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The Green Budget

Stephanie Flanders | 11:10 UK time, Wednesday, 2 February 2011

The Institute for Fiscal Studies thinks the chancellor is right not to start moving to a Plan B. Though borrowing could come in slightly lower than expected this year, the Institute's "Green Budget" says that "having set out his fiscal consolidation plan, it is important that Chancellor George Osborne resist the temptation to engage in any significant net giveaway in the Budget".

"While last week's growth figures were disappointing... any fiscal loosening aimed at helping the economy could be ineffective if it prompts an offsetting monetary tightening, and risks undermining investor confidence..."
The macroeconomic parts of the report were put together with senior economists from Barclays Wealth. They are quite gloomy about the economy's long-term potential growth rate, which they think could be lower than the Office for Budget Responsibility (OBR) has estimated (though the OBR is less optimistic on this front than the Treasury was under Alistair Darling).


On the broad economic outlook, the authors broadly endorse the government and the OBR's position - but with gloomy caveats. They think the downside risks are probably greater than the chancellor suggests. But, depressingly, the authors don't seem to think the government can do much to offset these risks - or mitigate the effects.

For example, they think there is a risk that consumption will disappoint this year - as households respond to declining real pay rates and, amongst other things, falling house prices. And they don't expect companies to rush to the rescue, with big increases in investment, even though - as I have mentioned many times here - many companies are sitting on plenty of cash. Most troubling, they worry that companies could start shedding labour in a serious way in 2011 and 2012, to raise productivity after several years when it has not risen at all.

All or any of these negative shocks could throw the government's borrowing numbers off track - with the Bank of England not necessarily able to respond. In other words - Plan A could be even worse than we think. But there may not be scope for a Plan B. They think there's a roughly 1 in 5 chance of a double dip recession in 2011.

However, the report gives the lie to the suggestion that the government's cuts are similar to the consolidation plans being undertaken by other countries. Out of 29 industrial countries, only Greece is planning a sharper decline in structural borrowing between 2010 and 2015. And only Ireland and Iceland are planning a larger reduction over this period in public spending as a share of GDP.

Update 1140: There is a tension in the IFS report on the vexed question of a Plan B. (Some would say there's the same tension inside the Treasury.)

As the quote I referred to earlier suggests, the IFS and their co-authors believe strongly that the chancellor should not change the fiscal strategy as a result of the recent disappointing growth numbers.

But, in the press conference launching the report, the IFS deputy director, Carl Emmerson, has now made clear that the IFS does think the chancellor needs a Plan B - and he needs to tell us all about it. He needs to explain clearly what he would do, if the economic outlook turned out to be worse than expected.

The folks at IFS and Barclays Wealth do not think that this would be damaging to market confidence - or the chancellor's standing in financial markets. Possibly it would help.

The chancellor seems to disagree - he thinks it's risky to even mention a possible back-up plan. But they can all agree, apparently, that Mr Osborne's credibility would be hit if he was seen to actually tone down his spending plans at only his second Budget.


Comments

Page 1 of 3

  • Comment number 1.

    They say: Since 2008, public sector workers seem to have been paid more, on average, than their equivalents in the private sector even after taking account of the higher qualifications among public sector workers. The planned two-year public sector pay freeze should, therefore, not lead to widespread recruitment problems, but some public sector vacancies, especially in London and the South East, will be hard to fill. Public sector pensions remain much more generous than those in the private sector.

    Given the other things they say in that paragraph and the general state of unemployment, isn't that a bit of a non sequitur ?

  • Comment number 2.

    The only source of additional govt revenue that is now available is in the contentious area of 'modern selective protectionism' (MSP) ... which none of of our gutless politicians seem able, willing and competent to discuss ... never mind even think of pursuing.

    The choice is stark ... take the tens of billions of £'s that are easily available in MSP and effect strong rebalancing forces in the UK economy, as a result... or watch the country grind to a halt and the anarchists come out on the street ... and plan the date for the next general election as political strife makes the Coalition govt unworkable as Lib Dem politicians resign as the economy nose dives... and a pattern of economic stagnation becomes further entrenched.

  • Comment number 3.

    No plan survives completely intact beyond the first attempt to implement it. It is guaranteed that he will have to adjustments to his propsals as he goes along, the rumoured dropping of the fuel duty increase is a good example. What is the point of making an alternative plan before you've even got the numbers back from the first stage of implementation?

  • Comment number 4.

    Whilst the IFS is right to point to the problems they utterly fail to address the real issue. With mortgage rates at historic lows there are real benefits to long term economic stability to "locking in" these rates for the long term in excess of 10yrs. With a "mobile mortgage" taking the debt at that level with you when you move.

    The benefit is that it would mean interest rate rises need not directly reduce incomes as dramatically but at the same time could be used to manage discretionery expenditure.

    Without this type of approach any rise in interest rates will have a catastrophic effect on growth.

  • Comment number 5.

    This blog does not seem to follow good news for the UK economy and seems determined to keep focusing on the bad official GDP figures from last week. Yesterday and today some better figures have emerged according to a the notayesmanseconomics web blog which I saw recommended on here.
    "So the UK manufacturing sector which represents approximately 13% of our economic output appears to be doing well and this will influence other sectors of our economy which depend on it...This morning has seen the purchasing managers report for UK construction for January and it too reports an improvement."

    So there is some better economic news being reported elsewhere although it is also coming with reports of higher inflationary trends and higher market interest-rates.If so why are we talking of a back-up plan?

  • Comment number 6.

    "The Institute for Fiscal Studies thinks the chancellor is right not to start moving to a Plan B."

    ...maybe that's because they know he doesn't have one?

    I mean moving from planA at the moment without a planB would be......falling into the abyss?

    "if it prompts an offsetting monetary tightening, and risks undermining investor confidence"

    It seems the IFS is being run by Gok Wan now (it's all about the confidence) - lets hope everyone gets confident soon so we can re-invigorate these giant Ponzi schemes littering the world of finance and once again pass all our financial troubles to the next generation.

    Speaking of which, isn't it great to see the Egyptian people changing their Government, not for themselves, but for their children - a stark contrast to the people of this country who are currently dumping from a great height on theirs because they cannot face up to the reality of the situation and have employed a number of magicians and confidence tricksters to 'solve the economic problem'.

  • Comment number 7.

    This government is not for turning?

  • Comment number 8.

    The IFS Green Budget observes that :'The recession therefore had a substantial impact, particularly on emissions generated by power stations (which fell 13% between 2008 and 2009), business emissions (down 15%) and emissions from
    industry (down 19%).'

    I am delighted that recession can have such a positive effect on the environment and therefore look forward to the double dip.

    But if we were really bothered by carbon emission we would build passive houses. Does anyone you know live in one?

  • Comment number 9.

    A thought on the 0.5% drop in GDP. This is very simplistic but there are about 90 days in a quarter so each day yields say 1% of economic output for that quarter. The OBR says we lost about 0.5% due to the weather which on my admittedly simplistic figures equates to half a day. If you do the sums on 60 working days in a quarter you get about a third of a days lost output. I run a small business and can say my experience is that we lost a hell of a lot more than half a days economic activity because of the weather. The country was virtually at a standstill for several days at least. I appreciate theres more to economic activity than people getting to work but I still reckon half a day lost in December is an underestimate.

  • Comment number 10.

    Any politicians credibility is going to take a big hit if they trumpet one thing and are then subsequently seen to drastically change drection.

    Here is a tip for young Osborne, when the Brown/Balls tripartite system started to unravel at its first real test (Northern Rock), Brown batted away any criticism by stating 'all systems need some fine tuning from time-to-time'.

    As a systems engineer, who would probably never work again if I'd screwed up as badly as Brown/Balls did with the tripartite system design, I found that particularly hard to swallow, but in politics, it seems you can actually get away with that sort of statement despite the actualite.

    So there it is Osborne, when it starts to come unglued, simply state that the plan needs a little fine-tuning and all will be well.

  • Comment number 11.

    Surely any course of action has to be given some time to take effect - panicking after one set of figures is not the way to go. All this talk of plan B is coming from the same idiots who were panicked into overreacting to swine flu, the Millenium Bug and into invading Iraq!

  • Comment number 12.

    Can someone help me?

    The government are saying that they plan to continue with their deficit reduction plan even if is doesn't work?

    That coming at this with only one solution and no back up plan is the key to maintaining market confidence?

    And that, even if GDP shrinks, and the deficit actually increases, they will carry on regardless?

    Anyone else filled with confidence?

  • Comment number 13.

    The BIG PICTURE is much more important concerning how this country of ours evolves. This government is

    slowly creating a new workforce with lower expectations of pay levels and pensions which will enable us

    (in time ) to compete with the rest of the world. Banking and other service industries (while important in the

    short term,) cannot create long term employment for future generations. We must evolve and compete with

    the rest of the world . This government, l believe,has set us on the correct course. A course we must hold fast to

    or suffer a slow decline.

  • Comment number 14.

    We shall see what happens. Someone will be right and someone will be wrong. The important thing for the Tories is to make sure they are not crippling normal people on normal salaries unfairly. It does now seem they are between a rock and a hard place! People have been commenting about the good news but all I have seen for me this year is no pay rise (in the private sector) and my expenditure rise and looking to rise further, I personally don't consider that an improving situation.

  • Comment number 15.

    6. At 12:28pm on 02 Feb 2011, writingsonthewall wrote:

    "Speaking of which, isn't it great to see the Egyptian people changing their Government, not for themselves, but for their children"

    Let's hope it is for the better - but I have a feeling that Egypt could be in for years of turmoil and strife only to emerge with a new but equally corrupt regime. That's the problem with any system creafted and implemented by us (humans)- however fair in principal there will always those who take advantage - may be the many or just the few.

  • Comment number 16.

    Why is there in every blogpost shameless spam of notayesmanseconomics?

    Isn't there a rule against this?

  • Comment number 17.

    "2. At 12:06pm on 02 Feb 2011, nautonier wrote:
    The only source of additional govt revenue that is now available is in the contentious area of 'modern selective protectionism' (MSP) ... which none of of our gutless politicians seem able, willing and competent to discuss ... never mind even think of pursuing."

    I agree but it's not going to happen - well not until it's too late..........

  • Comment number 18.

    Any 'Plan B' or 'Green Plan' will be scuppered by the private debt bubble. It must be tackled!

    The reality is that the underpinning of 'wealth' by over-valued assets is unsupportable and unstable. We have to get the Nation's assets back down to internationally competitive levels or we will just continue declining.

    Consider the case of farm workers - that backbone of the ability of the UK to feed itself. It is unlikely they earn much over 20K a year. so they can afford to live in a family home priced at no more than 60K say 70K with a 10K deposit. But in much of the country this price does not buy a garage! In fact most modest family homes in the SE countryside (where farm workers must live due tot he nature of their work) cost a minimum of 250K About 4 times what can be afforded. So house prices must fall by 75%!!!!!!! (Did I hear that this will bankrupt the banks - then the banks are already bankrupt!)

    We cannot ignore this problem if the economy is ever to recover!

    [Of course, this problem is directly the result of diabolically bad regulation and control of interest rates by the Bank of England - yet we still have yet to fire Mervyn King!]

  • Comment number 19.

    'Out of 29 industrial countries, only Greece is planning a sharper decline in structural borrowing between 2010 and 2015. And only Ireland and Iceland are planning a larger reduction over this period in public spending as a share of GDP.'

    And out of 29 industrial countries, how many have a higher deficit than we do? Let me guess... Greece, Ireland and Iceland.

  • Comment number 20.

    The first thing to do would be to scrap all subsidies for wind power and to scrap those eyesores still standing as they are so inefficient, cause problems on the National Grid with their random power generation. Also scrap any carbon trading/tax as we need carbon dioxide to live and the more we have [within limits] the better our plants grow and thus produce more food. Finally scrap all bio fuel production as it is using too much land and is much less efficient than good old petrol [and more expensive!]. Thorium based power generation should have started 40 years ago. Safe, incredibly efficient with very low waste levels it is the way to go.

    Google Thorium Power and be staggered at what we have been missing.

  • Comment number 21.

    The whole thing is trivial to work out, we currently have 30% of the working age population not working and the ONLY way to fix our economy is to sort out that problem so...
    a) The bank of England must state with no reservation that the base rate is NOT going to rise for at least 2 years. This is the ONLY way anyone will invest any money in improving their company and employing more people.
    b) The government should change the rules on purchasing to include costs of lost taxes, increased unemployment and lost strategic advantage in the UK caused by buying anything abroad. This will ensure that (within all the current EU and global regulations) we will buy British with British tax payers money.
    c) The government should tell (note not ask) the two banks we own that business bank charges will be zero AND that interest rates on business loans are no more than 1% above BofE base - this will encourage business to borrow and invest while preventing banks ripping off the most important part of our economy (real business).
    d) In order to offset the large amounts of money released by these factors increase taxes - this won't be popular but will keep a lid on government debt.

    Note, in no place do I care about inflation - frankly this is a global problem created - by and large - by gambling by banks and hugely rich individuals (CEO's and banks who get paid massive sums regardless of their failures). We can do nothing about this because this government, and the labour opposition, along with other governments in the world are personal friends with the rich.

  • Comment number 22.

    Why are the IFS and Barclays Wealth being allowed to make policy recommendations, when they were among those who imploded the economy in 2008?

    Being serious is no longer enough. Considering that many ordinary people called the meltdown well before the financial industry did, why is the financial industry still getting this preferential treatment, while ordinary people are being excluded from the debate?

  • Comment number 23.

    @13. At 12:54pm on 02 Feb 2011, signoff wrote:

    So you've bought into the 'we can only compete by being cheaper than anyone else' arguement.
    That may be so, but in that case we also need to have housing, clothes and food that are the same price as the cheapest.
    I also don't see why the CEO of a company made of the cheapest possible workers should walk away with several million pounds a year - even when they fail. The CEO of my last failed company (Symbian) was on over a million a year during its decline and closure, he is now working as CEO of another IT company - rewarded for failure - and not for the first time. We can spin similar stories of bankers who sink banks and now run a high street chemist... the list goes on.

  • Comment number 24.

    @12. At 12:53pm on 02 Feb 2011, newblogger wrote:
    Can someone help me?

    The government are saying that they plan to continue with their deficit reduction plan even if is doesn't work?



    Totally, the same as Thatchers 'not for turning', the ill advised attempt to stay in the exchange rate mechanism and the Brown/Blair spend spend spend (even if it is on foreign goods which support not one single British job).

    All politicians are basically thick, stupid, moronic and unable to grasp the basics of common sense. Worse the media back this up by critising if the politician (normally by accident) does an about face when a policy is clearly broken. Worst of all is that the voter has even less intelligence because they keep putting the same failed, cheating, disreputable bunch of no hopers in power time after time (for heavens sake, reelecting people already being tried for fiddling expenses because 'my dad voted...... so I must vote the same because I am too thick to think'

  • Comment number 25.

    7. At 12:30pm on 02 Feb 2011, stillpuzzled wrote:
    This government is not for turning?
    ---------------------------------------------------
    There are some wonderful and/or worrying links to the recent past. I hear echoes of the days of my youth .....

    The lesson Dave, GO & Co could learn from the Conservatives in the period 1979 to 1985ish is to throw away the blinkers, not take too narrow a view. We could debate for hours how great was the UK share of the blame for the 1981 world recession (usually just attributed to the USA) but the way the global economy is stacked now, it is possible we could tip the world into a recession.

    If we are not careful ...

    Hey! etc.

  • Comment number 26.

    when is a trade policy not a trade policy?

    When it's a devaluation!

    YES we need to expand manufacturing, cut imports and boost exports.

    YES "allowing" Sterling to fall by a third improves our terms of trade making exports cheaper and imports more expensive.

    BUT because we have such a high level of imports of energy, food and manufactured goods, the fall in the Pound is VERY inflationary, cutting living standards and effective demand in the economy.

    Devaluation is in effect an import tax and an export subsidy - but it is a VERY blunt tool indeed.

    That's why a much more effective solution is selectively applied import taxes and investment in exporting businesses that create jobs here and those that replace imports.

    You only have to look @ OPEC or the Chinese currency regime to see that markets are rigged - yet we go on with globalised trade for ideological rather than practical reasons.

    And it's not as if the Indians & Chinese etc don't have trade policies that involve protecting their own industries - they do.

    GO doesn't have a plan A in terms of growth & job creation - the CBI said so last week - they only have a spending & taxation policy.

    So an effective Plan B would be to create a taxation system to DETER imports and PROMOTE exports, so INVEST in productive businesses that reduce our dependency on imports AND create jobs.

    We were promised a White Paper before Christmas - WHERE IS IT?

    Answer - if you're ideologically opposed to government involvement in the market, you are powerless to do anything due to your own dogma.

  • Comment number 27.

    Summary: We will continue to do what the bankers tell us to do.

  • Comment number 28.

    Why does anyone think Osbourne needs a plan B. All he needs to do is modify his plan A by stealth. Already the petrol price increases are causing concern so he will modify the structure of road pricing by increasing the Road Fund License by £100 per year and stop the planned increase in fuel duty. He can in 2014 claim success if the deficit is not completly wiped out but within pre 2008 levels ie less than 3% of gdp.
    Where the politcal fall out will be is the pre election budget, he will want to cut the 50% tax rate but will he be able to.
    Is the onus on Osbourne, or is it with Cameron. If in 2013 the polls are still against the coaltion will Cameron act and invite Danny Alexandre to be chancellor, that would be a clever move the Lib/Dems would get most of the blame. Osbourne would do what Norman Lamont did go home and sing in the bath.

  • Comment number 29.

    20. At 1:18pm on 02 Feb 2011, Beejay wrote:
    The first thing to do would be to scrap all subsidies for wind power and to scrap those eyesores still standing as they are so inefficient, cause problems on the National Grid with their random power generation. Also scrap any carbon trading/tax as we need carbon dioxide to live and the more we have [within limits] the better our plants grow and thus produce more food. Finally scrap all bio fuel production as it is using too much land and is much less efficient than good old petrol [and more expensive!]. Thorium based power generation should have started 40 years ago. Safe, incredibly efficient with very low waste levels it is the way to go.

    Google Thorium Power and be staggered at what we have been missing.
    ------------------------------------------------------------------------
    Agree about the eyesore factor (why didn't we stick turbines on shopping centres, industrial estates and industrial sites? - nothing to spoil, lots of wind, customers nearby ...) but why waste money scrapping them now? Wait until they fail and take them down then.

    The carbon market disgrace is just starting to become public knowledge, there may be more to come. Unfortunately, dismantling it will take international agreement.

    A lot of land that can be used for crop production is unused in the UK. Crops for biofuels are a good idea. They can provide a useful income for farmers when other problems arise. They can be used as part of land rotation. They may have some benefits for wildlife.

    Biofuel tends to be used as a mix with highly taxed fuels. The Treasury, at present, probably wouldn't want it sold on its own at its true cost plus reasonable profit. Reform of our tax system, taking tax from fuels and placing it on income, would have greater benefits. It would make UK farming a lot more viable and reduce the level of imports. There would be health benefits (and hence savings) from greater UK arable production.

    I am generally pro-nuclear and alternatives but there are problems. Not least all sorts of vested interests, unwillingness of Government to really invest for the future, etc.

  • Comment number 30.

    #21 anotherfakename and anotherfakesolution. Banks are not lending because there is a lack of credible (i.e. viable) investment opportunities. This should tell everyone something, but apparently it doesn't.

    The fact that the banking system is systemically insolvent doesn't help much.

    Inflation (this time around) is caused by grotesque money printing. The money still can't find any investment home so it goes into blowing huge bubbles in commodity prices. You may find the price of petrol a moderate annoyance but many millions of people are finding the price of food to be something much worse.

    So Tunisians, Egyptians and others take to the streets. Where it will end we know not, but it began with the pathological hatred of truth so close to the hearts of the enlightened western citizenry. "My house price must rise forever and without end, and if the price for my ever rising house price is either starvation or insurrection in some far away land, well...that's a price I'm more than happy for someone else to pay."

    Get real. Get ready for full spectrum meltdown coming soon to an expensive neighborhood near you.



  • Comment number 31.

    2. At 12:06pm on 02 Feb 2011, nautonier wrote:
    The only source of additional govt revenue that is now available is in the contentious area of 'modern selective protectionism' (MSP) ... which none of of our gutless politicians seem able, willing and competent to discuss ... never mind even think of pursuing.

    The choice is stark ... take the tens of billions of £'s that are easily available in MSP and effect strong rebalancing forces in the UK economy, as a result... or watch the country grind to a halt and the anarchists come out on the street ... and plan the date for the next general election as political strife makes the Coalition govt unworkable as Lib Dem politicians resign as the economy nose dives... and a pattern of economic stagnation becomes further entrenched.
    ------------------------------------------------------------------------
    The big question is:
    How long do you think the revenues from those MSPs would be available for?
    And when would the retaliatory measures from the rest of the world (in a globalised economy) take to kick in?

  • Comment number 32.

    Why do we need an expensive Quango to come to the conclusion that cuts will cause less consumption leading to a dip in the economy.

    My 7 year old granddaughter could tell you if people have less money they will spend less. Obvious really. Osbourne is more stupid than I thought if they don't realise that they are risking another recession.

  • Comment number 33.

    Interesting that Stg has shown a good improvement today.

  • Comment number 34.

    #6 writingsonthewall. You really do look at the world through rose tinted spectacles. No perversion of reality is too great provided it allows you to stay true to the (assumed) teachings of the great Marxist in the sky.

    Egyptians are not engaged in some act of purity whereby the common man frees himself from the chains of captivity. They are simply responding to commodity price bubbles blown by the financial fanatics of the Fed and Threadneedle Street.

    Similar stuff has been going down in Mozambique and other places - but that doesn't seem to attract the attention of bleeding heart liberals. Now I wonder why that could be?

    But don't worry there will be a lot more of this kind of stuff. I wonder how long it will be until the bleeding hearts suddenly discover all manner of problems with Wahabbism.

  • Comment number 35.

    34 armagediontimes
    You say:
    "Egyptians are not engaged in some act of purity whereby the common man frees himself from the chains of captivity."

    but then kind-of contradict yourself by saying:

    "They are simply responding to commodity price bubbles blown by the financial fanatics of the Fed and Threadneedle Street."

    Maybe I'm wrong.

    Kind Regards

  • Comment number 36.

    29.

    What is the carbo footprint of a nuclear power station?

    No doubt you think its zero as it doesn't emit CO2..

    But think about all the concrete and steel that goes into it....

    It takes 15-20 YEARS to generate enough electricity to equal the amount of CO2 a similar sized fossil fuel power station would emit...

    And the fuel is running out - only 20-30 yrs of uranium left.

    Nuclear isn't such a good bet - clean up costs, security issues and such a poor carbon performance - better off with renewables, cutting fuel use and geothermal.

  • Comment number 37.

    "While last week's growth figures were disappointing... any fiscal loosening aimed at helping the economy could be ineffective if it prompts an offsetting monetary tightening, and risks undermining investor confidence..."

    The macroeconomic parts of the report were put together with senior economists from Barclays Wealth
    ___________________________________________________________

    Hello ?

  • Comment number 38.

    30. At 2:05pm on 02 Feb 2011, armagediontimes wrote:
    #21 anotherfakename and anotherfakesolution. Banks are not lending because there is a lack of credible (i.e. viable) investment opportunities. This should tell everyone something, but apparently it doesn't.

    The fact that the banking system is systemically insolvent doesn't help much.

    Inflation (this time around) is caused by grotesque money printing. The money still can't find any investment home so it goes into blowing huge bubbles in commodity prices. You may find the price of petrol a moderate annoyance but many millions of people are finding the price of food to be something much worse.
    -----------------------------------------------------------------------
    Do all the Ms indicate this?

    I would have said our current inflation is ALSO caused by:
    1. Rising cost of commodities,
    2. Taxation,
    3. Bonus culture, and
    4. Our Government's response to Global Warming {not the tax element} and its effect on essential costs.

  • Comment number 39.

    @26
    BUT because we have such a high level of imports of energy, food and manufactured goods, the fall in the Pound is VERY inflationary, cutting living standards and effective demand in the economy.


    True BUT the answer to the problem of high levels of imports is a VERY low REAL interest rate that allows people to invest in the plant, machinery, design and people required IN THIS COUNTRY to replace those imports. This is how Germany manages to invest and grow. Even now when the Bof E interest rate is low the loans to business, especially small business, are offered at eyewatering and ursurous interest rates. Barclays can turn round and claim most of its business loan applications are approved, but to be honest they don't have many because the interest rates and charges are so astronomical that no one is borrowing to invest. The government can fix that using the two banks we own and a simple instruction - a 5 minute phone call is all it would take.

  • Comment number 40.

    13. At 12:54pm on 02 Feb 2011, signoff wrote:
    The BIG PICTURE is much more important concerning how this country of ours evolves. This government is
    slowly creating a new workforce with lower expectations of pay levels and pensions which will enable us
    (in time ) to compete with the rest of the world. Banking and other service industries (while important in the
    short term,) cannot create long term employment for future generations. We must evolve and compete with
    the rest of the world . This government, l believe,has set us on the correct course. A course we must hold fast to
    or suffer a slow decline.
    ----------------------------------------------------------

    It never ceases to amaze me this argument by the capitalists that if we get poorer through either a) lower expectations of wages and pensions or b) devalue the currency then this will somehow achieve economic "recovery".

    So the choice is either: lower wages or suffer a slow decline?

    It looks like lose/lose to me to be honest.

    As Orwell said: Poverty = Wealth!

  • Comment number 41.

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

  • Comment number 42.

    37 EconomicsStudent
    "While last week's growth figures were disappointing... any fiscal loosening aimed at helping the economy could be ineffective if it prompts an offsetting monetary tightening, and risks undermining investor confidence..."

    The macroeconomic parts of the report were put together with senior economists from Barclays Wealth
    ___________________________________________________________

    Hello? indeed - surely if the fiscal tightening included not increasing or reducing indirect taxation, then there would be no real pressure to tighten monetary policy, given the economy is operating well under full capacity.

  • Comment number 43.

    Do you ever get the impression that no one really knows what to do about the economy?
    Loosen, tighten?
    Barclays Wealth vs. the Office for Budget Responsibility (OBR).
    "Depressingly, the authors don't seem to think the government can do much to offset these risks - or mitigate the effects."
    This type of stuff really confuses people...Well, it confuses me, and I'm a person.
    Of course consumption will decline! Last time I looked people were getting unemployed, salary-reduced, Vatted, and otherwise made poorer. If these negative shocks throw the government's borrowing numbers off track, then I can only ask: What did they expect? An avalanche of spending during a time of spending cuts and increased taxes?
    And after all these statements, what do we get as the conclusion?
    The IFS and their co-authors believe strongly that the chancellor should NOT CHANGE the fiscal strategy as a result of the recent disappointing growth numbers.
    Wait, not quite:
    The IFS deputy director, Carl Emmerson, has now made clear that the IFS DOES THINK the chancellor needs a Plan B.
    Media speculation over the facts is seen by many, including me, as part of the problem in ensuring that the public has an understanding of what is happening. (Cough, cough!) Then comes the best of all - Chote's quote: “By and large the media is a force for good in helping people to hold governments to account for the decisions they take in their name.”
    How?
    Most of the time, the poor, ignorant people don't know what's going and for whose good, but they know something isn't right about the economy.
    My recommendation, you and most Brits are going to hate:
    Stop sitting on the fence and fully commit to the Eurozone IF for no other reason than several economic brains are better than what I'm seeing out of Britain. Get your best & brightest economic minds into key EU positions. Be part of the solution and not part of the problem. Share the benefits. In case you didn't notice, the Euro is beginning to settle very very nicely; it has turned the corner.

  • Comment number 44.

    11. At 12:53pm on 02 Feb 2011, StartAgain wrote:
    "Surely any course of action has to be given some time to take effect - panicking after one set of figures is not the way to go. All this talk of plan B is coming from the same idiots who were panicked into overreacting to swine flu, the Millenium Bug and into invading Iraq!"

    Too early for Mr.Osborne`s policy to affect the economy,the concern has to be a conjunction of forces which come together in 2011 and terminally interact to produce a spiral of decline.

    Firms are sitting on piles of cash,not investing because of uncertainty.The immediate danger comes from a sharp decline in consumption resulting from higher fuel and food prices,high inflation,VAT increase,growth in unemployment and part time work.

    Interesting that the scale of Mr.Osborne`s cuts puts us in the same economic family as Greece,Iceland and Ireland.Should we be there?, or has he exaggerated the scale of the crisis because our deficit was so large,or is pursuing an ideological agenda of small state and Big Society?

    Plan B is just the British way,cautious,empirical,proceeding by trial and error.To march behind a banner of fixed principles is a throwback to the age of ideology which ended recently with the defeat of Hitler ansd collapse of communism.

    It is happening here accompanied by nostalgia and victimhood,(Our children will pay).This is an indication of the depth of the capitalist crisis rather than the merit of the proposals.





  • Comment number 45.

    I agree with the comments that we shouldn't have lower expectations for ourselves. Whats needed is more balance in pay across all jobs and to not reward or pay off failure with millions of pounds of golden handshakes! Having lived elsewhere in Europe I can say I really appreciated getting paid more for fewer hours with better working conditions and stronger Unions. I don't see these countries (Norway and Germany) having so many problems now! So having lower expectations of what i should be paid - no thanks! Anyway - if I was paid less I couldn't afford to work as Im priced out of the local property market so have to travel :)

  • Comment number 46.

    @38. At 2:49pm on 02 Feb 2011, Up2snuff wrote:

    "Banks are not lending because there is a lack of credible (i.e. viable) investment opportunities. This should tell everyone something, but apparently it doesn't."
    I dispute that. Barclays are currently advertising that they approve almost every loan request - so it is not the case that banks are being choosy, but the case that people aren't asking. People aren't asking because the loans are infeasibly expensive.

    "The fact that the banking system is systemically insolvent doesn't help much."
    Again its not making any real difference, the banks are being greedy on interest rates so people are paying off debt rather than borrowing - they are not even borrowing to invest. Look at the interest rates being offered, and then the additional costs of the application - frankly its frightening. When base rate is 0.5% mortagages are mainly about 5%, business loans 6-10%, personal borrowing and credit cards upto 30%.

    "Inflation (this time around) is caused by grotesque money printing. The money still can't find any investment home so it goes into blowing huge bubbles in commodity prices. You may find the price of petrol a moderate annoyance but many millions of people are finding the price of food to be something much worse."

    Frankly the price of food is more than an annoyance as well. Certainly though you are right - money has been printed, paid in bonuses to over paid bankers, spent (sorry 'invested') in commodity bubbles which is **** the rest of us over. Raising interest rates (as the BofE are threatening) will take MORE money from the poor and give more to the rich and make the bubbles so much worse. A raise in interest rates might cause a temporary raise in the value of the pound but it will add to commodity prices, further stifle investment and in the medium to long term cause further deterioration in the pound, further rises in unemployment and a worsening budget deficit - this has been the situation since the early '70's.

    "-----------------------------------------------------------------------
    Do all the Ms indicate this?

    I would have said our current inflation is ALSO caused by:
    1. Rising cost of commodities,"
    And this is global, stopping ALL UK demand will not affect this, thus raising interest rates is not an answer.

    "
    2. Taxation,
    "
    This causes a temporary spike which will be massaged away.

    "
    3. Bonus culture, and
    "
    The infeasibly rich paying themselves more than they earn and then needing to find something to do with it - stuffing it into commodoties and property.

    "
    4. Our Government's response to Global Warming {not the tax element} and its effect on essential costs.
    "
    The governments response to everything is clearly without proper consideration. Apart from yelling pointless and mindless abuse like school kids in a playground the 'professional politicians' have no ability to think, debate or consider the effects of 'policy' and because of this no ability to be swayed from their mistaken paths.

  • Comment number 47.

    As I read it, it has already dawned on our great leaders that there are two major holes in Plan A. The first is that they may be able to generate a 5+% increase in tax revenues this year through tax increases but for their deficit reduction figures to match they are going to have to create similar revenue increases year on year until 2015.

    That means economic growth of the order of 5% a year (hence the sudden interest in a growth policy -which they don't have).

    Alternatively, it could mean inflation boosting tax revenues (and thereby inflating away the debt): but that requires inflation in incomes (and so income tax) and spending (and so VAT revenues). However, as Mervyn King observed wages are not inflating and people hav eless spending power. And so it is gradually dawning on people that this is a squeeze and inflation offers no easy escape (without a spiral of wage inflation leading who knows where).

    Plan A will not work. Plan B will require a massive investment in productive sectors (manufacturing etc) that will generate the wealth to pay off our debts and support our standard of living. At present, this is not happening - because those with money to invest see a better/safer return in commodity speculation and the Far East: because people have become accustomed (and eductated) to a lifestyle based on consumption rather than production; and because anything we might want to make is already being made somewhere else and it is cheaper to import it than to build a plant to make it.

    Here is the legacy of the decisions taken in the 1980's to let so much of our manufacturing base go to the wall.

  • Comment number 48.

    Nationalise protected benefits from everyone's contracted out pension funds - the government (us) paid them so return the sum , I reckon worth £300billion.Give everyone the universal pension as compensation.

    This off the national debt will save say £15billion in interest per annum - use this to boost the economy.

    National debt reduced , boost to GDP and jobs.Just a thought.

  • Comment number 49.

    Commodities and energy are inflating rapidly in price for the simple reason of demand and supply. Additionally we are forced to extract ever more expensive fossil fuels due to depletion of the cheap readily available stuff and the same goes for mineral and metal ores. Economists and politicians have to face the reality that a rising world population, and in particular a rising aspirational and more affluent population in the BRIC countries and OPEC countries will pace ever more pressure on these globally traded commodities.

    This will lead to a reduction in availability of such basics for everyone including us in the West who must suffer a reduction in our living standards as a result.

    Until the world plans seriously to reduce the population growth and turn it negative and live more sustainably and simply which means trade more locally and on a smaller scale we risk nature choosing harshly for us.

    We may not like the idea that one day growth of consumption has to come to an end but not liking it doesn't change the reality of our finite world.

    When economists and politicians start to talk about societies based on less consumption and growth and tackle the urgent thinking on job sharing that will be required to prevent massive social breakdown in the real finite world we live in the better for us all.

    Exponential growth is only possible until you hit the limits of finite resources to empower that growth. This we are doing right now and the sooner we wake up and accept it the better.

  • Comment number 50.

    @43 My recommendation, you and most Brits are going to hate:
    Stop sitting on the fence and fully commit to the Eurozone IF for no other reason than several economic brains are better than what I'm seeing out of Britain. Get your best & brightest economic minds into key EU positions. Be part of the solution and not part of the problem. Share the benefits. In case you didn't notice, the Euro is beginning to settle very very nicely; it has turned the corner.

    I think the best option is entirely the opposite. The eurozone brains appear to be little better than ours (and frankly my goldfish has more brains than our entire house of commons combined). The reason to pull out of europe entirely is the money it will save us. First in the money we annually sink into the sorry mess - most of which finds its way to organised crime, second because of the extra costs we impose on ourselves in eurolegislation that everyone else routinely ignores and finally because from outside we can trade on at least as favourable terms without any of the pointless paperwork (China trades very well with the EU as just one example).

  • Comment number 51.

    BEWARE OF ASSET DENYERS!

    HMG owns UK Financial Investments - which is now worth £75 Bn - this comes from its share and loan portfolio to the UK banks.

    As last year's UK borrowing was £110 Bn, the NET position is that UK PLC borrowed only 5% of GDP last year when you count in the £75 Bn ASSET of UKFI which can be sold off to repay the debt when it is the right time.

    Unlike Greece, Eire or Portugal, we have this MAJOR ASSET and the market knows that shares in the UK's leading banks are valuable - so our credit worthiness is fundamentally different - and the market sentiment reflects this.

    I am not a "Deficit Denyer" - but neither am I an "Asset Denyer" - yes we need to do something about the deficit, but to claim that a major reduction immediately is an essential pre-requisite to economic growth is simply not true.

    "Ordinary" government borrowing is to bridge the gap between tax income ad public spending - you cannot claim that a huge investment in shareholding and loans is "ordinary" it is a unique event that should be seen as such.

    To take £110 Bn out of the economy on top of the falling living standards we already have and then to predict growth is economically illiterate and the idea that hacking back public spending will stop it "crowding out" the private sector which will then grow is also economically illiterate because this would only work if the spending cuts were then redirected into the private sector through tax cuts - this is not the case.

    Therefore GO doesn't have a creible Plan A let alone a Plan B - and the people in the OBR that go on claiming there will be 2M new jobs, £400BN investment in industry and UK exports up by a third are looking pretty isolated as the CBI says there is no viable plan for growth and the IFS is sounding the warning bell.

    Job loses in both the public and private sectors are accelerating rapidly and consumer confidence and spend is going into reverse - this will shrink tax take and drive up welfare payments, causing UK PLC to go further into debt as has happened in Eire - it is self-delusion on a grand scale by the ConDems - never let reality get inthe way of a good political dogma!

  • Comment number 52.

    6. At 4:18pm on 02 Feb 2011, anotherfakename wrote:

    2. Taxation,
    "
    This causes a temporary spike which will be massaged away.
    ----------------------------------------------------------
    This is a misconception about tax originated - and even any originated - inflation.

    Because a tax spike drops out of inflation indices after a year, people think it's OK, it's gone. Uh uh, it's still there in an inflated economy. The only way of massaging away inflation is deflation. Or, as I prefer to call it in the present economic climate - negative inflation.

    But with some taxation it's actually worse than that. Both NI and the Fuel Duties have unpleasant circulatory effects, especially in the public sector. For example, both have an effect on Council Tax.

  • Comment number 53.

    40. At 2:59pm on 02 Feb 2011, Reticent_Trader wrote:
    13. At 12:54pm on 02 Feb 2011, signoff wrote:
    The BIG PICTURE is much more important concerning how this country of ours evolves. This government is
    slowly creating a new workforce with lower expectations of pay levels and pensions which will enable us
    (in time ) to compete with the rest of the world. Banking and other service industries (while important in the
    short term,) cannot create long term employment for future generations. We must evolve and compete with
    the rest of the world . This government, l believe,has set us on the correct course. A course we must hold fast to
    or suffer a slow decline.
    ----------------------------------------------------------

    It never ceases to amaze me this argument by the capitalists that if we get poorer through either a) lower expectations of wages and pensions or b) devalue the currency then this will somehow achieve economic "recovery".

    So the choice is either: lower wages or suffer a slow decline?

    It looks like lose/lose to me to be honest.

    As Orwell said: Poverty = Wealth!
    =========================================================================
    The reason that it can lead to economic recovery is that it leads to a measure of lower costs for business. However if you have raging, or even more modest, inflation at the same time that will cancel out lower labour costs. In addition, if you have to support increasing numbers of unemployed and an increasing group of pensioners with benefits you have to raise taxes which can have a negative effect on recovery.

    This was the big lesson of the 1980's but the Petroleum Revenue Tax Cavalry rode to the rescue of HM Treasury and we did not have to really learn it. That will not happen again. The rescue bit, that is.

    And where there is some scope for increasing taxes by fiscal drag, stealth or new taxes, the Government/Treasury can prompt the recovery to take place. One of the many motives for the introduction of the Fuel Duty Escalator in 1992/93, I suggest!

    That is why Dave & GO make me nervous. I have not seen any sign that they know about the lessons of the 1980's and '90's, let alone have learnt them.

  • Comment number 54.

    The budget will be very green and consumption will decrease as I won't be using my car, buying petrol, taking it to the garage, paying road tax or reinsuring. And I'm over the moon.

  • Comment number 55.

    #38 Up2snuff. Sure rising commodity prices add to inflation, but ask why commodity prices are rising.

    Look at oil 1873-2002 long term average oil price USD 17/bbl (in 2002 money). What happened for that price relationship to breakdown so sudddenly and so completely?

    Look at rice futures at or near limit up pretty much every day. Ask why. Surely it cannot be a load of fat cat bankers suddenly starting a rîce eating competition.

    The UK has its own particular idiosyncracies, but none of that explains raging commodity price inflation. That is explained by excess money printing which will soon leave large amounts of people unable to afford food.

    The money printers know all this, yet still they print. Ask how John Paulson raked in a modest 5 billion last year. Yeah that¨s right, he was fully invested in commodities.

  • Comment number 56.

    what a load of rubbish..all osbourne and the rest of them are worried about is screwing us for the maximum possible, all this green stuff is garbage.

  • Comment number 57.

    At 1:53pm on 02 Feb 2011, richard bunning wrote:

    "Allowing sterling to fall by a third improves our terms of trade making exports cheaper and imports more expensive”

    I assume that the use of “terms of trade” was an error and should have been “balance of trade”. This however does provide the opportunity to address the often neglected cost to the economy as a wholw of a currency depreciation. A fall in the exchange rate means a deterioration in the UK’s terms of trade because the same slice of our national cake exported will now earn less foreign currency than before and will therefore pay for fewer imports. If we wanted to maintain the same level of imports we would have to give up via exports a much larger slice of our national cake. This can be likened to the effect of my accepting a cut in wages to stay competitive in the labour market because this will lead to a deterioration in my own household “terms of trade”. This is because every hour of labour “exported” from my household would now pay for fewer “imports” of goods and services into my household. This would mean a deterioration in my standard of living unless I was able to “export” more labour by working much longer hours to maintain my “imports” of goods and services at their original level.
    So a fall in the exchange may eventually improve the balance of trade but in the meantime the deterioration in the terms of trade will impact on living standards. As we know the cost in terms of falling living standards are unlikely to be evenly distributed. Of course a higher volume of exports will hopefully increase total employment but only if the extra jobs exceed those lost through cuts in government spending and falls consumer spending.

  • Comment number 58.

    Green budget?
    Is that what they're calling this,they need to get this global warming nonsence out of their head its all lies! wind turbines are being pulled down because they cost more money than they save,carbon credits is a scam why not introduce mandatory co2 scrubbers on chimneys if your that bothered. I cant even afford to run my car now with all these increases Insurance,TAX which doesnt even get spent on roads I think it goes to offset our emissions? thats what i can work out because a smaller less polluting car is FREE.
    Anyway the route of our money problems lies with the BOE why does the government LEND money off them? thats right all our income taxes go on feeding the ever growing INTEREST to their own bank becuse it went from private to public ownership in 1946? so are we paying interest to ourselves or is it still really private shareholders? WHERE IS ALL THE INTEREST GOING

  • Comment number 59.

    51. At 5:22pm on 02 Feb 2011, richard bunning wrote:
    ------------------------
    May I add a small point please,
    The BoE has about 24% of the current debt on its books. All the interest paid is re-circulated to the Treasury.

    To scare us into submission, GO quotes the largest gross figures that he can. Never, the real figures. Its misleading

    It would seem sensible to me for the BoE to stop taking on debt in any other currency than the £ sterling as they are. Its utter madness to borrow in other currencies.

    Also you write "...the idea that hacking back public spending will stop it "crowding out" the private sector which will then grow is also economically illiterate because this would only work if the spending cuts were then redirected into the private sector through tax cuts - this is not the case."

    I broadly agree that there is no chance of crowding out over most of the economy with such a high level of unemployment and underemployment. The country has a lot of unused capacity. The private sector will invest and grow when it sees it has a market somewhere for its output. The banks will lend the money when they see low risk propostiions before them. Stephanie stated "even though - as I have mentioned many times here - many companies are sitting on plenty of cash." My interpretation is that current policies from the condems is such that industry see investment as a risk and the banks see making loans in many cases as too high a risk, even if there is collateral. All points to there being difficult times ahead.

    Really rather worrying!

  • Comment number 60.

    Perhaps we could experiment with becoming a green eco-communist country? But instead of enduring years of sabotage and ridicule from the capitalist world we could just negotiate ourselves the freedom to be different ...and other countries could take our current population who don`t fancy the idea?

    No rushing about selling chinese rhubarb high on coffee while neglecting your kids...lots of recreation time..what`s not to like...comrades?

  • Comment number 61.

    31. At 2:07pm on 02 Feb 2011, Up2snuff wrote:

    2. At 12:06pm on 02 Feb 2011, nautonier wrote:
    The only source of additional govt revenue that is now available is in the contentious area of 'modern selective protectionism' (MSP) ... which none of of our gutless politicians seem able, willing and competent to discuss ... never mind even think of pursuing.

    The choice is stark ... take the tens of billions of £'s that are easily available in MSP and effect strong rebalancing forces in the UK economy, as a result... or watch the country grind to a halt and the anarchists come out on the street ... and plan the date for the next general election as political strife makes the Coalition govt unworkable as Lib Dem politicians resign as the economy nose dives... and a pattern of economic stagnation becomes further entrenched.
    ------------------------------------------------------------------------
    - Good questions -Uptosnuff

    The big question is:
    How long do you think the revenues from those MSPs would be available for?
    .....................
    Depends on which ones of the thousands of British import items that the MSP is applied to ... some for a matter of months or seasonal such as the import of in-season food that is available in Britain ... 5-10% tariff on the importer/importation. Remember that not eveything is tariffed ... requires very careful targeting to get the maximum desired benefits.

    4 x 4 and other high end fuel guzzling vehicles ... permanent - say 20-25%% tariff on the importer/importation

    Basic foodstuffs such as meat, poultry, milk ... 10-20% on the importer/importation

    Finished electrical goods ... 20% + whereever possible

    Every product imported to the needa looking at and not every import should be tariffed and some tariffs on many items can be zero or even just 2-3% where it is economic to tariff.

    Obviously, those imports such as commodities and where demand is such that there are no UK alternatives due to e.g. patent restrictions etc need not be tariffed as their tariffing might be inflationery in the UK economy... obviously to be avoided and be left alone.

    ......................
    And when would the retaliatory measures from the rest of the world (in a globalised economy) take to kick in?

    .......................
    ANSWER ... they already have ... the UK is already paying rigged prices and export tariffs from the producer on some products and some products are pushed at us through currency subsidies in the country of origin.

    We pay rigged prices on imported fuel and energy and supermarket food on basic dairy foods as the price creep supermarket cartels rip us off every time we go shopping.

    If the UK can play the game and not over do it and bring in fair trade arguments and principled protectionsism on e.g goods produced cheaply overseas with e.g child labour and zero employment right conditions ... then tariffs can persuade importers to import less, retailers to buy British and British businesses to spot the new margins and banks to lend to them as they never miss a real opportunity.

    So the 'retaliatory fears' that the frightened rabbit syndrome attitude naysayers throw around is unproven and unfounded ... because selective tariffing has never been applied in the UK as far as I know and the world trade organisation is a complete waste of time and their are thousands of protectionist breaches occuring globally every day ... probably 30% - 50% of world trade is not fair trade or free trade and is therefore protectionist with currency and subsidy props etc.

    Tariffs, if well chosen can be immensely powerful if say 80% tariff on all imported electrical private road vehicles by 2018 and 50% of UK private road vehicles to be electric by 2018 ... what do you think would happen to the UK vehicle manufacturing of electrical vehicles during the next several years?

    Some countries might retaliate but so long as the UK protectionsim is proportionate and not unduly discriminatory and is not excessive ... no one will bat an eye and the markets will just adjust and swallow the tariffs and behaviours of e.g. importers, retailers and consumers would be changed.

    It will be difficult for many to retaliate against Britain as foreign countries like some of the things that Britain does actually produce ... armanents/ordnances, RR vehicles, RR engines etc. Some of Britain's trading partners might object and some might not want a global review of their own human rights abuses in their manufacturing processes ... Britain might have to make some new friends and do less trade with others and look for alternative energy sources and technologies which would be a good thing for UK jobs, if sourced in the UK.

    If we wish to have a completely open UK where only the global spivs and vested interests prosper - keep Britain open and exposed and unprotected.

    If we want a new stronger Britain with less choice in the shops but with a new stronger identity, where domestic aggregate demand is very high and innovators and new businesses are busy filling demand gaps and industry is training UK citizens for nee technologies, producing new vehicles ... then we become much more selective about our imports and start taxing what we should be finishing, assembling, designing and building, growing, making ourselves.

    Retaliation is not the issue ... it is cowardice and self interest from the UK establishment that is the problem and prevents the UK from reinvesting itself.

    We get smart and learn how to play and start the playing the game which is global trade and how to protect ourselves from its negative effects ... or we continue with the current economic decline (short medium and long term).

    Now who was it? ... Who in 2007 said that Britain had a new economy based on services and finance?

    Modern selective protectionsism need not only apply to trade ... it could also apply to e.g. finance ... credit card racketeering e.g. Uk consumers pay a lower interest rate on products 'made' in the UK

    The effect on our domestic economy would be massive and imeediate and the revenue stream would be worthwhile in atime of budget costs ... this kills several vultures with one stone:

    1) tariff revenue
    2) rebalancing effects and redistributive forces and new UK business opportunities
    3) changes behaviour
    4) TARIFFS PAID BY THE IMPORTER AND NOT BY THE CONSUMER
    5) immediate effects
    6) etc etc etc

    A completely open border Britain has brought our country to near catastrophe ... hard choices need to be made if Britain is not to become a very unpleasant place to be for those low earners/ earning less than say 120% of an average UK income.

    There is no evidence or history of MSP having any serious negative issues with it if handled competently as it has never been tried/applied... everything needs 'competence' ... Is that now 'too big an ask'?

    Britain can't just sit and do nothing choices have to be made ... we have very little in the way of natural resources ... our biggest export is now 'human rights' ... shove it down their throats and tell them all to make things properly and fairly and recognise the employment and other rights of workers or pay our higher import tariffs!

    Other countries exporting to the UK do not treat and pay their workers properly and so their exports are cheap compared to our own high cost production ... we must level the playing field ... this is difficult, risky, etc ... but we have no choice unless the 'UK haves' and 'have nots' divide is going to get much, much wider in th UK and be huge problem going forward that makes the UK very near completely 'un-manageable'.

    Our UK establishment are self interest cowards and bullies and things need to change.

  • Comment number 62.

    The economy cannot be balanced until property prices return to realistic levels, so I second previous suggestions for a property tax; NB: tax goes with the property, owner has to pay it irrespective of their nationality/domicile/cosy tax arrangements.
    Probably best to go for a simple % of land+building(s) value, lets say 1% per year.
    Discount/exemption for specific land uses such as commercial arable & livestock.
    Target should for 3-bed semi-det house prices in an area to be ~4x average salary in that area, which I reckon is ~50% to 60% of current prices in most of the country.( yes, I do own a house )

  • Comment number 63.

    Why do people insist on using phrases like 'exponential growth'? The word exponential only matters if you decide to define growth in terms of a repeating number for a given discrete time period occuring again and again.

    If the economy doubles over the next 20 years (doubtful) then I can express that as an exponential annual growth or otherwise - its just a way of describing the growth.

    The important point is sustainability of any growth - how would we sustain a doubling of our economy based on current resources? What capacity is their to grow responsibly, fairly and sustainably.

    Picking up on Richard Bunning's point on the £75bn asset with respect to nationalised bits of banks. That would save around £3bn in interest (based on 10-15 year borrowing costs) - thats quite a lot more than the difference in gilt yields compared to a year ago is saving us, although George O would have you think he's saved us from financial ruin (£200-£300m per annum based on 20-30bps difference on say £100bn of new borrowing).

  • Comment number 64.

    #32. My 7 year old granddaughter could tell you if people have less money they will spend less. Obvious really. Osbourne is more stupid than I thought if they don't realise that they are risking another recession.

    Well it depends where you look. The other day Sky announced record numbers. Now surely if you are short of money you don't spend £60 a month just to watch extra TV channels? And why do I not observe any real difference in the speed of motorists on the motorway, when you can get 10%-15% better fuel economy by slowing down to closer to 60mph?

    The answer is that our country is splitting apart at the seams. There are millions to whom £60 a month for Sky is loose change. And millions for whom £60 extra is needed just to provide the basics of existence.

    Much is made of the very extreme end of incomes (like the footballers), but the real challenge in this country is that a family with 2 professionals in it can live in the same neighbourhood as another family, with such difference in standard of living it is almost as shocking as what is seen in 3rd world cities. In the one family they have 2 new cars every few years, foreign holidays, and all the rest of the middle class trappings, and the other is near destitution, with almost no prospects for a better future.

    This is why I am so frustrated at all the media focus on meaningless stuff like "we grew by 1%, or shrunk by 0.5%". Both these growth figures are pitiful when you consider we are borrowing at least 9% of our GDP. So we are killing our futures and that of our children, for very very little return.

    I see practically no actions being taken to stop the splitting of our society into the desperately poor and the comfortably well off. The first step must be to stop the outsourcing of jobs to factories in eastern europe. It must be worthwhile to give tax incentives to make it worth creating local employment.

  • Comment number 65.

    Do you remember prime minister John Major's fateful speech in 1993? He boldly claimed then that the Pound Sterling was set to become the 'strongest currency in Europe'. Because of the resolute Tory policy!
    That hilarious claim sparked the City revolt that devalued that so-called 'strongest currency' as investors all over world sold off sterling - because they thought the Tory Government had finally lost its marbles.
    Cameron was the Chancellor's adviser then - his only proper job outside being a Party hack - and he may still have bitter memories of those disastrous times. He ought to think on that disaster because that's where we're going.
    It's the same old obstinacy. Because it's hurting, they think it must be working. Well it is hurting. And the people are reacting to that. Loads of people are alarmed by their rhetoric and are paying down their debts as a defence against their expected drop in income and/or loss of employment. Companies are not investing. Instead they're building cash reserves to survive the recession they sense is coming. As a result, consumer spending and business investment are spiralling downwards with serious consequences for jobs and tax revenues.
    But only here in Britain. Because only here, have we got the same myopic rulers that made such a mess of economic policy throughout the 1980s and early 1990s. And that left us with rapidly declining essential services and massive interest pay-outs on government debts almost twice what we pay even today. Unemployment exceeded three million and the cost of supporting that army of unemployed and early retired was staggering.
    As in the early '70s and in the early '90s, this Tory Government is trying to change to their ideological aim of less public services and re-balanced taxes onto spending and away from income taxes. But it's far too quick a prescription, and the policy's abrupt disruption to normal economic transactions is already showing up in our declining GDP whilst all other countries are already into expansion of trade and tax revenues. British policy failure will soon show up in falling tax revenues and mounting debts. That's why British families and businesses are cutting back!

  • Comment number 66.

    57 the dreaded Wiki defines "terms of trade":

    "terms of trade or TOT is (Exports)/(Imports), or (Price Exports)/(Price Imports). In layman's terms it means how much is exported per import. "

    To amplify what I said, for the ConDems a fall in sterling "impoves" our terms of trade because it means the UK could sell more overseas and afford less imports which they would see as a "good thing" because it would lead to an improvement in the UK's balance of trade - i.e. the net amount comparing exports to imports - at the moment significantly negative.

    You quite rightly go on to point out that it's anything but "good" for ordinary people who find their money doesn't go so far and they must either cut back or find more cash from elsewhere to support their consumption.

    So Mr Cameron's real proposition was this:

    I will cut your living standards by allowing the Pound to lose a third of its value and hold wages down whilst making deep and proufound cuts to your public services which will significantly reduce your standard of living and quality of life.

    I will do this on the false premis that the current level of UK borrowing is entirely due to the excessive spending of the previous government when actually I know that there is a massive asset in UKFI that balances most of this borrowing which was caused not by general public spending but by the credit crisis in the USA, that drove UK banks to the brink of collapse, leaving the previous government no choice but to intervene, borrow the money and recapitalise the banks.

    Even though I can see that following this policy has driven Eire to the point of meltdown, I am going to do the same in the UK because this is too good an opportunity to implement our policies of rolling back the state because we are ideologically committed to private enterprise and shrinking the public sector.

    Now - how many of us would have voted for this?

    Nick Clegg, I suppose.....

  • Comment number 67.

    Richard @ 66

    Nick Clegg would have held a placard with your DC proposition with the word NOT after every I WILL, in front of all the voters in the weeks running up to the election.

    Then he would have voted for Cameron (again).

  • Comment number 68.

    67

    I stand humbly corrected...

    ...he's too clever for me by 'alf, g'vnor.

  • Comment number 69.

    PLAN B

    The oil tax.

    It has been decided that our dependence on oil is a threat. Not only does the energy we need require a significant outflow of wealth, it funds societies that we fundamentally abhor. From America to Saudi Arabia, our oil money is blood money.

    Let us stop this.

    Within a time frame of two years we want a complete migration of our heating and transportation energy requirements from oil to wind, solar, and wave power.

    This will be accomplished under the ambitious, and righteous, banner of a "War on Oil".

    We will transform our entire energy infrastructure, our nation will be propelled from the 20th century to the 22nd century, and we will do this at any expense. Half our nation will be employed building this infrastructure, and the results will be complete self sufficiency and technology exports that few will be able to do without. The end result will be a transformation that will be the envy of the world. From poverty to science fiction fantasy, as Japan achievied in the '80's, a quantum leap such as this will not be repeated for decades to come.

    We will suspend the usual methods of finance and accounting, just as we did in 1939, and we will emerge victorious.

    THIS IS PLAN B.


  • Comment number 70.

    Although Plan A may not be popular, it is at least a plan. Deficit reduction makes perfect sense, so give it time (not just a few months)and Plan A will almost certainly have the desired efect.

    But it is far too early to pass judgement on Plan A at the moment, other perhaps than on its popularity....

    What we actually need, is for the Government to publish the National Deficit on a weekly basis, so we're all aware of how big it is and how much it has grown over the last few days.

  • Comment number 71.

    66

    I agree with you. The whole thrust of Tory policy is to drive down wages of the mass of the population, sell-off state services in order to provide new areas of profits and so enable the govt to cut taxes on business and allow individuals to pick up the tab for their services and needs.

    The Tories do not fear Ireland's example, they want to emulate it. It's a rehash of the policy in the 1980s.

    as something else wrote above, this will only fuel more bubbles. People will have less money so are they to buy or rent houses, educate children, and provide a decent standard of living. only through credit, so the whole cycle starts again.

    I wrote about it here last week after the gdp figures came out https://tinyurl.com/5toyusr

  • Comment number 72.

    #29 - crops for biofuels are a good idea.

    NOO - they are a very BAD IDEA. They take up valuable space which could be used to feed a growing population - not to mention that they are horribly inefficient. The only real workable solution is algea based biofueld - which takes up about 1/5 the space of crop biofuels for the same amount - and they acutally produce OIL instead of ETHANOL (the difference in energy is hughe). And we also have a perfect space to grow algea biofuels - all the disused oil rigs that will come

  • Comment number 73.

    Stephanie,

    when are you going to acknowledge something that has been going on for a while now, but the mainstream has only just picked up on. That is the size of things shrinking while the price staying the same.

    I have mentioned before that inflation in the USA and the UK ignores the fact that quantity is shrinking!

    Now even newsbeat have picked up on it:
    https://www.bbc.co.uk/newsbeat/12346546

    Yes according to inflation the chocolate bar is the same price. According to price per gram it is not. So now a chocolate bar has inflation of about 10%.

    Now apply that to other products that are shrinking in quantity. Then apply the fact that GDP accounts for inflation.

    Not only are the banks using accounting tricks to cook their inflation so are the worlds largest economies.

    The USA GDP accounting for real inflation is hugely negative. I mean c'mon how can they say inflation is near 0 in the USA? What are they including housing prices?


    Keynesian policies working well I see. Everything is the same price! They must be! Maybe in 2000 years time economists will understand the concept of relativity.

  • Comment number 74.

    70

    What isn't being revealed is the profits flowing into UKFI that owns the UK's stake in the bailed out bank that makes up the majority of our current borrowing.

    As the telegraph recently reported:
    https://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8290819/Profit-rebound-for-UKs-big-lenders.html

    UK banks are projected to turn in £24 Bn in profits, of which UKFI will get a large slice from RBS, Lloyds TSB etc.

    THIS INCOME WILL OFFSET A LARGE PROPORTION OF BORROWING COSTS FOR UK DEBT!

    The rebound of the banks will also mean UKFI will show a good profit on the investment, which can then be sold and the borrowing unravelled to reduce our debt dramatically.

    UKFI is worth IMHO at least £75 Bn - our borrowing is £110 Bn - so if you discount this from the total, we are borrowing just 5% of GDP - so why is everyone banging on about debt?

    You've been conned - there is no serious debt problem - it's a smokescreen to justify politically motivated spending cuts.

    Oh, and the debt will grow because this slash & burn approach to public spending has damaged consumer and business confidence and will send the UK into another recession, so driving down tax receipts and driving up welfare payments - a totally self-defeating economic policy.

    If you want to see the future, take a look at Eire - that's where we're headed.

  • Comment number 75.

    Why are we not investing enough in a "Green" future? Renewable energy including wind and solar is the future and the UK needs to be part of it. It will create new jobs, secure energy supply, ensure we dont pay for expensive oil and gas in years to come. It is the least cost option long term. So please let us see some political leadership and see the right policies for our future.

  • Comment number 76.

    74. At 10:34pm on 02 Feb 2011, richard bunning wrote:

    If you want to see the future, take a look at Eire - that's where we're headed.
    ------------------------------------
    Absolutely agree with this and many of your other points. Condem policies are going to be a disaster IMHO, even though the figures at the moment don't look too bad. I suspect they are going to turn sour over the next 6-9 months. The current policies are not going to help us, the people of this country. We all got mad at the politicians for their expenses. Perhaps we have run out of fury, because we should be feeling even more strongly about the disaster that is coming. Part of the problem is the media in general - they do not seem to see the downside at the moment. The only exception I have seen or heard was Paul Mason at the turn of the year on Newsnight who was very very gloomy, and nothing has really changed since then. Perhaps he has been asked to cheer up a bit!

    I'm sure some in the city know what is coming, another recession; an open secret, not to be admitted out loud. Mustn't scare the masses, they might revolt........

  • Comment number 77.

    63. At 8:29pm on 02 Feb 2011, TheGingerF

    Are you sure you understand the meaning of exponential?

    I think you will find this: “The word exponential only matters if you decide to define growth in terms of a repeating number for a given discrete time period occuring again and again.” Is not correct!

    “If the economy doubles over the next 20 years (doubtful) then I can express that as an exponential annual growth or otherwise - its just a way of describing the growth.”

    ERRR…..No!

    Try thinking about it this way:

    I am a Gardener and I grow carrots. The first year I grow 1 carrot, in the second year I grow 2 carrots, in the 3rd 4 carrots, in the 4th 8 carrots and in the 5th year 16 carrots. If this was then plotted it would show an upward curve over time, with the slope of the curve increasing during time. So over 5 years I have had an exponential growth of carrots.

    I may get this bit incorrect because it has been 30 odd years.

    If you now transfer this exponential line on to log paper you get a straight line and hence you can project it forward as a function of time and predict your expected growth of carrots. Then along comes a speculator and says I’ll buy that predicted growth off you for £x and then bets (hedges) that I will not make the expected yield.


  • Comment number 78.

    This is not at all how the BBc reported the IFS report at 1800 or 2200 hrs tonight - they seemed more interested in reporting the critisism of the Government not having alternate plans, or not explaining them well enough. This sort of selective reporting happened all the time with the last Government too:

    1. If you cannot report a balanced story, why report anything at all?

    2. If you cannot report without political bias, then we don't need you; or need to pay the entertainment/information tax you demand, do we?

  • Comment number 79.

    ...so if 70% of the UK workforce is in the Public Sector (which is paid for by Taxes), and 30% of the UK workforce is in the Private Sector (which pays those Taxes into the economy), it appears we are completely stuffed.

    Apparently if every house in the UK was sold it would not repay the national debt, so is worrying about the minutiaea of a possible "Plan B" even relevant to the economy?

    The UK Economy seems to be a completely closed debate between the bankers (who's only interest is their profit) and politicians (who's only interest is self-aggrandisement), with no relevance to UK productivity, Employment levels or Export potential, and this article appears to illustrate that, the author having simply copied verbatim the comments and reports of others, with no diagnosis or questioning at all, in fact it reads like the minutes of an an AGM.

    No wonder the World Economy is stumbling, if it is supported by simple "Yes People".

    Production and Export is the mainstay.
    Look at China, for example.

  • Comment number 80.

    #79 Katsu999,

    Your workforce calculations are very simplistic and are in fact wrong. If 70% of the UK workforce is in the Public Sector and 30% in the Private Sector then we would have achieved the holy grail of full employment - yipee!!! Did you forget about the 2.6 million unemployed (soon to rise dramatically) and the estimated 7 million 'economically inactive'?

    You then assume that the Public sector workers are merely a cost in tax terms on the private sector employees. Trouble is the majority of public sector workers are engaged in activities upon which the private sector employees require (directly or indirectly) to perform their work and living activities. So your simplistic 'cost' calculation is again misleading in its simplicity.

    I fail to see the relevance of the value of UK housing stock in relation to the National Debt. Can you please be more specific?

    "Production and Export is the mainstay.
    Look at China, for example."

    Here again your statement is just too simplistic. Whilst productive employment is one of the keys to future balancing of the economy, that is a very different objective to mere bald production. The requirement for the future wellbeing of the UK economy is to completely re-evaluate what we mean by productive activity ie the very essence of work. Is it really feasible to increase volumes of output with fewer workers?

    As for China then we are now starting to see the cracks appear in the supposed invincible model. Perhaps you would like to consider the G20 thinking about surpluses. You may also like to look at the latest comments about Chinese inflatioary bubbles.

  • Comment number 81.

    Thank goodness for some cautious rationality from the IFS to offset the codswallop from Balls and Blanchflower.

  • Comment number 82.

    69. Oblivion: A nice sounding idea but think of the ramifications and the lack of abilty of "alternative" fuel sources to replace oil for transportation, plastics, fertiliser etc. Electric cars are a non starter. The materials used in batteries are even more rare than oil and much more expensive. Then you've got to handle the huge costs of recycling their toxic contents after 5 years or so of use.

    No our whole leveraged society (in terms of population and the industrialised agriculture and distribution that supports it) is enthralled to oil.
    I challenge anyone to explain thoroughly an energy source that can viably replace oil whilst maintaining anything like our stated requirements for economic growth year on year (avoiding the word exponential).

  • Comment number 83.

    #44 bryhers
    ...To march behind a banner of fixed principles is a throwback to the age of ideology which ended recently with the defeat of Hitler ansd collapse of communism.

    It is happening here accompanied by nostalgia and victimhood,(Our children will pay).This is an indication of the depth of the capitalist crisis rather than the merit of the proposals.


    ..or perhaps it's indentical to the German and French approach - 'We will defend the euro at any cost' to a far greater economic crisis with potentially far greater consequences.

    In other words, it is to engender confidence that the politicians really do believe in the solution. Confidence being a prime market commodity.

  • Comment number 84.

    At 9:06pm on 02 Feb 2011, richard bunning wrote:
    57 the dreaded Wiki defines "terms of trade":

    "terms of trade or TOT is (Exports)/(Imports), or (Price Exports)/(Price Imports). In layman's terms it means how much is exported per import. "

    Sorry to be pedantic but I’m not quite sure why Wiki is using (Exports)/(Imports) as a measurement of the terms of trade. If this is referring to the respective total values of goods exported and imported then if the answer is greater than 1 then it simply tells us that the total value of exports is greater than what we pay for imports i.e we have a surplus on our balance of trade and the size of that surplus in relation to the import bill.

    It is (Price Exports)/(Price Imports) or to be more precise (export price index)/(import price index) x 100 that is used to measure movements in the UK’s terms of trade. The depreciation of sterling would have reduced export prices in terms of foreign currencies while raising the sterling prices of imports already being pushed up by the boom in world prices for commodities, energy and basic foodstuffs. So a fall in the “export price index” combined with a rise in the “import price index” will mean a fall in the terms of trade index and more has to be exported to pay for imports.

    Unfortunately there is no guarantee that this worsening in the UK’s terms of trade and the subsequent fall in living standards will achieve the prize of a significant improvement in the balance of trade. It all depends upon how sensitive is the overseas demand to our lower exports prices and the UK’s response to higher import prices. Given the make up of the UK’s imports the demand for them is likely to be relatively insensitive to higher prices while non-price features will also be important in supporting the export opportunities provided by the fall in sterling.

    Any major turn around in the UK’s balance of trade will come mainly from rising unemployment, falling real incomes and consumer confidence that further deflate the economy. The state of the domestic market will also force UK producers to devote more resources to developing export markets. However I suspect this particular aspect of rebalancing the economy via belt tightening will take considerably longer than the government anticipates and the price in terms of falling living standards will be considerable.

  • Comment number 85.

    #82 Sage_of_Cromerarrh
    ...Electric cars are a non starter. The materials used in batteries are even more rare than oil and much more expensive. ...

    Perhaps not ...the Chinese have managed to push battery technology in a different direction. Most batteries currently use lithium ion which is both expensive, rare and not particularly green. BYD have developed battery technology that uses ferrous ion, which is both plentiful and cheap...

  • Comment number 86.

    #80 foredeckdave
    ...Trouble is the majority of public sector workers are engaged in activities upon which the private sector employees require (directly or indirectly) to perform their work and living activities....

    'The majority'... Then why do we need the others ?

    I work in the public sector, lest you think me biased.

    At last count there were 6 million or so (https://www.statistics.gov.uk/pdfdir/pse1210.pdf%29 public sector workers - counting local council; civil servants; NHS, etc. You think we need them all ?

  • Comment number 87.

    69. At 9:41pm on 02 Feb 2011, Oblivion wrote:
    PLAN B

    The oil tax.
    ----------------------------------------------
    One of the annoyances to the major Gulf oil producers is the way the UK Government 'milks' their oil for tax. For a particular reason they consider it unfair and hypocritical. Some of the extreme ones would like to use it as an excuse for cutting off supply to the UK.

    The current prices of oil and the near availability of electric cars that can be used between, not just within, cities will mean a major jump to personal electric vehicles in this decade. The oil tax source from transport could dry up very quickly.

    The UK as a small country can support a gas network for heating and your proposal could create a new 'dash for gas' that may have difficult consequences. And make us more vulnerable to supply problems.

    As for renewables, we do not yet have an acceptable way of dealing with much of these and merely insist on big, highly susbsidised schemes for turbines (needing more money from the taxpayer) that spoil our countryside and coastline.

    So, dumping a load of extra tax on oil (we did that in 1992 and look at what happened) would mean that not only would your PLAN B became instantly obsolete, PLAN C - PLAN Y would not work and we would be on to PLAN Z ...
    ..... ZZZzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz

    I would suggest as a way of getting our economy moving:
    PLAN A - PART2: Cutting tax avoidance schemes severely, making it much harder for UK resident high-earning workers to avoid tax or avoid paying at the set rate - with - existing avoidance schemes such as ISAs maintained and enhanced to encourage saving among the lower paid.
    PLAN A - PART 3: Cutting fuel duties steadily to cut inflation (helps to maintain Council and other employment, makes business profitable, etc., etc.,) adding the tax lost to higher tax bands further up the income scale
    PLAN A - PART 4: Wholesale tax reform. For example, scrapping NI (especially Employers NI) and rolling it into income tax. Moving the total tax burden a little further up the scale with extra bands and some adjustment to help the 'squeezed middle'.

    There is no reason why GO could not make a start on this at the next Budget.

  • Comment number 88.

    82. At 07:36am on 03 Feb 2011, Sage_of_Cromerarrh wrote:
    69. Oblivion: A nice sounding idea but think of the ramifications and the lack of abilty of "alternative" fuel sources to replace oil for transportation, plastics, fertiliser etc. Electric cars are a non starter. The materials used in batteries are even more rare than oil and much more expensive. Then you've got to handle the huge costs of recycling their toxic contents after 5 years or so of use.
    -----------------------------------------------------------------------
    The next generation of electric cars are due next year. The present ones start. Why shouldn't the new ones?

    The other problems with using transport fuels as a tax sink are inflation, unemployment, depressed business growth and, eventually, a rush into an alternative. Whereupon the tax take from that source disappears. Currently we only spend about a sixth of transport taxes on transport in all its forms. There could be a £50bn+ black hole starting to appear in the UK Government budget in this decade.

  • Comment number 89.

    #86 Clive Hill,

    "You think we need them all ?"

    Just like you, I don't know. However, merely by privitising their activities so that they become private sector workers is not the answer.

    As I go on to say in my earlier post, we need to look at the whole world of work and the value that the work has to the economy.

  • Comment number 90.

    "They think there's a roughly 1 in 5 chance of a double dip recession in 2011."

    Really? I doubt if I'd be able to find a bookie who would give me odds as long as 4-1 on a double-dip. If I could I'd bet my house on it - if I had a house of course, which I don't, due to the ludicrous house price bubble which got us here in the first place.

  • Comment number 91.

    " 87. At 08:47am on 03 Feb 2011, Up2snuff wrote:

    There is no reason why GO could not make a start on this at the next Budget."

    Other than the small matter of political dogma.......

  • Comment number 92.

    "90. At 10:40am on 03 Feb 2011, davidbrent wrote:
    "They think there's a roughly 1 in 5 chance of a double dip recession in 2011."

    Really? I doubt if I'd be able to find a bookie who would give me odds as long as 4-1 on a double-dip. If I could I'd bet my house on it - if I had a house of course, which I don't, due to the ludicrous house price bubble which got us here in the first place."

    I don't think we will see double dip - there may be the odd quarter here and there that turns negative but not consecutive - bumping along the bottom going nowhere that's the UK for some time.


  • Comment number 93.

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

  • Comment number 94.

    "While last week's growth figures were disappointing... any fiscal loosening aimed at helping the economy could be ineffective if it prompts an offsetting monetary tightening, and risks undermining investor confidence..."

    Well we must keep these ‘investors’ happy at all costs! What more can we do?
    - Withdraw all remaining forms of ‘welfare’ for working, or unemployed people, who have ‘net’ worth less than £250K (so that this can be more ‘effectively’ used instead to provide more ‘suitable’ levels of corporate welfare instead, for the Banks. So much for a ‘free market’ eh?)
    - Abolish the NHS, the entire 'Public' Sector and state backed statutory education COMPLETELY etc and then offer this, from now on, to only those who can pay handsomely for it in the ‘magic’ of the ‘marketplace’… (After all it’s only ‘the super rich’ and the seriously well off who are ‘deserving’ and morally upright aren’t they?)
    - Officially model the UK on the super doopa Authoritarian Chinese model (is it Communist? Capitalist? Corporatist? Dictatorial? Delete as applicable!). That model is just oh-so appealing and ‘growth friendly’ for our wonderful ‘investors’ to feast on some more. Anyone up for ‘work’ paying the princely sum of a dollar a day?
    - Sacrifice the first born of every working class serf…

  • Comment number 95.

    Common_man @ 77

    I am well aware of the mathematics of it all and how it can be applied in many walks of life.

    In Economics its not a particularly good way of doing so.

    Look back - if we have achieved a doubling of the economy over say the last 30 years - is that exponential? It is if after plotting the graph you then interpret it and communicate it in a certain way. Equally it could be shown to be a totally different progression altogether.

    Anyone who decides to buy something based on exponential growth (unless of course there's an attaching guarantee) and prices accordingly has almost certainly misinterpreted their data.

    We shouldn't buy into a view of the world based on some mystical definition of exponential growth.

  • Comment number 96.

    79 and 80 are very wrong.
    Only 21% of our workforce is employed in the public sector. Not 70%.
    Gracious, let's not build any more myths!

  • Comment number 97.

    #96 leftie,

    I never said that 70% did work in the public sector. The label attached to work is unimportant. It is the value of the work that really matters and this is not being addressed.

  • Comment number 98.

    95. At 12:19pm on 03 Feb 2011, TheGingerF

    Unfortunately my post 93 seems to have been moddied which could have help me to explain what I was trying to get across in post 77 but that’s life.

    Would you agree with this statement:

    Banks had to create more activity year on year to pay for the previous years plus profits?

    If you do not then ok I have lost the argument, if you do then this is a good explanation of exponential increase.

    So if in 2002 we projected this forward (which is the crunch of the original discussion) the crisis should have been foreseen. And if it was foreseen, why was it allowed to happen?

    Curved line graphs can be plotted on different types of graph paper and they then produce a straight line (or best fit within a spread of results) this line can be project forward. I sell my carrots for a fixed price to a speculator, if the price of carrots goes up then I lose out, if the price of carrots goes down then I win. The speculator to protect his losses now takes insurance out against his losses. The speculator receives his bonus for the future activity. simples

  • Comment number 99.

    96. At 12:21pm on 03 Feb 2011, leftie wrote:

    79 and 80 are very wrong.
    Only 21% of our workforce is employed in the public sector. Not 70%.
    Gracious, let's not build any more myths!
    ~~~~~~~~~~~~~~~~~
    Back in September, someone posted these figures, with a reliable source.

    I forgot the source. But the numbers make stark reading.

    there are 62 Million people in the UK (refer to Government web site ONS) only 36.6 Million are of a working age.
    7.7 million of these are economically inactive
    7.2 Million work part time
    6.65 million work in the public sector
    That leaves 16.7 million in full time employment in the private sector.


    i.e. 26% of the population are providing the profit to pay for the other 74%.

    Is it still a myth?

  • Comment number 100.

    86. At 08:37am on 03 Feb 2011, Clive Hill wrote:
    #80 foredeckdave
    ...Trouble is the majority of public sector workers are engaged in activities upon which the private sector employees require (directly or indirectly) to perform their work and living activities....

    ----------------------
    'The majority'... Then why do we need the others ?

    I work in the public sector, lest you think me biased.

    At last count there were 6 million or so (https://www.statistics.gov.uk/pdfdir/pse1210.pdf%29 public sector workers - counting local council; civil servants; NHS, etc. You think we need them all ?
    -----------------

    Clive, I think we need EVERYONE employed. If the private sector will not employ them, then the government needs to be 'Employer of Last Resort'(ELR). I don't want to assume too much about your opinions about this, so I'll just make some statements which you may or may not agree with.

    Long Term unemployment not only has devastating affects on those individuals who experience it, but significantly reduces the long term potential growth of the economy through "structural" unemployment. This can be resolved through a "Job Guarantee" scheme providing temporary work, paid at a reasonable minimum wage by the government, for anyone who wants the work - this keeps people in an employable state.

    Further, the work does not need to be "profitable", only productive to achieve its aim. It can be accompanied by further training and eductaion - something the private sector is not willing to do normally.

    Private sector 'employers' are often (though not always) the opposite of this, as they try to employ as few people as possible for as low a wage as possible - this is a perverse incentive inherent in the capatilist approach which must be off-set by government policies.

    Kind Regards

 

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