to be?
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95 lol ,a priceless gem
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This is nothing to do with UK plc. Its all about Gordon and his cronies seeking to con us into electing them yet again.
Each Labout government has failed. It's take over ten years of proper government to put things right.
Godron Brown has set fire to my house, and now expects a medal for putting it out.
Things can only get better ? Won't get fooled again.
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94. At 7:22pm on 21 Nov 2008, BridgesHF :
In response to RP and his predictions, VAT needs to be increased to a level that allows basic taxes to be reduced significantly enough to let people pay the bills and create an element of '' in built debt'' on purchases. 22.5% is not sufficient to do this.
-----------------
You must be joking. So if you purchase something you end up paying almost a quarter again!
Most things have VAT added, and significantly this includes gas and electricity.
It is bad enough having to fork out more just now, but this would be political suicide.
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If they want to help put minimum wage up
to 8.75 per hour.
No tax under 15K
People at the bottom might begin to stand
a chance.
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Announcing a rise of VAT and then deferring it would be yet another idiotic political move, on a par with the taking away of MIRAS by Nigel Lawton.
Just like then you would get a short-lived boom followed by a prolonged bust. Hopefully Brown/Darling have advisors that are a little smarter than Peston's.
Bob - my opinion of you just took a hefty knock.
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101 and 95 Does it take onty three to form an aluminiumarty or a bermuda triangle ?
or is it a rerun
of "MOby dick 11 A habsbeen again"
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#88 Not true - there's a chicken and egg situation. Without publicly funded infrastructure and education, the private sector could not function. Also, much of the "private sector" is contracted to the public sector anyway.
We need to see money not as a commodity, but as a way to allocate resources. Then we need to look at how to balance production, services and consumption. The free market undoubtedly has a large part to play in this, but cannot drive it completely in a civilised society.
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Robert,
I'm not sure whether you're aware but VAT is an EU competence. That means that the EU regulates whether the UK can alter its VAT. The only way that VAT could be raised is through a unanimous vote in the commission, which is almost impossible to achieve.
The Commission may, however, look to harmonise VAT rates as part of its glorious statist socialist agenda to make everywhere in Europe identical, so it may agree to an EU-wide 20% VAT. This, though, will take months.
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103
You miss the point,you have the choice to purchase or pay higher taxes.
Would you not like the choice?
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I have just replayed Gordy on radio two
from today.
This man is not for real,how he has the face
to lay the blame with the Yanks is a mystery.
About as much of a mystery as WMD.
Gordy?
Why do you lie so?
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#4 Ian_the_chopper
Perhaps you should look at it in terms of deferring tax rises till better economic times rather than till after the next election. The government needs to promote spending now somehow, and tax cuts are a good way to do that - so what if it means increased borrowing, we can worry about that when GDP has picked up and banks have stopped collapsing. Or rather, the Tories can worry about that, it'll be their problem.
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Cutting public spending is not the answer. For the economically challenged, I'll just point out that reducing public spending means increasing the size of the dole queue.
Rather than cut spending, what is needed is to cut waste. Create more jobs. Lose those big Whitehall salaries and especially the huge consultant fees. Try to get IT that works rather than spend billions on systems that don't work.
It's a mixture of public service *and* private enterprise ineptitude that have led to the current situation. There's no room for blaming other people. Everyone has to accept their share of the blame.
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Why on earth will he not do something 'simple'!!!
He will undoubtedly try to confuse everyone yet again and make matters far too complex.
Just send everyone 500 quid and ask them to spend it.
Simple, requiring no changes to any legislation, a one off and easy to understand and demonstrably fair to the poor.
What I want to know is when interest rates will go up to a reasonable level, indicating that money is worth something again. The whole problem we are living through was due to making money worthless and to fix the problem it cannot be sensible to make it worth even less!!!!
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If you rob Peter to pay Paul then Peter is likely to come a knocking in the near future. Spend more to save the bacon - the problem is that all the spendaholics have been culled. A Darwin twist. Those who are financially timid are in the best position, but relatively small measures are most unlikely to get them to change their mind, every media message says to them that they have got it right, the meek shall inherit, sit tight. The banks are to blame. No, the more conservative banks left are behaving the way they always have, the banks you want right now, to lend willynilly like a load of demented scarecrows, are the ones who have skewered themselves on the Northern Rocks. You cannot manipulate reality with words and talk an uplift. Must be fustrating because words are so cheap compared with the problem. Still it will be written about for decades, a place in history, must make sure the story is right, all measures proposed, it was somebody elses fault they didnt want to follow a perfectly good script. Most frustrating. Ever thought you were set up as a scapegoat.
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Hey there Gordy.
I adore Labour,things can only get slammy.
If you pay tax lets do double whammy.
Worship Mandy & Ross,wish they keep out
of trouble.
Darlings going to tax Carling.
To get you out of the mud.
But really you are a dud.
Go get a bank.
Give it a spank.
Tell them to lend loads of money . . . .
############################
Bored now.
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What does a squirrel do in the summer? It buries nuts. Why? Cos then in winter time he's got something to eat and he won't die. So, collecting nuts in the summer is worthwhile work. Every task you do (as chancellor) think, would a squirrel do that? Think squirrels. Think nuts.
Courtesy David Brent.
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#113 No need to send it to everyone, just send it to the wives. It will be back in the tills before the end of the day!
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Any Questions tonight Radio 4
What happened to Gordon's Fiscal
Prudence?
Ive recycled it into 32 million rolls of
Lavatory Paper.
Gordy says he doesnt need any.
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How about Now :
VAT on Energy to Consumers to 5%
Employers NHI to Fall to 10%.
Insurance Premium Tax Scrapped
Later
[Year 2010/2011]
VAT on 'Services' Drop to 5% ( restaurants - eating out and building work on domestic , industrial and commercial/ govt properties.
VAT on Other non zero rated products rise to 20%
[Year 2011/2012]
Employees NHI increase to 14% flat including a 2% compulsory Pension saving contribuiton, and Basic Rate of Income Tax to 25% , with re-introduced 10% Starting Rate for first 5200 of taxable income.
[Year 2013/2014]
Increase air passenger duties by 50%.
VAT on Services and Energy to Rise to 7.5%.
These measures will help the lower income persons[ and make cost neutral middle/higher incomes ] , encourage employment in labour intensive industries , reduce employer costs ( including local authorities and government as an employer ) , introduce a compulsory savings element - which could be invested by government in those now reformed and lower risk banks replacing the loans as they fall due for repayment. Provide a means to repay government borrowing.
Assumes no real change in govt expenditure ( which needs greater expenditure on training, and less on defence spending over the next 5 years )
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44 friendlycard
You do make me laff. Dont you remember the deady embrace the Conservatives gave to Heseltines proposal to up VAT to the current rate to get out of the poll tax problem. The issue is whether or not something is palateable at Westminster, not with the electorate. : ) The electorate only count at an election and manifesto undertakings can be fudged : D If Brown and his ring are out then the Conservatives will say this is your inheritance from Labour, swallow. If Labour manage to get in again then it will be it was voted for and saved things, enjoy. Abroad sounds nice, at least better weather, but I have heard some of the problems are the same, just the bread is a different shape.
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I can see the the next party political broadcasts now using Lionel Bart:
In the Blue Corner
Dave Cameron strumming around a local supermarket, gets his shopping, never looking below eye height (in case he spots a sub-prime packet of noodles) and as he gets to the checkout he slaps his bum twice and sings
Oliver! Oliver! Never before has a boss wanted more!
I won't ask for more when I know what's in store.
In the Red corner
Overlooking a serene Georgian crescent in the Spring, Gordon puts his head over the balcony and sings:
Who will buy my sweet red roses?
Two blooms for a euro.
Who will buy this awkward feeling?
Im so sly I feel I can lie
Vote me in and Whenever things go wrong,
And I would keep it as a treasure To last my whole life long.
Me, oh my! I don't want to lose it
So what am I to do
To keep the sky so red?
There must be someone who will buy...
LONG LONG SELLER: Who will buy?
KNIFE GRINDER: Who will buy?
MILKMAID: Who will buy?
ROSE-SELLER: Who will buy?
ALL: Who will buy this wonderful economy?
We're so low I feel we must go
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Comment 112 : pete_in_halstead
"Cutting public spending is not the answer. For the economically challenged, I'll just point out that reducing public spending means increasing the size of the dole queue."
Well things must have changed since I did my economics degree 30-odd years ago. In my day, all the rage was that Keynesian demand management was about the nett of spending and taxation. The theory was that we should try to operate counter-cyclically, to try to smooth out savings rates in the economy as a whole.
So in the downturn, when private saving levels were above the desired trend, the government borrowed to take up the slack, by setting nett deficit budgets, while in the upturn, when private saving was below trend, the government supplemented the saving rate by setting nett repayment budgets.
Keynesianism is about the whole cycle, not just the recessionary part of it.
I don't see that the economically challenged are going to be helped very much by being told that there's a direct inverse link between the level of public spending and the length of the dole queue. I'd hesitate a guess that there's a bit more to it than that.
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This really shows how shortsighted an irresponsible the government are. As well as how ineffectual their economic and fiscal/monetary policy measures have been at settling the turbulent financial markets. The various cash injections have failed to re-capitalise banks and promote lending between financial instituions and to small businesses. The nationalisation of Northern Rock failed to stabilise the situation with more and more banks falling into the abyss of financial insolvency. Darlings interventionary
monetary policy has been like a political drill trying to penetrate a wall of undermined-financial-confidence-bricks, but his political drill-bit has been worn down to nothing from the effort, and the wall remains almost unmarked. Similarly, Darlings plans to buy up toxic assets and sub-prime debts have done little to restore public faith in the stability of the economy and spending has plunged.
However, while spending has fallen, and growth has slowed to record lows - yet inflation contiued to rise way above the government and Bank of England/Monetary Policy commision's target of 3% - the dreaded 'stag-flation'. Similarly, under Gordon Brown's Labour government (an end to boom and bust indeed! - now we just have bust) the exchange rate of the pound has fallen dramatically against the dollar and eurozone currencies. As a primarily importing country with a service driven economy, this is a grave predicament indeed for the UK. If only thatcher hadn't destroyed our manufacturing and primary industries. Adding to the countries problems is that, even with their massive bags of tax payers money as an encouragement, with governmet guarantees on their loans in addition. Kick start spending!? Alistair Darling couldn't kick start his own mother - and she's dead! Now I read that we are likely to face deflation - prices will fall, businesses will close, wages will drop through the floor and we'll be trapped in a recession for years to come. Great. The economy needs radical thinking if it is to make a recovery, not old recycled policies from last year when the credit crunch was in it's infancy! Times are changing. Irresponsible and unsustainable government borrowing now and higher taxes later will just make things worse. This is not a time for politcal electioneering, it is a time for drastic economic action!.
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113 john from
Brilliant. Every pound spent needs a further pound spent on administration to ensure it is dispensed properly, I understand that is the normal ratio. Creates jobs and boosts expenditure at one stroke. But keep it quiet or Milliband will steal it to go alongside his loft lagging project ; D
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It is all really quite staggering, beyond all normal reason. The financial markets have made us all this money, how much was invested in manufacturing, not a lot, how much do we now manufacture? not a lot. The 'solution' offered is ok as far as the financial aspects are concerened, maybe, but what about future generations?
Surley we must, must , must invest in a manufacturing base that can supply home produced goods to compliment the home produced services, that ring the word 'QUALITY' that the wider world wishes to purchase. Without a reasonable manufacturing base we as a country have nothing to offer and our future is assured to be a gloomy one.
Education education education must be replaced with manufacture manufacture manufacture. Real jobs for folk to regain pride in, the social benefits of such investment long term may prove beneficial as well.
Modern manufacturing with modern facilities, that is where the application of our intellect should be directed. accompanied by a modern regulated financial system to service it.
Dream on....
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Re: 112 - Why should everyone accept their share of the blame?
This was nothing to do with me, I'm just a normal guy in the street. In another street some some hedge fund guru trousered $2.6 billion last year. That's a lot of money for one years work.
In the US something like 500 people have got aggregate assets of $1.5 trillion.
How do you think they got this money?
The answer is by fleecing the entire world, and then sitting back having a laugh whilst the citizens of the world go around blaming each other or urging some form of bonkers collective responsibility of the peasantry.
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#20
"Surely the country already has enough pointless imported electronic gadgetry, designer clothes, 4X4 gas guzzlers, and other luxuries. This crisis ought to be a wake-up call to us all that these trinkets are mostly useless tat. We should enjoy the cheap and indeed free things in life, and be discouraged from wasting money on mainly imported dross.
TAX them with VAT at 30%, and abolish National Insurance- a tax on jobs. Heating fuel, and power, should be zero rated, however. Petrol VAT should be 20%, Diesel VAT should be cut to 10%."
Totally agree. Another benefit would be that manufacturers start making things that LAST just as they used to. The word would soon get around if x's washing machines only lasted a few years. if they fall apart, people would be employed and skilled to fix them. We'd therefore become much more economical with resources ? we have to anyway.
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This surely is the final nail (or bunch of nails) in the coffin of Gordon Bown's reputation and career - this Labour Government is ending in the same way as all previous ones - £ slumping, unemployment rising, government borrowing accelarating. The only piece I don't believe is about future cuts in spending - this lot wouldn't have the backbone to do it.
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May be Mr Preston is too young to remember that it was Margaret Thatcher who dismantled UK's manufacturing industry in fact of "clean" industry such as financial services, also deregulating it.
She also heavy promoted the culture of greed, labour are also culpable because went along with it.
So when they say greed is good, think of those losing their jobs and homes and often as a result their families.
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#125 Yes, I agree.
"Education education education must be replaced with manufacture manufacture manufacture."
The trouble is, they used the word education, but much of it was actually PC bovine ordure. Why teach a subject, when instead you can teach "study skills"?
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Celticace 125
Spot on.
The problem is very few want to do it.
UK PLC doesnt have the infrastructure.
The Banks are not interested.
The public wont pay at the TILL.
If it was possible i would reopen our two
factories.
1500 plus jobs.
Exports.
Less imports.
Hard currency etc etc
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This comment was removed because the moderators found it broke the House Rules.
post 129 savoed
Blame Thatcher?
I would blame:
Weak management
Lack of investment
Bad products.
Arrogance.
Union unrest mostly justified due to the above.
Lack of Skills
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We need to find things to produce that the rest of the world needs.
1. Umm
2. The Beatles
3. Delete 2 above been done and reworked
4. Umm
5. I give up, lets join the euro and have a ride on the back of Germany like all the rest of the union has done
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Our dear leader has had a most trying day. Earlier this morning one of the minions at the Brown Broadcasting Corporation caused him great anguish. On the Today programme the said minion let slip that the bloodsucking banks taken by our dear leader under his wing have so far not received a penny from the taxpayer funded bailout. This ruined the narrative of the day which was to blame the bloodsuckers for greedily hanging on to the taxpayers largesse rather than dispensing it to the small private sector companies desperate for credit. Poor old Jock and his pals at the Common Select Circus had their righteous anger ready to go and bang the whole of Fridays narrative was Kaput. Comrade Darling was summoned from his afternoon nap to rehearse the next distraction to get away from the idea that the policies of our dear leader might have had a wee bit to do with the current crisis caused by the Americans. Once again our dear leader reminded Comrade Darling that words would need to be exchanged with the Commissars at the Brown Broadcasting Corporation because he had heard from Comrade Balls that the audience on yesterdays Question Time were infiltrated by deviants and social misfits. The editors had allowed gossip to be spread that the problems of the banks were made on this side rather than on the other side of the Pond and that there had been a serious failure of financial regulation by the peoples commissariat at Canary Wharf. Broadcasting such slurs on our dear leader who has so carefully crafted this outstanding regulator will have repercussions. The line to take as far as our dear leader is concerned remains quite simple; blame it all on the Yanks. Northern Crock, blame the Yanks, Royal Bank of Scotland blame the Yanks, Bradford and Bingley blame the Yanks. Keep to the message that the UK is uniquely prepared to weather the current financial turbulence thanks to the great helmsman who has steered the ship of state for the last eleven years. With the help of a small band of tartan brothers at Westminster our dear leader hindered the Blairite faction from destroying education and health services in England and stayed true to the tradition of comrades from the past who took the begging bowl to the IMF in 1976. Achieving the current situation has required bold and decisive action from our dear leader. Lest we forget he is viewed on the international stage as the man whose hour has come. That this narrative has no substance whatsoever and that our dear leader hardly rates a mention in leading French or German newspapers is irrelevant as long as Bush House does what it does so well. The Briitish housing bubble was a wicked plot by the Yanks. Free and easy credit for the last six years was all the Yanks fault. Now it is up to our great leader to clean out the stables using his tried and tested methods for wasteful public expenditure. Please do not mention the Dome or Government It projects or PFI hospitals or ID cards. Reminding our dear leader that in the past he was vociferous in his criticism of unfunded tax cuts is a waste of time. This is no time for novices and our dear leader is already checking the flight schedules to the IMF. Flagging a future rise in VAT may lead to a short term splurge but it is a policy that has been tried and failed. Our dear leader should give Frau Merkel a call in Berlin because her outfit chose this path in 2007 and it certainly never led to the promised land. Our dear leader is running out of options and one he will not take is to call an early general election. Our dear leader was chosen from the ranks of the labour masses without the necessity of a vote and he has no intention of quitting the politburo before May 2010.
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What a disaster. When I recall I voted Labour in 1997 for "change", it makes me ill. Thatcher looks like a better option now... at least she had balls.
This government has no balls. It's all about winning the election. No long term thinking, just politics , politics and out smarting the Tories.
We entrust our futures to these fools - it's no wonder that very few people vote anymore.
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131, I think it is spot on. I can only agree with education becoming a mantra because people had nowhere else to go to hone their life skills, and educashun aint for everyone :o).
I know it will cost however I can see no really viable future without a modern manufacturing base. With our current demise we can only cure the patient if all aspects of the illness are addressed.
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Protectionism is a good thing for an Island such as ours.
In order to create a manufacturing base we need to close the borders to all others. We need to ensure that the new order produces the things we need and want with internal competition.
Only then, when that internal competition produces the best for the consumer should we be able to sell our wares outside our shores. The result will be British is best, British is saleable.
Build an internal economy first and expand second
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Comment 126 : armagediontimes
I'd really like to agree with you, if for nothing else because getting back on ones feet from your scenario is a lot easier than it is from mine.
I'm prepared to go along with the concept that the world's hierarchy are a bunch of duplicitous shysters to whom what is all-important, and influences every decision they make, is preserving their own positions of power, influence and wealth.
But, certainly in the "democratic" West, we allowed them the power to operate in this way. If the collective man in the street is so capable of running society better, why hasn't he been capable of overturning the kleptocracies? Why has he been taken in for so long by so many lies and distortions?
My feeling is that, as things stand at the moment, the collective man in the street is not capable of running a successful society. He's not capable, because the minds of too many are insufficiently developed to understand the need to qualify the pursuit of self-interest with the insertion of the word "enlightened". I'll not dispute that this infantilising of the population has been a deliberate policy of the social engineers seeking to maintain their control. Nor indeed that a more "enlightened" education policy could produce a population of men in the street wholly capable of running a successful society by direct democracy.
But, to me, what we've got now is some way short of this capability. And, regrettably, getting further behind all the time.
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Britain still has the greatest manufacturing industry in the world
Manufacturing debt
repackaging it as GDP and selling it to the Arabs or nouveu riche whilst charging a commission .
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I suppose the only comparably horrible experience might be to have gone in for some major surgery, like an amputation, and to wake up in post-op to the sight of a silvery-haired, bushy-eyebrowed doctor telling you that he's taken the wrong leg off. Oops. Yup, I guess that, what with Brown admitting that 'gee, we just might have made a wee mistake or two', trying to build an economy on just the financial sector, retails and construction was one of those mistakes.
I was wondering what the size of the hole would be from lost tax revenue when all those people in Canary Wharf had to start clearing their desks. Now we know. Think Titanic. Think iceberg.
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139 wrote : But, certainly in the "democratic" West, we allowed them the power to operate in this way. If the collective man in the street is so capable of running society better, why hasn't he been capable of overturning the kleptocracies? Why has he been taken in for sot long by so many lies and distortions?
Is it not because the system is designed for the man to think that they have become one of the kleptocracy? A heirachy with so many layers between it, a man can think he has made it with a suit or a Ferrari when what he actually needs is blood (blue blood)
If man thinks he is in the gang he will act as if he is in the gang, he is in fact an enforcer of their regime.
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Dear Robert: Great writing as always, with that particular sense of black humor!
Question: You stated:
'And the bulk of the tax cuts will be directed at those on lowest incomes, partly because they have the highest propensity to spend - for the good of the economy - and also for reasons of social justice.'
Wouldn't cutting the VAT back significantly accomplish both goals--easing the tax burden on those least able to afford it, as well stimulating spending by those same people? And, isn't an economy built upon the hand-to-mouth spending of the poor built upon morally 'sandy' soil? How about an economy built upon thrift and production of goods and services of concrete value?
Why engineer some complex re-jiggering of income tax, deciding who is and isn't 'deserving' of a tax break, only to take it all back with an increase in the VAT? It makes no sense, and seems self defeating.
We will have to ask the same question here, because what you are describing is 'Obama-nomics' with an English accent.
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137 Celticace18
Manufacturing comeback.
Not as it was. There is a specific comeback but it is - Flexible. Not easily produced in the Far East. Lifestyle related. Ethical. Environmentally sensitive. Targeted at a sophisticated consumer via social networking. Internet driven. Small scale. Growing. International customer, not specifically local customer, based. Therefore extremely robust strategically.
Find something that fits and it works.
Manufacturing as it was will never return. It had reached the end of the cycle and as the technical edge was lost the unit labour cost (transferable) dominated.
The UK government does not understand this and only seeks to aid a return of the old manufacturing model via grant aided satellite manufacturing units. These are unstable by definition and typically pack up and go a the drop of a hat, leaving no technical or marketing base. No growth, nothing sustainable. Basically the UK government likes large corporations despite the fact these are the businesses in trouble. That is because it is a large organisation in trouble and feels at home with them, they talk the same language.
As governments in different countries all seek to host, ie subsidise, the same monolithic businesses then overproduction occurs eg cars, aircraft. etc.
China, to name an obvious country, has done well out of the labour transfer but it will have major problems shortly. The transfer is pretty much complete but the inflexibility of the system construct is showing through already. It is just a modern rebuild of the 19th century and the same fate awaits.
I am afraid the old type of manufacturing is most unlikely to return and provide the economic uplift needed to carry the current shambles forward. The belief in financial services as a solution in the 80's was sound up to a point but it became over-egged. How little the UK government understands the current world was shown clearly with the recent refusal to assist in the next generation of internet infrastructure. Mainland Europe will steal a march.
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Back on subject
HMG is going to give us all a credit card on Monday. Buy now, pay later.
Only we dont know what the interest rate payable will be later on.
HMG has in fact become the very model of a bank that is now insolvent and there is nobody sitting in the commons to challenge it.
IS THERE NO ONE, IS THERE NOBODY to stand up against this hypocrisy
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The best advice A. Darling will ever receive :-
WHEN YOU ARE IN A HOLE STOP DIGGING!
The 'plan' as outlined above by Robert has so many holes that it can never provide a solid foundation for a return to economic prosperity and stability. By the time the lesson is learned a short to medium length recession will have turned long term.It is clear that we are heading into a cycle curve that will probably last five to seven years and the structural reconfiguration needed to pull us out of it will take all of that time. The probability is that two to three years will be downturn followed by an upturn that will in large part require a new mix of productive and wealth producing opportunities to emerge. Where this value generation will come from is still unclear and in large part will rely upon the talents of yet to emerge companies and entrepreneurs. Planning to return government borrowing to acceptable levels rapidly to allow for a favorable tax environment for the creation and investment in of these new enterprises should be the key goal of any fiscal policies that are now implemented.We are in a competitive global environment where our key asset is our talent to innovate and add value. Chucking money at meaningless short term spending boosts trying to sustain the unsustainable is clearly not the way to go.If this is the limit of political vision for our future then we truly are in deep trouble not just for this generation but the next as well.
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Well its going to take at least 2 - 3 months before jo public gets the message - so -Browns poll upswing will continue to Xmas.
Whats the odds on a January Election?
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Last 10 years of industrial policy, do me a favour. Go back to Margaret who mortgaged British industry. Impossible long term for a country to sell each other insurance policies to survive. We do need to make things. Realise this is probably deemed a pathetic out of touch point of view but with no industry to mortgage any longer, we are perhaps getting what we deserve!
Banks failed, city doesn't work, greed is rife, too many people taking too many bonuses all the way down the system. Night follows day.
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Well done Robert you have stirred them up again and 33# has added something more to the pot by suggesting that posts do not suggest solutions to the problems. No sooner said when the "usual suspects"start trotting out not only solutions but also the back slapping of other members of the clique on supposed quality of their comments.
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Wow, so by a trillion to one coincidence the tax won't have to rise until AFTER an election. Who would have thunk it....
Another interesting note, Mr Brown's laughable Budget report along with a statements like that borrowing would be 34bn - wrong by a factor of 3 - seems to have disappeared off the face of the Earth...
http://www.hm-treasury.gov.uk/budget/budget_07/bud_bud07_speech.cfm
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#148, yeah Thatcher has been out of power for 18 years - far longer than she was in power and Labour have been unable to do anything with the massive majorities they have in Parliament for the last 11 years.
With genuises like you I guess we can see why people seem to have been impressed by Brown.
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Not a single politician, not one commentator or presenter and certainly not a single 'expert' in the news has correctly identified the two interlinked problems the world is facing today:
1. The little financial difficulty: True, it started with sub-prime mortgages, BUT it is far deeper than that. After all the total of sub-prime mortgages is reported as being some $1.5 trillion, whereas Governments have so far pump close to $10 trillion into the banks. If the problem was just sub-prime mortgages, or 'banks not lending to each other', this $10 trillion cash injection would have solved in one go.
No, the problem is 'derivatives'. These dents and bets are worth some $500 trillion. Compare that to the GDP of the whole planet of just $50 trillion and you get some idea why this fantastic burden of debt can NEVER be repaid.
The only solutions are
a) hyperinflation to degrade the whole of that debt (following Zimbabwe)or
b) legal cancellation of all derivative contracts (!!) or
c) collapse of the whole financial system incl just about all banks, and starting all over again.
We need to choose one and go for it. The future is bleak whatever Gordon does, but pumping borrowed money into the economy in the utterly vain hope of recovery is just about the worst possible strategy.
2. The little problem of Energy and Growth.
Next year the world production of crude oil will, for the first time in history, decline for geological, not political or economic, reasons. Peak Gas will follow some 10 years later.
2008 is the end of the Era of Growth (as growth is predicated on the availability of cheap energy) and the start of the Era of Decline.
No matter what investment is made in oil or gas fields, the total production from 2009 onwards will decline every single year by perhaps 4%, thus our energy sources will halve every 20 years or so. This has already happened in 60 oil producing countries around the world, incl USA (1972) and UK(1999) and now, in 2009, global production will begin to decline.
The 1930s depression was bad enough, but this decline will be on a massively larger scale. To start with, it will be at least 40 years long. 40 years will take us to about 25% of current energy usage, which is what we can expect from all renewable sources combined. So at that stage, provided Governments have been wise enough to have invested massively in renewable energy, renewables may be able to take over from fossil fuels and perhaps stabilise the world economy.
So, the budget should
a) embrace the Green New Deal (£50 billion per year invested in renewables)
b) forget about tax cuts or other increases in current spending
c) choose a strategy for the self inflicted financial crisis - and follow through
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74 - ishkandar
Sir Walter Scott Marmion, Canto VI, Stanza 17.
But don't quote me on it
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#52 Yes we are the 8th largest exporter $442,200,000,000 in 2007
The problem is that we are the 4th largest importer $621,400,000,000 in 2007
(Source Wikipedia)
I looked at the ONS - the total trade deficit since 1997 is £518,000,000,000 - with the vast majority happening over the last few years. (This includes invisibles)
Your point?
Another nice point - how much money was raised by remortgaging and then spent in the economy? It wont happen this year or for the next two or three?
Yet another nice point - how many people who have just paid off loans are going to take out fresh ones?
Both these points suggest that consumer spending will drop drastically -although the headline drop in October was only 0.1% some sectors e.g. furnishings produced MUCH greater drops.
Many retailers have opted to hold pre-Christmas sales in a bid to boost spending at what should be their busiest time of year.
Food sales rose 1% in October, but non-food sales fell 1.1%. Sales of household goods were down 1.5% and clothing sales fell 3.4%
(If you think it is bad here - in Spain the drop in retail spending compared to September last year was 7.1%)
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107. At 7:49pm on 21 Nov 2008, sashaclarkson wrote:
Without publicly funded infrastructure and education, the private sector could not function.
Nothing is genuinely 'publicly funded' - public funds are just appropriated private funds.
Not only that, but plenty of education is already (directly) privately funded.
If people were 'allowed' to keep their money, they could set their own priorities and spend accordingly.
Compare the £250 million of 'public money' the EU have spent on an iffy 'competitor' to google -- how much did 'google' cost the tax payer?
The public sector is an overhead we tolerate - there is nothing special about it.
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If the government are going to fiddle with the tax system there is only one tax they should use and that's income tax.
It is relatively easy to adjust, the affects are going to make people marginally better or worse off and unlikely to destroy peoples livelihoods and it is paid on investment income as well as earned income.
Raising the level of VAT would be a disaster.
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There is an unusual sense of realism to this blog. You may want to add that it won't necessarily New Labour who have to raise the taxes and deal with the bulk of the hangover from the big spending years.
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#155 "Nothing is genuinely 'publicly funded' - public funds are just appropriated private funds."
This is ideology, not fact, Who owns the air we breathe, and which our cars and power stations use to burn? Who owns the land upon which roads, hospitals and schools are built?
Once everything was "owned" by the sovereign, and all title was subject to his whim in return for public service. But there also used to be many more common lands until they were enclosed, stolen, people thought at the time. All public or private property was originally taken and defended by force of arms. My Ukrainian great-grandparents ere born serfs, "owned" by the landowner and could in principle be sold or exchanged for a dog or a horse. When the serfs were freed in Russia, or the slaves freed in the western hemisphere, were they truly free, or just "appropriated private property"? It's all a matter of power and point of view. It just so happens that mine and yours don't agree
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Instead of borrowing money and, in the long term raising taxes, to continue with the current state spending program why not cut back on expenditure. Since labour came to power it is estimated that at least 5 million 'play jobs' have been created in the public sector.
We can no longer afford this luxury and loosing most of these post would do no harm to useful public services. It is also obscene that (when the rest of the working population are facing redundancy, pay and pensions cuts) we are prepare to bankrupt the country to protect the boys and girls who paint squiggles on the road and endlessly redraft the equality statement.
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This government can't pick up its tab any more.
2 million extra government jobs not required. 1 in 5 work for the government. Too expensive and inefficient NHS.
A massive welfare state where most don't deserve its protection.
Why should we all suffer while the government just bull-dozers its way through our finances.
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I for one would like to see differing vat rates; designed to drop as each industry requires a filip. Lets lower some to 12.5 % now and vat of 2% on energy.
However..
All this increase in capital ratio put on the banks is a lot hurried hogwash; their ratios would automatically improve as they reduced mortgage lending (There would be legal requirement to do so over time to be decided some naturally others artificially).
The government should never have "given" money to the banks as the only incentive to lend money is coupled with the requirement to pay interest on deposits.
It would have been far more efficient for HMG to use the money to set up a National Home Loan Corporation 2008 in competition with the banks ( for that is what they-the banks- need!). Any mortgage payer falling behind with their payments or otherwise would be able to apply to transfer to the NHLC2008.
NHLC2008 would have the following policy.
Interest would be fixed at 6 percent
As each months mortgage remained unpaid, one half percent of the capital value of the house would be transferred to HMLC2008.
If fifty payments became unpaid rent would be payable on the twenty five percent of value.
Mortgage payment would be reduced to pay for the remaining 75 percent.
At this point a housing assoc. would be able to bid for the property and offer a "sitting tenent" rent (to be considered by the occupier). This bid would become compulsory after 100 payments had been missed.
The immediate return to HMG would be less than 6 percent not a grubby 12 percent.
The capital return would be longer term and hopefully growing!.
The inefficiency of repossessions moving, rehousing, benefit etc is archaic as is the current mortgage legal wording.
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apparently it is against the house rules to point out that 2011 is not only "when the country is over the worse" but also by an amazing coincidence after the next election.
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Well we all know how reliable AD and GB are...:
http://www.epolitix.com/latestnews/article-detail/newsarticle/budget-2007-gordon-browns-speech-in-full/
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#161, yeah because MORE complexity is exactly what the tax system is calling for.
As for your brilliant idea of a government sponsored housing loan corporation to "compete" with the banks, a) you now have two - B and B, and NRK b) The US had two as well Freddie Mac and Fannie Mae - they worked well now didn't they!
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The financial system is rotten to the core and funnily enough its the US to blame and no one else...When you go to the land of the free, you can get a $25000 loan to buy a car default on your loan and then file under Chapter 11 bankruptcy and start all over. This was made for entrepreneurship to flourish so people can borrow money and try time and time again until they succeed. The problem is over 90% of people are just using Chapter11 for personal usage to get rid of all the medical bills they have accumulated or even gas and heating. They will lose their car and houses but hey within a year everything will be lended to them again. So in theory their should be a lot of pissed off creditors in the US, well no because they found this ingenius way of packaging the debt and selling it to the whole world...Now we are all broke because if their is one nation that knows how to WASTE and CONSUME it is the US. 2/3 of the economy is based on consumer spending what is that supposed to mean?
Their system can only work on total and absolute debt...and us buying it!
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#113 "Why on earth will he not do something 'simple'!!!"
That is impossible because it is against their most sacred religious beliefs to do anything simple !! An *Anathema* that only heretics and infidels will practice !!
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#117 "No need to send it to everyone, just send it to the wives. It will be back in the tills before the end of the day!"
Not mine, mate !! Sent it to her only and she'll ask where mine is and what have I spent it on ??
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#120 "Abroad sounds nice, at least better weather, but I have heard some of the problems are the same, just the bread is a different shape."
Obviously you've not gone far enough abroad !! There are lots of places where the people don't eat much bread !! :-)
Try a few rice eating countries. Most of them seem to be doing nicely for now !!
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#125 "Education education education must be replaced with manufacture manufacture manufacture. Real jobs for folk to regain pride in, the social benefits of such investment long term may prove beneficial as well."
Thus spake an advocate of the sweatshop economy !!
Without an *educated* workforce, the only things that can be manufactures are low tech products, toys and rubbish !! This is what is happening in some parts of the Pearl River Delta like Dongguan, the heartland of China's manufacturing miracle !! In other parts of the same place like Shenzhen, the manufacturing had gone up the food chain and are doing nicely, thank you.
In this economic downturn, the low tech companies are dying like flies; their workers are unemployed and cannot find better jobs because they are just not sufficient qualified/knowledgeable. Meanwhile, the higher tech companies are still having trouble getting the suitably qualified people.
Without the right education, the people will be just so many low paid wage slaves !!
You can produce all the rubbish and tat you want but if no one wants to buy them, they are just so many mountains of waste and monuments to the folly of man !!
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152: This would be logical, were it true!
Multiple tens of billions of bbls of oil have just been located and confirmed off the coast of Brazil.
http://www.upstreamonline.com/live/article166482.ece
There is a lot of oil on US shores in Alaska, if Congress would ever allow the country to act in its own best interests, and recover it. The caribou and polar bears will do just fine.
If oil is left in the ground, I guess that would be considered a 'geological reason'--but if recoverable(and marketable), then that oil would not be available due to 'stupidological reasons'.
We have gas. We have nuclear. We have any number of ways to make use of all of the above.
We don't have the luxury of folding our hands, sighing, and saying 'Well, I guess economic growth just won't ever be possible in the future...', and then surrendering to some sort of Environmental Politburo, who decides how to allocate poverty, instead of encouraging the formation of wealth.
Short term, we've got one gigantic mess to clean up. Long term, if we learn that economies can't be built by shoveling debt instruments back and forth, but can be built by people who invest themselves into creating and selling true goods and needed services, then my kid's and grandkids future can be bright indeed.
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#161 Unpaideconomist - Now I can see why you are an unpaid economist !!
After all that long and convoluted reasoning, would it not be far simpler and more efficient for the government to just buy up the toxic mortgages and let the profligate get on with their spend, spend, spend !!
In case you have not noticed, the idea is to cut out the spend, spend, spend; not encourage more of it by giving them more space and time to blow their money on anything but their mortgage.
If they can't pay, just buy up their homes and rent them back at a commercially viable, self-sustaining level of rent !! A little profit to pay for the purchase of more of them will not go amiss, too !!
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#158 In case you had not noticed, *ALL* land *and* Seas in Britain is still "owned" by the Queen/nation. I'm not so sure about the skies although this may also apply there. This is the legal basis for compulsory purchase orders so beloved by the national and local governments !!
I don't know much about the Ukraine but I was given to understand that most, if not all, of it was owned by the Mongols !!
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#153 Red Lenin, it was just a rhetorical question but thank you anyway. It was very nice of you to supply the source of that quotation !!
Perhaps it might encourage more people to read more and learn the lessons of history before they keep repeating the same mistakes.
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#145 "IS THERE NO ONE, IS THERE NOBODY to stand up against this hypocrisy"
I seem to remember a king somewhere asking a similiar question and a few of his knights took it upon themselves to answer it literally !! Something about a priest, I believe !!
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#144 What you say is, sadly, very true. Large corporations are not the most suitable source of sustained and sustainable (two totally distinct and separate concepts) growth.
However, they are an excellent source of seed funding for local technology improvements *if* they are clearly identified as such and used correctly.
You said,"China, to name an obvious country, has done well out of the labour transfer but it will have major problems shortly."
That problem was identified 15 years ago and much effort was made by local investors to push the economy up the food chain. When the crunch came 5 years ago, largely from Bangladesh, Vietnam, Cambodia and the Philippines with large cheap workforces, those that adapted survived and the rest fell by the wayside.
The shut down of toy makers and knick-knack makers and the collapse of SOEs (Nationalised industries, in English) of China's rust belt, so beloved of BBC's China reporters, simply serves to highlight this issue.
Much has been spoken/written about "making things" in Britain. Unless the British can "make things" cheaper than the Bangladeshis, their "things" are not going to be sold. Even the Chinese have given up "making things" in competition with the Bangladeshis !! They are buying Bangladeshi-made "things" and selling them higher valued items like computers and mobile phones !!
Unless Britain capitalise on its knowledge-based advantage, it will be in for some long and painful years in the wilderness !!
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It seems to me that the larger issue is that successive governments have been happy to see this country become a one-trick pony instead of diversifying the means of wealth creation.
Now that the pony can no longer perform it's trick, where does the money come from?
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147 west wales.
Public getting the message?
The majority dont seem get it.
The LIES
THE WMD
The Resignations
The Deaths in two war zones
The Borrowing/spending
The false benign economy
The micro management
The endless punitive legislation
The I D CARDS
42 days detention
The data collection on individuals
The prevention of protest: ie the old guy
knocked about at their own conference
arrested under terrorism legislation
The Lady that read out the names of the dead
~~~~~~~~~~~~~~~~~~~~~~~~~~~
HOW MUCH MORE DOES THERE HAVE TO BE
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Gordy???
New Labour
I voted in 1997 fo it.
The burden of SHAME has been with me
from June 1997.
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#161 I agree with the position taken. It reflects the stance taken by the swedish in the 1990's to correct the ills of their banking system.
The use of VAT is more of a concern as this is a tax on consumption and will affect all. Taxation need to be look at again. We need a more progressive tax system rather than the regressive system in place.
In relation to PM it is pleasing to see he taking responsibility for some of the ills of our ecomony. Is he the solution to the problem or is it time for new ideas?
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....and the middle income earners will yet again be picking up the future bill for the 'Brown Stimulus'.
Perhaps when the figures are released, someone can do a table of which income class benefits and by how much, alongside which income class will pay in the future, and by how much.
I am laying odds of 100/1 on, that it is the middle earners who get well and truly stuffed.
This all sounds like an incentive for the aspirational middle income earners to save and not spend.
Aspirational classes spend more on larger ticket items, if and only if, the spend is affordable, otherwise it becomes a deferred purchase.
Perhaps never to be purchased
As for the primed leak of raising VAT, this produces a negative effect on retailers and small businesses.
Example
You have 100 pounds to spend.
The Gov raises VAT
You still only have 100 pounds to spend
You haven't suddenly got more than 100 pounds
The retailer must therefore reduce its margin by the VAT increase amount if it wants to compete for your 100 pounds.
Otherwise you don't spend your 100 pound with them
Result - sales slump and profits slump.
However it is little wonder that the consumer is in so much debt.
The Government itself has for years adopted the credit card mentality of
'spend now and pay later with money you haven't got '
as official Government philosophy
The bailiffs will be knocking soon at Brown's door, if the tax-soaked middle income earners haven't kicked it down first, metaphorically speaking of course.
Perhaps Brown had better start looking at Disaster Management because that is where his policies are leading towards.
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This was all so horribly predictable and the culprits are the last two administrations along with the old style trade unions. This country used to be an industrial power house, manufacturing things, which in turn provided employment for people with a wide range of skill sets. Relying on banking and "the service indstry" for so long and at the same time let so many manufacturing companies and reasonably well paid jobs just disappear is at the root cause of this. One could also argue that the loss of this type of employer is also linked to many of the changes in society we can see. Any country where revenues and growth are dependent on individuals with a one year business plan ( the bonus) is inevitably going to fail. We need politicians with real long-term vision and a lot lot less spin, (which some of us call not telling the truth) Incidentally how is Lord Mandelson allowed to be a government minister if he has not been elected by the masses?
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Robert - 85% of people have no money to spend! They are all as 'leveraged' as the banks, after living the high life off the credit bubble! The thought of saving 5% on VAT by spending alot over the next year doesn't make sense!
Keep all your 70s analogies coming! This Labour Govt will go down in history as far worse than that! Gordon Brown will be remembered for steering us into the second great depression!
Where was the saving from tax revenues to help us in the slump?? Conservatives kick started the recovery from 90s recession by using their tax savings (hence it was 'relatively' short). Labour are going to just plunge us into more HUGE DEBT!
There isn't enough money in Britain to keep us afloat! We are going to tank!
I notice that there aren't many 'we are in a much better position than we were in the 90s recession' comments floating about now; because, we are clearly not!
Deflation will be far worse than 13/14% interest rates!!
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There's a subtle change of emphasis happening here. The original plan was that we would bail the banks out, but that the banks would ultimately repay us - now they get to walk away with their loot. You hardly need to consider what effect that may have on the next election...
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Vote Labour - bankrupting the country since 1975.
All that pain in the 1980s to build the semblance of a hard working, productive economy undoing decades of 'graceful decline'.
It took 11 years for a man with class angst and a chip on his shoulder to destroy it.
Explain how a fiscal stimulus works when those that have real income to shop, spend, etc, etc, know they are getting NONE of the benefit but all of the pain?
Mark my words, this will not work.
It will only retrench those that have the means and delay their spending further.
What I'd like to know is why only the Tories are holding them to account?
1976 and the IMF loan was the culmination of truly awful socialist policies.
The sense of humiliation and the outrage were palpable.
Never again, it was vowed, in '79 Labour were voted out for a generation.
Well, despite all the promises, all the assurances and probably all their efforts - they have done it again.
Labour CANNOT be trusted with the economy, they just cannot help themselves.
There is no compassion in spending so much money that you end up putting millions out of work.
We are about to surpass Sunny Jim's government with a current account deficit & record borrowing.
The public sector had better feel some of the pain too as we can see precious little for our taxes, time to reform them properly.
Personally, I'm beyond angry, I feel shame that this great country can elect a pack of shysters, spin merchants and half-baked incompetents as the very best of us.
Aided and abetted by trade unions that have contributed to square root of nothing to the reform and modernisation that our public services need.
A political force unscrutinised by its friends in public broadcasting, a force that plays the opposition personalities whilst stealing their policies.
Fooled by easy money, have this, pay later.
Oh, how we are paying now.
They say first among equals.
Yeah, if you say so.
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If he fails to announce such debt-reduction measures, there could be very strong downward pressure on sterling and a corresponding damaging rise in the cost for the government of borrowing.
Robert, you cannot say this. You are talking down the pound. This is unpatriotic and dangerously irresponsible.
Oh, actually, it isn't, it's just the truth.
Funny how you can get away with this but George Osborne isn't allowed to????
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And on a slightly different and more entertaining note:-
"Rats return to Hamelin, no sign of Pied Piper" - A Chinadaily report
So, there is a demonstration of obvious intelligence other than that of humans, when even rats are migrating to Germany.
Those of you thinking of relocating abroad had better make your minds up soon; before the rats beat you to it !!
And the Pied Piper is forbidden by the RIAA to play because they have copyrighted all *his* tunes and is selling them in overpriced CDs !!
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Well, it seems that "Prince" Vlad Putin is also in the cut-taxes-and-increase-unemployment-benefits game !! The difference is that he has tons of cash saved up from the oil boom years to play with !! He is also propping up the ruble with his *savings* !!
So, who will be seen as "the-man-who-saved-his-country ??
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Well it depends as to whom tax raises are pasted, in this country the very rich does not pay its fair share of the tax, it always fell to the middle class. Hope this time the government starts taxing the wealthy.
People are not talking about benefit cuts, which is needed to let hard working families have tax cuts to survive. Also this could be the time to push personal tax allowance to £12k as then we could save on administrators to give people back the money on some form of benefit.
Pound falling is good for the country as this will reduce imports for consumption and increase exports, this will be one of the good ways to come out of the mess we are in.
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VAT rises? You must be joking.
This is a consumption tax that will make things more expensive and harder to buy...the government are trying to get us to spend.
It is a tax that hits the poorest.
Surely even New Labour won't be silly enough to do that?
But then again you're probably right.
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May I summarise the current situation as a loaf of bread by price?
Nov 1.16
Dec 1.12
Jan 1.11
Feb 1.09
Mar 1.05
Apr 1.01
May 1.05
Jun 1.07
Jul 1.07
Aug 1.09
Sep 1.11
Oct 1.12
Nov 1.15
Dec 1.18
Jan 1.21
Feb 1.22
Mar 1.23
Apr 1.25
May 1.35
Jun 1.45
Jul 1.55
Aug Bread Shortage
Sep Rationing
Oct Food Stamps
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#182. nickough
wrote:
"Gordon Brown will be remembered for steering us into the second great depression"
I think perhaps you are being unduly optimistic - I have the nasty feeling that this depression will be so gigantic that the little problem of the 1930s will be seen as just a minor difficulty.
The big gamble today is that no one has the faintest idea of where, and how large the derivative debts maybe. These have to be unwound and that process may take a decade or more as many of the organisations holding the possibly worthless paper will go bust and the bankruptcy work will take a very long time. The volumes of trading are far far higher today than they were in the 1930s and as such it will take proportionally a longer time to unwind. There simply are neither the number of accountants available and nor is there the court time for matters to be resolved with any speed. It could take twenty years - perhaps more.
Also Gordon may be at the helm, but the ship is sinking in a deregulated sea that existed long before Gordon. The boy David was helping run financial matters in an earlier regime as an adviser to the chancellor so both of the possible 'leaders' are tainted by association - Vince Cable on the other hand- no that would be silly, wouldn't it?
Are we not looking for a competent administrator who understands the needs of the people well enough to make sure people do not starve? (And I mean 'is without food'.) Invest in soup kitchens.
I hope the depressionary black dog vanishes soon - I really do - but I think I have a well founded apprehension that it will be a far longer process than anybody realises.
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Monday 24th November 2008
A ordinary day to come in Britain just after a Winter cold snap, but in history will this be the day following a Treasury Statement, the temperature was not the only similarity the nation has with Iceland?
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I think in the future the government will claw back money by imposing huge windfall taxes on big company profits and increasing corporation tax, maybe increasing super tax to a hyper tax bracket on salaries of £80,000+. This will certainly start to balance the huge gap between the super rich and the normal earner. The only downside may be deterring foreign investment, which is why it is more important than ever to have a co-ordinated international way forward.
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Gordy??
Phone Pickfords{sorry they could be in Administration)
Pack your stuff.
Clear you office out.
Go and strut your stuff in ICELAND.
HurraH
Gordys gone to Iceland
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Want money? How about a sports tax?
tax and licences on national and international rugby, football, cricket and athletics events. They don't seem touched any by the depression or anything really. Jetting round the world in their own little galaxy. What's their input to the economy?
Ridiculous? What about the BBC licence fee? There's a ridiculous charge that is highly unpopular! And look at the tax on fuel - a product eveyone needs.
Always front page news on this site and all over the back of every newspaper, always on the National news TV and radio. Question of Sport, Heroes of Sport, Olympics research. All those well-fed overweaning gladiators dominating TV night after night every Saturday. 'And after every bit of news it's - 'and now the sport' - like everyone is just waiting for it.
How about somehting meaningful after the news - 'And now the Dispossession News' - the latest from all those who have lost their homes and livelihoods.
GC
Hon Sec
Banking Broadcasting Corporation (BBC)
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Nevermind all the bank bailouts, have Guns N'Roses bankrupted Dr. Pepper by releasing their new album in 2008? Will Dr. Pepper Snapple Group keep it's promise to "buy" a drink for every American? I see major problems -
I bet Cadbury's are relieved!
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#193.
All that will do is:
1. Drive the brains out of the country.
2. Drive business out of the country.
3. Put everyone on the dole.
If you tax the ability and talent, you lose it. Remember most of that talent has the ideas, sets up the new businesses, creates new product.
It happened with the last interstellar rocket-scientist Labour government taxing people at 99%.
It was called the Brain Drain.
My opinion.
Simplify everything. We have a tax code bigger than India's and the largest law statue ever.
A flat tax, 18% on everything, £15,000 threshold. Income, savings, capital gains, corporation tax. No loopholes, no exceptions. Every business registered at Companies House pays.
VAT of 17.5% on everything sold to the end customer except energy and most food. VAT of 17.5% on food with more than 30% fat.
Simplify benefits into three separate kinds: jobseeker, incapacity, family.
Set an income level to qualify at under £25,000 sole and under £40,000 joint.
Jobseekers is set for 6 months, turn down three job offers and it's reduced by 25%, turn down another, another 25%.
Incapacity is paid on what you can do, not can't.
Family is set at a fund per child, paid out as one lump sum at birth. Sole parent's can claim maintenance until child is 8; childcare vouchers provided by State.
Abolish tax credits, see flat tax.
Finally, privatise all government back office administration, profit margin linked to year on year cost reduction targets. End recognition of unions for pay bargaining and working practices changes.
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@193, Kellyspk
I really don't know why this windfall and supertax fantasy keeps raising it's head. The last windfall tax was agreed upon in advance, and given the current economical situation, I seriously doubt *any* business sector would be interested in repeating that.
Labour could try and force it through, and watch those businesses - and the UK jobs they provide - depart for more tax friendly places. I'm sure those who lost their jobs would happy about that...
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'To be clear, I am not talking about immediate tax rises.'
Sorting out the mess and, in particular, raising taxes and charging more for everything in our lives (how about a tax on breathing - after all we all have to do it, no chance of tax evasion) will be the focus of the next election.
It will be interesting to see how Brown can defend himself on accusations of having caused the problem, and then taking on the role of 'saviour of the nation' by raising taxes and charging for everything in sight to make us pay for what he allowed to happen.
Will the people rationally choose the best government to sort out the mess? Or will they simply punish Brown and New Labour for causing so much grief and pain in their lives?
However it goes it is time to take the the 'Great' out of Great Britain.
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Problem with whacking VAT up is that the personal import tax threshold goes up in December.
Putting it up to 22.5% will damage UK business quite badly, non-UK based businesses on the other hand will see an upsurge in sales of a hundred pounds or under to be exported to the UK, as they'll be free of VAT and duty.
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I would have thought it was simple enough. They have to simulate spending by us so VAT has to come down to 10%. They'll as give us some cash to spend so Income tax will come down a bit, penioners will get another slice to spend at bingo etc
But they don't want people to start hoarding money and saving it all it's got to come into the Ecomemy so they'll put a tax on saving accounts ;-)
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Darling might want to take a look at the Laffer curve - as imperfect as it it may be, it's a handy rule of thumb.
Best way to increase tax revenue and to reduce spending after the recession, is job generation by attracting private enterprises, and that means low business rates and taxes for businesses based, and employing, in the UK.
There are a other options than simply cutting taxes for business - extra cuts based on the percentage of UK employees, for example, would be a sweetener to get companies to shift more of their operations to the UK.
And can I say how nice someone has finally pointed out just how reliant on the Fat Cat bonuses Brown was. Funny how many of Brown's supporters are as forgetful as he is - especially about the times Brown praised the banking sector and those big bonuses...
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Agree. All the furore over fat cat pay is absurd. These people have enabled our increasingly bourgeois lifestyles over the last 10 years. Everybody enjoyed driving their Audis and eating at Jamie Oliver restaurants with 3-4 holidays a year. This was all directly enabled by the supremely profitable financial services sector.
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Remember that of course we don't actually make much here in the UK so any additional spending will boost imports and help everyone else's economies.
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How much would be saved by abolishing MPs' and civil servants gold-plated pension schemes?
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A rise in VAT?......wake up all you bloggers...remember VAT is levied on "SERVICES" not just goods off the high street shelf....
I speak for every small business in the country that involves "tradesmen".....painters, decorators, plumbers, plasterers, tilers, flooring specialists...etc etc etc..
Although there are many treadespeople who operate in the so called black cash economy there are the ones who run legitimate small businesses.
Take a £1000 job in a domestic house, the vat on that would be + 17.5% (£1175.00) and if VAT was raised to 22.5% the difference would be + £50.00, therefore the value of the job to the homeowner would be £1225.00.
£75.00 may not appear to be a high figure but for the average small family that is a donation of £75.00 to the government coughers that could have been spent on the weekly supermarket trip or towards the motgage.
Now from my prospective it is difficult to compete against the black economy (all those guys that go around doing cash in hands jobs)
Be very carefull what you do Mr Chancellor, a hike in VAT will drive more and more small businesses like me to operate cash in hand!
Remember the part of the economy I am refering to is the housing market, not just the sale of house but all the trade that make a living from working in peoples houses.
I turn over a mere £75.000 pa and i charge VAT...it is difficult enough to win jobs with a quote charging vat when i am competing against cash operators.
I suggest abolishing VAT on Services and apply VAT to Goods only, that way I would only be charging my customers VAT on the materials used on a job and not the labour aswell.
Further more i suggest raising the VAT registration threshold to atleast £150,000 and not keep it at the current business turnover level of £67,000.
RE: National Insurance, I pay one guy a salary of £15,000 who by the way i have just given a months notice to terminate his employment ("yes another one on the dole before xmas") due to a down turn in business....
as an employer I have to find on a PAYE salary of £15000 a sum of £102.02 per month as employers national insurance contributions, that is in addition to the figure my employee has to pay...£87.67....
that is one hell of a lot of national insurance.
Mr Gordon Brown, if you really want to help the small businees....abolish employers National Insurance Contributions, it is a deterent for a small business to take on an employee and abolish VAT on Services and apply it to goods only.
If you want my opinion the whole taxation system needs to be re written in this country it is way out of date and just full of historical panic attack measures that have been implemented when various parties have been in government.
"go back to basics"...wipe the slate clean and start again....
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How are we going to pay it back?
How are you going to explain the levels of taxes needed to pay this debt down over 5years?
It needs to be concrete and detailed to placate the markets, otherwise your budget statement will be out of date within 30 mins of your published report.
If you dont tell us, the commentators will, so will you make it clear and concise like '' over the next 5 years tax a will have to increase by x and tax b will have to increase by y, this will reduce the national debt as a % of GDP by 60%''?
You see Mr Darling, its not what you give away on Monday afternoon, it is whether your calculations and intent on the increase in taxes needed over the next 5 years is communicated effectively to all.
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Brown and Darling have given up all pretence of sanity; they are in a hole and are still digging.
He is going to borrow £100bn from us to give us tax cuts, money which doesn't really exist at all. He's obviously learnt new tricks about buying debt from his banker friends.
The show goes on, nothing has changed.
Parliament down the tubes, property down the tubes, banking down the tubes, insurance down the tubes, manufacturing down the tubes, retailing down the tubes; not a lot left is there?
Get rid of the whole lot of them now, before it is too late and we go down the tubes.
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Comment 203 : amerali
"Agree. All the furore over fat cat pay is absurd. These people have enabled our increasingly bourgeois lifestyles over the last 10 years. Everybody enjoyed driving their Audis and eating at Jamie Oliver restaurants with 3-4 holidays a year. This was all directly enabled by the supremely profitable financial services sector."
You're able to demonstrate, I presume, that the profits of the financial sector over the last few years were real contributions to the world's wealth? That they were over and above the wealth production in the non-financial sectors of the economy?
You see, there are some people who think that this explanation of events is just not accurate. They're not saying that there is no real added-value from the financial sector, just that there is a considerable part of declared financial income that is not added-value at all - it's value that's transferred in from other sectors of the economy. So, although there appears to have been huge social benefit from the activities of the financial sector, a large part of this is actually no more than the financial sector taking credit for another sector's wealth creation.
There's a very good article that explains some people's reservations about the picture that's been painted of the rise of the financial sector over recent years.
http://www.prospect-magazine.co.uk/article_details.php?id=10443
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Alistair Darling is absolutely right to outline taxes rises to pay back the debt. My worry is that with the Tories probably coming into power they'll consider the debt Labour's problem and won't raise taxes to pay it back. We'll just have debt permanently with a large proportion of GDP going on interests payments.
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197 PhaetonFlanFlinger:
That post sets out outstanding suggestions, quite brilliant.
But there is a snag.
Implementing your programme would require a government with courage, vision, intelligence and initiative - four characteristics conspicuously absent from the current lot!
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We are all doomed unless Government spending is cut and more money is put back into our pockets, but that's not going to happen is it.
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Just a small (and probably unpopular idea) reflecting my slight shade of green that is not just because I am so sick of what has happened to Britain.
Oil. Oil was up to about 120 dollar a barrel. It is now down to less than 50 dollar.
Tax Oil at an additional 50 dollar a barrel to get it back up to the levels people got (just about used to).
Currently the oil companies are not passing on the full reduction so why should these private companies profit. Get the price high again so people THINK before using the car, heating rooms to 40 etc.
At 200,000 barrels a day usage, thats 6.75m pounds/day. or 2500mill pounds a year.
Be green AND hard and tax it up to 130 dollars a barrel....
I know non of you will like this, I can hear you all squeaking now.. But of course hospitals and old people get heating free in my world, but then they would get their houses/hospitals insulated free also.
Energy is a finite resource (as many here have pointed out). So control use accordingly.
I flew into heathrow 2 weeks ago for a week and was APPALLED at the amount of lights left on in shops and offices after midnight - no one around and my wife asked if they were all still open? No I said.. How stupid is that was her comment.
Energy in the UK is far too cheap., and peple far too blase about it.
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#197 PhaetonFlanFlinger
"Incapacity is paid on what you can do, not can't."
Erm? - If I am fully fit do I get max allowance?
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Mr Peston
You are the Gorgons biographer.
Hmmm. What are you going to write about himthis week then?
Rearranged the deck chairs on the Titanic?
Wore his Eponymous Cords?
Consulted the entrails of a chicken?
Ordered Pickfords?
Please let us know.
Thank you.
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#135
Great Post!
It is so assuring to know we are Uniquely Prepared for all this.
But just a moment! Uniquely Prepared sounds like a euphemism ( like sub-prime ).
Uh-ho!
Brace yourselves!
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Would raising VAT work in this day of internet buying? Wouldn't Tesco and others still have Jersey based offshoots to avoid VAT? I've never understood why there cannot be one APR rate for home buyers and another for essential goods etc thereby regulating growth. .
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Robert,
If VAT is raised to 22.5% do you really expect us to believe that you are not Darling's friendly trail-blazing messenger ?
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#98 sashaclarkson
"The really poor often don't bother to vote anyway."
So you cannot blame them for this, they are victims like the rest of us.
If you do vote you do not get the referendum promised.
The Lisbon Treaty was swept through in a very behind-our-backs way.
The first party to offer a referendum on it and curb immigation gets my vote.
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#201 wrote "But they don't want people to start hoarding money and saving it all it's got to come into the Ecomemy so they'll put a tax on saving accounts"
There already is: at least 22% of interest paid (could be higher tax bands) unless covered by the ISA allowance I think. If the government were to raise that significantly as interest rates fall, the money would leave.
#207 wrote "How are we going to pay it back?"
Buy War Bonds? I am not joking. You are correct in what you imply, the credit market will be watching Darling with interest and when the day comes it does not like what it sees, more of the debt will have to be financed internally at below market rates.
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Even by the standards of Government, this story doesn't add up. Te repayments on borrowing 20 or 30bn more in one year and paying it back over 20 would be lost in the noise of Government finance. Far more reassuring to the markets, rather than fidling with VAT, would be to commit to reducing Government spending as a share of GDP, year on year from 2010-11, and using the 'savings' to raise he threshoild on income tax - that would help the lower paid workers and increase incentives to work as opposed to claiming tax credits etc etc
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BACK BRITAIN - BUY BRITISH
Abolish the dreaded VAT and instead recover the amount lost by imposing import duty on everything coming into the Country. Perhaps then we would produce more of the food we eat and encourage us to manufacture more of the stuff we REALLY need. What a boost this would be.
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Yes the financial sector has collapsed and it will take years before the tax revenues can be replaced. Building a manufacturing base to replace these revenues will take a decade. So we are in a deadly bind.
There is a solution.
We currently allow private firms (banks) to create supernormal profits by allowing them to lend more money than they have ob deposit. Banks may lend up to ten times the money they have on deposit. This is called fractional reserve lending.
Now if a bank is a significant player, they have to be rescued by the taxpayer when they get in trouble. So these private firms get supernormal profits in good times and are bailed out by the taxpayers in bad times. This is called moral hazard.
Suppose we don't allow this. Let's only allow a nationalised bank to do fractional reserve lending. Then any profits made can be ploughed back to the treasury.
So this is the solution. Let commercial lending still take place but have this backed by the shareholders funds.
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How exactly do you trust a Govt that says carbon taxes are aimed at supporting the development of new clean technologies and then trousers the revenue from selling carbon permits.
These guys are basically con artists..
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#152
"No, the problem is 'derivatives'. These dents and bets are worth some $500 trillion. Compare that to the GDP of the whole planet of just $50 trillion and you get some idea why this fantastic burden of debt can NEVER be repaid."
Your answer 1B seems to be the least painless.
What would be the consquences?
I see that USD 500 Trillion has been 'invented' in derivatives so they are basically worthless. A gamble that has not paid off.
- Like a pyramid scheme?
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RP: Excellent stuff as always if only to trigger mainly a good discussion.
As is becoming clear we borrowed too much and it is this deliveraging which is happening big time.
Encouraging more spending and by definition, in the main, more borrowing is not the way to treat citizens.
The biggest bubble has burst and that means pain for everyone in the UK especially.
CNBC had a great discussion about this yesterday morning and Hugh Hendry was pretty much spot on. He has made a 40% gain this year basically gambling on bonds and thought that the market must go down 80% from last year to bottom out. As he pointed out this would be a really really bad situation.
http://www.cnbc.com/id/15840232?video=935472423&play=1 for a replay and why the mega rich really want government intervention to maintain the status quo.
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"Moving it around' does not seem to work for us anymore so maybe we ought to find a way of actually making things again.
But that will be easier said than done when most children apparently want to be 'a celebrity' when they leave school rather than be useful people such as technicians, engineers or scientists."
Sorry but that doesn't make sense. The decline of manufacturing had nothing whatever to do with young people wanting to be celebrities. It happened because people like Mand S decided they were better off sourcing their products from overseas, showing a complete disregard for the wonderful manufacturers, in particular the textile industry, who had put them where they were in the first place.
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From this site:
"White working-class voters turn to the British National Party because they feel ignored by mainstream parties, the communities secretary has said. Hazel Blears accused the BNP of playing on people's apprehensions and peddling "pernicious but plausible lies".
Sorry, which was it?
1)White working class voters feel ignored by the mainstream parties or 2) the BNP is playing on peoples' apprehensions...?
Yeah. They should all smile more like Blears and stop complaining and just get on with it and they all jolly well need a jolly good talking to, just like after all those silly floods when there homes were slightly damaged in that mild flooding last year.
All those white working class people feeling the pinch after being dispossessed by banks and building societies because they lost their jobs because of a blip in the economy should vote Labour because Hazel says Gordon is a really jolly good Prime Minister. The BNP are really naughty taking voters off Gordon because it's not his fault.
GC
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#225
Certainly 1B is essentially basically painless to the wider economy, it's noddy money and never existed so when it disappears in principle no one will miss it. Sadly as any damage wil be sustained mostly bythe very wealthiest they will not permit this to happen.
However reading back through the 'sanctioned' media stories which have been made I fear that it is actually 1A - hyperinflation that has been decided upon as the way out.
My evidence - the warnings on the potentially dire consequences of deflation in the economy (if you are afraid of deflation then the opposite of inflation doesn;t seem so bad does it).
The pre-budget info - to try to fuel an inflationary mini-boom. But beware has to paid back so spend it while you can for tomorrow we will take it away if you don't (the mechanism to try to hyperinflate and then cut back to reduce the inflation so
generated).
Obama will create 2.5m jobs - how? well new deal massive government spending funded by printing money - wait a minute is that inflationary? YES IT IS.
Darling - fiscal stimulus paid by borrowing - inflationary
Everything seems to be pointing to an attempt to inflate the debt away.
Everyone realises that the level is so vast it can never be repaid.
Unlike the 70's when this last was done we have many many more people dependent on fixed incomes (OAP's) and the consequences of this on them and the poorest in society are unimaginable.
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VAT at 22.5%.
What is really sad about this whole thing is neither main party has a clue. Higher tax credits or lower taxes won't get the infrastructure built that our country so obviously needs. It won't change the planning laws to free infrastructure projects from being beholden to political support. We need new railways, roads, ports, factories, houses. We need a meritocratic elite provided by good education for all. We need fibre optic cables to every home and a coast dotted with windmills.
If we are going to spend our way out of this then spend it on things that will make our economy more productive and thereby raise the real incomes of normal people. Wasting it on short term higher consumption of imported goods is plain dumb.
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The Labour government knows the next election is lost and wants to use the remaining 18 months to stick the incoming government with the bill, then proceeding to bleat about higher taxes and cuts in public services all the way to the bank. How typically disingenuous of them.
Next time they mention it, just remember that public services were bought on credit too.
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#204
As mentioned previously - the UK is the worlds 8th largest exporter - Yippee!
Unfortunatley it is the world's 4th largest importer - groan.
Without the much maligned financial services sector the current trade deficit would be about £90,000,000,000 a year.
With the deficit it is only £50,000,000,000 a year. Until recently the gain in income in financial services covered the deficit in goods and we had a positive trade balance overall (The last time the balance in goods was positive was 1972)
Since Labour came to power £518 billion has left this country.
In fact if Mr Darling borrows £50 billion he might as well write a cheque made payabe to China for £10,000,000,000 directly.
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#151 I´ve come to the conclusion that you are either related to Thatcher or are the family retainer. It´s all linked there has been an unbroken continium since 79.
#161 You are lucky to be an unpaid economist - Any rational system would require that you pay others to read your thoughts.
#193 - You´re crazy.
#195 - Just keep watching the news there will be a major crash in "sport" in the not too distant future. First up will be the premier league.
#197 You´re opinions are disqualified on the grounds that they make eminent sense. Don´t you know that charlatans, tricksters and the incompetent all need complexity so as to hide what they are really up to.
# 206 Don´t you see that driving people into the black economy is another attraction for the government. It all helps with their drive to criminalise the entire population. It also provides handy PR cover "scroungers" "tax dodgers" "not paying their fair share" ad infinitum.
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Numbers
Presidant Bush was giving a press conference. "Bla Blah, Blah Blah Blah..."
An Aide came up and whispered in his ear.
President Bush put an a serious face. "Three Brazilians have been killed." he announced.
He turned to his aide and whispered "How many is that?"
USD 500 Trillion. How many artics would it take to transport that amount in 50 dollar bills?
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So it's a dastardly New Labour plot to get us into the euro!.....maybe lower VAT initially to soften us up then raise it in stages to align us with euro countries. The pound and the euro are also converging so soon it won't be such a big deal!!
I used to think it a very bad idea...we lose our independence and sovereignty etc but maybe in stormy waters it's safety in numbers and we all need to stick together in Europe.
If fuel and food are zero rated then the fools who spend on needless junk may as well be taxed on it at a high rate.
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#233
I think you will find the first major crash (no pun intended) in sport will be F1, its already happening, as for taxing sport I think you will find the poster omitted to mention motor sport and not unintentionally, NIMBYism at its best after all we would not want to see anyone DISPOSSED of their nice racing cars would we.
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To all those who think the Tories would do a better job.
You only have to look at the last two weeks to see how effective they would be.
They change like the wind!
One week they're saying they agree with the Government and what the goverment is doing.
And then this week they're saying they would cut public services and hiking up taxes.
Which would mean hitting pensioners and the less fortunate in society, not too mention a complete lack of investment in things like the NHS or public transportation.
You only have look back at the 80's and see the damage they did then to see what this country would be like under them.
15% interest rates anyone?
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#236 - Fair point, I missed that one. Vroom, Vroom...
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#236 and #238
Do you think Mrs Ecclestone has sussed this and that is why she is quitting?
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#203
"These people have enabled our increasingly bourgeois lifestyles over the last 10 years."
I like this comment. I'm sure that those of us who struggle to both heat our homes and put food on the table are also happy that we have people who are able to afford such extremely lavish lifestyles. It's nice to think that we have all benefitted so much from such extravagance. Had we not all benefitted so much there might have been poverty and inequality in the land.
Thank goodness we have Labour. The Conservatives probably would have made a complete hash of a healthy economy and we'd be in real trouble now and not know how to get out of it.
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BBC:
BBC News on the web.
http://news.bbc.co.uk/2/hi/uk_news/politics/7743305.stm
"Chancellor Fine Tunes Recovery Plan"
"David Coats from The Work Foundation, an independent research consultancy, said the chancellor was right to increase government spending - but it must be focused.
But Jill Kirby from right-wing think tank the Centre for Policy Studies warned against a "reckless expansion" of the public sector, which would not help to solve the economic troubles."
Hmmm, Independant Consultancy??
Another oxymoron? Someone is paying them, right?
Ditto Think Tank?
- God help us!
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There are three blatant lies people have been in denial about for too long:
1. House prices cant grow faster than wages forever.
2. We can afford to stop competing with the Chinese and Indians in technology and manufacturing.
3. You can work for the first 20 years of your life, work until you are 60 then retire and live on a pension until you are 80 or 90. This means that 40 working years need to create enough money to pay for 40 or 50 unproductive ones.
Part of the solution to the current problem is to facts and stop pretending that most of us will actually retire at 60 or 65. And if we dont expect to retire at 60 then why should we pay for other people to do so. We could make the govt finances look a lot healthier by rewriting the rules on public sector pensions.
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#135
I like the thread about how Labour likes to blame everyone else for our misfortunes.
We see this snivelling, weasling behaviour even now, blaming a run on the pound onto Osbourne's comments and saying that Cameron was making cheap political points over baby P's killing. I think there are no depths to which this government will stoop to avoid getting the blame for anything they ever did or taking responsibility for anything that happened under their watch.
The really amazing thing is that now Brownie has dourly steered us onto the rocks the rest of the world seems to think his methods are workable, so now everyone is taking his advice.
I won't be alone in saying "God help us all".
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No. 236. F1 was already a dying sport, (And I used to work there) the only race where I havent fallen asleep after lap 3 was the night race.
No. 237. Oh come on, yes the tories would be just as bad, but just imagine 5 years benign dictatorship under Boris Johnson...???
At least things would change for the better, albeit in unexpected ways.
No. 242, not sure if you have checked your pension yet. Mine has now disappeared, I must work until I die. And most people die between 70-75. So thanks for your kind words. I will cherish these as I am forced to type stupid figures into a keyboard satisfying some managers growth forecast for a meeting that will probably be cancelled with arthritic fingers giving me intense pain every micro-second, and having to put up with office ageism quips with my fixed grin. I look forward to this 'realistic' future in the 8th largest economy in the world.
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Strictly speaking i don't think this would be considered a "nudge" by Thaler or Sustein.
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A lot of interesting comments on this article.
I have worked in the automotive industry for my entrie adult life so I know we can design and export world class products.
I do think that the lack of any real industrial policy has been a major flaw of the current and last Conservative government, although I thought that Lord Hesletine at least understood this.
The key thing it seems to me is to balance the current account, which we have been increasingly bad at doing, over many generations.
This was fine whilst funds were flowing in to the country to make up for our import / export imbalance. Now./ Oh dear.
The drop in the value of the pound should help to stimulate exports so may help reduce the length of the coming recession.
Regarding VAT, does anyone remember the Tory government changing it from 8% to 15% in the 1979 budget? I always understood the Tory government's idea was to reduce direct taxation, whilst inceasing indirect taxes, so Alaistair Darling would be carrying on the path started by Geoffery (now Lord) Howe
In many other countries VAT is charged at a higher rate.
Quite apart from whether the banks will lend, and whether companies want to borrow it seems sensible to try to boost people's confidence in the short term with a fiscal stimulus, it just needs to go to those who will spend it in the UK, and not on foreign holidays etc.
I have a question; I understand that many of the Eastern europeans who came into the country to work over the last 4-5 years have now left. Does anyone know how much this has reduced GDP?
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Looks like Woolworths will go to the wall on Monday. The obvious question is which High Street household name will be next?
I don't fancy Debenhams chances as their 3 day early Christmas sale has been further extended to end tomorrow.
If the shops are fighting with sales five weeks before Christmas then the High Street is in real trouble!
Alistair's borrowing bonanza is too little too late as we are all maxxed out on our credit cards and debts and know that this winter the fuel bills will be astronomical with gas prices up 40% and electricity up 25% on average over last year.
Also come January we will be paying at least 6% more to use the trains and probably as much more for the buses as well.
Any money he can borrow to bribe us will go trying just to pay bills let alone spending on anything else.
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It just goes to show that, as any fule kno, financial services (indeed most services of any kind) are not really about wealth creation; they're about simply moving wealth around. The UK lost its capability and will to create wealth years ago as we convinced ourselves that manufacturing was somehow a dirty word.
The whole episode of Labour's time in power has been a carefully orchestrated economic mirage. Brown's version of socialism was cunning to say the least, but it's now come home to roost. We've had 10 years of Blair/Brown deceit that had a single purpose, pursued with the utmost political ruthlessness by both men in their different ways: to get Labour into power and keep them there.
This involved the Labour government fleecing the UK's dynamo of wealth creation (the despised middle classes) through stealth taxes, borrowing on a suicidal scale whilst masking the process, disguising the destruction of the UK's balance sheet, chucking money at the public sector to secure Labour votes and generally spinning their way into and through their time in power.
Of course, such an utterly cynical attitude to government was always destined to implode sooner or later, and so the day has arrived: Mon 24 Nov 08 to be precise.
All along the Tories were sleeping on the job and are now in complete disarray whilst the UK economy, courtesy of 21st century socialism, descends into that well-known category of basket case.
It will be interesting to watch the global equity and currency markets deliver their verdicts on Brownian economics over the coming weeks. I'll wager that they'll be unimpressed.
Meantime, the Tories snore on, clueless as to how to respond now that their strategy of trying-to-be-like-Labour has been blown clean out of the water.
How on earth did it get to this for the once Great Britain?
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this government can do what it likes why well it is so obvious that i am ashamed i didnt notice it before.
the british electorate are sheep all they do is bleat and whine but they will not stand up for themselves or incite change.
what has happened to the great british bulldog spirit that over the centuries has seen us rise up and force the changes world wide in our best interest ???
so sheep shall we bleat on or start to force the changes that will ensure a government that is honest and will work for the people of this once great brittian.
people shouldnt fear the government, government should fear the people.
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#246
"I have a question; I understand that many of the Eastern europeans who came into the country to work over the last 4-5 years have now left. Does anyone know how much this has reduced GDP?"
There would be no effect directly - any work they were doing that remains will be done by others so GDP remains the same (you may even argue it increases since more may have been required to get UK workers than the wages some eastern europeans are prepared to accept)
Any work that no longer exists is reflected in general GDP decrease.
Either way the attractiveness of working here and the decrease in numbers reflects the lower number of jobs and drop of the pound whihc makes money sent home (to families etc) worth much less.
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Why the Chancellor's plan won't work.
Over the past 10 years the rise in house prices has meant that for a significant percentage of people each year it has been.
House has gone up: increase mortgage: use money to buy car/ holiday/ pay off debt/ enjoy better lifestyle.
Usually different people each year - but some may have done it every year.
This year it has been: no increase in equity so can't increase mortgage: thus can't spend money - thus economy shrinking.
The Government in effect will try and replace this loss of spending power by their statement on Monday.
However next year we will be in the same position - no-one able to increase mortgage (in fact many will be trying to do the opposite)
So the Government will have to do the same again (with the added £15 billion debt or whatever to service)
In fact for 2010 the forecast is just as bad - so they will have to do it a third time. (assuming the same shower are in power)
In 2011 there may be an increase in house prices but I bet it won't bring house prices back to 2007 levels - so there won't be any re-mortgaging.
So the Government will have to do it a fourth time! (assuming the same shower are still in power)
And they will have to keep on doing it until the increase in house prices reaches the 10% a year level again -
And how long will that take?
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There used to be a old saying, who would you rather trust with your money...a coal miner or a banker and I know what the answer was, but...I think we have to extend that now and include The Chancellor.
The saying still stands but is there a correct answer to it all.
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#251
You diagnose the basic problem - credit on over inflated asset values has been the problem which fuelled the boom.
Had the government stepped in 3/4 years ago and acted to stop the housing bubble things might have been better.
Unfortunately whilst it would have been right they would have been electorally dead for being party poopers as we equate nominal value of our house to wealth.
So the balloon was allowed to inflate further and further and it has now burst. Without the dumb mortgage securitisations it would have gone pop earlier since these permitted the lending which supported the bubbles inflation.
No government of any flavour is going to specifically engineer a policy which does this - house prices and the underlying economy are going to contract until there is a balance of what can be afforded.
Any policy to meet this expectation will crash the economy even further and faster.
You will not see house prices increase @10% for some time unless inflation is close to this.
If you know what valuation your house was in 2004 , this is more like a true worth and vaguely affordable credit levels. Don;t get caught in the trap that it was ever worth the silly valuations of last year, they weren;t real. Like all assets they are only ever worth what someone will pay and can afford at a given time.
The market died because not enough people could afford it and never really could.
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Chancellor's plan won't work if the uk population is smart.
It depends on ppl going out and buying, if ppl are smart they wont go out and buy but save for the tax bombshell when it arrives.
Way I see it Brown and darling are trying to use the old way of borrow now pay later (just like a cheap sofa company), the very thing that got us into this trouble in the first place.
Tories appear to be right invest in business and cut spending borrowing ? suffer lesser pain for a little longer.
Keep the system ticking over while investing in traditional sectors, sooner or later it will recover with a much broader economic base.
There is a wisdom in not putting all your eggs in one basket, a significant number of UK eggs was in the financial services when that basket tipped over.
PS Gordon as long as ppl need cars need pc?s need tiny little gadgets that go bleep bleep bleep - manufacturing will never be a sunset industry.
Im a none voter so I am not following a party line, it is just what makes more sense to me.
But if darling trys this plan I will sit here saving and let the sheeple suffer the pain later, I may even take a few years abroad to work while the tax bombshell hits.
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249. delminister
-people shouldnt fear the government, government should fear the people.-
I think they already do.
It seems more and more obvious that the anti-terrorist laws, the banning of protests outside parliament, the attempt at introduction of ID cards, CCTV cameras on every corner and the many other Orwellian ideas and laws weren't really aimed at combating religious fanatics. That was a cunning sleight of hand.
We were the target all along.
The government have known about the derivatives bubble for years. They know about Peak Oil (or are we still supposed to believe the invasion of Iraq was about WMDs or establishing so-called democracy or an exit strategy that still hasn't materialised five years after we went in.)
The government know that very soon, maybe within the next couple of years, maybe longer, there will be a lot of cheated, angry, hungry people out there who have lost everything.
People who have never known hardship their entire lives will suddenly have to face the loss of their homes, their jobs, their life savings, their pensions and their futures.
There is a chance that they might want to get their hands on the people responsible.
It is only a matter of time.
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I don't think we've seen anything quite so outrageous since the computer industry made a fortune out of fixing the potential meltdown of the milennium bug, that they themselves had brought into being.
A Government that has run down the manufacturing sector, sold off a large chunk of the gold reserves cheaply, maxed out the nation's credit card, and come badly unstuck by not regulating the financial sector more rigourously, now seeks to portray itself as our saviour by borrowing even more to give us an early Christmas present.
Thus, we should all follow their example and forget Prudence ( she's so last year ), and borrow, borrow, borrow, then spend, spend, spend. For in good times and bad there is no payback, the money keeps on coming. Isn't life wonderful in the magical, mystical land of New Labour finance.
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The Web is an incredible resource and can act to inform and empower the people in ways that simply were not possible in the past.
Napoleon Bonaparte said that 'information is power' so in that spirit, I offer readers of this blog something that I hope will bring some clarity the the current situation:
http://www.chrismartenson.com/crashcourse
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Browns " I HAVE A DREAM"
Without HYPOCRISY there is NO HOPE.
Without TRUTH being LIES.
There is no FUTURE.
There MUST be CHANGE.
LIES to TRUTH.
ALL MUST BELIEVE.
FOR I BELIEVE MYSELF.
CHANGE IS ME.
I AM THE CHANGE.
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novoludo??
Notice you didnt take me up on the offer?
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RBS lending pledge to small firms - BBC headline
"Stephen Alambritis, of the Federation of Small Businesses (FSB), said other banks should follow suit.
"*Now is the time for them to wake up to the fact that they have been rescued*, so that in turn they can rescue small businesses," he said. "
Is he talking just to hear his own voice or has he truly *NOT* read this blog *YET* ??
Item - The Banks have *NOT* been rescued !! The money is *still not* there YET !! Only NR and B&B have been nationalised, not rescued !! All else has been government-grade bovine manure !!
Item - TWO (2) of the biggest banks have escaped the clutches of the Big Bad Wolf - HSBC and Barclays - traditional and deadly rivals of Natwest/RBS !! When they carry on doing business in the traditional prudent manner and start to make profits, RBS are going to feel very, very sorry that they supped with the Devil !!
Item - To buy into the government spin, after it had been shown for what it is, labels him as a fool or a party activist !! Either way, it discredits what he says !!
*IF* this man is representative of the small businesses, is it any wonder they are not doing well. However, thank God, he is *not* !! I personally know a great many small businessmen (and women) (0 to 5 employees) with far more sense that this !!
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#233
Perhaps I can add another bubble ready to burst to that of the overpriced sports sector - the art and antiques world should also return to reality.
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The situation we are witnessing in the UK is not new. It is the last stages of an economic cycle that has been followed by Kings, Emperors and Governments since they discovered paper money.
They all, without exception, buy their popularity or power by printing money.The warlords amongst them did it to pay for more armies to conquer more territory, the control junkies, a description which applies to most elected politicians, do it to buy votes.
It works OK in the early stages, as does any pyramid scheme, but as it expands the amount of money, it has to go faster and faster and it starts to fail. The failure occurs when the savers realise that they have been conned and stop lending, or the numbers just get too big.
The response, which is to panic into pouring even more money into the system, is almost certain to fail particularly if it is done with no particular goal in mind. This appears to be the government?s response.
The correct answer, if it is not too late, and it may be, is to spend money wisely to produce things that we need which will save money later.
Overseas lenders are not going to go on funding our present life style, maybe we get one more bite at the cherry but that is it. So we have to put our own house in order.
We have to stop spending on the thousands of pet schemes that ministers have had in the last 10 years but produce nothing concrete but red tape, believe me there are thousands of them.
We need to channel those resources into an area that will save us money, a great candidate is fossil energy but there will be others.
Use the tax system to encourage saving by the small saver.All money saved is tax deductable for example. That will make individuals feel better and help them put their own house in order. Create an easy saving system with no red tape and let people have their money back after a couple of years. Use the reduction in government spending above to pay for it.
Offer serious incentives to ALL fossil fuel replacement schemes, aimed at the small and medium enterprise. This will produce a targeted boost to the economy. Lots of businesses spending modest amounts of money will produce a quicker benefit than a few multinationals spending large amounts.
That money will be spent quickly as it will be obviously profitable. We will save on fossil fuel and the economy will start to recover.
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#233
Did you see http://news.bbc.co.uk/1/hi/uk/7741859.stm? It appears football plcs live under a different tax régime from the rest of us, in liquidation. Since when was the Football League exempt from the law of the land? What other exhonerations exist, for house-builders or bankers, perhaps? Can anyone tell them where to get off? Oh, if only...
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#260
Whether or not the banks have drawn government funds is immaterial - they have drawn moral support, which is an entirely different matter, and they have continued to damage the economy by their failure to function normally in return. Why should these pan-nationals Hongkong and Shanghai and Barclays be allowed a privileged position in the UK when they behave as they have and as you expect they will? They should be hauled in short and sharp.
The arguments in favour of the existing structure continuing tend to the absolutist in deciding that any and all debt is a bad thing - this is simply a rephrasing of the collapse of credit, even between banks. If that's the case, then they should stop taking deposits too. Of course, it isn't, though, simply that some debts will always be dodgy as the economy is biased against innovation - 90% of businesses fail in the first year, and the same winnowing-out continues for between 3 and 5 years. When real growth is aimed at 2% (and currently less), capped by taxation, and the existing companies aim at 5%, then there's precious little left for newcomers, and so there will always be failures.
This is fact. You, however, continue to argue as if all is well with the world, but it isn't. "When they carry on doing business in the traditional prudent manner and start to make profits" is pure claptrap, they haven't carried on prudently for the last ten years at least and so probably can't dig themselves out if they have to either. It's also questionable whether they will ever be able to generate sufficient profits this way to be able to do as you suggest.
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So have I got this right.. The government borrows x kazillion squid at 12% by issuing govt bonds.
We the taxpayer get a percentage of that x kazillion (because HMG and civil service move it about a bit).
We then will save this x Kazillion at 2% interest because we worry about feeding our families in the future.
We then must pay this x Kazillion back to those who lent it to us.
So again some money making institution will trouser the benefit of our hard work.
What do we get, a decline in the rate of decrease of the recession curve. Thats it.
Can the last one out please turn off the lights?
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#262
Plato was there first in the Republic, suggesting that this crisis will only resolve in tyranny and anarchy. Our task is to prove him wrong.
The last Dark Ages saw the Irish nation maintain a level of civilisation by self respect and economic autonomy. Perhaps this is the solution here, like you say - the failure of governments and the UN to regulate or even to function legislatively at an international level beyond the G-20 argues against continued support for as global market, as it is unpoliced and allows pan-nationals to abuse the populations of the world at all levels, from sweatshops to banking credit. It does, however, cast a number of nations adrift into chaos, but that may yet be necessary to avoid them sinking the entire world economy. Sorry, Bob Gelgof, but we can't even carry ourselves, quite apart from nations whose populations are 50% HIV-positive and whose productivity remains minimal even after the help they've been given.
The alternative is that the world becomes one huge Somalia or Rhodesia. That should be unnecessary, but may yet be unavoidable.
Viewed apocalyptically, I actually have harder evidence for Revelations than for the the fungibility of the banking system. Not only is there a remarkable alignment of end-time prophecies (research Abbot Malachy as a for-instance of one, like Plato, who has been remarkably accurate so far, even down to the eclipse which occured simultaneously with John Paul II's decease and Ratzinger's choice of papal name, which both happened since I faced this possibility for the first time, and also research the Mayan calendar for an autonomous cross-check), but I have also found considerably more hard documented evidence for what happened to the Ark of Moses (one of the end-times symptoms) than I do for the creditworthiness of HSBC or Barclays. It may be nonsense to believe in either, some might argue, but where then does this nihilism cease? At least I have track and behavioural record for the Ark...for those of you who wonder what I mean, read Revelations 11:19.
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Government-Grade-BOVINE-MANURE-ZZZ
Standard & Poors
EXCELLENT
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Apparently the soon to be promised VAT cut to 15% will put approximately GBP 10 into th average persons pockets by christmas and another GBP 10 every month until it is repealed.
That should pay for about 20% of the increased fuel bill this winter!
The real crime is that oil is now at 1/3 of the price that it was in the summer yet we had to have price rises this summer in gas and electric because of this and yet not a single utility provider has cut a single bill.
Also it is interesting to see that the price of diesel isn't falling at all and it is now on average 16p per litre more expensive than
unleaded. Only 2.5% of this relates to higher duty.
This won't help the hauliers, all those people who have bought diesel cars in the last few years and won't help bring down inflation on food and other goods.
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It is right that cuts are made now and paid for later. It is not good enough to pursue the alternative that things will sort themselves out in the long run because as JM Keynes put it - in the long run we are all dead.
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IF VAT is cut by 2.5% in the pre-Budget speech on MOnday, that should mean that a washing machine currently priced at £299.99 should be reduced to £293.61
Will that make any difference on my decision to purchase. - NO !
And are we likely to see the price labels in electrical retailers across the country change to £293.61. - NO, they'll still show £299.99
The retailers will pocket the difference and the man in the street will have to pay for it in a couple of years time.
Sorry, Darling, cutting VAT isn't the right answer.
I need a big cut in Council Tax, so there's more money in my pocket for me to spend.
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I am a bit late to this debate but our current situation is mainly due to the excessive borrowing carried out by companies, individuals and banks.
If the Chancellor mans the money pump to continue this approach, won't it add fuel to the fire and make it worse later?
Thatcher in a similar predicament in the early 1980's raised taxes and cauterised the wounds of the previous Labour mismanagement. It hurt at the time but we emerged later in much better shape.
But Thatcher was early in her first term in office. Messrs Brown and Co. have got to come to us soon for re-election. Surely this isn't the reason?
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Recently the Bank of England massively cut interest rates, and are talking about another cut in the near future. However, most banks have not passed this cut on to their customers. A reduction of 1.5 % on a £100,000 mortgage represents a saving for families of £125.00 per month.
Instead of messing about with VAT, or borrowing huge amounts of money to cut taxes (only to raise them again in the future) surely it is time for the banks to start making reparation for the mess they are largely responsible for, and make good use of all the tax-payers money recently given to them. They should be compelled to track the Bank of England rate for lending, and this will result in extra money available to families to spend. This is more likely to result in people buying more, than a cut in VAT ever will.
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Robert -- time for you to call Brown & Darling and explain the business implications if they change VAT rates -- up or down.
Has anyone considered the MASSIVE impact on the business processes and accounting systems. The cost to change these would be horrific.
Small businesses would be the worst hit and they are potentially less automated.
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"262. At 07:44am on 23 Nov 2008, Wellcaught wrote:
It works OK in the early stages, as does any pyramid scheme, but as it expands the amount of money, it has to go faster and faster and it starts to fail. The failure occurs when the savers realise that they have been conned and stop lending, or the numbers just get too big.
The correct answer, if it is not too late, and it may be, is to spend money wisely to produce things that we need which will save money later."
Sorry. It doesn't make a blind bit of difference what you spend the money on. There will still be more debt+interest on the debts than there is money to pay the debt. It doesn't matter how hard you work, how productive you are, how much you save. As long as the new loans being taken out don't match the debt+interest, the economy will remain in the tank.
There are three and ONLY three options.
1: Create NEW loans + debts to pay the old debt+interest.
2: Cancel the old debts+interest.
3: Print money to pay the debts+interest.
Our entire economy works on premise 1.
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Dear ole Gordy and Darling just can't help themselves can they? Back we climb into the rollercoaster car of boom and bust. We all know we need to return to a balanced economy along the lines of those of some of our more enlightened and better managed European neighbouresl (even the Americans realise this now) but not the caped crusaders of No 10 and 11.
If they really wanted to do something to redress the balance and break the cycle instead of pandering to the electorate they might consider the following:
* increase the minimum wage significantly.
* reduce corporation tax and other taxes
on employers to compensate.
* increase VAT on non essentials where
necessary to top up the compensatory
effect.
Or anything else but this ridiculous attempt by Brown and Darling to buy public favour and tabloid approval before the next snap election.
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@ 263 rahere
It seems that the Football League is a higher authority than HMRC. It has the power to deduct points from any club which does not follow its instructions to minimise payment of tax when becoming insolvent.
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@ 263 rahere
It seems that the Football League is a higher authority than HMRC. It has the power to deduct points from any club which does not follow its instructions to minimise payment of tax when becoming insolvent.
http://www.guardian.co.uk/football/2008/may/07/championship.leagueonefootball
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VAT cut?
On the one hand, UK made goods and services consumed in the UK get a little cheaper but in real terms; only half the price reduction from price increases due to last year's inflation.
On the other, seeing as only one politician has pointed out, Sterling has depreciated against the dollar, euro and yen.
Imported goods are getting more expensive, Sony announced price rises this week.
So VAT makes little difference.
There is also no VAT on food (which has rocketed in price) and limited VAT on energy (which has rocketed in price).
All in all, too little, too late. Who in hell's name agreed a EU floor of 15%?
Although it looks like the bananas scheme to use the tax credits system as a tax cut vehicle seems to have been abandoned.
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Borrowing to fund debt does not and never has worked at any level, how many countries have had (and still need) to have such debt written off?
Reduction in VAT, Its just anther con to have those with savings spend what they have, nothing else left to plunder.
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VAT cut passed on to consumers, yeah right!!
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The evidence suggests that it is going to be a long time before the effects of the coming recession are over. This suggests to me that a slump is more likely and there is little the government can do about it other than try and tweak it at the edges.
So we cut taxes now to try and boost demand. This begs two questions: which taxes and for how long?
The government seems able to answer the first but quite incapable of answering the second.
In my view all they are going to achieve at this stage is a slight softening of the speed and extent of the eventual wreck of the economy.
A reduction in VAT might help to clear some expensive inventory and tide businesses over a relatively short period but they will not seek to renew that inventory if the tax cut is for just a few weeks. Business needs to be able to plan and tax cuts followed by tax hikes will not help.
We need a far more radical approach.
Any tax cuts should be made for the longer term.
The expenditure of additional taxpayer funds by the government needs to be directed at supporting the economy as the only priority.
Current state spending must be restructured to focus on economic outputs.
A lot of current state spending can be cut and cut ruthlessly.
Capital projects which will be of long term benefit to the economic infrastructure are brought forward.
Government needs to fund R&D in new technologies and industries.
Exaggerated rewards and bonuses provided to senior public servants, including MPs and judges, need to be trimmed to meet current and future salary levels in the wider economy.
I expect the Chancellor will give us some of that tomorrow. However, I do not expect any refocussing of prevailing state spending as this government has an urgent need to look after its own client base. This could be where the entire project will fail.
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The government's spin machine is in overdrive today about tax cuts. However, this is the magician's classic sleight of hand to distract the audience's view of the real issue: paying for the bail outs already given. A subject that the has been avoided by government spokesmen.
Stimulus is required, of that there is no debate. However, the government will have to mortgage our, and out children's, future to pay for all of this and tomorrow will be a good day to bury bad news. As usual the devil will be in the detail not the distracting headlines.
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Like others, I believe that a VAT cut is pointless, as little if anything of this will be passed on to consumers and, even if passed on in full, would have little or no impact. Prices of goods and services are determined by the judgments of buyers and sellers, not by marginal cost changes.
But there is a far more serious issue here - the Government's apparent assumptions about the duration of recession are probably WRONG, and FAR too optimistic.
The assumption seems to be that recovery will be established within two years, at which point taxes can be raised and we can begin paying down debt.
I think two years is way too optimistic.
The comparators here are the Great Depression (say 1929-1939) and the Secondary Banking Crisis (roughly 1973-1980). In both cases, the recession was FAR LONGER than two years. Five years looks like a minimum.
So, can we afford fiscal stimulus, not just for a year or two but for at least five years, possibly longer?
In my opinion there is no way that we can afford, or even find, the level of government borrowing implicit in a multi-year recession.
If I am right about the likely duration of recession, we need a more structural response, not a quick-fix.
We need to start cutting assumptions for the levels of public spending that we can afford.
Government seems to assume that this is a short-term dip. Saner counsel would be to assume something longer and nastier.
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Robert, now would be a good time to start distancing yourself from the Treasury, or you will end up in the mire too!
Is the budget a long term solution to be implemented now? Absolutely not. Please send the following to Alistair Darling immediately!
People need wages not benefits-self respect comes from earning your own money from an honest day's work.
To earn wages, people need jobs.
To pay mortgages, people need jobs
To spend money, people need jobs
To get a mortgage, people need jobs
To pay back credit cards, people need jobs
To pay their bills, people need jobs
No job=no money=no house=abject misery.
To pay wages, companies need cashflow
To have cash flow, companies need cash
To get cash, companies lay off workers
No cash eventually means company dies
PAGE, NI and corporation tax is a huge bill for companies. As is their VAT bill in many cases(though I would imagine many companies are in a reclaim situation at the mo). This needs to be a long term change.
What, precisely, happens to those who are repossessed? Where do they live? 100 families a day is appalling. What will that cost the government in terms of benefits In the next year?
Tell you what Robert-let Alexander C and myself write the budget-this current proposal from AD is atrocious!
Better still, find someone who has the guts to propose and second a vote of no confidence in parliament tomorrow.
Alexander C -the new Oliver Cromwell!
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btw-it's that stupid phone of mine-PAGE should read PAYE!
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This economic crisis has been caused by Greed by both banks and government taxing those on middle incomes to the hilt, so that those who are needed to spend their way out of this crisis have nothing left to contribute. Some time ago I suggested that cutting petrol tax to 40p/l and bringing baxk mortgage tax relief would help stem the economic recession, since then many banks and thousands of businesses have had financial difficulties or gone bankrupt, requiring even more drastic action.
What is needed is to return a lot of money to these contributers, not a measley 2.5% cut in VAT which will do absolutely nothing . The economy needs a drastic kick start not just the 40p/l off petrol, return to Mortgage tax relief which I originally suggested, but also VAT down to 10%, and decrease in income tax. Some of these measures have to be permanent. Without this drastic action then many more companies will become bankrupt resulting in many millions more unemployed.
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For those that haven't read how the Swiss deal with things...
http://news.bbc.co.uk/2/hi/programmes/from_our_own_correspondent/7741561.stm
If only......
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v274. At 10:30am on 23 Nov 2008, true-liberal wrote:
"Sorry. It doesn't make a blind bit of difference what you spend the money on. There will still be more debt+interest on the debts than there is money to pay the debt. It doesn't matter how hard you work, how productive you are, how much you save. As long as the new loans being taken out don't match the debt+interest, the economy will remain in the tank"
I also wrote that the money would be provided by a reduction in wastefull and unproductive government spending
That way no greater supply of money is needed and investment is made in productive assets which will save expenditure later whilst boosting the economy whilst they are being constructed
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BUY2LET problems - There must be thousands of people out there committed to completed on worthless buy2lets - With regards to mis-selling by developers - There is help - take a look at this - The Unfair Commercial practices Directive - I wonder how many people are out their who feel thay have been mis-sold buy to let properties based upon developers exagerated and often disceptive future price claims and deliberately deceptive sales practices - The Uk now has the Unfair Commercial Practices Directive in law - which outlaws such exagerations - in fact makes it a criminal offence - when they are made to persuade the normal person in the street to sign unfair contracts - are there other people out there in the same position - feed back welcomed - We need to get together to form a help group to fight developers who have deceived us in this way - who out there can help especially now we have the power of the UCPD on our side.
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#287 traducer
Thanks for that link to the UBS story... What struck me was the phrase "its reputation in Switzerland may never recover."
Here in contrast it would seem that our memories are easily fooled but what's even worse is that rather than expressing our absolute disgust and horror at the behaviour of our banks and their managers our reaction has been very traditional. i.e. we've just accepted what's happened with a shrug of the shoulders!
What a bunch of wimps we are!
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just another couple of thoughts-
If people have their jobs then tax increases won't be necessary!
Exactly when are these 'brilliant' proposals meant to take effect? I suspect in the new year, they may even phased in over a protracted period, as so many other things have been.
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#274's post is worth a second look. When new lending falls below the interest on existing debt, the gears of the monetary system get stripped. Printing money does not produce the desired result, it is just one of several possible failure modes. Forcing lending as the government appears to be doing achieves nothing if there is no demand for credit at the going rate. Banks can be forced to lend, but the market cannot be forced to borrow. Capping rates only forces losses and brings you back to square one, destruction of credit (money) through default. For all their Keynesian pretensions, the government's actions appear targeted to attack a very Austrian problem, but top-down supply side solutions become less effective as the deflation singularity approaches. When all new lending gets spent on interest, that is the event horizon. See you on the other side?
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Firstly, to traducer (#287), thanks for the link. I'd just read that story. Great isn't it? BBC should email it to every UK-listed bank main Board Director for a laugh, if nothing else.
Secondly, just to give everyone a sense of perspective on Monday's announcement. The impression I'm getting is people think the government's not doing enough, not cutting enough tax, cutting the wrong ones, is it affordable anyway etc. Just come and join us in Ireland if you want to experience truly, awe-inspiring government incompetence. The Budget here resulted in tax increases. They weren't too sure whether to increase direct or indirect taxes, so they increased both: a levy on ALL income (ie no tax allowances at all) of 1%, 0.5% increase in VAT, oh and CGT is up as well just for good measure. In the meantime, all the banks here are insolvent but have not yet been recapitalised. We're hoping to merge them (good thing - there are far too many) and then sell them off to private equity funds.
Finally, something to look for on Monday if Ally D is serious about sorting out the mess long term. For the vast majority of workers in the private sector, recent events have detroyed pensions and other long term savings. For people with personal pensions, the damage is obvious: just check your latest valaution. However, most defined benefit schemes will be in no position to pay the benefits they're are currently committed to. Most UK schemes still have a substantial allocation to equities, probably 40-60%, so they will be down 20-30% as a result of recent events. It is unlikely that companies will be able to promise to fund the additional assets required to maintain the scheme. So pension benefits get cut, working lives get extended.
However, public servants continue to retire at 60, on index-linked salaries based on final earnings. It wouldn't be so bad if these schemes were at least funded, but they're not. Public sector pensions are simply paid out of current tax receipts. So, without reform, most people will be working longer to pay for public sector workers to continue as if nothing has happened.
Therefore, if Ally D is serious about spending now and cutting back in future, one thing he should definitely announce on Monday is the immediate closure of all public sector defined benefit pension schemes, both to new members and any further contributions on behalf of existing members. In other words, we freeze the laibility of those schemes to current levels. Of course, public sector bodies would instead have to make contributions to staff defined contribution pensions, as is the case with the bulk of workers in the private sector.
Will Ally D do this? Flying pigs come to mind. Given that 25% of individual Labour party members are white collar public sector workers, I think e can safely say this won't be on Ally D's agenda yet. It should be on Dave's though. He has few votes to lose by bashing the public sector, and may well re-inherit the "Thatcherite trades", ie the self-employed guys and small company staff who deserted Labour in millions in 1983. Will Dave go for it though? Does anyone see him as bold and decisive? No, I don't either. Depressing!
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The problem is that in order to make more profit, there has been a move towards lowering pay and reducing job security in the developed industrial nations. It does not seem to have occurred to policy makers that if this were successful, people (workers, as most of us are) would need to go into debt in order to maintain apparent living standards. This could carry on for quite a while due to the increase in house prices. However, now the chickens are coming home to roost. If people are to afford to spend, they need both job security and reasonable wage levels. Companies cannot have their cake and eat it. If they pay low wages or outsource so people in core nations have no jobs or Mac-Jobs then eventually consumption has to fall or debt has to rise.
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No. 290 Wee-scamp.
Agree wholeheartedly. I am so self-disgusted at our (the British publics) ineffectual attitude,
so contemptuous of the pathetic panicky response from BOTH sides of the house of commons, and filled with such anger at the continuing stance taken by the egotistic holyer-than-thou self-serving userous swines
that got us into this mess that I really cant type rationally for today.
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It seems to be widely expected that VAT will drop from 17.5% to 15% in the PBR tomorrow and it is being quoted (presumably from some government source) that this is expected to save the average family £10 a week.
To save £10 a week, a family would have to spend £400 on items/services that have VAT added to them. As most food items, energy, childrens' clothes, books, newspapers, airfares, mortgages, rents, public transport do not have 15.5% VAT, this 'saving' seems a huge amount.
I hope all journalists will be challenging this if this is indeed included in the speech tomorrow, as my family (2 adults, 2 young boys) would save nothing like this amount.
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#284 "Alexander C - the new Oliver Cromwell!"
#I'd vote for him - "warts and all"*. What we need in Parliament are people who
1) have the courage to think for themselves, and be above the potted-thinking tribal politics still inspiring many comments on this page.
1a) will not pretend facts don't exist merely because they're inconvenient.
2) will pledge to put manufacturing and technical innovation at the heart of an economic recovery plan.
3) will pledge not to increase salaries/pensions for MPs for at least 5 years. (This would act as a disincentive to creating hyperinflation.)
4) will commit to abolishing the control-freak police state bureaucracy being created by new "Labour".
That'll do for now. I'd happily create a website.
*A popular misquotation. According to Antonia Fraser's biography, Cromwell is said to have instructed "..Flatter me not at all. But remark all these roughnesses, pimples, warts ..... Otherwise I will never pay a farthing for it."
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For goodness sake! It's not just the governments fault that we are in the mess we are. I'm no lover of New Labour but all this moaning about their policies just ignores the legacy of the Thatcherite economic policy.
We have developed an economy that functioned upon cutting cost and thereby making money for today. The whole financial services industry glorified making short term profit and dressed itself with promises of a new reality. They encouraged companies to adopt globalisation wholesale. Any firm that looked to buy from British sources was derided. They applauded as british manufacturing was closed down. They gloried in the short term profit and refused to invest in manufacturing.
Even think tanks were telling us that only the South East portion of the country was worth any form of investment - because that was were the MONEY was!
Now we find out that the major imbalances in our economic legs are exacerbating the our economic woes. In fact, as the economy collapses we find energy and transport companies increasing rather than reducing prices.
So don't just blame the government alone for this crisis. Spread the blame to our leading economists and City leaders who forgot that we need strategic industry and encouraged loose administration.
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And here is my irrationality...
We have Her Majesties government
We are Her Majesties subjects
We have Her Majesties armed forces
The police swear an oath of allegience to.. Her Majesty.
There has to come a time when a certain person or her advisors says to government that they and their policies are irreparably damaging the fabric of the United Kingdom and that unless they sort it out they will ALL (including the civil service) be removed by fair means or foul.
Frankly a few years of royal dictatorship based on preserving the countries estates and social fabric seems to me more appealing.
What is the main advantage? HM is not motivated by the need to line her own pocket.
HM is not driven by short-term thinking.
Hm is popular at a level that goes beyond political consideration.
So. My thoughts for a sunday.
A right royal rebellion.
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as i walk down the high street i see every shop enticing me to spend with promotions of 30% off, 40% off, even 50% off.... so why will a 2.5% off VAT make any difference? or am i missing something?
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So the analysis is that Britain's prosperity in recent years was in large part due to the operation of a high stakes high risk gambling casino in which the country bet the farm on every roll of the dice. And now it has come up snake eyes.
This was the compensating revenue generator to the loss of manufacturing jobs to China. Now the end game is in sight for not only the UK but for all of Europe. It's unsustainable welfare state that it has lorded itself over America is about to inevitably die deader than a doornail.
The current economic crisis will set the world's economy back to where it was roughly in 1945. There will be winners and losers. The "we're all in this together" foolish rhetoric will come to an end. Those nations which have inherent economic advantages by reason of their culture, size, productivity, creativity, rewards for success, second chances after failure, etc will rise to the top again. The free wheeling free trade export of jobs and technology will end as political pressure in each country will force governments to look to the welfare of their people before the welfare of its international corporations whose loyalty is to no one, apparantly not even its shareholders but its corrupt executives.
When we come out of the far side of the tunnel, I think the US will be decidely on top of the heap once again and that is discounting new innovative technologies and disasters we cannot even predict that will tilt the playing field even further in its favor.
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So lets do the simple sums. Reduce VAT rate by 2.5%
New £10000 Kitchen @17.5% -£1750
@15% -£1500
Saving £250!
Oh yes I will rush out and buy a new kitchen NOT.
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#300: Spot on, fighting deflation with economic stimulus is like trying to put out a forest fire with a water pistol and now you can see why people say that. All my Christmas shopping will be done next year at my new favourite store, the Administrators.
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as I've said on previous posts-isn't treason defined as acts against the country? Bringing a country to it's knees surely constitutes this?
Exactly how can it be enforced?
And can we borrow a guillotine from France?
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I wonder when the penny will finally drop, and there will be a general realisation in this country that we have no God-given right to a cradle-to-grave welfare system. That we have such a system has been due to the materially productive section of our society being able to generate sufficient wealth to provide for the needs of the entire population.
For many years it was the responsibility of industry to do this, but the rise in the skill levels of low-wage, non-welfare economies elsewhere has led to a progressive decline in our economic advantage. So much so that we are just unable to compete at a global level in any industry in which labour input is a significant element.
No longer able to provide work for the mass of our population previously engaged in industrial production, we turned our attention to the service sector, financial and otherwise. And for a few years we've been able to make up for our loss of industrial wealth production with income from services. But there's a limit to how much we can screw out of other people for non-essential services. A butcher is going to think twice about paying his floor-sweeper or window-cleaner if the expectation is to be rewarded with ever-increasing quantities of fillet steak. And, as far as financial services are concerned, there's a limit to how much of someone else's wealth one can lay claim to by sleight of hand, or shifting bits of paper round a desk. The croupier's take relies on the punters being prepared to remain in the game.
So, my friends, what are we going to do when there's no one left in the world who's prepared to pay for the non-productive 90% of our population to live at a level of comfort and prosperity that they don't even dream of living at themselves?
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What is the real economy?
I suspect that the awfully clever Gordon Brown is going to revert to type. His formative years were spent in and working in a university.
Whether we like it or not universities now form a fair percentage of the economy.
He will reform the tax regime allowing them to reclaim the VAT they pay.
Instant short term hit. No matter that it is all taxpayers money anyway. He wants a temporary measure anyway.
Expanding the universities will of course put more pressure on what is left of manufacturing. Development companies and the like.
What is the real economy?
Do we have one?
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#301 "It's unsustainable welfare state that it has lorded itself over America is about to inevitably die deader than a doornail.
.............. political pressure in each country will force governments to look to the welfare of their people before the welfare of its international corporations whose loyalty is to no one"
I presume you're using "welfare" in two different senses here? Isn't what you actually mean in the second reference to reduce socially funded healthcare etc?
We used to have a joke in this country: "We have the best secret service in the world ... it belongs to the Russians". Now much of the US economy belongs to the Japanese. They don't have the level of resources that you have in the US, but they do have universal healthcare and education schemes. Have they cheated, or are they just better than you?
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Comment 301 : MarcusAureliusII
After posting 305, I saw your 301
Strange we should be having very similar thoughts at the same time!
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So a policy of 'shop 'til you drop' is going to be our gov'ts new mantra. Just heard GB say that anyone against this lacks compassion! What? It's hardly Churchillian is it.
Why not try making some stuff instead of buying imported stuff cheaper? And I don't mean making 2 new aircraft carriers and some new Tident submarines! It is a terrible truth that a large chunk of our remaining high-end industrial capacity depends on the arms trade. And those aircraft carriers and submarines are no use when it comes to stopping us pirates intercepting your shiploads of imports are they?
Build wind turbines instead.
Let's have wave-powered ducks in the Irish Sea instead of dead ducks in Westminster!
Also, as several of the recent blogs point out, a 2.5% cut in VAT is hardly going to make a big difference anyway. A lot of people have been badly spooked by recent events and are worried about losing their jobs so might not take the bait. And it is hardly a great plan to try to hoodwink vulnerable people into spending money that they don't have in order to 'save' 2.5%. Most people noticed last week's sales and will now try to buy their Christmas presents where the goods remain on sale or are discounted, with or without a VAT reduction.
Meanwhile Sterling has lost 20% of its value against most major currencies - meaning most of those goods in the shops, nearly all of which are imported - are actually costing someone in the supply chain a lot more and will have to pass the costs on to us at least in part if they are to avoid losing money on everything they sell.
A more effective gov't policy would be the 'drop money from helicopters' idea, or rather the 'drop time-limited vouchers'. And to develop a big public works project to create jobs, like Obama has recently announced for next year in the USA.
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I have recently been following Robert's blog with a view to gaining enlightenment regarding the current economic crisis and what might be done to improve things.
At the same time I have been reading 'The Smartest Guys in the Room (the amazing rise and scandalous fall of Enron)' by Bethany McLean and Peter Elkind.
It immediately struck me that many of the techniques used by senior management at Enron to inflate the stock price seem remarkably similar to those allegedly employed within the UK banking sector. A number of Enron executives are now serving long prison sentences.
I read recently that Sir Tom Mckillop has apologised to the shareholders, customers, and employees of RBS for what has befallen them. I presume that his knighthhood was awarded for 'Services (?) to Banking'. Sir Tom is very fortunate, he is not facing unemployment, repossession, or a significant reduction in pension prospects like so many affected by his bank's policies.
If I remember correctly, Lester Piggott was stripped of his knighthood and sent to prison for financial misdemeanours. Am I the only one who feels that similar treatment should be considered for our captains of the financial industry?
I have just watched John Sopel interviewing a smilingly-smug Gordon Brown, who once again blamed it all on the American sub-prime mortgage fiasco. He was unwilling to admit to any shred of responsibility. When asked about his position with regard to Northern Rock offering 125% mortgages, he completely bypassed answering the question. Like so many interviewers today, Mr. Sopel let him get away with it.
I certainly would never vote for Labour in the next election, but I have similar reservations about the Conservatives. Do David Cameron and George Osborne have any idea what life is like for the majority of the people in this country? Has either ever faced hardship or had to graft in his life? I doubt it!
I listened to David Davis on 'Desert Island Discs' recently, and I can't help feeling that someone who was from a single-parent family, served in the military, worked abroad, and coped with bullying would have made a much better leader of the Conservatives than the present incumbent. An opportunity missed....
However, my greatest worry is that the vast majority of the population do not realise (or do not want to realise) how very tough life is going to be for the next few years. They seem more concerned with the future of two infantile, foul-mouthed, and obscenely-overpaid BBC presenters, and whether John Sergeant should have left 'Strictly Dumb Prancing'.
Trevor H., Farnham
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So the government is trying to cure a problem of excess debt by borrowing more and expecting people to spend it on Chinese-made Christmas presents. Apart from sounding like trying to put out a fire with petrol, what if folk - worried by possible unemployment - wisely decide to reduce their debts, or just save it? And what happens when the economy begins to recover just as taxes should be increased? Follow the grand plan, raise taxes and watch the country sink back into recession - or postpone the tax hikes and risk a run on the pound.
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personally i think that the scale of the stimulus to be anounced tomorrow has been underestimated, remember the banking bailout was massive and surprised most commentators by the size of it, it clearly was no half-measure.
The thinking might be that it has to be breathtaking to have the desired effect and to possibly mitigate the risks of the borrowing needed, they seem to be in for a penny in for a pound!
I hope that it's not a pound of our flesh!
Totally agree with the comments on this blog re our manufacturing base etc, we need to think about what put the great in front of britain and invest in our school leavers with credible trades, the hardest thing is STILL in place and that is our reputation and history of past manufacturing excellence, financial services has been a house of cards.
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I remember when the intelligentsia were all telling us how lucky we were to have Tony Blair as our leader.
It was TB who said in no uncertain terms that manufacteiring was passe. Our future lay with "cool Brittania"
The awful truth is he was (and still is) correct.
Our moronic education system and celeb culture has ensured that.
I worked in industry, it is not just the skill shortage, which is dire enough.
The lack of application and even straight forward time keeping is a national disgrace
To be reliable and responsible is "stupid inint"
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#277
That is a clear case of tax evasion - the only reason to cooperate with the loss of 25 points next season is if there's going to be a next season for the club, but declaring insolvency in that way says there's no next season. Ho hum, methinks Chancellor Morton had a thing or two to say about those circumstances...25 points or 250000 fine per player...
It's certain that the Bank has now decided to deflate any excessively inflated sectors of the economy. Like Jonathon Was used to say, ever felt a little prick?
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#308 "Strange we should be having very similar thoughts at the same time!"
I'm not sure you are actually; MAII is an American supremacist of a sort, but with a big xhip on his shoulder. In Justin Webb's blog "Morphing America" he wrote: " .......The more I have studed, lived in, and come to know what Europe is about, the more I hate it."
He then goes on to castigate Europeans for allegedly hating America.
You (excellecefirst) merely try to look at the facts as dispassionately as you can and come to reasonable - if unpalatable - conclusions.
If I may sum up your latest (perfectly valid) conclusion: We can't expect to have a high standard of living, doing all the consuming, while others are doing all the producing.
And, I may add, having miserable reward for their efforts.
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Apart from anything else, I'm not buying Chinese rubbish...M&S are a prime example, a pair of so-called lycra trousers ripped before they stretched.
First, return to quality, then I'll buy.
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#270 wrote: "And are we likely to see the price labels in electrical retailers across the country change to 293.61. - NO, they'll still show 299.99"
#309 wrote: "Meanwhile Sterling has lost 20% of its value against most major currencies - meaning most of those goods in the shops, nearly all of which are imported - are actually costing someone in the supply chain a lot more and will have to pass the costs on to us at least in part if they are to avoid losing money on everything they sell."
#312 wrote: "personally i think that the scale of the stimulus to be anounced tomorrow has been underestimated"
For retailers just now, lowering costs is the only way to compensate for adverse currency movement, they know raising prices in this environment will drop sales revenue to zero. As things stand, I expect a massive nationwide default on dollar accounts payable in the New Year, so my hunch is the cut in VAT is not aimed at price reduction for consumer benefit but increasing retailers' margin to make good part of the difference. Look out for an announcement of immediate temporary cuts in business taxes if there is a systemic risk here.
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#305:...'as far as financial services are concerned, there's a limit to how much of someone else's wealth one can lay claim to by sleight of hand, or shifting bits of paper round a desk. The croupier's take relies on the punters being prepared to remain in the game.'
Spot on!!
And if we, the people who are supposed to 'rescue the economy' by spending our household income to the edge of bankruptcy, decide we don't wish to play anymore??
To carry the analogy on: What if the 'little people', the 'proles', decide to repaint and stick a new transmission into the current car, spendng $5K, instead of incurring $40K of debt ovier six years for a $28K car, that will depreciate to near zero before the loan is paid? (And heaven help your sorry backside if you are day late on one payment!!)
It appears this is happening already. My mechanic is thriving, and the new car dealerships located around him languish.
It's time for the punters to leave the casino, go home and build sane lives. I predict there will be businesses that provide goods and services for this constituency, and both can thrive.
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There are two big flaws with the idea of reducing VAT as described. First, the poorest will get least benefit as there is no VAT on essentials such as rent, food, public transport and children's clothing and only the lower rate of 5% on domestic fuel. Secondly, it relies on retailers to pass it on....
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I'll give my dear lady wife the credit card back and drop her off at the shopping centre.
There we are. Problem solved. Financial markets rejoice.
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No.301 MA11. I agree USA will emerge on top. They have sold the world all their rubbish mortgages, the US workforce can file Chapter 11 bankruptcy and move on to new mortgages and loans within a year.
In europe the workforce must keep paying for rubbish that the banks own.
Nicely shafted.
No. 304 Tigerjayj. My thoughts exactly.
Maybe the UK can start manufacturing high quality guillotines for export?
No. 305. EF. No, there is no god given right, but we pay high taxes AND national insurance (supposedly) for this privelidge. The NHS and Education therefore should be sacrosanct.
Social security? a different matter and I would agree that removing this fraud ridden edifice would serve the country well. Our 'safety net' is at the level of 'Luxury living' for many 3rd world (and even 2nd world) countries.
No. 309 Somali-pirate.
If my history serves me well the entire wealth of modern Britain was derived from piracy and privateering. With our inability to restart quality hi-tek manufacture within anything like the timescales needed to drag us out of this crisis may i suggest you have a good future opening and running piracy management courses around the country.
Live ducks at sea... nice comment.
No 310 Surrey-pensioner.
I suspect many many people share your view that those responsible should be behind bars. Both governments have refused to instigate the necessary legislation to bring these criminals to book.
No.313 peterbolt. I agree, i have had to work with these 'educated' products of our system for some time. Education is clearly not free.
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If they are going to increase borrowing by £100bn then they should focus on projects that keep wealth in the UK over the long term. Tidal projects for electricity generation in the severn would seem a good start. There are a number of environmentally friendly ways of tapping its potential.
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What I'd like to know, if the government were worried about the economy..
Why not cut VAT earlier? If growth was sluggish.. why not stimulate the economy sooner?
Heating bills rocket, gas, electric push domestic budgets hard - there's 5% VAT on that.
Why not cut that?
Petrol, diesel, heating oil... all with VAT on top of the duty.
Why not cut it a year ago?
Oh no, they took the extra revenue.
This crisis kicked off in the US, Gordon said it's global.
It is not. Only the over-leveraged have suffered, those with big debts.
HSBC?
The Spanish banks or Swedish ones, Australian, Canadian didn't suffer.. why?
They were properly regulated and managed.
And that is far more localised problem. Our UK banks weren't.
Because the government broke up the BoE's monetary and fiscal control.
If you change the rules of the game and suddenly things go wrong, who do you blame?
The players? Or the people that make the rules?
Brown rammed a brick on the accelerator and let UK plc drive off a cliff. Money supply has been growing by 10-15% a year, the country was awash with cash and the government did that.
They wasted their share, the Taxpayers Alliance have identified 16% (£100bn) of the £600bn budget that's waste.
Most recessions in modern history have been ended by an export-led recovery.
1,000,000 manufacturing jobs have gone since 1997. MG Rover, Vauxhall Luton, Jaguar Browns Lane, Peugeot Coventry. It's not a case of exporting skills, it's about beating them on quality, productivity and skills.
Instead, Brown saddled them with more tax, costs, more red tape, more costs (tax) on employment.
He failed to provide the incentives for overseas firms to remain and the light touch regulation for the homegrown ones to compete.
There is a little know fact about manufacturing, for every pound spent making something, it generates six for the wider economy.
Retail? a extra two pounds.
Public sector? -20p. Productivity has fallen since 1997.
That sums it up really.
Gordon Brown.
He's never led the country, never spent in the best interest of the country.
He's spent on partisan interests, kept his voters sweet, now he's undone - suddenly he's a global statesman.
Pull the other one.
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Robert Peston clearly hasn't been keeping his ear close to the ground lately...talk to ant tax professional in the last number of weeks and he would have heard the rumour that VAT is actually being CUT...in the short term at least. This oversight undermines a great deal of this journalist's article. Reporting must be both timely and accurate in order to effectively communicate...instead this article has merely panicked hundreds into responses...
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Message to the moderators:
Please do not nuke my next massage, its not that bad
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If the Government is a woman and the Economy is a man and to stay in in wedded bliss they must assert their love for one another tomorrow, I cant help but feel that a fake orgasm is about to occur
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I don't think anyone has been panicked into a response, it is quite the regular peanut gallery here.
It is true though, these articles no longer break the news, they manage expectations...
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Excellent analysis which underlines the state this country has got to - dependent on financial services (gambling with other people's money) and retail spending (buying imported goods,dressing them up in flashy shopping malls and adding a markup).And all this from the nation that brought the world the industrial revolution.
We have priced ourselves out of manufacturing,the real means to wealth largely because other countries do not have the restrictive legislation that we have and we pay ourselves too much.
The measures to be announced tomorrow are short term-designed more as a political fix.This country has to address the root causes of our failure under successive governments.
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Comment 321 : traducer
"No, there is no god given right [to a cradle-to-grave welfare state], but we pay high taxes AND national insurance (supposedly) for this privelidge. The NHS and Education therefore should be sacrosanct.
This is part of my point. High taxes and national insurance are one of the reasons why we are such a big-wage economy. There's a huge fixed cost just for living in the UK, and this is the main reason why we find it so difficult to compete commercially with low-welfare countries. At least, we do now that their quality of performance has improved so much.
In my opinion, there's nothing more important at the moment than to reassess the public sector with a view to making it lean, mean and ruthlessly efficient. I read that the Government is looking to make GBP 5billion "efficiency savings" starting in 2010/11. What! Isn't it an admission of total incompetence that the public sector HAS inefficiencies of this order, let alone deciding not to bother tackling them for another couple of years.
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Whichever way you look at it the UK has become a country of spivs.
Everybody is on the make. But not actually making anything.
Wee Harold Wilson was the last one to try to stabilise the way the economy was heading.
With selective employment tax.
SET was thrown out by the shopworkers union no less and from that moment on service industry ruled.
The UK lost its competitiveness to firstly Japan. (Shipbuilding)
Then in turn other nations built up their skills. Japan was most miffed by South Korea starting to get good at shipbuilding.
And what has the UK got to offer the world now?
Answers on a postcard to Gordon Brown. Be real quick though if you want to take advantage of the world's first universal single price Post Office.
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Oh dear, I don't see this prospective tax rise being very popular in the eyes of voters, even if it does mean short term tax cuts. The only love Gordon Brown's going to be getting will be in his tennis score at Wimbledon.
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Gambling is only a pastime for the very rich or fools.
To gamble 100 billion on the chance that those still holding cash will spend it are playing a very dangerous game indeed.
And it is only those now who have cash that have the real spending power.
Squeezing interest rates on savings is taking this spending power out of the economy which will encourage those still able to spend hold on even more tightly to what they've got.
Passing on reductions of VAT to companies can only work if more people are prepared to part with this hard earned cash.
Giving with one hand and taking with the other seems like going out of the frying pan into the fire rather than the stitch in time saves nine.
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307 Sasha Clarkson, among other things, the Japanese don't have a military budget. They don't need one. The US taxpayer has provided for their military defense largely the way Europe's has been provided for since the end of WWII. The US could pull out of the Pacific and leave Japan to defend itself. I wonder how the Chinese, Koreans, and others in the region would like seeing Japan with a large arsenal of nucelar weaopns. They are sitting on the largest stockpile of plutonium in the world.
The US will get of of the recession once it starts printing large sums of money. It must not only reflate the economy to make up for lost wealth but it must deflate the value of the debts Americans both public and private have incurred. To do this, the money supply will have to increase far faster than productivity so that is each dollar will be worth far less in buying power. Price and wage inflation will reduce all American debt t where it will be easily paid off. Those holding American bonds like China or other private debts like dollar denominated corporate bonds will get stuck with the loss. A remarkable strategy that anyone planning an economic war against the world could hardly outdo. America has always done this in the past but never on the scale that is required. That is why this "we're all in it together" jibberish won't fly.
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Does anyone think that the state of the Uk economy will result in less immigration or economic migrants? On a plus note with the week pound, im thinking that more tourists will come to Britain. Unluckily for me I don't have a degree in travel and tourism.
Hindsight is a wonderful thing. But im thinking that the last few governments put all their eggs in one basket. I mean surely the lesson should be for future governments- that we should diversify our economy so that its not solely reliant on such a volatile sector such as the finance.
Robert Peston- 2010-2011! till the economy picks up again. Oh dear, my job prospects are bleak.
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I think it was Frank Skinner who said 'You always knew where you were with Maggie. It was just that being there without a paddle was the problem.' With Labour, it seems to me, we don't even have a canoe.
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"288. At 12:43pm on 23 Nov 2008, Wellcaught wrote:
I also wrote that the money would be provided by a reduction in wastefull and unproductive government spending
That way no greater supply of money is needed and investment is made in productive assets which will save expenditure later whilst boosting the economy whilst they are being constructed"
Please explain *exactly* how, a reduction in government spending increases the NUMBER of Great British Pounds in existence.
THAT is the problem. The definition of the Credit Crunch. That there is not enough credit out there to pay the existing debt + interest.
It doesn't matter that spending is productive or not because... It is money itself which we are short of, not work or materials. You can't pay off debt with work... Just go try it, ask your bank manager if you can pledge 40 hours of your time to your mortgage. The banks want money or the assets.
As I said, there are only 3 options. Increase loans, increase currency, or decrease the debt by writing it off. You can't "work" your way out of the credit crunch because when you pay debt off, you make the problem worse, not better, the credit used to pay the debt is destroyed.
You see what you are actually suggesting amounts to option 3 in that list.
That is: Allow all the businesses out there with some debt on their books or homeowners with mortgages, to go bankrupt. That way the debt is cancelled hopefully leaving enough credit behind to make everyone feel happy enough to start spending and taking out loans again.
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Some random thoughts. Firstly all this talk about government debt seems to ignore the 'off balance sheet' borrowings incurred by PFI contracts which run into many billions. As already noted this is Enron country and as such massively understates the indebtedness of this government. Someone should have the guts to tell us the truth about the real size of our hole.
Secondly I shall believe in deflation when Council Tax, Rail fares and Water rates begin to fall. Many pensioners are experiencing a big drop in their disposable income - they will be spending far less in future, not more. Why does Council tax go ever upwards. Mainly because this government has underresourced Local Authorities, particularly in the South. One of the biggest liabilities is paying for both present and future civil servants pensions and it is growing fast every year but nobody has the nerve to tackle this huge contingent liability.
Thirdly, being somewhat flippant, to save £100 billion you would need to save £1 per second non stop for some 3000 years. It is a colossal amount of money.
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Looks like Citigroup will need some more money tomorrow anything up to USD 50 billion if reports are correct. I wonder how long before the rest of the US banks are in need of a top up from Uncle Sam?
There are hundreds of billions of pounds worth of commercial property in the UK let alone unlet retail sites that are struggling to be let and won't be let at anywhere near the prices that the building costs and bank loans were based upon.
Expect RBS and HBOS to be back for more money, and I mean a lot more money, in the next three to six months.
Also how much money do the banks have tied up in loans to private equity companies that bought much of the High Street?
Anyone know who the two banks are that are likely to put Woolworths into adminsitration tomorrow?
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Anyone want to guess the result of the Barclays vote tomorrow?
Somehow I think the shareholders will pull back from the precipice.
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it seems the PM runs the ecconomy and his chancellor is only there to look pretty.
hey a reduction in vat is on the cards wow great that should get the sheep voting them back in to further damage an already ruined country.
well sheep time to grow more wool becouse soon it will be shearing time and gordon has the shears.
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'spend now because you will not have as much in two years time'...
I haven't got any money spare now !!
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45% new higher level income tax.
http://news.bbc.co.uk/1/hi/uk_politics/7745070.stm
Not briefed on this Robert?
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#333 MarcusaureliusII
Now - this is an interesting and thought-provoking "meditation" - rather than a hate-filled polemic! :-) So - no attempt at a snappy comeback ;-)
It could be argued that military spending has been an albatross around the neck of the UK since WWII, but I think most of the population would now be happy to forgo any last pretensions to great power status. We have to rebuild and reinvent ourselves.
But militarily, can the US cut back? Would it be willing to? How would this affect the US economy? What about the cost to America of the State of Israel? And, truly, how many major US military interventions have achieved their aim? Korea sort of, the cold-war stand-off with the Soviet Union too I suppose, except that now we have Imperial Russia redux? I would be genuinely interested in your point of view!
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Post 342 I'm sure Robert was briefed.
He has been quiet for a couple of days and was no doubt looking for a midnight posting on the matter.
Looks like Nick Robinson has beaten him to it.
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#342 "Not briefed on this Robert?"
Many people seem to disagree, but personally I don't think that Pesto is a lobotomised cyberman* government spokesman. After all, his comment:
"the chancellor will admit, by implication, that the government's industrial policy of the past decade has been something of a disaster." does show definite evidence of independent thought? (Unless AD is briefing against GB that is.)
*ie, not a typical New Labour MP
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Rumours started that Labour intend to increase top rate of tax to 45% for amounts over £150,000 per annum.
Does not affect me and no doubt those on £150,000 with massive mortgages wont be too inconvenienced - and they wouldn't have voted Labour anyway.
The cynic in me suggests that what these people will do (company directors/ higher management) will be increase their gross pay where possible so that their net pay is the same - thus reducing the amount of money available to pay other workers who have less control over their wages.
However it is a good political move - providing those facing the largest increases don't decide to move to another country.
As to amounts - I found this comment from three years ago;
"Just 3.6m people are paying £73.2billion in income tax, proving that the Government is forcing higher-rate taxpayers to shoulder more than half of the income tax burden"
Which suggests that increasing the tax by 12.5% (40 -> 45) would earn about £5 billion. (as the vast majority of 40% taxpayers are on less than £150K)
If tax breaks are going to be £17 billion it still leaves the Government to find £12 billion in tax rises
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11 years of Labour government.
"You can trust us with the economy"
The last lot had us cap in hand to the IMF. The mess this lot are creating will be far worse. Hold on tight, because here comes national bankruptcy.
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# 326 Considering the credit hangover, more a case of fiscal brewer's droop. However much AD tries to stimulate the economy, he just won't be able to get it up! ;-)
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#337 wrote: "Secondly I shall believe in deflation when Council Tax, Rail fares and Water rates begin to fall."
Deflation is a credit, not a price phenomenon. Why would taxes fall when the government is in debt and the amount of money in circulation is falling? Think about it.
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sashaclarkson #345
That's one more thing I hate about Europeans, the way they distort history, the way they forget, the way they change the facts to suit their propaganda. The cold war was not a standoff. The US won that war plain and simple. It cost trillions of dollars. The world almost came to an end more than once. The US prevented North Korea from gobbling up South Korea just the way it prevented the USSR from gobbling up the entire world. It should have won in Vietnam if it hadn't fought so stupidly. The US fought Vietnam the way Israel fought Lebanon. It won in Iraq in 1991. It overthrew Saddam Hussein but is still floundering in the aftermath. It won in Serbia ending the genocide and freeing Kosovo. It has isolated the infection of Cuba although it is now spreading again. But Communism doesn't have the backing of the USSR to take over South America anymore. There hasn't been another attack by al Qaeda on the US since 9-11-01 no thanks to all the help the US didn't get from its so called allies in NATO. Some mutual defense pact that turned out to be. BTW, without the US, Britain, France AND THE USSR would have lost WWII to Germany. In fact without the US WWI might still be going on.
Not only did American taxpayers pay for the defense of the free world, US policy created the conditions to rebuild Western Europe after the war by encouraging large American corporations to invest there and allowing them to repatriate their profits and giving Europe very favorable one way trade advantages with virtually free access to the huge US market while it protected its own domestic markets in Europe. I saw this first hand when I lived in Europe. All of Europe's advantages in the US markets came to an end with GATT and now WTO. China has been allowed to get away with economic murder in its trade relations with the US. That has to stop too.
Israel is a nuclear power. If it feels threatened, it should use its power to defend itself or risk perishing. It doesn't matter what the rest of the world thinks, they've always hated the Jews anyway. If it continues fighting future wars the way it fought in Lebanon, it will perish. Fate doesn't give the careless and arrogant many second chances. And that is also a lesson for the US. If it relents on the war on terror, on Iran, on North Korea, it may wake up one day to a nightmare that will make 9-11 look like a picnic in the park on a sunny afternoon.
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336. At 9:43pm on 23 Nov 2008, true-liberal wrote:
"288. At 12:43pm on 23 Nov 2008, Wellcaught wrote:
I also wrote that the money would be provided by a reduction in wastefull and unproductive government spending
That way no greater supply of money is needed and investment is made in productive assets which will save expenditure later whilst boosting the economy whilst they are being constructed"
Please explain *exactly* how, a reduction in government spending increases the NUMBER of Great British Pounds in existence.
I did not for one second suggest that it would create more pounds. I suggested that the existing pounds should be redeployed into something usefull, rather than wasted on absurd quangos.
It is inevitable that the government will increase the money supply eventually as that is what governments have always done throughout history.They like to stay in power which is where I came in.
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I feel like the last survivour of a world desimating a killer virus.... post #350!
And 'desimating' is what is about to happen. Smoke and mirrors? ...a desparate need to be seen to be doing something?...because 'something must be done'!
VAT down to 15%. Problem? You gotta spend to "feel" the benefit. And is that Sony plasma super dooper wide screen HDMI with freeview built in digital TV ...British made? Will the British Economy actually benefit from the ...tax reduced... purchase of that item SIr?
Top rate tax ...UP... to 45%. Once you've earned £150,000. I'm sitting rigth now with over a dozen people (5.3 million actually) who, by virtue of their earning power, working for minimum wage, are asking why not re-introduce the 10p starter rate? Too embarrassing Mr Brown?
The words I want to use to express how I feel about this government, it so called rescue of the economy and their direct contribution to current plight, are banned by the moderator.
Discuss.
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Cometh the hour, cometh the man, but where is he? Gordy is a busted flush, and the Boy Dave, well.......
In 1979 we had different problems, but no less serious. Someone came forward then with the guts to do what had to be done. That it was squandered and corrupted by subsequent reptiles doesn't diminish that fact.
Who will it be in 2012 to come forward and take the reins?
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Wow #350!
i was gonna rise to the bait ....but actually your rewritting of history is almost but not quite on a par with Hitler's validation and condemnation of the Jews circa 1929.
Next time you decide to 'contribute' to a debate, check your facts and try and be sober... cos it's only through beer goggles that what you have written could possibly make sense.
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Sashaclarkson and TigerjayJ
Just wondered if i am AlexanderC???
I would be happy to do the Bank of England
job and absorb the FSA,also the Treasury &
the former DTI.
Only on a NON political basis.
Should i send in my application??
Will you say yes?
The sole objective would be to make UK plc
hold its head high and put the Great back in
Britain.
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326, What if thet are both male adjusted?
Which one will get the thin end of the wedge first ,either way i shant listen out for the patter of little feet,but there could be a frankenstein clowne coming our way with a head thats well screwed,on.
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#345 MAII Yet another paranoid hate-filled rant showing a scant understanding of historical complexities. I note from other blogs that other US citizens are not of your mind - do you hate them too? Speaking of the distortion of history, My father gave up six years of his life in WWII. He was already in action in North Africa long before the US came into the war. Britain stood alone. We could have said "sod principle" and cut a deal with Germany, as some like Halifax wished to do, but we didn't. However, America might then have faced attack on both shores. True, the communist regime in the Soviet Union collapsed, and good riddance - members of my family were executed - but now you have an unfriendly resurgent Russia - is that a victory?
Since you hate us all so much, why do you bother to cast your pearls before us?
I refer you to the defendant's reply in the legal case of Arkell v Pressdram (1971)
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#355 alexandercurzon YES you are AlexanderC.*
As for being non political, that is the point. We want people who think how best to make things work, not score petty tribal points. Stand against some mindless idiot MP (there are plenty of them). Preferably someone who has always voted the party line. Just tell it as you see it.
*Alexander - from the Greek: alex andros - defender of men. A fine name - I should Know.
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"351. At 10:52pm on 23 Nov 2008, Wellcaught wrote:
true-liberal wrote:
"Please explain *exactly* how, a reduction in government spending increases the NUMBER of Great British Pounds in existence."
I did not for one second suggest that it would create more pounds. I suggested that the existing pounds should be redeployed into something usefull, rather than wasted on absurd quangos."
But that has absolutely no effect on the problem. Which is that in total, there aren't enough Great British Pounds in existence to pay all of the debt+interest. Moving the ones which do exist from here to there and back again isn't going to change that. They still vanish when a debt is paid.
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sashaclarkson 357, what was your father doing in Northern Africa? Defending a worldwide mafia of the most heinous criminals ever, called the British Empire. Remember that? It's how my country got started, revolting against its crimes and criminal leaders.
How do you know what other Americans think? There are over 300 million of them who probably have 300 million different points of view. And quite frankly, many I've spoken with are too polite to tell Europeans to their faces what they say to each other about them. Take my word for it though, to most Americans that "special relationship" is a figment of Britain's imagination.
With all the America bashing I've heard from Europeans over the last decade or two, I thought it might be interesting if Europeans were on the receiving end of it for a change. And how angry they get that even one lone voice speaks out against them reminding them of their gross shortcomings and that of their societies. But then that intolerance is one of their main characteristics which constrains their civilization to total inferiority, the demand for conformity of thought and speech to dogma. Too bad you can't conduct an inquisition. How ironic that the one time Europe listened to America and copied its recent ludicrous financial schemes, that was its ultimate undoing. Doesn't anyone else see the irony in that? It would make a good O'Henry story.
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Alexandercurzon-
Yes you are Alexander C-aka-lord protector of the UK!
Behind you 100%.
Love to help-Politics and money should never, ever walk hand in hand
Currently I've run into a couple of slight problems:
Would love to manufacture high quality guillotines for export-there is definitely an emerging market, but-no steel industry, so blades would have to be imported, same as the wood-and skilled craftsman for this kind of work are very thin on the ground.
Also having trouble locating enough Beefeaters to make the arrests, the holding cells don't have satellite TV, and the only hangman CV's submitted are from applicants with no experience, no commitment and no pride in their job.
Oh, and no chance of a bank loan to get it off the ground either.
Quite happy to send you my CV....!
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#361 "and the only hangman CV's submitted are from applicants with no experience, no commitment and no pride in their job."
Have you tried Singapore ?? Since they reduced the number of hangings there due to the success of their anti-drug campaigns, they may have a few sparsely employed hangmen "hanging around", as it were !!
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#346 "However it is a good political move - providing those facing the largest increases don't decide to move to another country."
Not all persons earning >150k a year are bankers, etc. Many/most of them are doctors and dentists, especially the highly skilled ones. As it is, we are already desperately short of doctors and dentists per se, good, bad or indifferent !! Add this tax and off they go to where they are treated more kindly !!
The next time anyone has a major life threatening problem, they may have to queue for 12 hours before being seen to. All the while, they will be *blessing* the government that had taxed all these doctors out of the country to pay for their political ends !!
And without highly skilled and knowledgeable engineers, there will be no new manufacturing to "make things" to get Britain out of this mess.
This is typical of the Stalinist attitudes that nearly destroyed Britain in the '70s and it will do so again !!
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#345 ""the chancellor will admit, by implication, that the government's industrial policy of the past decade has been something of a disaster." does show definite evidence of independent thought? (Unless AD is briefing against GB that is.)"
Beware the Ides of March ???
Sounds much better than "Et tu, Darling" which sounds more like an extract from a Mills and Boon knee-trembler !!
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#336 "That is: Allow all the businesses out there with some debt on their books or homeowners with mortgages, to go bankrupt. That way the debt is cancelled hopefully leaving enough credit behind to make everyone feel happy enough to start spending and taking out loans again."
All that sounds very nice and utopian until you realise the debt isn't "destroyed". It has to be paid for and it *IS* paid for by the debt insurance. The insurance company, being somewhat stung by this wholesale reneging of debt, will raise its future premiums which will make future debts ever more expensive, often to the point of being prohibitive, which is their main objective anyway !!
And the banks, having been stung by the sub-prime crunch, will not lend *WITHOUT* insurance cover !! So the taking out of more loans will be that much more difficult.
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#334 "On a plus note with the week pound, im thinking that more tourists will come to Britain."
But only if there is *NO* civil unrest in the streets !! There are plenty of places in the world with nicer, warmer climates and friendlier natives who will cheerfully take the tourists' money without subjecting them immigration interrogations !!
The Maldives are very lovely if the tide isn't too high !!
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#323 "He's spent on partisan interests, kept his voters sweet, now he's undone - suddenly he's a global statesman."
Of course he is !! And Baron Münchhausen insist that he is a swashbuckling hero and Don Quixote de la Mancha battles giants !!
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VAT can only fall to 15% in order to comply with legislation from the EU, and then rise at most to 25%. So we will pay 15% now, and then as much as 25% in the future. This is not good. As the poor are those whom are hit hardest.
If these changes to the tax system direct or indirect tax the whole system need reform. A progressive tax system is needed. A change in the personal allowance need to be adjusted to give people a real boost, and not just an increase in benefits.
We are all ecomonist in our own right as we need to mirco manage our money to reflect what is best for our own household. The British ecomony needs to get off borrowing as soon as possible and rebalance. New energy is one proposals. Any new ideas?
With regards to the banks, in 1930's governments had to pass legislation to impose the will of the people (focusing banks to lend at reasonable rates). I do not agree with this proposed course of action. Maybe we all need to change our attitudes going forward.
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359
The problem of not enough pounds, which incidently I do understand,will almost certainly be dealt with by "printing money" as I said before
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If this half witted pair of oafs want to do something useful...apart from the obvious...then reduce Fuel Duty by 10p. That would help everyone but particularly big business.
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No.350 MA11
Thank you for your perspective, I am very fortunate to have family connections high in both the British and American military and thankfully (imho) their views do not bear similarity with yours. There is intense professional rivalry between our forces, but it is healthy not unhealthy.
I cant comment on WW1, I am not so familiar with the economics however WW2 is closer to hand. Please study more closely the terms of the Lend-Lease agreement between the USA and UK.
The American taxpayer did, as you state, pay for the materials that were shipped to the UK however they were repaid, in full, with interest and in kind at extremely usurous rates.
1) The final WW2 was made 31 December 2006. Yes, thats how long it took to pay off. US lent 4.3bn UK repaid 7.5bn.
2) The USA demanded full trade access to all British commonwealth markets. They got it and it helped destroy British manufacturing output from then on.
3) The USA demanded technology. They got antibiotics, nuclear research (The UK was the leader in this technolagy in the 40' and early 50's) and computer technology. The 'reciprocal' technology transfer agreement has never been honoured by the USA.
4) The USA demanded the West Indies - they didnt get it.
5) The USA demanded bases just about everywhere on commonwealth territory, they got it. Diego Garcia being the most strategic.
The USA effectively destroyed the British empire they did probably as good a job peacefully as the Germans would have done militarily.
There is more, so much more....
Serbia-Kosovo. I mention this because I feel strongly about it. This is a personal view and not motivated by religion. I apologise in advance to any Albanians reading this.
Kosovo has strategic and religious significance. It has been regarded by Serbians for centuries as sacred, some of their most important religious shrines are there.
The majority population was Serb.
Albania, also believes Kosovo has significance and various freedom fighting groups were set up. There was also concomitant discrimination and suppression from Serbia.
This escalated. Escalated into a religious war - it took in 3 other countries
NATO broke its founding rules under American influence and moved from a defensive organisation into an aggressive organisation. Serbia was attacked.
Now why? Why would the USA get involved? To save the underdog? The answer... Camp Bondsteel.
The largest USA base in the region. Permanent. In Serbia (sorry Kosovo) 7000 plus US personnel. But isnt the region secure already? Thats a lot of military.
It is my personal view that the USA wages permanent economic and military warfare.
hence I agree with your view that the US will come out on top of this crisis - and our Banks did not know what they were buying - more fool them
I like Americans, I have many friends and family there (dating from 1870's). But I do like to challenge their somewhat US-centric viewpoint. It comes from never having to actually run another country/culture. Its still a country in junior school.
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To the poster who said
I wonder how many people are out there who feel they have been mis-sold buy to let properties based upon developers exaggerated and often deceptive future price claims and deliberately deceptive sales practices.
Much like the people who invested in Iceland isle of man and are now regretting their investments, what did they expect? You don?t get higher returns and tax incentives without taking more risk, the benefits of investing offshore obviously will have the downside of a lack of protection in the uk, you cant have it both ways. As for buy to let properties being mis ?sold it?s the same greed factor, the want something for nothing, anyone with a modicum of sense would realise that there was always a downside, but rather than thinking for themselves they were swayed by the get rich quick sales and media promotions, its about time some of the TV property programs started showing a bit more of the downside risk and about time people started thinking for themselves and taking responsibility for the decisions they make.
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For those who say a VAT cut is not going to make you go and buy a new kitchen or a new fridge as the cost reduction is minimal, I think you miss the point, almost every bill that comes into the household has an element of VAT in it, so even without changing a family?s current spending habits they will end up with a little more in their pocket, it might not be much but it is a step in the right direction for everybody.
RP will you be issuing an explanation for your 22% VAT scare mongering if it doesn?t happen or will you be content to make yet another media exaggeration just to gain headlines like your over stated claims on how many banks were going to the BOE for money.
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# 360 MA II
Just curious as to why you're clearly such an avid reader of the BBC's web output and contributor to this blog, given your pretty visceral dislike of all things European?
Not that I'm suggesting you shouldn't read the BBC. For all its faults, at least the BBC acknowledges a world outside the UK, and indeed a world outside "Europe". My experience of US news sources is that they're pretty challenged to report anything outside their own State, and certainly outside the US. Foreign news is certainly covered a bit simplisitically on your side of the ocean.
I'm also interested in how you define "Europe": geographically? In which case you'd dislike a tiny piece of Turkey and about one-third of Russia, but like the rest of those countries. Or do you equate "Europe" with the EU? In which case has your dislike grown or lessened as the EU has expanded. Or do you have some other definition?
I think it's a pity you're so anti-European. If you look closely, I think you'll see the EU edging ever closer to political union, despite reservations from many citizens. The debate draws a lot on your country's early philosophical debates between federalists and states' righters. In our (Europe's) case, I think the states' righters will win the debate, primarily because we're even less homogenous than America and have spent most of the last 500 years at war with each other. You should actually be proud that the US political system is still seen as a model for others, despite 8 appalling years of George Dubya's administration. Hopefully, our debate won't end as yours did with a costly and very bloody civil war.
Finally, I doubt you are as representative of American opinion as you think. I have many American friends, mainly as a result of having worked for US-owned companies through much of my career, and have been a frequent visitor to the US. Other than US immigration officials (especially at JFK), I have yet to meet anyone who was anything other than genuinely welcoming. The US isn't perfect, and few of its citizens claim that it is. The same is equally true of all European countries, and we all delight in slagging off the EU. The stridency of anti-American feeling you will see on the streets here comes from people who have probably never visited the US. Their views are formed exclusively from seeing the way George Dubya has behaved (abetted by Blair to our eternal shame). I think you'll see a very different attitude here when President-Elect Obama takes office. Indeed, the 200,000 "fans" that turned out to hear him speak in Berlin during the election campaign suggests an improvement in European-US relations at the level of ordinary citizens has already begun.
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Some many points so little time.
Increasing tax on ultra-high earners will not work. For them income tax is optional. Tories worked this out when reducing top rate tax down to 40%, tax take from high earners increased. Putting it up will, more than likely, simply reduce tax paid.
Lab. has made it very easy to stop paying top rate tax. Capital Gains is at 18% so instead of paying income tax invest in a scheme that instead of paying income creates a capital gain (only the reverse of the 1970s schemes - never let it be said that Lab studies history).
As for banks being the great evil. In the UK in the last 80 years we have had 2 big banking crisis (now and 1930s) and one smaller one (1974) - which interestingly is about half way between the two big crisis. In the last 30 years we have had 2 major, non-bank recessions (1879-82 and 1990-92) and a dot.com bust - and that does not count most of the 1970s where growth rate was useless, apart from the Heath/Barber boom. Seems to me the finance industry is a long term safer better than manufacturing.
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Comment 350 : MarcusAureliusII
Do you really think that all these wars that the USA has "won" have been about saving the rest of the world from itself? Have they all been huge, grand, magnanimous gestures carried out at great expense to the USA, with little or no upside to Americans other than a massive sense of pride at having, selflessly, improved the lives of various groups of foreigners?
Is this what distinguishes the USA from the rest of the world? Has it risen above other peoples' petty squabbles about power and wealth, so that its actions are never anything other than pursuing the general good, in a way that's equitable and balanced to everyone concerned?
Or is there maybe a tincy-wincy bit of thinking that American hegemony might just ensure that US interests can be kept at the top of the agenda in any international negotiations? Could it be said that there have been occasions where the best settlement between two foreign powers was vetoed because it wasn't in the best interests of the USA?
This isn't saying, necessarily, that the USA hasn't on balance been a force for good. Just that presuming entirely virtuous motives can lead to the glossing over of outcomes that don't fit in very well with the initial presumption. It's only by really understanding the past that one can make fully-informed judgements about what actions to take in the future
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Given what has happened since 1776 to the USA, it might be better if they had never left the United Kingdom. So, why not apply to rejoin?
I'm sure that we Brits could forgive the Americans for joining up with all those beastly Frenchies, Spanish and Dutch in order to gain independence.
Just think, 'Marcus Aurelius', you could have your very own queen, and a proper history and culture.
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#255. maroon3 wrote:
249. delminister
-people shouldnt fear the government, government should fear the people.-
I think they already do.
....
We were the target all along.
Great day to bury bad news!
BBC today:
30,000 police are to be given two days of intensive training on the use of 10,000 new taser guns.
http://news.bbc.co.uk/1/hi/uk/7745137.stm
And if that isn't enough to get your heart racing, has anybody wondered why there is little to no coverage on Iceland? The system is inimical to our interests.
youtube.com/user/dorisig
And it's still early as yet....
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So the chancellor will admit, by implication, that the government's industrial policy of the past decade has been something of a disaster.
Can't wait
#255. maroon3 wrote:
249. delminister
-people shouldnt fear the government, government should fear the people.-
I think they already do.
....
We were the target all along.
Great day to bury bad news!
BBC today:
30,000 police are to be given two days of intensive training on the use of 10,000 new taser guns.
http://news.bbc.co.uk/1/hi/uk/7745137.stm
And if that isn't enough to get your heart racing, has anybody wondered why there is little to no coverage on Iceland? The system is inimical to our interests.
youtube.com/user/dorisig
And it's still early as yet....
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