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Indebted Britain

Robert Peston | 11:44 UK time, Thursday, 21 May 2009

So the government has been put on notice to reduce public sector debt by one of the agencies widely regarded as having exaggerated the safety and quality of all manner of investment products that turned out to be toxic.

However the right response is not to laugh.

Standard & Poor's, like Moody's and Fitch, still has tremendous clout - not least because even the Bank of England still uses their ratings of creditworthiness to determine which assets and securities it will take from banks.

First things first. No reason to panic.

There may have been a bit of weakness in sterling and UK government bonds or gilts this morning. But nothing cataclysmic.

And, strikingly, the Debt Management Office has this morning completed the biggest ever auction of gilts in history. And it sold the lot very comfortably indeed, with far more bids than it needed.

So we ain't bust yet.

Also, S&P has not said that the UK will definitely lose its triple-A rating, its rare and precious badge that we are good for our IOU's in all seasons.

Putting British sovereign debt on negative outlook is not as bad as being assessed for possible downgrade, which almost always leads to a downgrade.

Apparently, a negative outlook is followed by downgrade in about a third of cases.

And some would say that S&P is stating the bloomin' obvious, that public sector debt is patently rising too fast - and that we can't assess the long term health of the economy, or the ability of the government to meet its financial obligations, till we know the taxation and debt plans of the next government.

S&P is thus in slightly different language repeating what the IMF said yesterday, that the UK needs a bolder plan to stem the rise in the national debt.

Comments

Page 1 of 3

  • Comment number 1.

    A change of outlook to negative should be taken as a warning to the UK.

    I fear though that Alistair & Gordon are blindly leading us up an alley that will lead to a downgrade and an inevitable IMF loan.

    Many have seen this day coming but it doesn't make the poison taste any better for it.

    I'll leave others to make the obvious comments re prudence, end of boom and bust etc.

  • Comment number 2.

    "We ain't bust yet". Check your definition of bust, then put all the PFI, Network Rail and other off-balance sheet debt which Gordon is hiding up front. I think you'll find we are!

    What is more obvious is that we need an election now so that the IMF, Standard and Poor etc. can have a longer term answer on what Britain is doing to get finances back on track.

  • Comment number 3.

    NO NEED TO PANIC YET. WE HAVE TIME FOR THAT NEXT YEAR.
    Robert, tell me about off-balance sheet toxic investments.

    The UK is damaged but hopefully not beyond salvage.

  • Comment number 4.

    This suggests a general election soon would be in the long term interests of the economy as no government is going to articulate bad news in relation to recovering from public sector deficits before a general election. The result is almost inevitable but the 100 to 150 re-elected Labour MP's need to focus on purging the failed New Labour policies in readiness for the next but one election.

  • Comment number 5.

    Joy so it is cuts all round no matter who gets in power next.

    Can I make a few suggestions where we start?
    1. give MPs a flat rate with no expenses. If they have to travel in to London the chances are their main home is cheaper and local wages lower. This would also do away with all of the costly admin associated with it.
    2. get rid of at least 50% of quangos they have mushroomed under current adminstration and most serve little useful purpose except providing jobs for the well connected.
    3. reduce NHS (in fact all civil service) management posts by at least 1/3rd
    4. stop all new admissions to gov final salary schemes.
    5. start talks aimed at reducing current liability on gov pensions.
    Right think that is a good start, guess no one would really notice most of these, so probably being totally unrealistic as they are much more likley to cut waste collections....

  • Comment number 6.

    Never mind. Viggers is out for a duck. That'll save a few bob.

  • Comment number 7.

    Can anyone quantify the risk premium if UK debt is downgraded and what this will mean for interest rates?

  • Comment number 8.

    "First things first. No reason to panic"

    no, unless it's personal debt...



    Repossessions, insolvencies, liquidations, unemployment, seizures, court orders ALL up and nobody came..


    GC

  • Comment number 9.

    Has anyone ever worked out what percentage of the population needs to be un-employed for a service based economy, such as ours, to stop functioning?

  • Comment number 10.

    How is it that a mere rating agency can affect at countries standing?
    Why on earth, after their failings in the very recent past regarding lots of financial institutions and products, are they even being listened to!?

  • Comment number 11.

    Quite simply Robert -- Great Britain needs and deserves an election so that the people of the country can vote in a government that will actually address the massive public spending plan adopted by Gordon Brown and Darling. GB/Darling were key factors in bringing the country to it's financial knees. Time for them to be moved on and make way for a leader with the ability to make tough decisions. It won't be easy but as all the major economic analysts are saying [IMF, S and P etc], the UK MUST address public spending if it is to turn the situation around.

  • Comment number 12.

    The very fact that you felt the need to add "...by one of the agencies widely regarded as having ... " is laughable itself. No amount of pro-government spin can avoid the fact that Labour have messed up the public finances - again.

  • Comment number 13.

    Yeah yeah Peston we know the drill

    Everyone else thinks we are bankrupt, everyone else is stupid, labour know what they are doing, dont panic.

  • Comment number 14.

    As I see it, the widening public sector debt is not due to increasing government spending but the dramatic fall in tax revenues. If Robert's previous blog about excess pay bonuses were to be axed across the board in all industries the fall in tax revenues would be accentuated even more - personal tax rates are higher than corporation tax rates. What is becoming clearer is that only certain economic sectors are responding to the financial stimulus.

    What is worrying particularly for the PM at PMQs yesterday are questions from Labour bankbench MPs complaining about banks not able to provide loans to struggling businesses. Are banks at board level saying one thing and at branch level something different?

  • Comment number 15.

    Interesting that even this has only mildly dented sterlings value against dollar - a month ago this would have caused sterling to drop like a stone.

  • Comment number 16.

    While what you say is true, this is like sitting on the Titanic and saying dont worry that big white thig we are heading towards is basically water. Ive never seen anyone spin so hard ti try and put the best light on sucha disaster. What you fail to mention is that the reason wed are in this position is a very important phrase in the S&P comments.It refers to "general government debt" ie all the debt the government doesnt put on the books to try and make themselves look good, well these days less rubbish. The reality is a better way to deal with these problems Robert, sticking your head in the sand and saying its not all that bad, like your friend Gordon, will never get us out of this mess.

  • Comment number 17.

    But what are S&P going to say after another 12 months of crash gordon?
    It can only get worse.

    Remember:

    Things can only get better....
    No more boom and bust ....
    Government of all the talents ....
    No election while I work on strategy ....

    First run on a bank for 100years
    First speaker to be removed for 300 years
    First lords to be suspended for 300 years

    How many more firsts?

  • Comment number 18.

    Robert, you've said it in your opening paragraph - why should we take any notice of rating from S&P who's sort got us into the hole into which we have now fallen.

    More importantly, why should, just because of their latest utterance, sterling fall by 1 cent against the Euro. The heard instinct is alive and well, and living still in the financial markets.

    As has been said about the House of Commons - changing the speaker achieves nothing, it's the rules, and the way (the financial markets) operate and are regulated that needs to change. We can't continually be in hock to them.

  • Comment number 19.

    Heads up to those in the public sector,up to now its been the private sector that has taken all the pain of the credit crunch in terms of job cuts and reduced pay packets,but that will change in the next 12 months.The budget deficit will be significantly greater than the governments projections and thus drastic cutbacks will be required.First to be affected will be large capital expenditure projects.But the next government will have to make significant cuts in all areas including a drastic review of public sector pensions.

  • Comment number 20.

    How many lunches will the UK Plc need to buy to keep a good rating? On the quality of the ratings of financial products now gone or going down the pan there can be nothing systematic in the process.

  • Comment number 21.

    We already have a "bold plan" to cut debt,the boldness revolves around the breathtaking growth assumptions that underpin our debt repayment plans.Real growth comes from improvement in productivity and/or innovation in industry..no chance.We need a "painful" plan to cut debt,the longer we ignore this the more painful the medicine.

    Also I have to question using demand for gilt auctions as a barometer of health.So long as we use Quantiticve Easing to 'print money' to back bonds demand will be artifically high.QE has to end sooner or later at that point we will see the real demand for gilts.

    Our relative economic stability is an illusion, we are still heading for rocks.

  • Comment number 22.

    It's small wonder that Gold is going through the roof.

    And despite poor gold jewellery sales on the high street...they can't find enough new gold to keep up with demand!

    Has anyone else noticed the ads for 'old gold' in the local papers?

  • Comment number 23.

    This is the very topic which will dominate our politics for years to come. This is the potential chaos the Prime Minister is obsessing about. This is the big gamble on which this government has staked our futures.

    Can we find enough buyers for our debts? Does enough capital exist in the world to fund both the debt of the UK, the USA and all other deficit rich countries in the world? I hear the sound of interest rates rising.

    The best way to deal with debt is not to get into it in the first place, but assuming you have and possibly for the best of reasons the only ways I know are to start paying it off and to stop adding to it. At the expense of being accused of sensationalising as if I was writing the Daily Mail, I would say that I see no sign that this government is doing either.

    However, there are inferences in the budget statement that some cuts are already in process and all government departments have been told there is no more money. Is this the austerity that Cameron is talking about or the chaos Brown fears?

    How the political class set out to square the circle is yet to be seen. I know I would be looking to cut government spending but not in a way which would damage front line services and capital expenditure. These are the two factors which will help to maintain and improve employment at a difficult time. I do accept that this begs the question as to what is to be cut but certainly quangoes and consultants are going to have to work very hard to ensure they have a prospect.

    An austere future awaits us all. We need to return to the principles of added value and accept that investment actually needs a tangible return.

  • Comment number 24.

    Isn't a large chunk of the debt being built up also accruing assets (shares in banks, mortgages, derivatives, etc.) - almost all of which will be worth something in the future (not always as much as the government paid for it for some). Or is this already accounted for in the debt figures the put out (and in which case how are the valuing things that the market couldn't)?

  • Comment number 25.

    S&P downgrading our rating is a disaster.

    This is Brown's economic legacy to this country.

    This is a very dark day for our standing in the world.

  • Comment number 26.

    Have you ever thought of being a labour party spin doctor Robert?
    Step 1 - Focus on the positives (check)
    Step 2 - Rubbish those who report bad news (check)
    Step 3 - Claim the Tories wouldn't do any better (not in this article)
    Step 4 - Blame Thatcher (I'll be waiting for this)
    Step 5 - Ensure good news is higher up news agenda than bad news (???)

    Whatever you're opinion of S&P, the simple fact is that a Debt to GDP of 100% just isn't something you'd associate with a AAA rated nation.
    The big point you've missed here is the fact that the negative outlook has come so early. It suggests that S&P don't feel the need to wait to see whether the economy follows the path set out by Darling in the April budget - they've dismissed it as fantasy

  • Comment number 27.

    You are kidding right? This is no big deal, nothing to see here, don't worry?

    Robert, if one were to put in an FOI request, might one find any communications from HMG to you on this issue today?

  • Comment number 28.

    Robert,

    Your flippant poking fun at S&P missing the point.

    We should not be here in the first place.

    No Chancellor worthy of office runs such a massive deficit in the good times, let alone such a massive deficit in the bad times.

    Reading the S&P statement they seem to be hedging their bets on a new government in 2010 that will sort it out.

    We need that election now and we need this government gone now.

    Then the painful process of rebuilding can begin.

  • Comment number 29.

    What interests me most is who are we actually in debt to? Which I suppose to a certain extent equates to asking who is buying the Gilts. Are we in debt to
    - our own Pension Funds?
    - a relatively small number of rich individuals (either directly or indirectly via Hedge Funds, offshore funds etc)?
    - foreign banks and governments?

    Why does this matter? Well, there seems to be a lot of suggestions out there that we must all suffer for the next decade (higher unemployment, higher tax, lower public spending, increased retirement age) in order that the debt can eventually be paid off and the system can return to the status quo. But do we really want to return to the status quo (ie the same distribution of wealth we had at the start of the crisis). Perhaps the more fundamental problem is that the distribution of wealth had gone badly out of equilibrium and that indeed was a major cause of the crisis.

    If that is the real problem, then it needs to be addressed first. Redistribute wealth from rich to poor. Find a more viable way of paying for pensions. Sort out international trade so there are no longer big net importers and big net exporters. By doing so the burden of paying off the debt would fall more on those who have benefitted excessively during the preceding years.

  • Comment number 30.

    There's every reason to be very worried.

    First if even the clods at S & P et al can see it, only months after the visible debt was incurred and everyone else in the world cottoned on, then it is pretty dire.

    Second, there is also a vast off-balance sheet debt for such things as PFI hanging over us.

    Third, there are goingto be a lot fewer tax payers, private and corporate, and far more claimants. The balance is shifting the wrong way fast.

    So yes, I am worried, really.

  • Comment number 31.

    'Apparently, a negative outlook is followed by downgrade in about a third of cases. '


    I wonder what camp we are in

    The 33% or
    The 67%

    ;-)

  • Comment number 32.

    is'nt it about time these "Credit Agencies" were investigated and asked to explain themselves? If they were any good surely they would have predicted the current financial crisis? or at least warned us of some of the problems inherent in the banking industry? Why does anyone still pay any attention to them?

  • Comment number 33.

    Gosh this is tedious isn't it.

    S&P couldn't rate a DVD let alone national debt/outlook of an entire economy. It's absurd, just look at Iceland, Ireland etc.

    That isn't to say we aren't borrowing a lot of money, clearly we are/have, but by and large the effects short term of policy (borrowing and spending) must be seen as positive, at least mitigating a potential meltdown. Fair play for that at least.

    S&P however- where were you? Who are you? And what do you offer? Lets downgrade them by ignoring and minimising their significance, whilst (cough cough) starting to watch the pennies and seriously look at reducing over medium/long term national debt.(but not as a result of what they say you understand).

    Politicising money results in so much hypocrisy and irony it's comedic.

  • Comment number 34.

    "S&P is thus in slightly different language repeating what the IMF said yesterday, that the UK needs a bolder plan to stem the rise in the national debt. "

    Will the UK get the bolder plan?

    Labour's signal about Tory "cuts" at PM questions shows their balancing of the national interest and party interest.

    The Tories will have to cut to pay off debt - definitions aside about what is a cut and what is greater efficiency.

    Neither of the main two parties saw the crisis coming and the actions taken to date do not, so far as an interested non-economist can see, mean that the "unique global phenomenon" (actually pretty much a Wall St Crash re-run) can happen again.

    Maybe Labour know the Tories are going to change things and so making their own changes to the BoE/FSA balance would be an admission of guilt.

    We still don't know how much toxic debt there is and where it is.

    But if things are getting better and this is not another bubble that will burst further undermining recovery then thats good.

    But I so wish the mighty Vince Cable was let loose to fix things - though even he did not really identify the regulatory problems before the event.

  • Comment number 35.

    I know most on here are of the "every silver lining has a cloud" persuasion, but it is also worth noting that the record issue of gilts also has a yield of 2.6% compared to a long term average for non-indexed linked gilts of c4.5%. That means the cost to the UK of servicing its debt is not increasing nearly as fast as its overall borrowings.

    The fact is that, whilst we should not have tested the outer limits of debt capacity as far as we collectively did, most countries/companies/individuals will just learn to live with their debt levels. Those that can refinance at current rates will, in fact, be sitting quite comfortably.

    Still not slitting my wrists.

  • Comment number 36.

    This is a fair analysis of the situation in which the UK finds itself. And in reality the UK will likely benefit in the long run from a little externally imposed discipline on its finances.

    However, let this be a warning to Gordon Brown not follow Barack Obama's disastrous economic policies of reckless spending, eroding the tax base with draconian tax increases and getting the central bank to print money limitlessly. Barack Obama has no external check on his power - neither ratings agencies nor Congress nor a sycophantic media -- and will take these policies too far. Brown has checks on his power in the UK, and would be well advised to stop idol worshipping Obama before it leads him straight out of power.

  • Comment number 37.

    Why should I be worried - my job is still secure, like the vast majority. There is still food in the shops and power coming to my home. The sky is not falling as much as the media would have us believe. This is not like a debt on a house when you have to pay it back before you die - we have the rest of Human history to pay it back and personally that means I will enjoy my life. I'm truely sorry that some lose their jobs in this downturn but that has always occurred and will happen again, hopefully they will get a job when the economy picks up again as it surely will.
    What is important is that Public Services are not cut during this period so that those truely in need, our schools and hospitals do not suffer. If that means borrowing more today from some infinite point in the future
    then that is fine with me.

  • Comment number 38.

    "some would say that S&P is stating the bloomin' obvious, that public sector debt is patently rising too fast"

    Some would say? That would be everyone aside from Gordon and Alistair then?

  • Comment number 39.

    What, pray, has Standard and Poor done to improve its own performance?
    We need to know before we place any credence on their comments. Unless of course, you're a Tory, in which case any bad things anyone says will be lapped up and regurgitated ad nauseam.

  • Comment number 40.

    A very laid-back article by Robert! Wandering even further from the business beat into Stephanie Flanders' territory.

    But this is actually relevant to business, for the following reason. While public debt does have to be managed responsibly by government, the only way to answer how quickly it will be paid off is to ask: how productive is the UK private sector? And that's a critical question which government does have an influence over - here's why:

    http://www.knowingandmaking.com/2009/05/private-productivity-and-public-debt.html

  • Comment number 41.

    Yawn.....

    I believe just about everybody has been saying the UK needs to reduce public sector debt.

    Except, of course, the Government........

    Time for a general election.

  • Comment number 42.

    Browns comments in yesterday that we don't want teh disruption of an election when he is tryig to get things sorted is his opinion only to my knowledge.

    I have yet to talk to one person who shares that view.

    Labour is disfunctional, morally bankrupt and singularly incapable of organising anthing eitehr efficiently, effectively or on budget.

    Call the election Mr. Ditherer and then realise you can dither anyhwere else except in 10 Downing Street and let this country move ahead and it desperately needs to do. For sure you will be remembered as a total disaster!

  • Comment number 43.

    Well, Robert, you have bought the Treasury line, or are spinning it. The problem is that no independent commentators, economists or organisations believe the UK economic forecasts produced by the Government. They all think that the fall will be deeper and the recovery slower than projected by the Treasury, and the forecasts for the medium term are hopelessly optimistic. It is only when we have a government that gets to grips with borrowing that we will see ratings agencies happy again. Since Brown is constantly harping on about the Tories wanting spending cuts, I really cannot see this government grasping the nettle. I look forward to a year of negative comment.

  • Comment number 44.

    It beggars belief tnat we still pay any attention to S&P. They were the ones that colluded with the investment banks to put AAA ratings on the toxic debt thant our banks bought. They should be brought to justice and made to pay. True to form equity markets tanked well before the news was released. Look at the Forex markets they fell at 0942 when the news came out yet the options stunters had already sent the stock market 2.2% lower an hour or more before the data was released. Coincidence- of course. We will not turn the corner until we get our pound of flesh from those who engineered the current situation. Somebody please inform the FSA that perhaps they should have a look at the rating agencies and their role in this whole debacle.

  • Comment number 45.

    The Government is discredited and the right-wing tabloid rags (Daily Mail/Express) seem to make me believe that we are stepping closer to complete anarchy.

    Labour's solution to preventing problems has always seemed to be:

    1) Let the problem happen
    2) Throw taxpayer's money at the problem
    3) Repeat step 2 until problem is perceived to have disappeared
    4) Take all the credit

    (apart from the current fiasco with MP expenses, where step 2 is "sack an MP")

    It is a complete joke, but as you say, it isn't funny at all. I feel virtually powerless. The only power, it seems, to change our woes, is to vote in a General Election to change the party of government.

    It is most likely that the new party to be elected is the Conservatives. They'll hold power for a number of years, until public confidence in them wanes, as it always seems to be.

    Then what? Labour will be back in, ready to cause more misery unless there is someone else big enough to present a challenge. That is what we all need to be part of to make it happen.

  • Comment number 46.

    Of course there's no need to worry beacuse it's a Labour government in charge. This worries me greatly, this is serious and we need an election now.

    What do we need to do, another riot like the Poll Tax, would that get some attention? The country's finances are in dire straights and something needs to be done and soon.

  • Comment number 47.

    Debt is OK so long as you can service it and roll it over. That is so long as your creditors are happy - this report is a warning that the UK creditors are not that happy.

    If debt has to be reduced (as it must be) there are just two ways to do it cut spending or raise income, or do both. Long long ago last year many of us on this blog pointed this out it seems that the rating agencies have just playing catch up.

    The problem is that the political will to either do anything or in the Toey case even talk about needing to do anything is absent. This is all due to the proximity of the General Election. If the Tories win and have not been honest with the electorate about the need to take action about this problem they will very quickly be hated by the electorate - the trouble fro them is that by admitting now that something must be done about it they think the risk not winning! On the other hand Labour are scared about actually doing anything, on the expectation that the Tories will win and then the Tories will be punished by the electorate.

    These simple political realities will however damage the economy as nothing will be done and thus any recovery will be delayed. Indeed it is probably that the do noting policies and the actually going the wrong way policies of the Bank of England will make things much worse.

    PS fire the the Governor and the MPC NOW.

  • Comment number 48.

    10,

    Becuase they are part of the mechanism used to implement the con that is capitalism / democracy ;-)

  • Comment number 49.

    "So we ain't bust yet."

    Just like most of the banks aren't actually bust either?

    If this isn't bust I don't know what is!!

  • Comment number 50.

    What concerns me for Britain's sake is that all the cheap (immigrant) labour is fleeing the country and some are even leaving their debts behind them. What concerns me even more is who is going to fund the NHS and pensions pots in a few years time? The City of London has been nationalised and the finance sector will never again employ the numbers of people it used to and will never again contribute as much to national coffers as it once used to. What other sector (manufacturing or otherwise) is going to step up and contribute?

    What further concerns me is that the UK is not self-sufficient in energy supplies any more. There's another potential cold winter coming and the price of energy is soaring because investors are buying it as protection against all too inevitable inflation. What if Sterling is too weak by then to pay Norway's and Russia's prices?

    Negative outlook followed by negative review followed by ratings downgrade is imminent in my book. Then the cost of debt soars and it becomes a bit of a death spiral. Better make sure British diplomats are getting out there and securing some wealthy friends. May not be just the banks that need bailing out in a year or so...

  • Comment number 51.

    And what about the pension provisions for all of the disgraced retirees? Poor chaps. It can be argued that they did to our country what Sir Fred thought he was just doing to his bank. I know, his actions had massive consequences for millions of ordinary people. Actually, this is a point of similarity. The morality of these people is what has driven all of these individuals' actions, not just the odd duck island here and there. So, we have, thanks to a leak to the press, seen the tip of the iceberg, so I hope that our reaction will not be to just smile and pop a bit of it into our gin.

  • Comment number 52.

    Surely what we need to focus on here is not so much these observations from the IMF and S&P, but the Government's risible forecasts and (lack of) plans for gripping the public finances in the medium-term.

    This Labour Government has absolutely shredded the UK economy (by design) and has yet to demonstrate it understands the thermonuclear bomb that is future state spending (actual and contingent liabilities) and debt. The truth is that, as has been the case throughout the time we've been ruled by the Labour Party, we are even now being deceived. They just don't get it, do they?

    The Government knows full well that its economic forecasts and related plans are fantastic: they represent a most desparate risk to the lives of ordinary people; but of course that reality doesn't win votes.

    Since we now know for certain that our political class has its own interests at heart (Gordon Brown tells us that a general election would "cause chaos", ie politicians would lose their taxpayer-funded, luxury lifestyles), my suggestion to my fellow citizens is to prepare for the worst in the coming years.

    These guys in Westminster are arrogant, incompetent, self-serving dolts: that's why the UK's economic, political and social circumstances have been in a nosedive for a decade, culminating in a flat-spin right now as we blog.

    I have no further interest in our political elite, in what they say (lie) or what they do (steal our money): they can go to hell in a handcart. For me, the watchword for the next decade is 'community self-reliance': an essential attribute as our national socio-economic circumstances implode ... courtesy of a decade of The Brown Terror.

  • Comment number 53.

    Have a degree Robert... a B.A. Hons (Brown Apologist, with Honours)

    As I pointed out in an earlier post, look at the tiny level of Gilt issuance outside the 5-25yr windown where the BoE is buying..... THERE IS LITTLE NATURAL DEMAND for UK Governement paper.

  • Comment number 54.

    "S&P is thus in slightly different language repeating what the IMF said yesterday, that the UK needs a bolder plan to stem the rise in the national debt. "

    But we definitely won't get that until we have a General Election and a change of Government!

  • Comment number 55.

    Want to hear something scary?

    Usually bull traps - or dead cat bounces historically last about 30 days. I was surprised to see the upturn in the market going for much longer than that.

    Could the frightening prospect be that the extended length of the trap (bounce) indicates a much longer and deeper fall now it's over?

    If you look at 1929 data, there was the initial fall (caused by a credit crunch I believe) which was steep, followed by a bounce, followed by a much longer and slower decline - which is much more difficult to stop.

    My brother asked me the other day - 'why are the markets rising when there is clearly job cut after job cut and downgrade after downgrade?"

    "maybe the markets have finally lost their senses" - I replied.

    However I believe the reality is that markets can only react to the information they have - if that information being supplied is wrong, or altered in some way - they will appear to act irrationally.

    Governments have been giving out bad forecasts - hugely over-optimistic

    Companies have (nmore so in the States) been employing tactics to hide their interim losses (I think AIG changed it's reporting date to hide December)

    There is also talk of 'profits' at some of these banks, but this is actually taxpayer subsidy and not profit at all.

    I think this recession will prove once and for all that "You CANNOT talk your way out of recession - no matter how much you try"

  • Comment number 56.

    Don't anyone even suggest things may be improvong or these moongazing incompetents Brown and Darling will go off and borrow more cash we cannot afford to pay back.

  • Comment number 57.

    'So we ain't bust yet'

    Robert, you said it. Perhaps you can spell out the hyperinflation plus poverty consequences of when the UK does go bust, which most educated economists know it soon will. We are technically bust now, it is just that the government has only recently started printing money by ordering its nationalised banks to lend it money via gilt purchases.

  • Comment number 58.

    yet???

    people who panic early are usually the ones that come off better in the long run - you should have been panicking last year really - if you leave your panicking to when the gilt auctions fail (and they will), or when the pound crashes and interest rates have to be raised (inevitable), or when printing money unleashes an inflation hell - well, you've left it too late ;)

  • Comment number 59.

    The is the same Standard and Poors that gave Lehman's an A rating ?

    Sorry, to be accurate it slightly lowered the rating from A+ to A a couple of weeks before Lehman's complete demise.

  • Comment number 60.

    It was the credit rating agencies rating of securitsed sub prime mortgages that helped start this mess.

    The answer is simple, seize the assets buried in off shore tax havens of those that have received the mega bonuses and mega rewards from hedge funds etc. These are the same people now bleating about tax rises, government debt, rather than supporting any moves to help the victims of their greed.

  • Comment number 61.

    Peston and Robinson - ZanuLabour double act on taxpayers expenses. This is an AFFRONT to the electorate and the ramblings of a child. WHERE exactly do u not worry about the UK`s finances Mr Peston. As a so called - highly paid Zanu Labour mouthpiece, it is too much to expect rational reporting but please save us the ZanuLabour spin and guff. The UK is broke - face it - Clown and Co got us here - the Tories have one hell of a job ahead of them. By the way why not publish your salary and expenses - in the name of democracy??????

  • Comment number 62.

    Is this a practical example of the forthcoming reality of this situation, I wonder?

    My wife, who is a doctor (let's call her Dr Moraymint) in a district hospital here in Scotland, has just called me at the office to say she has learned of plans being cooked up to close her complete unit with unseemly haste. There's an air of panic amongst the NHS management class (here it would seem anyway) as it presumably starts to foresee and feel the practical impact of a country heading rapidly for insolvency (to all intents and purposes).

    The truth is that when you add in all the contingent liabilities and off-balance sheet debt that Gordon Brown has loaded on to the public sector (his usual masterclass in economic deceit), we're as good as bankrupt. The impact will be felt soon enough: for my family, possibly sooner than we would like, if my doctor wife is fired. No doubt this Labour Government would argue desparate times need desparate measures.

    It's just a pity that our own incompetent political scum led us to where we are today on a socialist ticket that decreed that everyone had to get rich quick. So, inflation measures were massaged, credit costs were artificially lowered, the money supply stoked up and, hey presto, we have a debt-fuelled, never-never economy with everyone owning and flipping houses and cars that they could never in the end afford.

    Meanwhile Gordon Brown could tell us we were all prospering whilst he was spending unfeasibly large sums of non-existent money on ever-worsening public services (ask my wife about the decade-long collapse of health services). The man truly is a genius.

    And that 'incompetent political scum' I mentioned earlier (aka The Labour Party) were all along being led (aka bullied into silence or else cut off at the knees) by that mother of all confidence tricksters, one Gordon Brown MP.

    No wonder Brown tells us that an election would "cause chaos". It would reveal the Labour Party for the unmitigated disaster that it is and has been for a decade and more.

  • Comment number 63.

    All major credit rating agencies has lost all their creditworthiness in the financial crisis. Look at how the AAA rated CDS loses in value overnight. The worst joke is the Iceland still got their AAA status on the day of their own bankruptcy. The rating agencies grossly overrates their own ability of rating.

    If anyone wants a better indicator of credit risk, better to look at the CDS. It is not a perfect measure, but it is much more superior than those overrated credit agencies, plus it is more timely.

  • Comment number 64.

    please explain where the money we borrow comes from. who is lending all this dosh to our govt?
    I thought every country was struggling..even china?
    thanks

  • Comment number 65.

    Why wasn't this news story on the main lunchtime news?
    Why isn't it on the front page of the BBC website?

    People need to be made aware of where we are at, and the credit agencies are independent inspectors of our markets. They count. This should be headline news not tucked away.

    Come on BBC - wake up and please report the facts to the people!

  • Comment number 66.

    "First things first. No reason to panic"

    Absolutely, Robert.

    In fact, this Hitch-hikers Guide that I have here seems to agree with you - it says "Don't Panic" in reassuringly big letters on the front of it.

    It also says, of planet Earth, that it's "Mostly Harmless".

    Oh, how reassured I feel about all that.

    Was that a Vogon I saw over there?

    (with apologies and great respect to the late Douglas Adams)

    .

  • Comment number 67.

    37,

    Has a secure job, and doesnt mind borrowing so he can keep it. lol what a gem of a post!

  • Comment number 68.

    ...want to hear something else scary?

    I have a man on the inside in one of our great institutions (I'm not RP so I won't name it). They were hit quite hard by GMAC and other sub-prime losses, racking up a deficit of some 850m (although this figure may not be accurate). One of their bigger exposures was to a famous high street brand - who is no longer with us.

    The management decided that they needed to fill that hole - and therefore started issuing fixed rate savings products which have a 1 yr maturity. These products were pitched at a very high rate (for these times) and the takeup has been exceptional - enough to plug the hole.

    Unfortunately there is a rather large liability to pay when these fixed income products mature. However the grand plan is to sell more insurance and payment protection to provide the revenue to cover this payment in a years time.

    This is how banks and building societies operate - they are gambling on the recovery being like the chancellor said (which we all know is a pipe dream) as the additional products are all mortgage related and in order to raise the required revenue they need the mortgage business to dramatically rise to the same levels as about a year ago.

    This is not much better than a Ponzi scheme as they need the new money to pay off the old debt, just to keep the thing going a bit longer - but I will be surprised if this insititution survives once the payback deadline hits (I think it's summer next year).

    We all put our faith in the fact that the people who are in charge know what they're doing - the reality is very different and very scary.

    This is how crashes happen, they don't loose everything on the first day, but the process of domino's takes some time. The markets thought it was all over but the reality is very different. This particular institution was hit hard by someone going bust 6 months after the credit crunch started - and the insititution itself might be able to survive for a year before it's either bankrupt or bought out.

    Gamblers are running our country - we're on the biggest gamble yet and I certainly don't like the odds.

    The problem is that as we now know - MP's who make these decisions do not have the same concerns as us (mortgages, food bills and inflation) in fact their concerns are more moats, duck islands (I still can't believe that one!) and plasma TV's.

    So is anyone still confident that GB is doing right by us? It seems clear to me his goals and the goals of his party are not aligned with the general public as a whole, but with a very small number of wealthy individuals.

  • Comment number 69.

    Pesto - and your claim about the Gilts auction going swimmingly ? Hmmmm.... care to comment on who is doing the buying?

  • Comment number 70.

    What interests me most is who are we actually in debt to?

    well Robert "forgot" to mention this, but the "successful" gilt auctions largely consist of the Bank of England buying government debt, using money cooked up via quantitive easing. We are funding our own debt, using imaginary money.

    Clever eh?

    And our children and grandchildren will pay it back.

    Assuming we don't have to eat them to get through the economic catacylsm that is unfolding. but hey, dont' worry. Robert says no need to panic. The BBC focus is on duck houses, and the causes of duck houses. No need worry. Just go back to sleep. Sleeeeeep. Remain calm... all is well. Sleeeeeeep

  • Comment number 71.

    Lest we forget that it's the astonishing greed, incompetence and self-delusion of the PRIVATE sector that has bankrupted us as a nation ...

    Of course there should be a spotlight on public spending in the current circumstances, however it is not the public sector that is principally at fault for the position we find ourselves in.

    The only answer is to bring back national service!!! ... or slightly more realistically, how about some kind of scheme that encourages/incentivises/requires people to work in both sectors at some stage of their careers?

  • Comment number 72.

    #29 Random_thought

    An interesting question posed. My answer is b "a relatively small number of rich individuals (either directly or indirectly via Hedge Funds, offshore funds etc)?"

    If you look at the history of debt, and more specifically - why has it grown so much over the last few years?

    With the constant re-distribution of wealth going upwards, the only way the poorer members of society can manage is by taking out debt. The debt fills the hole created by the overproduction which is endemic to Capitalism.

    When the Governments of the world decided to take control of interest rates (through central banking) they thought they had solved the crisis.

    Sadly, like many gambles, all they did was put off their losses to another day. The only way to alleviate overproduction and to stop deflation is to give people money with which to buy all those goods and therefore maintaining the price. Giving money away will devalue your currency - so the next best thing is to lend it to them.

    The rise of debt in this country (and around the world) is simply a tool for hiding the yawning gap between the richest and the poorest. It's very effective, but as with all good cons, it will be found out sooner rather than later...

  • Comment number 73.

    No other business is run potentially by any one of five or six separate and distinct boards of directors and while one is given carte blanche to run the business as they see fit the others sit in the wings and have to content themselves with issuing petty jibes and criticisms if not downright lies about how much better a job they would be doing.
    If this state of affairs happened in business it would be in constant and confused turmoil each time the new board of directors took their seats and changed everything and would ultimately be in a mess.
    At the head of and over Party Politics should be a body of the most talented people elected to ultimately govern our country, not according to their party political beliefs but according to what is best for our country and what is right and wrong. That cannot be very different whatever party you happen to belong to. In other words, run it like a board of directors running any business.
    It is time for a big shake up and for Politicians to put the Governing of our country above the sometimes ridiculously childish tit for tat tribalistic Party Politics and to remove entirely the greedy temptation of personal extra rewards.

  • Comment number 74.

    Robert,

    You should be looking much deeper into what is happening. Such a Budget deficit is quite unsustainable and Public spending must be reigned in and Public Sector final salary pensions halted.

    Not just rating Agencies or the IMF but China and Japan are looking very carefully at sterling. The main reason is that these two Countries, then adding in the Oil rich Arab Countries hold 80% to 90% of the Worlds foreign reserves. China holds almost two Trillion, mostly in US dollars. The judgement now for them is that the dollar will tank and a new basket of currencies will become a "Reserve Basket" of foreign currency to hold for foreign transactions.

    Sterling is in the frame to join that basket when the US Dollar is kicked out as the Worlds reserve Currency and the currency to price both Oil and Gas. Our currency itself has now beocme a "hostage to fortune" as it has risen sharply in thev past 24 hours against the US Dollar. I believe that the Chinese and Japaese are dumping dollars and simply buying positions in stering and other key currencies for the future. That is why UK Sterling has not yet tanked over either the expenses debacle or these latest terrible trade figures. The UK Economy, certainly our currency, is now out of our control and in the hands of currency speculators, the IMF and the Ratings Agencies.

  • Comment number 75.

    #21 You correctly point out that the bond market is totally artificial at the moment and is effectively a guarranteed win for the hedge funds buying the debt. They just sell it back as part of the Quantitative Easing plan and lock in the profit earning themselves a nice fat profit for nothing!! Brilliant!!! When QE stops (in the next few months if M4 improves sufficiently) look for dumping of these bonds (the people who bought into this latest bubble too late) and an empty 'auction room'. Then wait for the downgrade and increased debt servicing costs for UK plc - keep working everyone!!!

  • Comment number 76.

    This government are too busy with bailouts and scandals, the real economy is suffering BIGTIME. This government are a mess, a disaster and it will only get worse.

    Still,

    Nice to see that after helping out the hard pressed bankers, the hard pressed politicians are ok.

  • Comment number 77.

    We will neither cut nor grow our way out of this.

    But we will have to learn to pay for the services which everyone has come to expect; from health and education and frail older people supported at home, to not having out-of-work paupers on the streets, or a thousand Baby Ps.

    OK, we can't afford Trident or ID cards or expeditions to Iraq or Afghanistan. But the only real solution is 5p or more on basic rate of income tax and 10p/litre more fuel duty. Gordon Brown is still running away from reality, reacting not leading. I only wish I could anyone else doing better.

  • Comment number 78.

    If the debt issue were a problem, then our national debts - including households & businesses - would be way higher than in all other OECD States. But they're not. If market participants thought the UK Government debt was not worth buying, that would be reflected in a premium vs other European States. But there's no such premium. Nor is our exchange rate out of line. If anything $1.56 is probably a full valuation. M Broughton of CBI is correct: the timely and accurate interventions by HM Treasury & BoE have done well. Perhaps that's why UK decline is less than in USA, Japan & Germany? Moreover, Brown's leadership @ G20 achieved their trade co-operation to above expectations.

    Maybe we're all missing something here? Could it be that what is described as Brown's hesitations are actually his pausing to gather evidence and expert opinion before launching pragmatic policy? Isn't that sort of thoughtfulness what we really need?

  • Comment number 79.

    Spot the odd one out :-)

    analysts reaction

    KENNETH BROUX, ECONOMIST, LLOYDS TSB CORPORATE MARKETS
    This is a reality check for the UK government. They are not the US. (The debt to GDP ratio) is set to rise sharply. Whether we get to 100pc depends on the bank liabilities. But obviously S&P think the recession means more red ink and the latest borrowing estimates are unsustainable.

    CHIARA CORSA, ECONOMIST, UNICREDIT
    This is definitely negative news ... I think that the change in the rating outlook reflected the governments clumsy exercise in the pre-Budget to try to square the numbers.

    AMIT KARA, UK ECONOMIST, UBS
    It is not too much of a surprise given the state of the fiscal finances but I think the key message for the government from this is that at some point in the not too distant future they will have to slash spending and consolidate the fiscal position quite dramatically, possibly by more than they have in their forecast.

    MARK MILLER, ECONOMIST, BANK OF SCOTLAND TREASURY SERVICES
    The UK outlook downgrade certainly catches the eye, but shouldnt really be a surprise. A prospective 100pc debt to GDP ratio is clearly on the radar screen and has been for some time.

    COLIN ELLIS, DAIWA SECURITIES
    Public sector net borrowing was £8.5bn in April, down from the whopping figure of £18.2bn in March. But that was still bigger than had been expected tax receipts were down sharply again and as such, while it is clearly very early days, todays figures marked an inauspicious start to the new financial year. And coupled with S&Ps surprise decision to put the UK on negative outlook the cherished AAA rating is now under threat the spotlight is very much on the state of the public finances. Whoever wins the next election, tax hikes and sharp spending cuts will be the order of the day but todays announcement by S&P puts that much more pressure on the next government to act.

    ROBERT PESTON, BBC
    "No reason to panic...we ain't bust yet."

  • Comment number 80.

    So how does the government improve its position so that the ratings are not faintly threatening? What is more to the point is how does the government run the country in such a way that there is as close to full employment as possible? It is actually dead simple and can be stated shortly and sweetly in the five golden rules of economic strength:

    (1) Balance the budget of the country;
    (2) Never borrow more than 5% of GDP;
    (3) Do not borrow again until you have paid off previous borrowings;
    (4) Pay off all government debt, and when you have done so
    (5) Return to the gold standard and persuade your allies to do likewise to build up an international system of sound money.

    But the crop of rogue politicians we have at the moment are not going to tell you this. They will lie to you about this just as they have lied and cheated about their expenses claims. They will tell you that there are hundreds of reasons why they should not stick to these five golden rules. But all they are trying to do is to pretend to you that they know how to do things in order to get you to vote them into power. And to get into power they will lie, cheat, and pull the wool over your eyes. They will bribe you too bribe you with promises of more spending. This is the economics of the madhouse.

    Tony Blair and Gordon Brown are probably the most deceitful men who have ever been invested with the high office of Prime Minister. As the country reels under its financial burdens that arch cunning deceiver Gordon Brown is already electioneering: Dont let the Tories in. The result will be chaos. They will cut spending. Labour will not cut spending. He is as far from the truth as Paddington Bear from darkest Peru. Spending cuts MASSIVE spending cuts are not merely going to happen, they are inevitable. Gordon Brown knows that. But he thinks the British people are fools and that he can go on hoodwinking them.

    The truth is strong medicine, and it is sometimes very unpleasant tasting medicine. But it is only the truth that can set us free from the terrible financial state we are in. There must be spending cuts, deep spending cuts, but they are part of the solution to our problems. The failure to impose them would be a deepening of our problems. Who will finance the borrowing that would have to be made if there were no cuts? Who in the world will lend us the money? It is not going to happen. Our creditors know that this time we have gone too far.

  • Comment number 81.

    What I would like to know is why the likes of Standard & Poor's are still in business yet alone why they have tremendous clout?

    It was these clowns who gave AAA ratings to toxic dept without bothering to find out whether the loans could be repaid.

  • Comment number 82.

    64. At 2:14pm on 21 May 2009, secondmcblogger wrote:
    please explain where the money we borrow comes from. who is lending all this dosh to our govt?
    I thought every country was struggling..even china?
    thanks



    This is how it works, govt prints money, govt gives money to RBS redeeming gilts RBS bought from govt, RBS buy more govt gilts


    Now as for the theory that this printed money was going to provide banks with capital to provide loans to get the whels of UK PLC going again well...........

    Where is the lending?

  • Comment number 83.

    Moraymint and Frank Fisher - very well put. Sums up the UK perfectly - totally unlike the author of this article - Gordo Clown`s biographer no less.

  • Comment number 84.

    Message 52 moraymint

    Good post!

    From the heart and from the front-line as well.

  • Comment number 85.

    14 excellentcatblogger wrote:

    "if [ ] excess pay bonuses were to be axed across the board in all industries the fall in tax revenues would be accentuated even more - personal tax rates are higher than corporation tax rates"

    Oh, well why don't we pay these toe rags billions then - think of the tax receipts that would generate.

    In fact, why not pay them trillions.......

  • Comment number 86.

    It sounds to me like the establishment softening us all up for the inevitable rises in taxation and cuts in spending we're all going to have to swallow in the years ahead! As if we didn't know eh?

  • Comment number 87.

    #67 JavaMan (about #37)

    Hey ho - what do I care? It's me, me, me all the time......a classic selfish product of a selfish system.

    Maybe you (JavaMan) need to explain to him that there won't be any public services in the future if we carry on like this. Countries are like people, once they get too far into debt they can never get out. Maybe he's happy for his kids to be owned by Arabs or the Chinese, but I was thinking maybe they will be free and not slaves and maybe enjoy the freedoms we have?

    I suppose a lot of people put their faith in 'things have always worked out before' - the reality is (as someone pointed out earlier) there have been a lot of firsts in this recession already which negates a lot of our historical reassurances.

  • Comment number 88.

    Will we or won't we.

    Alistair Darling still says we will come out of recession at the end of the year. That gives him another few months to kid everyone.

    The only reason people are feeling optimistic is because the debt and quantititive easing continue to camouflage a bloody awful deterioration in the economies here and worldwide.

    Brown seems to have no intention of pulling back on public spending. He's only stretching his time out as long as he can and couldn't care less what sort of mess he leaves the next government to sort out.

    What we do know for sure is that it will cost us all an arm and a leg and unemployment will eventually start affecting the public sector for real. Not much choice is there?


  • Comment number 89.

    150 years of history and they still don't realise that the Tories are and always will be a corrupt self serving clique of BANKERS, supported by their catamite followers "THE SELF MADE MEN" whose one and only goal is personal enrichment.

    The Tory parties fiscal c.v from Barber through Lawson has been a one line joke. "Let the rich get richer and they'll sort the whole thing out"

    I personally have no objection to that philosophy, but seeing the hysterical rhapsodisng about the glorious blue dawn to come is seriously turning my stomach. Be careful what you wish for you illiterate, innumerate, proto-nazis because you might get what you are asking for.

    Debt levels are manageable and though far too high will be accomodated by a normal turn out fron the recession, AAA to AAA- has some effect on UK financing costs, but with 3m libor screaming toward 1% does that sound like there is no cheap money out there? Todays gilt auction was the biggest ever and was oversubscribed. A few weeks ago the same posters were screaming about the demise of the pound, overnight it was above 1.58 usd and nearly broke the euro 87p mark. So you won't be mentioning that then. This bear market rally will peter out, but might tail off slowly into the gradual real recovery. Expect "Bad News Bears" to be loud at the moment because lots of hedgies have been caught short by the rally and are having to cover positions, so by Dooming and Glooming all over the place they can do that cheaper.

    Its not all good but its not all bad and cheer up you can all vote BNP in the EU elections with a clear conscience, because its about the economy and a few bobs worth of expenses, not really gas ovens.

  • Comment number 90.

    Well, well well.... I predict there will be an early election. Brown will be very concerned that "the Unions" are looking to put up their own candidates in the next election... (Public and Commercial Services union (PCS) has said in the face of a "morally bankrupt" government the union is to consult its members about putting up union candidates in future general elections)... Brown can't afford for this to happen. It will split the Labour Vote. It will reduce their income. It will be the end for the Labour Party....

  • Comment number 91.

    The problem with high national debt levels is that we have already mortgaged away at least the next decade.

    We simply could not afford to bail out a further catastrophe again.

    Lets hope the banks and the establishment does not become so irresponsible again.

    Somehow i doubt it

  • Comment number 92.

    #37 sarantium

    I think I get your point:

    1. You are not bothered
    2. Your job is safe
    3. You got money so you can eat
    4. It will get all paid back by our kids
    5. If ysomeone you don't know lost theirr job, so what...
    6. Make sure the Public Services have enough money

    I think you work in Public Services!


  • Comment number 93.

    Has anyone looked at the markets this afternoon?

    We really are Tommy Tuckered in a big way.

    The next stop is Government raising rates to encourage the sale of it's gilts - then we're really into the next phase.

    DON'T PANIC says Peston PANIC say the markets....

    Can anyone lend me a tenner?

  • Comment number 94.

    Moncursallio etc - can I have some of whatever u r taking - u r obviously on another planet to the rest of us being ground into the dust bu so called Socialist ZanuLabour.

  • Comment number 95.

    In the famous words of....

    I say Britain
    You say Bankrupt
    Britains gone Bankrupt
    It's a bankrupt Britain

    All roads lead to Slimon Cowell

  • Comment number 96.

    Where were the rating agencies when everything was being leveraged? I don't remember them saying that the banks and governments had too many "toxic" assets. It is difficult to trust any in the financial world. They betrayed everyone and still posture as establishments of purity. The courts have awarded the car thief your car and requre you to continue payments. Based on your payments he will have good credit. Sounds fair.

  • Comment number 97.

    #92 thinkb4

    .....works in the fees office maybe??

  • Comment number 98.

    But we shouldn't forget what caused the doubling of the national debt...
    Incompetence, negligence and greed in banking.
    Those who think "the recession is not too bad, we are coming out of it" are in denial as to the deep, underlying damage that has been caused.
    Some of the points that Robert makes are optimistic....good.
    Bur I haven't seen any real action from HMG yet to encourage us.
    The latest treasury report into executive pay was a very good start, but needs more teeth.
    The FSA have also seemed to have been to the dentist...let's hope they are real teeth, and not dentures.
    But what is really needed are regulations on mortgage lending, and regulations to curb the cause of the debt blowout...namely..."competition to lend".
    The world has changed, the vast pool of cash in the Middle East and Asia means that this "competition to lend" between banks is likely to send us straight back into financial trouble, and even more debt will end up on the shoulders of the taxpayer.....there is no-one else to "guarantee" it.
    And future risks are not just financial....the rich-poor gap is becoming dangerous. Public anger is high.
    The establishment seem to be trying to take us back to the pre-war "upstairs-downstairs" society.
    The Victorian rich-poor gap cannot return to this country without causing serious civil strife.
    Let's hope that Roberts' optomistic article contains something for ordinary folk, and is not just a "fat-cats" welfare report.

  • Comment number 99.

    #193 WRITINGSONTHEWALL

    God you are an irritating idiot.

    30 percent rally in the ftse and then you see a 2.9% correction, HELP! Sell your children for medical research!

    Gilts? As previously posted the BIGGEST EVER SALE WENT OFF WITHOUT A HITCH!

    Why don't you just post " I think Camerons cute!" and repeat ad nauseum.

  • Comment number 100.

    94 ronregan

    Another badly educated person using the term socialist to define - 'things I don't like'

    Please show me where in the socialist handbook does it say
    "When you're bankers run out of money, support the private sector and let them have free reign to make money from the public funding"
    Where is PFI in the socialist handbook?
    Where is the 10p tax removal (regressive taxation) in the socialist handbook?

    The reality is this Government and every Governemnt before it serves the ruling classes. It's convenient for them that people like you 'fight amongst the scraps' so you never actually overthrow the true enemy.

    If Labour really were socialist the banks would never have gone bust in the first place, because Government would have been CONTROLLING THEM on behalf of the worker.

    It's a bit like me describing the Tories as facsists - no mattter what else you say about them, they do not hold such views.

    Maybe this is the problem, there are too many people in the world who can't be bothered to understand the problems of the world and are happy to repeat the tabloid education they have without actually verfiying what it is they're talking about! This is how politicans can get away with murder because half the population don't have the initiative to logically question what they are saying.

 

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