Autumn Statement

[ADK]

But yet we're paying £53 billion in debt interest a year

 

It seems like a lot but I still believe we need to borrow in order to stimulate demand. I don't think austerity measures will help. The only way to solve the deficit problem is to get the economy back on track, bringing debt down is something to be achieved in 10-20 years.

[Strokes]

All this rubbish about the deficit is a red herring, the government can borrow at very low interest rates.

Eh, we are spending more than we are earning, year on year and it doesn't matter because its comparatively cheap? So at what point does the insolvent practice become a problem for you?

[ADK]

Eh, we are spending more than we are earning, year on year and it doesn't matter because its comparatively cheap? So at what point does the insolvent practice become a problem for you?

 

It is a problem in so far as we are borrowing more than we should be given the comparative state of the economy, but it's something that has to be solved gradually and in the context of other issues that we face. If anything we need to raise taxes slightly. If the economy is really growing faster than the rest of Europe then we ought to slow it slightly in order to balance the books.

[Guest ttfn]

Keynesian economics and the idea of the government stimulating demand may have worked at times in the past when economies were more closed than they are now but with economies being so open and integrated these days, it would simply be irresponsible. I'd like to know what you feel they should have increased spending on?

The government has been unfortunate with how useless the eurozone recovery has been, which led to slower growth to begin with. They wouldn't have balanced the books by the end of this parliament anyway but they would have been much closer had other places come close to matching our growth. People should also be careful when boasting about how well we are doing, the recovery is too fragile and too reliant on spending by consumers here. Consumer confidence is brittle and is starting to fall again so it's far from rosy. Plus I remember hearing that only Spain has a bigger defecit as a % of GDP than us which suggests the government is still supporting the economy too much

Oi Oxford fvck off with your fancy words, logic and examples.

Good luck with your interview if you haven't had it yet. They're normally about now aren't they?

[Guest Kopfkino]

Oi Oxford fvck off with your fancy words, logic and examples.

Good luck with your interview if you haven't had it yet. They're normally about now aren't they?

Well actually as it happens I have to get there by tonight and my interviews on then Monday and Tuesday and possibly Wednesday. Just looking forward to the experience evn if I get rejected

[Alf Bentley]

And this is what it is spent on:

http://www.mirror.co.uk/news/uk-news/worlds-fattest-man-keith-martin-4751943#rlabs=2 

 

I presume that you are a time-waster as your post above this one shows what the "handouts" are mainly spent on, as do my previous posts - pensions, social services for children, support for the disabled, unemployed etc. Sure, there is always a minority of piss-takers who need to be weeded out, but it is a minority - and if it really is a massive problem (I don't believe it is), then the Tories should answer for that, as they've been in power for nearly 5 years. 

 

 

Keynesian economics and the idea of the government stimulating demand may have worked at times in the past when economies were more closed than they are now but with economies being so open and integrated these days, it would simply be irresponsible. I'd like to know what you feel they should have increased spending on?

 

The government has been unfortunate with how useless the eurozone recovery has been, which led to slower growth to begin with. They wouldn't have balanced the books by the end of this parliament anyway but they would have been much closer had other places come close to matching our growth. People should also be careful when boasting about how well we are doing, the recovery is too fragile and too reliant on spending by consumers here. Consumer confidence is brittle and is starting to fall again so it's far from rosy. Plus I remember hearing that only Spain has a bigger defecit as a % of GDP than us which suggests the government is still supporting the economy too much

 

If Keynesian economics is now an irresponsible policy of the past, nobody told the USA :xmaslaugh: :

http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment_Act_of_2009

The American Recovery and Reinvestment Act of 2009 (ARRA), commonly referred to as the Stimulus or The Recovery Act, was an economic stimulus package enacted by the 111th United States Congress in February 2009 and signed into law by President Barack Obama.To respond to the Great Recession, the primary objective for ARRA was to save and create jobs almost immediately. Secondary objectives were to provide temporary relief programs for those most impacted by the recession and invest in infrastructure, education, health, and renewable energy. The rationale for ARRA was from Keynesian macroeconomic theory, which argues that, during recessions, the government should offset the decrease in private spending with an increase in public spending in order to save jobs and stop further economic deterioration.

It's interesting that supporters of Tory economic policy (a strange mix of pre-1930s balanced budget obsessions and a belief in the God-like powers of unregulated free markets - weird, after 2008!) don't just contest alternative theories, they try to deny their right to exist. I don't deny the right of Thatcherite economics to exist, I just disagree with it: cutting spending during a recession slows growth and causes hardship and social squalor. I'm mystified at how a short-term rise in the growth figures can be deemed an economic success story, when most people's living standards have been falling for 6 years. Who's benefiting from that recent improvement in growth, cos it sure as hell isn't most people?!

 

You're taking a very short-term view of growth, too. Growth in the UK has been better than in the EU and US for 1-2 years; before that, it was lower than both. 

http://www.economicshelp.org/blog/5843/economics/economic-growth-stats-2/(scroll down to bottom graph; source: IMF/OECD)

Let's see how good that growth remains if the Tories get re-elected and introduce cuts at 1.5 times the rate they've done in the last 5 years. Slash-and-burn on public spending means less money in household budgets - and lost revenue for private firms working on public sector contracts. How is that going to be offset? Who's going to suddenly be buying lots more goods and services to compensate for that? While welcome, the improved growth so far has been of low quality as it hasn't generated an improvement in tax revenues, hence the deficit remaining high.

 

Here's an interesting little discussion about Keynesianism and free-marketeers from The Economist

http://www.economist.com/blogs/freeexchange/2012/08/keynes-and-hayek

 

It's true that ideas such as "socialism in one country" are impossible now, due to the openness of international markets. That could generate all sorts of risks: e.g economic instability, capital flight, uncompetitive exports, trade imbalance, currency devaluation. But the idea that this prevents any demand stimulus is nonsense: Obama's Keynesian stimulus and the fact that US growth has outperformed UK growth for most of the past 5 years is proof of that. Germany and the Nordic countries also successfully operate policies at least partly at odds with the Thatcherite ideology that "there is no alternative" to slash-and-burn, unregulated free markets, the so-called trickle-down effect, massive inequality and social squalor. Of course, it's possible to have high public spending that doesn't work (France) or to run a deficit at the wrong time (UK Labour 2001-07), but a recession or time when households & private sector aren't spending is a good time for more public spending....then cut the deficit more when the economy improves again.

 

Plus, there's the small matter that, while the UK economy has become more international, a very large part of it still exists mainly within the domestic arena (e.g. much of construction, small business, personal services) and is not in cut-throat competition with foreign firms.

 

What should the Tories have increased spending on?

I'm no economic expert, but here are a few ideas:

- A programme to stimulate house-building (as opposed to mortgage lending)

- Bring forward planned infrastructure projects

- Increase spending on scientific research

- Spend more on proper apprenticeships

- Provide advice, research grants or start-up loans for firms in the industries of the future (e.g. renewable energy, biotech)

- Spend more to help small business, including small firms supplying big firms (e.g. car parts suppliers)

- Provide more facilities/advice for young musical artistes, film makers etc (music & culture is a money-spinner for the UK)

Some of these (e.g. construction) would be labour-intensive, reducing unemployment and boosting demand & tax revenues immediately; others would yield longer-term benefits by producing a more skilled, better prepared workforce or by creating patent/copyright revenues in the future, so the economy would perform better down the line...and small businesses are a lot more likely to pay their tax than global megacorporations! 

[Alf Bentley]

p.s. What was "Help to Buy" but a Keynesian demand stimulus?  :xmaslaugh:

 

Not sure I'd have chosen housing finance for a stimulus, after the role of sub-prime mortgage lending in the 2008 crash, but I'm sure that genius Mr. Osborne knows better....   

[Webbo]

p.s. What was "Help to Buy" but a Keynesian demand stimulus?  :xmaslaugh:

 

Not sure I'd have chosen housing finance for a stimulus, after the role of sub-prime mortgage lending in the 2008 crash, but I'm sure that genius Mr. Osborne knows better....   

It was helping young people of modest means to get on the housing ladder. The Tories aiding aspiration as always.

[Sir Fynwy]

It was helping young people of modest means to get on the housing ladder. The Tories aiding aspiration as always.

Tax the pips out of buy to let landlords and they will release low end properties for first time buyers [emoji6]

[Webbo]

Tax the pips out of buy to let landlords and they will release low end properties for first time buyers [emoji6]

People investing in property to keep themselves in their old age? You might be happy persecuting pensioners but I'm not. Perhaps I care too much.

[Sir Fynwy]

People investing in property to keep themselves in their old age? You might be happy persecuting pensioners but I'm not. Perhaps I care too much.

Buy a ****ing pension rather than pricing first time buyers out of the market.

[Guest MattP]

Buy a ****ing pension rather than pricing first time buyers out of the market.

Yes because buying a pension is safe isn't it? Wow.

[Alf Bentley]

Yes, indeed, and money paid into pensions can then be lent out for productive investment in small businesses.

 

So, some young person, maybe an aspiring painter and decorator, could borrow that money to establish a business, contributing to the national economy and the fulfilment of his/her aspirations....which would be all the more easily achieved, as Sir Fynwy, points out, with house prices being lower. It's a win-win-win scenario, Webbo!  

 

Same old Tories! Aiding the wealthy at the expense of the aspirational young, the modernisation of the economy and social mobility!  :xmaswink:

 

As for Matt.....pensions can be gamble, true....but are you seriously saying that there is no risk in investing in the housing market?!  :xmasohmy:

Mind you, I suppose you could gamble on a never-ending Tory government that will invest in nothing apart from speculation in the housing market...

[leicsmac]

I have little sympathy for those who use a fundamental human right as an investment and by so doing price others out - regardless of their age. 

 

Besides, there are far better options for investment than property, as long as you know what you are doing. Blue-chip stocks, some commodities...all show reasonable long term growth, even if they bounce a bit in the short term.

 

And besides, as Alf says, property is hardly a sure thing anyway - though lots of people who have invested in it are squawking right now to try and keep it so.

[Webbo]

Same old Labour attacking vulnerable pensioners.

[Alf Bentley]

Same old Labour attacking vulnerable pensioners.

 

I knew you were getting on, but didn't realise you were that old!

 

I'll get onto Jon Ashworth and ask him to campaign for more zimmer frames for decaying painters and decorators.....same old lefties, always caring for the vulnerable! 

[MooseBreath]

I presume that you are a time-waster as your post above this one shows what the "handouts" are mainly spent on, as do my previous posts - pensions, social services for children, support for the disabled, unemployed etc. Sure, there is always a minority of piss-takers who need to be weeded out, but it is a minority - and if it really is a massive problem (I don't believe it is), then the Tories should answer for that, as they've been in power for nearly 5 years.

If Keynesian economics is now an irresponsible policy of the past, nobody told the USA :xmaslaugh: :

http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment_Act_of_2009

The American Recovery and Reinvestment Act of 2009 (ARRA), commonly referred to as the Stimulus or The Recovery Act, was an economic stimulus package enacted by the 111th United States Congress in February 2009 and signed into law by President Barack Obama.To respond to the Great Recession, the primary objective for ARRA was to save and create jobs almost immediately. Secondary objectives were to provide temporary relief programs for those most impacted by the recession and invest in infrastructure, education, health, and renewable energy. The rationale for ARRA was from Keynesian macroeconomic theory, which argues that, during recessions, the government should offset the decrease in private spending with an increase in public spending in order to save jobs and stop further economic deterioration.

It's interesting that supporters of Tory economic policy (a strange mix of pre-1930s balanced budget obsessions and a belief in the God-like powers of unregulated free markets - weird, after 2008!) don't just contest alternative theories, they try to deny their right to exist. I don't deny the right of Thatcherite economics to exist, I just disagree with it: cutting spending during a recession slows growth and causes hardship and social squalor. I'm mystified at how a short-term rise in the growth figures can be deemed an economic success story, when most people's living standards have been falling for 6 years. Who's benefiting from that recent improvement in growth, cos it sure as hell isn't most people?!

You're taking a very short-term view of growth, too. Growth in the UK has been better than in the EU and US for 1-2 years; before that, it was lower than both.

http://www.economicshelp.org/blog/5843/economics/economic-growth-stats-2/(scroll down to bottom graph; source: IMF/OECD)

Let's see how good that growth remains if the Tories get re-elected and introduce cuts at 1.5 times the rate they've done in the last 5 years. Slash-and-burn on public spending means less money in household budgets - and lost revenue for private firms working on public sector contracts. How is that going to be offset? Who's going to suddenly be buying lots more goods and services to compensate for that? While welcome, the improved growth so far has been of low quality as it hasn't generated an improvement in tax revenues, hence the deficit remaining high.

Here's an interesting little discussion about Keynesianism and free-marketeers from The Economist

http://www.economist.com/blogs/freeexchange/2012/08/keynes-and-hayek

It's true that ideas such as "socialism in one country" are impossible now, due to the openness of international markets. That could generate all sorts of risks: e.g economic instability, capital flight, uncompetitive exports, trade imbalance, currency devaluation. But the idea that this prevents any demand stimulus is nonsense: Obama's Keynesian stimulus and the fact that US growth has outperformed UK growth for most of the past 5 years is proof of that. Germany and the Nordic countries also successfully operate policies at least partly at odds with the Thatcherite ideology that "there is no alternative" to slash-and-burn, unregulated free markets, the so-called trickle-down effect, massive inequality and social squalor. Of course, it's possible to have high public spending that doesn't work (France) or to run a deficit at the wrong time (UK Labour 2001-07), but a recession or time when households & private sector aren't spending is a good time for more public spending....then cut the deficit more when the economy improves again.

Plus, there's the small matter that, while the UK economy has become more international, a very large part of it still exists mainly within the domestic arena (e.g. much of construction, small business, personal services) and is not in cut-throat competition with foreign firms.

What should the Tories have increased spending on?

I'm no economic expert, but here are a few ideas:

- A programme to stimulate house-building (as opposed to mortgage lending)

- Bring forward planned infrastructure projects

- Increase spending on scientific research

- Spend more on proper apprenticeships

- Provide advice, research grants or start-up loans for firms in the industries of the future (e.g. renewable energy, biotech)

- Spend more to help small business, including small firms supplying big firms (e.g. car parts suppliers)

- Provide more facilities/advice for young musical artistes, film makers etc (music & culture is a money-spinner for the UK)

Some of these (e.g. construction) would be labour-intensive, reducing unemployment and boosting demand & tax revenues immediately; others would yield longer-term benefits by producing a more skilled, better prepared workforce or by creating patent/copyright revenues in the future, so the economy would perform better down the line...and small businesses are a lot more likely to pay their tax than global megacorporations!

Interesting that you'd bring the US into this argument, presumably implying that we would have been better off following their example? Obama is close to having doubled US national debt, he's increased it by $7trillion and counting. By the end of next year their debt will be about 110% of GDP.

What do you think the endgame of all that borrowing will be? Do you think they can suddenly just stop borrowing and right on que all that money will start rolling back in again, having been used productively in the economy? I suppose it's possible but, given that despite that huge stimulus they're still growing more slowly than us, I struggle to see where that growth is going to come from when the stimulus stops. To me it all seems fake. Just a larger scale version of buying a flash car on credit that you can't really afford.

If you think we should only cut when the economy is doing well (because you're clinging onto the belief that cutting while struggling causes problems in spite of overwhelming evidence to the contrary, but whatever), then do you think now is the time to start cutting? If not then when?

[Sir Fynwy]

Yes because buying a pension is safe isn't it? Wow.

How stupid can you get?

[Dr The Singh]

How stupid can you get?

This is foxestalk!!!  Fvck of and Die territory

[Alf Bentley]

Interesting that you'd bring the US into this argument, presumably implying that we would have been better off following their example? Obama is close to having doubled US national debt, he's increased it by $7trillion and counting. By the end of next year their debt will be about 110% of GDP.

What do you think the endgame of all that borrowing will be? Do you think they can suddenly just stop borrowing and right on que all that money will start rolling back in again, having been used productively in the economy? I suppose it's possible but, given that despite that huge stimulus they're still growing more slowly than us, I struggle to see where that growth is going to come from when the stimulus stops. To me it all seems fake. Just a larger scale version of buying a flash car on credit that you can't really afford.

If you think we should only cut when the economy is doing well (because you're clinging onto the belief that cutting while struggling causes problems in spite of overwhelming evidence to the contrary, but whatever), then do you think now is the time to start cutting? If not then when?

 

I don't know enough about the US economy to say whether or not they've done better than us overall. I only raised the US to challenge KingGTF's belief that Keynesian economics is no longer an option. It is. Obviously, it will be opposed by free market Thatcherites (most Tories now, though that wasn't the case once), but it IS an option, as the US proves.

 

Maybe US growth was lower than ours in 2014, but it wasn't between 2010 and 2013: see graph cited in my last post, based on IMF/OECD data. You can't selectively quote short-term data to prove a point, otherwise I could quote the fact that the UK deficit rose by 10% in the first half of this year (whereas it has fallen over several years - albeit much more slowly than Osborne predicted).

 

Deficits do have to be reduced in good times. You can't just keep putting things on the "credit card", but the timing has to be right and the deficit certainly doesn't have to be eliminated within 5 years (we've had a deficit for all but about 4 of the last 35 years!). The aim should certainly be to reduce it significantly, as we can't just keep adding to the cumulative debt (now very high after the bank bail-outs etc.). How quickly will partly depend on the international economy, particularly whether the Eurozone economy improves or lurches back into crisis. Yes, there should be some cuts, but increases in tax revenues also have a major role to play in reducing the deficit. For that reason, I approve of Osborne's "Google tax", in principle (who knows whether it'll work in practice?). He could do a lot more on tax avoidance. He could also reverse the cut in the top income tax rate - Tory supporters claimed that this wouldn't affect tax revenue as those on £150k+ would be more willing to pay at the lower rate....not true, is it?! Some demand stimuli (e.g. for housebuilding) could also generate more tax and cut the deficit (getting construction workers paying more tax instead of claiming benefits or earning low pay). Raising the minimum wage by a reasonable amount could also generate more tax by raising real pay right up the income scale, generating higher household spending at a time when inflation is low, so risk of harm from that is low....

 

Alternatively, we could just tax the Leicester City defence every time an opposing striker is left unmarked in our box.....deficit and debt cleared within a season!!   

[Webbo]

This is why Keynesian economics are out of date. What good does it do us artificially boosting household spending when most of the money will be spent on foreign tat? The shops may be able to employ some more low paid workers, assuming the money isn't spent over the internet. Some painters and decorators might even be busier than they were before but on the whole the boost to the economy won't be that great. And then what happens when the stimulus is stopped and we still don't have industries that employ thousands on high salaries?

[MooseBreath]

We'll have to wait and see how unprecedented levels of debt play out in the US before we can judge it's success, but my simple mind can't get past the fact that what seems like a ginormous amount of borrowing isn't translating into a growth rate any better than ours while we're reducing our deficit. So advocating more borrowing in the assumption that it will lead to more growth just seems to ignore what's actually happening in the world today.

Ditto Germany and the nordics. I'd say we're on a largely level playing field with germany, and they avoided recession this quarter by 0.1% of GDP. A recession in the UK right now would correctly be seen as a total failure. Thankfully we're nowhere near it. The Nordic countries have the advantage of vast natural resources, but they won't last forever. Will they continue to do well when they haven't got all that money coming in? Who knows.

I agree with the Google tax in as much as if you're going to have a tax then it should be enforced. I also agree that we should stimulate house building but that's more a social/quality of life concern rather than pure economic, and the blockers to that are more to do with regulations. Besides I'm not sure the construction industry can cope with much more building if these kinds of reports are to be believed:

http://www.theguardian.com/business/2014/nov/04/construction-sector-skills-shortage-housebuilding

Maybe all this low tax is meaning businesses are putting down roots here, building offices, warehouses, factories etc

[Alf Bentley]

This is why Keynesian economics are out of date. What good does it do us artificially boosting household spending when most of the money will be spent on foreign tat? The shops may be able to employ some more low paid workers, assuming the money isn't spent over the internet. Some painters and decorators might even be busier than they were before but on the whole the boost to the economy won't be that great. And then what happens when the stimulus is stopped and we still don't have industries that employ thousands on high salaries?

 

If properly managed, a public sector demand stimulus during a downturn can trigger private sector growth: e.g. govt. incentives for housebuilding-> more construction workers buying goods/services, paying tax & not claiming benefits + boost to manufacturers/sellers of bricks, paint etc. + boost to firms making/selling furniture, estate agents, decorators (!)-> such firms are able to boost turnover, profits & investment in building their businesses (maybe to be more efficient or to move into exports) + their employees, in turn, are spending more, paying more tax and claiming fewer benefits -> improvement in deficit & stimulus can be withdrawn at the right time in the right way.

 

Do people spend most of their money on foreign tat? Think of what we spend our money on: housing; mortgages; food; travel; education; health; cars; insurance; furniture; pubs/gigs/cinemas/restaurants; gyms; hairdressers.....some of that might be bought from abroad, but most of it won't be; OK, some items (e.g. electronic goods, clothes) will often be imports, but there'll still be British firms, British workers and British tax involved in the supply chain - that even applies to the Internet (Amazon distribution centres etc.).

 

As for not having industries employing people on high salaries, it's partly government, working in tandem with private business and the education sector, that can help such industries to grow. In my previous post, I mentioned investing in scientific research, providing support for business start-ups in cutting edge industries, investing in facilities for young musicians or film-makers (big export earners), or establishing more high-quality apprenticeships. Again, if properly managed, public spending like that could pay for itself hundreds of times over in the medium-term through higher value-added, higher pay, higher tax, higher exports etc. Shops full of low-paid (or unpaid) workers is what we've got now - that's part of why Osborne hasn't been able to collect the tax revenue that he expected or reduce the deficit to the extent that he planned, despite the scale of the cuts.

 

We'll have to wait and see how unprecedented levels of debt play out in the US before we can judge it's success, but my simple mind can't get past the fact that what seems like a ginormous amount of borrowing isn't translating into a growth rate any better than ours while we're reducing our deficit. So advocating more borrowing in the assumption that it will lead to more growth just seems to ignore what's actually happening in the world today.

Ditto Germany and the nordics. I'd say we're on a largely level playing field with germany, and they avoided recession this quarter by 0.1% of GDP. A recession in the UK right now would correctly be seen as a total failure. Thankfully we're nowhere near it. The Nordic countries have the advantage of vast natural resources, but they won't last forever. Will they continue to do well when they haven't got all that money coming in? Who knows.

I agree with the Google tax in as much as if you're going to have a tax then it should be enforced. I also agree that we should stimulate house building but that's more a social/quality of life concern rather than pure economic, and the blockers to that are more to do with regulations. Besides I'm not sure the construction industry can cope with much more building if these kinds of reports are to be believed:

http://www.theguardian.com/business/2014/nov/04/construction-sector-skills-shortage-housebuilding

Maybe all this low tax is meaning businesses are putting down roots here, building offices, warehouses, factories etc

 

As I said in my last post, I'm not advocating more borrowing now, just a slower reduction in the deficit than the Tories are advocating, the use of tax rises and not just spending cuts, and the selective use of demand stimuli. Short-term and limited borrowing to stimulate growth and kick-start faster deficit reduction might have been an idea back in 2010-11, but we've moved on now, after 2-3 years of "flatlining" - Balls was actually right about that back then, it's just no longer applicable as growth has belatedly been forthcoming, even if it is a type of growth that comes with continued low pay and low tax revenues.

 

We're reducing our deficit much more slowly than Osborne hoped (actually rising again just now), while still reducing our real incomes and our social cohesion...that's not sustainable long-term. Maybe that will suddenly change. Maybe suddenly incomes will start rising to match GDP growth, tax revenues will rise, the deficit will fall and we won't have millions of people living in poverty, many millions more just about getting by on falling incomes/debt, and shopping streets full of pound shops, charity shops, bookies and buy-to-let estate agents. But why should such a transformation happen? We've had growth for 1-2 years now, but pay is still stagnant or falling; few employers see any need to raise pay so as to recruit or retain.

 

Re. your Guardian article on skills shortages in the construction industry: that's precisely the sort of investment that could have been made (under both Labour & Tory govts, to be fair) in tandem with employers and colleges to make the country better equipped to prosper economically. Instead, New Labour obsessed about pleasing middle-class parents by sending 50% of kids to uni (why?!) and the Tories obsessed about cutting spending to the bone to balance the budget more and earlier than was needed, as if we were back in the 1920s.

 

Anyway, we'll never convince one another, as our politics are different. I enjoy these discussions, though, even if, as self-appointed experts on global macroeconomics, we're a bit like Sunday league managers advising Pearson on how to achieve success in the Premier League.