UK is back in recession, says OECD

Jimmy_31

Graham_Devon wrote: »

Personally feel you are seeing far too much into a blunder.

It definately is a very poor blunder, and labour and it's supporters should take it as so and make as much of it as they wish.

But taking it too far, and going down the conspiracy theory route (in which you'd have to have Unite and the Tories working together on a pact that can never be broken) only serves to make labour and it's supporters look a little desperate, falling over themselves to take a gift and totally destroy it with their excitement.

A good thing can be taken too far. The good thing was the blunder. Taking it too far is the fantasy world liable stuff.

How many blunders does it take to start thinking things are actually done on purpose.

These are the people who are entrusted to run our country yet we should keep accepting their schoolboy errors.

We have a video of the tory treasurer trying to sell access to our prime minister, nothings happened about this and we are also supposed to believe the first time he tried to sell access to the PM is the time he was caught on video.

Graham_Devon

Jimmy_31 wrote: »

How many blunders does it take to start thinking things are actually done on purpose.

These are the people who are entrusted to run our country yet we should keep accepting their schoolboy errors.

We have a video of the tory treasurer trying to sell access to our prime minister, nothings happened about this and we are also supposed to believe the first time he tried to sell access to the PM is the time he was caught on video.

We had the same under labour. Infact more so (but we need to give time to the coalition too).

Blunders. Cash for honours etc.

Labour got away with it for 11 years.

It's alright going on about a jerry can, or the name of a pasty outlet with was taken over by another company, but they pale into insignificance next to a bigot blunder. Worth remembering

shortchanged_2

Graham, do you think though that it is normal behaviour to encourage people to stockpile fuel?

This is definately not seen as normal practice.

Look at the facts Graham. No strike has even been set as yet.

People being 'advised' to fill up their cars!!

How much have the sales of petrol and diesel gone up in the past few days.

It certainly looks very, very fishy.

Graham_Devon

I feel it's damned if you do, damned if you don't.

If unite had called a strike yesterday evening, people would be suggesting the government had failed and had not done enough to warn people.

It happened with Blair and the fuel protests. He was lambasted for not instructing his party to warn us of the consequences and running around on party missions while it was all going off. By the time they warned anyone, it was too late.

I don't think theres any right decision at this point, and this is where I wouldn't like to be in politics. You'll get lambasted if you do, you'll get lambasted if you don't, and usually by the same people.

It's not like deciding a policy where the consequences only come if you do something. It's a decision which has to be made as the consequences are coming anyway and you have little in the way of space to move.

The jerry can thing was an obvious blunder. But I can only imagine the same people would be lambasting the government right now if the strikes had gone ahead and petrol stations had run dry, with people stranded around the country.

The pasty thing is an obvious, unthought blunder.

Thing is, with decisions like this advice, we'll never know. The strike may go ahead, it may not. But either way, the decision to advise topping up the tank has been made, and you can only ever look at that with hindsight.

Labour did much the same with Swine Flu. Pumped it up and warned over something it wasn't. But it may have been if they hadn't had ramped up their efforts....who knows?

I really do empthasis with peoples thoughts on this. But in the same vein, I doubt you would be suggesting Cameron had made the right decision by doing absolutely nothing if the strike had taken place now and you couldn't get any fuel.

As Tony Blair stated in his book....sometimes all you can do is make the worst decision.....simply because you don't actually know what will happen.

pqrdef

ruggedtoast wrote: »

They have borrowed their way to growth, whereas we have paid back our way to recession.

We haven't paid anything back. In fact we've hardly started the spending cuts. The election was too late to have much effect on 2011-12 budgets that were already being planned. Now is when it all starts.

gagahouse

pqrdef wrote: »

We haven't paid anything back. In fact we've hardly started the spending cuts. The election was too late to have much effect on 2011-12 budgets that were already being planned. Now is when it all starts.

2.2 Economic imbalances
Obviously, if an economy becomes dominated by two specific drivers, the sectors most exposed to
these drivers will grow more than sectors less exposed to them. In the UK, sector exposure was as
follows:
 The construction, real estate and finance (‘CREF’) sectors were propelled by private
borrowing. In aggregate, these sectors grew by 42% in real terms between 2000 and 2009.
 Health, education and public administration (‘HEPA’) expanded on the back of escalating
public spending, growing by 28% over the same period.
 Other sectors shrank by 5%, within which retailing grew by 8% but manufacturing output fell
by 26%. By 2009, the manufacturing share of the economy had declined to 11%, from 17% in 2000.
These trends can be seen in more detail in fig. 3
1
.
2.3 Critical sectoral imbalances
Disparate rates of growth resulted in severe imbalances in the sectoral composition of the economy.
By 2009:
 The CREF sectors, linked to growth in private borrowing, accounted for 40% of economic
output.
 HEPA activities, linked to public spending, accounted for a further 19% of the economy.
Fig. 3: Contributions to GVA, 2000-09, expressed at constant 2010 values
£bn at 2010 values 2000 2007 2008 2009 vs 2000 % of 2009
Construction £59 £87 £84 £75 +27% 6%
Real estate £244 £319 £317 £307 +26% 24%
Finance £58 £112 £122 £130 +123% 10%

1
Technical note: as of Blue Book 2011, the Office for National Statistics has made radical changes to GVA reporting. We aim to
maintain proxy equivalents to these figures for 2010 and subsequent years.page
UK economy primer
9
CREF £361 £517 £523 £512 +42% 40%
Health £72 £96 £98 £96 +35% 7%
Education £62 £78 £80 £79 +27% 6%
Public administration £55 £68 £68 £67 +22% 5%
HEPA £189 £242 £246 £243 +28% 19%
Other sectors £569 £586 £584 £538 -5% 42%
Of which:
Retail £134 £152 £154 £144 +8% 11%
Manufacturing £194 £166 £157 £144 -26% 11%
All other £241 £267 £274 £249 +4% 19%
Economy (GVA) £1,119 £1,346 £1,353 £1,292 +15% 100%
GDP £1,265 £1,510 £1,509 £1,436 +14%
This means that 59% of UK economic output is linked to two erstwhile drivers (private borrowing and
public spending), both of which are now dead in the water.
At the same time, the combination of wage stagnation and high inflation has eroded consumer
disposable incomes to the detriment of retailing, which accounts for a further 11% of the economy.
We can say, therefore, that as much as 70% of the British economy has become incapable of
growth. The case for drastic realignment of the economy seems self-evident.
III. BRITAIN – POLICY RESPONSES
3.1 The government fiscal plan
The coalition government is determined to eliminate Britain’s structural fiscal deficit. In the last year
of the Labour administration (2009-10), the government borrowed £156bn, or 11.2% of GDP.
Of every £1 spent by the state in that year, 23.3p was borrowed.
We are convinced that the government is right to make deficit reduction a policy target. The recent
announcement from Moody’s underlines this imperative.
Rises in interest rates would be a disaster, given that UK household debt stands at over 150% of
incomes.
At the end of FY 2010-11, private secured (mortgage) debt totalled £1,238bn, and unsecured credit
totalled £222bn. Together, these sums equate to 99% of GDP.
Note, also, that:
 If interest rates were to rise by just 100bps, 24% of all variable rate mortgages (by value)
would “need to adjust” (meaning negotiate with lenders, or default). This percentage increases to
47% if rates were to rise by 200bps, and 69% at 300bps.
 In 2009, 32% of all small firms
2
had interest payments which exceeded their profits, as did
27% of larger firms (and 41% of small real estate businesses).
3.2 The plan’s Achilles’ heel – dependency on growth

2
In this context, “small” firms are those with turnover of less than £1m.page
UK economy primer
10
Given the severity of the debt exposure both of individuals and of the British economy as a whole,
the government is right to emphasise deficit reduction.
But the weakness in this plan is that it relies far more on revenue growth than on spending
reductions. This dependency on growth remains in place despite recent sharp downgrades to official
growth projections.
As set out in fig. 4, the government aims to reduce the deficit (at 2010-11 values) from £160bn in
2009-10 to £41bn in 2014-15, a decrease of £119bn.
Within this £119bn target, £99bn – 83% of the total – is expected to come from increases in revenue,
and £20bn (17%) from lower spending.
If we allow for the impact of higher interest payments on government debt, the targeted reduction
totals £143bn. Of this, £99bn (69%) is allocated to revenue increases, and £44bn (31%) to
reductions in all spending other than interest.
Within the targeted £99bn increase in revenues, we estimate that £32bn would result from higher
rates of tax and £67bn from the revenue effects of growth.
Fig. 4: Contributions to deficit reduction plan, 2014-15 versus 2009-10
£bn at 2010-11 values 2009-10 2014-15 +/- As % of target
Revenues £528 £627 +£99 83%
of which:
Tax rates +£32 27%
Growth +£67 56%
Expenditure £688 £668 (-£20) 17%
of which:
Expenditure ex-interest £657 £612 (-£44) 37%
Interest £32 £56 (+£24) -20%
Deficit £160 £41 +£119 100%
If – purely for illustrative purposes – the economy was no larger in 2014-15 than in 2009-10, the
following could be expected to happen to the plan:
 Revenue shortfall: £73bn
o Absence of growth component: £67bn
o Adverse impact on yield from tax rate increases: £6bn
 Spending over-shoot: £26bn
o Automatic stabiliser costs: £19bn
o Additional interest expense: £7bn
 Overall deviation from plan: £99bn
 Actual deficit reduction only £20bn (rather than the planned £119bn).page
UK economy primer
11
We must conclude, therefore, that the deficit reduction plan is a hostage to economic growth.
We can also observe that, whilst revenues are projected to grow by 19% in real terms between 2009-
10 and 2014-15, real public spending (other than interest expense) is slated to decline by only 6.8%
over the same period.
Cuts in real departmental budgets are far larger than 6.8%, but this reflects leverage to the following:
 Spending on health and international aid is excluded from spending reductions.
 Most of the cuts will come from ‘own spending’, not from transfer payments such as benefits
and pensions.
The government’s plan, therefore, depends upon growth. Revenue expansion - rather than spending
cuts - is expected to carry the lion’s share of deficit reduction.
3.3 The policy challenge
Let’s sum up the situation as it stands:
 The government is right to target deficit reduction, but its plan is a hostage to growth.
 Neither of the erstwhile drivers of the British economy – private borrowing and rising
government spending – remains operative.
 As much as 70% of the economy is incapable of growth in the absence of these drivers.
The policy challenge, then, is to deliver growth in the absence of the principal pre-crisis drivers
of the British economy.
3.4 Traditional policy tools have failed
Most traditional monetary and fiscal policy tools have been tried, but have not delivered growth:
 Interest rates have been held at 0.5% for almost three years.
 Deficit stimulus has been tried (to the tune of about £515bn):
o 2008-09 deficit: £96bn
o 2009-10 deficit: £156bn
o 2010-11 deficit: £141bn
o 2011-12 deficit: est. £120bn
 QE –£325bn to date.
The core of the problem, where traditional policy tools are concerned, is that:
 Most conventional policy alternatives have failed, principally because this is a deleveraging
(rather than a destocking) recession.
and
 Scope for further stimulus is limited by the deficit reduction imperative.
but
 The deficit plan depends upon restoring growth.

Understanding the context makes it very easy to predict the medium term outlook. Britain has very deep structural problems which aren't going away soon.

http://www.tullettprebon.com/announcements/strategyinsights/occasionalpapers/2011/SOP20120305.pdf

kabayiri

pqrdef wrote: »

We haven't paid anything back. In fact we've hardly started the spending cuts. The election was too late to have much effect on 2011-12 budgets that were already being planned. Now is when it all starts.

The whole election process was a missed opportunity to start the fiscal restraint earlier.

All the parties spent a good 6 months in the run up to the election painting an upbeat situation about how they could resolve things. Then cue the election -> then pour out a relentless torrent of bad news about the actual state of affairs. They are professional charlatans on a grand scale.

You are right, it all starts now, and it will grind on for decades.

bo_drinker

http://www.youtube.com/watch?feature=player_embedded&v=rxBMT0rH9hU#!

crash123

kabayiri wrote: »

You are right, it all starts now, and it will grind on for decades.

Got to agree I think this will go on and on

[Deleted User]

Mrs_Bones wrote: »

Don't worry, the wonder government have it all sorted. Start a panic about a fuel strike that is not even certain and hay presto everyone rushes to stock up on extra fuel even if it's not needed. Result lots of extra dosh straight in to the treasury coffers just before quarters end and no official return to recession. Isn't it good to be in the hands of such master planners

estimates predict only £32 million EXTRA vat on panic buying weds and thurs,and i doubt that will reach the treasury by 31st march anyway