More blows against Brown's spending narrative

Julianlzb87

Woodward is actually a deep cover
mole working on the behalf of the
Ssinsburys fortune.

By helping Labour lose power
he is helping reduce inheritance tax.

Jim

I don't see how it can be fixed without major pain. As I understand the figures, to stop increasing the debt we need to cut by 25%, since 1 pound in four spent is borrowed.
Do you have total debt figures at the Speccie? It seems the fiscal deficit will between 12% to 14% of GDP by next year, possibly more if you factor in the falling GDP figures.
Then you have the external debt, which could be about 250% of GDP, if you include RBS's loan book, PFI, unfunded pensions. Can anyone verify this?
This quote seems appropriate " The last duty of a central banker is to tell the public the truth" Alan Blinder. Essentially Bundred wants to keep people in the pound, only a fool would believe him. Our debt figures are over 3 times worse than Argentina's when they went bankrupt.
We are going bankrupt, the old and the young will die, if you trust public servants at this point, you will probably be among them.

paul holdstock

brown/blair spent the last few years of the major government, spinning lies and dis-information continually.
once in government, nothing changed.
they have lied us into wars, destroyed the nations pension provisions, and left our children/grandchildren/great grandchildren with astounding levels of debt, and presided over a decline in political integrity beyond measure.
quite how they think, that once ejected by the electorate, they will get away without retribution being brought down on them, beggars belief.
the nations appetite for revenge, will encourage the in-coming government to throw them to the wolves.
although it wont make our day to day lives any easier, their suffering will provide a modicom of light relief.

Dirty Euro

There is no reason for extensive spending cuts. This is just right wing people using the excuse of a recession to the opposite of what Obama has done.
Obama has used ti to the make the USA more left wing the right want to use it to make us more right wing. They want to cut services to lower their taxes that is all. The debt is no worse than Germany or France.
This just seems like the right wing press are trying to brainwash us to have a more right wing society. The Blairites are showing themselves as just tories.

Andy Leeds

When you have a benefit bill greater than the take from income tax you have one hell of a problem.

Pat

Well, a voucher scheme for education could be used to effectively cut education costs- if people unused voucher value were returned to the parents after a few years.
Similarly an individual medical account would save on health- if unused money was freed for general use after a year or two.

Westmorlander

@Dirty Euro.

Given your posts over the past year on various blogs, I'm still unsure whether you seriously believe what you say or whether it is a long-running attempt at satire.

KJ

Dirty Euro "There is no reason for extensive spending cuts"

So which taxes would you raise?

Barman at The Red Lion, Whitehall

@ Dirty Euro

You appear to have sumbled into the wrong Blog - I think you are looking for Labourlist - they tend to believe your kind of inane rhetoric...

Bickers

Dirto Euro:

Don't you geddit! Brown's spending splurge (which has been very wasteful and mainly unproductive) was built on a sea of debt. That debt can only be maintained at current or lower future levels if the IOU's the Government has to issue to cover those debts are believed to be sound by the international money markets that lend money to the Government.

One way or another we have to live within our means, as individuals and at the Government level we haven't been so we have to get real and spoend what we can afford and get better value for money, something Labour have been inept at doing

Denis Cooper

Bundred writes about the interest on government debt -

"... the assumption that interest on government debt will be only £42.9bn in 2010/11 appears shaky."

"That forecast for central government interest payments is, incidentally, more than 40% greater than the actual 2007/08 level of £30bn. It is more than our total defence spending of £35.7bn in 2007/08, and much more than the £31bn we spent on schools in that year."

Etc.

But much of that increased interest on government debt will be due to the Bank of England, which is creating new money and buying up government debt as fast as it is being issued by the Treasury.

And as the Bank of England is publicly owned, and all its profits can be claimed by its sole shareholder, the government, in principle all the interest paid by the Treasury to the Bank can be returned to the Treasury.

It may not be quite that simple in practice, because the Treasury has also indemnified the Bank against losses arising from the operation of the Asset Purchase Facility through which it is buying up gilts from the market; so if the market prices of those gilts fall in the future, as they may, then apart from paying interest the Treasury will also have to compensate the Bank for its capital losses.

However as the government owns the Bank it could impose an alternative method of payment on what is in effect a captive lender, ie payment not in cash but in more gilts, for compensation for capital losses, and for payment of the interest, and for repayment of the principle as the gilts mature.

In other words, while the Bank continues to own government debt the government could arrange for it to be rolled over indefinitely.

The thought did cross my mind that at some point in the future the government might quietly arrange for all the gilts held by the Bank to be cancelled, but on second thoughts that would leave a massive hole in the Bank's balance sheet - or more acccurately, the balance sheet of its subsidiary, BEAPFF, which actually does the buying of gilts, using new money lent by the Bank:

http://www.bankofengland.co.uk/markets/apf/balancesheetimpact.htm

Rolling the debt over would not have that effect, as BEAPFF would still have gilts as assets.

I suppose it can be summarised as UK taxpayers borrowing from themselves, and borrowing money which they don't actually have, against the security of future tax revenues which they and their children will provide, but with the option of indefinitely deferring repayment of themselves.

Athesius the Facilitator

I think "dirty euro" has been on an afternoon session in his local. Surely he's drunk. What a load of waffle from an ill informed "lower deck lawyer".

John Moss

Brown laid the dynamite in the foundations with his £200 billion plus borrowing spree from 01-08. IF he had kept spening increases to what would have been covered by increasing tax receipts, then we would not be in such a hole.

Governemnt is going to have to do less and do what it does for less. An immediate cash freeze is needed in all departmental spending with a 3-5% per annum cut in non-departmental spend for the next three years.

In parallel, we need a strategy for growth based on lower business taxes and lower VAT on construction and replacement of plant and machinery. Scrap the various allowances to pay for some of this, but go for growth and investment to raise tax receipts, rather than choking business to death.

Hysteria

DES appears here from time to time - IF he is serious , his only contribution is to remind us that vast swathes of the population don't "get it" and will remain stuck in a "them and us/ left v right" mind set. People of their ilk are fighting the class wars of the last century.

Or he may just be 'avin a larf !!!

Anon for a change

I believe Dirty Euro used to call himself " Dirty European Socialist" on other blogs.I recognise the 'english style'

He was always posting all over the place so i called him Benefits Des.He has a lot of time on his hands !!

TGF UKIP

And don't forget Peter, your Tory pals have been entirely complicit in Brown's lunatic spending plans right up to a very few weeks ago.

Even now they cannot bring themselves to speak authentically and sensibly on the required level and direction of spending cuts.

Mind you, not having a credible, acceptable or even visible economic spokesman doesn't exactly help their case.

TrevorsDen

UKIP - Tories have not been complicit in anything - its Brown who has been spending and borrowing. Tories regularly voted against Browns budgets.

You only need to see the current lies being spread by Brown to see the political wisdom of Tories caution before the crunch - remember the imminent liklyhood of a pre crunch election?

UKIPS actions of course make the return of a Brown govt more not less likely.

Dirty Euro

I am not falling for it there is no need for a massive cut in public spending at all. I will not be bullied form the facts. It is the elite trying to brainwash us. I will not fall for it. We all know the Blairites are traitors to the left. They want to force us to accepts cuts we do not need.

Anon for a change : Do not bully me off with your offensive remarks you are have nothing useful to say.

TomTom

I am not falling for it there is no need for a massive cut in public spending at all

Well the Labour Party is bankrupt with Gordon Brown personally on the hook for its outstanding loans of £10 million plus.

The country seems to be taking on loans it cannot re-pay; monetizing debt and redeeming foreigner holdings of Gilts through credit expansion in the UK banking system which in turn is fuelling food and oil prices through speculative trading.

The Government is rebuilding bank profitability at the expense of the national economy and then borrowing by debasing the savings of its own population and using British token money to create a speculative bubble which destroys the external value of the currency internationally.

Spending cuts are a sine qua non but Labour will not make them because it is a party congenitally directed towards 1931 and only saved by not being re-elected....1997-2010 will prove that Labour is a self-destructive party addicted to extravagance and larceny and this will be its end as 20 years of austerity and poverty lie ahead and the spendthrifts of Labour end up on the scrapheap of history

Paul M

Politicians are just rational operators. When Labour came to government, they cynically calculated that they could "buy" themselves at least 10 years of power by embarking on a vast program of unfunded spending. This involved massive transfers; borrowing and stealth taxes to pay for them; huge amounts of fancy off-balance-sheet PFI footwork; and the creation of a client state that would keep voting them back into power. They did not bank on a financial crisis to expose the state of the nation's finances, and now the chickens have come home to roost. As it turns out, the confidence trick bought them not 10 but 12 years of power, and some very fat pensions to ease the pain of losing their jobs in 11 months' time. The media, the Opposition, and the voters let them get away with it. It should be a long, long time before they are voted back into office: they can hardly re-brand themselves "New New Labour" next time. For dealing with politicans, as with other sellers of goods and services with shoddy reputations, the Romans had it right: Caveat Emptor.

RobC

I wonder if there is an odd moment during the day or night that Brown's inner self admits that he has been an absolute disaster and his reputation is in shreds?
It would appear that his carnutian ego can do little to stem the rising tide other than to lie repeatedly to himself and us betraying both his Party and more importantly the Country as we all face the very real prospect of drowning in a sea of his debt.

John Gillman

The 'cause'(of this national financial, economic and political mess) is in the belief...that State welfare comes before wealth. Wealth creation can be taken for granted, and wealth creators taxed without thought. But, schooling, health etc., belongs to political power. If, over 60 years, or longer, schooling, health services, pensions, etc., had been largely allowed to develop on their own, with households assuming responsibilty, as they have with what is the usual household expenditure in the unintelligently labelled 'private sector', the problem of Government spending(borrowing, taxing) would have been more manageable. Once in the 'private sector', these services would be largely returned to their home base...if there were to develop a widespread understanding that this is where they should be, where they in fact came from, and greatly preferable to the miseries of Government monopoly. To call only State monopoly services 'public', and the rest 'private', is of course perverse. No citizen, save bureaucrats, has a say in State services. They are cut off from public choice and influence far more than Tesco, John Lewis, Clarke shoes... etc. It is the 'private sector' that serves the public. The 'command sector' swallows what it can.

Such radical changes would be no guarantee of Government virtue of course. Governments might gear up huge debts for other reasons(wars) or other new-fangled notions (global warming). And the socialists would always have it otherwise, for the hatred of freedom and a free people is a constant motive, equality always the excuse for State robbery.

Further there is always the intractable problem of the non-social class. Those who perhaps cannot, or those who will not, ensure what would be regarded as minimum standards by the majority. There is no final answer, and the taxpayer would have to provide. Even when they do, over decades, to the tune of trillions of pounds, whether here or e.g. in the US, there remains a persistent underclass.

The present crisis provides an opportunity to re-shape the 'public sector' drastically. However, since current debts are so huge, and the difficulty of getting finances back into balance so daunting, it is most unlikely that those who should be thinking along these lines are actually are doing so. Politicians want to show themselves indispensible, by spending other people's (taxpayers') money. They would hate to think their importance diminished by citizens getting their tax money back, and taking their own decisions on a wide scale. It is they (politicians) who for years have sought to persuade the electorate that they could spend the electorate's money better than the electorate. They have been remarkably successful.

It should go without saying that, in a fiercely competitive world, the nation depends absolutely on its wealth creating class...inventors, scientists, engineers, designers, entrepreneurs, bankers, marketing people, salesmen, etc.. If taxes rise to meet the Government's folly, Britain will slide into relative poverty, for this class will go abroad, or become demoralised. If everyone persists in thinking State welfare before wealth, it is a certainty.