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 …
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.
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).
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.
"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.
@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!
"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.
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.
"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.
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!
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.
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...
@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!!
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?
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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"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.
"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.
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.
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.
-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
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.
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!
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!
> 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
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?
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)
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...
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.
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...
@ 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!
It's a bit too easy to blame the politicians though. If you keep voting for more spending than taxes, you can't complain when you run out of money.
There's an argument for forcing balanced budgets, but then you can end up with deadlock, like this year in the US, and sudden massive cuts in spending, or rises in taxes. The Fiscal Cliff + the new Eurozone crisis might be enough to plunge the world back into recession this year.
The difference between us and Greece is that the government there hid its deficit spending last decade. Very few people seem to have noticed, partly because they don't have the financial analysts and think tanks we do in London. There are a lot more people involved in politics here. So the electorate knew we were over-spending, but apparently approved. Perhaps we'll learn a lesson from that, and maybe not vote for people who can't count in future...
I worry about changing the law to stop democracy from working. Unless we have to conclude that democracy can't be made to work. I'm not that pessimistic.
The whole purpose of QE is to devalue the pound and hence deflate the debt; a side benefit is that purchasing government bonds through the usual channels provides a nice little earner to those hard up City folk. In theory the money created for QE is temporary in that the bonds are fixed term and when sold the proceeds disappear back whence they came. In the meantime they even earn interest (from the government...).
There are, however, a couple of minor disadvantages:
- other countries are doing the same (hello USA), so the debt deflation is limited;
- recent bond prices have been relatively high (varies inversely with interest rate), so its likely the sale income wont cover the purchase costs, even allowing for the interest received;
- devaluing the pound increases the cost of imports such as fuel, explaining why we have significant inflation with a stagnant economy.
The fascinating thing about this and the previous government, and the BoE, is that they keep pushing interest rates lower and lower and the economy doesn't respond, so they do it some more. I think there must be some economic theory that says savers will spend more as the rates fall - despite the actual behaviour which is that fear takes over and nobody spends on anything other than paying down their debts (which is fine in principle, but an economic killer if it cuts too far into spending). Some are now talking seriously about moving to negative interest rates (Cyprus-lite?), which would be a clear sign of a broken financial system.
>>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.
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.
>>If GDP grows by 2%, and inflation is also 2% then your economy has got 4% bigger<<
That is exactly the kind of thinking that has got us into the state that we are in - and it's nonsense. On that basis, the Weimar Republic had an economic growth in excess of 1 million percent.
>>and your national debt has stayed the same<<
As for the national debt remaining the same, it is currently increasing at around £500 million per day and that figure will continue to increase in size. The only way that this will change is if we stop running a budget deficit; and there is no sign of that happening any time soon.
True, some debt can be of value; but only if you have a record of paying it off (which currently we do). However, as soon as it looks likely that you will default, the lines of credit will vanish and the government of the day (whoever they are) will have to be prepared to pay much higher rates of interest in order to borrow the money.
>>If GDP grows by 2%, and inflation is also 2% then your economy has got 4% bigger<<That is exactly the kind of thinking that has got us into the state that we are in - and it's nonsense. On that basis, the Weimar Republic had an economic growth in excess of 1 million percent.
Tony S,
Sorry, I didn't put that very clearly. What I was trying to say is that government debt has a fixed face value. A combination of economic growth and inflation increases the nominal size of the economy, whereas debt stays the same size. Inflation of around 2% is perfectly healthy - having inflation lower than that can actually be risky.
Obviously this is why there is interest on government (and all) debt, in order to cover the loss due to inflation, as well as make a profit. Deflation turns debt into a crippling burden, see Greece (and to some extent Japan) for details. If the nominal size of your economy falls, your debt burden becomes an increasing percentage of this, which is why the Eurozone are completely insane in the way they've destroyed the Greek economy, and are now moving on to do the same to Spain, Italy, Portugal and Cyprus. With control of the currency, the UK government is able to make some cuts, while making sure we don't tip into deflation, and as long as nominal GDP doesn't fall the current stock of debt remains manageable. At least so long as we can slowly halt the growth of our debt, due to current deficits.
It's a careful juggling act, between reality, confidence, psychology, politics and economics. It's all fun, until someone loses an eye...
Not a bad budget, really. Good part of it benefits me personally.
Just waiting for all the closet economic experts to get bored in their IT jobs and start spouting on here about nuances of economic theory nobody in the real world of finance bothers with. I would get some popcorn but I'm worried that the government may introduce a tax on it.
Beer, because at 1p off, why not?
-Impaired behavior and judgment
-Memory loss
-Lack of concentration and coordination
-Impaired vision and hearing
-Slower motor skills and reactions
-Mood swings
-Slurred speech
-Jaundice
-Liver cirrhosis
-Alcoholic hepatitis
-Alcoholic fatty liver
-Liver cancer
-Vomiting
-Resonance Cascade
-Peptic ulcers
-Throat cancer
-Stomach cancer
-Gastritis
-Hemorrhaging
-Colon cancer
-Infertility
-Impotency
-Breast cancer
-Sterility (in men)
-Atrophy of testes (in men)
and you would never ever, cross my heart, would do what they've been trying to do in Cyprus, i.e. rob people of their savings, right?
I mean, our (our?) banks do not deal with terrorists, don't launder accounts held by those nasty terrorists states, likewise they would NEVER touch deposits offered by those states with less than AAA rating in human rights, would they? And they would never, ever willingly handle accounts of them nasty Russian mafia people, right? Our banks would only deal with clean, honest to God Russian billionaires, isn't it right, George?
So promise me, George, you would not, one fine day, possibly on Saturday morning, announce that from now on, all bank accounts (minus those which have mysteriously cleared in the last 24 hours) are subject to a one-off x% tax, because the country is in deep shit, we're all in it, innit, so pay up folks, cause, like, someone's gotta, right?
(...)
Thank you George, thank you, I have full faith in your reassurances that such things would never happen here.
Piro,
What high inflation!?!?!
CPI is under 3%, RPI just over. That's not even close to being high! What are you talking about! It's over target, but it's not ridiculous, nor high, and certainly not hyper. It doesn't even appear to be out-of-control.
Just because people keep talking about high inflation, doesn't mean we actually have it.
"CPI is under 3%, RPI just over"
I guess it's relative. 3% inflation isn't high in absolute terms, but before 2007 I could get paid 2.75% (perhaps even 3 and over at some point) interest on my savings account which meant at least it stayed marginally ahead of inflation, or just about on par. So if I put £100 in the bank today, what I can buy with that money in real terms atays constant.
Now I'm paid eff all interest on savings, 3% inflation is effectively taking money out of my savings because as time goes buy, I can buy less and less with the same money. Of course, that's exactly the point of low interest rates - getting people to spend more money now because it will be worth less later.
But people still aren't spending because hey, there's only so much consumerist BS you can get people to spend and maybe they've realised that it' sbetter to have £90 to spend on food next year than £100 spent today on cheap tat they don't need and likelier than not will get chucked at next spring-clean.
James Micallef,
Inflation is not high, by any historical measure. You don't get owt for nowt. There is a risk to any investment. If you want to make a profit from your money you have to risk it. The higher the risk, the higher the return - so long as it doesn't go wrong of course. At the moment the banks are being massively risk averse with their deposits, which is what people (and the government) want.
Of course, we have negative real interest rates. Because everyone wants their money safe, and that's one of the reasons for the economy stagnating. The alternative would be worse - and still wouldn't lead to savings making a safe profit.
People remember the good old days 20-30 years ago, when you could regularly get 6-10% on savings accounts. But at the time, that was still close to (or sometimes less than) the level of inflation. Ordinary, safe savings will just about protect your capital, rarely much more. And this is because the banks have to make a profit, and mortgage rates are low.
There never is a guaranteed protection from inflation. To do it, you have to use your money in some way, and thus accept risk. This is what the Bitcoin loonies talk about. How their lovely coins appreciate in value, rather than suffering the evils of inflation. And what happens? People hoard them, in the hopes of making future profits, so they fail as a currency. Any economy run solely on Bitcoins would collapse.
Remember every saver needs a borrower. Neither is more virtuous than the other. If nobody will borrow, then no-one can save. If too many people save, and won't invest or spend, then the economy will collapse. This is one of the roots of the Eurozone crisis.
Easy way around that, just tax the banks a percentage of how much money they hold on behalf of their account holders, not the account holders themselves. If the banks lower interest rates to compensate that's their problem.
That's exactly what Spain has done today by the way. Nice timing
Lots and lots of job promoting tax cuts, raise in personal tax allowance to £10k is impressive - a rise of almost a third since the coalition came to power - and I very much like the mortgage assistance and new home building changes, which should encourage more buyers, and contribute to growth.
Things like how the Employers NI contributions changed are also very clever - they disproportionally favour smaller firms, so it is less likely that it just gets pocketed by big companies.
Slight cut to corp tax to promote job growth in larger companies too. Just need to spend slightly less and have the economy grow a bit and we're golden.
We have to recognise that our growth will rely a lot on the EU. Whilst they are stagnating, it is a lot trickier to grow.
"and I very much like the mortgage assistance and new home building changes, which should encourage more buyers, and contribute to growth"
I don't. Too late and wrong. Much of our trouble (and piss poor housing stock and following low quality of life) is due to decades of ridiculous and unsustainable property price inflation. Inflation fuelled by reckless lending and supply being strangled by planning regulation.
The housing market (including all the 'economy' associated with it) is comatose and will remain so until prices have bottomed out and bear some resemblance to what it would cost to build. That won't happen till general inflation catches up with property inflation and measures to help buy new builds are just delaying it.
What he could have done (and should have years ago) is rip planning regulation to shreds providing lots of cheap land for large and efficient builds (instead of having to build shitty expensive hovels 2 or 3 at a time in tiny brown field sites). That would have bottomed out the property market quickly reviving the associated 'economy' and providing much needed housing. Best part is it costs nothing apart from whines from NIMBYS and those pushed into negative equity now (which is no worse than waiting for inflation to catch up).
My mother still gets tempted by offers of lots of money for half her back garden because it would likely get planning permission for a house (or god forbid block of flats) build. Her garden backs onto empty fields for almost as far as the eye can see. Half her back garden is apparently worth 200k while the same area the other side of her fence isn't worth 100 quid - so stupid you couldn't make it up.
I was going to upvote until I saw you recommended ripping planning to shreds. Certainly there probably needs to be a lot of reform, granted some greenfields are not necessary or should be reviewd, but unsuitable builds can't be allowed (unless the developer will foot the bill for the extra services needed - water, roads, electricity, sewage, schools, etc). Plus, building controls should probably go up to ensure high standards and to safeguard purchasers/builders' customers.
Cost to build needs to be reduced. Architects, builders, builders' merchants, insurance companies (and even building control) all need to improve the efficiency of UK house building. Houses take far too long to build in the UK, are far too inefficient and sometimes the insurers will run scared of perfectly good houses that are of 'non-standard' construction. Yes, some of it is the market. Some people want their brick semi a certain way because that's what's familiar, but if the price was half and the heating bill was a quarter, fashions would soon change.
Conservative policy was to relax the planning laws, it even went into the coalition agreement. But NIMBYs have votes too, and many of the Tory right (Telegraph, Mail, Conservative Home) are as NIMBY as anyone. If you read the Torygraph it's enough to make you despair. They supposedly believe in free markets, but constantly want the government to stimulate the economy, protect the greenbelt and restrict building plus prop up house prices.
Remember though, the Lib Dems are in the coalition, so it's going to be hard to get both lots to agree on planning reform. Also we don't actually want an immediate 50% drop in house prices, as that would massively weaken the banks, and screw the economy even more. What we need is house prices to rise less than inflation for the next few decades.
Also, more jobs Ooop North. If we can get people to move/stay up there, it would take the pressure off
the over-crowded South East, and stop the bonkers price rises.
Finally, I'm also worried about the government mortgage schemes. Several of the places I looked at (including the one I bought, and one of the ones that fell through) were on these part-buy-part rent schemes. When prices fall, they're a negotiation nightmare. The ones who sold me mine, made a huge loss, and yet had to keep up mortgage repayments for an extra year - because the government side wouldn't accept that the place was now worth 30% less. They only took my offer after a whole year after rejecting the same from someone else. That's a nice £5-£10k of wasted mortgage payments thanks...
Plus, in the case of the 2 I looked at, they'd been built at the height of the madness. 2006/7. Both were waaay over-priced. But because everything else was expensive, and you could only get this finance on new builds, the house builders could jack their prices up stupidly - leaving all those poor sods in negative equity, when they were often the poorest to start with - and so were already close to 100% mortgages. Buying a new build seems to be like buying a new car. As soon as you take the keys, the value drops by 10%. At least the new schemes are no longer restricted to new builds.
What he could have done (and should have years ago) is rip planning regulation to shreds providing lots of cheap land for large and efficient builds (instead of having to build shitty expensive hovels 2 or 3 at a time in tiny brown field sites). That would have bottomed out the property market quickly
I agree with a lot of what you said about the "too late and too wrong". Every budget has something to try and assist the first time buyer, rarely do they work. I'm hopeful this time, because I want to be a first time buyer some time soon - drives me crazy paying more in rent than I would on a mortgage, just because I can't get the mortgage in the first place.
'Solving' the housing crisis is extremely hard. If you make building new houses much cheaper, by ripping up planning as you suggest, then the value of houses would drop massively. This would push a huge section of homeowners into negative equity, and would probably worsen the recession.
The other aspect is that building houses needs to be profitable for the house builders in order for more houses to be built. If you suddenly slash the value of land, any property developer sitting on land takes a huge haircut, and now can't afford to build houses.
What I would like to see is more house building ordered by councils, in conjunction with house builders. They should be allowed to acquire land and bypass some planning regs in order to build more affordable housing that is available to rent for social tenants. They should use the housing as an incentive for the social tenants to keep in work, being good citizens etc, by offsetting rent paid against purchasing the house, eventually leading to home ownership.
This would hopefully not overly affect house prices, but then I'm neither an economist nor a politician, so wtf do I know :)
"If you make building new houses much cheaper, by ripping up planning as you suggest, then the value of houses would drop massively. This would push a huge section of homeowners into negative equity, and would probably worsen the recession."
The houses don't and never had that 'value' in the first place, why do you think mortgage lenders need 20% deposits? Because the few dumb or desperate people buying now are paying 20% more than they are worth. You can pretend you don't have negative equity by pretending your house is worth more than anyone will pay and wait a couple of decades for general inflation to catch up but that leaves all the 'economy' associated with building, moving, furnishing etc comatose. We are in the shit and need to dig ourselves out not wait for it to stop smelling so bad.
Something is only worth what someone will pay for it. People are paying for houses currently - the market still exists - ergo houses are worth that currently.
I understand your argument, that house prices are artificially high due to constraint on supply. However, a constraint on supply is still a constraint on supply. If someone cut down 90% the lemon trees in the world, that would be an artificial constraint on supply, but the value of a lemon would still rise.
Your plan to destroy planning constraints would move people out of your supposed 'pretend negative equity' and into real negative equity, and that would not stimulate the housing market, it would destroy it. 90% of home-owners would never be able to move house.
"Something is only worth what someone will pay for it".
Something is worth what it costs to make. If someone cut down lemon trees someone else would plant them and make money from it.
" 'pretend negative equity' and into real negative equity, and that would not stimulate the housing market, it would destroy it. 90% of home-owners would never be able to move house."
I would love it if my house was worth 10 quid because I would go out tomorrow and buy a much nicer one for 20 quid. The idea that there is anything good about high or rising house prices is ridiculous. The only people to benefit are speculators, developers, and those moving down market all at the expense of the majority who are trying to get on or move up the ladder ^H^H^H^H^H^H treadmill.
Something is worth what it costs to make.
JP19,
Go and study some economics old chap. By that logic nothing would get made - with no profit why would anyone work except to grow their own food?
Price is there in order to manage scarcity. There will always be scarcity. In our lemons example, the price would remain high, until more lemon trees were planted, and then had grown to maturity, to start producing more lemons. Then the price would drop again. In the intervening period, lemon growers would make big profits and people would use fewer lemons, and pay more for them.
If lemons were free everyone would want loads of them. Even if they ended up throwing most away. But it wouldn't be worth the cost of picking them.
If they only cost exactly the costs of production plus transport, then no-one would ever plant any more orchards. It wouldn't be worth the effort, as the money put into it, would never be repaid. So as the lemon trees dies off, supply would drop, price would rise, and lemons would become scarce.
In the same example, there'd never be an iPhone. Why spend a few billion on research, and setting up production lines for no profit?
Relaxing planning laws could lead to a nasty ending. If we sold our fields (small family farm) we could make a tidy sum and be happy for quite a few generations. However, you'd be importing one farms worth of food more. Decent quality food, no horse c*ck burgers laced with bute, but lamb that ends up in the loca butchers with a little sign telling you which farm it came from. Now multiply that by a lot of farms and all of a sudden you have no food security. We talk about energy security and how it's important not to be totally reliant on foreign countries for our energy supplies (I know we would be in trouble if the oil stopped, but we could ration a decent amount of what we do have and maybe get by). What happens when you have virtually no farms left? At best you get screwed on price and quality.
Sure some relaxing of rules on a case by case basis could be ok, but please do consider the other side of what that would mean. We still do have a decent farming industry even with its ups and downs and to me it makes a lot of sense to know where your food is coming from. Recent times have shown what happens when you aren't careful!
"Osborne blamed the Eurozone crisis and the previous Labour government for much of the economy's woes." Of course he did!
I do think were stuck in this loop till Europe gets its self sorted. Spending within the UK will only partially help the economy, we need to make and sell. If our biggest market can't buy, we can't sell.
"We've got to go on making difficult decisions so that Britain can live within its means"
Very soon, "living within its means" will mean "living without electricity". That's gonna help your fucking economy lots and lots - pretty soon you won't have to worry about your economy because you won't even have an economy to worry about in the first place. And remember: your perishable food will last longer if you don't open the refrigerator during blackout hours when they use those smart meters to cut your power for 10 hours every day.
But good to see that broadband is going well, Google must be pleased. Which is good because the government was probably following Google's orders. On the other hand, maybe someone should tell Google that no matter how fast the internet is, they can't serve ads to people who can't connect to the internet in the first place because there's no electricity for most of the day. Maybe if Google finds this out, they'll order your government to do something about getting you dumb sods cheap power with 24/7 availability. And you better hope they do because if they don't then that kind of electrical service is going to nothing but a bittersweet memory.
And then Soviet England will take its place, proudly, among the other Third World nations.
so the eurozone is still in long term decline and our economy isn't declining at the same rate - wow. The only issue here appears to be that Ed Millpede reckons George O should have seen this coming despite leading economists, himself and Ed Ballsup not predicting it at the time either.
Overall this seems a pretty good budget given what's possible against a backdrop of £2Trillion of debt / unfunded public sector pensions, shrinking economies in our key trading partners and a public who still believe that a couple of millionaires paying more will offset the fact that more than 2/3 of the population are now net recipients from the government when taking into account the tax they pay and the tax credits / benefits they receive.
corporation tax/NI is changed so smbs can make more money.
In my experience my boss will gladly trouser the extra cash and not hire anyone or give them a payrise.
Mind you my boss paid me ssp only during a recent illness after working for him for 10 yrs +, and even his tight arse rivals said "what a f***ing cheapskate"
This budget is more about mid term bollocks to the lot of you from the government, and just enough to keep you from invading parliment and stringing the lot of them up from the nearest lamp post.
Next year it will be loverly with lots of giveaways in the vain hope that someone might vote for them.......... before stringing them up from the nearest lamp post
He was British, wasn't he? And he had a lot of very good ideas about how to recover a tanked economy.
Do the opposite of what Keynes advised, and find yourself in the predicament you're in today. Find your way out of a deep economic crash by slashing spending and investments to the bone? How does that work, exactly?
But no, no signs whatsoever of backtracking on this Recovery Through Austerity insanity. It's not working, they've been warned it was not going to work, but they keep at it.
"We've destroyed the British economy in order to save it. The only way from where we are right now is up".
Er, the government is cutting spending by 1% of GDP a year. Or trying to. That's not slashing. It's nothing close to the madness the Eurozone are pursuing, even though we've now got a worse budget deficit than Greece!
Learn some economics. Keynes (who was a genius) said you had to pay down debt in the boom, in order to keep the economy more stable, and to build up a reserve to deficit spend in the recession. The ones who forgot Keynes were Labour. Now they talk as if he was a genius, when it's easy. When he was in government they ignored him.
There might have been a collapse in confidence in the UK economy if there had not been any cuts. There's no way of knowing. The result of having little growth, but no drop either is not that bad, considering the alternative. Look at the Eurozone for what can go wrong, and just how fast and badly.
Could the government have done better. Always. By the way it was Labour who cut the capital spending, Osborne confirmed the decision already taken by Darling. That looks to have been an error both parties made.
In an ideal world you'd design and set up a bunch of big capital spending projects, and only do them when a recession hits. That way the government could get them cheap, and boost the economy at crucial times Hard to organise though.
Austerity Britain? We're just playing at austerity. Just across the Irish Sea, they're doing if for real (and giving us cheap burgers because the horses bought during the boom were too expensive to stable!). It's so bad in Ireland, the unions there are saying the British weren't as bad as the EU (I'm pro-British in Northern Ireland, but I can't excuse some of the nasty stuff that was done to the Irish over hundreds of years).
@AC
The Keynsian response is to do something, even if it is to pay people to bury money, because they earn, they spend (UK GOv gets the VAT on spending). They buy materials from someone, who now has money, which they spend. It creates employment, the Government taxes the employment... and gets a nice new bit of infrastructure.
It worked in the '30s. The US is the easiest to think about - road building and the Hoover Dam.
Now it's a bit different. We would buy all the steel (or whatever) from China, so no cash in our economy. We'd get cheap labour from other EU countries to turn up and do the work, who would send the funds back home. No cash in our economy. Then we'd get Capita to run the IT (into the ground) and just pay cash to shareholders, most of whom already have the cash to spend. All of the contractors would be based in Lichtenstein and pay next to no tax.
Spend to grow isn't as simple as it used to be.
while all those feckers are busy bouncing their money between the various companies in other countries within their group to reduce taxable income is a bit of a joke really.
I would like to see a flat rate corporation tax introduced of 25%... if a company makes 1 pound, it owes 25p to the government. If it tries to move the money to another country to reduce their tax liabilities, tax them 30% on the money being transferred out of the country.
I can pretty much guarantee that they will stop avoiding their tax bills at that point.
And dropping 1p off the duty on beer... bit of a joke really... in cold weather, you can usually get a couple of good p's out of a pint... especially after 10 or 12 of them.
A good idea, but it's not that simple. Skipping over such difficult matters as defining how a company "makes £1"...
Gordon Brown had a go at this by making transfer prices (the mechanism to get profit out of the country) to be essentially illegal if they were not at "arm's length" - as in the same prices as would be charged between two separate entities, or a commercial rate. Sounds sensible. Only companies make out there is no market price to compare with. How so? I'll explain. What's the going price for the left wing of a say a Eurofighter? There is no market for one, unless you make the rest of the aircraft (and then paint it white and put the tusks on it). Usually the "rest of aircraft maker" is the same company as the "left bit" maker, so it's a unique purchaser who can set whatever price it needs to. Nobody can argue with that price - there is no market for comparison.
Starbucks do this using "royalty payments" for the use of the brand. There's no market for that, so it's difficult to set an arm's length price. At that point you haggle with HMRC. Step forward Dave Hartnett to make a cushy deal.
Forcing companies to do things they don't want to can cause them to leave. I'd not be heartbroken for a minute if Starbucks packed up and left, (someone else would fill the void I am sure) but if enough employers do it we'd be in a right old pickle.
Also, we have these pesky little double taxation treaties with other countries that would prohibit that sort of behaviour.
What can be done? Well, I don't really know. Setting a global standard Corporation Tax rate would nail it - there's no point if in every jurisdiction you pay the same. But there is no chance on earth anyone would agree to that.
If you google "Laffer Curve" you'll learn about optimal tax rates. At 0% tax you get £0 in tax. At 100% tax you get £0 in tax too - because nobody will set up a business in your country to work for no return. Somewhere in the middle is a maximum point, where you collect overall the most tax. It's not so high that it's worthwhile paying someone to work out how to reduce your tax bill, but not so low as to make it not worthwhile for a Government to collect the tax. Problem is, nobody knows what the point is, and it probably varies from person to person.
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