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Tories withdraw support from the gilt market

Robert Peston | 09:51 UK time, Monday, 1 February 2010

Stephanie Flanders has written a fascinating piece about the Tories' attempt to cut just enough, were they to win office, such that the Bank of England won't feel minded to increase the cost of money.

She asks whether David Cameron's apparent desire for a negotiated entente with the Bank of England would taint the central bank's hard-won independence.

But there's another more immediate risk from what has been widely seen as a watering-down of the Tory leader's determination to make a decisive start in cutting the UK's ballooning deficit (which you may have seen on BBC News in an interview with me last Thursday in Davos): will it give the willies to those who lend to the British government?

Because - as you probably don't need telling - there are investors who believe that decisive action to reduce UK public-sector borrowing is needed sooner rather than later.

And any concern that investors may have at the current government's preference for both deferring cuts and resisting the temptation to say precisely what would be cut has hitherto been allayed by their conviction that the belt-tightening Tories would win the election in the spring and do what's necessary.

Arguably, it was investors' confidence that the axe-wielding Conservatives would triumph that has made it easier and cheaper for the current government to borrow the record-breaking sums it needs in the gilt markets.

Alistair Darling would deny that he's been leveraging the fiscal credibility of the Tories, but not all analysts would agree.

So what if the Tories are no longer quite so fiscally credible?

What if the Tories would cut the deficit slower than investors deem essential? What then?

It is still the painful case that a record-breaking £200bn-odd of gilts has to be sold this year and next.

In theory, if the Tories are slowing the repayment profile for the national debt, the interest rate the government pays on those gilts would rise.

It's probably also worth pointing out at this juncture that the Tories' lead in opinion polls over Labour has also narrowed, so they're not quite the shoo-in they were to win a decisive result in the election.

Also, it is an intriguing moment for the Tories to be muddying their position on when to cut the debt.

The innocent explanation is that it is a response to growing and widespread fears that economic recovery in the UK is far from robust or entrenched - so Messrs Cameron and Osborne would not want to be seen to be killing off the buds in a sharp frost of public-expenditure reductions and tax increases.

But among bankers and investors it's the world-leading scale of Britain's indebtedness that is nearer the front of consciousness. If anything, the bigger risk to the UK right now is a crisis of confidence in the financial community about the credit-worthiness of the UK.

To be clear, there is no direct read-across (to use the dreadful business cliche) from Greece's acute difficulties in borrowing: the UK's finances are in better shape than Greece's, the UK economy is more flexible than Greece's and there isn't international pressure on the UK to improve the accuracy and reliability of government book-keeping.

That said, at Davos, for example, perhaps the biggest talking point was McKinsey's epic study of the respective debts of major economies, "Debt and Deleveraging".

This is not pleasant reading if you're British.

It shows that - of the world's biggest and richest countries - the UK and Japan are far-and-away the world's most indebted countries.

This is on the measure that adds together the debts of households, companies, government and financial institutions, and then compares that sum with GDP, or what the country produces.

On that basis, in 2008, the UK's debt to GDP ratio was 469%, the highest in the the world, compared with 459% for Japan. The ratio of heavily indebted America was "just" 300% in US.

Arguably, the foreign lending of our very international banks should be excluded from the calculation. But even on that basis, the UK's debt-to-GDP ratio was 380%, so still considerably higher than any other big economy other than Japan.

Now McKinsey points out that our debt-to-GDP ratio fell a smidgeon in the first half of 2009. But not enough to be statistically or economically significant: on the unadjusted numbers, UK-debt-to-GDP was 466%, compared with 471% for Japan.

Now the degree to which we should be worried about that depends on considerations such as whether the size and international nature of our banking sector is a source of concern or celebration, and whether the UK's relative housing scarcity means that a massive rise in housing-related debt over the past decade is sustainable.

McKinsey's main thesis however is that slow economic growth is an almost inevitable consequence of high relative indebtedness.

It gives detailed empirical form to an argument you'll have read here many times over the past couple of years.

And it's very much at the forefront of policymakers' thinking - as shown in an address given last week by Andy Haldane, the Bank of England's executive director for financial stability.

Mckinsey's analysis is also explicitly cited by Bill Gross, managing director of the leading bond investor, Pimco, in his February Investment Outlook - which has attracted a bit more attention than normal and says:

"The UK is a must to avoid. Its gilts are resting on a bed of nitroglycerine. High debt with the potential to devalue its currency present high risks to bond investors" (for gawd's sake Bill, say what you mean).

Certainly not all bond investors are as down on Britain as Mr Gross. But with the ratings agency, S&P, last week nudging down the "industrial" credit-rating for British banks, it would be fair to say that there's a degree of nervousness about the future course of the
pound and British government bonds.

And there's particularly high anxiety for those who believe that the main prop to demand for gilts has been the Bank of England's Quantitative Easing programme to buy £200bn of them.

Now if you were a conspiracy theorist, you would note that David Cameron's change of tone on debt-reduction coincides with what will probably be the most important financial decision this side of the general election - that is whether the Bank of England will stop buying gilts.

If he has made the fiscal position of a future Tory government less clear, he has made the Bank of England's decision on whether to withdraw support for the gilt market that much more complicated.

And - you could argue - that Mr Cameron has increased the risk that investors will stop lending to HMG or demand much more onerous terms.

Which, of course, would upset him, but perhaps his personal pain would be rather less if any sterling crisis were to happen before the general election.

UPDATE 13:01

By the way, and to state the obvious, if David Cameron has postponed the date when a Tory government would cut the deficit, that may put pressure on the troika of leading rating agencies to bring forward their reviews of whether the UK should keep its AAA rating for sovereign debt.



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  • Comment number 1.

    Wah Investors?

  • Comment number 2.

    I really cannot understand how politicians think that they are now in control of this country's economy. We are in debt on a grand scale and it's increasing every day, we are nothing more than debt junkies. When the rest of the world calls time on the UK and stops pushing, we will then know what cold turkey feels like. We will also then have confirmed what a bunch of useless windbags our main political parties are.

  • Comment number 3.

    The really sad thing about all this is that we seem to be caught:
    1. The general population has been so cushioned from the effects of all this borrowing that it doesn't really seem to be a problem for many people;
    2. What most people actually see, if they are still in employment, are flat earnings (up if in the public sector) helped by ultra-low borrowing rates to give an ok position;
    3. No-one understands (even the professionals) what will happen when quantitative easing goes into reverse;
    4. The tax rises are all "for the rich" and, in any case, are for next year;
    5. The Government constantly conflates the absolute level of debt (which will continue to rise and break all records on even their figures) and the annual deficit, which is scheduled to fall by 50% if you believe them;
    6. No-one is talking about the deficit in terms that are comprehensible to most people. For example, how many people understand that, even on the current government's own figures, the interest on the debt will exceed the schools and armed forces budget combined in 2012? Even if everything else were equal, this would imply significant budget cuts or extra tax;
    7. The government is, amazingly, still proposing plans (e.g. today's home care for the elderly) which will increase expenditure;
    8. All of the above have created a public illusion that, somehow, we don't need to do much about the debt levels or expenditure. Cuts proposed by Tories therefore look like savaging the welfare state unnecessarily.
    How on earth has the level of debate slipped this far? We now have the only realistic policy, i.e. significant cuts, off the agenda...

  • Comment number 4.

    Proof positive that the politicians should not be lecturing on the failings of short term vision!!!

    Mr Cameron is possibly afraid that if he is truthful about the extent of cuts that are necessary then he will lose massive amount of support from the public sector who will be fearing for their jobs and pensions. It is the same with Mr Darling and all politicians who look no further than the next general election. They have, therefore, a maximum vision of 5 years.

    Tough decisions will be required and this needs to be made clear now. Yes, many will lose their jobs and for that I am sorry, but until these cuts are made, we will all suffer

  • Comment number 5.

    It is all very well with these theories the tories are creating from their think tanks, unless the job market produces the wealth to give the government tax revenue the indebtedness of the country will go on for more than the 10 years predicted.
    It looks to me that the calculators have been working overtime to change polices, unlike the country....

  • Comment number 6.

    So the choice at the next GE is 'liberal democratic' free-market-anarchy loving party flavour blue versus 'liberal democratic' free-market-anarchy loving party flavour red (or maybe red or blue with a hint of yellow flavour).

    The ideology that is not allowed to be questioned has well and truly boxed themselves in so as to allow the electorate a choice of one....reminds of criticisms of the old eastern bloc countries/ know, the one party state election gags ...can't quite remember who made them though!

    Why don't they just rename the General Election the 'General Proclomation'.

    Don't they realise how silly they all look?...they've all morphed into one confluent entity to the point where they may as well sit where they like on the benches in the House of Commons!

    As it all makes no difference.

  • Comment number 7.


    You point out that total debt feel slightly at a tiem when government debt sky rocketed. This means that households and companies deleveraged.

    Total government debt (to gdp) is still only 22nd largest, better than France, Germany, and Italy!

    The idea that we're on the verge of a soverign debt crisis is totaly insane.

    There will eb higher interest rates and a lower valued pound. But interest rates are unstatainably low anyway. There is no way that my mortage repayment is a saver bet than the US government but I'm currently paying less interest than T-Bonds!

    I'd rather see the government borrow to invest in our export industries and take advantage of a lower pound.

    PS The McKinsey paper is compelling but many of their empircal ideas are less than sound, their analysis is probably ok but once again assumes that pre 2008 status quo in reaction functions of investors and governments. I would argue that such inference, i.e. using the past to predict the future, may not be reliable. This is especially true given changes to the way banks are regulated and their capital ratio requirement.

  • Comment number 8.

    p.s. there are several very nice houses for sale in down town Miami for less than $30,000

  • Comment number 9.

    Noblesse, The schools budegt is £84billion and debt servicing is only about £40billion!

  • Comment number 10.

    I dread the thought that our anaemic recovery may provoke the BoE into yet more QE, with its malign effects on inflation.

    And while I'm not a great fan or Cameron or Osborne, the thought of a hung Parliament or (remember the electoral boundary issues require a 10% Tory lead for a majority) is much scarier, as GB would have no compunction about inflating his way out of debt.

    Maybe Cameron is doing a balancing act - lulling the BoE into stopping QE while in practice intending draconian cuts. But is he that cunning - and will the Tories have a majority ?

  • Comment number 11.

    Robert said: "perhaps his (Cameron's) personal pain would be rather less if any sterling crisis were to happen before the general election."

    We are in the clarty, Robert! Who put us there - Brown. Who is taking us up to the Election wire - Brown. So who is playing games because he is in charge - Brown! Who created 60% of the jobs in the last ten years - The Noo Labour Government in the Public Sector. Where are these jobs? In Labour "strongholds". So who has the most to gain keeping the borrowing going - Brown...........Simples

  • Comment number 12.

    The electorate is so stupid and ill-informed that politicians have no choice but to promise more than they can possibly deliver.

    The tories (I hope) know what must be done, but they also know that if they are open and honest about debt reduction they will not be elected, with the masses voting for the nice cuddly Labour party who will pay for their free care when their old. (With monopoly money presumably...)

    The timing of this debt crisis - in the run up to a close election - is a disaster as politicians addressing the issue as it needs to be addressed would likely be committing electoral suicide. So we have Cameron shifting position, and going down in my estimation :-(

    The spectre of this government being re-elected and wreaking further havoc though means the tories keep my vote as "best of bad lot" though.

  • Comment number 13.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 14.

    Yes we need cut's and tax rises to prevent people from buying imports as we do not manfacture much these day's.

    We have been telling the public (for the last 30 years to borrow)now the boomerang has returned we better duck!

    If we cut now or shortly we will end up in a downward spiral, housing, stock market and pound will all go into free fall, and we will affect all those economies we buy from!

    We better start praying now for a massive miracle!

  • Comment number 15.

    This highlights the shear hubris and arogance of the current government when it's spokespeople constantly talk in terms of not withdrawing the stimulus measures too early for fear of compounding the downturn. This choice is not within their favour, when the markets decide that enough is enough they will not be able to assume automatic credit lines. They think that they can enforce the big banks to buy these gilts as a means of shoring up capital structures on the bank's balance sheets, this will only lead to further contrained lending and higher interest rates. Labour are playing a very dangerous and damaging political game with the nations economic future, this needs to be emphasised more by the media classes to hold them to account and make them face up to their responsibilities of fiscal management. If cutting spending and raising taxes now is necessary to correct the structural flaws in the economy then the pain in terms of lower growth and higher unemployment in the short term is the price to pay for the extended period of macro economic incompetance over recent years. Better for the government to decide when it will address the structural deficit than allow the markets to determine it, in the the long term it will be much more damaging to the UK's economic prospects if the latter were to occur.

  • Comment number 16.

    There should not even be a general election unless political parties reveal their projected spending plans/cuts - after all it is the great british public who will have to fund it - no change there then.

    Normally, to be accepted for anything (such as a credit card) one has to reveal key details but somehow politicians seem to think this logic doesn't apply to them. How can our so-called representatives really ask people to vote for them when major proposals/plans, that are likely to affect millions of lives for years, are a kept secret.

  • Comment number 17.

    Robert - not quite clear why the "foreign lending by our international banks" (or any other lending for that matter) should enter the calculation, as lending is an asset whereas borrowing/indebtedness is a liability. It's the aggregate UK borrowing liability that is the problem, I guess.

    The other side of the coin, however, is that for every £1 of borrowing (a liability) there is a £1 of lending (an asset). The question is - who holds those assets? Presumably mainly those pesky banks again!

  • Comment number 18.

    no 16 bp wrote,

    There should not even be a general election unless political parties reveal their projected spending plans/cuts - after all it is the great british public who will have to fund it - no change there then.

    That, in this case is a good point. After all this election is different to the rest!! Will we all be in a greater mess afterwards, and still at 'war'
    Time to have a online vote somewhere.

  • Comment number 19.

    As I've said before, (and I will say again right up to the election), Cameron has done the deal with Murdoch which will effectively dismember the BBC.
    Everything which the BBC pundits produce prior to the election is tainted if not slanted by the naked self-interest of keeping Labour in power

  • Comment number 20.

    Sorry Bobby baby but I did not see your interview with Mr Cameron last Thursday.

    I did however see his interview on the Politics Show on Sunday.

    Apart from the usual - I'll interrupt him before he answers so that nobody actually gets to hear him explain why he is doing something or nothing - we were treated to an interviewer who would not look at Mr Cameron at all whilst he, the interviewer pontificated.

    Not only is this the height of bad manners, it is treating the interviewee with contempt.

    The BBC should apologise!

  • Comment number 21.

    It does look as though David Cameron is getting cold feet doesn't it Robert? As you say his thoughts have wider implications as international investors will be noting what he says. There is a lot of interesting views on these matters on today on Japan and the lessons it can teach us. It looks as though he is right and our politicians are losing control of events.

  • Comment number 22.

    Your article highlights the problem with our economy. Its workings are dictated by "investors" looking for a fast buck who don't give a damn about the people's welfare. Caledonian Comment

  • Comment number 23.

    The practice of comparing our debt with GDP does not really bring the problem into focus. As I read the figures we are borrowing roughly £200 billion this year (and next?) as a contribution to total Government expenditure of roughly £600 billion.

    Who can afford to borrow one third of their "income" to fund non-wealth generating expenditure?

    There are only three ways out of this. The wealth-generating economy could start to grow like topsy and provide a sufficient boost to tax revenues. (No-one out there should be holding their breath).

    Or Government (of whatever stamp) cuts its cloth to suit its circumstances and puts up taxes/reduces spending until they are back in balance. In the absence of economic growth, however, this is very likely to depress the economy: and leave people feeling a lot worse off.

    Or we see inflation kick in. This looks favorite to me. Particularly as
    comparisons between the UK and Japan are slightly misleading. Japan has a long history of running a massive trade surplus with the rest of the World (which helps cover their debt) whereas the UK has a long history of trade deficits.

  • Comment number 24.

    Politicians will not take the difficult decisions necessary to balance the books or reduce our debt, just as many of the public will not sort out their personal finances.

    The next election is the one to lose, as whoever is in power will preside over a national crisis, and if you are NOT Labour, will get the blame from our publically owned media.

    Let Brown "save" the nation - maybe the world?

  • Comment number 25.

    Cameron and Osborne are clearly in a bind about how to convey this message. They should not fall into the same trap as Alistair Darling - i.e trying to both simultaneously have banks lend AND deleverage. The FT carries a opinion article about The US having averted deflation citing James Bullard of the Fed Reserve of St. Louis. The Obama adminstration rhetoric having moved on to deficit reduction turf as well. I am deeply sceptical of whether they have averted deflation, despite some positive growth signs in Q4 growth. This looks like a blip and it would be amazing if after the monstrous sums thrown at the economy and the extraodrinary loose monetary stance both side of the pond that there was no reaction! Timing of stimulus removal is exquisitely difficult. It is a measure of how addicted to the debt fuelled economy that voters have become, that there has to be such a softening of the message. The real need however is to restore sound money AND growth and this problem has been with us since the unhinging of the USD from its gold peg - aconstant swing from inflation to disinflation. We need a better placed global reserve system. Worth looking at this article

  • Comment number 26.

    Speaking to someone in a Local Authority recently, it appears that the cuts are already starting to be organised. But the result of the cuts will only really be apparent next year.

    It would appear that the QE option for funding the Government next year is the most likely outcome irrespective of who gets in power next.

    I just hope Mr King doesn't mind losing what's left of his credibility as a central banker.

  • Comment number 27.

    Pragmatically* Speaking

    1. Maybe a People takeover (of the government)
    would be better than :

    2. A Banking takeover (of the government)
    or a
    3.A Tory takeover (of the government)
    * pragmatic
    1. Dealing or concerned with facts or actual occurrences; practical.
    2. Philosophy Of or relating to pragmatism.
    3. Relating to or being the study of cause and effect in historical or political events with emphasis on the practical lessons to be learned from them.

  • Comment number 28.


    Could you give us something historical to compare the situation to?

    What percentage of overall debt/GDP ratio has historically triggered sovereign defaults? (If Robert isn't up to it, could someone informed let us know please.)

    It might help us all work out whether the Bulls or the Bears on this forum are correct!

  • Comment number 29.

    No sign of WritingsOnTheWall for...what must be 3 or 4 days now.

    Has he given up? I miss genuiniely miss his insight.

  • Comment number 30.

    "...there is no direct read-across (to use the dreadful business cliche) from Greece's acute difficulties in borrowing..."

    But it's OK to use obfuscatory terms like "write-downs", "negative growth" and the ubiquitous "quantitative easing"?

    Come off it, Robert. This sector is riddled with doublespeak - why not call a spade a hand-held earth-disrupting implement?

  • Comment number 31.

    So, the "City" turned from great "wealth creator" to "wealth destroyer" in the space of about 5 years.
    Is it the governments' fault?
    Perhaps not, as they were "bedazzled" by the bankers into thinking there was a great "boom".
    They better start learning the difference between a " boom" and a "debt-laden farce".
    The UK financial industry shovelled-up the rest of the worlds' cash, squandered it on pie-in-the-sky rubbish investment vehicles and lame-duck overpriced and unrealistic property markets, then dumped the debts on the public.
    In the process of this farce, they "pocketed" billions for themselves, causing the rich-poor gap to balloon.
    Government debt now heralds an austere future for most of us (unless you're a banker).
    Further currency devaluations?
    Designer inflation?
    Or just broke Britons?
    We are now enslaved to the rest of the world, its' cash and its' investors, because British bankers have squandered or pocketed a fortune.
    This wreck has a long way to run.

  • Comment number 32.

    Whatever analysis and spin is put upon the country's indebtedness one has to wonder what penetrating enlightenment of the growing problem you provided in the period 2002/7, Robert. Exactly the same could be said of your colleagues Stephanie Flanders and her predecessor Evan Davies. And to that one can add your collective employer, the BBC.

    Nary a word was cautioned about the debt boom. I guess that you were all taken in by your daily feeds from No10 that boom and bust had been ended and that things could only get better!

  • Comment number 33.

    You say :-
    "In theory, if the Tories are slowing the repayment profile for the national debt, the interest rate the government pays on those gilts would rise."

    This is not strictly true. The MPC would only need to raise rates in order to sell more gilts to private investors if the economy were showing general signs of overheating and the money supply needed to be reduced. We are a long way from that situation.

    While the recovery remains sluggish the government should if necessary sell its bonds to the BOE as an extension of the quantitative easing programme. Heavy private sales might slow the recovery further.

    In any case, if Lord Turner's excellent suggestion to deal directly with the cause of overheating - excessive lending by financial institutuions to particular sectors- is accepted, then we will have a much better way of dealing selectively with bubbles, rather than by using base rate rises as in the past, which depress the whole economy.

    I am afraid that Stephanie seems to have listened to too many bankers' lobbyists. The banks of course like high interest rates and realise that if the supervision of the banks is taken out of banker-friendly BOE hands and put into the hands of Lord Turner's FSA, the days when they could easily make huge profits might be over.

    David Cameron's back tracking, like his previous irresponsible scare tactics, is purely political. He and the shadow chancellor presumably get their economic advice from old school friends in the city.

    Surely, after the financial catastrophe caused by the banks only two years ago, it is time to realise that economic advice from city operators is likely to reflect their own narrow interests and may be poisonous for the rest of us who work on "main stret".

  • Comment number 34.

    @Elduderino01. In the Latin American debt crisis of the 1980s, debt to GDP levels were around 50%, 62% in some severe cases and about 27% in better managed counties like Chile. So it doesn't take a lot to tip the balance!

  • Comment number 35.

    Doesn't your piece make many of the same points as Flanders' Nixon piece? Begs the question - why the BBC is paying 2 of you to write about the same stuff? As harry hill say's - only one way to find out who's best...

    Anyway, I do agree that recovery be dammed, the biggest challenge the UK faces is its ability to service it's debt in future and even it's ability to raise these huge amounts in the first place.

    Trouble is I can't see any politicians around with the backbone to do what's necessary. Maybe Cameron is hiding his spots so he can win the election? I'd forgive him misleading the electorate if he saves the economy, after all what does the electorate know..?

  • Comment number 36.

    The most depressing thing about the entire issue is that all Labour seem to want to do is keep the status quo, tell us they will make changes after the election and scoff at what the tories want to do.

    Pur-lease. I will vote tory at the election.

    Brown had 9 years of unprecedented growth and prosperity during which time he could have set aside a "rainy day pot" to ease us through the next recession. He was too arrogant though, proclaiming the end to boom and bust.

    Are we going to trust the men who failed to prepare for this recession to lead us out into the promised land?

    Not me.

  • Comment number 37.

    What I get from this is that if interest rates go up - as they surely will - we are all in trouble! As a country we are so highly geared that even 1 or 2 % points will cause difficulty in making repayments, which will increase risk to lender and hence rates and mean further cuts to try to keep up repayments and if we are not careful a snowball in to a really painful depression.

    Nationaly we are in danger of doing what many individuals appear to have done and borrowed on their credit card to a level where they are just about making the minimum monthly payments :(

  • Comment number 38.

    > It is still the painful case that a record-breaking £200bn-odd of gilts has
    > to be sold this year and next.

    How long do I have to wait before I get my "peace dividend"? The cold war stopped back in '89!

    > Which, of course, would upset him, but perhaps his personal pain would
    > be rather less if any sterling crisis were to happen before the general
    > election.

    He wouldn't care about his "personal pain" if he had 5 years in office.
    On the other hand, if a sterling crisis increased his chance of being
    PM, maybe he'd do what he could to cause one. But how would that benefit
    the "Bullingdon Club"? Surely they'd loose out too?

    Nope. He's got a good chance without bringing the pound in line with the
    Swiss Franc, and he doesn't want his chums to loose out, with thier
    "fixed investments" in deepest Surrey.

  • Comment number 39.

    "And - you could argue - that Mr Cameron has increased the risk that investors will stop lending to HMG or demand much more onerous terms.
    Which, of course, would upset him, but perhaps his personal pain would be rather less if any sterling crisis were to happen before the general election."

    Robert, you would appear to be insinuating that Cameron is adopting a sort of "short-selling" position on the UK for an immediate political advantage.

    True or otherwise, it could NEVER be as devastating as the amount by which the country has been sold short the last 13 years for purely political motives; a fact which you have been loath to highlight throughout.

  • Comment number 40.

    What's the fuss?

    Brown is only running a weekly deficit of 3.4 billion pounds and his fiscal responsibility act requires the government to reduce this to an even more respectable deficit of 1.7 billion pounds a week in four year's time. It's a terrific piece of law this act, since it will help lower the deficit to exactly its structural level at a time when the ecnomy has recovered.

    The country is truly blessed with such a government.

  • Comment number 41.

    my my Robert we have been busy in Davos!!

    There is truth in what you say.

    The Labour government is playing the market response in anticipation of a conservative government for all it is worth as justification for maintaining the status quo while simultaneously calling the conservatives proposals '' irresponsible'' (naughtey spin doctors at work again I see).

    By contrast the conservatives are suffering in the polls and have changed tack because labours strategy is working, the gap is being closed in the polls off the back of fear of savage cuts, savage cuts the markets consider a pre-requisite to further support to UK plc.

    I expect there may be abit of turbulence in the markets in the coming weeks / months as they try to figure out if the conservatives will still win, and if they do will they still put the required measures in place despite yesterdays aparent softening of thier position.

    As usual it just goes to show what abunch of useless manipulative spivs we have for 'leaders' whos only loyalty is to their party and to save their own parties neck by doing whatever they can to get as many seats as possible whether it is in the countries best interests or not.

    There is a petition on 10 downing street website to set up an option on the ballot paper for 'abstention'. None of this lot deserve an endoresement by the people, an election should never be about choosing the lesser of 2 evils.

  • Comment number 42.

    The bankers and investment firms are concerned about national debts that they caused. Banks can cause problems but want no part of solutions unless those solutions create high profits for them. Nationalize the debt with a government holding company and remove the interest costs. This is a crisis and a temporary solution may be necessary. The banks are only thinking about the banks and further distancing themselves from their irresponsible behaviors. The banks feel they have some "right" to profit from their unethical and unprofessional behavior.

  • Comment number 43.

    There just seems to be so much complacency on the 'cuts...when? soon'? question, as if it IS all completely under control

    Where though is the error in believing that if a) we get a hung parliament (which basically means one unable to agree the difficult questions) or b) a government desperately trying to to postpone really effective measures above anything else....... we may see a Bond-buyers strike which then both forces the Govt to raise rates against any inclination they may have to not do so....AND puts the Pound even more 'into play' for speculators to have a 'free hit'---

    Spinning the minor statistical quirks of 'recovery' may be okay at keeping the passing interest of the populace from rising into alarm---- but it's hard to see how it will convince Bond buyers to keep signing those cheques for ever

  • Comment number 44.

    Certainly not all bond investors are as down on Britain as Mr Gross....

    Certainly not all journalists are as down on Britain as the Beeb.

    And Pimco have been castigated for exaggerating the bond situation vis-a vis the UK ......

    The manufacturing sector is doing well ......

    The property sector is picking up ...

    ...though there are mixed messages.....

    Even the Tories seem to be agreeing now with Labour's policies as sense prevails.

    So let's not do a Northern Rock on UK gilts .....

    UK = OK ......okay!

  • Comment number 45.

    A combination of these piece plus Stephanie's "Cameron's Nixon moment" headline leaves a very bad taste in the mouth - which part of impartiality does the BBC not understand.

    Where is the analysis of the Govt (yes the people supposedly currently in charge) proposals for debt cutting - on basis that they are slower the Tories and for smaller amounts (and mostly "efficiency savings") would that support an argument that the current Govt is causing even more problems for investors.

    We have an election coming up - I would suggest that the duty on BBC to be impartial in an election year is even more pressing than normal. Please try and meet that duty.

  • Comment number 46.

    There is no doubt now that Cameron needs to loose the next election.

    When the Labour client state sees how they have been lied to and are ruined by the Labour cuts after the election the party will be finished.

    I agree the markets have been waiting thinking that it will be ok the Tories are going to get elected so we can let Labour tinker.

    I think we are now going to see a crisis before the election. My thoughts are now on where I should put my savings to avoid loosing a major portion of their value.

    Its time to batten down the hatches

  • Comment number 47.

    I think that originally David Cameron had intended to make more severe cuts because he believes that to address the deficit now rather than later is a better strategy, which is probably true.

    Unfortunately, the weakened state of the UK economy is such that to take drastic action without thinking it through is likely to damage the economy even further and therefore any cuts need to be gradual.

    David Cameron appears to have formed this opinion too.

    If Gordon Brown had started making gentle changes some time ago we would be slightly better placed in that the government would have slightly more income and the public would be better prepared to adjust to the new reality.

    Instead, the government have adopted a "wait and see" approach with the result that a number have firms gave gone under.

    Prudent members of the public and subscribers to the "Martin Lewis" school of dealing with finances are already looking at ways not only to reduce personal debt but doing so in a way that means little changes to their lifestyle.

    They are also preparing plans as to what action they will take if they are made redundant or unemployed.

    If every family in the country did this we could probably reduce a lot of the toxic debt in this country, but clearly, debt reduction won't happen overnight nor is it the only answer but every little bit helps.

    We could improve things greatly by having better strategies and mechanisms for getting people back to work, which over time would remove the massive expenditure on some of the benefits.

    We could address issues of environment protection, crime etc and increase the Exchequer coffers by massively increasing fines.

    We will probably have to expect tax increases but if they are gradual they will be more manageable.

    By gently increasing income and gently reducing expenditure in a well-thought out gradual manner, the government like families will over time get finances into balance without causing major trauma to the nation and without unnecessary damage to the economy.

    Let's hope that the politicians have the common sense,creativity and patience to adopt a strategy which can do that.

  • Comment number 48.

    Call me naive.....but it seems to me that what's needed is for the Conservative Party to spell out in language we can understand how exactly they intend to deal with our economic problems.

    Obviously they can't as they don't have any idea as to how they can slash the public debt without risking further economic turmoil.

    I nearly added something about causing serious financial hardship to the poorer members of society (those that did absolutely nothing to cause the problem) but then decided not to...this wouldn't be an issue for the Conservatives (It never has been in the past).

  • Comment number 49.

    What a pointless piece.

    The Tories have not withdrawn support from the Gilt Market, they are withdrawing support of their own stated policy to make savage cuts within 50 days of being elected. This once again confused and 'wobbling' message is due entirely to their crumbling lead in the opinion polls.

  • Comment number 50.

    I knew I should have sunk my savings into gold in late 2008.

    Now because the country and many of its citizens are in so much debt it seems inevitable that sterling devaluation comes next, so as to decrease the real-terms debt that the useless government have to service and get more of the citizens off the hook.

    This heavily punishes those few of us who were (unlike Brown) actually prudent, didn't get in over our heads and didn't help accelerate the crisis. Heavily. But we don't matter and are outnumbered by the fools and the feckless.

    I wish now that I had taken out as much debt as I get my hands on, because it looks like in the end that was the only sensible course of action - why not take the risk? UK PLC will shaft the careful to bail out the risk takers every time.

    Me? Bitter? Surely not...

  • Comment number 51.

    No UK political party is credible since non of their leaders evidence good financial management experience:

    + Brown led UK into recession having over spent in the boom years after years of previous Tory under investment.
    + Cameron, despite independent wealth feels it is his right to milk every penny he can from the state for his homes and expenses.
    + Osbourne has worked the tax system, by "flipping houses" to maximise his large personal income.
    + Not one of these leaders has had a "real job" outside politics

    How can the public or bankers funding UK trust any of them. Choose to interfere directly with BoE independence means the UK enters the twilight zone.

  • Comment number 52.

    Cameron's position is no different to any other politicians.

    He's out of time. He can't make the necessary cuts before the start of the fiscal year.

    However they are as we speak starting to organise 'the cuts', at least in my Local Authority according to a friend of mine.

    It seems that 'the cuts' are going to start taking effect gradually through the next fiscal year, presumably to get spending under control during 2010 - 2011.

    Whether Cameron, or anyone else for that matter, says, or does not say 'cuts are going to be severe' is irrelevant, because from what I’m hearing they are going to be severe no matter what a politician says.

    The only piece of the jigsaw left to fall into place is an announcement from the BOE regarding more quantitative easing. Which I suspect must be coming soon.

  • Comment number 53.

    Given that the UK banking sector = 500% of UK GDP ..... regulation will curtail the banking sector, which is obviously a world leader and is back making great profits, AND THEREFORE HARM THE UK ECONOMY DISPROPRTIONATELY.

    We are all justifiablY excited about a 0.1% rise in our economy as the juggernaut turns around out of recession .....but letting the regulators and the government hack our banks will not do anyone any good.

    THE RECENT 20% CONTRACTION IN BANKS SIZE HAS REDUCED OUR ECONOMY BY 100% of GDP ......but this only shows up as 5% an annualised basis.




    Regulation and safeguards are the financial equivalent of health and safety.....there will be no playing at school if government and regulators are allowed too much control.






  • Comment number 54.

    Onward Ho, I don't fully understand your stats therefore I struggle slightly in understanding the points you have made (either to agree or disagree).

    Surely nothing can be 500% of GDP, if one sector was 100% of GDP then it would be the only sector contributing? Similarly a 100% reduction in GDP means we are left with nothing...

  • Comment number 55.

    No, the size of the UK banking sector represents 500% of UKs annual gross domestic product.

    A bit like your house is worth a hundred grand but you earn 20k.

    Wealth exceeds income.

  • Comment number 56.

    The damage done by this phoney election campaign could just cause the sterling crisis this country needs like a hole in the head.

    We have politicians namely Mandelson behaving like they know how to control the economic crisis when they should have seen it coming in the first place and put the brakes on five years ago.

    People who just want to believe there isn't or wasn't a crisis and wish they would all just shut up.

    A tory party who want to tell us all the truth but dare not because they don't yet know how bad it is themselves.

    Mandelson and Brown can say what they like and spend what they like so long as they know the tories will have to clean up the mess.

    How this could backfire on them as more and more actually want to believe them and they could retain power and they have no plan.

    This is an explosive situation they put us in as the tories fall back and the markets see the the consequences of labour returned to create another five years of mayhem.

    They will probably assume that the British people have just accepted and pressed the self destruct button.

    Not a good omen for investing in the country right now and trying to talk up a country in this mess just doesn't wash with these people.

  • Comment number 57.

    Brett Manning commented that my estimate that debt in 2012 would exceed schools spending was wrong, saying that interest bill is £40 billion, school spending is £80 bn.
    Let me refer him to the Government's own PBR, in which the figures are
    1. Interest 2010-2011 £44.4 billion
    2. School spending 2010-2011 £51.3 billion.
    With the extra borrowing, my estimate for 2012 cannot be far out.

    It is just this sort of desperate misunderstanding that I was referring to when commenting that the problem is that people just don't get the debt levels.

  • Comment number 58.

    #51 DibbySpot
    Your almost right, but you forget the one politician who has excellent financial management experience... Vince Cable.

  • Comment number 59.

    #55 - so the value of the banks is 5 times the GDP of the UK. The key is then what proportion of the GDP do they contribute through their activities (& I guess the disposable spending power of their employees)? What they contribute to the UK is the key not the value of the banks' assets. If they then upped sticks & left then GDP would reduce by that amount (hurting the economy & taxpayer) but there may be a subsequent drop in commercial property prices. Is this correct?

  • Comment number 60.

    I don't understand why everyone is falling for the lie that we are out of recession. This is just more spin put out by the number 10 spin machine. The only reason things look slightly better is because the fool Brown and his incompetent cohorts have been printing money like there is no tomorrow - this has slightly boosted the markets - but it has to be paid back one day. The recession has never really happened because of the ludicrous policy of QA. Labour think they can stave off a recession and they are so so wrong. All they have been doing is putting off judgement day and creating another bubble - only next time it will be a lot worse due to their meddling and tinkling. The sooner we get rid of this incompetent rabble the better - although Brown is clearly going for scorched earth policy and just making things a lot worse. Peston knows what is really going on but spins the government line; probably something to do with his father being a labour peer.

  • Comment number 61.

    Where's WritingsOnTheWall when you need him/her? I'm struggling to understand how the comments of a politician should affect what seems to me a purely financial issue; if your books aren't balanced you're in trouble.
    In my happy little world that means whatever side the politicians are on they should 'play fair' and either keep debt to a manageable level or hold back some reserves and invest the profit (if you can call tax a profit) into the future of the electorate.
    So are the books balanced or not? And if the politicians are incapable of balancing them due to election commitments, then I'd suggest some kind of independent regulation on the government itself. Is it not a simple case of capping this whole debt-to-GDP ratio I'm reading about?

  • Comment number 62.

    Despite all the flannel from Cameron over recent months, international Bond markets have not stopped buying British Government Bonds and their interest rate yield curve is uninhibited. You'd expect them to pay heed to some potential PM wouldn't you? So why are the markets ignoring Cameron's forecasts?
    Hard to tell whether that resilience is due to any presumption about the outcome of the next election because the Tory plans are so silly, or because the UK deficit is so obviously manageable?
    Either way, if Bond market prices don't reflect these forecasts of doom from Cameron and Osbourne, it should make us wonder whether those two have any credibility?

  • Comment number 63.

    We saw a 40% fall in commercial property prices last year, such was the impact of the reduction in banking lending.
    A quarter of this fall has been regained.

    Boy do we need banks!

    The last thing we need to do is to shrink them again!

    Don't listen to just MPS and journalists and regulators...... they do not understand how much the banks matter, they are so obsessed with what happened last year that they will kill our golden goose because it doesn't have a golden egg permit.

  • Comment number 64.

    There are three ways to reduce a sovereign debt mountain: earn your way out of it, tax your way out of it, and cut your way out of it.
    When a Government does nothing for long enough, it runs out of options before it runs out of time.
    Being ridiculously overdependent on financial and retail services, we simply do not as yet have the industrial manufacturing power to earn our way out of it. Being in the midst of a depression masked only by injection of our own money (0.1% QE produced 0.1% growth)we can't tax our way out of it...or we make it worse.
    So we have to cut our way out of it. And to cut our way out of it means we need patient and confident foreign investors. I don't think we have either.
    Gilts marketing across the world this year is going to make it difficult for anyone in the West to sell them, let alone us.
    My own view is you're ascribing a level of intelligence to Cameron that he would like to have, but doesn't; and frankly, any Party playing politics with the Government's sovereign credibility doesn't deserve to be elected.
    Notably (and you were there Robert) German Economy Minister Rainer Brüderle said at Davos: "I don't think that a Greek bailout is the right way because German and French taxpayers can't pay for Greece." Herr
    Brüderle didn't bother to mention the UK: he knows we're a basket case already.
    Those who were not born yesterday are to be found these days at

  • Comment number 65.

    #61. At 4:08pm on 01 Feb 2010, Chris wrote:

    Where's WritingsOnTheWall?


    Some of you perhaps need to be made aware of a computer (spyware like( programme that some large corporations have automatically loaded onto their employee's computers. The programme is called 'sagent.exe'.

    SpyAgent is a keylogger program that has the ability to record keystrokes. SpyAgent runs in the background and is usually installed without the computer user even knowing it's present on their computers.

    You can check if it's on your computer by going to 'Task Manager' (i.e. by pressing CTRL+ALT+DEL and selecting the 'Task Manager' button) and then clicking on the 'Processes Tab' should then be able to see if the programme is running on your PC in the background.

    Just google sagent.exe for instructions on how to safely get rid of it.


  • Comment number 66.

    Why did you remove my message? The truth hurts and you lot are censoring the truth. You should all be ashamed of yourselves. Peston is nothing more than a labour stooge perpetuating the government's lies and deceits. All this QA will lead to economic armagedon and when anyone tells the truth the evil Mandelson (aka Joseph Goebbels) tells us we are talking down the country. No we are not, we are simply telling the truth; we are not all stupid you know. Some of us were educated before labour started dumbing everyone down. The BBC is so biased and needs to lose its' licence; it's worse than PRAVDA.....and you're all part of it.
    Just remember....."we reap what we sow".

  • Comment number 67.

    Robert - I have great regard for your work and that you're a real asset to the Beeb. However I am worried that you're not giving the debt story enough coverage across the BBC (or the BBC powers that be, aren't).

    It is an immensely important part of our (hoped?) economic recovery that we get the debt down. There are no economic reasons not to; we'll pay whether we like it or not, if we don't. So please do try to underline to the public that the debt HAS to be paid, and it's not as if we've actually got a choice. Joe Public must understand this, in the run up to the election.

    It's not really a party political issue either; Darling would cut almost as much as Cameron if Labour won (he'd have to; he'd have no choice; "investment in people" or not)!

    Please work harder to take this issue into the public consciousness.

  • Comment number 68.

    63. At 4:33pm on 01 Feb 2010, onward-ho wrote:
    'We saw a 40% fall in commercial property prices last year, such was the impact of the reduction in banking lending.
    A quarter of this fall has been regained'

    I have to disagree with you on this.

    In the Northwest we have seen a 40% fall over the last two years. This being due to YP multipliers dropping dramatically.

    Rents are now falling, particularly for office space, due to massive over-supply.

    I've seen no uplift in value in the Northwest, none.

  • Comment number 69.

    ~53:''everything is broken,
    because of grist,
    that curtails..'' ?? The Fall ''Feeling Numb''1996.

    Funny isn't it ??
    When people talk of ''investors confidence''.
    Either the sums add up or they don't.
    Perhaps people are doing different sums.
    Why ??

    As regards debt, the ordinary person has, in time, access to build up capital from activated wills. I.E.Inheritance.
    So debt to GDP or income levels which seem high, can be slowly eradicated in a generation. If average income is £29k and built-up debt of £150k then the inheritance of a £400k house, free of debt,other costs and tax efficient, will sustain two children's spendings over their lifetime.

    Thing is, the government don't have a parent company and must sell off the ''Celebral Caustic family''silver.

    As Labour will, the Tories have.

    ''Now. What am I bid for this Banksy on brick wall''.

  • Comment number 70.

    58. At 3:55pm on 01 Feb 2010, ruralwoman wrote:

    "#51 DibbySpot
    Your almost right, but you forget the one politician who has excellent financial management experience... Vince Cable."

    Why do people keep coming out with this nonsense. Saint Vincent de Cable just happens to be an ex-accountant who said the right sort of words at around the right time. Why does this make him the only person qualified to run the economy. What a bunch of sheep people are! No wonder this shower got into power three times in a row!

  • Comment number 71.


    You seem to have missed the last couple of years. The banks need a new set of rules. Continuing the process that allowed the banks to stall many national economies would seem short-sighted. You may want to calculate your share of the debt that the government assigned you on behalf of the banks. Granted, a financial industry is needed...just not this one.

  • Comment number 72.

    It all comes down to market sentiment, doesn't it?

    It is absurd that a Leader of the Opposition in talking up the fiscal condition can actually predicate the markets to think that the worst is going to happen.

    This just shows how far the international gilt markets have given up on Mr. Brown's government.

    We have the ineffable Mr. Darling trying to be as honest as No 10 will allow him by saying that this is going to be the worst spending round in 20 years. No, Alastair, you are a decent man but I reckon it will be the worst in 63 years. What we are looking at currently is nothing anywhere near as simple as that facing the country in 1990: the spending deficit then was about GBP 36 billion if my memory serves me well. A whole lot smaller than the GBP 200 billion this year and next which we have to address now.

    The simple truth is that cuts need to start immediately so that it can be seen that the issue is being addressed. This will allow us some time to evaluate the next set of cuts and so on until we have solved the deficit issue. This will occupy the time of the next government and possibly the one after.

    The reality that No 10 does not want to cut publicly and now should be a concern for us all. It would seem that Mr.Brown is prepared to spin the country into a dreadful catastrophe of further debt just to save the Labour bacon. Such risky opportunism is unforgiveable.

    What Cameron and his default government may or may not do should not be a factor in any calculation. However, at one level it serves to illustrate the contempt that the most incompetent government since that of Lord North lost the American colonies is held in the gilt markets. This should not be used as a reason not to allow someone to lead the British economy out of its current disaster.

    I expect a proper but subdued recovery will begin to manifest within the next two months but it will be very tentative, very small and very slow. It might not even have anything to do with any of the measures of the current government but be due to the inherent skills of the commercial and industrial sectors.

  • Comment number 73.

    #29 and 61.
    I find WOTW puzzling!
    I certainly won't deny that I find myself nodding in agreement with some of what he says, but have trouble reconciling it with his repeated failure to take his argument to the next step. Usually the one that starts to produce the "oh hang on - that would mean..." moment.
    I'm guessing from the posts referenced above that WOTW hasn't contributed since his suggestion a few days ago that:-
    * he was making "some people nervous",
    * that they might be out to get him.
    He then suggested:-
    * that if he didn't post again, then they'd got him
    * that this would prove the truth of what he'd been saying
    Maybe I'm just cynical, but as soon as I read that I thought "Bye WOTW", but certainly not for the reasons he planted!
    On here you don't even need to leave a pile of clothes on the beach!
    And new identities are easily created.

  • Comment number 74.

    Very interesting Robert especially the bit about tory motives.

    Hopefully the December increase in consumer lending is down to Xmas and the VAT increase. If not, with political inaction until May, £200 billion of QE about to be subjected to the FRSB, public debt continuing to balloon, dare I say the perfect storm approaches and the tories may just get their wish. God help us!

  • Comment number 75.

    What ever happened to responsibility,the socialists have been in power now for what,12 years they have spent the country to a point where it is held together as a second world country supported by massive taxes which is not sustainable.It is time to slash government spending,pull out of the EU and worry about the UK,the NHS needs serious review,and its time to deregulate all the controls on business and free the people of Great Britain from government reg's on their day to day lives.;

  • Comment number 76.


    You seem to be feeling the pressure these days, resorting to a rant in capitals.

    I guess the "extend and pretend" from the bank is being reviewed on your portfolio.

    I am afraid it is exactly your kind of misguided thinking that got us to where we are.

    It was interest rates being TOO LOW for the period after the dotcom crash in the early 2000s (instigated by that sage Greenspan) that in large part contributed to the eventual crash in 2008.

    Ever increasing asset prices is Alice in Wonderland economics. Propery prices will revert to the mean as they always have. It is just that it will take around 10 years and probably some harsh inflation this time.

    Hand the keys back and move on.

  • Comment number 77.

    Got the point, Robert.

    As we're in the phony election then despite the fact that Gordo and his Appallings, got us into this position if Cameron appears to dither then it will have an impact on the perception of our triple A rating.

    All S&P know is that Gordo and his Appallings are putting off dealing with the deficit except with their 'efficiency savings' whereas Cameron has to give a positive and firm statement as to how the deficit will be addressed if he gets elected, or S&P and the tutto nel mondo of credit ratings, will think the UK management ain't up to much and rate it down.

  • Comment number 78.

    Both Tory and Labour are demonstrating wrong thinking.

    Neither have understood anything about the causes of the last bubble and how to avoid the next. Both stress keeping interest rates low. This is doubly wrong. The only thing that low interest rates will achieve is another damaging bubble - nothing more. Rates must go up to 5 to 6 percent ASAP. (The inability to understand this caused the last bubble!)

  • Comment number 79.

    Thanks to freemarketanarchy (65. At 4:42pm).

    I didn't find any 'spybots'. Neither did I find WritingsOnTheWall at any of the other posts in this blog. There were a couple of nice poems though... which don't solve the issues we speak of but serve as a reminder that someone, somehow has experienced all this before.

  • Comment number 80.

    Just can't wait for your blog on Sir Victor Plank coming back to advise government.

    I bet the conspiracy theorists will be running wild.

    Or is it hang together or hang separately?

  • Comment number 81.

    78 John from Hendon

    I do agree with you for already we have a house price bubble while commercial propertis have been allowed to fall.

    Banks were forcasting house prices falling 15% last year and the government panicked and kept them propped up with low interest rates and QE.

    If interest rates rose to a proper level this would halt excessive borrowing and those who have savings would again have realistic interest rates and extra income to spend.

    All these financial manouvres over the past twelve months have been on political grounds and boy will we all have to pay for them in the coming months.

  • Comment number 82.

    Given the current deficits why has nobody raised abolishing, for a limited period the income tax benefits of ISAS and PEPS. It might hurt but it is borne by those who have the ability to save, including high earners. At least this would not be a retrospective tax as when indexing of Capital Gains was abolished, thereby taxing the inflationary element for long term savers from 1982.

  • Comment number 83.

    I'm not quite sure what freemarketanarchy meant but I think most people know that every web site you visit and quite probably every email you send is already logged by HMG.

    Planting information on your computer is trivially easy so it is quite possible (although nobody would do it would they) to suggest you have been visiting sites you shouldn't (and didn't).

    Oh, and ANY program you install can easily track everything you do and transmit that information via your internet connection including passwords etc. Simples.

    But of course nobody would do that would they?

  • Comment number 84.

    #82 RMichaelSh

    "abolishing, for a limited period the income tax benefits of ISAS and PEPS. It might hurt but it is borne by those who have the ability to save"

    Yes, brilliant, let's further punish the people who saved money and stayed within their means and out of the housing market! Devaluing the currency isn't enough, now we should actually take income away from savers as well!

    Start eating into my savings and I'll start demanding the free house the rest of you seem to feel is your right.

  • Comment number 85.


    Well spotted!

    'It shows that - of the world's biggest and richest countries - the UK and Japan are far-and-away the world's most indebted countries.'

    ....but why?

    IMPORTS - the Uk and Japan are both over-reliant on imports and coming back to my favourite topic of 12 months ago - neither the UK or Japan have a strong resource backed currency and are both socially engineered into a damaging holding pattern - resistance to change and radical policy implementation.

    I've been looking at all of the light bulbs in the shops - Does anyone know where I can purchase a British made light bulb - for Pete's sake - can't we even make some light bulbs in this country without importing most of them from China?

    What these clown politicians need to do is stop the rhetoric and get some of this 'stimulus money' into e.g. factories to make light-bulbs - i.e. some simple common-sense measures that will make a difference and cut the very damaging levels of UK imports

    Stagnate or Buzz!

  • Comment number 86.

    As many here have pointed out, Robert,the Tories have not withdrawn support from the Guilt market!

    £200 billion would create 200,000 new millionaires if the cash was just handed out at random. This would double the number of millionaires we have in this country. Maybe then the money would be spent and would increase our GDP which is 65% consumer spending.

    I challenge Mr Cameron to abolish all the Government Quangos (which even the Cabinet Office agree cost us £34 billion PER YEAR). Some put the figure spent by these non-entities at £82 billion per year. They do nothing for us and we wouldn't miss them and we could therefore make shallower cuts in front line public expenditure.

  • Comment number 87.

    This is a mixed bag of thoughts but hopefully it contributes to "going forward".

    1. By far and away the biggest assistant to halting the recession has been coordinated interest rate cuts arising from the first G20.

    2. We should continue along the same lines with coordinated QE disposal. That is, the G20 central bankers meet, put their negative chips (QE) on the table and agree an equitable G20 QE reduction. Sovereign Debt is reduced across the G20/G200 giving assistance to Japan, Spain, Ireland, Greece, US and the UK.

    3. Everyone wins and Mervin King comes home with the ability to issue further QE and fund this year's UK deficit. Greece and Japan get their AAA credit rating back.

    4. There is no impact on trade, capital movements, global imbalances and FOREX.

    5. The world accepts greater liquidity but this does not lead to inflation and even if it did it would be contained by its universiality.

    6. The net result is a reduction across the world in Sovereign Debt and the elimination of the great dangers that it presents.

    7. To date we have done nothing to solve the "credit problem". We have only shifted bank debt to Sovereign Debt and at the same time increased debt. I repeat, we have done nothing to solve the problem. We had a credit problem and now we have a bigger credit problem.

    8. We had to do something different but we did more of the same as the Archbishop of Cantebury pointed out.

    9. Credit is to bring foreward tomorrow's income and spend it today. It is bad news as pointed out by Mr. McCauber. When individuals do it it is they who have to pay for it out of future income. When the state does it it is jam (votes) today but it is future generations (not current voters) who have to pay.

    10. I have been advocating this extension of "coordinated interest rate cuts" for many months. Do we have alternatives?

    11. We have two alternatives. (Please remember that this is global and not just a UK problem.)

    12. The first alternative is to live within our means which would result in 20% cuts in public spending and massive tax rises for middle income families. This is the route that we are taking but we are delaying it in the UK until after the election. The problem with this alternative is that we might end up with a Greek Tragedy (Greece, Japan, Ireland, Spain) and the next government comes sooner than expected in the form of IMF loan conditions.

    13. The second alternative is to remember where the money has gone and take it back. We all know where the money has gone, but let me remind you. House price inflation. This has been a world-wide phenomenon brought about by low interest rates.

    14. Ultra low interest rates are now fanning house price inflation again. We need to get savings equal to loans, no deposits no loans, to curtail house price inflation. This is how it worked in the past before banks invented magic money in the form of selling on mortgage loans in the form of mortgage collateralise bonds.

    15. Wealth creation is the only way to pay for a welfare state and it comes from directing money to young men with ideas and, dare I say it, "investment bankers" who are the intermediaries in this process. Wealth creation does not come from bricks and mortar or holding gold or the legacy of dead artists who are dead and therefore guaranteed not to add to supply.

    16. I have pointed out on many sites that Mervin King's "nice decade", now renamed "the stability decade", was only "the credit decade". £1.5t of personal debt in the UK cut ten ways and spread over 10 years reduces GDP over that period from plus 3% pa to minus 7% pa. It was neither nice nor stable but building misery for the future as Mr. McCauber stated. Add in public debt at £850b, PFI at £216b, student loans and the £200b taken from future middle income pensions and real GDP is more like minus 20% over the New Labour period in office.

    Please comment.

  • Comment number 88.

    If we do default, we must default absolutley. That way, countries that lent "us" money would also have to default, and thier credit rating would fall too. If _everybody_ falls from AAA to AA, then who cares?

  • Comment number 89.

    'Now if you were a conspiracy theorist, you would note that David Cameron's change of tone on debt-reduction coincides with what will probably be the most important financial decision this side of the general election - that is whether the Bank of England will stop buying gilts.

    If he has made the fiscal position of a future Tory government less clear, he has made the Bank of England's decision on whether to withdraw support for the gilt market that much more complicated.

    And - you could argue - that Mr Cameron has increased the risk that investors will stop lending to HMG or demand much more onerous terms.

    Which, of course, would upset him, but perhaps his personal pain would be rather less if any sterling crisis were to happen before the general election.

    UPDATE 13:01

    By the way, and to state the obvious, if David Cameron has postponed the date when a Tory government would cut the deficit, that may put pressure on the troika of leading rating agencies to bring forward their reviews of whether the UK should keep its AAA rating for sovereign debt.



    I think its called 'tactics' - DC is not one to be under-estimated and is not going to be the fall guy for everyone else 'doing nothing' ... except printing money.

  • Comment number 90.

    87. At 7:08pm on 01 Feb 2010, David Lilley wrote:

    This is a mixed bag of thoughts but hopefully it contributes to "going forward".


    Some good ideas - well some excellent ideas - and the politicains will therefore ...ignore most of it or all of it completely!

  • Comment number 91.

    I think part of the problem of the labour/tory muddle about deficit levels and need for cuts is that both sides of the argument are true.

    On one side the level of budget deficit is massive, much larger than needed in previous recessions, and higher than any comparable economy.

    On the other side, we started with the official total debt as a proportion of GDP lower than comparable economies, and the rate of interest we are paying on government debt is quite low compared to historic levels.

    Its the equivalent to the addictive borrower who is actually staying solvent by being able to keep borrowing by using zero rate special offers. Forever putting off the day of reckoning.

    However, the difference with the UK debt is that no one plans to ever reduce the total level, unless you believe childish treasury graphs that show it magically starting to reduce many years ahead, finally getting back to where we were in 20-30 years time. The government only plan to keeping adding to the debt at half the rate they are now, within 5 years.

    If you never pay the debt back [in absolute terms], and forever have low interest rates, then the interest repayment will be painful but possible.

    But seeing as you cannot guarantee worldwide low government interest rates forever, and seriously large bills are coming our way based on an ageing population and unfunded pensions hole, we are handing over a horrendous legacy to our children. Unless someone finds an abundant energy source, or some other "magic from the hat" in the years to come.

  • Comment number 92.

    I cant imagine how anyone with even half a brain cell could vote for labout this time around.

    I'm traditionally a socialist by nature, but even *I* would never vote for labour to stay in power. You simply can't let them stay in power and think that everything is ok even as they've watched the economy plow into the biggest disaster scenario since the titanic.

    And of course all politicians are saying "its a global crisis and we couldnt have done anything" but thats simply not the case. We all saw how house price inflation was breaking records year on year. That amazing bubble of house prices that has disenfranchised a whole generation that can no longer afford to purchase a home. Somehow you cant spot that a huge bubble has to somehow eventually be corrected?

    I predicted the same years ago. How come all of the governments financial analysists didn't?

    We need to give labour a good hiding on sheer principle! They've literally been at the helm as we drove headlong towards the iceberg, they can't now claim it was "the temperature of the sea that nobody could predict".

    I'm just unbelievably angry, because I have savings and yet cant afford a house and now it looks like my savings will be worthless both here and abroad for the forseeable future.


  • Comment number 93.

    Did you notice by any chance that "the Royal Navy's flagship, HMS Illustrious" (per BBC and Jim Murphy MP) will be parked next to GB's Kirkcaldy constituency for the next eighteen months? What kind of navy can operate like that and retain credibility?
    It sums up the country's financial worth.
    Cameron-Osborne, someone, has to get off the fence and articulate sensible plans PDQ

  • Comment number 94.

    Don't panic the gilts will sell just like before. You can print your way out of a recession if you know what your doing. Have some faith, the governments got it under control.

  • Comment number 95.

    Suppose in March/ April (after the budget) the rating agencies decided to devalue the UK from their AAA rating.

    Which party would gain the most politically?

  • Comment number 96.

    "(which you may have seen on BBC News in an interview with me last Thursday in Davos)"

    An interview WITH YOU, Robert, rather than an interview BY YOU!

    My, my, you do appear to over rate yourself.

  • Comment number 97.

    88. At 7:39pm on 01 Feb 2010, Jacques Cartier wrote:
    If we do default, we must default absolutley. That way, countries that lent "us" money would also have to default, and thier credit rating would fall too. If _everybody_ falls from AAA to AA, then who cares?

    Didn't we threaten Iceland with anti-terrorism laws for daring to buckle?
    If every body defaulted, I can just see the politicians from all sorts of countries scratching their heads, trying to figure out how to do the same.... there is a slapstick movie in there!

    I think you do have a really good point. Especially since the rating agencies have shown themselves to be meaningless by their incompetence in awarding AAA to what turned out to be little bits of little bits of untraceable high-risk mortgages.

    The Bullingdom Club - far be it from me to suggest the members don't have cash but instead they have gold stocks......

  • Comment number 98.

    On post 63
    * 63. At 4:33pm on 01 Feb 2010, onward-ho wrote:

    We saw a 40% fall in commercial property prices last year, such was the impact of the reduction in banking lending.
    A quarter of this fall has been regained.

    Boy do we need banks!

    The last thing we need to do is to shrink them again!

    Don't listen to just MPS and journalists and regulators...... they do not understand how much the banks matter, they are so obsessed with what happened last year that they will kill our golden goose because it doesn't have a golden egg permit.

    #####TWO aspects to the above.... Commercial property isn't 'a bust' only because the Banks are constrained.... outside the world of finance, there is a real world in which commercial property is bust with other structural factors at least contributing along with 'lack of finance'---Hansom Cab companies didn't JUST go bust because Banks stopped lending... The product brought to market by Mr Benz had something to do with it----

    1 a)Many retailers have gone bust... look around any street and count the empty shops and offices (okay..outside Notting Hill and Hampstead perhaps)AND not just because of the 'credit crunch'...look at the pre-packs (these basically just throw an x-ray on companies where the business model is falty anyway and credit problems merely accelerate the inevitable....

    1b) Offices are getting smaller anyway now, and very quickly asanti-car, anti-parking and 'work from home' is established as a trend,along with outsourcing (either abroad or in the UK) and more internet based CRM systems than relying on call centres.... adds to the contraction of needed space..

    1c) Even call centres are contracting as services move from voice to internet enabled services, backed by (fewer) voice --- call centres are 'intermediate technology' really

    2) The debate isn't that we don't 'need Banking''s about 'what sort of banking we need?'--------- It's 'This sort' that has we mustn't confuse a logic path of:

    We need banks...therefore MUST retain banks and bank services. ENDS


    We need banks...therefore MUST retain banks and bank services......but not THESE 'failed' vampire squid banks...

    If we can 'improve' deaths fromsmallpox, a 45 year life expectancy, heart transplants, land people on the moon and invent the WWW...we can surely replace clearly failing bankins with better versions not run for the benefit of the executives at the expense of everyone else....?

  • Comment number 99.

    87. At 7:08pm on 01 Feb 2010, David Lilley wrote:
    'Please comment'

    This mess is easily solvable. Let the BOE create more money, fund the Government and buy back the pre-issued gilts as it proceeds.

    But then there’s the hidden fear.

    What if the world put a question mark over sterling.

    When those you trade with lose confidence in your currency’s value, you look straight down the hole to oblivion.

    They’ve risked this scenario for a year now.

    May be they’ll risk for another, but ultimately it’s an awfully big risk to take.

    Mr King has likely been asked to print another £200 billion, because the necessary cuts in public expenditure are currently only being organised, but cannot be implemented yet.

    If he agrees, he sacrifices his reputation as a central banker in doing so.

    As regards politicians, they are not in control, if indeed they have been in the past.

    This is not about politics, it’s about maths. £200 billion worth of maths.

  • Comment number 100.

    At 8:35pm on 01 Feb 2010, ALEX EXETE

    Do you really believe what you wrote Alex or do I detect irony? There are very few people out there who believe this govt has everything under control; they clearly haven't a clue what they are doing and are making it up as they go along. Reality and common sense tells most people that we are in for an even bigger recession when this incompetent govt have finished printing money and their scorched earth policy. We have a very depressing future ahead of us, despite the idiot Mandelson telling people to talk the country up! You can only talk something up is there is solid foundation and something worth talking up. Labour have trashed the country and the economy and continue to do so with their lies.


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