Incredibly, this was the best case scenario

Hysteria

Jeez Fraser - is it really that bad....? So what can "we" do to balance the books - which painful decisions do we have to take - your analysis of the potential savings a few days ago is not going to make much of a dent - no?

Sterence

And this is news?
What is so terrifying is that it takes incredibly optimistic forecasts to lead even to these enormous levels of debt. If the City consensus of GDP growth is right, the PSND will go £50bn worse than the already horrendous Treasury forecast. And whatever timescale the Govt has in mind (ie is in denial about) will be made massively longer by the huge increase in Gilt yields.
Welcome to the poorhouse.

Christian Gowers

I am reminded of the 2006 budget when Gordon Brown planned to borrow £37bn that year and then £36bn, £30bn, £25bn, £24bn & £23bn in the subsequent years, totally unaware that there would be a recession after two years, leaving absolutely no possibility of our country entering the difficulty in good shape.

Gordon's entire chancellorship was based on the "prediction" that growth would continue indefinitely, and even now he is talking about returning to the Golden Rule of borrowing "only to invest" once the recession is over.

In my eyes the Golden Rule was only a way to justify reckless borrowing and the way I see it is that he is going to borrow his way out of this hole, then return to reckless lending, so that by the time the next economic glitch comes we'll have an even bigger national debt.

Jed Yoong

"Next year we'll have debt levels of 60.5% of GDP on a Maastricht basis."
Kee Kee, The USD would have collapsed and we would have electronic money, just like in RPG computer games!

"All that agonising work the Conservatives did turning the situation around in the 1980s: ruined. It took Brown ten years to destroy his inheritance - but by Jove, he's done it now. Tax the rich, spend like mad and destroy the public finances."

Sounds like what the Dems are saying in the US!

William Norton

Fraser: you might enjoy trawling through the Treasury website: interesting document on the use of the regulator power (which is what Darling is using to change VAT; this doc is probably what has driven the new policy)
http://www.hm-treasury.gov.uk/d/adhereford03_4567ra_324.pdf

"6.99 A further practical challenge is the potential impact of in-year variations to VAT and
excise duties on business compliance costs. For retailers in particular, and especially those
smaller retailers that do not make use of computerised pricing and accounting systems,
adjusting for rate changes could be costly and time consuming. Under some circumstances,
this may mean rate changes are not passed on to consumers fully, or evenly across products.
One possible way of mitigating additional compliance costs would be to allow a short lead-in
period for rate changes; however, that could increase the risk of tax losses through forestalling
and avoidance which would also run counter to the desired stabilisation effect."

Neil

Old Labour is nearly back. If they win again expect marginal tax rates of 50 to 60% to pay back this £trillionc(declared) debt.

That's assuming we'll be out of a recession by 2010, which still looks the unlikely option

Peter Cheshire

Fraser, I believe that your analysis is correct. The more that the detail of the statement sinks in - and there was little new except the confirmation of the leaked fiscal changes and the publication of the government's ridiculously optimistic assumptions - the more awful do the economic prospects sound and the more dire does the state of the public finances appear. The really new feature is government confirmation of the latter point - the shocking state of the public finances.

Absolute and relative measures of public debt have been spun endlessly by Brown but yesterday's public statement of scale and - most tellingly - today's general media reaction have blown that spin away.

I never believed the myth of New Labour; Labour is Labour and never changes despite temporary pragmatic alliances. I fear that the country is facing a long period of very difficult economic conditions.

Perhaps this time, at long last, the electorate will learn what Labour always means and when given the opportunity will consign it to the dustbin of history.

Raised eyebrows

Fraser, why do you never ever actually talk about the economics of any of this. You talk about the staggering debt, but you don't explain why that will be bad, if it will.

Nor do you acknowledge the economic rationale for what the govt is doing. If you don't do so then it's obviously pretty easy to slag off the plans.

If you don't engage properly with the budget, what's the point in reporting it. We all might as well just head over to the FT for our coverage. They have Wolf on the economics PLUS political coverage....

TrevorsDen

Neverland? yes fair point.

But the real analogy is to call it a 'Dead Parrot' budget.

You take away what you think is a good deal and within 12 months its gone - shuffled of its mortal coil, a 'late budget'.

You realise you have been sold a giant con. And all the man at the shop can do is make preposterous excuses - like 'it will soon return to borrowing for investment'.

Victoria

Raised Eyebrows: In light of the current Labour government I understand your pain in not having things fully explained to you, economically speaking. That too is again a Labour failure.

Oh the woes of an electorate reliant on being fed information...

The Hairy Splinter

Raised eyebrows: paying the interest on the debts sucks money out of the economy and reduces the budget for public services. Do you see how it works now?

Raised Eyebrows

I totally understand that. My point wasn't that I don't get why huge public debt is potentially damaging.

My point was that Fraser doesn't engage on that level. Furthermore, if you're going to make that point then you at least need to explain why the govt is making the move in the first place.

There's an economic rationale for fiscal stimulus and an economic rationale against it. What I'm saying is that that is what we need to engage with. Sometimes I think Fraser doesn't see the wood for the politics...

Verity

Jed Yoong - You know what? Shut up.

The lefty "economists" have lost the argument. Watch it go downhill from here.

hadrian

Of course Fraser's analysis is correct-he didn't attend Dollar Academy and Glasgow University for nothing!
'Stimulus'..but to what, exactly? More spending of nationally unearned wealth? More borrowing and lending of funny money?