UK Spending Review
October 20, 2010 5:26 PM Subscribe
The Chancellor of the UK coalition government has announced the details of the Comprehensive Spending Review, setting budgets for government departments to 2014/15. Total savings will be £18 billion. Local government funding will be cut 7% each year for the next four years. The Arts Council budget will be cut by 30%. 490,000 jobs are forecast to be lost over the period in the public sector. The average cuts for each government department will be 19%.
The speech. HM Treasury Spending Review pages. Guardian summary. Independent article. Nick Robinson's blog for the BBC. Make your own cuts with the Guardian's interactive tool. Graphic showing 09/10 government spending (that is, before the cuts).
Local government funding will be cut 7% each year for the next four years.
Causing local taxes to go up with a net difference of zero to your actual bottom line. Don't worry, we already tried this in NEW England.
posted by mkb at 5:32 PM on October 20, 2010
Causing local taxes to go up with a net difference of zero to your actual bottom line. Don't worry, we already tried this in NEW England.
posted by mkb at 5:32 PM on October 20, 2010
Can somebody tell me (with pointers to evidence) is this due to the economic downturn (recession) or is it due to the bailouts (agreeing that both may be intrinsically interlinked)?
posted by gadha at 5:42 PM on October 20, 2010
posted by gadha at 5:42 PM on October 20, 2010
Riot.
posted by mobunited at 5:58 PM on October 20, 2010 [2 favorites]
posted by mobunited at 5:58 PM on October 20, 2010 [2 favorites]
One interesting thing is the 8% cut in the defence budget. As a consequence Britain has to cooperate closely with France in military matters, which, in terms of the last thousand years of history, is a hell-freezes-over kind of deal.
posted by Kattullus at 5:58 PM on October 20, 2010
posted by Kattullus at 5:58 PM on October 20, 2010
That "make your own cuts" tool is nice. "If only you could change this. But as you've borrowed the money, you have to pay it back"
posted by vidur at 5:59 PM on October 20, 2010
posted by vidur at 5:59 PM on October 20, 2010
Is Her Majesty's Treasury the amount paid for the royals?
Also, any option to raise taxes?
posted by klangklangston at 6:01 PM on October 20, 2010
Also, any option to raise taxes?
posted by klangklangston at 6:01 PM on October 20, 2010
Is Her Majesty's Treasury the amount paid for the royals?
I believe payments to the Royal Family etc come from the Civil List, and these payments are supposed to be frozen next year (when the cuts come into effect). I also read something about a 12% reduction in Royal Household operating expenses, although I could be mistaken.
posted by KokuRyu at 6:48 PM on October 20, 2010
I believe payments to the Royal Family etc come from the Civil List, and these payments are supposed to be frozen next year (when the cuts come into effect). I also read something about a 12% reduction in Royal Household operating expenses, although I could be mistaken.
posted by KokuRyu at 6:48 PM on October 20, 2010
I kind of wonder what Nick Clegg and the Liberal Democrats get out of this. Power for power's sake?
posted by KokuRyu at 6:48 PM on October 20, 2010
posted by KokuRyu at 6:48 PM on October 20, 2010
Steve Bell and Martin Rowson from the Guardian are utterly, savagely brilliant, by the way (and the online comments section of the Guardian is actually readable and informative, kind of like MetaFilter).
I wish we had cartoonists like them in Canada, although I guess Aislin has his moments.
posted by KokuRyu at 6:52 PM on October 20, 2010
I wish we had cartoonists like them in Canada, although I guess Aislin has his moments.
posted by KokuRyu at 6:52 PM on October 20, 2010
There's no way that cutting half a million jobs can be anything but good for the economy. Last thing we need in a recession is more employed people.
posted by Pater Aletheias at 7:02 PM on October 20, 2010 [7 favorites]
posted by Pater Aletheias at 7:02 PM on October 20, 2010 [7 favorites]
As a consequence Britain has to cooperate closely with France in military matters, which, in terms of the last thousand years of history, is a hell-freezes-over kind of deal.
[cough] Entente cordiale [cough]
posted by kersplunk at 7:10 PM on October 20, 2010 [1 favorite]
[cough] Entente cordiale [cough]
posted by kersplunk at 7:10 PM on October 20, 2010 [1 favorite]
China Miéville weighs in with Letter to a progressive Liberal Democrat.
Doug Saunders: An Austerity Plan Made in Canada.
posted by dustyasymptotes at 7:30 PM on October 20, 2010 [4 favorites]
Doug Saunders: An Austerity Plan Made in Canada.
posted by dustyasymptotes at 7:30 PM on October 20, 2010 [4 favorites]
The real joke about the "Canadian budget" is that the minority Harper Conservative government has reversed most of the cuts over the past four and a half years.
posted by KokuRyu at 7:51 PM on October 20, 2010
posted by KokuRyu at 7:51 PM on October 20, 2010
From dustyasymptotes's link:
Sure, some Tories are fucking idiots - but a lot aren’t. They know that these measures, far from salvaging it, might might very well break the economy. And that is, for them, a risk worth taking, because either way, something is gained: a transfer of power, the finishing of the Thatcherite revolution, a recomposition of class strength. And if the cost of that is mass immiseration, and even the stagnation of the national economy, so be it.
posted by KokuRyu at 7:55 PM on October 20, 2010
Sure, some Tories are fucking idiots - but a lot aren’t. They know that these measures, far from salvaging it, might might very well break the economy. And that is, for them, a risk worth taking, because either way, something is gained: a transfer of power, the finishing of the Thatcherite revolution, a recomposition of class strength. And if the cost of that is mass immiseration, and even the stagnation of the national economy, so be it.
posted by KokuRyu at 7:55 PM on October 20, 2010
Johann Hari has a some thoughts in Independent.
posted by vidur at 7:56 PM on October 20, 2010 [10 favorites]
It can't be coincidental that this is being done to us by three men – Cameron, Osborne, and Nick Clegg – who have never worried about a bill in their lives. On a basic level, they do not understand the effects of these decisions on real people. Remember, Cameron said before the election: "The papers keep writing that [my wife, Samantha] comes from a very blue-blooded background", but "she is actually very unconventional. She went to a day school." Osborne is a beneficiary of a £4m trust fund he did nothing whatsoever to earn and which is stashed offshore to avoid tax. Clegg actually thought the state pension was £30 a week, a level that would kill pensioners.It would be funny if it weren't so tragic.
posted by vidur at 7:56 PM on October 20, 2010 [10 favorites]
On spending by the queen. Looks like the royals would now be making more.
posted by vidur at 8:14 PM on October 20, 2010
posted by vidur at 8:14 PM on October 20, 2010
One interesting thing is the 8% cut in the defence budget. As a consequence Britain has to cooperate closely with France in military matters, which, in terms of the last thousand years of history, is a hell-freezes-over kind of deal.
I see kersplunk beat me to it, but I want to reiterate that the Entente Cordiale secured British/French cooperation over a century ago. You may also have noticed the two world wars fought together and with the exception of de Gaulle's occasional hissy fits over NATO and Britain's entry into the Common Market, the two countries have pursued parallel paths. Nothing groundbreaking about their cooperation.
Now, back to the real issue, that Tory budget.
posted by boubelium at 8:23 PM on October 20, 2010
I see kersplunk beat me to it, but I want to reiterate that the Entente Cordiale secured British/French cooperation over a century ago. You may also have noticed the two world wars fought together and with the exception of de Gaulle's occasional hissy fits over NATO and Britain's entry into the Common Market, the two countries have pursued parallel paths. Nothing groundbreaking about their cooperation.
Now, back to the real issue, that Tory budget.
posted by boubelium at 8:23 PM on October 20, 2010
The reduction in military size is great news. I'm still waiting for a sweeping in of international cooperation so that we, citizens of the world, can collectively stop paying for weapons.
posted by esprit de l'escalier at 8:34 PM on October 20, 2010 [1 favorite]
posted by esprit de l'escalier at 8:34 PM on October 20, 2010 [1 favorite]
Regarding the job cuts, if the UK believes that they are headed for economic growth, cutting jobs is the right thing to do. You have to pay back the deficit some time, and it makes sense to do it when prices are increasing due to economic prosperity. I could not get the gdp figures for 2010 though, so I have no idea whether they believe their economy is expanding or not.
posted by esprit de l'escalier at 8:38 PM on October 20, 2010
posted by esprit de l'escalier at 8:38 PM on October 20, 2010
The basic idea is a good one, as these cuts would have to be made eventually, by the next generation if not this one. But the complicating factor is timing. Paul Martin did his cutting in the 90s, during a sustained economic boom. By contrast, the British government is implementing their austerity program when their country is barely clear of a recession, which complicates everything. If the economy tanks, the pound will go down and the cost of servicing the debt will rise, wiping out any gains. So I think there's a real risk the misery they're going to cause ordinary people could end up being for nothing if the breaks go against them.
posted by Kevin Street at 8:39 PM on October 20, 2010 [1 favorite]
posted by Kevin Street at 8:39 PM on October 20, 2010 [1 favorite]
Kevin Street: Agreed.
posted by esprit de l'escalier at 8:59 PM on October 20, 2010
posted by esprit de l'escalier at 8:59 PM on October 20, 2010
Yes, the trouble with comparing to the Canadian experience of Martin is that a) people loved Chretien more than their own parents for whatever reason, at least in the polls and b) Martin actually cut while the economy was up, like Keynesians are supposed to.
posted by GuyZero at 8:59 PM on October 20, 2010
posted by GuyZero at 8:59 PM on October 20, 2010
Sorry about that, esprit de l'escalier. Should have previewed first, as you said the same thing more concisely. The graduated approach they're taking may be a good idea, since they can cancel future cuts if the economy doesn't look like it can take the shock.
posted by Kevin Street at 9:07 PM on October 20, 2010
posted by Kevin Street at 9:07 PM on October 20, 2010
I dunno, the mid-90s, at least for me, was a grim time (it's why I left Canada). I do remember the Paul Martin budget from '98 - it was nasty.
posted by KokuRyu at 9:27 PM on October 20, 2010 [1 favorite]
posted by KokuRyu at 9:27 PM on October 20, 2010 [1 favorite]
The mid-90's was not Canada's greatest economic period, but in general the Canadian GDP grew pretty well under Martin. At any rate, he managed to cut debt without a huge public backlash. My memories of Martin are that he cut federal spending and that people generally liked it.
posted by GuyZero at 9:49 PM on October 20, 2010
posted by GuyZero at 9:49 PM on October 20, 2010
In response to Osborne, Alan Johnson acknowledged the "deficit has to be paid down" but said the announcements would affect "people's futures, people's jobs, people's pensions, people's services, their prospects for the future"
In other words, all the official opposition has to say is: We agree that this is neccesary, but it makes us sad because it will hurt people. And so it will.
I also disagree with Mieville - if this was a plot by Tory idealogues then why are are the NHS and education budgets actually set to rise? Why are there cuts in military spending (sacred to the Tory right)?
Whether the timing turns out to be brilliant or disastrous is of course an open question that only time will answer.
posted by atrazine at 10:05 PM on October 20, 2010
In other words, all the official opposition has to say is: We agree that this is neccesary, but it makes us sad because it will hurt people. And so it will.
I also disagree with Mieville - if this was a plot by Tory idealogues then why are are the NHS and education budgets actually set to rise? Why are there cuts in military spending (sacred to the Tory right)?
Whether the timing turns out to be brilliant or disastrous is of course an open question that only time will answer.
posted by atrazine at 10:05 PM on October 20, 2010
My memories of Martin are that he cut federal spending and that people generally liked it.
Talk to any municipal politician or municipal planner, and they will tell you that the $400B bill to replace decaying infrastructure is a direct result of federal downloading of responsibilities onto local governments - the same thing this new UK spending review is proposing.
why are are the NHS and education budgets actually set to rise?
I'm not sure if it's entirely true that education budgets are set to rise (more than, say the rate of inflation), but the NHS, while receiving maintained funding, will be expected to do more with that funding (just like the BBC), a de facto deep cut.
posted by KokuRyu at 10:18 PM on October 20, 2010
Talk to any municipal politician or municipal planner, and they will tell you that the $400B bill to replace decaying infrastructure is a direct result of federal downloading of responsibilities onto local governments - the same thing this new UK spending review is proposing.
why are are the NHS and education budgets actually set to rise?
I'm not sure if it's entirely true that education budgets are set to rise (more than, say the rate of inflation), but the NHS, while receiving maintained funding, will be expected to do more with that funding (just like the BBC), a de facto deep cut.
posted by KokuRyu at 10:18 PM on October 20, 2010
Talk to any municipal politician or municipal planner, and they will tell you that the $400B bill to replace decaying infrastructure is a direct result of federal downloading of responsibilities onto local governments - the same thing this new UK spending review is proposing.
Quite possibly - I don't know enough to dispute this.
But I do know that Martin won the Liberals three elections in a row (not counting the '93 election that returned the Libs to power) over 13-some years. So like I said, it may have been bad in numerous ways but the electorate generally liked it.
posted by GuyZero at 10:50 PM on October 20, 2010
Quite possibly - I don't know enough to dispute this.
But I do know that Martin won the Liberals three elections in a row (not counting the '93 election that returned the Libs to power) over 13-some years. So like I said, it may have been bad in numerous ways but the electorate generally liked it.
posted by GuyZero at 10:50 PM on October 20, 2010
There's no way that cutting half a million jobs can be anything but good for the economy. Last thing we need in a recession is more employed people.
I've had very mixed feelings about this coalition government. I loathed Thatcher and her legacy when I lived in the UK; but having grown up in Ireland during a period of severe recession, the experience left me not only a confirmed Europhile, but also enough of a fiscal conservative not to believe you can tax your way to equality or prosperity.
I'm quite surprised that the chancellor's budget actually increased spending on education by ~11% - most observers had expected a cut there too, and brutal fee increases for university students. To have kept up a commitment to increase spending this sector while cutting so many others (including defense) is a remarkably bold strategy.
Of course, cutting or not restaffing a half million jobs from the public payroll is a harsh policy, any way you slice it. On the other hand, there's jobs and jobs; each public sector job is paid for out of taxes. Roughly speaking, that many jobs cost each person in Britain about £200/year (assuming an average public sector wage of £24,000/year, which is a little below the median of £27,000). Certainly some of this can be offset by tax rises (and there are various 'stealth taxes' in the budget), but the belief that budgetary imbalances can be easily solved by just levying taxes on Other People is a misguided one. Even if there were a £15 billion cash pile sitting around for the taking that would offset these cuts, there won't be one there every parliament.
I'm absolutely not a proponent of 'small government' - I'm a strong believer in public services and public investment, and a great admirer of public health systems like the NHS, and have worked in the public health system of my native country (Ireland) in both administrative and care roles. I wish we would restructure the US health system to run along those lines, although I don't think most people appreciate just how enormous such an undertaking is.
However, while government can and should be responsive to people's needs and public services can be a great way to equalize economic opportunity and provide a solid foundation for long-term growth, the public sector is not, as some appear to think, a bottomless pit of resources that should always expand and never ever be dialed back. There are times when it's inefficient, and the fact is that it has to be paid for taxes - if not now, then later. The UK is facing its own demographic problems as a post-war baby boom generation enters retirement, but with one of the world's highest population densities it has considerably less room to grow its way out by promoting immigration than, say, the US (which has a population density quite a bit below average). There are limits to how much the budgetary shortfall can be covered with increased taxes because there's not much to prevent the financial services industry (the UK's primary source of revenue) from moving elsewhere at relatively short notice. I do think taxes on the wealthy should go up, but that just can't be the only approach to the country's structural economic challenges. Cutting spending is never pleasant, but it's a lot less painful than bequeathing a higher debt-GDP ratio to the next generation.
There's an opportunity here for Labour and the left wing of the Lib Dems to lay claim to some major economic turf, which might pay off big at the next election. But to do so, they're going to have to come up with some concrete numbers and be frank about where the money is going to come from and be spent. From my experience of Irish politics, failure to come with specifics and accept the resulting unpopularity will effectively cede the argument to the Tories for a generation.
posted by anigbrowl at 11:02 PM on October 20, 2010 [3 favorites]
I've had very mixed feelings about this coalition government. I loathed Thatcher and her legacy when I lived in the UK; but having grown up in Ireland during a period of severe recession, the experience left me not only a confirmed Europhile, but also enough of a fiscal conservative not to believe you can tax your way to equality or prosperity.
I'm quite surprised that the chancellor's budget actually increased spending on education by ~11% - most observers had expected a cut there too, and brutal fee increases for university students. To have kept up a commitment to increase spending this sector while cutting so many others (including defense) is a remarkably bold strategy.
Of course, cutting or not restaffing a half million jobs from the public payroll is a harsh policy, any way you slice it. On the other hand, there's jobs and jobs; each public sector job is paid for out of taxes. Roughly speaking, that many jobs cost each person in Britain about £200/year (assuming an average public sector wage of £24,000/year, which is a little below the median of £27,000). Certainly some of this can be offset by tax rises (and there are various 'stealth taxes' in the budget), but the belief that budgetary imbalances can be easily solved by just levying taxes on Other People is a misguided one. Even if there were a £15 billion cash pile sitting around for the taking that would offset these cuts, there won't be one there every parliament.
I'm absolutely not a proponent of 'small government' - I'm a strong believer in public services and public investment, and a great admirer of public health systems like the NHS, and have worked in the public health system of my native country (Ireland) in both administrative and care roles. I wish we would restructure the US health system to run along those lines, although I don't think most people appreciate just how enormous such an undertaking is.
However, while government can and should be responsive to people's needs and public services can be a great way to equalize economic opportunity and provide a solid foundation for long-term growth, the public sector is not, as some appear to think, a bottomless pit of resources that should always expand and never ever be dialed back. There are times when it's inefficient, and the fact is that it has to be paid for taxes - if not now, then later. The UK is facing its own demographic problems as a post-war baby boom generation enters retirement, but with one of the world's highest population densities it has considerably less room to grow its way out by promoting immigration than, say, the US (which has a population density quite a bit below average). There are limits to how much the budgetary shortfall can be covered with increased taxes because there's not much to prevent the financial services industry (the UK's primary source of revenue) from moving elsewhere at relatively short notice. I do think taxes on the wealthy should go up, but that just can't be the only approach to the country's structural economic challenges. Cutting spending is never pleasant, but it's a lot less painful than bequeathing a higher debt-GDP ratio to the next generation.
There's an opportunity here for Labour and the left wing of the Lib Dems to lay claim to some major economic turf, which might pay off big at the next election. But to do so, they're going to have to come up with some concrete numbers and be frank about where the money is going to come from and be spent. From my experience of Irish politics, failure to come with specifics and accept the resulting unpopularity will effectively cede the argument to the Tories for a generation.
posted by anigbrowl at 11:02 PM on October 20, 2010 [3 favorites]
I kind of wonder what Nick Clegg and the Liberal Democrats get out of this.
An opportunity for electoral reform Labour refused to countenance, and working with a party that hasn't been responsible for rollbacks in civil liberties that would have made even Thatcher blush?
And far be it for me to point out that the (at best) fast and loose and (at worst) downright corrupt practises of the UK banking sector occurred when Labour was in power; Blair and Brown could have easily closed of the rorts of Russian crooks moving to London and paying no taxes, or English peers claiming to be non-residents for tax purposes, or any one of a number of financially insane decisions that happened between 1997 and 2008.
posted by rodgerd at 11:23 PM on October 20, 2010 [7 favorites]
An opportunity for electoral reform Labour refused to countenance, and working with a party that hasn't been responsible for rollbacks in civil liberties that would have made even Thatcher blush?
And far be it for me to point out that the (at best) fast and loose and (at worst) downright corrupt practises of the UK banking sector occurred when Labour was in power; Blair and Brown could have easily closed of the rorts of Russian crooks moving to London and paying no taxes, or English peers claiming to be non-residents for tax purposes, or any one of a number of financially insane decisions that happened between 1997 and 2008.
posted by rodgerd at 11:23 PM on October 20, 2010 [7 favorites]
Vodaphone has apparently been let off 6 billion pounds in tax, while the Tories are claiming victory for getting a 1.25 billion settlement. This is part of the Tory plan to go softer on large corporations who cheat on their taxes. So that's a data point that tends to bend the curve towards 'evil' rather than 'misguided'.
posted by Grimgrin at 11:43 PM on October 20, 2010 [5 favorites]
posted by Grimgrin at 11:43 PM on October 20, 2010 [5 favorites]
The Day Margaret Thatcher Dies
posted by PeterMcDermott at 12:10 AM on October 21, 2010 [4 favorites]
posted by PeterMcDermott at 12:10 AM on October 21, 2010 [4 favorites]
Also, any option to raise taxes?
There's a massive tax gap that could be filled to substantially resolve many funding issues, but for ideological reasons the coterie of rich men running the country won't be going there, preferring instead to chuck about a million people out of work with some vague lies about the private sector taking up the slack in job provision.
An opportunity for electoral reform Labour refused to countenance
That's simply not true. Brown offered Clegg a referendum on full PR, with AV right away. But Clegg is a hard-line neo-liberal who's been arguing for this sort of sociopathic attack on the poor since the Orange Book, so chose to get into bed with his ideological chums rather than the softer neo-liberals of New Labour. Just because the latter are a shower of shite let's not forget the two former are a veritable torrent of the same.
posted by Abiezer at 12:23 AM on October 21, 2010 [4 favorites]
There's a massive tax gap that could be filled to substantially resolve many funding issues, but for ideological reasons the coterie of rich men running the country won't be going there, preferring instead to chuck about a million people out of work with some vague lies about the private sector taking up the slack in job provision.
An opportunity for electoral reform Labour refused to countenance
That's simply not true. Brown offered Clegg a referendum on full PR, with AV right away. But Clegg is a hard-line neo-liberal who's been arguing for this sort of sociopathic attack on the poor since the Orange Book, so chose to get into bed with his ideological chums rather than the softer neo-liberals of New Labour. Just because the latter are a shower of shite let's not forget the two former are a veritable torrent of the same.
posted by Abiezer at 12:23 AM on October 21, 2010 [4 favorites]
This is part of the Tory plan to go softer on large corporations who cheat on their taxes. So that's a data point that tends to bend the curve towards 'evil' rather than 'misguided'.'
Is there such a plan? I mean, Dave Hartnett is a civil servant, not a political appointee.
posted by atrazine at 12:31 AM on October 21, 2010
Is there such a plan? I mean, Dave Hartnett is a civil servant, not a political appointee.
posted by atrazine at 12:31 AM on October 21, 2010
To put this in perspective; we're paying £44 billion in debt interest alone. The government debt is set to increase this year alone by £150 billon or so. The national debt total is estimated to hit 100% of GDP by 2012. There was a real worry that the UK would see a big increase in the cost of borrowing if we didn't start tackling the problem.
The labour government massively increased public spending, largely paid for by increased tax receipts from the financial sector. That money has now disappeared, along with the other drop in income from the recession causing lower tax receipts, leaving us with a massive black hole in the budget (the structural deficit), over and above the money that had to be spent bailing out the 'light touch' regulated banks that Gordon and Tony were so enthusiastically flogging as a model to the rest of Europe.
If I remember rightly, it was Gordon Brown that claimed 'the end to boom and bust' under his economic stewardship.
We've maxed out the country credit cards. And we're still borrowing ever more money. They had three choices. Do nothing, and borrow even more, and borrow more again to pay for the ever spiralling debt interest payments, hoping we didn't take a bit hit in our credit rating. Massively raise taxes, or cut spending. They've gone for smallish tax rises, and cutting spending.
1/2 a million jobs over 5 years; that's 100k jobs lost in the public sector a year. This year, the private sector created 175k jobs.
Is it going to mean real hardship for people losing their jobs? Yes, it is. Are the alternatives of massive tax rises for the working and middle classes - thus causing a large contraction in the private sector, with big job losses, from the reduction in spending - a better choice?
These cuts aren't even going to cut the debt we're in as a country. They're just going to try and reduce the rate the debt is rising, hopefully with increases in tax receipts due to economic growth in the private sector bringing us back towards a manageable increase in the public sector debt.
We already pay something like 40% of income nationally in taxes to support the state spending. I consider myself fairly middle class, yet I'm in a tiny flat and struggle to make ends meet. The thought of trying to afford having children fills me with dread. I'm grateful that I'm not going to be seeing a massive increase in my taxes to try and pay our way out of the massive black hole the labour government left us with.
The state is important. It pays for schools, the NHS, social welfare spending for the vulnerable. 'I like paying my taxes - it buys civilization'. Education and the NHS are better protected that most departments. Yet every penny that pays for a job in the public sector has to come out of my and your taxes.
Is it fair that some benefit recipients get twice the average take home pay? Is it fair that some people and businesses can massively defraud the tax man and get away with it? Is it fair that people can go onto benefits for life and never bother to look for work, and pass their council house onto their children while working families struggle to make ends meet?
Hate on 'the nasty party', fair enough - I voted lib dem. Now lets hear your alternative to solving the debt problem.
posted by ArkhanJG at 12:38 AM on October 21, 2010 [4 favorites]
The labour government massively increased public spending, largely paid for by increased tax receipts from the financial sector. That money has now disappeared, along with the other drop in income from the recession causing lower tax receipts, leaving us with a massive black hole in the budget (the structural deficit), over and above the money that had to be spent bailing out the 'light touch' regulated banks that Gordon and Tony were so enthusiastically flogging as a model to the rest of Europe.
If I remember rightly, it was Gordon Brown that claimed 'the end to boom and bust' under his economic stewardship.
We've maxed out the country credit cards. And we're still borrowing ever more money. They had three choices. Do nothing, and borrow even more, and borrow more again to pay for the ever spiralling debt interest payments, hoping we didn't take a bit hit in our credit rating. Massively raise taxes, or cut spending. They've gone for smallish tax rises, and cutting spending.
1/2 a million jobs over 5 years; that's 100k jobs lost in the public sector a year. This year, the private sector created 175k jobs.
Is it going to mean real hardship for people losing their jobs? Yes, it is. Are the alternatives of massive tax rises for the working and middle classes - thus causing a large contraction in the private sector, with big job losses, from the reduction in spending - a better choice?
These cuts aren't even going to cut the debt we're in as a country. They're just going to try and reduce the rate the debt is rising, hopefully with increases in tax receipts due to economic growth in the private sector bringing us back towards a manageable increase in the public sector debt.
We already pay something like 40% of income nationally in taxes to support the state spending. I consider myself fairly middle class, yet I'm in a tiny flat and struggle to make ends meet. The thought of trying to afford having children fills me with dread. I'm grateful that I'm not going to be seeing a massive increase in my taxes to try and pay our way out of the massive black hole the labour government left us with.
The state is important. It pays for schools, the NHS, social welfare spending for the vulnerable. 'I like paying my taxes - it buys civilization'. Education and the NHS are better protected that most departments. Yet every penny that pays for a job in the public sector has to come out of my and your taxes.
Is it fair that some benefit recipients get twice the average take home pay? Is it fair that some people and businesses can massively defraud the tax man and get away with it? Is it fair that people can go onto benefits for life and never bother to look for work, and pass their council house onto their children while working families struggle to make ends meet?
Hate on 'the nasty party', fair enough - I voted lib dem. Now lets hear your alternative to solving the debt problem.
posted by ArkhanJG at 12:38 AM on October 21, 2010 [4 favorites]
Also, while swinging tax rises on the wealthy and big companies seem attractive, the problem is - as labour discovered in the 70's - that if you squeeze too hard, companies move overseas and the wealthy can afford the accountants to find the loopholes, so you don't gain very much.
There are increases in corporation 'stealth' taxes, the tories are keeping the 50% income tax band, I think they're reducing pension tax relief, and of course, the cutting of child benefit for high-rate income tax payers so it's not like they're letting the better off off scot free.
'Soak the rich' is a populist position, but it doesn't help much in the real world.
posted by ArkhanJG at 12:50 AM on October 21, 2010
There are increases in corporation 'stealth' taxes, the tories are keeping the 50% income tax band, I think they're reducing pension tax relief, and of course, the cutting of child benefit for high-rate income tax payers so it's not like they're letting the better off off scot free.
'Soak the rich' is a populist position, but it doesn't help much in the real world.
posted by ArkhanJG at 12:50 AM on October 21, 2010
Not really a danger IMO ArkhanJG - capital certainly threatens that kind of flight and governments cave, but really in the '70s they went overseas to exploit cheap labour in the emerging economies of the east - the tax regime at home wasn't that big a factor and if it were they'd have been long gone years back. Those left in the UK would stay unless things got far more hostile than a somewhat increased tax burden - there's all sorts of other logistical/cultural/historical reasons companies pay through the nose to be in the City of London rather than any number of cheaper possibilities.
posted by Abiezer at 1:07 AM on October 21, 2010 [2 favorites]
posted by Abiezer at 1:07 AM on October 21, 2010 [2 favorites]
Pithiest comment I heard all week: The Tories - the party that put the "n" back in cuts
( (C) Sandi Toksvig 2010)
[apologies for the lack of seriousness and the obvious cheap shot - I'm a bit depressed and this just made me laugh]
posted by MessageInABottle at 2:16 AM on October 21, 2010 [3 favorites]
( (C) Sandi Toksvig 2010)
[apologies for the lack of seriousness and the obvious cheap shot - I'm a bit depressed and this just made me laugh]
posted by MessageInABottle at 2:16 AM on October 21, 2010 [3 favorites]
boubelium: I see kersplunk beat me to it, but I want to reiterate that the Entente Cordiale secured British/French cooperation over a century ago. You may also have noticed the two world wars fought together and with the exception of de Gaulle's occasional hissy fits over NATO and Britain's entry into the Common Market, the two countries have pursued parallel paths. Nothing groundbreaking about their cooperation.
I think you're underestimating what exactly is going on right now in terms of military integration between France and Britain. They're not forming one army, but the integration promises to be quite extensive. To quote a French military analyst making the most French analogy possible: "It's about being sex buddies rather than marriage." The Entente Cordiale was in response to German power, but it seem that the current enthusiasm from the British side stems largely from a need to cut the budget. This isn't the formation of a European army, but having the EU's two most powerful armies start the process of integration is a step towards that. That this is a step taken by the famously Euroskeptic Tories is interesting to me.
posted by Kattullus at 2:30 AM on October 21, 2010
I think you're underestimating what exactly is going on right now in terms of military integration between France and Britain. They're not forming one army, but the integration promises to be quite extensive. To quote a French military analyst making the most French analogy possible: "It's about being sex buddies rather than marriage." The Entente Cordiale was in response to German power, but it seem that the current enthusiasm from the British side stems largely from a need to cut the budget. This isn't the formation of a European army, but having the EU's two most powerful armies start the process of integration is a step towards that. That this is a step taken by the famously Euroskeptic Tories is interesting to me.
posted by Kattullus at 2:30 AM on October 21, 2010
Brown offered Clegg a referendum on full PR, with AV right away.
Brown offered a pig in a poke. Even with a three line whip, every Labour and every Lib Dem vote wasn't a majority.
Brown basically needed to promise not only Labour, but more than half of the third party vote -- and even three line whips aren't guaranteed votes for Labour. Furthermore, there's a criticial difference between "We will hold a vote on" and "This Government shall implement." The first means that the Government will hold a vote. The second means that if that vote fails, the Government falls for no confidence.
Giving away a vote is easy.
It's really easy to make an offer you can't really hold to -- even if your government lasted that long, given the hostility that the rank-and-file of Labour had towards the LibDems. Given the "STFU and get over here" attitude that came out of Labour, I can see why Clegg would have walked away.
If Labour or Lib Dem had 10 more seats, something might have been worked out, but they didn't. Together, they had a minority government. And when it comes to PR, Labour has no credibility. PR was part of the Labour Manifesto for the 1994 elections -- one which netted Labour 147 seats, and an incredible 418-165 majority.
And yet, after all those years? No PR. None.
posted by eriko at 2:43 AM on October 21, 2010
Brown offered a pig in a poke. Even with a three line whip, every Labour and every Lib Dem vote wasn't a majority.
Brown basically needed to promise not only Labour, but more than half of the third party vote -- and even three line whips aren't guaranteed votes for Labour. Furthermore, there's a criticial difference between "We will hold a vote on" and "This Government shall implement." The first means that the Government will hold a vote. The second means that if that vote fails, the Government falls for no confidence.
Giving away a vote is easy.
It's really easy to make an offer you can't really hold to -- even if your government lasted that long, given the hostility that the rank-and-file of Labour had towards the LibDems. Given the "STFU and get over here" attitude that came out of Labour, I can see why Clegg would have walked away.
If Labour or Lib Dem had 10 more seats, something might have been worked out, but they didn't. Together, they had a minority government. And when it comes to PR, Labour has no credibility. PR was part of the Labour Manifesto for the 1994 elections -- one which netted Labour 147 seats, and an incredible 418-165 majority.
And yet, after all those years? No PR. None.
posted by eriko at 2:43 AM on October 21, 2010
I'm quite surprised that the chancellor's budget actually increased spending on education by ~11% - most observers had expected a cut there too, and brutal fee increases for university students.
The budget increase applies mainly to schools ("real terms increases of 0.1 per cent in each year of the Spending Review for the 5 to 16s school budget", p.41). Universities are facing cuts to the teaching grant to be compensated by fee increases for students: "major reform of the higher education sector to shift a greater proportion of funding from the taxpayer to the individuals who benefit, with extra support for those from the poorest backgrounds" (p.51); "subject to Parliamentary consent, universities will be able to increase graduate contributions supported by government loans, with a broadly offsetting reduction in the teaching grant, from the 2012-13 Academic Year" (p.53).
posted by rory at 2:46 AM on October 21, 2010
The budget increase applies mainly to schools ("real terms increases of 0.1 per cent in each year of the Spending Review for the 5 to 16s school budget", p.41). Universities are facing cuts to the teaching grant to be compensated by fee increases for students: "major reform of the higher education sector to shift a greater proportion of funding from the taxpayer to the individuals who benefit, with extra support for those from the poorest backgrounds" (p.51); "subject to Parliamentary consent, universities will be able to increase graduate contributions supported by government loans, with a broadly offsetting reduction in the teaching grant, from the 2012-13 Academic Year" (p.53).
posted by rory at 2:46 AM on October 21, 2010
I consider myself fairly middle class, yet I'm in a tiny flat and struggle to make ends meet. The thought of trying to afford having children fills me with dread.
What? Why would you consider yourself middle class, then? Because you work at a desk rather than down a mine? Because of your (admittedly rather nice) accent? Sorry, Arkhan, you're working class, even if you'd rather visit a gallery than dog racing. It's this delusion that's pushing political discourse in this country further to the right - people voting Tory, or Labour drifting right to appease floating voters - because they're "middle class" while the actual middle class reap the benefits.
posted by liquidindian at 2:52 AM on October 21, 2010 [3 favorites]
What? Why would you consider yourself middle class, then? Because you work at a desk rather than down a mine? Because of your (admittedly rather nice) accent? Sorry, Arkhan, you're working class, even if you'd rather visit a gallery than dog racing. It's this delusion that's pushing political discourse in this country further to the right - people voting Tory, or Labour drifting right to appease floating voters - because they're "middle class" while the actual middle class reap the benefits.
posted by liquidindian at 2:52 AM on October 21, 2010 [3 favorites]
Kattullus: which, in terms of the last thousand years of history, is a hell-freezes-over kind of deal.
Note that the fate of Trident is still undecided.
posted by smcg at 2:57 AM on October 21, 2010
Note that the fate of Trident is still undecided.
posted by smcg at 2:57 AM on October 21, 2010
By the way, "real terms increases of 0.1 per cent in each year of the Spending Review for the 5 to 16s school budget" are still going to feel like cuts on the receiving end, because Britain's primary schools are already struggling thanks to the UK baby boom of the 2000s.
posted by rory at 2:58 AM on October 21, 2010
posted by rory at 2:58 AM on October 21, 2010
Well, when the British economy collapses, we'll have a very nice demonstration of how well ignoring Keynes works. Not that it will have any effect on our right wingers, they'll just say it was because the English are a bunch of socialists, so it proves that unregulated capitalist policies are the only ones that work.
posted by Jimmy Havok at 3:03 AM on October 21, 2010 [1 favorite]
posted by Jimmy Havok at 3:03 AM on October 21, 2010 [1 favorite]
So I used to be a corporate lawyer, right? And one day everybody on the deal all trooped off to London City airport and got on a chartered jet to Jersey. And when we landed at Jersey airport, the plane pulled straight up to a hangar, we all got out and walked up some stairs to a fully-appointed boardroom in the hangar. And we held our board meeting and did important things, and then, when we were done, we walked down the stairs, got back on the plane and flew back to London.
All so we could show we were a Jersey-domiciled company.
Here are the rules for living in Britain: don't be young, black, a single parent, a migrant, infirm, elderly, disabled, or a carer for any of the above. Don't live north of Milton Keynes. Be rich. If you can't be rich, be middle class, but for God's sake hold on for dear life.
posted by bright cold day at 3:25 AM on October 21, 2010 [6 favorites]
All so we could show we were a Jersey-domiciled company.
Here are the rules for living in Britain: don't be young, black, a single parent, a migrant, infirm, elderly, disabled, or a carer for any of the above. Don't live north of Milton Keynes. Be rich. If you can't be rich, be middle class, but for God's sake hold on for dear life.
posted by bright cold day at 3:25 AM on October 21, 2010 [6 favorites]
Even with a three line whip, every Labour and every Lib Dem vote wasn't a majority.
And now as it stands we have only a vote on AV with the Tories against, and all these cuts. Masterful politics.
posted by Abiezer at 3:30 AM on October 21, 2010
And now as it stands we have only a vote on AV with the Tories against, and all these cuts. Masterful politics.
posted by Abiezer at 3:30 AM on October 21, 2010
liquidindian: "
What? Why would you consider yourself middle class, then? Because you work at a desk rather than down a mine? Because of your (admittedly rather nice) accent? Sorry, Arkhan, you're working class, even if you'd rather visit a gallery than dog racing. It's this delusion that's pushing political discourse in this country further to the right - people voting Tory, or Labour drifting right to appease floating voters - because they're "middle class" while the actual middle class reap the benefits."
I think this is a really interesting point, especially given how questions of class are tangled up with all sorts of social indicators and hereditary factors, at all points on the scale. For example, you'll find IT consultants on £90k a year whose fathers happened to be miners who still think of themselves as working class (or least 'from working class roots', which arguably they are), and Guardian-reading social workers and teachers on £22k a year with tens of thousands in student debt whose mothers and fathers were doctors and lawyers who absolutely consider themselves middle-class, but who, income-wise, are being extensively outmatched by plumbers and electricians.
I'm really worried about the effect these cuts will have in Scotland, even though I work in the private sector. One in four Scots works in what is admittedly a fairly bloated public sector, and we're probably going to lose at least a quarter of those jobs. I have no idea where the replacement jobs from the private sector are going to come from, not least because many of the apparently private sector jobs in Scotland are actually predominantly suppliers of the public sector (everything from cleaners to recruitment agencies). I mean, we can't all work in distillieries or games companies or drive tourist buses.
That said, I'm doing what I can personally to safeguard me and mine - attacking debt aggressively, trying to save money where I can and trying to earn more money if at all possible. Unfortunately, the economy is screwed if everyone is doing this, because no money gets spent. But I'm not willing to give myself a load of new credit card debt so that a graph somewhere can go up a trillionth of a point.
At what point do we start looking at economic solutions where eternal growth is not desired or necessary? Can someone tell me what's wrong with aiming for stasis? Because every time the markets have an attack of the vapours (either on the way up for a bubble or on the way down in a bust), millions of people are directly affected.
posted by Happy Dave at 3:59 AM on October 21, 2010
What? Why would you consider yourself middle class, then? Because you work at a desk rather than down a mine? Because of your (admittedly rather nice) accent? Sorry, Arkhan, you're working class, even if you'd rather visit a gallery than dog racing. It's this delusion that's pushing political discourse in this country further to the right - people voting Tory, or Labour drifting right to appease floating voters - because they're "middle class" while the actual middle class reap the benefits."
I think this is a really interesting point, especially given how questions of class are tangled up with all sorts of social indicators and hereditary factors, at all points on the scale. For example, you'll find IT consultants on £90k a year whose fathers happened to be miners who still think of themselves as working class (or least 'from working class roots', which arguably they are), and Guardian-reading social workers and teachers on £22k a year with tens of thousands in student debt whose mothers and fathers were doctors and lawyers who absolutely consider themselves middle-class, but who, income-wise, are being extensively outmatched by plumbers and electricians.
I'm really worried about the effect these cuts will have in Scotland, even though I work in the private sector. One in four Scots works in what is admittedly a fairly bloated public sector, and we're probably going to lose at least a quarter of those jobs. I have no idea where the replacement jobs from the private sector are going to come from, not least because many of the apparently private sector jobs in Scotland are actually predominantly suppliers of the public sector (everything from cleaners to recruitment agencies). I mean, we can't all work in distillieries or games companies or drive tourist buses.
That said, I'm doing what I can personally to safeguard me and mine - attacking debt aggressively, trying to save money where I can and trying to earn more money if at all possible. Unfortunately, the economy is screwed if everyone is doing this, because no money gets spent. But I'm not willing to give myself a load of new credit card debt so that a graph somewhere can go up a trillionth of a point.
At what point do we start looking at economic solutions where eternal growth is not desired or necessary? Can someone tell me what's wrong with aiming for stasis? Because every time the markets have an attack of the vapours (either on the way up for a bubble or on the way down in a bust), millions of people are directly affected.
posted by Happy Dave at 3:59 AM on October 21, 2010
At what point do we start looking at economic solutions where eternal growth is not desired or necessary? Can someone tell me what's wrong with aiming for stasis?
BBC Radio 4's Thinking Allowed on that very subject.
posted by liquidindian at 4:09 AM on October 21, 2010
BBC Radio 4's Thinking Allowed on that very subject.
posted by liquidindian at 4:09 AM on October 21, 2010
Roll up! Roll up! See the Great Osborno and his 10 top conjuring tricks:
It is striking how far commentators across the broad range of the political spectrum from the ardently pro-cuts right to the sceptical left - and especially the neutral wonks, who love to scour a Treasury red book, in between - quickly coalesced around the view that Osborne's presentation to the Commons was much too tricksy and misleading for his own good...posted by TheophileEscargot at 4:16 AM on October 21, 2010
So how does the Great Osborno conjure up his tricks? We couldn't claim to have uncovered this magician's full repertoire from one performance, but let's look at ten examples of sleight of hand in yesterday's CSR.
liquidindian: "
BBC Radio 4's Thinking Allowed on that very subject."
Thanks for that, interesting to listen to, although unfortunately it appears to be largely a defence of growth from Daniel Ben-Ami, rather than an examination of what stasis might mean. Indeed, the subtitle of the programme is 'the glories of growth'.
posted by Happy Dave at 4:38 AM on October 21, 2010
BBC Radio 4's Thinking Allowed on that very subject."
Thanks for that, interesting to listen to, although unfortunately it appears to be largely a defence of growth from Daniel Ben-Ami, rather than an examination of what stasis might mean. Indeed, the subtitle of the programme is 'the glories of growth'.
posted by Happy Dave at 4:38 AM on October 21, 2010
Oh. In that case, there's another programme in the recent archive that explores the opposite idea. Sorry, I pointed you at the wrong one.
posted by liquidindian at 4:46 AM on October 21, 2010
posted by liquidindian at 4:46 AM on October 21, 2010
Stiglitz in the Guardian:
There is a shortage of aggregate demand – the demand for goods and services that generates jobs. Cutbacks in government spending will mean lower output and higher unemployment, unless something else fills the gap. Monetary policy won't. Short-term interest rates can't go any lower, and quantitative easing is not likely to substantially reduce the long-term interest rates government pays – and is even less likely to lead to substantial increases either in consumption or investment....
Advocates of austerity believe that mystically, as the deficits come down, confidence in the economy will be restored and investment will boom... The confidence fairy that the austerity advocates claim will appear never does, partly perhaps because the downturns mean that the deficit reductions are always smaller than was hoped.
Outside of a small (but vocal and influential) band of deficit hawks, everyone realises that the austerity measures are likely to have a negative effect on the long and short term economic growth prospects. Ultimately we have to balance the governments books, but demand now is weak and government debt has almost never been cheaper. There is no private sector investment capital poised to flood the space left by the withdrawal of government spending. Reducing government spending now is more likely to lead to a shrinking of the economy, which in turn is going to completely destroy the notional deficit reduction that is the supposed justification for the exercise. According to the Chief Economist at KPMG UK, the spending review arithmetic is "contingent on heroic growth assumptions." I suspect that we will end up more or less back where we started and the prescription next time will be worse, as the hawks will claim we didn't cut enough. At least the Tories have an ideological foundation to behaviour, but I am most definitely in agreement with Mieville's question to the Lib Dems - WTF?
posted by Jakey at 4:47 AM on October 21, 2010 [2 favorites]
There is a shortage of aggregate demand – the demand for goods and services that generates jobs. Cutbacks in government spending will mean lower output and higher unemployment, unless something else fills the gap. Monetary policy won't. Short-term interest rates can't go any lower, and quantitative easing is not likely to substantially reduce the long-term interest rates government pays – and is even less likely to lead to substantial increases either in consumption or investment....
Advocates of austerity believe that mystically, as the deficits come down, confidence in the economy will be restored and investment will boom... The confidence fairy that the austerity advocates claim will appear never does, partly perhaps because the downturns mean that the deficit reductions are always smaller than was hoped.
Outside of a small (but vocal and influential) band of deficit hawks, everyone realises that the austerity measures are likely to have a negative effect on the long and short term economic growth prospects. Ultimately we have to balance the governments books, but demand now is weak and government debt has almost never been cheaper. There is no private sector investment capital poised to flood the space left by the withdrawal of government spending. Reducing government spending now is more likely to lead to a shrinking of the economy, which in turn is going to completely destroy the notional deficit reduction that is the supposed justification for the exercise. According to the Chief Economist at KPMG UK, the spending review arithmetic is "contingent on heroic growth assumptions." I suspect that we will end up more or less back where we started and the prescription next time will be worse, as the hawks will claim we didn't cut enough. At least the Tories have an ideological foundation to behaviour, but I am most definitely in agreement with Mieville's question to the Lib Dems - WTF?
posted by Jakey at 4:47 AM on October 21, 2010 [2 favorites]
Meanwhile, Culture Secretary Jeremy Hunt has come out and said yesterday's real-term cuts to the BBC budget "will give comfort to commercial rivals" and prevent the BBC from "blasting them out of the water".
Fucking brilliant news, Jeremy! I guess we all owe you a vote of thanks for preventing the BBC from being TOO GOOD! Truly you are a wonderful man and a humble servant of the people of your nation.
I can't remember a time that a politician has just come out and said "Yeah, I actually prefer companies to people" quite so blatantly.
posted by dudekiller at 5:06 AM on October 21, 2010 [5 favorites]
Fucking brilliant news, Jeremy! I guess we all owe you a vote of thanks for preventing the BBC from being TOO GOOD! Truly you are a wonderful man and a humble servant of the people of your nation.
I can't remember a time that a politician has just come out and said "Yeah, I actually prefer companies to people" quite so blatantly.
posted by dudekiller at 5:06 AM on October 21, 2010 [5 favorites]
Interesting to see that the Financial Times is giving lukewarm support, at best:
FT Comment page:
Martin Wolf "This may be a policy success or the biggest fiscal blunder since the 1930s"
Editorial: "A fiscal gamble"
Philip Stephens: "Cutting back with no plan B".
The FT also rebuts Osborne's claims that Labour's cuts would have been deeper, and (in the editorial) argues that the cuts are unfair on the lowest paid. The FT also points out that the USA faces similar problems with its deficit, but isn't making such deep cuts (and, interestingly, isn't facing the sort of rising govt bond prices that Osborne fears).
[Note: a lot of FT content is subscriber or registration-only; I've got IP access but I don't know if you'll be able to read all those articles]
posted by Infinite Jest at 5:16 AM on October 21, 2010
FT Comment page:
Martin Wolf "This may be a policy success or the biggest fiscal blunder since the 1930s"
Editorial: "A fiscal gamble"
Philip Stephens: "Cutting back with no plan B".
The FT also rebuts Osborne's claims that Labour's cuts would have been deeper, and (in the editorial) argues that the cuts are unfair on the lowest paid. The FT also points out that the USA faces similar problems with its deficit, but isn't making such deep cuts (and, interestingly, isn't facing the sort of rising govt bond prices that Osborne fears).
[Note: a lot of FT content is subscriber or registration-only; I've got IP access but I don't know if you'll be able to read all those articles]
posted by Infinite Jest at 5:16 AM on October 21, 2010
Martin Wolf "This may be a policy success or the biggest fiscal blunder since the 1930s"
Editorial: "A fiscal gamble"
Philip Stephens: "Cutting back with no plan B".
Hedging their bets because they know that this may well go very wrong - and if it does, it will be seen as vicious class warfare?
posted by lucien_reeve at 5:39 AM on October 21, 2010
Editorial: "A fiscal gamble"
Philip Stephens: "Cutting back with no plan B".
Hedging their bets because they know that this may well go very wrong - and if it does, it will be seen as vicious class warfare?
posted by lucien_reeve at 5:39 AM on October 21, 2010
Thing is, Britain has a terrifying deficit right now, and the only reason there hasn't been an Icelandic-style run on its currency and debt is the understanding that, whichever government would come out of the last election, it would enact such cuts.
Of course, the budget could also have been balanced with a higher tax increase and fewer cuts, which may have been socially fairer. Stimulus-wise, however, it wouldn't have changed much. Nobody is argueing with Keynes anymore, but the government of Britain, like those of other countries, has already fired all its Keynesian ammo at this monster of a recession. (Also, Keynes advocated running public deficits during recessions, but also public surplusses during boom periods. If Britain is in such a dire fiscal situation, it's also because Gordon Brown, as Chancellor of the Exchequer, let the public deficit balloon during an economic boom, and this not only through higher spending, but also by steadfastedly refusing to put any rein to shady fiscal practices by corps and large personal fortunes).
posted by Skeptic at 6:33 AM on October 21, 2010
Of course, the budget could also have been balanced with a higher tax increase and fewer cuts, which may have been socially fairer. Stimulus-wise, however, it wouldn't have changed much. Nobody is argueing with Keynes anymore, but the government of Britain, like those of other countries, has already fired all its Keynesian ammo at this monster of a recession. (Also, Keynes advocated running public deficits during recessions, but also public surplusses during boom periods. If Britain is in such a dire fiscal situation, it's also because Gordon Brown, as Chancellor of the Exchequer, let the public deficit balloon during an economic boom, and this not only through higher spending, but also by steadfastedly refusing to put any rein to shady fiscal practices by corps and large personal fortunes).
posted by Skeptic at 6:33 AM on October 21, 2010
it's also because Gordon Brown, as Chancellor of the Exchequer, let the public deficit balloon during an economic boom
I seem to remember the press bellowing in about 2000 about 'Blair's Warchest', the disgraceful surplus that the government were running, and no sign of tax cuts. Damned if you do, damned if you don't, damned if you're not a small-minded sod-the-poor gimme-back-my-money libertarian cretin.
posted by liquidindian at 6:42 AM on October 21, 2010 [1 favorite]
I seem to remember the press bellowing in about 2000 about 'Blair's Warchest', the disgraceful surplus that the government were running, and no sign of tax cuts. Damned if you do, damned if you don't, damned if you're not a small-minded sod-the-poor gimme-back-my-money libertarian cretin.
posted by liquidindian at 6:42 AM on October 21, 2010 [1 favorite]
The Institute of Fiscal Studies (IFS) now has a briefing including a distributional analysis PowerPoint. Conclusions:
posted by TheophileEscargot at 6:57 AM on October 21, 2010 [1 favorite]
- Welfare cuts announced yesterday are regressive, less so once child benefit cut fully in place
- Overall, richest tenth lose most, but because of Labour’s tax rises
- HMT say that package of tax and benefit reforms to be introduced by 2012-13 is progressive (apart from bottom income decile)
- We disagree. Having considered all welfare cuts:
- Reforms by 2012–13 are slightly regressive or flat within bottom nine-tenths of households
- Reforms by 2014–15 are more clearly regressive within bottom 90%
- The regressive impact is the result of reforms announced by the current Government both in the June Budget and in SR
- Families with children the biggest losers
- HMT said that reforms will not increase relative child poverty over next two years. Maybe, but what about future years?
Wow - I'm a mefi conservative and even I think some of you people have stockholm syndrome. Even fucking Milton Friedman thought fiscal policy like this was dumb. The prime rate is fucking 50bps and you are worried about the bond vigilantes? Deflation is horrifying. Worse than inflation. Inflation at least helps erase debts - part of the US and UKs problems. It also helps making housing more reasonable.
posted by JPD at 7:26 AM on October 21, 2010 [2 favorites]
posted by JPD at 7:26 AM on October 21, 2010 [2 favorites]
Universities are facing cuts to the teaching grant to be compensated by fee increases for students: "major reform of the higher education sector to shift a greater proportion of funding from the taxpayer to the individuals who benefit, with extra support for those from the poorest backgrounds"...
Rory,
That looks like a tip of the iceberg statement to me.
Higher education bean-counters in the UK have always cast a very, very envious eye on the US system - where many parents start saving for college the moment they get a positive pregnancy test.
(Painting with a very broad brush here...but I do have some background in this.)
In a nutshell, I'd be very, very worried if I was starting a family in the UK now.
(We moved from the UK to the US 18 years ago with two small kids. And we've always had to tolerate friendly schadenfreude from UK friends over the fortune we've had to pay for our kids' college, compared to them...)
posted by Jody Tresidder at 7:59 AM on October 21, 2010
Rory,
That looks like a tip of the iceberg statement to me.
Higher education bean-counters in the UK have always cast a very, very envious eye on the US system - where many parents start saving for college the moment they get a positive pregnancy test.
(Painting with a very broad brush here...but I do have some background in this.)
In a nutshell, I'd be very, very worried if I was starting a family in the UK now.
(We moved from the UK to the US 18 years ago with two small kids. And we've always had to tolerate friendly schadenfreude from UK friends over the fortune we've had to pay for our kids' college, compared to them...)
posted by Jody Tresidder at 7:59 AM on October 21, 2010
Thing is, Britain has a terrifying deficit right now, and the only reason there hasn't been an Icelandic-style run on its currency and debt is the understanding that, whichever government would come out of the last election, it would enact such cuts.
My understanding is that this really isn't the case - the UK economy is of a magnitude and centrality to the global finance system that it's not vulnerable in the same way (Guardian article making much the same point that turned up on a random Google), plus the debt is mostly held domestically. It's also by a long chalk not near the highest the deficit has been in the post-war period.
posted by Abiezer at 8:11 AM on October 21, 2010 [1 favorite]
My understanding is that this really isn't the case - the UK economy is of a magnitude and centrality to the global finance system that it's not vulnerable in the same way (Guardian article making much the same point that turned up on a random Google), plus the debt is mostly held domestically. It's also by a long chalk not near the highest the deficit has been in the post-war period.
posted by Abiezer at 8:11 AM on October 21, 2010 [1 favorite]
Yeah Iceland is a really bad comparion. For about 15 reasons. And it has nothing to with its centrality to the global finance system.
posted by JPD at 8:16 AM on October 21, 2010
posted by JPD at 8:16 AM on October 21, 2010
Skeptic, the deficit may be high at the moment, but the national debt is not particularly high compared to other OECD countries. There is also clearly a dearth of high-quality, low-risk assets on the market. As a result, government borrowing is cheap. The bond vigilantes are the IMF's Scooby-Doo baddies - look behind the costume and it's a bunch of deficit hawks and freshwater economists making GRAR noises and trying to scare us into following their ideology. There is no real monster.
Having said that, I do agree with your point about the failure of Brown to run any kind of surplus during the boom times, which I ascribe largely to his reluctance to institute a robust progressive taxation scheme. It's made a sticky situation much worse. But, even though I wouldn't start from here, here is where we are. Although the existing national debt makes the Keynesian route less than ideal, it's still a preferable option to the potentially disastrous austerity measures.
posted by Jakey at 8:21 AM on October 21, 2010
Having said that, I do agree with your point about the failure of Brown to run any kind of surplus during the boom times, which I ascribe largely to his reluctance to institute a robust progressive taxation scheme. It's made a sticky situation much worse. But, even though I wouldn't start from here, here is where we are. Although the existing national debt makes the Keynesian route less than ideal, it's still a preferable option to the potentially disastrous austerity measures.
posted by Jakey at 8:21 AM on October 21, 2010
Deflation is horrifying.
Right now, Britain has between 3 and 4.5% inflation, depending on how you measure it. This is surprisingly high, in the current economic climate, and shows that the UK has been overspending more than most.
posted by Skeptic at 9:59 AM on October 21, 2010
Right now, Britain has between 3 and 4.5% inflation, depending on how you measure it. This is surprisingly high, in the current economic climate, and shows that the UK has been overspending more than most.
posted by Skeptic at 9:59 AM on October 21, 2010
I find this NY Times article fascinating - it's equating the lack of burning cars on London's streets the day after the spending review is announced with some sort of broad acceptance of the cuts in general, using the 1990 Poll Tax riots as the baseline for violent reaction to government policy.
Given those riots came about after the poll tax was mooted in 1987 and after a couple of years of non-payment and protests, it seems like a silly comparison. Give it a couple of years before drawing your conclusions about our reaction, NYT.
posted by Happy Dave at 9:59 AM on October 21, 2010 [1 favorite]
Given those riots came about after the poll tax was mooted in 1987 and after a couple of years of non-payment and protests, it seems like a silly comparison. Give it a couple of years before drawing your conclusions about our reaction, NYT.
posted by Happy Dave at 9:59 AM on October 21, 2010 [1 favorite]
You may not have deflation now, but this is a decidedly deflationary budget. CPI which is a better measure is 3% - not very high, and a big chunk of why that's high has to do with food costs.
also making the statement that "Inflation is high and that means we are spending too much" seems to ignore a great deal of Macro 101, or perhaps better said, massively oversimplifying a variety of models to make the data fit your thesis.
Actually if anything high inflation combined with absurdly low nominal interest rates (50 bps on short term stuff) adds up to insanely low real rates, negative in fact - which is ) a better way to consider what the bond market thinks about debt levels )evidence that you were not overspending.
posted by JPD at 10:39 AM on October 21, 2010
also making the statement that "Inflation is high and that means we are spending too much" seems to ignore a great deal of Macro 101, or perhaps better said, massively oversimplifying a variety of models to make the data fit your thesis.
Actually if anything high inflation combined with absurdly low nominal interest rates (50 bps on short term stuff) adds up to insanely low real rates, negative in fact - which is ) a better way to consider what the bond market thinks about debt levels )evidence that you were not overspending.
posted by JPD at 10:39 AM on October 21, 2010
Also, Keynes advocated running public deficits during recessions, but also public surplusses during boom periods. If Britain is in such a dire fiscal situation, it's also because Gordon Brown, as Chancellor of the Exchequer, let the public deficit balloon during an economic boom, and this not only through higher spending, but also by steadfastedly refusing to put any rein to shady fiscal practices by corps and large personal fortunes
This is not unique to Britain, though. Almost every Western government I can think of squandered the dot-com and property boom opportunities to retire debt, beef up for Boomer retirement, or whatever, in favour of Reaganite tax cut bribery.
Right wing governments were more interested in tax & government = bad than the good economic governance they like to lay claim to, and nominally (very nominally, in the case of Blair) left-wing governments tended to be terrified of being seen to raise taxes or crack down on dodgy business practises.
posted by rodgerd at 10:41 AM on October 21, 2010
This is not unique to Britain, though. Almost every Western government I can think of squandered the dot-com and property boom opportunities to retire debt, beef up for Boomer retirement, or whatever, in favour of Reaganite tax cut bribery.
Right wing governments were more interested in tax & government = bad than the good economic governance they like to lay claim to, and nominally (very nominally, in the case of Blair) left-wing governments tended to be terrified of being seen to raise taxes or crack down on dodgy business practises.
posted by rodgerd at 10:41 AM on October 21, 2010
Its inherent to any sort of republic that true Keynesian policies are impossible to implement, precisely because its impossible to enact austerity when times are good and get re-elected.
posted by JPD at 10:43 AM on October 21, 2010
posted by JPD at 10:43 AM on October 21, 2010
When countries borrow private "debt-money" it always creates publicly-borne debt.
A British Member of Parliament said this about the Bank of England in 1810:
"There is something so consummately ridiculous in the idea of a nation's getting money by paying interest to itself upon its own stock, that the mind of every rational man naturally rejects it. It is, really, something little short of madness to suppose, that a nation can increase its wealth; increase its means of paying others; that it can do this by paying interest to itself. When time is taken to reflect, no rational man will attempt to maintain a proposition so shockingly absurd" (William Cobbett, M.P., Paper Against Gold, p.83).
Other comments to ponder or look into from the website: http://prosperityuk.com/
"With bank created credit now at 97% of money supply, entire economies are run for the profit of financial institutions. This is the real power, rarely recognised or acknowledged, to which all of us including governments the world over are subject.
Our money, instead of being supplied debt-free as a means of exchange, now comes as a debt owed to bankers providing them with vast profits, power and control, as the rest of us struggle with an increasing burden of debt.
One of the principal dangers to our society from widespread misconceptions about money is the way in which money creation can be exploitatively abused, and yet escape public criticism.
You need a bridge or a hospital or a school. Is there a shortage of steel, of bricks and mortar, or the means of their manufacture? Are the construction trades already engaged, up to and beyond their capacity? And have all the doctors and nursing staff migrated to richer pastures?
These are the practical questions to be answered before the mythmakers of “scarce and finite” money are seen to prevail. It is the availability of resources — and the public need — that matters, not the number of digits on a cheque.
A nation which understands these things can expand and prosper to the limit of its physical potential, provided it also has the will and the means to issue its own money, debt free, for all community endeavour.
However, under the present system, money becomes a medium of power and social control."
posted by rumbles at 11:07 AM on October 21, 2010 [1 favorite]
A British Member of Parliament said this about the Bank of England in 1810:
"There is something so consummately ridiculous in the idea of a nation's getting money by paying interest to itself upon its own stock, that the mind of every rational man naturally rejects it. It is, really, something little short of madness to suppose, that a nation can increase its wealth; increase its means of paying others; that it can do this by paying interest to itself. When time is taken to reflect, no rational man will attempt to maintain a proposition so shockingly absurd" (William Cobbett, M.P., Paper Against Gold, p.83).
Other comments to ponder or look into from the website: http://prosperityuk.com/
"With bank created credit now at 97% of money supply, entire economies are run for the profit of financial institutions. This is the real power, rarely recognised or acknowledged, to which all of us including governments the world over are subject.
Our money, instead of being supplied debt-free as a means of exchange, now comes as a debt owed to bankers providing them with vast profits, power and control, as the rest of us struggle with an increasing burden of debt.
One of the principal dangers to our society from widespread misconceptions about money is the way in which money creation can be exploitatively abused, and yet escape public criticism.
You need a bridge or a hospital or a school. Is there a shortage of steel, of bricks and mortar, or the means of their manufacture? Are the construction trades already engaged, up to and beyond their capacity? And have all the doctors and nursing staff migrated to richer pastures?
These are the practical questions to be answered before the mythmakers of “scarce and finite” money are seen to prevail. It is the availability of resources — and the public need — that matters, not the number of digits on a cheque.
A nation which understands these things can expand and prosper to the limit of its physical potential, provided it also has the will and the means to issue its own money, debt free, for all community endeavour.
However, under the present system, money becomes a medium of power and social control."
posted by rumbles at 11:07 AM on October 21, 2010 [1 favorite]
Angibrow: I'm quite surprised that the chancellor's budget actually increased spending on education by ~11% - most observers had expected a cut there too, and brutal fee increases for university students.
As others have mentioned, you've misread this one a little. The CSR cuts higher education teaching funding by 40% over four years. It seems likely that all teaching funding will be withdrawn for arts and social sciences degrees. The government have accepted the Browne review which proposes at least doubling the tuition fee that students pay. Apart from that, all's fine.
posted by reynir at 1:39 PM on October 21, 2010
As others have mentioned, you've misread this one a little. The CSR cuts higher education teaching funding by 40% over four years. It seems likely that all teaching funding will be withdrawn for arts and social sciences degrees. The government have accepted the Browne review which proposes at least doubling the tuition fee that students pay. Apart from that, all's fine.
posted by reynir at 1:39 PM on October 21, 2010
I kind of wonder what Nick Clegg and the Liberal Democrats get out of this.
Thirty pieces of silver. And a ministerial car.
posted by reynir at 1:41 PM on October 21, 2010
Thirty pieces of silver. And a ministerial car.
posted by reynir at 1:41 PM on October 21, 2010
I live in Ireland. It is incredible looking at these cuts - they are sort of a technicolour version of the muddled, fudged and disasterous policy of the past two years we've had here. When budget time comes around - thats about now - the Irish public start being prepared by politicians and the media to 'share the pain'. We must 'share the pain'. We are told that although we 'shared the pain' two years ago, unfortunately the goalposts have changed, and although they thought that would work, we are back in recession, and Ireland is experiencing a mild deflation (which is actually better than inflation in such an open economy, but I can't imagine it'll last forever). We have two ashen faced politicians, one who (not metaphorically) has cancer and should be in hospital rather than in public life, who keep trying to tell us, all is bad, but when the markets see that we've been good boys and girls and cut the shit out of everything, all will be well again.
(and we can all start thinking about that Mercedes we always wanted to buy.
I never wanted a Mercedes during the Celtic Tiger, and I never will.)
One of the things that was keeping me going, was the prospect that at least things might be ok in the UK. I could go and work in the UK, people around me could, I could benefit from a more stable economy in the UK as Ireland is highly dependent on UK exports, and our bereft-of-ideas politicians tend to follow UK policy in many respects. Now they can look over at that general race to the bottom and decide to do the same thing here in exactly the same way. I felt physically sick looking at these cuts, because I've lived through something moderately like them, and as Joseph Stiglitz pointed out in a way that greatly irritiated Brian Cowen and his ilk, they didn't work. Things like universal income tax, which last I heard was a batty idea thrown around by Republicans in the US, are the probable future here. Someone suggested in the Irish Times letters page that the Dáil should be dissolved and replaced by a 'council of businessman' who would run government departments like a business. This is mania. It is terrifying that such a thing is even being mooted. It sounds like something dreamt up by Mussolini.
The welfare state was just about the most humane invention created in so-called 'Great' Britain. I'm so sorry its gone.
http://www.lrb.co.uk/v32/n20/john-gray/progressive-like-the-1980s
posted by iamnotateenagegirl at 1:45 PM on October 21, 2010 [1 favorite]
(and we can all start thinking about that Mercedes we always wanted to buy.
I never wanted a Mercedes during the Celtic Tiger, and I never will.)
One of the things that was keeping me going, was the prospect that at least things might be ok in the UK. I could go and work in the UK, people around me could, I could benefit from a more stable economy in the UK as Ireland is highly dependent on UK exports, and our bereft-of-ideas politicians tend to follow UK policy in many respects. Now they can look over at that general race to the bottom and decide to do the same thing here in exactly the same way. I felt physically sick looking at these cuts, because I've lived through something moderately like them, and as Joseph Stiglitz pointed out in a way that greatly irritiated Brian Cowen and his ilk, they didn't work. Things like universal income tax, which last I heard was a batty idea thrown around by Republicans in the US, are the probable future here. Someone suggested in the Irish Times letters page that the Dáil should be dissolved and replaced by a 'council of businessman' who would run government departments like a business. This is mania. It is terrifying that such a thing is even being mooted. It sounds like something dreamt up by Mussolini.
The welfare state was just about the most humane invention created in so-called 'Great' Britain. I'm so sorry its gone.
http://www.lrb.co.uk/v32/n20/john-gray/progressive-like-the-1980s
posted by iamnotateenagegirl at 1:45 PM on October 21, 2010 [1 favorite]
universal income tax - this means flat rate tax.
posted by iamnotateenagegirl at 1:47 PM on October 21, 2010
posted by iamnotateenagegirl at 1:47 PM on October 21, 2010
it is also worth pointing out how essential the public service is in providing employment in Northern Ireland, where it provides for about 30% of the workforce. Without employment and with an increase in poverty, what is going to happen there?
I deeply wish for the reincarnation of Jonathan Swift.
posted by iamnotateenagegirl at 1:52 PM on October 21, 2010
I deeply wish for the reincarnation of Jonathan Swift.
posted by iamnotateenagegirl at 1:52 PM on October 21, 2010
The picture that I've been getting is as follows. Simplistically:
1. The deficit rather than the debt is the problem, and the deficit is not the debt, but rather the difference between income (taxation) and outgoings (expenditure + servicing the debt).
2. Obviously this difference can theoretically be reduced by cutting expenditure, but that usually means firing a lot of people employed by the government, who are then put on the dole (increasing expenditure again) and no longer pay taxes (reducing the income), with the further effect that consumer demand is killed, stifling any economic growth.
3. Work that is still needed to be done by those employees that are cut can be farmed out to private companies, but this will turn out to be more expensive in the long run, as those companies executives will generally be higher-paid than their public counterparts, the company will demand a profit that the public sector equivalent would not, and "efficiency savings" are often a euphemism for paying workers less than the public sector equivalent. Any savings to the company that are passed on to the state hiring the company may be wiped out by the reduced tax take and consumer involvement of those individuals (while the higher paid executives would contribute far less to the economy from their income). Again, expenditure is cut by considerably less than appears at first to be the case, whilst at the same time drastically reducing income (from income tax and VAT).
4. The great size of the public debt largely stems from the money lent to the banks, which they might be prevailed upon to pay back at some point, anyway.
5. Thus any attempts to reduce the differential between income and outgoings by cutting expenditure will simultaneously reduce income (and require remedial expenditure to quell social revolt) to such an extent that it will increase that differential.
6. Whenever expenditure has been cut during a recession that recession has deepened or turned into a depression, with such regularity that it can be reliably predicted that these cuts will has prolong and deepen this recession. That is to say the austerity measures in Ireland that iamnotateenagegirl mentioned not only did not work but directly caused further financial difficulties. (They "did not work" in the same way that repeated blows to the head "do not work" to cure a headache.)
Is that a fair picture? The dismal historical record of such economic policies alone is somewhat compelling.
posted by Grangousier at 4:44 PM on October 21, 2010
1. The deficit rather than the debt is the problem, and the deficit is not the debt, but rather the difference between income (taxation) and outgoings (expenditure + servicing the debt).
2. Obviously this difference can theoretically be reduced by cutting expenditure, but that usually means firing a lot of people employed by the government, who are then put on the dole (increasing expenditure again) and no longer pay taxes (reducing the income), with the further effect that consumer demand is killed, stifling any economic growth.
3. Work that is still needed to be done by those employees that are cut can be farmed out to private companies, but this will turn out to be more expensive in the long run, as those companies executives will generally be higher-paid than their public counterparts, the company will demand a profit that the public sector equivalent would not, and "efficiency savings" are often a euphemism for paying workers less than the public sector equivalent. Any savings to the company that are passed on to the state hiring the company may be wiped out by the reduced tax take and consumer involvement of those individuals (while the higher paid executives would contribute far less to the economy from their income). Again, expenditure is cut by considerably less than appears at first to be the case, whilst at the same time drastically reducing income (from income tax and VAT).
4. The great size of the public debt largely stems from the money lent to the banks, which they might be prevailed upon to pay back at some point, anyway.
5. Thus any attempts to reduce the differential between income and outgoings by cutting expenditure will simultaneously reduce income (and require remedial expenditure to quell social revolt) to such an extent that it will increase that differential.
6. Whenever expenditure has been cut during a recession that recession has deepened or turned into a depression, with such regularity that it can be reliably predicted that these cuts will has prolong and deepen this recession. That is to say the austerity measures in Ireland that iamnotateenagegirl mentioned not only did not work but directly caused further financial difficulties. (They "did not work" in the same way that repeated blows to the head "do not work" to cure a headache.)
Is that a fair picture? The dismal historical record of such economic policies alone is somewhat compelling.
posted by Grangousier at 4:44 PM on October 21, 2010
Oh, and...
7. The factors that have contributed to the current economic climate (e.g. enthusiastic involvement with the military adventures in Iraq and Afghanistan; an uncritical enthusiasm for modern banking; the need to spend huge amounts of money to save modern banking from collapse when it turned out that enthusiasm was misplaced) were shared mutually between Labour and the Conservatives: it was irrelevant that Labour were in power as far as these economic problems go as nothing they did that contributed to the problems are things which the Tories would not have done in their stead.
Again, fair?
posted by Grangousier at 4:51 PM on October 21, 2010
7. The factors that have contributed to the current economic climate (e.g. enthusiastic involvement with the military adventures in Iraq and Afghanistan; an uncritical enthusiasm for modern banking; the need to spend huge amounts of money to save modern banking from collapse when it turned out that enthusiasm was misplaced) were shared mutually between Labour and the Conservatives: it was irrelevant that Labour were in power as far as these economic problems go as nothing they did that contributed to the problems are things which the Tories would not have done in their stead.
Again, fair?
posted by Grangousier at 4:51 PM on October 21, 2010
Monbiot provides some interesting details of cuts to QUANGOs.
Public bodies whose purpose is to hold corporations to account are being swept away. Public bodies whose purpose is to help boost corporate profits, regardless of the consequences for people and the environment, have sailed through unharmed. .... The government’s programme of cuts looks like a classic example of disaster capitalism: using a crisis to re-shape the economy in the interests of business.
posted by wilful at 5:06 PM on October 21, 2010
Public bodies whose purpose is to hold corporations to account are being swept away. Public bodies whose purpose is to help boost corporate profits, regardless of the consequences for people and the environment, have sailed through unharmed. .... The government’s programme of cuts looks like a classic example of disaster capitalism: using a crisis to re-shape the economy in the interests of business.
posted by wilful at 5:06 PM on October 21, 2010
When the recession started, I was working for the Canadian equivalent of a QUANGO. We got a new CEO who started just as government started considering cutting. His motto to us folks in the management group was:
"Never let a good crisis go to waste."
Using cutbacks as an excuse, he got rid of a lot of people (including me) and hired his own people. I suppose you could call it disaster capitalism; I just call it sociopathic behaviour.
posted by KokuRyu at 6:49 PM on October 21, 2010
"Never let a good crisis go to waste."
Using cutbacks as an excuse, he got rid of a lot of people (including me) and hired his own people. I suppose you could call it disaster capitalism; I just call it sociopathic behaviour.
posted by KokuRyu at 6:49 PM on October 21, 2010
"With bank created credit now at 97% of money supply..."
The problem with this system is that it is a positive feedback loop, and positive feedback loops are inherently unstable. In boom times, people borrow more money, increasing the money supply and driving the boom into a bubble. In bust times, people default on their loans, pay back their loans, and don't borrow, reducing the money supply and driving the bust.
Central banks try to moderate this by manipulating interest rates, but they are always behind the ball, and almost always are prevented from using their stronger tools, such as requirements for reserve ratios, by the interests of the bankers who are their ultimate clients.
posted by Jimmy Havok at 8:46 PM on October 21, 2010
The problem with this system is that it is a positive feedback loop, and positive feedback loops are inherently unstable. In boom times, people borrow more money, increasing the money supply and driving the boom into a bubble. In bust times, people default on their loans, pay back their loans, and don't borrow, reducing the money supply and driving the bust.
Central banks try to moderate this by manipulating interest rates, but they are always behind the ball, and almost always are prevented from using their stronger tools, such as requirements for reserve ratios, by the interests of the bankers who are their ultimate clients.
posted by Jimmy Havok at 8:46 PM on October 21, 2010
>>I kind of wonder what Nick Clegg and the Liberal Democrats get out of this.
An opportunity for electoral reform Labour refused to countenance,
posted by KokuRyu at 10:18 PM on October 21, 2010
An opportunity for electoral reform Labour refused to countenance,
posted by KokuRyu at 10:18 PM on October 21, 2010
Well, it depends upon how you think it'll play out over the next 4-5 years, Grangousier.
1. The deficit rather than the debt is the problem, and the deficit is not the debt, but rather the difference between income (taxation) and outgoings (expenditure + servicing the debt).
Correct. the deficit will be £150 billion, this year. Part of that is the loans to the banks - with credit to Mr Darling here (last labour chancellor), we did avoid a bigger banking system collapse, which would have made things a hell of a lot worse. We should get some or most of that back eventually, so the main concentration is on the structural deficit, i.e. the ongoing difference between public spending and taxes.
2. Obviously this difference can theoretically be reduced by cutting expenditure, but that usually means firing a lot of people employed by the government, who are then put on the dole (increasing expenditure again) and no longer pay taxes (reducing the income), with the further effect that consumer demand is killed, stifling any economic growth.
Partially correct. The idea is that most of the jobs will go through 'natural wastage' over the next 4 years i.e. people leaving their jobs to find new ones, and they don't get replaced. There is about 8% turnover annually in the public sector, so theoretically, the idea is that most people will be leaving for jobs in the private sector rather than going on the dole. Whether that actually happens is the big question, of course.
3. Work that is still needed to be done by those employees that are cut can be farmed out to private companies, but this will turn out to be more expensive in the long run,
Again, not necessarily correct. Many of the cuts will be in services that will not be replaced by the private sector. The argument also goes that the private sector is more efficient as they're less tolerant of waste and workers not being as productive. Also, the private sector provision for things like pensions and other benefits is substantially lower than the public sector, again in theory. The alternative to tackling the deficit is to raise taxes on individuals, and the private sector. Some of that is also happening; VAT is going up to 20%, corporate taxes are going up, and the 50% income tax band is staying. Also, some of the cuts are not job cuts; for example, university spending will be cut with fee raises for students to make up the difference; those earning 42k a year lose child benefit, council house rents will rise, and there will be benefit cuts for people who don't seek work.
4. The great size of the public debt largely stems from the money lent to the banks, which they might be prevailed upon to pay back at some point, anyway.
Yes; but the cuts are supposedly to attack the part of the deficit of 'normal' welfare spending etc vs tax receipts. Part of it will also be made up by projected growth in the private sector, creating jobs and more tax receipts. The opposing argument is that by cutting public sector jobs, it will create such a drag on the economy that we'll enter a double dip recession, and possibly even deflation. So the pain will be for nothing, and the cuts will have made it worse. The other side is that tax increases would have the same effect, so it's better to cut, and let the private sector grow - having confidence that the worst is over - than cripple it with higher taxes to support public sector jobs.
The third option is to borrow like crazy now, have the public sector and the private sector protected, and pay off the deficit later when the economy has recovered, some time after 2015 or so. The risk there is a potential run on sterling, and a rise in the cost of borrowing ala what happened to greece and may still happen to portugal and spain. Some think that's a risk if we don't tackle the deficit now, many here in this thread think that's a paper tiger of a risk. In the end, we'll never know.
6. Whenever expenditure has been cut during a recession that recession has deepened or turned into a depression, with such regularity that it can be reliably predicted that these cuts will has prolong and deepen this recession. That is to say the austerity measures in Ireland that iamnotateenagegirl mentioned not only did not work but directly caused further financial difficulties. (They "did not work" in the same way that repeated blows to the head "do not work" to cure a headache.)
Again, that's debatable. Is it a blow to the head, or cutting out of a bloated appendix that's dragging down the rest of the system? I honestly don't know. If we see growth in the next few years, they will of course claim they were correct. If we re-enter the recession for a sustained period, then the critics will claim to be correct.
Is that a fair picture? The dismal historical record of such economic policies alone is somewhat compelling.
Since public sector cuts usually come when the economic position is already shaky, the question is whether the cuts made it worse, or made it less worse than it would have been without cuts. For what it's worth, most of europe is having to implement austerity measures (just witness the riots and fuel blockades in france, or the riots in greece, or indeed the protests in germany). So it's not like the UK is unique in trying to cut spending; though mainly the continent is raising pension ages and cutting benefits, while the UK is raising pension ages a little faster than planned, and bringing VAT up to european levels, while cutting public sector jobs and other welfare benefits.
7. The factors that have contributed to the current economic climate (e.g. enthusiastic involvement with the military adventures in Iraq and Afghanistan; an uncritical enthusiasm for modern banking; the need to spend huge amounts of money to save modern banking from collapse when it turned out that enthusiasm was misplaced) were shared mutually between Labour and the Conservatives: it was irrelevant that Labour were in power as far as these economic problems go as nothing they did that contributed to the problems are things which the Tories would not have done in their stead.
Probably true. Yet labour were the ones that did it, and crowed about the end of boom and bust, and sold the gold reserves at a record low price, and massively increased public sector spending, and fucked private pension schemes up the arse, rolled back civil liberties in unprecedented amounts, and deliberately got rid of many of the banking regulations tories had previously enacted, while enthusiastically telling everyone else in europe they should be doing it our way.
I'm not exactly fond of the tories, yet I find it dishonest that labour were also planning on cutting the public sector by a similar percentage. Where those cuts were going to fall is another question, as they haven't said. I think abiezer and I agree all three parties are a shower of shite; we disagree over which is the bigger shower.
posted by ArkhanJG at 12:48 AM on October 22, 2010
1. The deficit rather than the debt is the problem, and the deficit is not the debt, but rather the difference between income (taxation) and outgoings (expenditure + servicing the debt).
Correct. the deficit will be £150 billion, this year. Part of that is the loans to the banks - with credit to Mr Darling here (last labour chancellor), we did avoid a bigger banking system collapse, which would have made things a hell of a lot worse. We should get some or most of that back eventually, so the main concentration is on the structural deficit, i.e. the ongoing difference between public spending and taxes.
2. Obviously this difference can theoretically be reduced by cutting expenditure, but that usually means firing a lot of people employed by the government, who are then put on the dole (increasing expenditure again) and no longer pay taxes (reducing the income), with the further effect that consumer demand is killed, stifling any economic growth.
Partially correct. The idea is that most of the jobs will go through 'natural wastage' over the next 4 years i.e. people leaving their jobs to find new ones, and they don't get replaced. There is about 8% turnover annually in the public sector, so theoretically, the idea is that most people will be leaving for jobs in the private sector rather than going on the dole. Whether that actually happens is the big question, of course.
3. Work that is still needed to be done by those employees that are cut can be farmed out to private companies, but this will turn out to be more expensive in the long run,
Again, not necessarily correct. Many of the cuts will be in services that will not be replaced by the private sector. The argument also goes that the private sector is more efficient as they're less tolerant of waste and workers not being as productive. Also, the private sector provision for things like pensions and other benefits is substantially lower than the public sector, again in theory. The alternative to tackling the deficit is to raise taxes on individuals, and the private sector. Some of that is also happening; VAT is going up to 20%, corporate taxes are going up, and the 50% income tax band is staying. Also, some of the cuts are not job cuts; for example, university spending will be cut with fee raises for students to make up the difference; those earning 42k a year lose child benefit, council house rents will rise, and there will be benefit cuts for people who don't seek work.
4. The great size of the public debt largely stems from the money lent to the banks, which they might be prevailed upon to pay back at some point, anyway.
Yes; but the cuts are supposedly to attack the part of the deficit of 'normal' welfare spending etc vs tax receipts. Part of it will also be made up by projected growth in the private sector, creating jobs and more tax receipts. The opposing argument is that by cutting public sector jobs, it will create such a drag on the economy that we'll enter a double dip recession, and possibly even deflation. So the pain will be for nothing, and the cuts will have made it worse. The other side is that tax increases would have the same effect, so it's better to cut, and let the private sector grow - having confidence that the worst is over - than cripple it with higher taxes to support public sector jobs.
The third option is to borrow like crazy now, have the public sector and the private sector protected, and pay off the deficit later when the economy has recovered, some time after 2015 or so. The risk there is a potential run on sterling, and a rise in the cost of borrowing ala what happened to greece and may still happen to portugal and spain. Some think that's a risk if we don't tackle the deficit now, many here in this thread think that's a paper tiger of a risk. In the end, we'll never know.
6. Whenever expenditure has been cut during a recession that recession has deepened or turned into a depression, with such regularity that it can be reliably predicted that these cuts will has prolong and deepen this recession. That is to say the austerity measures in Ireland that iamnotateenagegirl mentioned not only did not work but directly caused further financial difficulties. (They "did not work" in the same way that repeated blows to the head "do not work" to cure a headache.)
Again, that's debatable. Is it a blow to the head, or cutting out of a bloated appendix that's dragging down the rest of the system? I honestly don't know. If we see growth in the next few years, they will of course claim they were correct. If we re-enter the recession for a sustained period, then the critics will claim to be correct.
Is that a fair picture? The dismal historical record of such economic policies alone is somewhat compelling.
Since public sector cuts usually come when the economic position is already shaky, the question is whether the cuts made it worse, or made it less worse than it would have been without cuts. For what it's worth, most of europe is having to implement austerity measures (just witness the riots and fuel blockades in france, or the riots in greece, or indeed the protests in germany). So it's not like the UK is unique in trying to cut spending; though mainly the continent is raising pension ages and cutting benefits, while the UK is raising pension ages a little faster than planned, and bringing VAT up to european levels, while cutting public sector jobs and other welfare benefits.
7. The factors that have contributed to the current economic climate (e.g. enthusiastic involvement with the military adventures in Iraq and Afghanistan; an uncritical enthusiasm for modern banking; the need to spend huge amounts of money to save modern banking from collapse when it turned out that enthusiasm was misplaced) were shared mutually between Labour and the Conservatives: it was irrelevant that Labour were in power as far as these economic problems go as nothing they did that contributed to the problems are things which the Tories would not have done in their stead.
Probably true. Yet labour were the ones that did it, and crowed about the end of boom and bust, and sold the gold reserves at a record low price, and massively increased public sector spending, and fucked private pension schemes up the arse, rolled back civil liberties in unprecedented amounts, and deliberately got rid of many of the banking regulations tories had previously enacted, while enthusiastically telling everyone else in europe they should be doing it our way.
I'm not exactly fond of the tories, yet I find it dishonest that labour were also planning on cutting the public sector by a similar percentage. Where those cuts were going to fall is another question, as they haven't said. I think abiezer and I agree all three parties are a shower of shite; we disagree over which is the bigger shower.
posted by ArkhanJG at 12:48 AM on October 22, 2010
"The cuts are so deep and will hit women so hard that they risk more than women’s financial security - they threaten hard fought progress we’ve made on women’s equality. The Chancellor’s plans undermine the status of women as equal partners with men in the world of work, home and society as a whole."
posted by Abiezer at 2:11 AM on October 22, 2010
posted by Abiezer at 2:11 AM on October 22, 2010
an opportunity for electoral reform Labour refused to countenance
Cameron has tossed them a bone which consists of a type of voting reform that might be better than FPTP now, but which is miles from the type of voting reform that most Liberal Democrats wanted. And because so many people who voted LibDem feel betrayed now, many of them will vote against AV in a protest vote against Clegg and co., even if that is cutting off noses to spite faces, because if Nick's saying that something is worth voting for, there must be something terribly wrong with it.
So there's a good chance even this limited approach to reform won't make it through, the Tories will then be able to pronounce that the public has no interest in proportional representation, and the chance of proper PR will be dead in the water for another generation.
The leadership of the LibDems had their once-in-a-lifetime golden opportunity to hold out and force a referendum on changing the UK electoral system to something much fairer.
They failed.
But hey, Nick's Deputy Prime Minister and sometimes when Cameron goes for a piss he'll let Nick sit in his big chair for a minute or two, so I guess it was worth it.
posted by reynir at 9:36 AM on October 22, 2010 [1 favorite]
Cameron has tossed them a bone which consists of a type of voting reform that might be better than FPTP now, but which is miles from the type of voting reform that most Liberal Democrats wanted. And because so many people who voted LibDem feel betrayed now, many of them will vote against AV in a protest vote against Clegg and co., even if that is cutting off noses to spite faces, because if Nick's saying that something is worth voting for, there must be something terribly wrong with it.
So there's a good chance even this limited approach to reform won't make it through, the Tories will then be able to pronounce that the public has no interest in proportional representation, and the chance of proper PR will be dead in the water for another generation.
The leadership of the LibDems had their once-in-a-lifetime golden opportunity to hold out and force a referendum on changing the UK electoral system to something much fairer.
They failed.
But hey, Nick's Deputy Prime Minister and sometimes when Cameron goes for a piss he'll let Nick sit in his big chair for a minute or two, so I guess it was worth it.
posted by reynir at 9:36 AM on October 22, 2010 [1 favorite]
Paul Krugman devoted his latest column to Britain's austerity plan. In summary: he thinks it's a really bad idea.
British Fashion Victims
"...The operative word here should, however, be “eventually.” Fiscal austerity will depress the economy further unless it can be offset by a fall in interest rates. Right now, interest rates in Britain, as in America, are already very low, with little room to fall further. The sensible thing, then, is to devise a plan for putting the nation’s fiscal house in order, while waiting until a solid economic recovery is under way before wielding the ax.
But trendy fashion, almost by definition, isn’t sensible — and the British government seems determined to ignore the lessons of history."
posted by Kevin Street at 3:12 PM on October 22, 2010
British Fashion Victims
"...The operative word here should, however, be “eventually.” Fiscal austerity will depress the economy further unless it can be offset by a fall in interest rates. Right now, interest rates in Britain, as in America, are already very low, with little room to fall further. The sensible thing, then, is to devise a plan for putting the nation’s fiscal house in order, while waiting until a solid economic recovery is under way before wielding the ax.
But trendy fashion, almost by definition, isn’t sensible — and the British government seems determined to ignore the lessons of history."
posted by Kevin Street at 3:12 PM on October 22, 2010
The Chretien cuts didn't appear so bad because they just downloaded all of the worst cuts -- to health, education and social services -- to the provinces that administer them.
The Tories in Ontario jumped into this cutting gleefully. Ontario didn't have a 1990s boom.
posted by jb at 5:49 PM on October 24, 2010
The Tories in Ontario jumped into this cutting gleefully. Ontario didn't have a 1990s boom.
posted by jb at 5:49 PM on October 24, 2010
Outbreak of compassionate conservatism at the Torygraph, as they realise Osborne is lying through his teeth about the extent of benefit fraud.
posted by Abiezer at 3:01 AM on November 3, 2010 [1 favorite]
posted by Abiezer at 3:01 AM on November 3, 2010 [1 favorite]
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posted by schmod at 5:31 PM on October 20, 2010