UK 'must cut spending or raise taxes,' say experts

kennyboy66_2

tomstickland wrote: »

I assume that it was used on recovering from the recession.

Please stop getting so excited about MY data and YOUR data. It's just data I've found via google and it doesn't belong to me.

I've read the book "Squandered" by David Craig (Craig David?) and he shows plenty of examples where increased spending (50% in real terms over 10 years) has not produced a proportionate improvement in output.

If anyone was balanced they would admit that past Conservative government record on paying off deficits was as lamentable at Labours.

At the end of the previous real "boom" (the Lawson one), the surplus was a mere £5bn - which rapidly deteriorated to a deficit approaching 8% of GDP.

The record from 1997 - 2000 was actually very good - but only because Labour stuck with Conservative spending plans. Once they were free of this constraint they have made a bit of a bollux of it all.

The only government IMHO that has actually reduced Government spending as a % of GDP was John Majors.
Rightly or wrongly he is villified while Thatcher is the darling of the right despite the fact that she was a big government spender.

Nothing much changes - its the British way.

kennyboy66_2

Generali wrote: »

IIRC, each extra GBP100 spent on the NHS produces the same amount of output currently produced by GBP1 of expenditure. Mostly that's due to increased spending on salaries - more money spent for no greater output.

Probably, in hindsight, a similar record to the financial services sector if we take the period 2000-2012

Generali

kennyboy66 wrote: »

Probably, in hindsight, a similar record to the financial services sector if we take the period 2000-2012

Quite possibly! The financial sector is a real mess right now. It's amazing how bad things are.

Crude oil, gold and US stocks all gonna be down this am by the looks of things.

Rochdale_Pioneers

kennyboy66 wrote: »

The only government IMHO that has actually reduced Government spending as a % of GDP was John Majors.
Rightly or wrongly he is villified while Thatcher is the darling of the right despite the fact that she was a big government spender.

That makes it even stranger. If Major cut government spending AND we increased GDP% debt from 32% to 52%, where in the name of God did all that money go?

tomstickland wrote:

Originally Posted by Rochdale Pioneers
Sorry, but where dod you learn to add? "Forgot to save during the boom"? According to the data you posted, debt went down during the boom. Are you disputing your own data?

It went up from 2002 to 2007 and was above the 1991 level in 2007.

So lets get this straight. You are claiming that Labour increased debt? So it was 50% when they too power in 1997 and was 44% in 2007. Thats a 6% decrease isn't it?

You are of course right that 44% is above the level seen in 1991. But then again debt rose exponentially during the 4 years following 1991, so thats not really a surprise is it?

You'll be blaming Labour for the 32% to 52% increase in 1990 - 1995 next.

davem7

Wookster wrote: »

These are quite real concerns.

Think about it Rochdale, government debt grew from ~32% to ~52% in the last recession (1990-1995). This time around we are going into a (significantly worse) recession with much higher debt (50% as opposed to 32%) which doesn't bode well for what debt will rise to when growth returns.

Not only that but the sheer quantum of liabilities being taken on are gigantic e.g. RBS.

This is scary stuff.

Thanks for this. That was probably one of the best replies I've heard on here in a long time.

At the end of the day, I believe that both the Labour government and the Conservative opposition have done a shockingly bad job over the past ten years. There are no 'right' and 'wrong' parties here.

That being said, I have to say that I think Gordon Brown has made a catastrophic mistake in his policy of borrowing to invest. Yes, it's true: debt as a proportion of the GDP is lower than it was in 1997. Big deal - that drop is tiny in comparison to what it could have been.

My issue is that the money which was supposed to be invested in public services and infrastructure in the second and third terms has been completely wasted. Ridiculously huge sums of money were heaped into the NHS, social security, the education system, numerous failed IT schemes (CSA, NHS, NIR, HMRC, ...) and more with no accountability and no oversight as to where the money was being spent.

Companies such as Fujitsu-Siemens, IBM and the like then come along and mop up the stupidly large contracts, knowing that it doesn't matter if they go over-budget or over-time, because there will be plenty of extra money and no recourse on the project going over time. All of that money has been drained straight into the pockets of large corporations, and therefore the executives that control them.

Now we are left in the unenviable position where that money would be rather useful, given that we have no idea how long or deep this recession is going to be. It also means that when we are getting out of the last stages of the recession, we're going to have a lot more work to do to get rid of our debts. 60% as opposed to, say, 45% of GDP is a massively large amount of money and time!

And don't forget that the more money we have to borrow, the weaker the currency becomes and the longer it will take to pay off loans we take out from other countries. Additionally, there is still a very strong possibility that our credit rating could take a hit, and then we're going to be talking about higher rates of interest and an even longer recovery.

In essense, we need a government that is going to be willing to take the medicine and reorganise our public spending, to something that is more focused on the areas that need it, and less on the projects that provide no value for our hard earned money. If you can't see that the Labour government does not provide that, then we really are in trouble.

kennyboy66_2

Rochdale_Pioneers wrote: »

That makes it even stranger. If Major cut government spending AND we increased GDP% debt from 32% to 52%, where in the name of God did all that money go?

Not so strange, thats normally what happens in recessions, tax revenues lag just like unemployment.

Not wishing to come over all Dickensian on you but in the long term Micawber is right.

“Annual income twenty pounds, annual expenditure nineteen pounds nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds and six pence, result misery.”

As it happens I reckon government could run an annual surplus from say 2015/16 - what is usually lacking is the will to do it.

All this "our children's children will pay for this" is just rubbish.

Rochdale_Pioneers

kennyboy66 wrote: »

All this "our children's children will pay for this" is just rubbish.

Was it also rubbish in 1990 - 1995?

Wookster

davem7 wrote: »

My issue is that the money which was supposed to be invested in public services and infrastructure in the second and third terms has been completely wasted. Ridiculously huge sums of money were heaped into the NHS, social security, the education system, numerous failed IT schemes (CSA, NHS, NIR, HMRC, ...) and more with no accountability and no oversight as to where the money was being spent.

Companies such as Fujitsu-Siemens, IBM and the like then come along and mop up the stupidly large contracts, knowing that it doesn't matter if they go over-budget or over-time, because there will be plenty of extra money and no recourse on the project going over time. All of that money has been drained straight into the pockets of large corporations, and therefore the executives that control them.

The view that debt isn't a bad thing means that money is spent recklessly - after all why bother to take care at how money is spent if you are of the view that there is a long and indefinite pipeline of it. This government has been utterly awful when it comes to negotiating contracts that give the tax payer value for money.

Generali

kennyboy66 wrote: »

All this "our children's children will pay for this" is just rubbish.

It depends how much is borrowed. It's not the borrowing of the Labour Government that bothers me so much as the extent of it.

Don't forget that you've got a budget deficit of tens of billions and hardly anyone's lost their job yet!

Wookster

Generali wrote: »

Don't forget that you've got a budget deficit of tens of billions and hardly anyone's lost their job yet!

This is the most scary thing especially when you think we will have high unemployment for an extended period.

Thanks Gordon for preparing us for this.