Politics

[NJS 4379]

The way I understand it CT is that up until the credit crunch, the deficit and the total debt were considered perfectly manageable - just like a family who has a mortgage and maybe other loans but has a decent total income so everything's okay.

 

The mistake that was made which I think most people accept is that it was assumed the golden age of financial services was unassailable - not many people were predicting such a shitstorm even if in hindsight is seems obvious.

 

 

I still don't think that going all out to pay off all the debts as soon as possible is the right strategy as I think it will do a lot more harm. I'd rather see a measured approach which says it will be paid off as and when we can afford it. Of course obvious wins like cancelling Trident should be part of that.

[Christmas Tree 4725]

The way I understand it CT is that up until the credit crunch, the deficit and the total debt were considered perfectly manageable - just like a family who has a mortgage and maybe other loans but has a decent total income so everything's okay.

 

The mistake that was made which I think most people accept is that it was assumed the golden age of financial services was unassailable - not many people were predicting such a shitstorm even if in hindsight is seems obvious.

 

 

I still don't think that going all out to pay off all the debts as soon as possible is the right strategy as I think it will do a lot more harm. I'd rather see a measured approach which says it will be paid off as and when we can afford it. Of course obvious wins like cancelling Trident should be part of that.

 

The financial meltdown has certainly made matters worse, but when you look at the data, this has been out of control for a long, long time. You do have to wonder how these supposedly very clever, very moral people at the top could justify spending these vast sums that we didnt have, whilst knowing there was little chance of getting to grip with it in their lifetime.

 

With regard to your second point, I dont think anyone is going "all out to pay off the debts".

 

Consider the 1000 billion of debt outstanding

an interest only payment this year of 43 billion on that debt

And spending plans already left in place by Labour that commit us to borrowing another 250 billion for next year.....

 

You then see that these 6 billion cuts so far are nowt.

 

Even if the emergency budget reduced Labours spending plans so we didnt have to borrow 250 billion next year, that still hasnt eaten one pound into the oustanding debt of 1000 billion.

 

Can you imagine what they would have to cut to save that 250 billion?

 

Health budget 104 billion

Education budget 69 billion

Defence budget 37 billion

 

It really is frightening because there is no way they can cut 250 billion so the debt next year will be 1250 billion approx.

 

Im looking at this from the debt view and not the party political view and am just mystified how they got it so wrong and where its all heading.... cue Parky

[Christmas Tree 4725]

Cameron "Years of pain ahead"

 

Sunday Times

 

 

DAVID CAMERON has warned that the economy is in a far worse state than previously thought and signalled that Britain faces years of “pain” as the spending axe falls.

 

The prime minister indicated a sharp downgrade in official growth forecasts and revealed that welfare and public sector pay would bear the brunt of budget cuts.

 

It is understood that tough measures being considered to help control the £156 billion budget deficit include benefit freezes and cuts in child tax credits. There are also likely to be below-inflation pay rises for state employees on top of next year’s planned freeze.

 

In an interview with The Sunday Times, Cameron said: “Proper statesmanship is taking the right action, explaining to people the purpose behind the pain.”

 

The prime minister said there would be no “trampoline recovery” of the economy. He warned there was a “serious problem” with forecasts inherited from Labour of robust 3% growth next year.

 

“There is a huge amount of debt that has got to be dealt with. Crossing our fingers, waiting for growth and hoping it will go away is simply not an answer,” he said.

 

“The country has got an overdraft. The interest on that overdraft is swallowing up things that the nation should otherwise be spending money on. We have got to take people with us on this difficult journey.”

 

Cameron gave a clear hint of the priorities for the emergency budget in two weeks’ time.

 

“You have to address the massive welfare bills,” he said. “You have to address public sector pay bills. You have to address the size of the bureaucracy that has built up over the past decade.

 

“Otherwise you will have to make reductions across the board which you don’t want to do. We need to address the areas where we have been living beyond our means.”

 

With the budget of the Department for Work and Pensions set to face cuts of up to 20% over the next five years, ministers are hoping for large savings from schemes to force claimants off incapacity benefit and into work.

 

More draconian measures are also on the table. Freezing all benefits for 12 months next year would raise £4.1 billion. Executing a Liberal Democrat pledge to axe child credits for couples on a joint income of more than £26,000 could save more than £1 billion a year. It is understood that ministers have ruled out means-testing child benefits and winter fuel payments.

 

All public sector workers earning more than £18,000 a year already face a pay freeze next year, but it is understood that curbs in wage rises beyond 2011 are likely to be unveiled in the budget on June 22.

 

Cameron said he had not seen the report being prepared by Sir Alan Budd, the head of the government’s new budget watchdog. MPs expect that Budd will scale down the current growth forecasts to somewhere nearer the average predictions of independent economists, who believe next year’s growth will be a sluggish 2%.

 

The prime minister insisted the figures that the coalition had inherited were wildly over-optimistic. “There were two levels of optimism in what the [Labour] government was forecasting,” Cameron said. “One was trampoline growth of 3% and above, and the second theory was that interest rates would always stay low.

 

“One of the most shocking things is the extent of the interest we are paying on our debt. If we don’t do anything about it, it is going to be £50, £60, £70 billion.

 

“It is going to be huge. We will be spending more on debt interest than we do on educating our children and defending our country. It is totally irresponsible what we are left with.”

 

Despite the challenge of cutting the deficit, Cameron said he was still confident that most of the gap could be closed by cuts in public spending.

 

“Sometimes politicians haven’t tried hard enough to reduce inefficient spending and reach for the taxes too quickly,” he said. “We shouldn’t do that.”

 

However, he refused to rule out an increase in Vat, which many analysts believe will go up from 17.5% to 20%.

 

“We want expenditure to bear the burden of what needs to be done,” he said.

 

Cameron signalled a softening of his stance on capital gains tax, which is due to go up this month from 18% to nearly 40% to help pay for the Lib Dem aim of taking the low-paid out of income tax.

 

Facing a growing rebellion from Tory backbenchers, the prime minister said he was considering some sort of relief for investors selling assets such as shares or second homes that they had held for a long time. “I totally understand the arguments,” Cameron said. “I did not come into politics to punish people who want to do the right thing and save.”

 

Giving his own gloss on the budget cuts, Nick Clegg, the deputy prime minister and Lib Dem leader, warned there would be no return to the “sink or swim” economics of the Thatcher era. “Fiscal retrenchment does not mean a repeat of the 1980s,” Clegg told The Observer. “We are going to do this differently.”

 

George Osborne, the chancellor, claimed a significant victory yesterday as the G20 group of leading nations backed the British government’s stance on spending cuts.

[Monkeys Fist 42428]

The highest paid and the influential get us into this mess.

Who do the Tories make pay for it?

 

Fucking rewind to the Thatcher years

 

There will be bother.

[ChezGiven 0]

Its funny because the lastest Keynesian models predict that the most effective expansionary policy, when interest rates are effectively zero, is increased government spending. Arguably the situation we are in now. The deficit hawks say to cut spending and encourage the banks to lend. The banks still arent lending but they are cutting anyway. The new Keynesians say

 

http://economistsview.typepad.com/economis...zero-bound.html

 

Its the recession that caused the deficit anyway CT, so the solution is an economic recovery. We shrank by 6%, so we need to grow by 3% for 2 years to be nearly back to where we were on tax revenues (with a debt built up whilst returning to even).

 

http://www.independent.co.uk/news/business...ce-1904129.html

 

Depressed earnings in the financial sector and the general weakness of the economy conspired to push receipts down by 9 per cent overall compared with last year; income tax takings slumped by 20 per cent, and corporation gains tax revenues fell by 6 per cent. VAT payments were up a little, after the 17.5 per cent rate was restored on 1 January. On the other side of the ledger, public spending is still showing double digit increases: 15 per cent up in January, driven higher by the rise in benefits to the unemployed.

 

The solution proposed across the G20 is to cut spending. This could give us a second recession which would further push down tax receipts and increase benefits.

[NJS 4379]

The CGT tax change affects 130,000 people - Cameron wants to protect them as a priority over millions of others - same old cunts.

[Renton 21621]

Dont know if anyone has depressed themselves on this website....

 

http://www.debtbombshell.com/

 

They used to have a counter just like that in Times square New York at the tail end of the Reagan years. Iirc under Clinton, the enormous US deficit was completely wiped out following several years of unprecedented growth. So surely, the key to the problem is to hold our nerve and get the economy to grow again, rather than risk another recession?

 

It is scarey though, but then I don't really understand macroeconomics, so it's a question of who you trust really.

Edited June 6, 2010 by Renton

[Matt 0]

Its funny because the lastest Keynesian models predict that the most effective expansionary policy, when interest rates are effectively zero, is increased government spending. Arguably the situation we are in now. The deficit hawks say to cut spending and encourage the banks to lend. The banks still arent lending but they are cutting anyway.

 

The solution proposed across the G20 is to cut spending. This could give us a second recession which would further push down tax receipts and increase benefits.

 

The Basel III regulations have the potential to well and truly derail the attempts to pump-prime the economy via additional bank lending. No-one should be surprised that most of the additional liquidity in the system was simply used to increase capital ratios (and I'm staggered that anyone thought it would play out differently). Basel III is going to apply another layer of capital requirements on banks, forcing them to reduce lending and increase retained capital. Vince can say what he likes, if the BIS have their way it will hit businesses hard (especially as a bank will have to reserve the same capital whether a loan is drawn or not). Then you have the spectre of the Volker rules making everyone- banks and businesses-collateralise their derivative positions- that would be an economic disaster and leave huge amounts of cash sitting doing nothing- further prevent stimulus funds from actually doing their job.

 

As for Cameron's plans, taxing expenditure is true to form. Will there be a corresponding review of ratable items to ensure that this is not simply going to make life more expensive for the less well-off? Unlikely.

 

I fundamentally disagree with Cameron's overdraft analogy, this is a deliberate attempt to frame the nation's debt position. Long-term government debt is a permanent piece of our national capital structure. It may be high, but it's certainly not all on demand. And yes, the interest on that debt could be used on schools, but a lot of the debt raised WAS used on schools, whereas we all know the Tories would simply cut taxes and tell parents to fuck off and set one up themselves.

[NJS 4379]

I fundamentally disagree with Cameron's overdraft analogy, this is a deliberate attempt to frame the nation's debt position. Long-term government debt is a permanent piece of our national capital structure. It may be high, but it's certainly not all on demand. And yes, the interest on that debt could be used on schools, but a lot of the debt raised WAS used on schools, whereas we all know the Tories would simply cut taxes and tell parents to fuck off and set one up themselves.

 

What bothers me in the light of the obvious fact that the £6bn is a drop in the ocean is that it seems to be pandering to the markets and ensuring they feel as if the right thing is being done rather than actually thinking about the best strategy.

 

One thing that was suggested in the run up to the election by Labour was to shift the balance of the economy back to manufacturing and away from finance and though realising that would be a tough task, it would have the benefit of having more of an ability to stick two fingers up to a sector which has too much power.

[Christmas Tree 4725]

Its funny because the lastest Keynesian models predict that the most effective expansionary policy, when interest rates are effectively zero, is increased government spending. Arguably the situation we are in now. The deficit hawks say to cut spending and encourage the banks to lend. The banks still arent lending but they are cutting anyway. The new Keynesians say

 

http://economistsview.typepad.com/economis...zero-bound.html

 

Its the recession that caused the deficit anyway CT, so the solution is an economic recovery. We shrank by 6%, so we need to grow by 3% for 2 years to be nearly back to where we were on tax revenues (with a debt built up whilst returning to even).

 

http://www.independent.co.uk/news/business...ce-1904129.html

 

Depressed earnings in the financial sector and the general weakness of the economy conspired to push receipts down by 9 per cent overall compared with last year; income tax takings slumped by 20 per cent, and corporation gains tax revenues fell by 6 per cent. VAT payments were up a little, after the 17.5 per cent rate was restored on 1 January. On the other side of the ledger, public spending is still showing double digit increases: 15 per cent up in January, driven higher by the rise in benefits to the unemployed.

 

The solution proposed across the G20 is to cut spending. This could give us a second recession which would further push down tax receipts and increase benefits.

 

The recession didnt cause the defecit only make it worse.

 

It was a well known policy to hope that growth will shrink the defecit but you can not just wait and hope while the oustanding debt continues to increase. You get to a tipping point where the interest payments along are such a huge burden that you can no longer do all the good things that governments should be doing with that money (as is the case now).

 

Labour predicted 3% growth for next year prior to the election however it now looks that those figures where way to optimistic so once again the debt rises.

 

The other problem to this plan is that you hope during the good years when the defecit is good, governments would use that money to reduce the overall debt. But what happens, tax cuts and massive public spending.

[Christmas Tree 4725]

The CGT tax change affects 130,000 people - Cameron wants to protect them as a priority over millions of others - same old cunts.

 

 

So objectively you will acknowledge that your lot are cunts for reducing it to 18% 2 years ago.

 

Joking aside I think Cameron is more towards Labour as Blair was towards Tory. It will be interesting to see how far he gets before his own lot reel him in.

[Christmas Tree 4725]

Dont know if anyone has depressed themselves on this website....

 

http://www.debtbombshell.com/

 

They used to have a counter just like that in Times square New York at the tail end of the Reagan years. Iirc under Clinton, the enormous US deficit was completely wiped out following several years of unprecedented growth. So surely, the key to the problem is to hold our nerve and get the economy to grow again, rather than risk another recession?

 

It is scarey though, but then I don't really understand macroeconomics, so it's a question of who you trust really.

 

I could be wrong but when you write that I get the impression your mistaking debt for defecit. (understandable btw because it is all very complex)

 

The debt is the total amount of money owed by the country, the defecit is just the difference in any particular year between what a government spends and what it has raised in that year. (income)

[Christmas Tree 4725]

Its funny because the lastest Keynesian models predict that the most effective expansionary policy, when interest rates are effectively zero, is increased government spending. Arguably the situation we are in now. The deficit hawks say to cut spending and encourage the banks to lend. The banks still arent lending but they are cutting anyway.

 

The solution proposed across the G20 is to cut spending. This could give us a second recession which would further push down tax receipts and increase benefits.

 

The Basel III regulations have the potential to well and truly derail the attempts to pump-prime the economy via additional bank lending. No-one should be surprised that most of the additional liquidity in the system was simply used to increase capital ratios (and I'm staggered that anyone thought it would play out differently). Basel III is going to apply another layer of capital requirements on banks, forcing them to reduce lending and increase retained capital. Vince can say what he likes, if the BIS have their way it will hit businesses hard (especially as a bank will have to reserve the same capital whether a loan is drawn or not). Then you have the spectre of the Volker rules making everyone- banks and businesses-collateralise their derivative positions- that would be an economic disaster and leave huge amounts of cash sitting doing nothing- further prevent stimulus funds from actually doing their job.

 

As for Cameron's plans, taxing expenditure is true to form. Will there be a corresponding review of ratable items to ensure that this is not simply going to make life more expensive for the less well-off? Unlikely.

 

I fundamentally disagree with Cameron's overdraft analogy, this is a deliberate attempt to frame the nation's debt position. Long-term government debt is a permanent piece of our national capital structure. It may be high, but it's certainly not all on demand. And yes, the interest on that debt could be used on schools, but a lot of the debt raised WAS used on schools, whereas we all know the Tories would simply cut taxes and tell parents to fuck off and set one up themselves.

 

This is simply not true. Most of the schools and hospitals have been built using private money (pfi's) and they account in total for about 5 billion of the national debt (according to that website). The truth is we have moved from owning schools and hospitals to now renting them from very rich men.

[The Fish 10857]

Its funny because the lastest Keynesian models predict that the most effective expansionary policy, when interest rates are effectively zero, is increased government spending. Arguably the situation we are in now. The deficit hawks say to cut spending and encourage the banks to lend. The banks still arent lending but they are cutting anyway.

 

The solution proposed across the G20 is to cut spending. This could give us a second recession which would further push down tax receipts and increase benefits.

 

The Basel III regulations have the potential to well and truly derail the attempts to pump-prime the economy via additional bank lending. No-one should be surprised that most of the additional liquidity in the system was simply used to increase capital ratios (and I'm staggered that anyone thought it would play out differently). Basel III is going to apply another layer of capital requirements on banks, forcing them to reduce lending and increase retained capital. Vince can say what he likes, if the BIS have their way it will hit businesses hard (especially as a bank will have to reserve the same capital whether a loan is drawn or not). Then you have the spectre of the Volker rules making everyone- banks and businesses-collateralise their derivative positions- that would be an economic disaster and leave huge amounts of cash sitting doing nothing- further prevent stimulus funds from actually doing their job.

 

As for Cameron's plans, taxing expenditure is true to form. Will there be a corresponding review of ratable items to ensure that this is not simply going to make life more expensive for the less well-off? Unlikely.

 

I fundamentally disagree with Cameron's overdraft analogy, this is a deliberate attempt to frame the nation's debt position. Long-term government debt is a permanent piece of our national capital structure. It may be high, but it's certainly not all on demand. And yes, the interest on that debt could be used on schools, but a lot of the debt raised WAS used on schools, whereas we all know the Tories would simply cut taxes and tell parents to fuck off and set one up themselves.

 

This is simply not true. Most of the schools and hospitals have been built using private money (pfi's) and they account in total for about 5 billion of the national debt (according to that website). The truth is we have moved from owning schools and hospitals to now renting them from very rich men.

 

wonder which way they vote?

[Renton 21621]

Its funny because the lastest Keynesian models predict that the most effective expansionary policy, when interest rates are effectively zero, is increased government spending. Arguably the situation we are in now. The deficit hawks say to cut spending and encourage the banks to lend. The banks still arent lending but they are cutting anyway. The new Keynesians say

 

http://economistsview.typepad.com/economis...zero-bound.html

 

Its the recession that caused the deficit anyway CT, so the solution is an economic recovery. We shrank by 6%, so we need to grow by 3% for 2 years to be nearly back to where we were on tax revenues (with a debt built up whilst returning to even).

 

http://www.independent.co.uk/news/business...ce-1904129.html

 

Depressed earnings in the financial sector and the general weakness of the economy conspired to push receipts down by 9 per cent overall compared with last year; income tax takings slumped by 20 per cent, and corporation gains tax revenues fell by 6 per cent. VAT payments were up a little, after the 17.5 per cent rate was restored on 1 January. On the other side of the ledger, public spending is still showing double digit increases: 15 per cent up in January, driven higher by the rise in benefits to the unemployed.

 

The solution proposed across the G20 is to cut spending. This could give us a second recession which would further push down tax receipts and increase benefits.

 

The recession didnt cause the defecit only make it worse.

 

It was a well known policy to hope that growth will shrink the defecit but you can not just wait and hope while the oustanding debt continues to increase. You get to a tipping point where the interest payments along are such a huge burden that you can no longer do all the good things that governments should be doing with that money (as is the case now).

 

Labour predicted 3% growth for next year prior to the election however it now looks that those figures where way to optimistic so once again the debt rises.

 

The other problem to this plan is that you hope during the good years when the defecit is good, governments would use that money to reduce the overall debt. But what happens, tax cuts and massive public spending.

 

It was the global crash and resultant recession that has made the deficit a problem though. Before that we'd had a decade of growth and had never had it so good - witness the regeneration of cities, real improvements in the NHS and education system etc. For whatever reason though, politicians and economists alike didn't see the crash coming. Which is just history repeating itself really - human nature.

 

At least Labour avoided a catastrophic depression happening though, something which could well have happened under tory plans of the lasr few years.

 

[manc-mag 1]

Its funny because the lastest Keynesian models predict that the most effective expansionary policy, when interest rates are effectively zero, is increased government spending. Arguably the situation we are in now. The deficit hawks say to cut spending and encourage the banks to lend. The banks still arent lending but they are cutting anyway.

 

The solution proposed across the G20 is to cut spending. This could give us a second recession which would further push down tax receipts and increase benefits.

 

The Basel III regulations have the potential to well and truly derail the attempts to pump-prime the economy via additional bank lending. No-one should be surprised that most of the additional liquidity in the system was simply used to increase capital ratios (and I'm staggered that anyone thought it would play out differently). Basel III is going to apply another layer of capital requirements on banks, forcing them to reduce lending and increase retained capital. Vince can say what he likes, if the BIS have their way it will hit businesses hard (especially as a bank will have to reserve the same capital whether a loan is drawn or not). Then you have the spectre of the Volker rules making everyone- banks and businesses-collateralise their derivative positions- that would be an economic disaster and leave huge amounts of cash sitting doing nothing- further prevent stimulus funds from actually doing their job.

 

As for Cameron's plans, taxing expenditure is true to form. Will there be a corresponding review of ratable items to ensure that this is not simply going to make life more expensive for the less well-off? Unlikely.

 

I fundamentally disagree with Cameron's overdraft analogy, this is a deliberate attempt to frame the nation's debt position. Long-term government debt is a permanent piece of our national capital structure. It may be high, but it's certainly not all on demand. And yes, the interest on that debt could be used on schools, but a lot of the debt raised WAS used on schools, whereas we all know the Tories would simply cut taxes and tell parents to fuck off and set one up themselves.

 

This is simply not true. Most of the schools and hospitals have been built using private money (pfi's) and they account in total for about 5 billion of the national debt (according to that website). The truth is we have moved from owning schools and hospitals to now renting them from very rich men.

 

What is the intrinsic benefit in 'owning' a school btw? They cost money whatever the ownership situation. The point is to get them performing and in fairness Labour did that better than the Tories, who largely couldnt give a fuck about state education.

[Christmas Tree 4725]

I fundamentally disagree with Cameron's overdraft analogy, this is a deliberate attempt to frame the nation's debt position. Long-term government debt is a permanent piece of our national capital structure. It may be high, but it's certainly not all on demand. And yes, the interest on that debt could be used on schools, but a lot of the debt raised WAS used on schools, whereas we all know the Tories would simply cut taxes and tell parents to fuck off and set one up themselves.

 

What bothers me in the light of the obvious fact that the £6bn is a drop in the ocean is that it seems to be pandering to the markets and ensuring they feel as if the right thing is being done rather than actually thinking about the best strategy.

 

One thing that was suggested in the run up to the election by Labour was to shift the balance of the economy back to manufacturing and away from finance and though realising that would be a tough task, it would have the benefit of having more of an ability to stick two fingers up to a sector which has too much power.

 

 

Honestly, if that was possible it would have done already. It simply is basic economics that we cant make stuff as cheap as third world countries.

 

My view is that "The Markets" are simply looking back to the 80's and remembering the Tories took the hard decisions and got the public finances back under control. They know they are prepared to do it again.

 

There will be very few winners, only losers unfortunately.

[Christmas Tree 4725]

Its funny because the lastest Keynesian models predict that the most effective expansionary policy, when interest rates are effectively zero, is increased government spending. Arguably the situation we are in now. The deficit hawks say to cut spending and encourage the banks to lend. The banks still arent lending but they are cutting anyway.

 

The solution proposed across the G20 is to cut spending. This could give us a second recession which would further push down tax receipts and increase benefits.

 

The Basel III regulations have the potential to well and truly derail the attempts to pump-prime the economy via additional bank lending. No-one should be surprised that most of the additional liquidity in the system was simply used to increase capital ratios (and I'm staggered that anyone thought it would play out differently). Basel III is going to apply another layer of capital requirements on banks, forcing them to reduce lending and increase retained capital. Vince can say what he likes, if the BIS have their way it will hit businesses hard (especially as a bank will have to reserve the same capital whether a loan is drawn or not). Then you have the spectre of the Volker rules making everyone- banks and businesses-collateralise their derivative positions- that would be an economic disaster and leave huge amounts of cash sitting doing nothing- further prevent stimulus funds from actually doing their job.

 

As for Cameron's plans, taxing expenditure is true to form. Will there be a corresponding review of ratable items to ensure that this is not simply going to make life more expensive for the less well-off? Unlikely.

 

I fundamentally disagree with Cameron's overdraft analogy, this is a deliberate attempt to frame the nation's debt position. Long-term government debt is a permanent piece of our national capital structure. It may be high, but it's certainly not all on demand. And yes, the interest on that debt could be used on schools, but a lot of the debt raised WAS used on schools, whereas we all know the Tories would simply cut taxes and tell parents to fuck off and set one up themselves.

 

This is simply not true. Most of the schools and hospitals have been built using private money (pfi's) and they account in total for about 5 billion of the national debt (according to that website). The truth is we have moved from owning schools and hospitals to now renting them from very rich men.

 

wonder which way they vote?

 

 

Well as its labour whose made them rich what do you think?

 

As its labour whose reduced gapital gains tax, what do you think?

[Renton 21621]

Dont know if anyone has depressed themselves on this website....

 

http://www.debtbombshell.com/

 

They used to have a counter just like that in Times square New York at the tail end of the Reagan years. Iirc under Clinton, the enormous US deficit was completely wiped out following several years of unprecedented growth. So surely, the key to the problem is to hold our nerve and get the economy to grow again, rather than risk another recession?

 

It is scarey though, but then I don't really understand macroeconomics, so it's a question of who you trust really.

 

I could be wrong but when you write that I get the impression your mistaking debt for defecit. (understandable btw because it is all very complex)

 

The debt is the total amount of money owed by the country, the defecit is just the difference in any particular year between what a government spends and what it has raised in that year. (income)

 

Yes, I know the difference between debt and deficit CT thanks very much. To be fair that is probably the extent of my understanding though as it is yours. I'm leaving this for the economists in our ranks to chew over (Chez and Matt).

[Renton 21621]

PFI is more akin to getting a mortgage than renting, isn't it?

 

Did you buy your house outright CT?

[Christmas Tree 4725]

Dont know if anyone has depressed themselves on this website....

 

http://www.debtbombshell.com/

 

They used to have a counter just like that in Times square New York at the tail end of the Reagan years. Iirc under Clinton, the enormous US deficit was completely wiped out following several years of unprecedented growth. So surely, the key to the problem is to hold our nerve and get the economy to grow again, rather than risk another recession?

 

It is scarey though, but then I don't really understand macroeconomics, so it's a question of who you trust really.

 

I could be wrong but when you write that I get the impression your mistaking debt for defecit. (understandable btw because it is all very complex)

 

The debt is the total amount of money owed by the country, the defecit is just the difference in any particular year between what a government spends and what it has raised in that year. (income)

 

Yes, I know the difference between debt and deficit CT thanks very much. To be fair that is probably the extent of my understanding though as it is yours. I'm leaving this for the economists in our ranks to chew over (Chez and Matt).

 

 

Yes but Matts post could have been in chinese for all I understood of it......Basel 111 wtf!

[Christmas Tree 4725]

PFI is more akin to getting a mortgage than renting, isn't it?

 

Did you buy your house outright CT?

 

 

No its not, its rental / service agreement

[ewerk 30602]

The UK's national debt is much lower than the US's as a percentage of GDP.

[manc-mag 1]

PFI is more akin to getting a mortgage than renting, isn't it?

 

Did you buy your house outright CT?

 

 

No its not, its rental / service agreement

 

With the option to take ownership at the end of the contract? So a hire purchase then if you like. (Nearer to a mortgage than rental though in any event).

 

Not saying its a perfect model btw but I think those arguments have been done to death over the past 10 years or so.

[Christmas Tree 4725]

Heres a nice read on PFI from the Chanel four news economist correspondant, Liam Halligan

 

 

Back in 2004, I received an invitation to the annual dinner of the Public Private Partnership (PPP) Forum. A glitzy, black-tie evening was promised, amidst the mock-Gothic splendour of London's Royal Courts of Justice. As a financial journalist, I am asked to numerous swanky, yet frankly humdrum events. But the mighty PPP Forum is different. It comprises many of the UK's corporate A-list - more than 100 contractors, banks and law firms.

 

PFI, in turn, is a multi-billion pound industry. New Labour has signed hundreds of long-term contracts with the private sector to construct - and then service and maintain - schools, hospitals and other public buildings. The government pays back investors over 30 years or more, after which the buildings revert to the state. Even two years ago, it was clear the government had based the biggest public building programme since the war on a gigantic - and controversial - hire-purchase scheme.

 

Given all that - and noticing the stiff-card dinner invitation implied a cabinet minister would be speaking - I decided to attend. The food wasn't bad and the atmosphere convivial. But the evening left me disturbed. Whenever I politely asked fellow diners an awkward question, I was - politely, for the most part - fobbed off. Back then, as now, I had reservations about PFI. Amid sumptuous surroundings, I questioned the double- and sometimes triple-digit returns being made from projects driven by public money. I protested that commercial confidentiality meant the details of long-term agreements between PFI companies and taxpayers often remained under wraps - even to the head teachers and NHS bosses trying to run the schools and hospitals involved. Because the private sector pays more to borrow than the state, I quizzed the logic of today's politicians building up huge off-balance-sheet liabilities under PFI, to be met by tomorrow's taxpayers. And, while the government claims to use PFI over conventional procurement only after a rigorous value for money test, I suggested this exercise was a sham.

 

After all, as early as 1997, then Health Minister Alan Milburn proclaimed, 'it's PFI or bust'. In other words, if local health chiefs don't agree to PFI, the hospital won't be built. I remember quoting figures to a chap at my table: by the end of 2003, PFI had been used for 90 of the 100 hospitals built or refurbished under New Labour. Similarly - 500 out of 550 new or renovated schools. Surely, the fact that PFI allowed ministers to be regularly photographed opening shiny new buildings - while keeping much of the spending off the government's books - meant the system was likely to be rigged. Gordon Brown, I argued, would continue using PFI, without question, to bolster his claim to be 'a prudent chancellor'. My analysis was met with a wry smile.

 

But what I most vividly recall from that dinner two years ago was a group of cuff-linked PFI professionals noisily toasting Saddam Hussein. 'The Iraq war has really done us a favour,' one well-oiled reveller explained, while slapping my back. 'Since it kicked off, you media types have been so obsessed with foreign policy that PFI has dropped off your radar'. At that point, I resolved to become very interested in PFI. And, over the last six months - with that toast still ringing in my ears - I've made an in-depth TV documentary.

 

So far, much of the analysis into PFI has been party pris. Trade unions, and academics funded by trade unions, have produced a slew of critical studies, which the PPP Forum has rightly dismissed as 'biased'. After all, much of the public sector is allergic to any form of private involvement in state schools and hospitals. The only other source of detailed 'research' has been big City accounting firms, invariably, in favour of PFI. But they're making a killing from what is now a £4bn-a-year industry so have a vested interest.

 

I have no ideological aversion to PFI. My only allegiance is to that ultimate vested interest - taxpayers. And, as my documentary - I hope - makes clear, PFI gives very bad taxpayer value. Some of the facts I've unearthed - on long-term liabilities, on ramped-up maintenance charges, on broken contracts are shocking.

 

New Labour has signed PFI deals worth £43bn. The long-term taxpayer cost - £150bn. The cost of changing a light switch in a leading PFI hospital? A cool £333 and I've got the document which proves it. Locked into a long-term PFI contract, a local authority is currently shelling out tens of thousands of pounds a month for meals and cleaning services in a school which closed last year. And a head teacher at a school which Tony Blair has singled-out as 'evidence PFI works' told me the policy is 'lunacy'. After years of wrangling with contractors, she said: 'I was initially very positive about PFI. But I've ended up hugely frustrated at the waste of public money'.

 

In the face of growing discontent, ministers remain petrified of reining-in the all-powerful PFI industry. Without it, public service delivery would grind to a halt. And, having committed themselves - and us - so deeply, the government can't bear to go back. My invitation to the most recent PPP forum dinner seems to have got lost in the post. The industry will never believe me, but I really wanted PFI to work. The private sector should be heavily involved in delivering our public services. We need to retreat from the dogma of state provision.

 

But as the PFI stench gets worse, opposition is growing, not only among the usual suspects, but among ranks of non-aligned taxpayers too.

 

And that is the tragedy. PFI is giving the private sector a bad name.