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back to article Osborne slashes growth forecast by half in bleak economy statement

Chancellor of the Exchequer George Osborne "levelled" with the British public today by admitting that the economy remains in the toilet as he slashed growth estimates. "We've got to go on making difficult decisions so that Britain can live within its means," he told Parliament. But his grim statement to the House revealed that …

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Paris Hilton

"The Office for Budget Responsibility"

Is that department a check on the power of The Office for Fiscal Recklessness, or something?

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I guess they were created after labour pissed away a fortune during the 'good years'. Not that the tories and their minions in yellow are any better.

It could all be fixed petty easily. Make voting compulsory. Add a none of the above box. If more than 40% of people select none of the above you drown the theavin gits and start over. If you like poetic justice drown them in a taxpayer funded moat and bury them under a duck house.

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Re: Make voting compulsory.

No.

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Re: Make voting compulsory.

Theres 30-40% of people don't bother to vote, I bet they don't bother to stop bitching about things they disagree with. If you implement a none of the above option then compulsory voting is fair. Some countries have it already. As long as people have time off work to vote there aren't many reasons why people shouldn't vote. If you want a protest vote then tick none of the above and maybe the duck house gets a little higher!

Just curious but why wouldn't you want compulsory voting (with an exception for those not capable of voting for reasons of mental handicap \ illness etc).

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Anonymous Coward

Re: Make voting compulsory.

UK polling stations are open from 7am to 10pm, Shirley you don't need time off work to get there?

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Re: Make voting compulsory.

"Just curious but why wouldn't you want compulsory voting (with an exception for those not capable of voting for reasons of mental handicap \ illness etc)."

Because you can't force people to be "free"?

Besides, think about it this way: Those 30-40% of people that don't want to vote (don't confuse this with "can't be bothered") are going to vent their frustration somehow. Would you like to see the BNP with any more seats?

Myself, I vote in every general election and some by-elections. Force me to "vote", and every single vote will be for "the big tear in the middle of the sheet". So what does that achieve asides nothing?

Or perhaps I'll just refuse, be fined, refuse to pay, be fined more, be unable to pay.. you get the idea. It'll cost you more than it'll cost me. 50p a week out of the fortnightly giro for the next 25 years?

Do you seriously want to put someone in prison because they have no desire to choose which slippery bastards get to sodomise them for the next 5 years?

Just because the Australians do it, doesn't mean it's a good idea.

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Re: Make voting compulsory.

You'd hope! Depends how long the queue is and how long your shifts are. With a solid postal \ electronic voting system, decent poll hours and capacity it shouldn't be an issue but lets face it, we aren't talking about people known for their ability to coordinate a pissup in a brewery. It's crazy over here, huge queues, not enough ballot papers, none of it is innocent. Politicians take every chance to try and sway the vote by making it harder for people who aren't in their parties demographic to vote. Then if they do manage to get to the station there can be huge queues which doesn't work if you only have 2 hours to vote in. Never underestimate how low this lot will stoop.

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Re: Make voting compulsory.

@m gale

Thanks! I wasn't suggesting locking people up nor forcing them to vote for any party. My thought was actually the opposite, capturing the 'they're all scum, drown the buggers' vote.

My reasoning was basically that right now a big chunk of people don't vote for various reasons, some because they can't be arsed (but usually manage to complain the most) but a lot because none of the options are any good. Thats a really valid vote, 'none of the above' needs to be recorded and frankly if the count is high enough then they have to start over with new candidates \ policies.

As it stands you don't get a free vote. You get a chance to vote for one of 3 main parties (at least for your vote to count) and the leader they select. What if 50% of the population think they're all crap and doesn't vote, one of them still gets in as that opinion isn't counted. I do think we need to take some steps to address voter apathy and ensure our leaders are selected by a genuine majority. It might make them start to behave.

Again thank your for explaining your point!

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Re: Make voting compulsory.

"None of the above" is a great idea. Might even persuade some people to get back onto the electoral roll (as illegal as that is, I know several people who don't exist as far as that register is concerned).

Forcing people into polling stations though... just no. Again, the only way you force people to do anything is with a big stick, and that basically means fines and prison time. For not voting.

When you put "prison time" and "for not voting" together, the more you think about it, the more insane it sounds.

Edit: Before I forget, I know a couple of people who consider that taking part in the circus lends it legitimacy. You won't ever get a vote out of them, not even for "none of the above". More reason why compulsory voting is a bad idea.

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Re: Make voting compulsory.

Very true. I don't think we could get close to requiring voting unless there was a genuine option for dissent \ protest voting. I think in recent years turnout has been between 60 and 70 percent for general elections, I know stateside it can be really low for county elections.

The current buggers have it far too easy. If one lot screws up badly they get sin binned for 4-8 years then they are back again. Look at how many got caught with dodgy expense accounts and carried on, and not just carried on but deliberately found a way around the rules by renting houses to each other. I'm sorry but it's insane. They have to be dealt with properly. If I included an invalid expense on my bill to a client I wouldn't work again, at least not in the same job. Yet they can do it publically, repeatedly and all they have to do is some pseudo catholic confession on tv routine, a quick hand through the candle, a hail tony and all is forgiven.

I do think it's our duty to vote, I respect thats old fashioned and unpopular, but we have a duty to try and keep improving. Right now the system is just fundamentally flawed with very little chance of repair.

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Re: Make voting compulsory.

"I do think it's our duty to vote."

I consider it a right, not a duty.

Now, keeping an eye out for threats on what little real freedom exists.. that, I consider a duty. You can't do that by rolling out of your bed every 5 years to put a cross on a box. That's just a sideshow.

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Anonymous Coward

50 minutes of blah and 6 minutes of what was already on the front of the standard. Not impressive oh and he didn't put up petrol tax, whoo hoo!

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Pint

Don't forget the beer.

Penny off a pint of beer. Modern version of panem et circenses, I guess.

GJC

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Re: Don't forget the beer.

I just heard on the news that 1p off the pint might be illegal under EU rules as it discriminates against the wine industry!

I think the other old adage about not being able to organise certain things in a brewery is actually true!

Mines the one with 1p at the bottom of the glass that I nearly choked on!

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Anonymous Coward

Re: Don't forget the beer.

panem et circenses

more like toast and freeview.

oops, forgot the tv license :((((

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"many might argue that the government hasn't gone far enough"

while even more would argue that the Government has absolutely no electoral mandate to go as far it as gone.

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Stop

"while even more would argue..."

No, I don't think they would. Cameron and Osborne are still in Downing Street, so the government clearly hasn't gone anywhere near far enough.

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Headmaster

While I appreciate the sentiment I have to disagree with the statement: they have both a majority in parliament and also an absolute majority of votes cast. In British terms that's an unusually strong mandate as many recent governments have had majorities in parliament with well under 40 % of votes cast.

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LPF
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@Peter Bond Oh do please shut up, they got more votes than any other party, and they and the liberals got more votes than labour, so they get to form the government. You don't like it immergrate or next time don't vote for an idiot labour government that cocks up their responsiblties to supervide the economy and then leaves us a trillion pounds in debt!!

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Due to the oddities of our electoral system, had Labour won an election with 36% of the vote to the Conservatives 29%, they'd have got a landslide. Because it was the other way round, we got a hung Parliament. As I recall the figures, Blair only got 37% in 2005, against a Conservative 35%, and still got a majority of 60.

Interestingly the Lib Dems decided to sulk and veto the Tory constituency redrawing, and pretty much guaranteed they won't be in government for a while. Labour are looking to be the most likely winners of the next election, as if they can recover up to say 35% of the vote (polling in the 40s it should be easy), and the Conservatives get about the same (or even a few percent more), the current system is likely to give Labour an absolute majority. So no room for Lib Dems in coalition unless Labour do really, really badly.

This oddity is because of the way the boundaries are drawn. Labour tend to represent constituencies with fewer voters. So they don't need as many votes to win an election. Of course, PR has it's own oddities. In Greece and Italy, parties with well under 30% of the vote got topped up to an absolute majority in the lower house of Parliament, in an attempt to give more stable governments...

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WTF?

don't jump to idiotic and wholly erroneous conclusions LPF

I've voted Liberal all my life, but didn't vote for my party to act as the prop for a bunch of elitist, spoiled tossers like Dave and his cronies to set about dismantling the civic underpinnings of the country.

Clegg threw everything the party stood for out of the window for a nasty little power grab.

As for the Tory's getting more votes, you do realize that's not how our parliamentary system works?

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It could have been worse

I've voted Liberal all my life, but didn't vote for …

If it's any consolation, if wasn't a coalition it would have been so much worse.

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Re: It could have been worse

Don't know why you've been downvoted. The vast majority that Labour enjoyed is probably half the reason we're in this shit.

No opposition. At all.

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Peter Bond,

You've voted Liberal all your life. So for your whole life you've supported a party that believes in electoral reform that they expect to mean regular coalition governments. Partly because they believe the current system of winner-takes-all is undemocratic (which in some ways it is). Also partly because some believe that coalitions lead to more consensus and better long-term behaviour from governments.

For the first time in 40 years there's a hung Parliament. The party that believes coalition government is a good thing goes into coalition.

They choose to ally with the party that won. By a massively clear margin. The alternative being a coalition with a party who'd lost, and still wouldn't have quite enough votes for an overall majority, and were led by a man who'd been PM without winning an election, and had now got his party's worst result in 80 years.

What the fuck else was Clegg supposed to do!

To not go into coalition would mean the Lib Dems should just wind the party up, and give up. That they didn't really believe in their own politics and should just re-join Labour. They said before the election they'd try to form a coalition with the winner (whoever it was), they did so. There's nothing wrong, dishonest or inconsistent about it.

If you can't work out what the party you say you've always supported was going to do, even though they told you, put it in their manifesto, and it chimes with everything they've said they believed in since their formation, then you should consider not voting again, as it's possibly too complicated.

Sorry to be rude, but that argument about the Lib Dems really pisses me off. I don't like them as a party, but the hysterical criticism of politicians can get wildly unfair, and how can we have democracy if people won't use their fucking brains? The Lib Dems have done exactly what they've been saying they believe in for 30 years. If politicians compromise and try to get on with things, they've got no principals. If they stick to their guns, and do what they believe in it's because they can't rise above narrow party advantage and act in the national interest. As an electorate we need to grow up.

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Devil

@LPF

"You don't like it immergrate or next time don't vote for an idiot labour government that cocks up their responsiblties to supervide the economy and then leaves us a trillion pounds in debt!!"

Well, successive governments have given us an education system that has left you bereft of grammar and incapable of spelling correctly, so it is no surprise that your opinions are illogical.

The "coalition" didn't get a majority.at all. They got about 17.5 million votes, out of what, about 53 million peasants on the electoral roll. The main parties continue to exist only because a notable proportion of half-wits vote for the same party as their grandad. And in part, because of that we're guaranteed a Labour bunglement after the next election, so that the same cretins that made the mess will be able to worsen it (even more than the tw@ts currently messing things up).

None of the three parties have a clue. They won't solve the problem they made, and until they're ALL in opposition nobody else will.

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Re: @LPF

Ledswinger,

The coalition got close to 60% of the vote. I've not got the exact figures to hand to check. That's a majority in anyone's book.

Admittedly not an absolute majority of all voters. But if people can't be arsed to vote once every 4 years, they've no excuse to complain if they get a government they don't want.

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"So for your whole life you've supported a party that believes in electoral reform that they expect to mean regular coalition governments... The party that believes coalition government is a good thing goes into coalition."

You beat me to it. The Lib Dems had no choice but to go into coalition (or abandon all hope of saying they support PR, which means regular coalitions). They had very little option but to go into it with the Tories, as any other would have both been very complicated (using every party in Parliament to oppose the Tories) and against the apparent wishes of the electorate (who basically voted Labour out).

On top of this, they have done real good for the country. They have tempered the Tory government, and pushed through beneficial changes (such as the rise in personal allowance).

The only real policy mistake I believe they have made was breaking their promise on tuition fees. This was a firm commitment to vote against any rise, and they just tossed that down the toilet. Apart from that, the main damage to the party is just in the association with the Conservatives and their policies. It is a perception held by many, and that will have the most damaging consequences. However, this is because the proles electorate are stupid have not thought it through.

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There are no easy answers for what went wrong over so many years

Really?

Don't deregulate the banking system allowing them to behave recklessly.

Don't lend money to peopel who can't afford to pay it back.

Don't package up these debts into products you don't understand.

Don't claim that financial products are safe when you don't even know what they are.

These answers all seem pretty easy. There are plenty more.

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Re: There are no easy answers for what went wrong over so many years

Don't count your babies before they hatch

Don't throw the chicken out with the bathwater

Beauty is in the eye of the tiger

etc

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Re: There are no easy answers for what went wrong over so many years

-Don't allow banks to create money out of thin air a.k.a. fractional reserve banking.

-Don't allow banks to gamble with other people's savings, only with their own money, or money given to them expressly to invest.

-Don't allow a tax code so convoluted that people who can't afford £1,000/hr lawyers bear the maximum brunt of taxation while people / corporations who can afford it will pay £1M in legal fees to avoid £100M in taxes

and on the other end of the scale

-Don't give benefits to people who are abusing the system

-Give benefits in food / clothing stamps that can be used ONLY for the necessities for which they are being provided, not in cash that can be spent on cigarettes / alcohol / gambling etc etc

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Re: There are no easy answers for what went wrong over so many years

Food and clothing stamps are still currency

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Re: There are no easy answers for what went wrong over so many years

True, and the goods they buy can be sold on, but not at face value. It's more of a principal thing. The US (and it's not often I'll say they get it right) nailed it with their WIC program. As I understand it, you get a set of vouchers that detail exactly what you can buy with them. They are aimed at improving the diets of pregnant and new mothers and their kids. It will literally say 1 gallon milk, 1lb cheese etc on each voucher. You go to the store and redeem them. You can't even use them on something easy and popular to resell like phone cards or washing powder. Sure you can try and resell a basket of healthy food but good luck with it. I'm sure there is a level of abuse, but I think it does far more good than just giving parents cash to spend in the bingo hall or cheap booze shops.

To be clear, I fully support giving all kids a great start in life and th concept of family tax credit is great. The execution was piss poor. It was a simple vote buying exercise and far too many kids got no benefit from it. The government viewed it's job as getting kids out of poverty and measured this by a baseline income level. They didn't measure if the kids were actually helped or if their parents spent it on smack, bingo, fags and aldi vodka, just that they had given them the money. Not everyone makes great decisions, sad as it is, it is a reality that a huge chunk of all that money just got wasted and if anything made the situation worse. Sure some parents used it as it was intended but a trip to somewhere like Hull or Wythenshawe or Middlesbrough might open some eyes as to just how much didn't.

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Holmes

To fix the problem

We need to sort out benefits! Cap child benefit at 2 kids and just give job seekers food stamps, and if someone is found the be defrauding the benefits office disallow them from ever claiming again. Also make it a requirement to actually have worked in the UK for a period of time before allowing someone to claim!

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Anonymous Coward

Re: To fix the problem

yours is a half-baked solution, I propose one to solve the problem once and for all: sterilize them. No, obviously not us, THEM! :(

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Re: To fix the problem

That is because it is only part of a solution, that's the bit about fixing benefits and the benefit culture, I also think we need to spend more on growth and industry like this high speed railway, also the minimum wage needs raising too to encourage people to get into work.

You don't cut to grow, money in for money out, we have a real problem with people thinking it is fine to live on benefits and to pop out kids for money. There is actually someone with 11 kids and lives on benefits and has for the past 7 years getting over £600 a week! I am in a well paid sales job and don't get that kind of money!

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Facepalm

Re: To fix the problem

Mr Farage, how many times do we have to tell you?

This is a UK IT forum - not a UKIP one.

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Re: To fix the problem

Actually all for being part of the EU, no idea where I am going to vote though really doubt it would be UKIP though. To be honest all the major political parties at the moment are unappealing!

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Re: To fix the problem

I've solved that in the past by voting Green.

I certainly don't agree with all their policies, but I also think that climate change is a real problem that far outweighs stuff like economic difficulties, terrorism or immigration.

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Re: To fix the problem

all the major political parties at the moment are unappealing!

Well of course they are. There's no infinite supplies of money for doing nice things. Plus the major priority has to be the economy, so all they can really do is argue about who'd manage it best - and spout on about depressing economics.

Cameron and Osborne lost the last election by being honest in January 2010. They were sitting on a solid 42-44% in the polls, and had been for over a year. Then they started a campaign to talk about what they'd cut in order to get the deficit down while not cutting health or education. Osborne said if they didn't do this, they'd have no mandate for cuts. After 2 weeks of that their poll rating had crashed to around 36%, so they stopped, and went back to being non-specific. Their polling never really shifted again.

Have we as voters taught our politicians a valuable lesson here? Be Blair and Brown, massively raise spending in 2002, but don't say you will in the preceding election. Don't raise tax all that much though. Hope for the best. Keep on winning and being popular for ages. Or, tell the truth about the economy as you see it, and what's required in order to protect the most popular areas of spending (health / education), lost nearly 10% of your support. Perhaps the voters get the politicians they deserve?

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Re: To fix the problem

You almost certainly don't have her kind of expenses either, and I'd hope that you wouldn't think that her children should be paying for the (I would argue) foolishness/possible mental illness of the mother.

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@I ain't Spartacus Re: To fix the problem

Perhaps the voters get the politicians they deserve?

That's a bit 'chicken and egg' is it not? Which came first: the lying politician or the credulous sucker?

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Re: To fix the problem

> also the minimum wage needs raising too to encourage people to get into work.

Really? Have you worked out why all of the industry has moved over seas yet? Everyone says we need to stimulate job creation (i.e. attract companies to the UK) and then rapidly follows that up by asking for more money for the employees. Two mutually opposite statements ...

Yes we need a sensible standard of living. Keeping inflating wages is _not_ the answer - that will just drive more international companies overseas where wages are cheaper.

There are some obvious things to go after - the main one is housing. Housing consumes more as a percentage of income as in almost any time in modern history? Why? It's utterly nonsensical. Houses have no more worth now than they did in the 50s - i.e. it's a roof over your head, no more, no less - the main issue is that they are used as an "investment" and inflating property prices has been used to make us think the economy is booming . It's all bollocks, and an illusion to make the middle classes think they are wealthy. [I suppose I count as middle class and own a house, but even I admit it's all bollocks].

We need to build more houses / flats and in a large scale. It would be massively unpopular (i.e. house prices will drop and screw the banks and anyone with a small deposit will go into negative equity), but if you increased housing supply (or improved efficiency) by 25% you would cause a drop in living costs for everyone involved. No wage increase, but the same wages go further.

This is partly what the govt was trying to achieve by taxing spare bedrooms if you are on benefits - it encourages efficient use of the housing stock, although they haven't thought it though very hard [it also encourages those with a spare room or two to have lots of babies to stop the tax - which is probably the exact opposite of the effect you want in some areas ...].

Oh, and tax landlords so those "with cash" stop hoovering up the housing supply that does exist. It just encourages the inflation and is basically a tax on employment.

P

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Holmes

Who'd have thunk it?

Pile on the austerity and tighten the belts, and the growth contracts. I think I've heard it before, does the name Keynes ring any bells Mr. Chancellor?

The time to balance your budget is when you have lot of cash... oh, sorry, Gordon Brown royally screwed THAt one up didn't he?

Right now is the time (with interest rates near rock bottom) to borrow money to spend on stimulus - directly and via training schemes to unemployed/underployed, and into infrastructure (with suppliers not having a lot of work in a flat economy, gov can get strict contracts and more value for money)

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Re: Who'd have thunk it?

Now is a great time to borrow. Except when no-one will lend to you. See Spain, Italy, Greece, Ireland, Cyprus, for details... Remember the Eurozone are doing QE, they're just funnelling it through the banks and calling it LTRO. Otherwise Spain and Italy would already be in default.

Of course, people will currently lend to us. And it's possible that we could have spent some more, and still got low government interest rates. But no-one knows how much more. All this is psychological. Will the current Eurozone fuck-up in Cyprus cause bank-runs and destroy the Euro, or will people just see it as a small case not worth worrying about? No-one knows. No-one can know until you do it, and no-one can know if the alternative would have worked if you don't.

As you rightly point out, if we'd not been borrowing £30 billion a year since 2002, we'd have had lower debt when the crisis hit, and not been employing 100,000 odd public service workers more than we could pay for. Even to balance the books without a recession would have been painful, but if you're going to deficit spend it really helps not to have a huge structural deficit as well, that you've no idea how to pay for.

Basically the (probably) permanent damage done to the financial services industry by their own incompetence, plus the chronic government overspending left a structural deficit of £50-£90 billion per year. Depending on how Eyeore-ish the economist you asked. Quite hard to convince people to lend the extra £100 billion a year we were borrowing at the time, when even once everything was over we'd still be guzzling down the cash at say £60 billion a year...

Having our main trading partners committing a protracted and bizarre eurocide isn't exactly helping either.

As Jim Hacker said, Chancellor is an awful job. You're always responsible for taxes, and recession. Much better to go straight to being Prime Minister. I wonder if Gordon Brown would agree with him...

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Re: Who'd have thunk it?

>>Right now is the time (with interest rates near rock bottom) to borrow money to spend on stimulus <<

Except that we already owe so much money that it will take many decades to repay it; in fact, the chances are that it won't even be repaid at any time in the working life of anyone reading this article; possibly during the working life of their children, but I wouldn't bet on it.

Quote from Mr Micawber;

"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

Multiply that by about 50 billion and that's the situation the country is in; although it should be highlighted that the budget deficit is well over 100 Billion each year and the National Debt is now over 1 Trillion (and that will increase by a further 140 Billion this year alone). The current interest payments on that are now 45 Billion a year; just a little less than is spent on Education (note that figure doesn't pay off any of the capital owed).

A number of people have commented elsewhere about tinkering with various taxes, cutting benefits; in most cases, they don't bother to check just how much those specifics will actually generate or save. In most cases, the amounts involved are just a few billion here or there; that's a lot for an indvidual, but in context of how much is actually owed by the country, these are just small amounts that will actually save nothing and are more about making it look like the politicians are in control and trying to do something.

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Re: Who'd have thunk it?

Except the 'you need people to lend to you' line is bollocks.

The BoE have spent nearly £400 billion - look it up - on QE. Where did that money come from?

Answer: nowhere. It appeared magically out of thin air when it was needed. Literally. With no exaggeration.

Basically the BoE makes up some electronic cash and hands it to banks cash in return for worthless paper 'assets.' Then the banks invest the cash in more worthless paper, and make profits from it.

They're supposed to lend it, but inexplicably there doesn't seem to be any serious accounting or oversight of where the money goes after the banks trouser it. (Funny that.)

Krugman has already proved that debt-to-GDP has fuck all to do with prosperity. See e.g. this graph.

So what's the point of austerity?

Well... Given that economics is basically politics by other means, and given that the elite 0.1% have been making ever-increasing shedloads of cash during the Osbomeron Depression, it should be obvious what's really going on, and that it has nothing to do with fiscal responsibility.

Basically if you're not in the 0.1% you're getting screwed by a steaming pile of smug double-chinned Bullingdon bullshit - which was the plan all along, and which, as plans go, is succeeding admirably.

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Re: Who'd have thunk it?

Tony S,

You don't necessarily need to pay off the national debt. Having some is even useful, as long as the interest payments aren't too high, it allows people to be able to buy safe bonds, with predictable (if low) returns. Although at the moment they're not looking quite so safe.

If you can balance the budget, and grow the economy - then the level of debt becomes less-and-less important, as the economy gets bigger. If GDP grows by 2%, and inflation is also 2%, then your economy has got 4% bigger and your national debt has stayed the same. It doesn't take many years of that for the national debt to become less of an issue. You can even pay some off if you're feeling rich.

Italy's problem is that it's been holding national debt above 100% of GDP for years. But now the population is stagnant (it may be dropping now), and joining the Euro buggered up their economy. So there were doubts about their debt when they were only growing slowly, the damage in the recession means their economy is the same size as it was in 1998, but with an extra 15 years of debt (although inflation makes that slightly less bad). Which is why they're going to either need to leave the Euro, massively restructure their economy, accept a million immigrants or default. Or some combination of those. Plus inflation, but being in the Euro they don't get to make that call.

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Re: Who'd have thunk it?

Except the 'you need people to lend to you' line is bollocks.

The BoE have spent nearly £400 billion - look it up - on QE. Where did that money come from?

Answer: nowhere. It appeared magically out of thin air when it was needed. Literally. With no exaggeration.

Basically the BoE makes up some electronic cash and hands it to banks cash in return for worthless paper 'assets.' Then the banks invest the cash in more worthless paper, and make profits from it.

And then you've got all the other usual boring 1% stuff...

TheOtherHobbes,

You don't really quite QE. Mostly it's been used to buy government gilts, so the banks aren't making money with that lot - although the other lot has probably lead to some of the spike in the stock market. Supposedly the government will pay this money back, or it'll be sold to the markets at a time when we're not in such a financial mess that this is possible. However doing this has its costs. QE has been one of the major causes of the currency devaluation, which means the pound in your pocket is worth less. However it's allowed us to cushion the financial shock - which otherwise would have lead to chaos. At some point, I'd imagine some of this debt will be sold, and some cancelled. But you can't keep on magicking the money up, eventually you have to stop, or get dangerous levels of inflation.

The point of austerity is that we currently spend more than we tax. To the tune of well north of £100 billion. Some of that is good deficit spending. Money on unemployment benefit, redundancy pay-outs, special help for times of recession helps to make recessions less painful. This is sometimes called the automatic stabilisers, and is temporary. When the recession goes away and unemployment drops, this kind of spending also drops.

Sadly we also have a very large structural deficit. That's the damage to our tax base from not getting quite so much cash from the financial services industry - basically because a lot of that boom profit wasn't really real. It would be interesting to see our real economic output for that time, with the bizarre not-real-profits that caused the crash taken out (but probably impossible to work out). Anyway there's that, plus the £30-odd billion of unfunded spending that Gordon and Tony bequeathed us. That's government spending they gave us, but were too dishonest to raise the taxes for.

You simply can't spend £60 billion a year more than you tax for eternity. You can't keep printing money to save the day, QE is an emergency measure only. Otherwise it's hyper-inflation-a-gogo.

Finally, your little graph from Paul Krugman is interesting. And rather dishonest. Don't know how good an economist he is, I've only studied it for a few years, but I have noticed him being very flexible with the facts in his public pronouncements, so Nobel prize or not, I've little faith in the man. He talks about how low UK debt was by historical standards - and yet even if George Osborne's plans had worked perfectly debt to GDP would be expected to go well over 100% by 2015. So just by filling in the projections on that graph things would have looked a lot less like a little bump at the end.

Finally, look at the 1930s depression. That gave us a spike in debt to GDP of only 25%, and it was paid off / grown off again in 5 years! So the debt to GDP rise in the great depression was less than the 'little insignificant' one on the right of the graph he was talking about, even not including for the trajectory meaning that it would be doubling again. The huge spikes on that graph were caused by Britain paying for 2 world wars (3 if you count the Napoleonic). So his graph shows us that debt was rising at the same rate as World War I or II, but that was no reason to be worried. What a genius! Or possibly not...

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Re: Who'd have thunk it?

@ Spartacus / Tony / Hobbes - interesting follow-ups all round

What really got us (us being most citizens in developed world) into the mess is allowing politicians to dupe us with promises of giving us more free stuff and taxing us less. Of course, I don't think that citizens need a pHD in economics to be able to vote, so there needs to be more structural impediments to politicians' castles in the sky.

For example, much as I dislike how the Republicans in the US have hijacked recent votes on increasing the US public debt, at least they have a mechanism by which increasing of debt is discussed publicly and voted upon. The EU had a 3% deficit limit that was supposed to be fixed, but crumbled completely as soon as France and Germany went over it. There needs to be some sort of constitutional override that does not allow structural deficits beyond a certain limit, and going over in an emergency needs to be approved by 2/3 majority and re-approved every year.

If politicians can't come to an agreement about it, I propose the method supposedly used with medieval cardinals who were having a hard time electing a pope: Lock them up with only bread and water for sustenance until they reach a solution, and if they're in there a few months without an answer, take off the roof!

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