Cuts are never fun. Budget cuts even less so. As a raging liberal who believes in high taxes and excellent public services you may think that I am against the budget cuts. However this is not the case. My ideology is what it is – an ideology. At this current juncture I prefer to step into the real world as things are not all sweetness and light out there. Last night I had a long debate with a socialist who preferred not to be a realist and believes that we can recoup all the money just by enforcing tax a bit stronger. Yeah… Also he believes that the money is there and the need for cuts is one big lie because that is what the Tory party ideology wants to do – shrink the public sector. Now they might do but when you look at things in the real world – a party (or in this case a coalition government) doing these swinging budget cuts when the party has no overall majority and aren’t exactly;y well liked anyway just because they might ideologically want to do so is just flat out insane.
If they could shrink the public sector slowly but surely to reach their ideological goals then they would. People don’t notice things when they are slowly taken away from then. It is like an addiction. If you smoked 20 a day and then suddenly stopped then you’d know all about it. However if you smoked 20 a day and went down to 19 one week, 18 the next and so on, you wouldn’t notice the loss of the nicotine so much. It is the same with Public Services. If a council run day care centre closes one month and an outreach programme for young kids closes three months later than you won’t notice it as much unless you are directly effected. If both of these happen at the same time along with Car Park charges going up and a local school being closed then people notice and people begin to moan loudly.
I likened the country’s debt situation to that of an individual. If you owe say £5,000 and you can’t pay it back the way you are spending money then you make changes. You stop going out as much, stop buying new clothes, you budget harder. You don’t spend more money to get out of that debt because at some point the people you owe money to will want the money back. I was informed that my argument was moronic and you can’t liken a country’s debt to an individuals and I ask ‘why not?’. A debt is a debt is a debt. You owe money to people who at some point will want their money back. After the events of Greece in late April/early May of 2010 a lot of these money people are kind’ve twitchy to say the least.
The United Kingdom has the largest deficit in the EU and would be the next country to hit the rocks. Greece was bailed out because if Greece went the whole of the EuroZone was in serious trouble. Spain and Portugal both had their credit rating taken down a notch before the rot was stopped. We however are not in the EuroZone even though we are in the EU. So countries such as Germany who put together the bail-out package would be less inclined to do so for us as the rot wouldn’t spread as fast as we are using two different currencies. Also at some point you have to stop the bleeding and unless we shape up we are going to be the country that people let sink.
So the only real thing is to is swift and harsh cuts in public spending to right our debt, yes? Well that is where people start thinking about themselves. Jobs will be lost and it will not be pretty. As a country we’ve been spending more money that we’ve got coming in. As anyone who is either unemployed, or is a student or works from home as has the TV on in the background whenever you hear ‘but we’ve got more going out than we’ve got coming in’ you know it’s a bad sign. They usually call Ocean Finance and all is well with the world and they buy a new car but I don’t think we can consolidate all our loans into one easy payment. No-one is lending us that type of money in one hit.
So we need to pay off the loans but people don’t want any budget cuts. Sadly I can see no way in which both of these goals can be achieved successfully. Plenty more qualified people than me have looked at the finances and come up with the same solution. Some believe that we can do both – well you know what – we flat out can’t. So now you have to look at scales of budget cuts. Just how quickly do we want to get our house in shape? Do we want to have a rough few years and then come out of it stronger or do we want a bad couple of decades but without the harshness of the next few years. That is the question everyone has to ask themselves. I for one would like the country to get out of debt ASAP as the marketplace is still a very volatile one. If any other country hits the skids then we are in trouble unless the money lenders can see we are getting our house in order.
I’m lucky enough to know someone very high up at one of the banks who took me through exactly what happened and why we are in the mess we are in. He accepted that the banks were certainly not blameless but in the end it all came down to simple cashflow and panic. The banks and even Lehman Brothers who were let go by the US (which was in his words ‘the biggest mistake ever made’) had enough money. However the money was all tied up in long-term investments and one bank wanted their money back from them now. Lehman Brothers could provide that money but whilst they were getting it together – another bank heard that the other bank were demanding all their money back now so they also asked for all their money back. A domino effect in a game of chinese whispers erupted and suddenly everyone Lehman Brothers owed money to wanted the money back – and now – and they couldn’t get the capital together. They were broke and they weren’t bailed out and subsequently went under.
All the other banks looked at each other and said ‘if Lehman Brothers can go under – we can all go under’ and then suddenly the banks had a very fast game of raising capital and kicking to the curb long-term projects. They all needed money in their accounts there and then otherwise they may go under as well. That is why they stopped lending money except to those who they were very confident they would get the money back from. Banks weren’t going to gamble anymore under this environment.
So on to Greece. Exactly the same thing happened. Lots of banks lend money to countries all the time. They see countries as about as good an investment as you can get. So when suddenly Greece looked like it may default on its loans all the banks wanted all their money back that day. Greece didn’t have the money and therefore they were going bankrupt until they were bailed out by Germany & friends. Those who believe that it can’t happen here are quite frankly deluded as all it takes is a game of chinese whispers and panic and suddenly we are staring down the barrel.
Moving on – people are saying that these cuts will hurt the working class and they are right. I’m from working class stock (albeit I now live in a middle class apartment and have a middle class income) but my background is working class. I can see why they are up in arms and scared about the cuts. Jobs going, services going, things just getting worse and worse and worse. However if we don’t cut the deficit and quickly then one of these banks we owe money to will want it back and want it back now. We’ll be able to pay them but if other banks start demanding their money back then we are screwed and would need a bail-out or we’d go under.
Now a bankrupt Britain would hurt the working classes far more than the middle or upper classes. Why you ask. Well because the middle and upper classes will still have cash. The working classes generally do not have cash and have mortgages and need help from the banks to cover bills and such. Small businesses also often need loans from banks to invest in their futures. In a bankrupt Britain the banks will not be lending any money. In fact they very well might demand all their money back straight away and most people with mortgages for instance will not have that money. They will default on their mortgage and be declared bankrupt. The banks would take over these properties and sell them to cash buyers or those with a big deposit and therefore a small mortgage and risk for them. So middle and upper classes buy more and more properties as they can afford to and then rent them out to the working classes. The rich get richer and the poor can’t make a step on to the property ladder.
Yes the savage cuts the government are lining up are not good but they are a necessary evil. Without them the rich get richer and the poor get poorer. It is time for us to get our finances in shape and bite the bullet for a few years. If we don’t then this country will go to the dogs sooner rather than later. I prefer short term hit and long term stability to short-term head in the sandism and long-term worry.
This isn’t about ideology and shouldn’t be a debate along party lines. This is about getting out of this financial mess we are in and the best way to do that. I think the country turning things around and cutting the debt is by far the most important thing – and so does the city. I know people don’t care what the city thinks but if the city doesn’t like what the government are doing then we are done folks – we are done and bankruptcy will happen and I’ll tell you this for nought. If you think the proposed cuts are bad now – imagine what they’ll be in a bankrupt Britain.
The future is not long-term it is short-term. Let’s not run before we can walk. Get our finances sorted today and we’ll live to potentially see a brighter tomorrow. If we don’t then the future may be very bleak for the majority of us.
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Greg, I’m certainly not criticising a judicial review process you clearly know a great deal about. No, not at all.
I’m questioning credibility of collosal expenditure and imeasurable manpower when the outcome so often confirms the publics lack of confidence in the system.
We can’t seem to count on justice being served.
Diversion is the last bastion of the desperate. Bloody Sunday? Not worth looking into? None of these matters warranted a thorough review? Faced with an economic argument you neither understand or are willing to try to comprehend, you start criticising the judicial review process. It’s utterly pathetic. I have lost patience with your inane ramblings and won’t respond further.
I suggest you read about the issues you so aggressively discuss and come to some kind of understanding that speaking from such a position of ignorance just makes your argument look baseless.
I am not currently a Labour candidate, for clarity, but you ate utterly wrong in your assessment of my views. I do think we need to cut spending, but you are ignoring the incredibly deep recession in calculating your figures. The deficit and debt before the banking crisis was similar (deficit) and lower (debt) than in 1997.
The fact that it is high now is almost entirely due to a collapse in tax revenues and the high costs of unemployment and lower consumer spending on account of the recession. This means that through growth, much of the bulk of the deficit can be reduced. I do advocate cuts and tax rises. I would extend the bank levy and increase the tax burden in the very wealthy. I would not be undertaking a ridiculously expensive top down overhaul of the NHS.
There is a fundamental flaw in the cutters argument – without growth, deficit reduction cannot succeed. Unemployment is very expensive. Much better to keep support in the economy now while private sector demand is low, then rebalance when we have a sustained recovery.
We are nothing like Greece, I’ve explained why above. You might care to recall that after the most serious cuts in a generation in Ireland, its rating was downgraded because of no prospect of growth. If you think savaging the state to appease the bond markets, based on limited and disputed evidence is a sensible approach to restoring the health of our economy, I suggest your priorities are woefully out of kilter.
Explain this Labour Government Money-Sapping Legacy:
Just so I am 100% clear here, the inquiry into Billy Wright was prompted by the findings in 2004, of Judge Peter Cory who said he was satisfied that “there was sufficient evidence of collusive acts by prison authorities to warrant the holding of such an inquiry”
Now, 5 years and £30 million later, we are now told “There is no evidence of collusion…”
Absolutely fantastic. A good use of our time and money? Yet another inquiry that costs a fortune, takes years to conduct and delivers absolutely nothing, similar to;
Chilcot. Hutton. Shipman. Ladbroke Grove. De Menezes.
We must be keeping these retired judges and QCs very well fed and watered; Take your time chaps.. Get your noses right into the corners of the trough.. Oh, don’t worry.. we’ll pick up the tab. You’re done? OK, run along now. Another inquiry to milk beckons.
STOP WASTING OUR MONEY
People are losing their jobs. Families are losing their houses. Companies are struggling with these austere times. Even top-tier brands are launching their wares accompanied with fish & chips! The Unions are threatening the nation with coordinated strikes by staff in already over remunerated, less productive sectors.
It is really a worry that Gregg a perspective Labour canditate thinks we should continue to borrow at the current rate we are.
We are not borrowing to spend on infrastructure we are borrowing to spend on day to day costs, every month we have to go cap in hand to the markets to borrow £8bn so that we have enougth cash to pay the wages. It’s simply unsustainable and unless we make plans to reign in at least the amount we have to borrow each month then the rate of interest we get charged will go up and up then interest rates will and then we could see a massive collapse of everything, homes flooding the market, demand falling through the floor and so on.
When labour took over in 1997 the borrowing as a percentage of GDP was 40%, Labour continued with the Tories spending plans for the first 3 years and the borrowing actually came down, since then borrowing has increased massively and is now expected to reach 80% of GDP by which time only Japan is expected to be worse than ours in the G8 and we really dont want to end up like Japan with negative inflation. Infact our position would be worse than Japan because we would owe our money oversees where as Japan”s debts are to it’s populace by and large so when the money is repaid it’ll go back into it’s economy.
Anyone who thinks that we would not have ended up like Greece is completly ignoring that the UK was already close to having it’s AAA credit rating downgraded by two agencies and that the country has gone broke before in 1976 needing an IMF bailout! (when the deficit was only 6% not 12%!)
To suggest that we dont worry because it’s only repayable in 13 years just goes to show the mindset underlying why we are in this position in the first place.
Whoever is in power, all we should ask is that the country lives within it’s means, is that so unfair?
So you agree its poor experience for UK politics?
Regards,
Floating voter; that was glad to see the back of the champagne socialist party I once voted for.
@Polleetickle
Twitter.com
Polleetickle
David Cameron managed five years in PR before entering politics. Just what we need – a spin doctor with virtually no commercial experience.
More worryingly, George Osborne has never had a job outside government and is running the economy. He tried to get a job at the Times but was rejected and got a little advisor role from his mates in the Conservative Party. Never worked in his life and with a £40m trust fund, never has to.
Luckily, Danny Alexander, Chief Secretary to the Treasurer, did have a proper job. He was a communications officer for the Cairngorns National Park.
I have no idea who you voted for, but a more callow group, out of touch with commercial and human reality, you’ll struggle to find.
I bow to your fiscal prowess.
On another note, who votes for a commercial virgin?
David Miliband is a potential PM with absolutely no experience of private business, industry, or enterprise of any kind.
D. Miliband’s first job was for the National Council for Voluntary Organisations.
From 1989 to 1994, D. Miliband was a policy analyst at the Institute for Public Policy Research (IPPR).
In 1994 D. Miliband became Tony Blair’s Head of Policy, a position held until the 2001 election.
In the 2001 general election D. Miliband was elected to Parliament for the Labour stronghold of South Shields.
In June 2002 D. Miliband was appointed Schools Minister.
15 December 2004, in the reshuffle D. Miliband replaced Ruth Kelly as a Cabinet Office Minister.
May 2005, saw D. Miliband promoted to Minister of State for Communities and Local Government
5 May 2006 D. Miliband replaced Beckett as Secretary of State for Environment, Food and Rural Affairs
28 June 2007 Miliband was appointed Foreign Secretary.
Reads like a 40 years old virgin, doesn’t it?
Polleetickle – You’ll note the only party suggesting savage cuts to the public sector failed to get a majority at the election.
I’m sorry, I have absolutely no idea what you are trying to say here:
“It is inexcusable for Labour to blame any of the opposition on ANY of the last governments failures to reform as promised or bringing this country to its knee’s. ”
Good luck with your crusade. Can I suggest you take a couple of books with you to read on the train – something by Keynes would be a start. Or just a basic economics textbook. Might save you some embarrassment when you arrive.
Just for the record here but I should point out that the party standing for no cuts in the short term also failed to win this election. Just thought it needed pointing out.
Well, check the manifestos. Lib Dems and Labour both said no cuts in the short term and agreed on the pace of deficit reduction. Total share of the vote was about 55%, which looks like a majority to me.
to: greglovelluk
I am confident that reforms would be possible by any government with a huge majority – that is if they wanted them implemented.
**********************************************
It is inexcusable for Labour to blame any of the opposition on ANY of the last governments failures to reform as promised or bringing this country to its knee’s.
You will likely agree finding equally unforgivable & mindless; Thatcher, Lawson et al bringing this country to its knee’s beforehand, as I do.
**********************************************
Blair, Straw, Brown, Mandelson, Balls, the Miliband 2, Harperson, Clarke, Burnham, Abbott et al failed us, you and the future generations and I’m going to speak out about anyone that fails in their public duties to diligently go about their job purposefully. No matter who, where, or when-ever this takes me.
Neil – I have to go and run my (private sector) company now, but a quick response.
I could shout myself hoarse on this borrowing issue, but it doesn’t seem to be working. Most large funds are obligated to hold government debt – they have no choice! It’s seen as the safest way of protecting investors’ money. If you think we as a nation (the sixth biggest economy in the world), won’t be able to borrow, then either you have a blistering insight into global finance that no-one in the world shares, or you are wrong. I am pretty sure it’s the latter. After the Second World War our economy boomed despite us borrowing 200% of GDP. Just something to consider.
Second – you can make an argument for more streamlined public services, but privatisation seems like a funny way of going about it. It seems you are suggesting we have an influx of companies, legally obliged to generate profits for shareholders, delivering services that taxpayers pay for? Why should government money go to these companies’ profits? Or, are you suggesting the government stops using tax revenue to pay for health (for example), so if you are rich you choose a lovely new private hospital and if you are poor you are left to rot because you cannot afford healthcare?
One way or another, these services are needed. Health, education, policing etc. Which are the areas you want privatised? Not these, I assume. Most of what was nationalised industry is now private anyway – gas, electricity, water, phone, rail and soon the post.
I cannot see how you, as a self-professed left-leaning liberal, can think that privatising what’s left of our national services to be run as profit-making enterprises, will benefit anyone except the rich.
As for the rail link. I imagine it would be a public-private initiative anyway, but you must look beyond the service. The companies building the line would be private, the material suppliers, engineers, surveyors, workmen and architects will all be private. Businesses can thrive and survive through these kinds of projects.
Some capital spending by government is vital to stimulate growth when demand is low. The private sector doesn’t have the country’s interest at heart. This is where government steps in. And when the recovery is so feeble, that is the time for govenment to be active.
Wow this thread turned into fun. I’m gutted I left the computer now. Anyway…
Enjoy running your private sector company – the way you worded that really had a snobby nosed attitude about it. I went for a workout and to watch last nights NFL game I skyplused – just thought you’d want to know…
I clearly said that core services had to be state run and I want more money pumped into these. Money that has to be taken from elsewhere so other things have to go. My ideology is what it is – however we live in times where my ideology is not apt alas. We are in shit creek so whacking up taxes for awesome hospitals and education won’t go down with the masses – therefore it cannot be done.
I clearly stated in my blog that my ideology doesn’t fit with the times we live in. This isn’t a party ideal either as with every bain in my body (like most Liberals) I do not like what the Conservative party stands for – however we aren’t living in normal times. I want someone whose going to bite the bullet and try and sort the mess out because we are in one hell of a mess finanically.
Had the Lib Dems not formed a coalition with the Tories then the city would’ve been shit scared and the markets would’ve taken a nose dive. That is a fact. Not my words but those of several high flying bankers. You may argue that they would say that – but I prefer to think that they actually know what they are talking about Re: the economy.
I know you keep banging on about it being a different kind’ve debt but when you strip everything away a debt is a debt. If you are telling me that we’ll never have to pay this money we owe back then we don’t have a debt and everyone is lying to us. If you are saying that at some point we’ll have to pay it back then it’s a debt.
You say we are a safe investment but Lehman Brothers were the safest bank on the planet and they went down. Nothing is safe. If we struggle then our credit status will be cut and y’know what – that probably isn’t a good thing…
Greece was an EU member and therefore perceived as extremely safe. They nearly went under. Just because we are big and mighty today doesn’t mean that it will always be the case. I prefer to look at the situation like an adult and deal with the problems that face us. Not stick my head in the sand and hope that it will all go away.
At times like these I think we have to cut our cloth accordingly with regards to the public sector. You think we should make it fatter and more bloated.
In the end we’ll never know whose right nor wrong as we’ll only see one of these things happen. If it fails then it fails and if it is a success then it is a success. Both sides of the ledger will argue whatever happens that things would be better/worse had they gone in the other direction.
We are going to cut our cloth accordingly and we’ll have to see how it plays out. I think that financially it is the sensible thing to do to keep the world’s business believing that Britain is open for business and ready to work hard to get itself back on its feet. If you think that we should show the world that we are going to spend our way out of trouble then that may be the right thing to do. However it’s never worked before in a time of peace and with the rest of the world being open for business as well these days and a much more competitive marketplace – it seems to me that approach would doom us all.
Now I’m off but alas I have no businesses to run. I’m a failure clearly but I do have an electric toothbrush so I can’t be doing too badly and I’m going to go and use it.
This has been fun.
Just to say, I wasn’t trying to sound snobby. I wanted to pre-empt the claims that I am public sector worker defending my job.
I think if you look back at my posts you will see why I think you are wrong on understanding the nature of government debt, and very wrong on Greece being “more secure” for being in the Euro – quite the opposite.
To say a “debt is a debt” is to equate money owed to a loan shark down the pub with a 25 year mortgage. One will cost you your kneecaps, the other will secure you a roof to live under.
People who think the debt is nothing to worry about should take the time to read this
http://www.debtbombshell.com/
Neil, I do have a daughter and I am more concerned about the assault on public services we are about to witness than I am about refinancing long-term, UK-held debt.
You need to get away from this idea that someone is simply going to demand their money back. It’s completely not how the system works. There is in no sense any element of saddling debt on future generations. It’s a myth. I know it’s the easy approach to say “we have debt, we muct pay it back”, but in the case of government bonds it really isn’t that simple – if anything, the demand for safe investments on behalf of a growing mass of pensioners will continue to increase. The respected economist and former Tory Lord, Lord Skidelsky, made a superb speech on this in the Lords recently – I strongly suggest you read it:
http://www.skidelskyr.com/site/article/house-of-lords-debate-finance-bill-second-reading-and-remaining-stages/
I do, however, strongly agree that serious capital investment must be made in future technologies. This, in my view, is something the government should be doing now to ensure we have a dynamic economy ready to tackle the environmental challenges of the next century.
The problem is, short term pain may not in any real sense lead to long-term gain. We could be abandoning a generation of school-leavers to long-term unemployment, engendering a system of education and healthcare which will benefit the rich, willing and able to pay for private care and increasing class divides in an already divided country.
Put simply, the best way to tackle the deficit is growth – grow business, grow employment and you grow demand and grow tax revenues. Yes, cut back where you can – I don’t advocate spending forever more, but I think being stuck in a low-demand, low-employment and potentially high-inflation economy could cripple us for a decade.
Why can’t people demand their money back? That is a basic principle of money lending – you can ask for it back and you can ask for it back on your terms. Even if they are locked into a contract then at the end of the contract you can ask for it all back. If the person who owes the money doesn’t have it then they need to finance the repayment via another loan/bond issue or be declared bankrupt. At some point people will stop lending and bond issues will not be taken up as we will not be seen as a country with a strong economy and therefore will not be able to repay these loans/bond issue.
Yes we need to have a balance and not kill the economy but the economy runs on the private sector. The public sector provides a tonne of jobs but does not provide money. Yes we get money in taxes from people who work in the public sector but the money that swells the country comes from the private sector. Whilst I think that key departments must remain in public hands because they are too important, other departments and jobs can go to the private sector where upon they can invest the time and money to turn them into money makers. Our public sector is far too bloated and there are a tonne of pointless jobs out there. Not as many as ten years ago I grant you but there are many employed by the country to do pointless jobs.
A strong private sector will stimulate the growth this country needs and a lean mean fat grilling machine of a public sector to keep the core services running like we would expect. As a country we cannot sustain the public sector long term in the state it is currently in without putting up taxes long term. If we want high taxes then we want it knowing our police force, our hospitals, our schools and universities and our defence are amongst the best in the world.
The economy won’t grow just by pumping more money into the public sector, creating jobs that won’t boost long-term growth for the economy. For example I don’t see how the proposed High Speed rail-link will boost the economy that much. Yes getting to Birmingham quicker by 10-15 minutes than previously but how long will that take for the economy to recoup the money spent on it and then turn in a profit? Are international firms going to be swayed to invest in Birmingham because they are now closer to London in terms of time by 10-15mins?
Now the answer is very long-term – possibly yes. However wouldn’t it be better for a private firm to run this and for us to recoup taxes on this project instead of spending 50bn on it ourselves out of tax payers money? That money could be used elsewhere for now. I’m not against the public sector but we need to ringfence the important stuff and then trim down the other aspects of the public sector and allow the private sector to run it. If it doesn’t make money and isn’t essential or at least highly important then why not let someone who can make it make money take over and enjoy the taxes of their successes?
Neil, I’m sorry, but you make two (at least) fundamental mistakes.
First, a country’s debt is nothing like an individual debt. A country doesn’t have it’s debt “called in”, it raises money through the bond markets. UK government bonds are currently maturing at about 13 years, which means the capital only needs to be paid in 13 years time. So, what do we do in 13 years time? Well, as we have done throughout the modern era, simply refinance the debt. Bonds are a hugely cost-effective way of borrowing money – we are not in debt to any banks and they cannot just ask us to pay it back.
Tied to this, a large proportion of our debt is held by UK institutions, eg pension funds, which means that in many ways, the debt is simply a reallocation of money within the UK – the (very low) interest paid on the bonds goes into pension funds and so is redistributed within the UK. The reason why these funds are choosing government debt is because fears of excessive austerity leading to low growth means they are avoiding equities (ie company shares). This makes UK government debt very popular at the moment as it’s considered incredibly “safe”.
Secondly, we are absolutely nothing like Greece. Greece’s problem is not, as you suggest, thank banks called in debts, but that the maturity on its debt was very short, meaning they repeatedly needed to refinance. This means interest rates which much higher. In addition, Greece has a huge black economy, so much of the money wasn’t caught in the fiscal system and was running at overall debt levels in excess of 100% of GDP (nothing like us – we entered the recession with debt around 40% of GDP). Finally, Greece had no control over its monetary policy – interest rates and money supply – because it’s in the Euro. This meant it hand one hand behind its back when dealing with the crisis. Being outside the Euro is a major help to us because we can control all aspects of economic policy.
There is much more I could say to explain why you are wrong, but the major point to consider is growth. Where is growth coming from in our economy if vast sums are removed by the government? This has a huge knock-on effect on the private sector – IT firms, builders, developers etc all suffer when government stops spending. If you can explain to me how we are going to grow the eoncomy (which will in itself tackle the bulk of the deficit), then I’d be happy to accept your approach. As it is, you aren’t really demonstrating that grasp of basic economics you profess.
At some point though we’ll be unable to refinance the debt or do so in terms that will cripple the country. Money isn’t exactly flowing around the global economy at the moment and neither is credit. A basic principle of debt is you have to pay it back at some point and the time has clearly come that we are going to have to pay it back. You can only lives beyond your means for so long and as a country we have been doing so at quite a drastic level. If you think we’ll be able to refinance and refinance forever and ever amen then you live in cloud cuckoo land. At some point money has to be paid back to those who are owed it. Surely you have to agree?
Now whilst Greece was different to our circumstances – we have the largest deficit in the EU and therefore would without a doubt be on shaky ground should the markets panic, which they can very easily do.
You say we need to grow the public sector but didn’t Canada do what we are planning to do 15 years ago and it revolutionised their Private Sector and brought longer term stability to the country? I’m all for high taxes and great public services but you know what – most voters aren’t. They want low taxes and excellent public services. Sometimes life is a bitch. Personally I’d invest heavily in what the world will need over the coming decades and centuries. Over the next 100 years the buzz words will be ‘renewable energy’ and I’d invest heavily in that sector. Countries from all over the world will be bringing down their oil and gas usage and using renewable energy to get a) their bill down and b) to hit emissions targets. It is the one sector we know will grow vastly in the coming decades so I’d mmove hard and fast to get the UK to the front of that queue and make this country the heartland of renewable energy manufacturing.
I don’t profess to know it all but I know that when you owe money you have to pay it back. For decades governments have just refinanced the debt and saddled the next generation with the debt. At some point it has to stop otherwise the doomsday scenario happens. I have no idea how old you are or if you’ll have kids but when they grow up do you want to see them living in a bankrupt country? If you do then spend, spend, spend and sod the future. If you want them to be able to aspire to be someone then you, like the rest of us have to take the hit now. Short term pain for long term gain.
Again you (like all people who disagree with the debt) believe that the worst can never happen. We’ll always have money flowing around and if we don’t – we’ll just go out and get more from someone else in the form of more bonds or big loans. Those days are gone. For today, for us, and for our kids and our children’s children, we need to stop the rot before it sets in so much that the house falls down.
.. and the tin-pot chancellor did what, in terms of financial wizardry, to protect the UK from itself and spiralling debt?
A great deal of what you describe as prudently financed is rot. Gordon Brown admits to seeing the banking crisis coming yet did nothing but screw the shareholders of banks. GB is complicit in the global financial crisis because he behaved ignorantly. With Blair then Brown at the helm this nation stood no chance, NONE!
I hope the UK will be allowed to grow its economy by private sector investment. But I dont expect the Unions want to see this happening and would rather a double-dip recession was on the cards.
Beware the militants within.
OK, I may be loose with my metaphors, but the point being that surplus council funds (in itself very surprising considering the public debt) is almost completely lost rather than being slightly devalued at hame.
This would be very useful right now and in my view absolutely everyone involved in managing public funds must be completely and utterly responsible for their actions and not, as seems the mood of the day, result in being excused, swept under the carpet or the culprits paid-off to be re-employed elsewhere.
Its like a brotherhood of protection exists in the public sector… Sorry, whats that? It does? Thats a serious problem.
Neil,
Great piece. You describe the public purse better than many.
I’m no expert either, but cutbacks are tough on anyone. Let alone a nation that sleepwalked into a benefits system that not only paid out more than it collected or paid some more than the minimum wage. But, a system that unnecessarily paid benefits to the wealthy who probably spent more on fizzy white wine than poor families spent on staples.
Anyone that believes the money is available for public services is wearing rose-tinted glasses; Iceland also swiped a massive amount of public funds thanks to the guidance of a financially astute John Prescott, that should have been invested in UK Plc.
Anyone that believes the money is available for public services is deluded by the economies of a government that failed on many points; Not only to sell gold low but failed to stave off the latter part of ‘boom & bust’ following some immensely productive and financially rewarding years. rewarding, it seems, for expensed ministers that were meant to have been equally busy reforming parliament than filling in paperwork for biscuits, moats and televisions while in the back of expensed taxi’s after a trip to TV World for another fee!
Anyone that believes the money is available for public services is, quite frankly, going to suffer from personal mis-management of finances the same way that Labour failed to avoid in amounting over £15 million debts, according to the prospective labour treasurer, John Prescott.
The swiftness of the cuts may well be politically orientated and scheduled to show positive growth in the lead up to 2015. But, that’s an investment I am prepared to accept if it means Labour not being seen in power for, yes, decades!
The reality is that Gordon Brown even admitted to Jeremy Paxman; That he foresaw a banking crisis c2008. The UK PM, as a retrospectively tin-pot chancellor, in failing to then implement Banking reform, itself demonstrates why Labour were crushed by the bumper and subsequent tyres of the vehicle that was the looming car-crash election – that a great many foresaw.
The Labour leadership competition as it is, confirms that Labour still haven’t fully realised the numerous reasons for their election failure. It wasn’t all Brown and Blair, but certain individuals tainted with woeful decision-making; staying for gain or leaving when times get tough. The sort of people now standing for Labour party leadership retain the ethos; Champagne at their table, beer at yours – but both at the public’s expense.
It seems the UK can’t afford a crate of either at the moment.
Well said Neil, if the country is going to be able to compete in the future and keep people employed it is going to have to become more efficent and be run more like a business unfortunatly.
We simply cant go on spending 12% more than the money coming in, common sense tells most people this and simply “growing” isn’t going to reign in the deficit either (we grew the last 12 years but so did the deficit!).
While the country was growing if Gordon Brown had used the time to reduce the countries deficit rather than increase it every year we wouldn’t be having this disccusion and we would have comfortably ridden out the recession. By not dealing with it we are simply putting off the problem and as you say best to deal with it ASAP and be as competative as possible in the future.
At the end of the day the coaltion government had to announce measures to reign in the deficit to keep the markets happy, otherwise borrowing costs would have risen resulting in higher interest rates and then we really would have seen a double dip recesision and probably collapse in the housing market and massive increase in reposessions. Labour recognised this before the election but now they seem to be living in denial!
BTW people knock the banks but they are one of a few industries brining money into the country to pay for the lets face it bloated public sector. Everytime a banker get paid a £1m bonus half of that goes to the government, every time a bank makes £1bn 30% of that goes to the Exchequer as well! While I am all for rebalancing the economy and boosting manufacturing we shouldn’t stop the banks doing what they do best!
“I likened the country’s debt situation to that of an individual”
which demonstrates that you don’t understand economics
A debt is a debt is a debt. At some point you get asked to pay that debt back. If you don’t agree with that then you quite simply don’t understand basic economics. Our debt is largest and more widespread but it is a debt.
ok, BRISTOLWESTPAUL, explain the country’s debt for the layman instead of being so passively obnoxious.
I have tried to explain it below. It’s much easier to think it’s like an individual debt, but in reality it isn’t at all.
The Polleetickle – thanks for your comment on my blog. Do you want to engage in some sensible economic debate, or are you happy just to chuck around ill-informed abuse? You’re not doing your cause much good making yourself out to be someone with substantially no grasp of the issues at hand.
Gordon Brown was shouted down by the Tories when he proposed tougher banking regulation – whose side were you on then?
In reality, as the Institute for Fiscal Studies states: “Labour entered the recession in 2007 with similar structural deficit to that inherited in 1997, but a smaller underlying debt”. So, after 18 years of woeful Tory underfunding of health, police and schools, Labour managed to achieve enormous investment while keeping the debt level constant.
I do wish some of you ill-informed ideologues would read some facts on occasion. Ranting about economics you don’t understand just convinces people that the cuts are fundamentally ideological after all.
perhaps, bristolwestpaul, you can also explain why councils’ surplus funds were invested abroad instead of directly invested in UK Plc – thereby, championing everything this nation stood for instead of propagating the futures of others that consequently failed.
Turnover is vanity, profit is sanity but cash is King! Unless you’re John Prescott or Alistair Darling.
Polleetickle – I find it very surprising that you think for a government, “cash is king”! Why does a government want to sit on cash? It can’t take it out of the “business”. This adage really doesn’t apply to government at all. You seem to be getting confused about the nature of public finances. I genuinely am not trying to patronise you here, but it is dangerous to make assumptions about one kind of spending based on another.