Tory cuts could be mighty unpleasant

Rochdale_Pioneers

Mr_Mumble wrote: »

2001 323.0 2002 348.1 2003 380.1 2004 424.0 2005 465.1 2006 500.8 2007 534.1
That doesn't look like 9% to me, presumably you're using % of GDP which is akin to me asking my bank for a mortgage based on the value of every property in the cul-de-sac.

So using debt as a % of GDP - the measure used by every government and inter/extra-governmental body - is wrong?

And no, its not just about the deficit. Tories keep attacking the overall level of debt not just the debt accumulated in a single year.

Mr_Mumble

Rochdale_Pioneers wrote: »

So using debt as a % of GDP - the measure used by every government and inter/extra-governmental body - is wrong?

Fundamentally, yes, yes it is. Ignoring this strawman though your statement was:

"Brown's spending years post 2001 added 9% onto debt."

This is demonstrably not true. It added 65% to debt in nominal terms, 35% after inflation. You've made the same mistake New Labour made: you can't increase debt on the back of a bubble-induced spurt of tax revenue (which artificially inflates GDP). Why wasn't New Labour reducing the debt in these years the same way Mrs T did back in the late eighties?

And no, its not just about the deficit. Tories keep attacking the overall level of debt not just the debt accumulated in a single year.

You use current debt levels, that everyone knows are going way up (thanks to the deficit), to try and defend New Labour. The Tory attacks focus on the level of debt that is about to be accrued and the debt repayments required that could have been used for tax cuts or increased services.

Sir_Humphrey

Mr_Mumble wrote: »

You use current debt levels, that everyone knows are going way up (thanks to the deficit), to try and defend New Labour. The Tory attacks focus on the level of debt that is about to be accrued and the debt repayments required that could have been used for tax cuts or increased services.

The trouble with that argument is that without the debt-based support, the GDP fall would be greater still, and the tax revenues lower still and benefits payments higher. This would still add to the deficit.

Cutting the public deficit just shifts the burden from the state on to individuals in the short run.

Rochdale_Pioneers

Mr_Mumble wrote: »

Fundamentally, yes, yes it is. Ignoring this strawman though your statement was:

"Brown's spending years post 2001 added 9% onto debt."

This is demonstrably not true. It added 65% to debt in nominal terms, 35% after inflation. You've made the same mistake New Labour made: you can't increase debt on the back of a bubble-induced spurt of tax revenue (which artificially inflates GDP). Why wasn't New Labour reducing the debt in these years the same way Mrs T did back in the late eighties?.

1. I'll clarify what i said. Debt as a % of GDP went up 900 basis points from 35% to 44%.
2. If everyone else is wrong and you are the only one who is right, I'll happily stay wrong if thats OK
3. Labour cut debt for half a decade in the late 90s. The Tories cut debt for half a decade in the late 80s. Whats your point? Debt soared in the 80s under Thatcher, despite vast oceans of cash pouring in from North Sea Oil and privatisation revenues. Why? Because slashing state spending in the depths of a recession is a disaster, and 1981 is the living proof. The fact that Osborse has apparently been studying this budget as a model for his planned emergency budget is what is startling all the economists, the city and now the voters.

Wookster

Rochdale_Pioneers wrote: »

3. Labour cut debt for half a decade in the late 90s. The Tories cut debt for half a decade in the late 80s. Whats your point? Debt soared in the 80s under Thatcher, despite vast oceans of cash pouring in from North Sea Oil and privatisation revenues. Why? Because slashing state spending in the depths of a recession is a disaster, and 1981 is the living proof. The fact that Osborse has apparently been studying this budget as a model for his planned emergency budget is what is startling all the economists, the city and now the voters.

What you haven't said, is the little caveat that pretty much all Labour supporters seem to miss: if you can afford not to cut expenditure.

If Crash had been prudent in the good years rather than running significant deficits from 2000/1 onwards then there would be a strong case to maintain public spending.

Thrugelmir

Rochdale_Pioneers wrote: »

. Whether Labour made mistakes or not isn't the question - its would the Tories have made the same/worse mistakes and what therefore are the implications if they form the government?

We will never know. I will vote for the party thats is straight talking and honest, (as far as politcians ever are). So far the Labour Government seem incapable of actually telling us the truth. Focusing more on winning an election than actually running the economy with a long term view.

Thrugelmir

Rochdale_Pioneers wrote: »

Why? Because slashing state spending in the depths of a recession is a disaster,

Tax revenues have fallen and may take a decade to rebuild to the level of 2007.

The contribution from the City of London alone is estimated to have dropped from £67 billion to £39 billion this year alone.

So the Government can't continue to spend at the current level. As this money would have to be borrowed.

We have no reserves...........

Mr_Mumble

Sir_Humphrey wrote: »

The trouble with that argument is that without the debt-based support, the GDP fall would be greater still, and the tax revenues lower still and benefits payments higher. This would still add to the deficit.

This is an argument to maintain current spending rather than an explanation of why Labour started a massive spending spree on the back of a property and financial bubble.

The problem with current spending isn't the cyclical deficit brought about by the recession but the structural deficit that will remain afterward.

Cutting the public deficit just shifts the burden from the state on to individuals in the short run.

Depends on what is cut:
1. The £4bn given to the World Bank every year (£3bn more than France)
2. The £6bn that the DFID doesn't spend on immediate aid (more than £1bn spent on lobbying alone since 2000).
3. The net £6bn given to the EU each year (France gives a net figure around £1bn).

How would cutting this largess hurt British taxpayers in the short run (outside of a very elite group of mandarins at Whitehall)?

Rochdale_Pioneers wrote:

2. If everyone else is wrong and you are the only one who is right, I'll happily stay wrong if thats OK

By "everyone" I presume you mean government apparatchiks.;) Companies and individuals would use debt to income. By using debt to GDP there is an implied assumption that government can tax at whatever rate it wants to, patently absurd.

3. Labour cut debt for half a decade in the late 90s. The Tories cut debt for half a decade in the late 80s.

Labour cut debt by promising to keep to Tory spending plans in the '97 manifesto. This fiscal prudence was based on the expected business cycle downturn to come. Perhaps the Tories would have made the same mistakes but its doubtful given Ken Clarke's good governance in the mid-nineties. Labour were lucky that the business cycle was extended but rather than remaining skeptical and keeping money for a rainy day Gordon Brown believed he'd put an end to "boom and bust" and went on a spending spree.

Rochdale_Pioneers

Wookster wrote: »

If Crash had been prudent in the good years rather than running significant deficits from 2000/1 onwards then there would be a strong case to maintain public spending.

As previously discussed debt as a % of GDP went up 900 basis points to 44%. If UK debt was now 900 basis points lower than the 79% and rising that it currently is we would not be having a happy discussion about maintaining spending - you and the right would be banging on about debt. Brown did not spend so much money that we can't afford to spend it now. The money was spent stopping the financial system from collapsing completely.

Mr_Mumble wrote:

By "everyone" I presume you mean government apparatchiks.;) Companies and individuals would use debt to income. By using debt to GDP there is an implied assumption that government can tax at whatever rate it wants to, patently absurd.

Government apparatchicks from every government, the EU, the IMF, the OECD, the World Bank.... As I said I'm happier using their methodology than yours.

Optimist

Thrugelmir wrote: »

Tax revenues have fallen and may take a decade to rebuild to the level of 2007.

The contribution from the City of London alone is estimated to have dropped from £67 billion to £39 billion this year alone.

So the Government can't continue to spend at the current level. As this money would have to be borrowed.

We have no reserves...........

There is a good chance it wont get back to those levels for a very long time

I know of several traders and companies who are thinking of, or have moved to Switzerland just for tax purposes.

Might only be a few at the moment but the amount of tax loss is significant a company generating revenue of £80 odd million can save £10 million in taxes

For any company that deals in information or finances its a relatively simple move to make, and a stable tax regime and easy connectivity makes it very appealing.