In Brown's debt

The Bellman

Keep at it, Fraser. You must have hit McSnotty and Blinky where it hurts, because Lord Mandelsohn has just waded in with a counter-allegation on 'Tory lies', saying that Osborne G made 'deliberately misleading' comments about McSnotty blocking Tory access to Treasury figures.

Given that his deranged delusional boss tried to get Dave banned from a cocktail party, he's surely more than petty enough to pull this off. (In fact, wasn't a similar point raised a few months ago?) And, frankly, by cancelling the spending review, they lying bastards are concealingTreasury figures not just from their political opponents, but their masters, the voters.

When Blinky is accusing Casual Dave of being a bully, and Mandelsohn accuses Osborne of lying, allegations of such hilarious, eye-watering hypocrisy, you know your blade has struck them where it hurts. Give no quarter, and enjoy watching them squirm. I know I will.

Heuschrecker

Eurozone inflation rate for June -0.1%. (eurostat 30/6/09)

UK by far highest inflation rate(fiddled) in EU27 of major countries; only exceeded by out of control Baltic states(now crashing into deflation) and Bulgaria, Romania.

UK, a joke. Not to be taken seriously in leading economies. Most similar to US; another country gone broke through Ponzi schemes. See California, Indiana etc. all under water.

Chris lancashire

I was around in the 70's (and not in short pants). Rampant inflation skews all sorts of decisions and markets - property, equity, etc. and brought huge labour demands and unrest. Until recently I really thought all that was behind us.

And yes, Brown will be long remembered as the worst Chancellor and the worst PM of modern times. His mismanagement in 2001-7 was absolutely epic, accompanied at the time with hubris on a similar scale.

However, I take issue with your view of the sale of Northern Rock - if it makes even borderline economic sense (and the public have yet to see the terms of ther deal) then the Govt. should get shot.

Finally, if Brown, Balls and Mandelson think that we will begin to start coming out of recession in time for a GE (or any time soon after) then they have not even begun to understood the damage they have done.

Sir Graphus

Dave needs to take a deep breath and realise that he should measure his time as PM in terms of what it achieves and not its longevity.

In other words, he should not be afraid to do what's needed, be jeered roundly for his efforts and booted out after 5 years. He will need to have faith that posterity shall respect him.

I'm not sure he's that sort of bloke, though.

Peter

...waits for call from Gordon Brown saying it's all lies, and you should take that post down.

Jonathan Cook

Can someone please help???

Does this article imply that it is best move savings out of Sterling and jump into gold or another currency

Jason

Brown's policy of running the economy in deficit during the boom times surely needs to be looked at, as again this was a purely political decision, allowing him his famous three election winning "Tory cuts" dividing line (you can't use the "cuts" arguement when surplus spending is simply reduced)

James

I want to cry.

oldtimer

Whichever way you look at it the standard of living in the UK will fall. It will be by a mixture of job losses, pay freezes, pay cuts, inflation, higher taxation, sterling devaluation. You name it. We will get it. It is the consequence and responsibility of the most incompetent and evil government in living memory.

It places a huge responsibility on the next government to make the least damaging choices within its own remit of public spending and taxation.

One observation about inflation as the solution. It might devalue the government`s debt but it would put up the cost of capital and kill the incentive to invest.

PS One benefit of the Kay article, it puts Balls` blatherings into their proper context. Has the FT seen the light?

John Moss

This is socialist, statist, establishment nonsense!

To raise tax revenue, one must cut tax rates to boost growth and restrict public spending.

Freeze all departmental spending totals at current cash levels and cut by 5% all non-departmental spending totals each year for five years.

Give welfare claimants a maximum of 6 months benefits before reductions of 25% kick in. Reduce the minimum wage by 25% for those who have been unemployed for more than 6 months.

Cut Corporation Tax to 10% and VAT on construction work requiring planning consent or building control approval to 5%. Give 100% tax relief on investment in research and development.

The deficit will be larger next year as a consequence, but shrink far faster thereafter.

Barry

The simple way to combat the glee Brown may feel in opposition would be to announce a 5p Brown Tax supplement to Income Tax. Shove up personal allowances at the same time though. Yes it's petty but it's the only language Brown appears to understand.

Andy

For those who can't read the full article due to not being a suscriber:

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Britain has sunk itself deep into a fiscal black hole
By John Kay

Published: June 30 2009 19:11 | Last updated: June 30 2009 19:11

This year, Britain is likely to incur a fiscal deficit of more than 12 per cent of national income. This figure is completely outside the normal experience of developed countries in peacetime. How did it happen and what are its implications?

The normal rule of prudent public finance is to allow for substantial cyclical variation. Recessions cut tax receipts and lead to additional expenditure, especially on benefits. Moderate surpluses in good times turn into moderate deficits in bad times, so things balance out overall.

The British government, ostensibly committed to this principle, has obfuscated to abuse it so that Britain entered the recession with a large underlying deficit. The downturn turned a substantial gap in public finances into a chasm. This situation was aggravated by the speed and scale of the recession and the realisation that many of the earnings from financial services, which had previously boosted tax receipts, had been illusory. The contribution of financial services to public finances has been not only removed but reversed.

Even if there were a rapid economic recovery, there would still be a large deficit. At least half of the current deficit will need to be eliminated by cuts in public expenditure and increases in tax rates. These will have to be very substantial. After all, 1 per cent of gross domestic product equates to 3 per cent of public expenditure, two points on the basic rate of income tax and three points on the standard rate of value added tax. At least six such “units” of deficit budgeting will be required over the next few years.

And the background is not benign. There are always upward pressures on public spending, but there are several additional ones ahead. The costs of servicing public debt will rise, as amounts and rates increase. The government will, like the banks themselves, defer accounting for the costs of the bank bail-outs as long as possible. But the reality remains that every penny that subsidises the financial system is a penny diverted from schools and hospitals.

The costs of off-balance-sheet financing have also come home to roost, as they always do. The spending of local authorities and National Health Service trusts will be squeezed by commitments they have incurred under the private finance initiative. The impact on health and benefit costs of an ageing population will begin to make itself felt over the next decade.

In practice, the only successful method of reducing public spending as a share of GDP has been to impose tight curbs while the economy is growing rapidly. We shall be lucky if such an opportunity appears. The reality is that the usual victims of pressure on discretionary expenditure – nurseries and universities, culture and sport – should brace themselves for hard times, and Britain’s crumbling public infrastructure will crumble further.

Inflation reduces the value of public and private debts and makes many adjustments easier. It is much easier to fail to keep wages and salaries in line with inflation than to reduce them outright. It would be a pity to throw away the gains from a successful struggle over two decades to squeeze inflation from western economies. But the governments of Britain and the US may separately and privately conclude that such a choice is less bad than the other options they face.

Even so, both countries are going to have to reconcile themselves to substantially higher tax rates. A tax package to raise £70bn ($115bn, 82bn), probably the minimum required to stabilise Britain’s public finances, might put four points on the rate of income tax, take VAT to 20 per cent, freeze personal allowances and tax thresholds, add five points to corporation tax and collect a bit of extra revenue from the usual suspects such as alcohol, petrol and cigarettes.

I wouldn’t want to be the political front person for that package. Perhaps the Conservatives should give the finance portfolio back to Kenneth Clarke. In 1997 he lost the election no chancellor would want to lose. Whoever succeeds in 2010 will have won the election no chancellor would want to win.

Simon Stephenson

Slowly slowly catchee monkey, but you're heading in the right direction Fraser. The critical realisation that has to happen before we can start rebuilding is that the direction of US/UK affairs for the last 15 - 20 years has been based on adolescent crap - some of it clever perhaps, but none of it with an ounce of wisdom. That if we accept that any part of this socio-political framework is worth keeping then we'll get nowhere. And that the sooner the better that we accept that we made a wrong turning, through taking our eye off the ball more than anything, and that the only way forward is if we go back to the crossroads first.

Good luck!

Alan Douglas

"Few major politicians in recent years would have been so unpatriotic as to deploy a scorched earth strategy on their own country."

Aye, there's the rub - Brown's country is undoubtedly Scotland. What the hated English get is only just desserts.

The Barnett formula is still alive and kicking the English in the Edwards.

Mike, Brighton

Brown's actions are nothing short of criminal. Can he be prosecuted for "Misfeasance in Public Office"?

David Logan

Interesting piece in the Telegraph by Irwin Seltzer (Murdoch's representative on earth) who used to be something of a Brown fan but is now scthing about these spending plans. Little doubt about who the Murdoch press will be backing at the next election. As usual, the winner!

Liz Brown

GULP...............
We must stop brownballs before it becomes even more catastrophic and I see that Byrnes has now joined the liars........

Ian C

As the Lady has said in private
"They've done it again".

Well this time, let the rest of us do it once and for all - kill Labour off. They were let off the hook at the end of the 80's by the Poll Tax.

The Tories must set the economy free of its socialist shackles -from within and from Europe. Growth, and fast, is the only way of returning to a healthy economy.

That means handing back initiative, and their income, to people to spend as they see fit while controlling the excesses of capitalism that will inevitably result with a severity of penalties not yet seen in this country - more along the US model.

There will need to be the equivalent of the defeat of the miners, with the public service unions. It can be done but will need 10 years to complete if started on Day 1 of a new gov't.

Ian C

John Moss - that is the route.

boulay

Barry, not actually a bad idea although would probably be more likely to happen (otherwise it would be criticised as childish and political) if it was called "National Debt Repayment Tax" to frankly tell people why they are paying it - it would focus peoples' minds on national debt and stop it from being an abstract idea to them and instead making it real.

Martin C

Vandalising the value of Sterling really isn't painless. Well, actually, it is fairly painless if you are on an index-linked public-sector final salary pension.
But for the four-fifths of the working population who do not work for the state and who depend on a fixed pension pot and savings, then it is going to be very, very painful indeed.
Its high time the public sector, in particular the decision makers, were put on money purchase pensions. When their eggs are in the same basket as the rest of us, I'm sure the quality of decision making will improve remarkably.

Moraymint

The best article yet on the utterly lamentable and truly shocking state of affairs that is now the fag-end of 12 years of Labour Government. Have we ever seen anything this bad in peacetime?

These guys (little more than political poseurs, gangsters and shysters, many of them now unelected) took office in 1997 in order to hold office. They had to get into power by fair means or foul, knowing that openly selling socialism was a complete non-starter. They chose foul means in the shape of Blair as a media-savvy, front-man (with no workable political policies), with that unreconstructed socialist, Brown, the true holder of power in the UK this past decade or so, pulling the levers in the backgound. Moreover, Brown was all along determined to scupper Blair's leadership. How not to run a country, eh?

Having deliberately avoided selling socialism openly to gain office, Brown executed socialism by stealth until the levers came off in his hand. Now, we're going to pay for it, and some.

As always, the socialists have run out of money; simple as that. Worse, they've trashed just about every public service you can mention, opened our borders to untrammelled immigration, screwed our armed forces into the deck, wracked up public debt on an almost unimagineable scale, corrupted British politics into a basket case and, finally, totally demoralised the nation.

If the electorate doesn't send Labour to hell in handcart at the next General Election, never to return again to politics, then I fear it's probably a case of abandon hope all ye who live here.

In a perverse way, it would be interesting to see Brown win the next election simply to watch him be finally destroyed by his own legacy. The problem is, the UK would have to go down with him. My money would be on street riots under a re-elected Labour Government.

Indeed, the Tories need to be careful that they don't suffer a similar fate. Right now, I'm not convinced the Tories understand just how bad is the situation here.

Mark C

It is utterly depressing.
The Cabinet (apart from Balls and Cooper) should rise against Brown. Now.

Publius

I agree with John Moss. Too much of this analysis takes as a given the socialist statist view, and then just wonders how to fund it.

The vast cat's cradle of regulation and regulators and box-tickers needs to be unpicked.... Actually no, not unpicked, just slashed through, like the Gordian Knot.

It has become so all-pervasive that we have ceased to see it. But it''s there, and it needs to be removed.

Chris lancashire

Jonathan Cook: That's exactly what it implies. The best places to put your sterling are euroland property (particularly France but not the sodding Dordogne) and, riskier, Canadian $ junior gold minimg shares.

Jim

The other alternative is to repudiate the debt. I don't see why the taxpayer should subsidise the losses of banksters, you can't build a successful economy with socialism for the well connected. Socialism, as we know, doesn't work.
Anybody who still has savings in sterling needs to shift it into gold, and quickly. You also want to keep some of it outside the country. Hopefully this disaster will lead to revolution, we need to get our politicians under our control, or they will return us to serfdom.

kinglear

I think , to paraphrase Churchill we are not at the beginning of the end, but just the end of the beginning. It's going to get much much worse

Denis Cooper

It astonishes me that there's now so little mainstream media commentary about "quantitative easing".

I watched a TV report about the GDP contraction during the first quarter being some tenths of a per cent sharper than previously thought, but now there are signs that the worst may be over; and the supposedly knowledgeable "economics editor" didn't even think it worth recalling that on March 11th Mervyn King threw the switch and set the printing presses rolling.

Since when they've been running day and night, with short breaks for essential maintenance, and have now churned out £100 billion - roughly equivalent to 7 per cent of GDP.

Of which newly created money, 97 per cent has found its way into the government's coffers, by the Bank buying up previously issued gilts from the market, while in parallel the Treasury's Debt Management Office has been selling new gilts into the market.

Taking into account the 3 per cent which has actually been used for the originally stated purpose of buying commercial assets "to inject liquidity into the financial system", the Bank will complete its first £100 billion of purchases of existing gilts today - details here:

http://www.bankofengland.co.uk/markets/apf/index .htm#giltresults

The link to "Balance Sheet impact" leads to a bar chart, in which the ever rising bars are almost entirely turquoise - purchases of previously issued gilts, another £3.0 billion scheduled for this afternoon.

Without the Bank mopping up surplus gilts from the market, it's unlikely that the Treasury would have been able to borrow anything like enough by selling more gilts; so the government would have been forced to make severe cuts in its expenditure - in the worst case by a quarter, as that's how much of its present spending is now being funded by borrowing - and that would have sent the economy into meltdown.

The problem now is that while the condition of the economy may have stabilised, it's (figuratively but effectively) on life support provided by the printing presses, and those presses must be kept running until the economy has recovered sufficiently to keep itself alive unaided.

Which may mean that so-called "quantitative easing" will have to continue for a couple of years, and then it will be a few more years before the government's finances return to balance, and then it'll be decades before we finally clear the accumulated hundreds of billions of debt that have been racked up.

Thanks, Gordon.

steve

reply to Jonathan Cook re. Sterling.

I'm a full-time forex trader/scalper.
The Pound recently broke above a key level to reach $1.67, this opens the door to $1.71 or $1.73.
Not sure if it'll rise further, depends upon data releases & continued risk appetite.

The Equity rally may soon end, see: http://caps.fool.com/Blogs/ViewPost.aspx?bpid=220803&t=01002756778892789413
Thursday's jobs report could trigger a sell-off.
I'd recommend exiting Sterling asap. Safest bet would be the Yen or Chinese Yuan (Hong Kong account with HSBC), the Dollar could rise as Equity profits are taken.
Gold won't do well if the Dollar rises.

Long term I'd be long the Aussie, wait for a fall in commodities to 'buy a dip'.

steve

bit more info re. Sterling.
15yr & 25yr average for the Pound is $1.65.
There's a risk the recent low of $1.35 could be revisited.

Short the UK

Fraser,

Deep down psychopaths/sociopaths are evil people.

The bad people are the ones who realise what their evil leader is doing but instead of a finding a moral compass they accept the evil. Many in the Cabinet are culpable in this economic farce.

If they are patriots they should stand up and refute this madness.

Simon Stephenson

Moraymint : 10.26

Well reasoned, but you leave out the important point that the whole New Labour ethos, modern man if you like, has employed mutual back-scratching like no other. As a result of which the higher echelons of education, banking, media, commerce, local government , etc, etc, are stacked with sympathisers and fellow-travellers who have got there not through ability to do the job, but because of their dedication to the cause.

The entire infrastructure of the country is controlled by people who believe that State domination is the natural order of things, and who do not have the minds to be any use at putting in the changes necessary, but, also, do have the minds to insert major contrived obstacles all along the way.

I fear you are right. I don't think many really understand the difficulties ahead. And as I wrote yesterday, this problem will be exacerbated by the Labour hierarchy's refusal to give their diehard supporters the slack they need to acquiesce with what needs to happen without losing face to an unacceptable degree. If anything, this is perhaps the most important thing the Conservatives need to work at - how to create the arena for such a non-opposition pact with true Labour supporters knowing that this will be resisted all the way by the Leninist leadership.

Sally Chatterjee

Fiscal vandalism. If even Conservative MPs and officials are struggling to realise the uphill gradients ahead, the public is probably totally ignorant: if they knew, Brown would be gone.

Hysteria

Further to Mr Mint and Mr Stephenson - I agree the points - but how do we move from being interested (not to say concerned) bystanders to the slow train wreck of the country to some degree of action.?

I know that preparation and self support helps the individual and family - but can't we do anything to get others to "wake up"?

I stil don't see any really serious opposition from teh Tory lines - why aren't the "Big Guns" out there shouting from the rooftops as to what damage is being done? Where is Clark? IDS? Hague?

lola

I am absolutely certain that Brown needs to be arrested if the Tories win. The very minute that the result is declared they should the police round and get him banged up in the slammer.