Public sector borrowing soaring

purch

"Secret plans to slash public spending by up to 30 per cent, with massive cuts affecting public transport, the Armed Forces, schools, hospitals and welfare benefits, are being drawn up by Whitehall mandarins.

If they are secret plans, how come the Daily Mail know about them ???

"Plans to slash public spending by up to 30 per cent, with massive cuts affecting public transport, the Armed Forces, schools, hospitals and welfare benefits, are being made up by Daily Mail hacks to discredit the Government"

Thrugelmir

tomterm8 wrote: »

I think there are ways to raise taxes by 75 billion without anywhere near the disruption that cutting 75 billion off public spending would cause, certainly. I don't think you can do either without causing massive disruption to the economy, though. The bottom line is I think it would cause a recession deeper than the one we've just been through, and the public finances would probably end up in a worse state than they are now. The best way to cut the deficit is to encourage growth.

Growth in a particular sector? How is this growth to be funded ?

The problem is that the interest payable on servicing the national debt is going to head skywards. We have to rebalance the books by cutting expenditure.

LeeSouthEast

20% tax on investment dividends? ... that'll hurt, and simply take investment banking overseas.

wageslave

I honestly cant understand why everyone is banging on about house prices when anyone with half a pea for a brain can see we are in real trouble with government spending.

I doesn't take a Micawber to see that if we are spending more than we bring in the result is abject bliddy misery. We are one election away from the Crash of Western Democracy (Part Deux).

Old_Slaphead

Thrugelmir wrote: »

Growth in a particular sector? How is this growth to be funded ?

Seems to me that this Government has nailed it's flag to the South East service & finance sectors flagpole for the last decade and basically stuff anyone else. Funding for manufacturing ie real jobs - forget it.

Oh yes, and if they want to save some money how about cutting some of the legions of carbon trust-type 'free' surveys which every man and his dog seems to be offering these days (obviously another Govt sponsored job creation scheme....a bit like HIPS inspectors and rating appeals 'consultants').

Afriend_2

wageslave wrote: »

I honestly cant understand why everyone is banging on about house prices when anyone with half a pea for a brain can see we are in real trouble with government spending.

I doesn't take a Micawber to see that if we are spending more than we bring in the result is abject bliddy misery. We are one election away from the Crash of Western Democracy (Part Deux).

China's emergenging economy may help even unproductive coutries such as the UK maintain a decent standard of living. Cheap goods, helping to maintain low inflation and all that.
The cost of raw materials could be a problem going forward though.

wageslave

Afriend wrote: »

China's emergenging economy may help even unproductive coutries such as the UK maintain a decent standard of living. Cheap goods, helping to maintain low inflation and all that.
The cost of raw materials could be a problem going forward though.

That doesn't really address the problem we have in the short term, Afriend, I wish it did. We are, as a nation, in debt up to our eyeballs and getting deeper into the financial sh*t every day.

globalds

Chinese authorities may be about to loosen the reins on the nation's currency, allowing appreciation against the U.S. dollar to resume, although the pace could be slower than it was before the financial crisis.

http://www.marketwatch.com/story/chinas-yuan-may-resume-rise-but-more-slowly-2009-09-17

I know this article is dollar based ...But the value of the pound does not appear to be headed in a dissimilar direction ..... Those cheap goods May not be the solution.

Thrugelmir

globalds wrote: »

http://www.marketwatch.com/story/chinas-yuan-may-resume-rise-but-more-slowly-2009-09-17

I know this article is dollar based ...But the value of the pound does not appear to be headed in a dissimilar direction ..... Those cheap goods May not be the solution.

World markets trade in US$ and Euro's. Unfortunately the £ has its own problems which will hit exchange rates against these currencies.

tomterm8

Thrugelmir wrote: »

Growth in a particular sector? How is this growth to be funded ?

Growth in the economy as a whole. You can achieve this through a mixture of fiscal and monetary stimulus, and quantative lending targets to banks. Given the economy is now growing, the urgent thing is to get it growing near its trend growth as quickly as possible.

Thrugelmir wrote: »

The problem is that the interest payable on servicing the national debt is going to head skywards. We have to rebalance the books by cutting expenditure.

Look, there are four causes of the deficit:

1. A structural deficit, caused by bad demographics (in particular, pension requirements)
2. A cyclical deficit, caused by the recession and
3. A banking sector deficit, caused by a huge wealth transfer from the taxpayer to the banking sector.
4. A war deficit, caused by the ongoing wars in afghanistan, and former war in iraq.

Of these, 1 is the hardest to fix. 2, will fix itself given time.

The banking sector deficit is an interesting case, since by its nature, it is caused by spending money on financial assets that are likely to eventually produce a profit, after the cost of the investment. If you exclude the cost of the bailout, the debt burden is still high but not historically so, and well within the affordable bracket.

So, the shareholdings and special liquidity fund need to be operated to make a profit larger than the interest cost to the government. And, inherantly, over a long term that should not be difficult to do. The government is acting as a bank, borrowing for low interest, and loaning money at high interest. Banks are often very profitable, as long as they lend wisely.