No, Prime Minister

Dean

You quote selectively. Here is what he had to say about fiscal stimuli packages in general (which the Tories oppose):

"Governments should be ready to increase their spending on economic stimulus programmes if circumstances require it, the International Monetary Fund's chief economist Olivier Blanchard said in comments published on Tuesday.

In an interview with French daily Le Monde, Blanchard called on Germany in particular to boost its spending in the next few months as some of its European partners such as France have called for.

"The coming months will be very bad. Halting this loss of confidence, providing stimulus and, if necessary, replacing private demand are essential if we want to prevent the recession from becoming a Great Depression," Blanchard told Le Monde.

Laughing Larry

If you owned a chain of chip shops would you put Gordon Brown in charge of one of them? He has never run a business and has no grounding in basic accounting. He over spends like crazy, introduces crazy giveaways and rarely smiles. I'd throw his CV in the bin, this would probably mean I'd be sued for not giving a moron a break.

luke

There are surely two questions here.

(1) Can we afford a stimulus at all? I think we can. But the truth is what you think this depends on. If you look at just our current run-rate fiscal position then we have a structural deficit and you would think maybe not (this is what the tories do). If you look at our long-term debt as a % of GDP we are clearly better placed than many other countries and can afford it. On balance i come down in the "yes" camp.

2) Secondly, whats the right way of spending the stimulus? I am strongly in favour of the VAT move (as kenneth clarke was, if you remember). Primarily because its quick - and as an economist that is the critical thing here. Getting the stimulus into the economy fast is vital. So changes to personal taxation or spending are far far too slow.

Some people seem to think that there are other overiding considerations. The lib dems argue it would be better to give people the cash, but the problem here is the tax system is just too slow.

The other counter argument is that the VAT doesnt provide an incentive. But to be honest that misses the point. The VAT move injects 1% of GDP into the economy. Even if business passed none of it on, it would still do this.

Economically it is, I believe, the soundest of all options (precisely why ken was so keen)

DavefromLuton

You may be interested in my own shopping experiences.
I have spent £1062 in total including a swiss-made watch for my wife.
Of the rest, £328 was spent on goods made in China, £63 the USA, and £32 India.
The amount spent on UK goods was £42 plus, possibly, the cost of the wrapping paper.
All the goods except the watch were bought on line so the main beneficiaries were Amazon (American) and the parcel delivery companies (probably European).
My shopping habits were not changed by the budget VAT changes - I would have bought these goods anyway. So the exchequer has lost approx £23 in foregone VAT - which I will now save.
Congratulations on a job well done Mr Darling!!!!!

JohnAnt

Larry - Oh, I dunno, if it's chips you want, Gordon's shoulders are covered with them.

Dean

Can I just add to my previous post that, when an IMF official describes the outlook as "very bad", it must be little short of catastrophic. These people move in the world of diplomacy, and use very careful, highly nuanced language. In a few months time, the only questions people will be asking are 1) why didn't governments do more, when they knew how bad it was going to be? and 2) how much more fiscal stimulus is required to avoid a '30s style slump? I honestly don't know what answer the Tory front bench will give to this question, but I sincerely hope they have one, because I too would like to feel that there is an alternative to Brown.

George Laird

Dear All

The cut on VAT was done for one reason and one reason only, to be seen to be doing something.

It was a gimmick.

Universally mocked with scorn poured over it by everyone and his dug.

Brown missed the point totally.

There are serious problems for example, the over inflation of the housing market.

Mortgages 60% down in approvals.

What do we get but Lame Brain Brown frettering over a few pence off a DVD player.

When is Brown going to address causes and not symptoms?

We now see that Labour has stalled in the polls again, so expect a steady drop as more people start to ask questions and then more questions.

Finally, they will be asking when is this fool going to call a General Election?

Yours sincerely

George Laird
The Campaign for Human Rights at Glasgow University

TrevorsDen

"If you look at our long-term debt as a % of GDP "

The question then revolves around the faith one has in the GDP figure. Britain has suffered a massive influx of immigration, which is inevitably going to inflate the GDP, but to what effect? GDP per head has not really changed. Just what does our GDP consist of compared to other countries?
An economy
1 - consisting of people borrowing money to simply pay for services from other people and not actually producing much
2 - consisting of unproductive public services paid for out of taxation and current account borrowing
... well its not much of an 'economy'.

In terms of numbers our debt has grown and grown. That's a fact, not a manipulated statistic..

Labour Matters

Oh dear, the Tory boys at Coffee House are at it again: letting ideology get in the way of the facts.

Let's play along then and pretend that the UK can't afford a fiscal stimulus. In which case neither can Japan; Italy; Germany; France; Portugal; or the the USA, as they all have greater public debt/GDP than the UK. Sweden and Spain are looking dicey too, but it depends on where your arbitrary line is drawn.

That leaves South Korea; Mexico; New Zealand; China; and, Australia (of those who are already providing a fiscal stimulus).

So now what are you going to do to prevent a deflationary spiral and a second Great Depression? Nothing, just like the Tory frontbech?

Grow up boys!

Paul Lettan

The VAT decrease was to provide immediate relief. I expect a major budgetary package once it is clear what Obama is doing in the States. This will co-ordinate with preparations for a world conference on the economy, Obama's first official visit to the UK, followed by a short 21 day election campaign.

JimBob

"as they all have greater public debt/GDP than the UK"

Yes, if you remove all the big balances from the UK one. Very cunning that Mr Brown

mac

Labour Matters: "letting ideology get in the way of the facts."

Come on LM, this is such a tired cliche I couldn't even laugh at it.

Nicholas

"letting ideology get in the way of the facts."

Something Labour are much better at than the Tories as a rule, although Labour "ideology" has been a bit chameleon over the last decade, sometimes embracing national socialism, sometimes Stalinism and sometimes old fashioned hucksterism, all dressed up in a rather disingenuous facade of centre-leftism. In any case, Labour prefer facts to be kept securely locked up in the dark and secret rather than going anywhere where something might get in the way of them don't they? That's why they get so annoyed about leaks. Completely incapable of telling the truth or facing it, as are most of their adherents.

So what does your idea of growing up involve, Labour Matters? Becoming a socialist, then expecting to be treated like a child by the state and treating everyone else like one? No thanks. Rather be a Tory boy (I'm not) than a conniving, deceitful, hypocritical, shameless, nanny-needing Labour man.

You need to understand, although I think the next election may ram the message home to you and your kind, that just because you support Labour does not mean you are always right and everyone else is always wrong.

And why? Why does Labour matter? Or is that some kind of subliminal piece of arrogant bluster to establish your left wing credentials and stick up for your masters? The only thing about Labour that matters to me right now is seeing the back of them once and for all. I'd vote for any party to achieve that end.

King Prawn

Here's some economic facts for you.

Firstly,a 2.5% cut in VAT is not going to encourage people to spend more money if they do not have the money in the first place.

Second, this so-called stimulus package is being paid for by borrowing more money. Because the UK economy is in such a bad state (the falling currency price is the main indicator of this) then the UK is seen as having a larger risk factor. So before anyone lends money to the UK Government, lenders will demand increasingly higher rate of interest before they lend that money to our Government.

It won't be long before the amount paid in interest charges will exceed defence or more seriously something the education budget.

Thirdly, if you are going to have a stimulus package where should it go. Should it go in tax cuts to wealth creators who create actual jobs inthis country. Should it go in extra money to likely Labout Party voters by increasing pensions and other benefits. Do you carry out important public works such as Crossrail and improvements to our transport system. Or do you increase the number of penpushers in this country. Brown is likely to go for the final option which is why public service employment is increasing.

Cameron is yet to come up with a coherent plan. But that is better than what Brown is given us.

mitch

"So now what are you going to do to prevent a deflationary spiral and a second Great Depression?"

2.5% off Vat and the taxpayer paying the bankers xmas bonus surely wont.
Nobody will believe thing can get better until the current governments have been replaced and new ideas brought forward.Tax and spend as a cure for taxing and spending is stupid.

Pete, Scotland

Having worked from the early 70's till now, there are only 2 things that have made me feel better off.

1/ a wage increae.

2/ a tax cut (a proper one, not the stupid 2% vat thing)

Wilhelm

Liebour doesnt matter

What kind of pot are you smoking ?

Susan Hill

''The Campaign for Human Rights at Glasgow University''
Doesn`t Glasgow University advocate human rights already then ?

LS

Dean: "fiscal stimuli packages in general (which the Tories oppose)"

Wrong.

They oppose unaffordable fiscal stimulus.

Our fiscal stimulus would be affordable if Brown hadn't pissed the fruits of the (No More) boom up the wall and left himself utterly unprepared for the (No More) bust.

Nick Kaplan

Labour matters offers us the same false dichotomy his pathetic leader is offering the public; that between 'do something' Labour and the do nothing Tories. But the real dichotomy is between 'do anything to make us look good, even when it will make things worse' labour and the 'leave things to run their course as quickly and painlessly as possible Tories'.

It's all very well and good promising to act but only if your actions will have some positive effect, however, since Brown's policies are based on Keynesian economic assumptions that have (time and time again) proven to be false, one can only conclude that it is he who is being ideological and the Tories who are being pragmatic.

The false assumption at the heart of Brown's policy is that governments can create wealth. This is the fundamental basis of the equation on which Keynes based his general theory which says that national income equals consumption, plus government spending, plus investment, plus net exports.

However, unlike consumption (which is the spending of wealth created) governments transfer wealth they do not create it. Governments either transfer wealth from one group to another (redistribution) or from the future to the past (borrowing). This means that the result of increased government spending will be decreases elsewhere in the economy, thus if taxes are decreased and this decrease is offset by borrowing rather than spending reductions the result will not be an increase in consumption (on which Brown is mistakenly relying), but instead there will be increased saving in the knowledge that future taxes will rise, also the huge government debt will crowd-out investment. Thus any reduction in taxes is going to have very little positive effect as will any increase in spending, at the same time as crippling long run economic growth by ensuring increased future taxes which will inevitably reduce incentives to work thereby slowing our escape from this recession.

Instead of helping there is a good chance Brown’s proposals will lengthen the recession even if they do make it slightly shallower. What little gains there may be in the short run will be far outweighed by the negative long run effects of Keynesian economics; stagflation.

Incidentally this is exactly what happen under the New Deal which did noting for unemployment (it was the same in 1937 as in 1932) whilst creating massive structural problems in the economy and lengthening the depression unnecessarily.

The only sensible policy is to let the recession run its course while making sensible supply side reforms to ease the pain of low and middle-income workers as well as businesses through tax reductions funded by spending cuts (which need not mean cuts to front line services, there is plenty of wasteful spending e.g. Advertising, International Aid, Diversity Officers, the planned spending increases in the NHS (even though we already have European levels of expenditure on health) etc). This is what the Tories are proposing and whilst it is not politically popular it does make economic sense.

The fact is that Brown knows all too well that Keynesian economics proved to be an absolute farce (there is not one instance of large scale government stimuli working), but he also knows that the public have no understanding of this. This is why Brown is simply doing what is popular (since being seen to be acting always goes down well even when the long term effects of such action will be negative) whilst Cameron is suggesting what is right; it’s a sad fact of democracy that what is popular is always more successful than what is correct, and that is a fact well suited to Brown’s penchant for scheming and spinning. It also suits his socialist ambitions well, thus it is him and the other Labour trolls who are basking in ideological glee at the recession and the excuse it has given them to impose socialism once again. Its you socialists who are being the ideological opportunists, not us Conservatives.

Roger Thornhill

Gordon has no real experience and yet people are complaining about Tory cabinet jobs.

I WANY my representative to be experienced in life and in work. Ideally, they have started, run, built up their own company. Most who have done so will appreciate the value of everyone from the cleaner to the Sales Manager. Understands cash flow, keeping clients happy, investing in the futute and the value of training and discipline (including FIRING sociopaths). They will also reject too much H&S and over fussy employment law which impoverishes us all.

seb

@ Dean

I think there has always been an alternative to Brown. The opposite of 'deranged' has always been 'sane'.

Simon

King Prawn, the falling currency price is primarily the result of significant drops in interest rates. I know of know serious economist who would disagree with this.

If sterling was under pressure as a result of borrowing there would be a decline in the currencies AA rating - which hasnt happened.

Rhoda Klapp

Simon, all the toxic debt CDS instruments too had good credit ratings. Until they didn't.

Peter Gompertz

If the answer is 'Labour Matters' posting at 4.18 pm on 23rd December 2008 it must be a seriously stupid question.