Brown has played into the hands of the Tory Bullingdon Boys he loathes

Peter Sudworth

Very interesting article. However, the reason why goods are priced at 4.99 is a security one. If a customer hands over a five pound note the teller must open the till to give the customer his one pence change, otherwise it would be possible for him to pocket the five pounds without putting it properly through the till.

Jim

Very thorough report, but it seems that few of our politicians really comprehend the new era we are moving into. The debt isn't really a problem, unless you lent it to the British government as it cannot be repaid. The reason being that we have now passed peak oil, therefore the growth economy is over, barring a technological revolution. Obviously that could happen, but a even if a replacement for oil is found tomorrow, the development lag would mean we would still be in for a rocky transition period.
It appears that government debt is now going exponential, but a buyers strike is on. The change of attitudes required to deal with this new reality has hardly begun, just think what it would mean to avert hyper-inflation, scrapping the welfare state, pulling out of various wars, de-globalisation and re-industrialising.
People are not going to be able to make that much of a mental leap immediately, cold hard reality will force it gradually. So hyper-inflation is guaranteed, with all the social and economic dislocations that will entail.
We don't just have a debt problem, we need a new business and social model. We are nowhere near that point at the moment.

Chris Bates

An excellent article that destroys what's left of Gordon Brown's economic credibility. Regarding the VAT cut, I am wondering whether it is a cynical ploy by the government to take the credit for all the sales and discounts that are likely to be offered by retailers in the coming months and years.

tony

Good stuff, Fraser.

But why is nobody advocating a simple answer to this problem, by putting the state's 'administrative staff' on a 4-day week?

This class, (separate from the front-line public service deliverers) speak for about 50% of the Government's 35% of the economy. So a 20% salary-cut for the administrative class represents 10% of government expenditure.. or a 10% cut of all taxes.

This class have failed in their duty to regulate and direct the affairs of this nation, and so at least they ought to be encouraged to do less, rather than more. And a 4-day week for a couple of years is not exactly
going to bankrupt them.

A 10% cut in all taxes, both individual and corporate, would produce a massive boost to the economy. If growth is resumed by 3% per annum, then after a couple of years these administrators could go back on to full-time pay.

So, in summary;

- nobody loses their jobs
- no state borrowing needed
- no tax increases required
- everybody gets a payrise
- Economy boosted
- public services unaffected
- the administrative class is given time to research new ideas on what constitutes 'good governance' .. and to reflect on the fact that they are reliant, as we all are, on a soundly managed economy

Daniel

As usual, the Tory right class warriors come out all guns blazing with inane, antagonistic comments directed at public sector workers. To point out the obvious - the Conservatives need the support of a large number of public sector employees who are currently floating voters to form a majority at the next election. So telling them they're useless and need to take a pay cut is not exactly a recipe for electoral success. If anyone should be taking a pay cut, it is the senior bankers whose greed and poor risk management has led to this crisis.

Hereford

@ Peter Sudworth: No it is because people usually delete, in their minds,the numbers after the decimal point. So you charge, as near as damit, a fiver for something that the punter will say "I paid under a fiver for that", or "I paid just over four quid."

Thus £99.99 becomes "under £100."

Hereford

@tony: Sorry mate, you can't do that. Civil Servants have cast iron protections from variation of contracts. The cost of doing anything would be huge and have a frightening cash flow impact on any government's budgets.

That's why successive governments' promises to cut the cost of the civil service have ended up as smoke and mirrors.

tony

Daniel,

Banks, and all sorts of other enterprises need to operate within 'the law'.. which needs regulation, and administration.

Our problem now is that our adminstrators have failed in their duty. And, it seems that a lot of other people are going to lose their livelihoods. And so within a population of 70m, there are bound to be people driven to extremes of deseration, and the consequences are going to be murders, suicides, starvation, etc. as a direct result of this failure of adminstration. Sadly these will be among those who are already living marginally, for example who have 'hostages to fortune' such as children and other dependents.

So, as it is likely that the adminstrative echelons of the government service are furthest from the margin of despair, it seems that they should take a cut in their working week. And, as resourceful and skilled individuals, they could easily find part-time work in that extra day to help their family budget, if needed.

And, on a demographic basis, there are likely to be as many left and right voters among the affected class, so it is not exactly an 'impossible' thing for either or both parties to advocate. Mind you, as MPs themselves fall within this class, it might be interesting to see how they would approach the issue.

But, what spending cuts would you propose?

Peter Sudworth

@Hereford
Apologies, but if you check with retailers, I think you will find that it is to force them to put it through the tills.

Simon Stephenson

"Politics is once again about economics, his [Brown's] specialist subject."

This myth keeps getting repreated. Brown is not a specialist economist. In fact, I doubt if he is a specialist historian, either, despite this being the subject in which he obtained his university qualifications.

His specialism is in climbing the ladder of power, and at this he has demonstrated the phenomenal strength of his will. For someone so intent on steering this country into a way of life alien to all bar a handful, his methods of camouflaging his real agenda has been something at which to marvel.

But of course it helps to have a conscience that is completely controlled by his own ambition.

He's a major risk to the well-being of this country, and an alert adult-savvy population would have put a stop to his upward progress years ago.

JohnAnt

Brown's G20 plan to make the global economy complicit in his debt-creation pyramid scheme is now unravelling. The Germans won't play ball: they don't like the idea of unfunded government spending on further consumer debt. The French and the US will go for protectionism. Other countries will wait and see.
Wait until the new year, when Brown can't conceal any longer the glut of unsold gilts, and people are waking up to the fact that he's pretended to sober up the economy by forcing it to have another drink. Then it'll be Darling on the plane to the IMF.

John Corfield

A superb concise well argued article, well done Fraser.
My main concern is how can Brown offering us a miserly VAT reduction of 2.5% think that this will induce us to spend more?
What planet is the man on?
Where is his common sense?
Or is it that he is so wrapped up being Captain Economic Marvel his hubris and complete alienation from reality and how the majority of us are suffering allows him to promote such a ludicrous policy and expect us to view it as call to spend more?
I really worry for the sanity of this PM.
He is still a dead-man walking to the next election

Colonial

Whether through ignorance or through fear of the truth, the realities of this recession are being avoided. In essence it is not complicated.

1. Consumer debt ballooned as it never has before.
2. A resultant tidal wave of money washed through the economy.
3. It gave rise to a consumer lead mega boom.
4. Debt reached a ceiling. Spending tapered off radically. End of story.

For the populace to believe that the party is about to start again is dumb. For politicians to pretend that it will is evil. It could only do so if the previous tidal wave of money was replaced. And that is not going to happen.

The West is in for a long, unavoidable and painful, readjustment process. The books have to be balanced, exports need to increase massively, debt paid off, spending cut, society needs to adapt to a 2009 onwards world, government waste and stupidity ( ever heard of LGBT Officers? A new ceiling in indulgent idiocy ) needs to end.

In short the economy needs to reinvent itself.