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Why £73bn is the new £90bn

Stephanie Flanders | 17:05 UK time, Thursday, 10 December 2009

As usual, the Institute for Fiscal Studies (IFS) has pulled an all-nighter and extracted some gems from the reams of documents put out by the Treasury yesterday. Here are the key headlines.

Copy of pre-Budget reportFirst, the independent think-tank estimates that the chancellor's new forecasts for public spending from 2011/12 to 2013/4 would represent a real cut in departmental spending of 3.2% a year, slightly more than the previous estimate of 2.9% after the budget.

That amounts to a cumulative cut of £36bn over the period.

The protections to frontline schools and other key services for 2011 and 2012 suggest that all non-protected areas would face cuts of 6.4% a year in those two years - or a cumulative £25.5bn.

On National Insurance, they say experience suggests employers will pass on the rise in employers NI. If so, that would mean that only workers earning less than £14,000 a year would be protected from the rises in NI announced yesterday, not £20,000 as the chancellor said.

However, the IFS confirmed that the top 10% of earners would bear most of the brunt of the tax rises planned for 2010-11 - eventually facing a hit to net household income of 5% - if they don't take steps to avoid paying it, a big if in the case of the very highest earners, who face the biggest hit.

Other groups will face hits of 1% or often much less. That would seem to confirm the figures from Labour yesterday (see my other blog today), that the top 2% of taxpayers would pay half of the new taxes.

Carl Emmerson, the IFS's senior fiscal guru, was asked about Conservatives' claims that the NHS would lose out from the pre-Budget report (PBR).

He said he thought that was doubtful, given that the cost of the rise in employers' NI (which, as we have already established, would probably be paid by employees, anyway, not the NHS) - would need to be weighed against the savings to the NHS of having a lower wage bill from 2011 onwards.

Not to mention that 95% of the NHS budget is being protected from real cuts in 2011 and 2012, at considerable cost to other departments.

And finally, I can confirm that £73bn is the new £90bn. Two days ago there was a £90bn a year hole in the budget that the government - any government - needed to fill, either through tax rises or spending cuts. Now it's £73bn.

We'll never know exactly how much the budget needs to be squeezed. But £73bn is a good enough guess to be getting along with.

Before the PBR, Alistair Darling was planning to rely mainly on tighter spending to fill that hole, at least in the first few years of the plan. That's still true, but the balance has shifted sharply in the direction of higher taxes.

Instead of £1 pound in new taxes for £4 of cuts in 2013-14, the ratio in that year will be one to three.

Of course, that's assuming that all those top earners don't manage to suffer a large and inexplicable fall in their taxable income and pension contributions in the meantime.

Or flee the country - as they always threaten to do. Or persuade a Conservative government to let them off the hook.

The IFS also confirmed that the chancellor has not revealed where much of that cumulative £36bn cut in departmental spending will be found.

Towards that number, the government has sad it will find efficiency savings worth £12bn; it will also get £3.4bn from the 1% cap on the public sector pay, £1bn from reforming public sector pensions, and £5bn from eliminating "lower priority" projects, some of which are listed in the report.

That leaves about £15bn unaccounted for, but it's important to remember that any savings on low priority projects, or from added efficiency, which are found in the protected areas - which represent a significant chunk of public spending - will not count toward the £36bn because they will be ploughed back into those protected budgets.

In reality, the government will need to find much more than £15bn in additional savings to meet the £36bn cut imbedded in its forecasts, assuming the IFS's calculations are right.

I spoke about the difficulties of measuring efficiency savings on Monday - even where the government has claimed to have achieved savings in the past, they have not all added up.

If further reason were scepticism were needed, the IFS points out that the government has already promised to achieve some £35bn in efficiency savings in the current spending round, which ends in spring 2011. So far they are only £8.5bn of the way to the £35bn target, leaving a big mountain to climb in the final year.

Update 1817: There's been a bit of confusion about this, but the total cost of fixing the hole in the budget over the next 8 years is going to be the equivalent of £2,400 per family, per year, in the form of higher taxes or lower spending and investment. Unfortunately, that's not cumulative, it's annual.

And what about the Conservatives? Well, it's tricky to compare the Chancellor's plans with George Osborne's, because he has committed to protect the NHS for the full three years from 2011-14, whereas Labour has only mentioned the first two years.

The Tories haven't committed to protect schools (yet), but they have followed the government's commitment to increasing ODA.

On this basis, the IFS reckons that they would need to find cuts of £38.9bn on non-protected departments - which, on the face of it, sounds worse than Labour. That is certainly what Treasury officials have been keen to impress on the British press corps this afternoon.

But - and believe me when I say that this pains me more than it pains you - it turns out that it's more complicated than that. That £38.9bn isn't really comparable to the £36bn figure (sigh), because the £36bn is the cut facing all departmental spending, if you weren't protecting anything, or increasing ODA.

If you take those pledges into account, the cut for other departments under Labour looks very similar to the Conservatives'. And it would be larger, if Labour decided to protect the "frontline" for three years rather than two.

If the Tories would rather not get into all this detail, they have another way to respond to Labour's claims that Conservative cuts on other departments would be worse than the government's. It goes likes this: "we're having to cut other things more because we're protecting the NHS for the full three years. Are you saying you won't?"

Comments

Page 1 of 3

  • Comment number 1.

    This thing is unravelling before our eyes.......

  • Comment number 2.

    well, well, well, what a surprise. the 'headliners' spewed out by Mr Darling are very 'selective' in their accuracy. Everybody knows this country is broke and everybody knows the con tricks this government will pull to win votes.

    What they fail to understand is that the public are not as daft anymore and can see through any of these con tricks.

    'Will the last person to leave Britain please switch off the lights' springs to mind !

  • Comment number 3.

    Its do nothing dithering, dont panic, dont panic. Look I've got my eyes wide shut. I can't see it, can you.

    1.5 Trillion GBP has quite few billion in it. 1500 last time I looked. That would be getting on towards 6 figures per private sector worker plus interest. Bearing in mind that the wealth creation does not occur in the public secotr or the economically inactive.

    Spyglass to the wrong eye. I see no ships, only hardships.

    What a useless lot, thank goodness we are not at war. Oh. We are. Better ring the bell in the belltower then.

  • Comment number 4.

    I have been pessimistic about prospects based only an the tiny number of business people I know who I now see are revisionary whingers with a reactionary world view and opinions based on nothing more substantial than their own personal real world experiences...

    But I have now changed my own views as a result of the Pre-Budget address and coverage and become convinced that the worst is behind us and we are on the brink of a recovery to rival 2001-7 and probably exceed it.

    It is now obvious to me that what these former friends of mine, and I, should have been doing is not dealing with issues and problems in our deplorably real world businesses, using analysis and then action; doing all that long hours and late nights stuff ---instead we should have spent the last year talking about these supposed problems over and over again until they went away of their own accord.

    I don't know why , other than my own dimwittedness, I didn't think of doing this before now, because it really does work.

    Apologies for my previously depressing pessimism --- but from here on in I think we have the best of all possible worlds...really.

  • Comment number 5.

    So: the tax rises on those earning over £20,000 a year are going towards funding an above inflation increase for those on benefits, not towards reducing the size of the fiscal deficit.

    The fiscal deficit of £73 billion next year equates to an increase in the basic rate of income tax of 16p, i.e. the basic rate of income tax would have to increase from 20p to 36p. This would just eliminate the deficit, not pay off any debt.

    This the scale of the tax rises we are facing after the election. Labour's investment in public services must be protected.

  • Comment number 6.

    Slash and burn?

    I think the government finds its operations so large and so disparate it has no idea how and where to cut. Hence the managers of budgets who are less well connected in the political game within their own Department have their budgets slashed whilst the smooth operators protect each others backs to live another day.

    So in my view slash and burn is the only way the state can cut its expenditure. It makes a nonsense of those protestations that public services will be protected. Whether it be a Labour or Tory administration public services will be the first to be go: mark my words!

  • Comment number 7.

    You can't expect the "Rich" to take all the pain with tax increases. If they had any sense they would leave and only return when we face up to the real issue. The bottom line is for at least 5 years or more we have been spending more on the public sector than we can afford ie % of GDP.
    We are have got to have a massive rewind of the overall public sector scopes and that will include:
    1. State pensions
    2. Winter fuel allowances
    3. Education
    4. Health
    Areas like defence, local government and Whitehall are going to be affected the worst.
    I totally disagree with this plan of halving the annual debt within 4 years. It makes sense to aim to have a balanced budget within 4 years. Borrowing more money over the next 4 years will simply add MASSIVE interest bills and reduce actual expenditure.

    Two other points

    1. The assumption is we are going to charge straight back into 2-3 % growth . If this growth does not materialise ,the UK will be broke within 12 months.
    2. We have spent billions of PFI schemes , again big charge will have to be deducted from the budgets, if budgets remained the same , real spending on teachers and books will be hit hard.
    Lets get real and reject the fudge of this government , we are up to our neckes in debt and we need to start cutting NOW to make a differance to our economy tomorrow . Borrowing more money is pointless and will not achieve anything except make the pain more servere in years to come.




  • Comment number 8.

  • Comment number 9.

    All I see is a sea of figures subject to claim, counter-claim and interpretation... What the chancellor has failed to do is tell us what he is ACTUALLY going to do....e.g. Abolish quango "X", cancel procuremnt "Y", Freeze public salaries above "Z"

    The bonus tax is pathetic and so easily avoided its ridiculous.

    Just what I expected and just why I'll not be voting Labour...ever again...

  • Comment number 10.

    6. At 6:06pm on 10 Dec 2009, stanilic wrote:
    Slash and burn?

    I think the government finds its operations so large and so disparate it has no idea how and where to cut. Hence the managers of budgets who are less well connected in the political game within their own Department have their budgets slashed whilst the smooth operators protect each others backs to live another day.

    So in my view slash and burn is the only way the state can cut its expenditure. It makes a nonsense of those protestations that public services will be protected. Whether it be a Labour or Tory administration public services will be the first to be go: mark my words!
    lash and burn?

    xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

    Spot on.

    It's already happening. LA's are looking at cutting all the locally managed services. They type of services that prevent the Baby P situation. They want "Tesco size" contracts (easier to manage at their end) with no local accountability or buy in.... the consequences will be disaterous as local services meet local need, they understand the needs of, and are accountable to the communities in which they serve. It's exactly these organisations which will be needed when things get really bad, but by then they will be gone......

  • Comment number 11.

    Someone here suggested the Gov wouldn't know where to make the cuts. Well, according to a well placed friend in education, it seems that in his region a big accountancy firm has won a 'very large contract' to investigate and advise his seniors how to make the savings. I do wonder if anyone in the Government above front line workers actually has any kind of relevant expertise. Give them something like 'diverity', 'equality', multi-cultural, mobility and they seem fine, motivated and on the case. Give them some real work to do and they call in a consultant - at least this is how it looks to us tax payers.

  • Comment number 12.

    11

    Typical the main guys get £150,000 a year to manage and when iot comes to cut get other consultants to do the work . SAYS IT ALL.

  • Comment number 13.

    It is much easier to gain public consent for tax rises and spending cuts when it is perceived that there is a crisis - as it is at the moment.

    In two or three years time the feeling of crisis will have gone and people will resent tax rises and public sector workers will come out on strike against below inflation pay rises or lower pension benefits.

    So by deferring the pain the Chancellor (under the PMs guidance?) has done the country a disservice.

  • Comment number 14.

    11. At 6:45pm on 10 Dec 2009, Joepublic wrote:
    Someone here suggested the Gov wouldn't know where to make the cuts. Well, according to a well placed friend in education, it seems that in his region a big accountancy firm has won a 'very large contract' to investigate and advise his seniors how to make the savings.
    ------------------------------------

    One problem that has got us where we are over the last 25 years is the dependency on accountants to design the way things are done, in preference to experts in the areas being looked at.

    This always results in layers of accountants remaining, as they understand each other, when other management functions have been dispensed with. Always comes back to bean counting, pig weighing etc. rather than creating a better service. Leaness of service can be far removed from efficiency.

  • Comment number 15.

    So Steph - do you have any idea as to how we're now going to rebalance the economy as per Mandy's vision of the future?

  • Comment number 16.

    Excellent post Stephanie - interesting and incisive and makes clear the lack of real info from the sitting government regarding future plans.

    Still, dont really expect Labour to tell us the pain up front - dont want to antagonise the union bosses - do they?

  • Comment number 17.

    All these figures are worthless if interest rates go up.
    What has happened to gilts today Steph? They got hammered and the CDS are on the way up as well.

    Hardly a ringing endorsement of the PBR.

  • Comment number 18.

    The national debt now stands at 800 billion, and is happily expected to be 1.47 trillion by 2014. Is there any point to raising nat. ins. by half a percent? It doesn't even cover the cost of changing the rate and will mean a cut in the earnings not only of taxpayers but also of the employers. Darling is starting to look embarrassed when he flounders around repeating Brown's soundbites,though he still hasn't summoned up enough integrity to actually do the honourable thing and resign. Yesterday's fiasco was an exercise in deceit of the highest order and clearly demonstrates the level of incompetence and disregard for the electorate now endemic in this failing government and it's political ambitions.

  • Comment number 19.

    I am one of the high earners who are supposed to be contributing more to this budget. However, I left the country last year with little intention to come back (and pay UK taxes) until the country becomes fairer for the wealth creators. Rather than receive an extra 10% from my income, they have lost 40% of it.

    This is exactly what happened in the 70s when Labour last had a chance to wreck the economy. 68% top rate of tax (and a further 30% for dividend income) drove anyone with any ability out of the country. It then took many years of Thatcherism and Conservatism to make the country productive again. All ruined by the last 12 years of Labour tax and spend.

  • Comment number 20.

    The day of the PBR was also the day the government chose to bury some other bad news.

    'In a document released on its website only a few hours before the Chancellor's pre-Budget report (PBR) statement, the Office for National Statistics (ONS) laid out the definitive cost taxpayers will have to bear for both the state old age pension and public sector pensions.

    The document reveals:

    The total public sector pensions bill is now £810bn, a figure confirmed later in the day in the pre-Budget report. The majority of the state employees are on generous final salary schemes unattainable elsewhere in the UK.

    This bill for key public sector workers' pensions has rocketed by 20pc between 2006 and 2008.

    The Government Actuary's Department's estimate of the cost of the state pension due to all workers is £1,350bn as of 2005 – equivalent to almost 100pc of Britain's annual economic output.

    The entire bill of around £2.2 trillion would more than triple the size of the national debt overnight. It is entirely unfunded, so will have to be paid directly by future generations of taxpayers, rather than out of a pot contributed to by the pensioners themselves.'

    Add this little lot to the national debt to get a true picture of the mess we are in, and thats not including PFI. Goes some way to explaining our open door policy on immigration to prop up our giant pension ponzi scheme. Batten down the hatches, the mother of all financial sh1t storms is on its way and unavoidable.

  • Comment number 21.

    And all the bad notes that the government so graciously assumed from the banks...how is that addressed? The rich negociate their taxes and everyone has them subtracted from their pay..directly. As we saw in the financial collapse digtal money can disappear over night so I assume the govenment will simply make some appear on their balance sheets. Not sure if the new qualifications for government are magician or court jester, in either case I am sure you need a recommendation from a banker. An unbalanced budget is as good as a balanced budget these days as many think the worst is yet to come.

  • Comment number 22.

    Some questions.

    1. What is private sector percentage of GDP?
    2. What is public sector percentage of GDP?
    3. What is the country’s ratio of gross domestic capital formation as a percentage of GDP?

    Now, what were the above numbers in , 2000, 1997 and 1992?

  • Comment number 23.

    Steph

    Before I comment generally can I just clear up what seems to be an oversight on your behalf.

    Increasing NI contributions has two parts - those paid by the employee and the corresponding bit paid by employers. NI is a tax on jobs pure and simple. The Tories claim on the NHS is quite right. It is the employers NI bill that also goes up and has to be accounted for in public sector budgets like that of the NHS (think of it as a tax funded by tax).

    Of course anybody who has ever been in business will recognise this - those of course funded through the public purse - like you Stephanie - won't.

    Whatever else from yesterday's Homer Simpson pre-budget report the NI increase is a SILENT KILLER. PERIOD.

    I do hope that those who have been burying their collective heads in the sand finally woke up yesterday. If you hadn't noticed the country is in deep, deep trouble.

    Alistair's lala land growth forecasts make a mockery of the troubles ahead.

    I watched the BBC news and newsnight (as a licence fee payer I feel I must). Analysis? you must be joking....

    I've unfortunately realised for sometime that the country is run by half-wits, and that the reporting media is also full of half-wits.

    No wonder we're in such a state.......Steph - by the way look up 'pontification'.....

  • Comment number 24.

    riverside

    Your argument

    "Bearing in mind that the wealth creation does not occur in the public secotr or the economically inactive."

    is only part correct in the economically inactive.

    Of course an NHS Doctor or Nurse or Policeman or Squaddie is creating Wealth.

    Perhaps your argument is best phrased.

    "Bearing in mind that the wealth creation does not occur in the useless jobs created by New Labour in some areas of the Public Sector particularly management or the economically inactive."

  • Comment number 25.

    isn't the irish budget more like what would have happened without an election?

  • Comment number 26.

    A friend said to me "when you said that Gordon Brown was an unmitigated disaster for the UK, I thought you were mad because at the time he was widely regarded as one of the greatest chancellors ever. Now I realise you were right."

    Now these figures prove that Gordon Brown will be regarded as the worst Chancellor in history.

  • Comment number 27.

    I am becoming increasingly angry with the insistence that the NHS and Education budgets be 'protected'. From all the reports I have seen recently it is clear that in many respects Health and Education are failing. At the very least we are receiving a poor return considering the amount of money invested.

    I am disappointed that the Conservative's knee jerk rection is to simply match Labour's promises.

    What is desperately required is a grown up debate about all government spending. I am certain that we could enjoy better services for less expenditure from all departments if the political will existed.

  • Comment number 28.

    24 gruad999:

    'Of course an NHS Doctor or Nurse or Policeman or Squaddie is creating Wealth'

    Nope

    The NHS Doc is assisting health, generally.

    The policeman is regulating wealth and 60 percent of the time doing paperwork.

    The squaddie is protecting.

    The public sector is paid to provide services that aid society.

    Wealth only is created in the private sector. All other activities may multiply or aid velocity but wealth can only originate from the private sector.

    The figures are truely mindblowing. If you look at the numbers working, approx 50 percnet of population, take out those on working tax credit, or on minimum tax. Bearing in mind 20%, some say 25% of kids are living in poverty, so that gives some idea. Take out immigrants who disappear when it suits them, and who can blame them. Divide the remaining number and hey presto. As well as paying to keep the game afloat the private secotr worker has a lifetime of work to pay off the UK debt on top.

    These figures are close to totally unravelling. If G Brown was acting as a private individual he would be on an IVA at best.

    And no I am not a Tory. However I read about a caterpillar sat on a mushroom saying if you eat from this side you grow, if you eat from that side you shrink. This side that side. Choices, choices.

  • Comment number 29.

    No 27 wrote "I am becoming increasingly angry with the insistence that the NHS and Education budgets be 'protected'. From all the reports I have seen recently it is clear that in many respects Health and Education are failing." The budgets wouldn't need to be protected if the government stopped trying to centralise everything and trusted/empowered those at the sharp end to get on and do the job. Indeed, if, say with schools, Ed Balls department was eliminated and the total England budget was divided by the number of students in school and that per capita amount given to the schools, the amount of money would probably buy the best education on the planet. Why do bureaucrats in Whitehall think they should control schools from a command centre. Wasn't centrality what brought the USSR down?

    As several people have commented here, wealth must be generated which means people delivering something that a foreigner is prepared to pay for. Making stuff or delivering services just to ourselves in the UK won't pay for our energy, food, and Chinese imports, our foreign holidays, foreign films, dividends to foreigners who now own most of the UK's businesses. What doesn't the government understand about $1 of imports from China or Russia needing to be paid for by $1 earned from someone with dollars to spend and not borrowed from someone (Chinese?) who have a barrow load of dollars to lend us to so can buy their Christmas tat or more gas to keep ourselves over-heated. In my youth, this was called Balance of Payments. No-one in government seems bothered about owing money on trade any more -- just another item on the long list of debts this country has.

  • Comment number 30.

    WELL THE 2 SCOTS IN CHARGE. HAVE REMOVED ANY DOUBT ABOUT THEIR INTENTIONS, TO LEAVE A WONDERFULL LEGACY FOR THE NEXT ADMINISTRATION.....THEY EXPECT GROWTH OF 3.5% IN 2011 NO CHANCE AFTER THE EMERGENCY BUDGET IMMEADETLY AFTER THE NEXT ELECTION!!!!!!!!!!!!ROUND OUR RURAL NECK OF THE WOODS THE PUBLIC SECTOR WAS 70% OF GDP!!!!!!!!!!! THAT WAS BEFORE THE LARGE ALLUMINIUM SMELTER CLOSED LAST MONTH WITH LOSS THE BEST JOBS AROUND. ALONG WITH 3 OTHER MULTI NATIONALS OVER THE LAST COUPLE OF YEARS, WELL THATS GLOBALISATION!!!!! CANT SEE YOU DOWN SOUTH BEING HAPPY BUNNIES SUBSIDISING THE MAJORITY ROUND HERE EITHER PRETENDING TO WORK FOR THE PUBLIC SECTOR OR ON BENEFITS......AND HAVE A PLANK OF WOOD ON THEIR SHOULDER AGAINST ANY WEALTH CREATOR!!!!!!!!!!!CAPITALIST PIGS WERE CALLED IN THE MINORITY YOU SEE...... BRING ON THE EMERGENCY SPENDING CUTS, IF THE IMF ARE NOT THEIR FIRST...BOYS FROM THE BLACK STUFF WILL WILL LOOK LIKE A TEA PARTY WHEN THIS GOES PEAR SHAPED. GOOD LUCK WE ARE ALL GOING TO NEED IT!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  • Comment number 31.

    More rubbish from all partys none of them know how we got in this mess or how to get out of it.
    Perhaps we should stop following the Americsns use our own ideas and stop throwing money away onPhoney wars, look after our own people before spending exhorbitant amounts on looking after immigrants in lavish accommodation, giving them handouts when they have not contributed anything to the country but tell our own people they can't have something even though they have lived, worked and paid all their taxes every year of their working life.
    The answe to this situation is when your country deserts you then it is time to look elsewhere.
    I suggest Turkey yes it is a muslim country but when out there you would not know it no benefits just like here but property cheap people very nice and the climate is something else oh yes and work is easy to find if you are willing to work hard.
    I would go tomorrow but have been stitched up by this country and the cronies of every political persuasion running it for so many years that i am not in a financial situation to be able to leave and now they want more.
    So politicians stop fleecing us stop lieing to us and make sure that those that can afford to pay do so including the overpaid footballers and entertainers oh and bankers.

  • Comment number 32.

    Dear Ms Flanders what is not being properly explained is how this massive budget deficit will impact the ordinary person.

    It seems strange to me that the whole focus of the current economic debate has moved away from employment and onto something much less tangible. For the average family either keeping their job or actually getting one is the number one priority.

    Since this economic crisis began the one thing that stands out is the total lack of credibility amongst any of the so called experts, including yourself, in predicting the way the economy/businesses are performing, the most often used phrase, by the so called experts, has been 'better-than-expected'.

    Now as the economy is at least stabilising, all the doom mongers are banging on about is the budget deficit, as if it needs to be reduced next week. From where I sit the only way of tackling this deficit is to ensure businesses are profitable and unemployment starts to come down.

    Your name Ms Flanders is quite appropriate, as your blogs read like those of a World War One general ordering the men to go over the top and victory will be ours regardless of the casualties, while sitting safely behind the lines in the comfort of their headquarters. Maybe if you were unemployed struggling to ‘make ends meet’ you wouldn’t be quite so keen to see massive Government spending reductions.

  • Comment number 33.

    #32 - who funds this deficit?

    At the moment, the deficit is being funded by the Bank of England creating magic money. The usual purchasers (pension funds, fixed income investors from UK and abroad) are net sellers.

    Today, the 10 year interest rate went up significantly and the cost of insuring the risk of the UK defaulting on the debt went up as well. Corporate debt issued by McDonald's is safer than UK sovereign debt based on the insurance premium. It sums up the state of the UK economy quite nicely.

  • Comment number 34.

    32 Trebor46

    Borrowed time, time is money. You can delay but time will not.

    'Never stop believing in the good sense of the British Public.' Gordon Brown.

  • Comment number 35.

    WELL THE 2 SCOTS IN CHARGE. HAVE REMOVED ANY DOUBT ABOUT THEIR INTENTIONS, TO LEAVE A WONDERFULL LEGACY FOR THE NEXT ADMINISTRATION.....
    --------------------------------------------------------------------
    Or even perhap, to the SON of a Scotman named Cameron?

    Its in the Genes....

  • Comment number 36.

    This is a serious question... what steps can we the public make to get a general election without waiting another 6 months?

    Just because we are a democracy surely we are not powerless to just sit and wait for bankruptcy to become unavoidable.

    Is it possible to have some massive online poll asking the public if they want an immediate election... and if enough millions vote for it, would that force the hand of the government?

  • Comment number 37.

    For goodness sake! Let's have some reality here.

    Yesterdays statement was totally political. It sent a message within Parliament that little or no amunition would be given by the government to the opposition parties prior to the election - leaving them to their necks in the 'cuts noose'. It also sent a message to the national and global financiers that the present government are prepared to take action (it matters not a lot if their proposals satisfy everybody as ultimately decisions will not be made on hard figures but on 'feel' and 'confidence'.

    Perhaps more importantly is the clear lack of understanding of the nature of developed economies shown in many of the above posts. In Western Europe it is now clear that the balance between public and private sectors and their relative values and costs no longer fits the traditional views of private being wealth generating and public being cost. In reality the two are now so inter-woven that the black/white argument merely leads to erroneous conclusions. Wealth is not merely created by the private sector in isloation and neither does it create wealth despite the constraints of public controls and costs. That the balance between the two has to be managed is to me unarguable.

  • Comment number 38.

    What is wrong with people? Why don´t you understand that politicians are completely irrelvant, they have all been captured by financial oligarchs?

    Look at facts, not spin and lies. The banking system is systemically insolvent. Bank losses have been transferred to sovereign states. These losses are so huge that they will and are causing sovereign insolvency.

    Why would governments assume these losses if they were not captured by financial oligarchs? It is evidentially more cost effective to forgive private domestic debt. Why is this not even an option, not even worthy of discussion? How can anyone possibly think that governments represent the people?

    Meltdown is coming. Look at Dubai, Latvia, Estonia, Lithuania, Iceland, Ireland, Greece, the Ukraine, Japan...the list goes on. What has any of this got to do with greedy Britons over leveraging themselves just so they can avoid living on the street? Are you all mad?

    The only possible way out is for the people to rise up and overthrow the oligarchs. They will not do so and hence there is no way out. No politician is coming to save you, and no-one is interested in any form of economic recovery. The only interest is in a further sequestration of wealth, so that the already super rich can live peacefully whilst the world economy implodes led by the destruction of the US$.

    You think you have problems now, they are as nothing compared to what is coming. Ask yourself how you are going to feed yourselves and provide shelter for yourselves. You think a politician is going to do any of these things for you then you are going to be hungry and cold sooner than you think.

  • Comment number 39.

    #37 foredeckdave. You urge reality and then provide none. Understand this: The UK does not do anything at a sufficient scale to provide for its population.

    The only possible wealth generating activities are growing things, extracting things or making things. Nothing else counts as wealth creation. It is simple and has been understood for thousands of years, and yet seemingly forgotten inside a generation.

  • Comment number 40.

    Just living up to their promises - they have truly removed all prospect of a return to the days of boom and bust

  • Comment number 41.

    #39 armagediontimes

    You are just plain wrong. Your definition of wealth is just too limited. Hence the rest of your argument is just plain wrong.

    If you continue to limit the concept of wealth to merely the monetry value that can be made by exploitation of growing things, extracting things or making things then you will never be able to understand the true wealth of society. You can put all of the oligarchs to the sword but you would have achieved presicely nothing. The time has come to completely re-value all of the elements of socio-economic reality. The NHS, education etc. etc. all contribute to the ability of society (the population) to create national and individual wealth - the effectiveness of these organisations is up for debate as well!

    If you take the NHS then you are looking at the largest organisation in the whole country. Then look at who is making the strategic and operational decisions. It's not the workers who are the problem it is the executive management. Yet even in its present state the NHS are making a valuable contribution to the national wealth.

  • Comment number 42.

    When it comes to Public spending Politicians seem to know no bounds, for as we move into an era of claims for Bell-Towers etc:, the latest that I heard from one Politician on tonights Newsnight Programme was that the ways of MPs' overnight Expenses payments in light of the continuing Expenses Claims Scandle has now changed.

    This hapless MP whom considered himself to be a victim of circumstances then when on to confirm that HE now stays overnight in a Hotel when attending the Commons, and that HE has to Pay each Night for Hotel Bills of which HE then Claims backs from the Tax-Payer for Payments Receipts of between 20 - 120 Pounds per Night.

    Well, I ask myself just where do to you find any such Hotel near to The Commons and in and around Central London that will charge so LITTLE for Bed & Breakfast, when most Hotels would charge upwards and well over 300 Pounds per-night.
    Perhap for 20 Pounds your Local MP can enjoy a Night in Card-Board City near too and just off of the West-End, or for around 120 Pounds a night a Bed with Rising Damp at Rigsby's or perhap at the London branch of Fawlty Towers?

    Of course, the moral to this issue is that Politicians STILL don't get it, for they are still treating the Public like fools by thinking that we would even begin to start beliving that our MPs' are now spending so little in the way of Public money now upon their re-newed Expenses Claims which will be forever still growing by making the ever blooming Public deficit ever larger.

    To this end we get what and whom we Vote for, and its ALL our own fault for trusting them. Never Again.

  • Comment number 43.

    #38 - the only way for this to happen is for fractional reserve banking to die.

    The problem is that people do not understand the consequences of that economic transformation either.

  • Comment number 44.

    dont worry house prices are still rising whats the problem lol

  • Comment number 45.

    37 foredeckdave:

    ''Wealth is not merely created by the private sector in isloation and neither does it create wealth despite the constraints of public controls and costs. That the balance between the two has to be managed is to me unarguable.''

    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

    Where is the balance with 1.5 Trillion GBP debt. You talk of balance but provide none. This is just spin. Are you worried that services may be withdrawn. Don't be. It is a certainty. You will see what wealth is generated in the public sector. I dont know why developing countries never thought of this. QED Look at Japan.

    But I don't want to go among mad people,' Alice remarked. 'Oh, you can't help that,' said the Cat: 'We're all mad here. I'm mad. You're mad.

  • Comment number 46.

    39 armagediontimes

    ''The only possible wealth generating activities are growing things, extracting things or making things. Nothing else counts as wealth creation.''

    This is worth quoting particularly as Armagediontimes is not fond of quotes.

    It is odd that the architypal wealth generating activities are not given respect. It implies - Until respect returns to such activities wealth will not be generated - This points to the fact this is a cultural problem not a financial problem. Hence the culture has to cease. This is the most difficult of tasks as it is a belief system. Hey hey I'm a believer, seems the more I took the more was given. I thought reality was just a fairytale. Hey hey I'm a believer. Now I know for sure. Reality was out to get me thats the way it seemed.

  • Comment number 47.

    This new tax Bank Payroll Tax was hilarious. I work in a medium sized city trading firm and following a 20 minute meeting, a quick call to a lawyer and a memo to management we decided that we (like many others) would just change some dates slightly and the whole issue goes away.

    Good work Darling.

  • Comment number 48.

    1. There is only ONE way to makes theses cuts and that is an across the board CUT in the pay of civil servants. (My guess is by 15 percent.)

    2. To make this acceptable ALL private sector pay must also be cut by the same percentage.

    The public sector pay cut will not damage services - provided there are no mass strikes - this type of cut was the eventual solution in the 1930s and it is the ONLY way that will work.

    The pain of the pay cuts in the public sector must be inflicted upon the private sector too in the hope that this will prevent mass strikes in the public sector and thus maintain services.

    The perceived unacceptability of this proposal and its necessity shows just how big an hole in the country that then banks have created.

    For this reason I also think that combined with these cuts in pay there must be a national maximum wage (of say 200,000 GBP) for at least five years. If this is not done the social unrest will create far too much disruption for the economy to recover and this will necessitate even deeper cuts.

    Further for these reasons it is highly advisable that we as a country pursue a policy of reducing the relative and indeed absolute size of the banking liabilities that we have in the country.

    Also if we do not take these necessary steps then the currency will almost inevitably collapse and interest rates will no just rise to acceptable levels, but will rocket.

  • Comment number 49.

    We don't hear the word "exports" much anymore.

  • Comment number 50.

    48. John_from_Hendon:

    "1. There is only ONE way to makes theses cuts and that is an across the board CUT in the pay of civil servants. (My guess is by 15 percent.)

    2. To make this acceptable ALL private sector pay must also be cut by the same percentage."

    You are right about cutting public sector pay - reducing the overall wage bill is inevitable, so the choice lies between reducing unit pay or reducing the total headcount. Ireland's budget - which is so much more realistic than the zero-content PBR - included pay cuts on a sliding scale beginning at 5%. This was the second cut implemented so far this year. Benefits have been cut across the board as well.

    I see what you mean about a national maximum wage, but I don't think this can be made to work in a global economy - the brightest people will just leave. In any case, their employers could simply pay them from overseas. So we'd need to look at exchange controls as well. At that point, we cease to be a free market economy.

    About the currency collapsing and interest rates rising, you are right to point this out. But this isn't, in my opinion, a risk - I would describe it as an inevitability. Gilts markets are flagging the imminence of this, I think.

  • Comment number 51.

    When are we going to get a Government that doesn't routinely lie to the people?

  • Comment number 52.

    #41 foredeckdave. You demonstrate precisely why there is no hope. What a ludicrous argument it is to deny that wealth can be created by any method other than growing things, extracting things, or making things.

    What is the first priority of every living creature? It is to eat. Where do you think food comes from, other than by growing it? Is it not self evidently obvious that without food there would be no life?

    What do Doctors do? As a first priority they eat. Then they are able to do their job, and how do they do their job? Yes, they use tools and equipment that have been made for them by someone else i.e. they are crucially reliant on things that are made. What use would a Dr. be without access to drugs and medical equipment?

    When it is cold, how do stay warm? Maybe like everyone else you rely on some combination of shelter, heating and warm clothes i.e. you rely on things that have been made, grown or extracted. Do you know any other way of providing warmth?

    You can live a long time without access to a flat screen TV or an insurance policy, or an equal opportunities advisor. You will likely last a couple of months at most without access to food. This is not difficult to understand.

  • Comment number 53.

    37 foredeckdave:

    ''Wealth is not merely created by the private sector in isloation and neither does it create wealth despite the constraints of public controls and costs. That the balance between the two has to be managed is to me unarguable.''

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

    You are correct where you say that the Public Sector itself doe's not create any direct Wealth, other than perhap indirectly in the Health Service whom if you like keep the Nation fit enought to Work in the Manufacturing Sector that Export Goods that creates Wealth.

    The problem that we have in the UK today is that we have all in the past have come to rely upon too heavly the "Invisable" Wealth that was created in the City and the Taxes paid upon those investments to the Public purse.

    However, now with the demise of our Manufacturing based Industries along with the cheap Goods now coming from China and other once Third-World Countries we are finding that the once Days of when Britain Exported to the World are over, along with the Wealth that was once also created within these Export Markets.

    We can ALL throw Numbers around ALL Day to try and balance the cost of todays British Society, but at the end of the Day unless we can come up with a re-newed way of getting the Country back into an Export Drive which intails that we also will have spend Billions of Pounds yet in New Developments to even get to a point whereby we can produce items that in the First-Place are a much needed item World-Wide, and are Cheap but of good quality enought to beat our rivals then and until then we are ALL in the UK going nowhere fast.

    The problem that we first need to sort out is: Just where are we going to find the Billions of Pounds needed to kick-start our Economy when we will have to reduce the size of our borrowing requirement to pay off our National Debt?

  • Comment number 54.

    Come on, Dave, tell us all about your get-well-in-12-months programme! Gordon does not dare to tell us, and will prolong our illness. The public mood is strongly in favour of radical surgery.

  • Comment number 55.

    The biggest con trick in history is nearly complete. Millions of innocent people left with billions of debt that the financial masters of the universe have ridden off into the sunset with.

    Nathan Rothschild, " I care not what puppet is placed on the throne of England to rule the Empire on which the sun never sets. The man who controls Britain's money supply, controls the British Empire, and I control the British money supply."

    Thomas Jefferson, "If the American people ever allow private banks to control the issue of their currency, first by inflation then by deflation, the banks and the corporations will grow up around them, will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

    Woodrow Wilson, “I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.”

    So we will all have to work longer and harder as our civil liberties are eroded and the creeping influence of business and government interferes with every aspect of our life. We don't need a new government we need real choice. People are waking up but it is too little, too late.

  • Comment number 56.

    #51
    When we get an electorate that doesn't prefer comforting lies to inconvenient truths......

  • Comment number 57.

    #50. Friendlycard wrote:

    "I see what you mean about a national maximum wage, but I don't think this can be made to work in a global economy - the brightest people will just leave. In any case, their employers could simply pay them from overseas. So we'd need to look at exchange controls as well. At that point, we cease to be a free market economy."

    Brightest = those that got us into this mess.... I would also argue that there are a large number of people who could equally well do these jobs that might be vacated as the method of selection is not actually on ability in the first place. Also we will need exit visas for those leaving the country so that they can prove that they have paid their taxes!

    Exchange Control - yes I am very much afraid so.

    We have allowed our economy to be destroyed by the so called 'free market' - a market that is neither free nor a market, but a set of cartels and monopolies created by the wrong regulatory structures that actually prevent market competition and the operation of a market through, in the main, gigantic barriers to entry into the market and the associated protection for those already part of 'the good and the great'.

    ps fire the regualtors....

  • Comment number 58.

    The trouble with many in Britain is that we are awful when it comes down to the re-newal of something, for how offen have you read that there is a protest group somewhere protesting about the demolition of some broken - down Victorian Building, or that someone is objecting to a Road Widening Scheme, and we ALL wonder just why it cost a fortune to heat those Old Victorian properties, or it takes us forever to get anywhere by Road Transport.

    By contrast, in many other Countries they atlease don't suffer from these hang-up's, and set about far quicker to the re-new stage of anything, for if its busted don't bother in trying to repair anything at an un-economical Price, except of course in the UK.

    While it is true that we can create a much needed inward Re-newal programme for Housing and Building in general which inturn will create much needed Employment, but again this will ALL come down too: How do we pay for any much needed Building Programmes given the state of the UK's Finances?

  • Comment number 59.

    Well summarised Stephanie. Clearly everyone is doing the same thing and fidling with the edges to make it appear prettier. So we really have no choice of discernably different government. So what to do ? (No one will leave, everyone will moan, no one will make a big difference) It's best to stop whining, or trying to agonise over the nuances in pain. Get back on the hamster wheel to worry about what we'll have for dinner tomorrow....Christmas comes, but once a year y'know.

  • Comment number 60.

    How about charging overseas visitors for their treatment in the NHS. Think of the contribution and savings. If you went to Canada you would have to pay up, even if you were a national going home after 3 years. It's high time this Government stopped giving away our money. I know of cases where houses have been bought for relatives to live in whilst they wait in the NHS queue then sold after they have had a free convalescent home stay as well.

  • Comment number 61.

    #48

    Government, central and local simply just has to do less.

    10% less each year for three years overall and then some. 10% less over three years is about the size of the current budget deficit.

    This is happening in the private sector.

    Nothing should be sacrosanct.

    I am grateful for health care that is free at the point of delivery and my experience of education for children was good, in three very different places and I don't have a problem with refuse collection and street cleansing or my observation of services for the elderly and infirm.

    But, in my daily round, I see plenty of unnecessary activity and utter waste of resources - money, effort and natural.

    If it means that no more long term contracts are awarded for waste management, highway maintenance, school rebuilding, housing development or new defence projects so be it. Books can take the place of expensive to maintain technology. If I were to spend anything it would not be on technology it would be replacement windows.

    Renegotiate long term contracts. Don't do any 'variable' work that triggers additional payments.

    If it means dumping 'communications' departments, so be it. We don't need to be told about the council. We don't need satisfaction surveys. If we are disatisfied, there's the ballot box, next time.

    Cut out 30% of all first, seciond and third tier posts in the civil service. Given a whirl. I bet the work would get done anyway.

    If it means slimming down the MOD, so be it.

    If it means accepting that there are risks in life and the individual has to manage them for themselves and their families, so be it. We can manage without endless databases of to records whether our homes are green or whether we can be volunteers.

    If managers can't find savings without consultants, get new managers.

    Don't fill vacant posts and where this might be destructive (nurses or primary school teachers) have temp banks on regular wage rates.

    Stop paying councillors. If councillors want paid employment, let them apply for a position. For example the chair of Birmingham City Council is to receive 55,947 and the deputy 41,960. Cabinet members 31,330. Say there are eight of them - thats, 346,000. Double it for all the other allowances and councillors - thats 700,000. Multiply that by 400 local authorities thats a quarter of a billion. Peanuts you say. Not when you extrapolate this to all the boards of all the public and quasi public sector. No one expected these sorts of payments in a more frugal time.

    No foreign travel. No travel. No taxis. No conferences. No jollies, No entertainment budgets.

    Dump schemes like the children's trust.

    Get rid of the play development posts and the leased vans.

    Turn off the street lights in the middle of the night, its green and mean.

    Turn off everything in office blocks at night.

    Turn down the heating in all public buildings in the day - one degree, maybe two. Woolly jumpers can make a come back and its easy to say do you want redundancies or will you put on warmer clothes. Also green and mean.

    Stop providing services outside 8-6 monday to friday, except emergencies. Government is not competing for customers and offices can be shut down

    If you want out of hours work, enable say Inland Revenue staff to work from home at the weekend. Surely all the new technology would enable this.

    There are a myriad of small, medium and large changes that can be made.

    Pay cuts won't get at the contracted out or the unnecessary activity. That needs tackling first. It needs someone with balls just to say 10% cuts. Go and find them, I don't want to hear any ifs or buts. get on with it.

    There are plenty of other things I would do that might take longer but would make a fundamental shift from encouraging reliance on the state to enabling business.

  • Comment number 62.

    57. John_from_Hendon:

    "Exchange Control - yes I am very much afraid so."

    I see where you're coming from here, but don't think it'll work. First of all, the UK is not self-sufficient - critically, we need to import both food and energy. Second, we also need to borrow from foreigners.

    To import essentials such as food and energy, we need to export. Until recently, financial services were big earners of foreign exchange. Now, I'm hard pressed to name anything that Britain can export, in large enough quantities, to pay for our imports of essentials.

    We have to recognise that no one owes us a living. For far too long, we've rested on our historic status as one of the world's leading economies. Our main assets in recent years have been energy and financial services. But energy has declined to the point where we are net importers, and we all know what has happened to financial services.

    Likewise, both public and government seem to think that we have some kind of divine right to high quality public services. In fact, we don't. We can only have the public services that we can pay for, that is, earn. We live in a global economy in which we need to compete and earn a living. Until this is recognised, no recovery is possible.

  • Comment number 63.

    At least Shell will be able to make a contrbution to the Government coffers now it has secured the rights to to develop Iraq's giant Majnoon oil field. It proves the Iraq war was "worth it" after all to some.....

  • Comment number 64.

    So it wasnt about the Iraqui people of terrorisim at all it was about oil revenues!!!!

    Will either Blair, Bush or Brownballs refute that statement?

  • Comment number 65.

    61. mrsbloggs13c2:

    Brilliant post, absolutely spot on. But I fear that what you suggest has a big flaw - it's far too rational, and far too self-denying, for our lords and masters to implement. Otherwise, a superb analysis.

  • Comment number 66.

    friendlycard

    ''Likewise, both public and government seem to think that we have some kind of divine right to high quality public services. In fact, we don't. We can only have the public services that we can pay for, that is, earn. We live in a global economy in which we need to compete and earn a living. Until this is recognised, no recovery is possible.''

    Correct.

    re national maximum wage. I also agree people will simply go abroad. My reaction to a private sector maximum wage is dream on. I know people emigrating, thats without a maximum wage. Moving appears attractive. Other countries are quite happy to host relocating businesses. Why on earth should I pay other peoples debt. Public services are consistently arrogant, unfocused, inefficient, and constructing pomp and cermony buildings.

    Economically, apart from the Number 10 Big Spender problem, some of the issue is the clinging to the concept of a 'job'. 'Jobs' as we now know them did not exist to any extent until 200 years ago. what happened then. The Industrial revolution and the growth big businees and big government in parrallel. Because the Industrial revolution is over and done with it follows 'jobs' have to change. 'Jobs' also came with pensions, which are ripening as a problem. what is to come is the dismantling of 'big'.

  • Comment number 67.

    #65

    Thank you

    Here's another suggestions.

    Let's dump GDP as the primary measure indicator of economic performance.

    It does not deal with debt

    Its too broad and too derivative

    It enables canibalistic behaviour by government - check out the number of stats that are based on percentages of GDP when right now government spending is a vast proportion of GDP.

    Its like a serpent eating its tail.

    And we never get told what it is only that it changed.

    A fudge, in other words a bit like the fudge associated with reducing the budget deficit by 50% in 4 years when that would mean it still would be nearly 50% higher than it was 3 years ago.

    Bald stark harsh numbers are what's required and if GDP is used lets get the bald number - 1.3 trillion or whatever and lets know what proportion of this is funded by tax revenue including PPP/PFI/Joint Venture payments.

    I'd have graphs of the bald harsh numbers printed on the front page of every newspaper once a month and one of those graphs would be total government debt and another would be government spending. Graphs of percentage movements would be banned. They are derivatives and as such not entirely understandable.

  • Comment number 68.

    How exactly is it suggested that "employers will pass on the rise in employers NI"? Surely no-one is expecting employees to take a cut in pay to fund increased employers' contributions?

  • Comment number 69.

    mrsbloggs13c2 #61 Turn off the street lights in the middle of the night, it's green and mean. I have long advocated this, but I guess the Health & Safety Nazis would moan about that.
    Turn off everything in office blocks at night. I have a clever plug costing less than 15 quid that turns off all the peripherals when I turn off my PC. There are some real quick wins out there!
    Still think VAT will go up further in the emergency Tory budget post election.
    And don't get caught holding equities at election time, they'll rise on the result but as QE is turned off and the cuts are announced, expect Armageddon.
    I hear Bognor is nice for a summer holiday.


  • Comment number 70.

    66, 67:

    Great posts, this is a very productive thread.

    The issues of emigration and debt responsibility, raised in 66, interest me a great deal.

    When most of the present Cabinet went through university, they had their tuition fees paid for them, and had maintenance grants as well. Yet now they are asking the current (and future) generations of young people, already saddled with student debt, to shoulder a huge national debt as well. It's totally unfair.

    So, should one emigrate? My own view is that the current debt isn't my fault. I didn't live irresponsibly. I didn't run up huge debts. And I certainly didn't vote Labour. So, is there any reason why I should stay here and help pay for this mess? After all, it's not as if the UK was a fun place to live these days - it's a joyless, angst-ridden, bully-cum-nanny state with tatty infrastructure run by hypocritical moralisers. The more I think of it, the more tempting emigration becomes.

    Re. 67, yes, GDP is a poor measure. I like the idea of publishing graphs as you suggest. After all, cigarette packets carry health warnings and scary photos - perhaps we should put wealth warnings and scary photos on government financial publications? A group photo of Brown, Darling and Balls might do the job, perhaps? As for a warning, how about "Believing this PBR could harm you and those around you"? Now there's an idea...........

  • Comment number 71.

    I do like MrsBloggs's clear cut call to examine the real waste in public sector.

    Here's a thought. 1600 hours at nmw equates to something under 10000GBP.
    Tax & NI will take 32% of everything over....is it 6000 now. Let's say about £1200.
    Benefits and what have you will pay most of that straight back.

    Efficient or what?

    Making these public sector nmw guys redundant is only 60% efficient. Basically you need to sack 2 to save one wage equivalent (and that's without any redundancy payments)

  • Comment number 72.

    #61 Mrs Bloggs

    Insightful, to the point, and spot on.

  • Comment number 73.

    According to data printed in yesterday's Times the total tax take per head has increased by around 14.5% in the six tax years between 2003-04 to 2009-10. A flat inflation rate of 2.5% over the same period would result in an increase of about 16%. Given that neither population nor tax rates have changed dramatically we can surmise that total taxable income, whether personal or corporate has not increased at all over these years.

    Furthermore we can say that those who claim to have been "creating wealth" over this period haven't really created any tangible wealth for the population at large, at least not taxable wealth. Since these "wealth creators" have awarded themselves bonuses totalling several billion without affecting taxable income per head this also suggests that they are adept at avoiding tax on their total income.

    So we are left with the inescapable conclusion that the increase in spending which seems to be such an important part of the measurement of this country's financial health has been almost entirely fuelled by borrowing, probably by converting the perceived value of property into cash.

    Government spending has increased dramatically but Government income through tax has remained flat, so rather than a "tax and spend" Government we have a "borrow and spend" Government. But since that's exactly how we conduct our personal financial affairs why should we find fault in it?

  • Comment number 74.

    Wealth generation comes from adding value for which people are prepared to pay. At its most fundamental, this is indeed from making, growing or creating things - converting raw materials into something which has a perceived monetary value. This value can be found in intellect, objects and "things", or indeed services such as provision of health, safety or protection. It depends upon the kind of society we want to live in as to how we rate and value these various things.
    However, the current society we live in is governed by a ruling class who have taken central control over so much of our life through a target driven culture that the values are being skewed, or lost, in the name of political dogma. In our working lives, it is a truism that "what gets measured, gets done" but this simple fact belies the cost of the measuring! As one example of this out of thousands, and its repercussions: -

    (Note, I came to know know about this following a conversation down the pub :-) , and I am making no statement whatsoever about the validity or not of this particular target)

    There are new minority recruitment targets for the fire and safety services (document is here : http://www.info4local.gov.uk/documents/publications/1171397 )
    In itself, this is not necessarily a bad thing. But just think what this implies.
    At some high level, this has been decided as a "target". It has necessitated the compilation of the figures as a first cost. But take this down to a local recruitment level. It is now necessary for someone to collect, collate and report on the outcome of every recruitment interview, and someone else to help make a decision on recruitment based not only on "the best person for the job" but also on their race, creed, colour or sexuality. This will also probably add in extra time in legal consultations to protect the service from accusations of bias from both the majority population and the minorities, plus additional training for the interviewer in removal of bias. Thus, two or three extra people are needed, all of who are taking away money from the ability to pay for front line service professionals.
    As another example: my ex wife was an admin manager in a health trust. For every target handed down from a centralised decision making process, it was necessary to employ administrators just to prove that the targets were being met. In the NHS, there are hundreds of targets. For every three lower grade administrative assistants on £15K per year, count this as two young nurses on £22.5K per year, and just think a) how many more front line service providers could be employed or b) how much money could be saved, if the target culture was severely dismantled and local accountability handed back to local NHS services - plus all of the civil servants who collect all of these reports and collate them back into statistics for politicians to selectively quote as proof of their prowess.
    Major savings are possible at the stroke of a pen.

  • Comment number 75.

    You know I'm not an exponent of the 'flog the publice service worker' horse; indeed I'm of the sustain employment levels camp and sort that part out later, cos I do not think too many have thought through the real cost of bashing the large sections of the employed.

    Advocating 15% wage cuts may work for higher paid public sector, but remember that large portions of ps employees are close to nmw. That 15% drop in income will lead to at least 10% clawback in benefits.

    But just to show I'm not advocating 'protect jobs at any cost' just look at this:
    the average number of support staff in a state school (ex caretaker/cleaner/cooks) in the 1970's was 8. Today it is nearer 30.

    Ask your self this: is the ability of the average school leaver to survive in today's job market and society any better than it was 30 years ago. Are these school kids suffiently competitive on the world stage to enable the retention of employment opportunity in the UK.
    This is not the top 10% MoU's running our commerce. Just the average Joe Bloe.

    Add to that the question: is UK really a competitive environment or it too expensive/too inefficient. If the latter is true what fundamentals make it so?

  • Comment number 76.

    74:

    Very perceptive.

    I don't think many people would quarrel with these two statements:

    - "Private sector activities are the wealth-generating engine of the economy";

    and

    - "As a civilised society, we need to provide effective services including healthcare, law and order and a safety net for those who are unemployed, are elderly or have low incomes".

    Right. So, where do things go wrong? Essentially, things go wrong when the redistribution/transfer mechanism fails. It fails when resources, needed by those who require social services or support, does not reach those people because it sticks to the fingers of government.

    Ultimately, our problem is that we have an unelected administrative elite which (a) feathers its own nest, and (b) invents structures (such as the target culture) designed to hide or justify this process.

    So our problem is both simple and complicated. Simple, in that we can restore financial stability by ejecting the target-setting, self-justifying over-managers in the state sector. Complicated, because they are like tape-worms - very hard to eradicate.

  • Comment number 77.

    #74 Russell Branch

    I'm a supporter of option a.
    However, what would happen is that the G would do what they've done in education and rather than provide trained nurses (teachers) they would provide cover support staff, untrained in nursing (teaching), cos they are cheaper.

    Then they would say that they've increased nursing staff (teachers) by 10% when in fact they've decreased life-support (teaching) capability by 'x'%.

  • Comment number 78.

    Would this whole problem not be solved by a stonking rise in inflation (say to 20% pa) for a few years which would, in real terms, reduce the debt?

  • Comment number 79.

    #73

    Interesting. Could you provide a link to the article.

    Nevertheless 2009/2010 has some substantial differences from say 2007/2008 or even 2008/2009.

    Despite all sorts of increases, the tax take is down this year because of reductions in VAT, a lower tax take from stamp duty because of the significant drop in houses sold (plus all the additional losses associated with a drop in fee income for the banks, income tax from surveyors, estate agents, mortgage brokers and the like), lower corporation tax from the banks and many other businesses etc. I'd guess that these changes alone are at least 30 billion.

    But here's the thing, the VAT take probably was pretty dependable revenue but all that income from housing transactions wasn't and one of the reasons we keep hearing ministers bleat on about lending to the housing sector is that the churn generated revenue for the Treasury.

  • Comment number 80.

    Well if you take out a £1,000 loan and inflation is at 20% the debt is halved in real terms in 3 years (ingnoring interest of course)because the £1,000 is only worth £500 - so you effectively owe £500.

  • Comment number 81.

    #74 Russell Branch. You provide a lucid and cogent account as to exactly why the government has effectively declared war on pubs.

  • Comment number 82.

    I am one of the high earners who are supposed to be contributing more to this budget. However, I left the country last year with little intention to come back (and pay UK taxes) until the country becomes fairer for the wealth creators. Rather than receive an extra 10% from my income, they have lost 40% of it.

    This is exactly what happened in the 70s when Labour last had a chance to wreck the economy. 68% top rate of tax (and a further 30% for dividend income) drove anyone with any ability out of the country. It then took many years of Thatcherism and Conservatism to make the country productive again. All ruined by the last 12 years of Labour tax and spend.
    --------------------------------------------------------------------

    What a load of tosh.....I am also a high earner so this isn't a Labour advert in any way but.....I actually go Lib Dem or Green as I hate both the big parties!

    the reason we are in the mess isn't just down to Labour. And Maggie did nothing of the sort! All she did was sell up all the valuable resources we had...making the few who who could afford to buy them mega rich and the rest of the country broke!

    If we had used the income from oil to actually make our country better, instead of funding unemployment and lining a few peoples pockets, we'd be in a much better position. All Maggie and her lot did was lead us down the super capitalist road, selling all our assets and privatising things which should never have been so.

    Instead of being sensible, we've spent the last 20 years allowing the bankers and investment types to skim a massive chunk off of all the countries earnings without actually adding any value. In fact, they took that money and gambled it away.....genius!

    And as for those property devlopers and investors...what the?! these guys were making millions from doing a spot painting and decorating. Why don't we claw some of this money back from them as well. Tax profits from shares and investments, especially property by a huge amount...spend the money on projects and R&D which will really benefit the masses in the future.

    Yes, this country is in a mess, but it has been for a while. I'm glad the public are coming round to it and hopefully we see some action soon. I don't mean a few sticky plasters as is currently proposed, but a radical overhaul of the whole system. One in which the wealth generators actually get rewarded and those bean counters get what they deserve for the value they add.....sweet FA!

  • Comment number 83.

    48. At 09:44am on 11 Dec 2009, John_from_Hendon wrote:

    "
    1. There is only ONE way to makes theses cuts and that is an across the board CUT in the pay of civil servants. (My guess is by 15 percent.)

    2. To make this acceptable ALL private sector pay must also be cut by the same percentage."

    Good one John. Agreed.


  • Comment number 84.

    So, Stuck between the Devil and the deep blue sea, eh? Didn't the Last Labour government in the '70s spend UK to the brink of bankruptcy? Although I'm not looking forward to the Tories brand of medicine, either. Cameron, the Thatcher for the teenies (twenty-teenies, that is!)?
    Of course with a "top down approach" making efficiency savings is simple, even measuring them is simple:- Just slash the departmental budget by a percentage, let them work it out for themselves, and stipulate a certain number of "front line" staff. Check back in 1 or 2 years and get those receiving the service to fill in a satisfaction survey . . . simples, yes?

  • Comment number 85.

    41. At 00:17am on 11 Dec 2009, foredeckdave wrote:

    "#39 armagediontimes

    You are just plain wrong. Your definition of wealth is just too limited. Hence the rest of your argument is just plain wrong.

    If you continue to limit the concept of wealth to merely the monetry value that can be made by exploitation of growing things, extracting things or making things then you will never be able to understand the true wealth of society. "

    Dave: This isn't really the point. The point is that as a nation we have to achieve a balance of payments. If we want German and Japanese cars, we have to import them; Saudi oil - import it; American computers, Japanese games consoles, Finnish telephones, French wine - import them. People don't give us their stuff for nothing - we have to pay with money or swap for home-produced goods. The point is that we don't dig much coal, make much steel, build many cars, etc., etc. And since the EC got a grip, we don't fish many fish or grow many crops or animals. Look in the estate agents and see how many farm houses are for sales with tens of acres of empty fields. Or check the southern counties and look at the number of old mills and barns that are now house conversions. Our politicians have destroyed our industries.

    If your products are computer services, financial services, etc. you either use them internally or sell them abroad. But these things are being off-shored to India and China now. So we are left with the NHS, the Army, the Civil Service, local authorities.

    We can't swap local authority services for Hyundais or Audis. We can't swap Social work for Chinese-made computers. We can sell education services to foreigners (which is why our universities are full of them) and we can sell medical treatment to foreigners (which is why we get that kind of tourism), but this doesn't really benefit the rest of us, who are supposed to be the beneficiaries.

    No, we have to stop buying more than we produce. So, get an allotment, and teach yourself carpentry. It's going to get tough here.

  • Comment number 86.

    Well, this is all much ado about, well, nothing really. Firstly, does anyone really believe that the Tories would have "stopped the music" (heavily regulated/prohibited) the banking sector to avert the disaster the befell us in the banking crisis? If so, give father christmas a kiss for me and feed the fairies as well.
    Let's be clear, there is a whopping structural deficit and some pain will inevitably be necessary to whittle that down, but that does not have to be achieved within the lifetime of a single parliament. The debt of the nation has various time maturities and much hand wringing by the high income earners is little more than hypocracy for the following reason. Not only the public sector benitifited from rising expenditure over the last decade or so, but lets also try IT, banking, construction et al. Having all gorged themselves at the national table, it really is pitiful to hear people deride the government for keeping their industries afloat for the last decade.
    I am nearly 50 and cannot ever remember such a period of national investment in infrastructure and renewal of those things which supposably mean most to the nation. So can someone please recognise at least some small part of what has been done and forget for one brief moment where the next Jag, foreign villa, plasma screen, caribbean holiday or other material totems are coming from!
    PS I don't vote for the incumbent party either

  • Comment number 87.

    #68 Captain Detail

    "How exactly is it suggested that "employers will pass on the rise in employers NI"? Surely no-one is expecting employees to take a cut in pay to fund increased employers' contributions? "

    Unfortunately that will be precisely what happens in small private companies across the land - stark choice : pay cut to cover NI increase or no job / reduced hours.

    Welcome to the real world - the great pity is that that bloated public sector will not be subject to the same discipline...they will carry on with their 1% pay rises, merely giving it back in another form.

  • Comment number 88.

    #82 Scott Crawford,

    Well said sir.

    I rally cannot see where this race to be the biggest 'cutters' is going to get us without taking radical action to change the reasons why we got here in the first place. Even if we do repay all of the debt we are only re-creating an environment wherein the avericious can again gorge themselves.

    This is why I have been arguing that we really need to look again at what we truly value as being wealth and the power that bestow upon individuals and organisations that hold that 'wealth'. The bankers and the financial services industry in general have been allowed a far greater degree of power than they should ever have been allowed to hold. As you say they have been allowed to "skim a masive chunk off of all the countrys' earnings without actually adding any value. In fact, they took that money and gambled it away.....genius!" The real dilema is that they never actually created any true wealth but their losses now have to be repayed using the nations wealth.

    Our great and glorious business leaders are also culpable. Again, for over 20 years they have exported manufacturing purely upon the basis of cost. Their argument has been that lower costs have resulted in lower prices. That is just not true. If you look at the price indicies over the last 20 years you will find that lower costs have gone directly into higher dividends and not had the same effect upon prices. As a nation we now find ourselves in a position wherein we need to increase exports but do not have the manufacturig infrastructure with which to do it.

    There is no doubt that savings can be made in the public sector, that public pension schemes need to more closely reflect the norm in the private sector but this is a question of management and not butchery. We simply cannot accept that we need to allow bankers to keep their bonus payments in our own good and then destroy our public services.

    So if we do have to use the knife then lets make it equitable. Let's start with the tax avoiders. An immediate 60% tax levied on all funds found in tax havens to be paid with 18 months - confiscation after that. Scrapping of the non-domicile tax status. I'm sure we could go on!

  • Comment number 89.

    It takes the man who saved world to know how to screw up the United Kingdom for generations to come. Well done Crash Brown, history will never forget you.

  • Comment number 90.

    #85 Bertram Bird

    Bertram, I accept what you are saying. However, how do you intend to buy all of these imports when you merely maintain a self-interested financial services industry and feed business executives who have more interest in their City profile than in creating home grown wealth? Oh I forgot! You will take out a great swage of public spending and incur higher and higher levels of tax to support the pigs in the trough.

    Sure we have to develop a level of balance and that will not be done without pain in both the public and private sectors. However if you think that 4 or 5 years of pain merely to return to some pre-squeeze position is worth it the OK. For me, I would rather look forward to a more effective economic reality.

  • Comment number 91.

    Reading many Postings on this Board you clearly get the message that everyone would like to emigrate (if they could) away from the UK in some form of mass exodus if only to get away from the endless Rain we keep having, for like it or not we ALL know that after the next General Election things will be about as bleak as they can possibly get.

    For me, the future is not just about the bleakness of the first hours after the next Election, but moreover just what is being done today to head-off and reverse the UK's fortunes on post election Day-Plus One, since all we are getting from every major Political Party is the Slogans and slagging-off's ( by playing Politics) in forever saying that this mess we are in is all the other Parties fault.

    This type of childish attitude being displayed be ALL the Political Parties has simply got to stop, for even they and by they I mean ALL Politicians ( as well as Bankers ) have got alot of growing-up to do if we are ever going to get in anyway out of this mess our Economy is in, but I fear that if things get much worse and at this moment in time I cannot see any reasons that things won't, then expect to see the so-called Elite of British Society ahead of you waving good-buy to the UK.

  • Comment number 92.

    88 fdd

    What is up with you dave. Taxing bankers and ex doms is worthwhile but peanuts. Your just polishing your foredeck not checking the hull.

    The problem is the size of the public sector, well known, public sector pensions (Local rates provide LGAs 1/3 of income, 2/3 come from Central Office, however 1/3 LGA commitments are 1/3 of LGA budget, so all your rates pay is their pension, not services). Coupled with this is the slide in the manufacturing sector from 30 percent of GDP to 5 percent. Rebalancing the public sector just exposes the loss of manufacturing activity and the consequential unemployment. All of this has been known and warned about for 4 decades. The whole thing has been propped up with speculative buying of property adn truely colossal debt, most of which has been ruthlessly trageted on the younger end of the population.

    All of this nancyboy polishing and tweaking is a waste of time. The rebalance will occur whether or not it is wanted. Begin at the beginning and go on till you come to the end: then stop. We are not yet at the beginning. In true NuLab spirit Darling has played pass the brown parcel. And is asking us all to drink from the Jonestown economic cup.

  • Comment number 93.

    76 fcard

    ......''Right. So, where do things go wrong? Essentially, things go wrong when the redistribution/transfer mechanism fails''

    Nope. Things when wrong when the government and the public turned their back on the idea of manufacturing. Wealth generation. All you are seeing is the consquences of a lack of wealth generation. Why dress it up. The public are getting what they have voted for with their wallets. Those in the public sector who are due to be laid off are getting the result they voted for wioth their wallets. The government - of all colours - is getting the result they voted for with their wallet and their shoddy short term strategy. Enjoy.

    The latest bit of Gordon strategy is reported as being advised by Ed Balls, assistant magican to Gordon Brown in his period as chancellor. To out large the education budget against the Conservatives as a politcal ploy. That just about sums it up. An education minster who likes to play a financial instrument and creatively accounts.

  • Comment number 94.

    #92 riverside

    For goodness sake READ what I've written and not what you THINK that I have written!

    Let me say it plainly.The public sector will have to take its share of the pain. However, to just cut and cut and cut until you have supposedly achieved enough blood-letting to satisfy the national and global agencies that led all of us into this mess is just futile. At the end of the blood-letting you will find that the amount and the time taken were not the criticl factors, it was how the rating agencies and others felt that was important.

    Well I for one, am sick of being told by avericious non-elected, non-value producing gangsters to play a game that is so rigged in their favour that neither I nor you can ever win. That is why I am urguing that we MUST re-define what we mean by wealth and how it can/should be controlled. The present system has lost all of its ethical credibility.

    If you want to return to the sailing analogy then I'm not polishing the foredeck, I'm actually warning that we have sailed into danger.

  • Comment number 95.

    Re:93 riverside.

    Things when wrong when the government and the public turned their back on the idea of manufacturing. Wealth generation. All you are seeing is the consquences of a lack of wealth generation.
    ---------------------------------------------------
    Couldn't agree more, spot on, since as I have been saying for ages now that any Country is "Only" Worth and as Rich at the end of the Day in relation to how much it Exports.

    The trouble in the UK is that over the past 30 Years we have wound-up, and closed down nearly ALL our once Traditional manufacturing based Industries WITHOUT replacing them with any replacement large-scale re-newed in-wards investments for manufacturing renewal to talk up the Employment slack in our Economy for future Growth.

    All we have had in recent times is an explosion in Services aka: White Van Man, but there is only so much you can deliver to Door-Steps without manufacturing the Goods in the First-Place, hence now the reasons that the UK has returned to being today once again a Net-Importer of Goods from once Third-World Countries such as China etc:

    Therefore, because of a complete under-sight of setting our sights over the past 30 Years from both Labour and Conservative Governments on what was and still is today needed for renewed long-term Growth and Investments we are today still not even in/at any Planned development stage to step-up Growth.

    Both, Labour and Conservative Governments have failed the People while attending too and concerning themselves with their own Expenses Claims, plus their other self-interest.

  • Comment number 96.

    ffd

    I know what you have written and think, and the fact you are landlocked sailor. Meanwhile I am quite happy building my boat. The advantage of an island is it is easy to leave it.

    You are wasting your time with your rabble rousing, the rabble are sleepy and prepared to drink from the poisioned chalice, just like in Jonestown. Too much Strictly Come Dancing. The enormity of the problem is not the debt, sloved by cuts, or the government, solved by a GE, it is the decades of destruction of a wealth producing sector.

    How do you think new wealth is to be created. Let me guess - by training. No. By a cultural shift. Do you know how hard it is to shift a culture, you have no idea, you are part of the culture, you are thinking within it. You have already lost because the culture has lost.

    The only route for many is the decline cycle, a form of economic cannibalism. Enjoy. Oh, do you want to supersize that dave. Reality cheque time. What was Gordons big idea, oh yeah, lets ask the Chinese to open factories here, 100s of them. What a lunatic. the Chinese will only buy strategically and will seek to develope their domestic scene, they have said as much by their actions.

    And we have various bodies talking things up, like Lrd Turner - 'When we get more affluent we will want to fly more' so lets develop air travel and punatively green tax those who dont fly. No oil has peaked already by some estimates. We should be seeking to reduce air travel.

    The establishment is part of the culture. Members of the establishment support the culture because it rewards them individually.

    Do you see the problem.

  • Comment number 97.

    I think some people are missing a big point here - the big point being that we're not just anybody, we're British.

    Consequently, normal laws of economics don't apply to us. Hadn't you heard? For example, we're not subject to the economic cycle like lesser mortals - 'boom and bust' has been abolished by that Nobel economist of the future, his Holiness Gordon. The abolition of boom and bust was a great weight off my mind when I heard about it, I must say. Sorted. Well done, Gordon.

    Being British exempts us from manufacturing - for goodness' sake, don't you realise that working in a factory can make your clothes grubby, and you could even get dirt under your fingernails? Certainly beneath our dignity as Brits.

    We don't mind doing a little work, mind, but we feel much more comfortable in 'service' jobs - as far as manual labour is concerned, well, that's what foreigners are for, isn't it?

    We're proud to be "a nation of shopkeepers".....and hairdressers, consultants, estate agents, civil servants, care professionals, and, er.....consultants. Obese, us? Never - we get plenty of exercise, walking down to the benefits office.

    OTT, I know, but the British mentality has been painfully close to this caricature, unfortunately. Most people seemed perfectly happy living on North Sea oil revenues, financial services, and borrowing against artificial rises in housing equity.

    Well, those gravy trains have hit the buffers. We can learn how to work, or we can get used to a new concept - poverty. As we're about to find out very soon, no-one owes the UK a living.

  • Comment number 98.

    Stephanie and above,
    I see you and Mr Chote have done a lot of hard work on the tax and spend numbers. What about growth? The Bank of England looked at growth over their forecast horizon of two years. They saw significant headwinds against recovery of nominal spending - huge spare capacity / credit-crunch- nationally and globally. They did not find they could forecast growth returning to pre-recession trends both nationally and globally. The PBR admits to a possibility of the permanent loss of 5% output. And yet for 2011 they are forecasting growth of 3.25-3.5% with bullish global growth. The BoE publish the average of 22 forecasts for GDP at Q4 2011 giving 2.2% four-quarter percentage change as the average of forecasts. This is a significant variation to the Treasury. The Treasury seem to be running with Goldman Sachs against others who predict 3.4% 2011 growth significantly boosted by bullish predicted trade. Can you comment..........

  • Comment number 99.

    #96 riverside,

    If you think I'm landlocked then you really know nothing at all! BTW you don't have to live on an island to be able to sail away.

    I'm very far from rabble rousing. Like most myopics you appear to be wedded to TINA (There Is No Alternative). You really must learn to actually think before you start ranting (corr I'm morphing into JJ!).

    I AGREE with you that true wealth generation has been neglected in the UK for decades. Where we part is that I do not see wealth solely as the excess made by manufacturing. Organisations harp on about their strength being in their people - it is just so much chin-music. In our economic model the only strength that is valued is the ability of that organisation to satisfy the demands of their shareholders irrespective that those demands may run contrary to the long term wellbeing of the organisation. The tail (the financial sector) has been wagging the dog for far too long.

    My argument therefore lies not with re-birth of UK manufacturing but with a continuation of the pacification of the self-satisfying money machine. At the present, wealth and hence power is only vested in the organs of the global financial organs - hence Buffett's comment about "winning the war". As you have ably stated wealth is not created by financial organs and we have to find a way of reducing and controlling their ability to feed themselves at our expense.

    As for the public sector, I am very concerned that significant damage will be done during a frenzy of cutting for cutting's sake. There is no doubt that there are issues in the public sector that need to be addressed. However, it is irresponsible to cut services only to assuage the financial markets and return to some form of unsustainable position akin to the pre-crunch economy but without the bubble to sustain it. That would not just be a double-dip it would be a true disaster.

    Hence my call to revisit the concept of wealth and its use

  • Comment number 100.

    I agree with many of the comments above ... and have referred to a number (e.g. post 74, 96, 97) on http://poweromics.blogspot.com

    and

    I echo the issue raised by post 98 above ... why is no-one challenging the Government to find out what foundations/evidence they are basing their bullish growth figures on ... besides a wet finger and thin air ... IMHO such assumptions make any detailed arguments about protected budgets/precise levels of future cuts almost irrelevant ...

    ... the lack of financial risk management got us to where we are today ... but have politicians, economists and the mainstream media learnt anything from the past two years ... it would appear not ... as IMHO the biggest risks are associated with recent Government projections are the risks associated with future growth ... yet that seems to be the one area of risk being completely ignored.

 

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