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The market consequences of a minority Tory government

Robert Peston | 10:11 UK time, Saturday, 8 May 2010

On BBC Breakfast this morning, Vernon Bogdanor said he had no doubt that there would be a minority Tory government, without explicit support from the Lib Dems, that would limp along till another general election in the autumn.

Now he's seen a good few electoral cycles. And his view is not to be dismissed lightly.

As I said yesterday (see A coalition forged by a sterling crisis), the obstacles in the way of the Lib Dems forming a pact with either the Conservatives or Labour look insuperable.

So what would happen on markets if the Tories do end up governing as minority, with all legislation subject to cross-party negotiation and haggling?

Well, the strong probability, perhaps a racing certainty, is that investors would take fright.

Because although a Tory chancellor could cut some spending without resorting to Commons votes - although not if such cuts involved fundamental structural reforms to public services - any tax rises would have to be put to Parliament.

Investors would be unsettled at the idea that a Conservative finance bill or reconfiguration of the public sector would be vulnerable to being voted down in toto - because confidence in plans to reduce the UK's record peacetime public-sector deficit would be undermined.

In those circumstances it is highly likely that sterling would fall and that the government would find it harder and more expensive to borrow.

Or to put it another way, the warning made during the election campaign by Ken Clarke, the Tory Business Secretary, that the UK could find itself again asking for financial succour from the International Monetary Fund might be prescient rather than alarmist.

Here's the painful irony. If there were another election in the autumn, fought against the backdrop of a flight from sterling, it would be all about the detail of how to slash the £160bn-odd deficit.

That is the debate that many said we should have had over the past few weeks, but didn't - in the view of some - because the party leaders were too frightened to tell voters the painful truth about precisely which public services would be squeezed.

A combination of an indecisive election and pressure from financial markets may make that a debate postponed rather than cancelled.

Comments

  • Comment number 1.

    No matter how much political rhetoric is thrown in and no matter how many elections are held, THIS monetary system needs to be replaced altogether with a new and an efficient way of achieving sustainable progress.

    Mind you, we say PROGRESS not growth, as growth means THE inflation of yet another balloon and the consequent burst.

    Again, my question stands, When are any of the mainstream journalists going to inform the public about alternatives to the monetary system?

  • Comment number 2.

    "Or to put it another way, the warning made during the election campaign by Ken Clarke, the Tory Business Secretary, that the UK could find itself again asking for financial succour from the International Monetary Fund might be prescient rather than alarmist."

    Oh for crying out loud! Only in Labour's wildest dreams was anything else ever going to be the case. Again the fact that people don't understand the mess we are in doesn't mean we're not in a mess. What doesn't seem to be mentioned is that there was very little market support for continued Labour policies either. The one chance for the U.K economy was a strong administration with the ability to cut spending now rather than endure the pain that Greece is facing in 5 years. Now due to Labour voters trying to continue the debt binge we are properly and irreversibly screwed.

    When you are a hole you stop digging.

  • Comment number 3.

    When you say investors , you really mean speculators , don't you ? The usual suspects come up again : vulture hedge funds , rating agencies , etc etc . Ok then let's hand over the government of the UK to Moody's and the Paulson hedge fund . Plus we won't have to bother with elections anymore .

  • Comment number 4.

    The Conservatives would probably be best off if Brown tries to struggle on with Lib Dem support. There would be financial meltdown and the coalition would breakdown in months with the inevitable Tory landslide.

    But if, as you say, the Tories govern alone and Brown's poisoned chalice blows up in their faces, they may be blamed for the disaster by the electorate who seem to have the attention span of a Goldfish...

  • Comment number 5.

    So, we will be forced into a National Government at that time, for who will have the stomach for another election in six months?!

    Let's have a formal National Government now not the messy cross party haggling and horse trading that will ensue from a Conservative minority administration. Do we really want Osbourne, who is totally untried and untested, to deal with sterling in this inevitable crisis?

  • Comment number 6.

    This won't happen but what do we think about this idea:
    Brown rings Cameron and Clegg and says, 'Listen fellas, this is a bit of a mess, how about we all get round a table to talk about this?' They get round said table and thrash things out. It's agreed that Brown can't really stay as PM so he steps down, the rest of the government is made up of guys from all three parties something like this: Cameron PM (most votes etc so I guess that would have to be the way), Cable Chancellor (lets Osbourne off the hook and he can then stop reading those textbooks 'so Ken, what's the difference between monetary and fiscal policy again?'), pick one of the Millibands for Home and one for Foreign secretary, Hague, err, Education?, etc etc...you get the picture. Government of National Unity time. It might work but, as I say, It won't happen.

  • Comment number 7.

    Surely Cameron will realise that in these circumstances, Ken Clarke has to be his Chancellor?

    Odds of 6-1 on Betfair. Worth a flutter?

  • Comment number 8.

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

  • Comment number 9.

    4. gruad999:

    "The Conservatives would probably be best off if Brown tries to struggle on with Lib Dem support. There would be financial meltdown and the coalition would breakdown in months with the inevitable Tory landslide."

    Spot on. What has struck me - listening, for instance, to Ed Milliband and Ben Bradshaw on Radio 4 - is that Labour cannot bring themselves to admit that they have "lost" the election. The sheer arrogance of these people beggars belief. Meanwhile, their Glorious Leader looks like he will need to be dragged from No. 10 by his ankles....

    .....so, LEAVE LABOUR THERE, is my preference. The Lib Dems are instinctively more comfortable with Labour than with the Tories. GB will promise them anything - a referendum on PR, so why not a moon made of blue cheese? - just to cling on to an office that he was never elected to (or remotely qualified for) in the first place. We're going to be going back to the polls in the autumn anyway. Meanwhile, whoever is in office is going to get the blame either for the consequences of action (tax rises, spending cuts) or of inaction (a sterling crisis).

    So, David Cameron's best policy by far would be to let Labour cope (or fail to cope) with their own economic mess, leading to a Tory landslide in the autumn.

  • Comment number 10.


    Nick Clegg and the party he leads must face up to the responsibility DEMANDED by this country to insure
    the survival of our political and financial integrity ( our what is left of it ). The Lib Dems must be prepared
    to ABSTAIN on Bills that they cannot agree with. THE COUNTRY IS WATCHING!!!!!!!!!!


  • Comment number 11.

    You still dont get it.

    We VOTED for a hung Parliament.
    That way nobody can put any cuts through.

  • Comment number 12.

    I do get annoyed at the implication that it is the markets rather than the electorate who should be deciding who governs the country. If investors are making decisions on fright then this is another failing of the market.
    I’m finding it more difficult to see how clegg can maintain integrity here. The words “seek” and “first” may have been carefully chosen, as well as “entering into talks with other parties in a constructive spirit” but it is a contradiction, at the very best it makes the first promise worthless.
    The liberals offered the electorate real change from the old two, if they sell this promise away and keep one of the old two in power, trying to take credit for all that works and blaming their partner for all that goes wrong is not going to work.
    Ironically, the best for the country ( and possibly for each of the three parties) may have been similar to Clegg’s original idea of an attempt to get a three party agreement on the size of budget cuts needed and to sign up to this program over the next 5 years irrespective of any future elections

  • Comment number 13.

    gruad999 - Although I feel the Tories have got the right policies to tackle the deficit, I totally agree with you in that this is a poisoned chalice, and letting Labour and Lib Dems carry the can for another 6 months before a General Election would be needed isn't that daft as it would result in a Tory landslide......and yes some people have got the memory of a goldfish, sad but true!

  • Comment number 14.

    Thankyou Robert. As long our political servants have their heads in the sand, or think we have, we are heading for serious trouble. I watched this 'crash' in the financial sense happening in terms of business oppotunities dying from May 2008 but all around me patted me on the head and said its not real. 2 years later i have been muttering about needing a centre right compromise for the last 6 months... Still they pat my head! When am I to be proved right? What ideology can be more important than the countries long term security. WE ARE AT WAR, financially and physically. Pleaase tell the political class to grow up!

  • Comment number 15.

    I agree that Ken Clarkes views on the bond markets was right. This was always the danger - its just that the public didn't/dont want to face the inecvitable pain and some have stuck thier heads inb the sand by voting anti consewrvative ( It is very convenient for the public to have a third party which enables them to do this).

    I also agree that a minority government looks to be on the cards as
    1. the Libs wont want to be associated with deep or early Tory Cuts and
    2. they regard getting PR as more important than the national interest ( it is by no means clear that the public want PR despite the unfairness of FPTP. Indded the present impasse just shows what life may be like when there's no clear decision and this will nearly always be the case under true PR.I am not convinced Labour really want it either.)

    So I suspect we will get a minority govt. ( This will be a little less unstable than a lib/lab/nationalist pact. The latter offers the prospect of big of cuts in England whilst Wales / Scotland /N Ireland get less - the latter outcome will enrage already disgruntled English voters. The bond markets would definitely take fright at this prospect). However the markets are also likely react as soon as a minority Cons. government looks like not being able to deal effectively with the enormous deficit and we'll be forced to have an election. [A Euro/Portuguese/ Spanish crisis is also looking more likely by the day. The UK may b not be far behind]. A crisis and another election will force the public to actually address the IMPERATIVE for taking swift, firm & painful action - otherwise a Greek tragedy will become us. Whether the public would vote Conservative in larger numbers in such circumstances is anyone's guess but I think it is more likely than not if there is a crisis.

  • Comment number 16.

    ‘Investors may take fright’!........ come on.

    I reckon most foreign investors already have.

    And I believe they took fright at the back end of 2008, because the Bank of England was planning quantitative easing (printing money).

    The main investor in Government debt is the Government. It has been buying its own debt (£200 billion of it) since the start of QE.

    For those who still don’t fully understand what’s going on:

    Maastricht Treaty Article 104
    1. Overdraft facilities or any other type of credit facility with the ECB or with the
    central banks of the Member States (hereinafter referred to as ‘national central banks’)
    in favour of Community institutions or bodies, central governments, regional, local or
    other public authorities, other bodies governed by public law, or public undertakings of
    Member States shall be prohibited, as shall the purchase directly from them by the ECB
    or national central banks of debt instruments.

    The Bank of England (wholly owned by the UK government) purchases existing gilts via the Gilt Edge Market Makers, thereby making way for the purchase of newly issued gilts.

    It does this to avoid breaching article 104 of the Maastricht Treaty.

    Why is the Bank of England (the Government) buying its own debt?
    Because there’s insufficient demand from external ‘investors’.

    Why is there insufficient demand from external investors?
    Because the level of indebtedness of the UK is now at point where default is a significant possibility, hence the Government has to buy its own debt.

    The question on any external investor’s mind is likely to be:
    How long will the UK Government (whether Tory, Labour or a coalition) fund itself by purchasing its own debt, thereby debasing its currency?

    If we knew the answer to that we could predict both:
    1) The likely depreciation of sterling in the short term.
    2) The level and timing of public sector cuts.

  • Comment number 17.

    Comment No.1 plamski hits the nail on the head! Why can't the BBC do an Adam Curtis documentary on the phenomanal "Zeitgeist the movie" and "zeitgeist Addendum" and explore the possibility of a resource based economy. No economist however clever can ensure constant steady growth. A monetary based economy will always lead to boom and bust leaving the poorest most vulnerable. So why isn't a resource based economy discussed? Is it because the present unfair system allows a small minority of super rich people to control everything through capital investment. Why should the super rich be allowed to play god and decide how our society develops. It's blinkered fallacy to believe we need a big pile of printed paper before a new hospital can be built when we already have the land, the raw materials, the skilled labour, the energy and the technology to put it all together. We live in a system where almost every consumer item is purposely built to fail a short time after the guarantee expires. Think of the waste. It is madness. Come on BBC do your journalistic duty to the people you serve and investigate the sensible alternatives to this worringly sick system.

  • Comment number 18.

    A minority Conservative government will not get its Queen's speech passed which means that we will have another General Election by July - a disaster economically! (for the Nation and the parties.)

    We need a National Government of Labour and Conservatives. That seems to me the only option.

  • Comment number 19.

    4. At 10:53am on 08 May 2010, gruad999 wrote:

    "The Conservatives would probably be best off if Brown tries to struggle on with Lib Dem support. There would be financial meltdown and the coalition would breakdown in months with the inevitable Tory landslide."

    And this is one of the biggest problems we have. Idiots like this and the politicians only giving a rat's ass about politics and themselves rather than thinking of what is best for the country.

    You think 'financial meltdown' is the 'best' thing that could happen? What kind of person does that show you to be...?

  • Comment number 20.

    For a sector of the economy -obligingly called 'the markets' -to hold such sway over the whole economy after what has happened these last 2 years is nothing short of shameful. When what is being discussed is of epoch making proportions -the future of the governing of the UK -I think we should be allowing our elected representatives to take their time (within reason of course).

    The desperation of the markets for there to be a resolution to this by Monday is testament to their short term thinking and sums up in a nutshell how this country's economy has been run for the last 30yrs.

  • Comment number 21.

    People on this site seem to think investors means banks, rating agencies etc but the real investors are countries like China. They have to 'invest' their surplus cash and will always put it in the place they think safest. Our future is completely dependant on proving that we have a strong sustainable economy.

  • Comment number 22.

    Remedy the problem by getting the three party leaders to work together "for the good of the country": Cameron as PM, Brown as Chancellor and Clegg as Foreign Secretary. They should swallow their prides, accept the fact that the British public did not give any of them the mandate to "rule independently", and co-operate if they want us to believe their sincerity.

  • Comment number 23.

    I'm in favour of letting the Conservatives get on with it with a minority government, the LibDems should not get into bed with either of the other two, that way lies electoral suicide

    If I had wanted the Tories or Lab I would have voted for them, why would I vote LibDem if my vote was in fact a proxy vote in favour of one of the big two.

    The Government (conservative) should be allowed to present their bills and be knocked back if they are too outrageous.

    Backbenchers (anybody remember them ?) will hold the balance of power and will for once be able to hold the government to account.

    The voters of this country voted for a hung parliament for good reason, we don't trust any of them to do our bidding.

    Once they have gained our trust that they will work in the best interests of the nation as a whole then we will reward those that do with the reins of power, until then they are all on probation.

    The markets might be a bit jittery but I think they might find comfort in the fact that on the whole the UK is a broadly sensible place.




  • Comment number 24.

    The reason we didn't have a proper debate over the last few weeks is because the media were all busy drooling over either Clegg or Cameron and not questioning their policies just saying they were "good blokes" The only in depth questioning of policies occoured with labour, and then not very often.

    Every journalist should hang their head in shame over how they covered the election. 4 weeks of pandering to the leaders whims, lapping up their every word and simply no investigation or cross examination at all. Pathetic!

  • Comment number 25.

    All I can see happening is a Tory Minority government that limps onto an inevitable second election. Clegg CAN'T and won't get into bed with the Tories because

    1) The two parties have too many policies that are fundamentally different (nuclear weapons, tackling the deficit, inheritance tax etc). That why Cameron gave his 'let's work with the LD's' but here's my series of 'lines in the sand'

    2) There is too much arrogance from the Tories 'we ARE the party of power' to ever countenance working with the Liberal Democrats.

    So the second option is a Lib-Lab pact. While from a policy perspective this arrangement might work better, this will never happen either because:

    1) Gordon Brown would have to go. But, the Labour Party won too many seats, and the Lib Dems too few, for the Lib Dems to say 'Ditch your leader'. Nick Clegg has (or seems to) a pathological HATRED of Gordon Brown.

    2) Even with the LD's joining Labour, they would STILL not have an overall majority. That would mean perhaps Plaid, SNP also joining. They would extract a high price for joining such a coalition. Any coalition with more than 2 parties is DOOMED to failure.

    Which leaves us with a Cameron minority government (with perhaps also the DUP). The Queen's speech will contain very little (if anything) about cuts (as the cuts don't need to be voted on in parliament), and also contain nothing controversial. The government will limp on until a 'crisis' occurs (is manufactured). On the back of perhaps six months of 'compentent government' the Tories will say 'vote for us, nothing to fear here', and will hope (and probably get) an overall majority. This is when the 'fun' will really start.

  • Comment number 26.

    17. At 11:51am on 08 May 2010, dannymega wrote:
    So why isn't a resource based economy discussed?
    ------------------------

    dannymega, the BBC does not want to discuss ALTERNATIVE as they are NO LONGER the voice of the public but the servants of the ruling elite and financial oligarchs.

    But keep your hopes UP because when the time fOR AN idea has come nothing can stop it!

    The best we can do FOR NOW is spread the word - there is an alternative to the monetary system and it's far more EFFICIENT and FAIRER.

  • Comment number 27.

    If Cameron really wants to make a deal with the liberals there is clearly one to be made and it would produce a strong goverment which would reasure the markets.
    It would put Vince Cable and Nick Clegg into the inner circle of the Cabinet. Vince would back up Osbourne probably as chief secretary to the treasury. With Ken Clarke at Business to add another wise and experienced head. That should deal with the markets concerns over Osbournes lack of experience.
    Nick Clegg would be some type of Deputy Prime minister, but much more influential than past ones.
    These would probably be the only cabinet posts for Lib Dems. But there are some other posts where they could be put.
    With the Tories single seat in Scotland it would make sense to make a Lib Dem scottish secretary.
    As Junior partner they can not expect much influence or seats in the foriegn office or defense. But overseas aid minister would be perfect for a lib dem to get foriegn relations experience. Cameron has ring fenced its budget so no controversy there. Also I think few tory MPs would want the post on their CV.
    In the home office why not give them responsibility for local goverment where they are probably controling more councils than the Tories. What better way to get the councils on board for the needed cuts. Also it would make the liberal role in goverment very visible to the troops on the ground.
    As for Electoral reform. The tories have to give a meaningful concession in this area. The first thing they can do is set the date for next election in say four years time. Obviously it wouldn't change the law but its easy start. Next it would have to offer something which offers a meaningful chance at PR. But any referendum should be towards the end of the 4 years. This would make the implied deal that the Liberals must now prove that a coalition can give four years of stability while dealing with some of the toughest conditions any goverment is likely to face. Do that and all reasonable people will consider that they have earned PR.

  • Comment number 28.

    There is obviously a conflict here between little England (Tory) and the Celtic / Urban areas (anti-Tory). Perhaps the Tories would be better off offering the provinces independence, then they can be the sole rules of England. Much to the joy of our masters, Ruper Murdoch and the hedge fund managers.

  • Comment number 29.

    Such ignorance!

    Heres a random selection of facts

    1) the markets and investors are collectively the people who have lent money to the government. If some of them feel less comfortable about this prospect, they sell. Gilt prices fall, interest rates go up. Very simple and does not require a conspiracy theory to explain.

    2) People never complain about speculators when prices are rising...and its much easier to speculate in rising markets than falling ones because its easier to borrow cash than to borrow stock

    3) The vast majority of the UK government debt is funded domestically- it is almost the exact mirror image of the financial surplus being run by the UK private sector. The financial positions of the government, the private sector and the overseas sector must sum to zero as a matter of arithmatic. The government deficit is 12.8% of GDP; the UK current account deficit is only 1.1% of GDP. That means the private sector is running a surplus of 13.9% of GDP. Not ideal, but not like Greece either.

    4) The underlying cause of the original banking crisis and the current sovereign crisis, which has not even started to be addressed,is the existence of massive global imbalances. China runs a current account surplus of 5.2% of GDP; German of 5.3% GDP. If one country runs a surplus, someone else has to run a deficit. For China, that someone is the US; for Germany it is the Southern Eurozone countries (that last point has nothing to do with what I started saying...but I got on a roll)

  • Comment number 30.

    So, the FTSE, hedge-funds, bond markets are whingeing and currency speculators are playing with Sterling too? So what? All of the above behave like this 24/7 all year round, globally - even if an ant sneezes on a leased plant on the trading floor.

    The UK voters have decided that they are no longer prepared to tolerate political extremes, nor ultimate power of any political ideology?

    All voters/non voters too, in UK pay tax - direct or indirect. Therefore, by that premise we have ALL bailed out banks and bankers reported fraudulent behaviour?

    This so-called media invention of 'political crisis' is a hype. More truthful is that it's actually a wake-up call for Westminster and our so called democratic system?

    We should all calm down - there is no rush - the political parties have had a shot across their bows and ignore the voters' response at their peril?

  • Comment number 31.

    Well, Robert, 'investors will take fright'. Who are these 'investors'? Are they the same 'investors' who brought whole economies to their knees and continue to travel the planet by speculation, but no contribution?

  • Comment number 32.

    There is no problem with having either a minority or coalition government.

    The real question is what is wrong with the "markets" that they "take fright" so easily, and why are we being held to ransom by the greedy profit-mongers and gamblers that use OUR money and OUR livelihoods as their own personal plaything ?

  • Comment number 33.

    #24 laughingdevil

    totally agree with the point that its a bit rich of the media to say the discussions over the last few weeks should have been of substance when they were only interested in reporting on style and dumbing down for us what was said, rather than challanging further questioning and critque.

  • Comment number 34.

    #5 wrote "Do we really want Osbourne, who is totally untried and untested, to deal with sterling in this inevitable crisis?"

    I'd rather have Osbourne than any more of Labour who despite their fine sounding rhetoric took us from having a very strong economy to one that's seemingly about to collapse around us.

    We've got the option of one who is untried and untested, or one who is tested and found wanting. I'll go for untested.

  • Comment number 35.

    25. johnniemojo:

    "Nick Clegg has (or seems to) a pathological HATRED of Gordon Brown".

    Well, he's hardly alone there. That's a pretty good description of how very many of us feel about Brown, this ghastly, incompetent egotist, an appalling chancellor, a pathetic PM, and a bullying control-freak, who has done his best to destroy both Britain and Labour.

    The sooner we see this deeply flawed individual hauled kicking and moaning from Downing Street, the better.

  • Comment number 36.

    Please Nick listen to me.
    I am a former FBU rep and long term internationalist. Please will you support David...support ghim through thick and thin and show ue mettle. Show your commitment to my country. Please. PLEASE NICK. Please for my country's sake.

  • Comment number 37.

    19. At 12:09pm on 08 May 2010, allan365 wrote:

    "And this is one of the biggest problems we have. Idiots like this and the politicians only giving a rat's ass about politics and themselves rather than thinking of what is best for the country.

    You think 'financial meltdown' is the 'best' thing that could happen? What kind of person does that show you to be...?"

    Allan365 - thanks for your comment.

    I'm not in favour of meltdown but Brown's policies have created this crisis and it would precipitate the Rock Bottom Moment for this Country to turn its life around.

    The alternative is to repeat the 70's until eventually the Tories come up with Thatcher Mk II and I'm sure you wouldn't want that.


  • Comment number 38.

    It should be easy. Lib Dems and the Tories should grab whatever power they can get their hands on now.

    All they need to do is to agree a strong clear policy on spending cuts and deficit reduction. They have the votes between them. There is no need to go back to the great unwashed. They just need to be prepared to take the flak.

    Sell it to the trolls and get on with government.

    Highlight of the election.
    Joanne Cash's face at the declaration. Deep joy. RIP.

    Lowlight of the election.
    The BBC's celebrity party bash. Perhaps 3.5 billion could be better spent elsewhere. Just a thought.

  • Comment number 39.

    If the LibDems do not reach a deal and a minority Conservative Government takes office, which does prove unstable and results in a run on the pound it will make a strong case for Conservative objections to electoral reform: they will use it as evidence that coalitions can't work and a later election this year could see the LibDems punished severely by the electorate. The LibDems face tough decisions. But the LibDems have always called for this kind of scenario and they must now show they can rise to the national interest and make this work. I have a feeling that they will and Vernon Bogdanor is being too pessimistic. What we can't have is a deal with Labour. They clearly lost, and no arithmetic would give Labour a majority. It would look incredible, unjust and like some quasi coup d'etat. A Conservative-LibDem coalition is the correct outcome based on what the voters chose. It will be tough. But it's the right way forward.

  • Comment number 40.

    What makes so many of you think that the 'goldfish' electorate who failed to give us a Conservative landslide this time would do so in 6 months or so after a Lib-Lab pact of some description collapses? Since both Lab and LD have said that they do not intend to tackle the debt crisis straight away, the goldfish will not yet have seen the inevitable cuts and tax rises, so will presumably assume that everything in the garden is still rosy. Hell, if the price of a Lib-Lab pact is for Gordon to go, the goldfish may even think that Labour are better than they were, and vote for them again.

  • Comment number 41.

    So the 1000 point drop on the Dow on Thursday afternoon was all about fears for a UK hung parliament? And the FTSE drop on Friday had nothing to do with that?

    The BBC didn't seem to make the connection on Friday morning, with reports saying 'Its a hung parliament AND the FTSE has got the jitters' in the same breath, seeming to imply that if Cameron had got a clear majority the markets would all have been soaring.

    This is a global financial crisis and the fact of a hung parliament per se will make little difference - it is the decisions made by that parliament which will sway the UK markets. But in the next few days it is the world markets that matter

  • Comment number 42.

    Like many commentators here I do take a real dislike to both the "markets" and the "media" (Murdoch's Sun) deciding who controls our country and our destiny. Lets tell them to shove it :)
    When parties have majorities, they can do what their dogma decrees. Maggie's Poll tax, Labour's knee jerk legislation. I think we would all like to see a country run where consensual politics ruled (by politicians who were interested in running the country correctly rather than point scoring off each other)
    I also think that the time has come where everyone vote is valued, and the first past the post system was reformed. Of course we have to deal the with the nutter parties somehow - but that is a debate for another day.

  • Comment number 43.

    42. Warg60 wrote:
    "I also think that the time has come where everyone vote is valued"

    Perhaps, but as I commented on one of Stephanie's blogs,

    I would rather have a wothless vote and a working economy, than a working vote and a worthless economy.

  • Comment number 44.

    I might be missing something here..but where is the safe haven for all the money that is not going to be available to the UK from Monday?

  • Comment number 45.

    I really have had a gutsful of being told about how the 'markets' and 'investors' are getting jittery or taking flight. I really couldn't care less - they don't decide who governs the UK, the electorate does - that's why we have a democracy.

    I also don't care what the credit agencies think either. These are the same imbeciles who gave those wonderful sub-prime based securities a rock-solid rating, just before the financial markets imploded, precipitating the deepest recession in living memory. Why anybody still listens to these people is quite ridiculous.

    Let's have a Government of national unity to get through this current crisis and then let's all sit down and work out an alternative to the hopelessly flawed and compromised monetary system that so clearly no longer works.

    It's bad enough having the majority of the UK's media owned and operated by a handful of super-rich foreigners - telling us how to vote, without the same greedy bunch trying to apply pressure to our elected politicians.

  • Comment number 46.

    It seems that the Lib Dems have a very difficult decision to make. This is the reality of a hung parliament and would illustrate the reality of proportional representation, where hung parliaments are the norm.

    Why are the Lib Dems and their supporters so hung up on electoral reform, given the state of our economy and emerging crisis on the continent? Nice to see they're got their priorities sorted..

    For all Labour's faults, thank goodness they're minding the recovery whilst the others bicker amongst themselves.

  • Comment number 47.

    Well Evan Harris is saying the Lib Dems are under massive pressure from their membership to walk away from the Tories (BBC 24 News interview).

    The number of personal insolvencies is rapidly increasing. Are we ready for more because that is the promise of Boy George.

  • Comment number 48.

    I'd been assuming a Tory minority government would be the outcome - I can't see Con-Lib, I can't see GB-Lib and I can't see how Lab can change leader and then go with Libs. So, obviously a Tory minority government.

    But then I saw Robin Butler on the BBC News and he said GB would be within the constitution to go with a minority government and put a Queen's Speach before Parliament. Why wouldn't he do this in preference to letting Cameron do it? If the QS looked liked it addressed economic issues, pushed PR, dropped ID cards, would the other parties DARE vote it down? After all, they (Torys and Libs) would have failed to come up with a better solution.

  • Comment number 49.

    Like a few million people in this country I work hard, pay taxes, and at election time I vote for a party who has the best perspective on the economy, civil rights, crime, and many other issues. I have seen the financial markets cause great distress and unemployment. Now Robert Peston is telling us that the markets are in a state of fear.

    Perhaps it is time for the BBC and its economic experts to recognise it is not a question of preventing fear in the markets; it is a question of grasping the political nettle, recognising that it is the markets who have to be feared. Good logic: those who have failed, have feathered their own nests and caused great harm, are the people to fear. We don't need the BBC to rant on about how we must have cut backs to placate these people.

    We want a government that has the bottle to put the very fear of God into the markets. Will Cameron and Clegg's bunch of toffs do this?

  • Comment number 50.

    Much to my distaste the markets are highly relevant since gordon brown left us needing to borrow 7 billion (1.4 trillion in 5 years) from these markets. Currently we pay a pretty low interest as it is more or less guarenteed we won't default (those ratings agency again). If the markets get spooked and think there is a chance we may default suddenly the interest we pay will have to go up as the investment is seen as riskier. Greece would have had to pay 15% interest on their debt hence they asked the eurozone for a cheaper deal. 1.4 trillion is a pretty big mortgage to service even without an increase in interest rates

    Much as I would love to keep public sector spending at current levels (I work in it) it is unsustainable. Labour have done a lot to improve it, but its not that difficult if you can mortgage yourself up to your neck to provide the cash for it.

    Will the tories cut spending drastically. I am sure they will. However starting to cut the defecit now may be tough, but better than greek style austerity in 3 years.

    Conservative government with a lib dem conscience could work really well, if and only if they act like grown ups and put whats right for the people who elected them ahead of political posturing

  • Comment number 51.

    For those who don't want our politics to be influenced by the markets, there is a simple solution. Stop government borrowing. Reduce the deficit from 13% of GDP to 0%. Of course, this would require an austerity package far more severe than Greece's.

    Alternatively, if we want to retain some semblance of society as we know it, we need to borrow massive amounts from the bond markets. Quite unreasonably, the bond markets expect to be paid back. Even more outrageously, if they consider that there is a risk of default, or that they will be paid back in devalued currency, they have the utter cheek to expect to be paid a risk premium.

    Bloggers on this site are obviously saintly people who take to heart the words of Jesus in Luke 6v35 "Lend without expecting to be paid back". Alas the evil sinners who run the bond markets have different expectations.

  • Comment number 52.

    Site editors: although this piece reflects Robert's idiosyncratic verbal style, in the written form consolidated paragraphing would improve readability, surely?

  • Comment number 53.

    Before the election Lib Dems argued that we had nothing to fear from a hung parliament; nor should we fear PR. Other countries with PR, they say, have been governed successfully for years by coalitions (ok, not Israel or Italy).

    Now that we have a hung parliament, the Lib Dems have the chance to prove the doubters wrong. If they can show that they have the maturity to create a stable coalition in the national interest with the Tories, then the case against PR will be demolished. Ultimately it won't matter whether or not the Tories give them a referendum on PR. Sooner or later the referendum will come and they will win it.

    Alternatively, if, as some bloggers suggest, the Lib Dems refuse to engage with Conservative (or Labour), and let the country stagger on with minority government so that they can avoid taking any responsibility for the hard decisions that need to be made to rescue the economy, the fears of the doubters will be justified.

    Ultimately it's time for the Lib Dems to grow up. Prove that they can be a party of government, not just a party for protest voters.

  • Comment number 54.

    If the markets and investors are so jittery about our little UK hung parliament then they must be more superstitious than I thought.
    How about we give them some monopoly money and casino chips to play with while the rest of us get on with actually doing things.

  • Comment number 55.

    The number of contributors above who have a comic book understanding of "investors", "speculators", "ratings agencies" is frightening - no wonder the labour vote held up so well.

    If government dramatically increases public spending, as it has done in the past 7 years (breaking Brown's own "golden rule") such that the nation runs up both a huge annual borrowing requirement and an enormous national debt, at some point the borrowing, and hence the spending must be reduced (we will still be borrowing but this amounts to 'cuts' to muppets who think spending only goes one way).

    It is not a matter of 'casino speculation', but prudence on the part of any individual or institution considering holding sterling assets or bonds (ie. the debt). Why keep lending if the borrower acts imprudently such that there is a risk of not getting the monies back, or only devalued assets back? If we run a deficit based welfare state economy reliant upon fiat currency like most of the developed world, we have to play by the whims of those who own the deficit to avoid collapse. Not the system I want, but we are stuck with it. Better a Tory-LibDem coalition to get the pain out of the way quickly and consensually - otherwise wait for the IMF and imposed deficit reduction of drastic measure.

  • Comment number 56.

    I suspect that we will call in the IMF, because that way the politicians can blame the IMF for the tax rises and cuts that are required to pay off Gordon Brown's debts.

    Eddy George was completely right that who ever implements the tax rises and cuts will be out for a generation, unless they manage to successfully pass the blame back the Gordon Brown, and the pain that is due to the IMF having to give us the fiscal medicine again.

  • Comment number 57.

    There seems to be some idea that somehow the Conservatives are going to take the "difficult decisions" in all these discussions and that Labour will continue to spend willy nilly and a vote for labour was irresponsible. They only said they will not do anything to shrink the economy in this year. I heard nothing substantial except vague references to waste in the Conservative Rhetoric, what does that mean? The only party that proposed anything painful was Labour and millions of labour supporters voted to increase their own tax contributions in the national interest. The Lib Dems appear to have been proposing invading the Isle of Man and any other tax haven and hijacking the funds of the rich. Even the Conservatives were proposing a unilateral "we're very angry at you" tax on the banks, who are the only part of the UK economy that can get us out of this financial state.

  • Comment number 58.

    Against the backdrop of impending financial crisis and an indecisive election wouldn't the best way forward be for the Lib Dems to propose a Government of National Unity for an agreed period, like a year? It could even include union and CBI representatives. Such a body could make serious financial decisions which would reassure and could be seen as in the national rather than party interest. It would also take away the fear any governing party must have of facing the consequences of the huge unpopular decisions that are needed when the next election is due. That way we might get better decisions.

  • Comment number 59.

    I don't know why the Tories and Labour don't form a pact and govern together. Before voting I couldn't really distinguish the two parties, and I still can't see that much difference between them now. In fact voting at this election, more than any other, was like voting for a bank manager.

    Politics in this country has become business management, and little to do with what kind of country or world we want to live in.

  • Comment number 60.

    @KUDOSPETER wrote:
    "I do get annoyed at the implication that it is the markets rather than the electorate who should be deciding who governs the country. If investors are making decisions on fright then this is another failing of the market."

    Peter - do you not understand that the reason the markets dictate this is because THEY are the people who lent the Government £164,000,000,000 this year, and will be expected to lend to them again every year for the foreseeable future! So that Labour can continue pretending that things are going well, while piling up a bigger and bigger reckoning for our children.

    The reason "the markets" are spooked is because they KNOW that unless someone takes action soon there will come a point when the Government cannot repay its debts and investors will not get back the money they invested. We know it can happen - it's called Greece.

    And the "markets" are not all fat cats - my pension is dependent on the performance of investments, and the professional investment managers who are investing on behalf of others have an expectation that if they lend money out they will get it back. After all I'm sure you would expect your savings to be repaid if you put it in the bank, wouldn't you? Where do you think that money goes?

    If you want "the markets" to have no say on our elections the answer is simpe - cut the deficit to zero by paying back the £1,400,000,000,000 we owe to other people for the massive overspending of the past 13 years.

  • Comment number 61.

    There is only one chance of the Conservatives forming ANY Government and that is in partnership with the Lib Dems. Should this fail Gordon Brown would consider it his obligation and duty to form a Majority Government with the Lib Dems and the Nationalists. Talk of a Conservative minority government is just wishful thinking. You cannot underestimate the pathological bitterness against the Conservatives left by the last administration. More people voted against the Conservatives than for. Lab/Lib-Dem/nationalists would be seen by all as completely workable, to have the opportunity to keep a Conservative administration out and not take it out of some misguided sense of fairness would not be accetable to most Labour voters.

  • Comment number 62.

    Surely talk of the IMF is overheated. Let's assume that we have to sell £170 bn of bonds over the next 12 months and that we currently get buyers by offering an interest rate of say 5% (current 10 year rate is 4.75%). Now imagine that rate has to triple because of a loss in confidence in order to attract buyers (remember Greece could find buyers for its bonds if the country could afford to pay the interest). This would mean that we would have to find an extra £17bn per annum to pay for one year's borrowing. Very, very nasty indeed, but not IMF nasty.

    Even without a budget we should be able to quickly find £17 bn by e.g. halting capital projects (including the Olympics if necessary),scrapping pointless projects such as ID cards, banning all expense claims and consultant fees, bringing the troops home now, sell off bonds in HBOS and RBS, cancel the civil list for a year, freeze recruitment etc etc.

    And we could take a leaf out of California's book. Last year the public sector wage bill was £158 bn (important to note that this is 20-25% of all public spending - I suspect people think the wage bill represents a much bigger slice). If all workers are required to take 1 unpaid day's holiday a month that would save £7 bn straight off.

    Of course we couldn't easily find this every year, but it gives us 12 months breathing space to find a solution to the hung parliament or hold another election, by which time the bond market may have become more willing to buy at lower rates.

  • Comment number 63.

    50. At 7:53pm on 08 May 2010, murph wrote:

    "If the markets get spooked and think there is a chance we may default suddenly the interest we pay will have to go up as the investment is seen as riskier. Greece would have had to pay 15% interest on their debt hence they asked the eurozone for a cheaper deal. 1.4 trillion is a pretty big mortgage to service even without an increase in interest rates"

    I think you are assuming that bonds are like a credit card and that the interest on the whole of your debt can be varied. Not so. Bonds are issued with a fixed interest rate (coupon). If I sell you a £100 10 year bond at a coupon of 5% then I pay you £5 every year for 10 year when I then pay you your £100 back. That rate never changes. Coupon rates only change on new issuance. Yields are different. If confidence in my bonds drops and you buy the same bond for £80 (when it has a face value of £100 and a 5% coupon) you still get £5 per annum (with a yield of 6.25%), but that doesn't increase my interest payments in real terms - what it does is tell me I am going to have to increase my interest rate if I want to shift any more bonds.

  • Comment number 64.

    @Jaundiced Eye wrote:

    "Even without a budget we should be able to quickly find £17 bn by e.g. halting capital projects (including the Olympics if necessary),scrapping pointless projects such as ID cards, banning all expense claims and consultant fees, bringing the troops home now, sell off bonds in HBOS and RBS, cancel the civil list for a year, freeze recruitment etc etc."

    Yes - but that is exactly what Labour and the Lib Dems will NOT do. It would lose them votes, so they won't take it on. Best to leave it as an SEP (Somebody Else's Problem).

    IMO the best thing for the Tories to do now is allow the Lib Dems to bed in with Labour - the coalition would not last more than a year, and the Tories would be able to pick up all those south England Lib Dem seats when the inevitable 2011 election comes along.

  • Comment number 65.

    @Severian

    Like you I am in a funded pension scheme dependent on investment performance. It's one of the last final salary schemes (although it may well end up career average because of the turmoil in the markets). You should try comparing your pension with a money-purchase scheme (the figure I've seen is that if you are expecting c£20,000 on a final salary/career average pension = c£5,000 p.a. for the same investment in a money purchase scheme).

    Your pension depends on people, companies and governments borrowing money. If that stops your pension will crash and burn. In fact, much of the chaos in the markets has been caused by the greed of our pension schemes. Have a look at this article by Phillip Inman to understand why the mess we are in is largely the fault of our desire for cheap pensions funding a rich long retirement (https://www.guardian.co.uk/business/2010/apr/12/pension-funds-global-recession%29.

    If our government stops borrowing, it's bread and dripping for you and me when we retire. [Unsuitable/Broken URL removed by Moderator]

  • Comment number 66.

    What sensationalist stuff. Your sources are closed minded.

    There are only 3 majority governments in the EU at the moment.

    People are greedy. 13 years of labour were the most fair and prosperous years for this country that have ever been.

    Greece and other EU countries hold the tie. If Portugal default or possibilly others then we may head for a double dip recession.

    The markets themselves are detrimental to common sense when in some infrastructual circumstances. Look at the housing and car markets which between them caused the bubble to burst (along with bad banking).

    Who knows what will happen but there isn't much this country can do if the EU falters. Everyone will have to take a step back in the west and consolidate.

  • Comment number 67.

    #53 "Ultimately it's time for the Lib Dems to grow up. Prove that they can be a party of government, not just a party for protest voters."

    I think its the Tories and Labour that need to grow up. FPTP favours one of them at the expense of how the rest of the country thinks. Its also very simplistic to compare PR to a hung parliament, as if we did use PR then party politics as we know it wouldn't exist. Also, we all know why the Tories are averse to PR - as it would make it impossible to force through Conservative agenda.

    With PR, maybe, just maybe, we might end up with adults discussing and voting on issues fairly. MPs might end up doing their job!

    As others have said, I find the influence of the markets quite sickening, they create their own mess (out of panic) and we end up paying for it.

  • Comment number 68.

    Somebody wrote: "So why isn't a resource based economy discussed? Is it because the present unfair system allows a small minority of super rich people to control everything through capital investment. Why should the super rich be allowed to play god and decide how our society develops."
    Want to know why? Because if the super rich didn't control everything they'd send the tanks out on the streets on the pretext of keeping order. So, don't be naive. Grow up. This is the way the world really works.

  • Comment number 69.

    Heres the Thing. I pretty much stopped reading all about what the markets will do "If this or that happens" 2 paragraphs into it.
    The markets can not do without us. We are inter-dependant. Without the markets we cannot trade. And without us there is No one else to trade with in this country. So Lets all just take a breathe and see what happens. The markets will still be there after all of this is over with. Life goes on. Markets rise and markets fall. That is the nature of it.
    Lets not try and pre-empt what might happen. Banks/stock markets will try to make money from us, one way or another. And no matter what happens between Clegg/Cameron or Clegg/Brown. The Markets will still be here.

  • Comment number 70.

    @Severian

    I take your point - my point was that a minority Tory government could do most of those things without having to pass a budget which is a political scenario which Robert Peston thinks could trigger a visit from the IMF.

  • Comment number 71.

    @Mel0dymaker

    This is the Catch22 for Nick Clegg. To form a workable coalition with the Tories he will have to drop all but the weakest commitment to PR. If he bails on a deal with the Tories he proves that the type of election result almost guaranteed by PR can't be made to work even by it's most ardent supporters.

  • Comment number 72.

    warg @ 42

    ".... I think we would all like to see a country run where consensual politics ruled (by politicians who were interested in running the country correctly rather than point scoring off each other)"

    i disagree - consensual politics leads to no person or party being held responsible for their time in office/actions
    we are in a mess which ever party forms the next government, this requires one single party of conviction to sort it out, cuts will come in all forms as will tax rises, like many, i dont think the electorate realises the damage thats been done here.

    i agree with the early comment, cameron should sit tight and do nothing, let labour/libdems get together - labour dropped us in this mess, let them try and get us out of it.

    mandelson said this year that he couldnt understand the stigma associated with going to the IMF for money to bail us out, hes already sounded them out incase the UK needs them to step in - the stigma being the conditions attached to any bail out from them, which forces the government's hand to reveal the true status of our debts, once again, not pointed out to the voting public, including QE and PFI interest payments on the country's books.

    if the conservatives can hold on a few more months, then when the next election is called, which a sterling crisis or no confidence vote will surely spark

  • Comment number 73.

    I started off hoping for Con/Lib coalition or a Tory minority government - now I hope Salmond gets his rainbow coalition and they can see the chickens come home to roost.

    In that scenario I also hope that Broon remains as PM so that he can ensure that there is a Tory landslide in the autumn.

    I was initially concerned that the next election would be fought under PR but it will never happen, even with Broon's way of rushing into things rather than go through the appropriate and necessary consultation process. The fact is that too many Labour MPs are against PR and would defy the whip - and it would only take about 3 to defeat any PR Bill.

    I am also shocked that the Lib Dems feel so anti a coalition with the Tories - it destroys the credibility of their claim that PR in their preferred STV form would in any way be fair. It is now obvious that it would lead to a permanent socialist coalition government. I wonder how many voters realised that they were voting for this kind of mess and this kind of intransigence when they put their X on the ballot paper.

    In particular, how many people who may have voted Tory and saw the Lib Dems as a middling alternative - the scales should now fall from their eyes, as they say.

    I can only hope they have learned their lesson for the autumn election to come. Let's let Broon struggle on and get the blame for the cuts he will have to make - it's his mess after all.

  • Comment number 74.

    I dislike the way that the "markets" are being personalised by the media. It's no secret that the "markets" are just a few hundred overpaid wonks in the City (the same ones who were waving their platinum cards at G7 protesters a few years ago). It's really no surprise that they would like a Tory victory so why does the media treat them as an a unbiased "expert"?

  • Comment number 75.

    " 2. At 10:40am on 08 May 2010, Mr T wrote:
    "Or to put it another way, the warning made during the election campaign by Ken Clarke, the Tory Business Secretary, that the UK could find itself again asking for financial succour from the International Monetary Fund might be prescient rather than alarmist."

    Oh for crying out loud! Only in Labour's wildest dreams was anything else ever going to be the case. Again the fact that people don't understand the mess we are in doesn't mean we're not in a mess. What doesn't seem to be mentioned is that there was very little market support for continued Labour policies either. The one chance for the U.K economy was a strong administration with the ability to cut spending now rather than endure the pain that Greece is facing in 5 years. Now due to Labour voters trying to continue the debt binge we are properly and irreversibly screwed.

    When you are a hole you stop digging."

    I think blaming labour voters is pathetic. The public as a whole were not convinced any particular party was fit to govern. The mess we are in was not the Labour governments fault. It was the bankers who caused this by fueling a period of unsustainable growth by loaning our future wealth. The bubbles burst. They needed bailed out by the government, which conviently passed the buck to us. Now the bubble is starting to burst again as the markets realise that even the governments cant afford to pay off this mess. So who will bail out all the governments, mmmmmmmmm. The labour government are simple a small boat in a sea shortly to be subject to a perfect storm. Its going to get messy. Good luck.

  • Comment number 76.

    The sad facts are whichever way you toss the figures with our democratic process nobody won the sole right to govern.
    We can all sit and blame the government when most of us really know that the real criminals here are the banking and investment corporations who have been forced to show their bare hands after buying the Emporers clothes with our money,now with no magic beanstalk to climb they approached Brown and co and the rest is history.
    Those of you that think that any individual political party can resolve the financial woes of this country are still reading the three bears,IMO (worthless) we only have to remember that the "great" fell out of Britain years ago,we should now be watching; Greece,Spain,Portugal,Southern Ireland,Iceland and of course the biggest of all financial gamblers the USA.
    But I suppose here in the UK we'll all sit with everything crossed blaming the weather,the government(whoever they are)etc,etc,doing what we really are "Great" about "whingeing"!.

  • Comment number 77.

    51 & 55
    Surely one of the key features of neoliberalism over the past 30 years has been exactly that the ruling/ financial elite actually WANT ALL POPULATIONS/ GOVERNMENTS to be IN FINANCIAL DEBT as much as possible. Do you really believe right wingers such as Reagan, Thatcher, and the Bushes (and all their big money corporate backers) didn't want government in a significant amount of debt at any given time?
    This means that no political party, on any point of the spectrum, must be allowed to gain power on a platform to run with no debt. This appears to be a battle that has been resolved, for the time being, some time ago... People/ governments in debt are necessarily significantly less able to provide resistance to the demands of those they 'owe'...
    The elites lobby and manipulate the political classes to provide the appropriate and desired outcomes.
    This then gives these shadowy figures all the 'leverage' they want, and need, in order to be able to communicate through Murdoch/ right wing media that - ' You can vote for anyone you like in our 'democracy'(tee hee!!)... So long as you accept that you (the masses) must accept the burden of the costs of our profit system while we must never be prevented from pursuing, receiving and accumulating our own private profit for eternity...'
    This would seem to me to explain why the 'mainstream' parties will only consider public spending cuts now that the system is in crisis and the money that ought to have been available for public spending, pre-2007/8 'crunch/ crisis' has now been donated to prop up the broken banking/ financial system, that actually created the problems, instead!
    It's peculiar how the Conservatives (and their multinational corporate/ 'pro-market' friends), for example, claim to "love" this country, Great Britain, and yet they will not offer, as a suggestion, to agree to propose a windfall tax on large scale corporate profits to help the country through these 'hard times'...
    WELCOME TO THE DICTATORSHIP OF BIG CAPITAL!!!

  • Comment number 78.

    Most of the comments above seem to focus on cuts to public services as the only way of cutting the deficit. I'm not denying for a moment that cuts will be necessary, but raising taxes will also help to balance the books. So what did the Conservatives propose at the election? Yes that's right - to LOWER inheritance tax for a tiny percentage of people who are already extremely rich!! Or to put it another way they propose to squeeze the poor to lower taxes for the rich. It is proposals like this that a make the majority of decent people in this country feel like vomiting and help to explain why Dave couldn't win an overall majority even after 13 years of a Labour government stuck in the biggest worldwide economic crisis since the end of the war.
    Let the Conservatives limp on for 6 months to a year in a minority government revealing themselves for what they are and then we can have another general election where Labour (with a new leader) and the Lib Dems can win enough seats to form a credible and strong coalition. It's the best chance we've got.

  • Comment number 79.

    Why on earth does everyone in Britain fall about sobbing and wailing at the thought of a coalition government? Is it entirely impossible, when far fewer people are disenfranchised than usually are by this ridiculous first past the post system, that there may for once be consensus politics resulting in more measured decisions by politicians rather more aware than they generally are of the sensitivity of their position? Or am I being very naive?

  • Comment number 80.

    1997 labour win election. Set out to pay off massive debt left by Ken Clarke. 2005 debt repaid, government spending rises to build new hospitals and schools after years of decline under conservatives. 2006 problems arising in USA banking sector. 2007/08 problems reach europe and rest of world economies. 2008/09 USA, Europe, Asia and all other economies borrow heavily to support collapsing banking system. In Uk massive amounts of public money (100 billion to northern rock. plus similar to lloyds TSb) government finances stretched as more cash needed to prop up banks. So I conclude that the current crises is down to bad banikg practises not bad government borrowing. Yes we can cut back on public spending and have 6 million out of work as in the 1980s 1990s. but tax revenue will fall, and benefits will rise. Cut benefits and that would promote likely public unrest. Thousands of families would lose their homes, and the prospect of finding whole families living on the streets stars to become a scenario.

    By the way, will somebody out there define the word Democracy. It may prove enlightening, and give some insight to our rather biased political commentators as to what is wrong with this country.

  • Comment number 81.

    We're already in the second dip.
    The worst of it is that we're there because of the same bampots that caused the first;

    We bailed them out once; now they want us to pay full dollar for the second they created by simply playing casino with our livelihoods.

    Can we grow up finally?

    Can we wake up finally?

    Is there anyone out there that believes democratic nations are more important than casino work by the banks?

 

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