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[Rods2]

While Dithering Dave and Osborne fiddle the UK economy burns.

In 1997 when McRuin took the reins our public services spending was £250bn it is now £744bn. The UK GDP did not triple in this time and this is the crux of our current problems. The private sector has been squeezed so it can longer provide the level of growth we need. At best with an economic tail wind it will deliver much below trend growth, with our current economic head winds it can't deliver any growth.

The Balls and Millipede approach is to borrow to invest, all this would do is bankrupt the country more quickly as government investment these days mainly means giving free money to their client groups, so this would generate no new businesses.

The opposite would be to go all out to eliminate the deficit. This is what they are doing in the Eurozone with devastating results as the Government increases taxes and reduces spending (with taxes front loaded and spending cuts back loaded which is the easiest but very worst way). For every 1% of GDP rises in taxes, the economy shrinks by between 1.8 and 3.4%, so government spending goes up with unemployment and their benefits and the tax base shrinks, so they try to meet the target by another round of the same as part of an economic death spiral. This is where Greece, Spain and Portugal are and where Italy and France are heading. So this doesn't work.

The third route which Osborne is following is some tax rises and some cuts and a little bit of deficit reduction. But this isn't working either which is why we are heading for a triple dip recession and real wages have fallen by 13.2% since 2008 and will continue to fall for sometime.

Now I have argued for sometime that what we need is real public spending cuts especially with discretionary items like Overseas Aid and the money then used for tax cuts. This will start rebalance the economy and the desperately need private sector wealth creation and growth. Now the danger with this is that the tax cuts go to pay down debts rather than buying goods you won't get the private sector growth you require to kick-start the economy. But if the tax cuts were biased towards the lower paid by say increasing the tax threshold to £12,000, then I think you would find most people and families on less than £40,000 would spend it where they are currently financially stretched.

Well two countries have tried this approach Sweden and Estonia and guess what, the tax reductions have been more than paid for through tax growth where their economies have had some good growth.

We an unsustainable deficit we have had what is a closing window of opportunity to sort the deficit before the country has a financial crisis, this window of opportunity is rapidly disappearing. Without this rebalancing of the private / public sector, the UK on its present trajectory is going to have a very hard economic landing.

I said in the past that the Chancellor's Autumn would be the start of a tipping point for our own economic storm, with Fitch now leading the pack where the UK is overdue losing its AAA rating, this will lead to higher borrowing costs, to counter this the government will resort to QE which will raise inflation further, which will increase the UK's stagflation, falling wages etc, this spiral will lead to more QE to buy the gilts the market won't which leads to higher inflation until we have hyperinflation. At this point your currency is worthless, so you can't buy the foreign currency you need for fuel, food and raw materials. To sort this mess and to administer the horrible medicine, this will probably have to be applied by the IMF as part of our bailout terms.

Now with Dithering Dave concentrating of gay marriage, climate change, Lords reform and playing for hours on his kids DS and George Osborne on their strategy to get reelected at the next election. They are both relying on a bit of economic can kicking (this weeks budget statement) and hoping something will turn up, like a big drop in oil prices and massive growth elsewhere in the world! To me this is an abdication of their responsibility to sort out our economic problems which are the biggest threat to our way of life since 1940.

The only thing that might save our bacon is shale oil and gas, but sadly, I think like the unexploited Greek Med oil and gas reserves, this will be too little too late.

[Varche]

Agreed.

The prognosis for Britain and Europe as a whole is very poor.

Why would any politician guarantee they would be out of office next election by doing the right thing.?

[Marks DTM Calib]

Forget tax cuts, we can't afford it.

Spending cuts yes definitely but I can see tax rises to

[badmuver]

Cut all the mp's wages to a average one then see how much money they would save 

http://www.parliament.uk/about/mps-and-lords/members/pay-mps/

[Nickbat]

Forget tax cuts, we can't afford it.

Spending cuts yes definitely but I can see tax rises to

What about the Laffer Curve, Mark?

We need tax cuts to stimulate the economy and thus increase the tax revenue. Yes, spending cuts as well, but just hiking taxes will sink what's left of the economy. 

[Rods2]

We need public spending cuts with tax cuts, so it is fiscally neutral, this way more money will be spent in the private sector. When money is spend in the private sector the velocity is much bigger, so the money gets quickly recirculated reinforcing growth, plus companies will then start to invest some of the £750bn cash they are sitting on waiting to be spent once the economy starts growing and confidence returns.

This way tax revenues go up with the growth, which will reduce the deficit.

All taxes rises do is for every 1% rise, you will typically lose 0.9% to 2.8% tax elsewhere, this is the problem with austerity in Europe, which is why they are chasing their tails in an economic death spiral in Greece, Spain and Portugal.

The Government have also done themselves no favours where they have continually blamed the financial sectors for our woes, when in really, our crisis is a Government overspending (by Labour) which is turning into a sovereign debt crisis. What they have spent rescuing the banks is 2 to 3 years money they collect in taxes from the city. If it wasn't for services in this country, which run a balance of payments surplus of 2 to 3% of GDP, then our balance of payment would look really ugly, where it is lack of manufacturing, that gives us our import / export deficit. So when people talk about get rid of the financial sector as it is a liability, and scaling back the service sector to be replaced by manufacturing, be careful what you wish for.

Remember services covers a very wide range of industries including: Banking, Insurance, Accountancy, Legal services, Engineering consultancy (including ARM whose designs power 95% or phones and tablet computers), Architecture, Sport (Especially Premiership football as the most watched in the world, but also cricket, rugby, darts, snooker, F1 to name but a few), TV programs, Books (like Harry Potter), films, music and computer software (10% of games are developed in the UK) to name but a few.

[henryd]

I've read these posts with great interest but only limited understanding,if I read correctly then we are as a country in the shit

Did I read right

[Sir Tigger KC]

Deeply in the Doo-Doos Henry!! 

[henryd]

Deeply in the Doo-Doos Henry!! 

 

[Rods2]

Think of it a cross between Greece, Spain, The Weimar Republic and Zimbabwe hitting us in the next one to four years. 

It will be very big fans and elephant sized, so everybody in the UK will be getting plenty of it. 

The IMF and EU may come to the rescue, but if they do, the price will be becoming a province of Europe, with the EU having complete control over our laws and finances and us adopting the Euro. 

[Olympia5776]

Forget tax cuts, we can't afford it.

Spending cuts yes definitely but I can see tax rises to

What about the Laffer Curve, Mark?

We need tax cuts to stimulate the economy and thus increase the tax revenue. Yes, spending cuts as well, but just hiking taxes will sink what's left of the economy. 

I couldn't agree more .
As Churchill said ,
"We contend that for a nation to try to tax itself into
prosperity is like a man standing in a bucket and trying
to lift himself up by the handle."

Over here in La La land the political elite have just passed a budget so brutal it beggers belief.
In all my years I have never seen an elected  government act with such utter intolerance and total disregard to the people they represent. If these measures are an inkling of what is in store for you back home then brace yourselves.
I would consider our household to be an average example of the targeted section of society and after careful examination of the package expect to see a nett cost as a direct result of this budget of € 1800 - €2000 per annum.
Most , if not all will be as a result of new taxes and large increases to existing ones. On top of this there are swinging cuts that will effect the most vulnerable and isolated amongst the community . The result will have an incalculable effect on the spend of every household in real Ireland away from Dublin, but Hey, that's OK the Troika is smiling ... Shame on them.
I had scant regard for the political parties growing up in UK but these cretins overe here are in an entirely different league .
They are primarily from a school teaching background with limited real world exposure , most political pundits agree that none of them have any real grasp on the situation and are way out of their depth the result being that the inmates are running the asylum......

[Varche]

Think of it a cross between Greece, Spain, The Weimar Republic and Zimbabwe hitting us in the next one to four years. 

It will be very big fans and elephant sized, so everybody in the UK will be getting plenty of it. 

The IMF and EU may come to the rescue, but if they do, the price will be becoming a province of Europe, with the EU having complete control over our laws and finances and us adopting the Euro. 

And as I keep saying adopting the Euro within five years. People laugh and say it is far fetched. We will see.

[Varche]

Forget tax cuts, we can't afford it.

Spending cuts yes definitely but I can see tax rises to

What about the Laffer Curve, Mark?

We need tax cuts to stimulate the economy and thus increase the tax revenue. Yes, spending cuts as well, but just hiking taxes will sink what's left of the economy. 

I couldn't agree more .
As Churchill said ,
"We contend that for a nation to try to tax itself into
prosperity is like a man standing in a bucket and trying
to lift himself up by the handle."

Over here in La La land the political elite have just passed a budget so brutal it beggers belief.
In all my years I have never seen an elected  government act with such utter intolerance and total disregard to the people they represent. If these measures are an inkling of what is in store for you back home then brace yourselves.
I would consider our household to be an average example of the targeted section of society and after careful examination of the package expect to see a nett cost as a direct result of this budget of € 1800 - €2000 per annum.
Most , if not all will be as a result of new taxes and large increases to existing ones. On top of this there are swinging cuts that will effect the most vulnerable and isolated amongst the community . The result will have an incalculable effect on the spend of every household in real Ireland away from Dublin, but Hey, that's OK the Troika is smiling ... Shame on them.
I had scant regard for the political parties growing up in UK but these cretins overe here are in an entirely different league .
They are primarily from a school teaching background with limited real world exposure , most political pundits agree that none of them have any real grasp on the situation and are way out of their depth the result being that the inmates are running the asylum......

With bailout comes the quiet acceptance by the sitting government that Brussels now rubber stamps austerity. We don't read much about it as the Irish are toeing the Brussels line. i.e. it looks as though the Irish government are behind the budget cuts. The Greek Cypriots were horrified at the cuts they must accept for their (first) bailout.  They will soon learn much the same as the PorknCheese have done.