Budget Mar 13 Thread

[Top_gun]

Why is growth cut, though, and why are debts rising?

First, the debt would be rising had Osborne's predicted growth, in his first budget, been met. It would be rising if Labour had won and Alastair Darling's budget gad been implemented.

In terms of what was politically feasible, nothing, and I mean absolutely nothing any in coming government could, have done would have resulted in anything other than the debt rising. If, on coming to power, the coalition had scrapped the NHS, and I mean shut it down entirely and provided no state health provision at all for three years, and saved £120bn on top of the cuts that have been made, debt would STILL have gone up, at this point in the Parluament.

Suppose you, personally, owe £100,000.

And, you earn £20k a year and spend £25k a year. So, every year, you spend £5k more than you earn, and you do it by borrowing. What happens to your debt? Yup, it goes up.

So, you implement an austerity package of £1.5k, and are promised a £1k pay rise. That means your debt is now only going up by £2.5k .... but it's still going up. And then the pay rise doesn't come through.So, it's going up faster than you expected, but slower than it was when it was £5k.

And broadly speaking, if on a far larger scale, that's what's happened with the economy.

Why has growth been stunted? Several reasons. First, weak domestic demand., that is, consumers not consuming, or not as much, anyway. And why? Because they had too karge a debt themselves, and have been paying it off. Unless you salary goes way up, you cannot both pay off a large credit card bill and go on a shopping spree.

Second, poor export growth. Our two biggest export markets, by far, are the EU and the US and you might have noticed, both are in a mess. It's very hard to hugely increase exports when your major customers aren't buying.

Exports to other areas, like India, have risen sharply, but as they were so small, even a large percentage increase is still pretty small. That situation badly needs to be addressed, and it is being addressed, but it is the work of a couple of decades, not a couple of years.

So, debts are rising because they were always going to. The very first budget said that. Growth is not as expected mainly because of deleveraging by UK consumers (a necessary process) and because of the economic woes in the eurozone and US.

Nice try but the real problem is that the Tories just didn't think through their economics policy. What we hearing is simply poor excuse mongering rather than factual economic reasoning.

Many years ago I used to think Tories were competent handlers of the economy but as my knowledge of economics increased it was clear their policies were nothing more than ideology and dogma.

[TheAnimus]

Nice try but the real problem is that the Tories just didn't think through their economics policy. What we hearing is simply poor excuse mongering rather than factual economic reasoning.

Many years ago I used to think Tories were competent handlers of the economy but as my knowledge of economics increased it was clear their policies were nothing more than ideology and dogma.

Please share your learned wisdoms of economics?

It's as if you ignored the points of his post. The debt was going to rise, regardless.

What is it they would have done differently? Because frankly the alternative to the Tories have been absolutely shocking:
http://www.telegraph.co.uk/finance/b...d-deficit.html

[Saracen]

Nice try but the real problem is that the Tories just didn't think through their economics policy. What we hearing is simply poor excuse mongering rather than factual economic reasoning.

Many years ago I used to think Tories were competent handlers of the economy but as my knowledge of economics increased it was clear their policies were nothing more than ideology and dogma.

What is poor excuse mongering?

The debt was always going to rise over the term of this Parliament. The figures are in the Red Book for 2010, clear for all to see. For the years from 2010-11 to 2014-15, the Red Book forecasts were for a rise in debt of £355.5bn, and that assumes that all targets, like growth, were hit.

Let me put it another way. If you have a deficit in a given year, the debt IS going to rise that year. And the initial 5-year target was to eliminate the deficit by the end of the Parliament. Not before the end, but by the end. And that means that we would, by projection, be running a deficit each and every year, and that means the debt goes up each and every year. If you don't believe me, go look in the Red Book. The figures are there, in 2010, in black and white, showing that increased debt was forecast, from the June 2010 budget on.

If your economics knowledge had increased adequately, you'd know that just about everything every economist says is in part not so much dogma as theory. This is because, first, the national economy is so complex as to be be next to impossible to accurately model. Secondly, the national economy does not operate in isolation, so you have to factor in the effects of economies all over the world. Third, even if you could do that, human beings are by definition somewhat unpredictable and irrational, and what we do impacts on those nice, neat Treasury models in ways impossible to accurately predict.

And fourth, the assumptions in those models are usually based on a blend of theory and analysis of historical data. Great. That's about all we can do. But if your model has assumptions based on, for example, the reaction of the economy to a given set of stimuli in a given recession, then the reaction of the economy in the next recession will not be the same if the underlying causes of the recession were different.

And finally, just about anything any government can do will have multiple effects. If you "stimulate" the economy by massive spending, you will likely generate growth. Ed Balls is right about that .... providing you recognise that just how much growth depends on precisely how you do that spending. But .... if you borrow heavily, the odds are the interest rates go up, and that means, among other things, you have less to spend next year because a larger part of your income goes on servicing the existing debt, and the new debt your stimulus just incurred.

So, you generate growth, and you incur extra interest costs. But do you generate enough growth to justify the costs, and to more than or less than pay for it.

If you come up with anyone that claims to KNOW the answer to that, I'll show you someone that is either a liar or a fool. Because the simple truth of that kind of economic experiment is that nobody, and I mean NOBODY, knows for sure.

So, it's a somewhat dogmatic position of the Tories that the solution is to cut costs, reduce deficit, restructure the economy, and above all, keep interest rates down. It's also a dogmatic position of Labour that if you just keep borrowing and spending, growth will return.

Here's the cold, hard unpalatable truth. We DO NOT KNOW which is the best strategy. And nor does either Osborne or Balls. And we never will.

But there is an underlying and erroneous assumption in all the carping from Balls and Labour, which is that because the government aren't meeting forecast projections, doing things their way would have been better. In fact, of course, it could have been much worse.

We should not assume that if Plan A turns our bad, Plan B would have been better. It could have been worse. Or much, much worse. And we do not and cannot ever know, because we didn't do it.

So to that extent, it's all dogma and ideology, from both parties. That's the true 'value' of economics - it's an artful blend of computer modelling, theory, historical analysis, dogma and crystal ball.

[HalloweenJack]

so the `second home mortage scheme` has been outed.... wont even get oods that those middle/high to high earners will take advantage to get tarquin his first home

[Barakka]

An interesting take on the Budget...
Do people get Osborne and co yet ?

[wasabi]

An interesting take on the Budget...
Do people get Osborne and co yet ?

Interesting? Just an opinionated left-wing claptrap by the Gruniad. Does it argue using economic critique of why the policiies are bad? Nah.. Just an endless load of vague whining about values.

[TheAnimus]

so the `second home mortage scheme` has been outed.... wont even get oods that those middle/high to high earners will take advantage to get tarquin his first home

That is a gross over simplification of a moronic scheme.

You come across as rather, whats the word, bitter on this matter, even towing a petty political line that it is going to be used by a group of people you appear to deride.

Let me tell you, its worse than that!

Just have a quick shifty over HSBC's mortgages, you can get ones at 2.49%, why the hell not, I'm mortgaging up to 80% to raise some capital right now!

The idea that banks not lending is responsible for the home ownership problems is nonsense. It's a complete lack of supply.
http://www.home.co.uk/guides/house_p...n=london&all=1
We've seen house prices double since the start of the century! Helping people get a mortgage isn't going to help that. Think of it this way.

You've got 1 house, three potential buyers:
a) Has income of £20k per year, savings of £10k
b) Has income of £20k per year, savings of £20k
c) Has parents who have income of £40k per year, but thanks to the rise in their family homes value, can swap some of the equity to get savings of £80k.

C is going to win. It doesn't matter what you do. The only difference now is the sale price will be higher, because all of them can afford to borrow more money. It is still going to be C who can afford the most.

This means the only people who benefit from this, in realised terms are those who are down-sizing. But everyone else will feel all nice and happy that their property has increased in value.

A+B still won't be able to buy a home, nothing has changed. Perspective second home owners are at no more of an advantage than they were before, which is why I find the politization of it rather irksome, as once again we've not addressed the problem, and labour sure as hell didn't care about it before.

We need to change planning laws, there was talk from the colaition about this, but nothing pratically appears to have changed, at least in London.

We need to invest in useful things like transport, but mostly, the right kind of transport. HS2 is pure pork barrelling it appears to me. It is going to really help people get to work as there are so few stops, the cost is so high they could have say added an extra tube stop to most lines in London, Londoning being the part of the UK were home ownership and rental-lockin are the highest at the moment. Instead we're linking the centre of Birmingham which has terrible city road systems, no mass transit system. That might help boost the cost of flats in the centre, but not much else. Afterall why would someone live in Birmingham to commute 30 min by bus, before going to London 50 min (a saving of almost 15min for all that cash) then 15 min on the tube, before a 5-10min walk. Wow, that's really going to help isn't it! a 2 hour commute dropping to 1:45. I can see the good times now.

If we made it more affordable for people to live furhter away with reliable local public transport links, it would help bring land that isn't green belt in to use. Instead we've got this focus on joining big cities, very sligthly faster. We should be looking at bringing good quality mass transist systems for every day use.

This way, Mr C is still going to get the flat in the centre with the view and trendy location, but A+B will still be able to have something too.

We spend such a disproportionate amount of our income on housing, this is only going to make it worse. It would be loverly to see a plan that would change that.

There is one side effect thou, jack up the house prices and our economic figures, debt to GDP etc can look better!

[TheAnimus]

Interesting? Just an opinionated left-wing claptrap by the Gruniad. Does it argue using economic critique of why the policiies are bad? Nah.. Just an endless load of vague whining about values.

"Polly Toynbee"

Oh, yes, tell you what I'll listen to her concerns about home ownership, when she sells her holiday home in Italy, I'll listen to her views on the environment when she isn't constantly jetting over to her tuscan home. I'll listen to her views on wages and renumeration when she actually pays her aids/interns. I'll listen to her about inequality and poverty when she doesn't own complexly structured entities that one might construe shield her estimated millions of wealth from taxation.

Oh wait, its the Guardian, the paper written by complete hypocrites. I wounder what that makes its subscribers.

[HalloweenJack]

since you`ve decided to `paint` me with a political brush - which party line to I tow then?

edit:

and if you say labour then I`ll fall about laughing. alot.

[TheAnimus]

since you`ve decided to `paint` me with a political brush - which party line to I tow then?

No, just that you appeared to be attacking a group of people who currently contain wealth. I was meaning political in a pure manner, such demonising is strongly characteristic of applied marxist theories.

Calling it a second home scheme is wrong, its not, it applies to everyone. Trying to paint one set of society as benefiting from it in the manner you did is not only inaccurate (as I hope my previous post elaborated) but just down right rude.

I'd also add that if I get to the stage where I'd ever contimplate having children, I would have more than enough resources set asside to subsidise their living, I consider it offensive to suggest that such behaviour is in any way worthy of derision. It smacks of the lets drag everyone down to equality ideology.

http://www.telegraph.co.uk/finance/b...g-machine.html

Has a very good write up of the problems we're facing. I don't think it is hyperbole to say we're already well in to a lost decade.

The question is do we learn the lessons from Japan?
http://en.wikipedia.org/wiki/Lost_Decade_(Japan)
They used a lot of Keynsian Stimulas. It didn't work. Debt got much worse.

I'm not saying to throw the baby out with the bathwater, and that any stimulas is a bad idea, its just the investment has to provide a payoff that is greater than the cost of its borrowing, even if that cost is 'hidden' with inflation.

I think we have to be honest, realise that we've not even begun to feal the worst of it, make people come to peice with the notion they might have to have fewer high value, luxury imported items. Child poverty for a family of two starts at £18k. Povery by our definition is really something to be proud of, however it will be worse in the coming few years as food and cheap chinese imports cost more. That is going to happen, anyone who says we can stop it is either a damned fithly lier or one of the smartest and soon to be richest men alive!

[Phage]

If you're at all interested in language, have a look at the use of the word 'fair' currently. It has nothing to do with equality...
(Last time I posted on this subject I had a few members here frothing !)

[Top_gun]

No, just that you appeared to be attacking a group of people who currently contain wealth. I was meaning political in a pure manner, such demonising is strongly characteristic of applied marxist theories.

Calling it a second home scheme is wrong, its not, it applies to everyone. Trying to paint one set of society as benefiting from it in the manner you did is not only inaccurate (as I hope my previous post elaborated) but just down right rude.

Halloweenjack was just expressing his own view on the budget. To suggest his opinion was purely motivated on demonising a group of greedy people is just plain ridiculous. Sorry TA but there are a few people here who are capable of thinking for themselves rather than towing a party line.

Attempting to hijack every argument, just because they don't follow your world view, is harmful to discussion.

I'd also add that if I get to the stage where I'd ever contimplate having children, I would have more than enough resources set asside to subsidise their living, I consider it offensive to suggest that such behaviour is in any way worthy of derision. It smacks of the lets drag everyone down to equality ideology.

Assuming of course if your health insurance is willing to payout when required. Or your pension scheme gives a very poor return on your premiums.

http://www.telegraph.co.uk/finance/b...g-machine.html

Has a very good write up of the problems we're facing. I don't think it is hyperbole to say we're already well in to a lost decade.

We are already on the way to a lost decade thanks to a economic illiterate chancellor called George Osborne.

Actually, the write up confirms my belief that Osborne is out of his depth and showed no economic leadership to steer us through the difficult times. Hopefully the incoming Canadian may have some idea to stop the Tory mess up of our economy.

The question is do we learn the lessons from Japan?
http://en.wikipedia.org/wiki/Lost_Decade_(Japan)
They used a lot of Keynsian Stimulas. It didn't work. Debt got much worse.

I'm not saying to throw the baby out with the bathwater, and that any stimulas is a bad idea, its just the investment has to provide a payoff that is greater than the cost of its borrowing, even if that cost is 'hidden' with inflation.

Japan has long stated that fiscal policy was not enough to deal with their economic woes. So to say Keynesian stimulus was a failure shows a lack of understanding of economic policies.

I think we have to be honest, realise that we've not even begun to feal the worst of it, make people come to peice with the notion they might have to have fewer high value, luxury imported items. Child poverty for a family of two starts at £18k. Povery by our definition is really something to be proud of, however it will be worse in the coming few years as food and cheap chinese imports cost more. That is going to happen, anyone who says we can stop it is either a damned fithly lier or one of the smartest and soon to be richest men alive!

Sorry TA, but poverty is more than figures on a spreadsheet. Thanks to a Tory government, real people are undergoing severe hardship and soup kitchens have never been busier.

[wasabi]

Halloweenjack was just expressing his own view on the budget. To suggest his opinion is purely motivated on demonising a group of greedy people is just plain ridiculous.

You DO realise that Halloweenjack said the following:"so the `second home mortage scheme` has been outed.... wont even get oods that those middle/high to high earners will take advantage to get tarquin his first home"?

[Top_gun]

Irrelevant, wasabi.

[TheAnimus]

Halloweenjack was just expressing his own view on the budget. To suggest his opinion is purely motivated on demonising a group of greedy people is just plain ridiculous. Sorry TA but there are a few people here who capable of thinking for themselves rather than towing a party line.

You think I'm toeing a party line. On a scale of how dumb I think the new home buying scheme is, we're talking about 2/3s of a Brown. I really think it is that bad. However the way he thinks it's bad, for the reason I elaborated at length, are un-just and petty.

Attempting to hijack every argument, just because they don't follow your world view, is harmful to discussion.

Please, teach me what your doing here again?

Assuming of course if your health insurance is willing payout when required. Or your pension scheme gives a very poor return on your premiums.

Depends which health insurance you refer too, as I've said many times before, I consider free at point of access medical aid and health services to be a necessity for a first world society. It appears its more about you saying I'm a party member, I'm not. When it comes to things in the budget, I think the best ideas, such as raising personal allowance, are not tory.

We are already on the way to a lost decade thanks to a economic illiterate chancellor called George Osborne.

Nothing about the people before him? You know all that public sector borrowing hidden via PFI, all the rise in national debt, so that any change in GDP thrusts us in to a nasty defect. Oh yea, its all Osbornes fault. There are things that could have been done differently, but borrowing to spend cash? I can't believe anything can suggest that is a good thing, if you feel that way, please tell me where the cash should be spent? I've ranted enough in this thread about my feelings where I think we need investment, where for you? If you don't believe the data, that we messed up in 2004-2008 period, with increasing debt fuelled spending, I'd love to know why? I can't imagine how it was worthwhile spending, it wasn't looking back with the benefit of hindsight, it didn't feel it at the time.

Actually, the write up confirms my belief that Osborne is out of his depth and showed no economic leadership to steer us through the difficult times. Hopefully the incoming Canadian may have some idea to stop the Tory mess up of our economy.

I don't think it is that he is out of his depth, I think it is that the actions which would really help, are politically undesirable, so they don't have the strength to do what is needed for a quicker recovery.

Japan has long stated that fisical policy was not enough to deal with their economic woes. So to say Keynesian stimulas was a failure shows a lack of understanding of economic policies.

HAHAHAHAHAHAHA. No seriously. Now your saying that use of government fiscal policy isn't the solution, yet your blaming Osborn (for what, I'm not sure, you appear to be on the spend, spend, spend). Also you'll notice in all threads where I talk about Keynesian stimulus theory I normally state that it depends where the money is spent. In one thread a while back I remarked on what would happen if they government just wrote me a cheque for £1.5bn, if they would get a return greater than the borrowing for the investment.

It is, perfectly fair, even wikipedia agrees, that Japan used a lot of Keynesian stimulus, and it failed, badly, it made things worse, as the stimulus not just failed, you had the increase in cost, due to the debt.

Sorry TA, but poverty is more than figures on a spreadsheet. Thanks to a Tory government, real people are undergoing severe hardship and soup kitchens have never been busier.

Actually child poverty is defined as a number on a spreadsheet, this is what I'm talking about, it is a legally relivent economic indicator.

People who are homeless, the males with no children who generally appear last on any waiting list, will still be were they where before the decade started. It is not the bottom rung who are loosing out, in fact on a global scale, those in most poverty are having their lifestyle improved. But this is coming at the expense of everyone else, as I said before, we profited on their cheap labour.

In fact its amazing, I have not said anything positive about the Tories, only neutral, I've said a lot that is bad about Labour, we know it is bad, we know the mistake they made, which many people knew at the time was wrong. Why is everything bad for you a result of the Tory party?

I fear your a champaign socalist, who if anyone uses numbers to suggest your ideas are unsustainable, they are someone who is just looking at figures on a spreadsheet (which is the most important thing to do for any planning!) when your ideas mess up, badly, it can't be the ideas, because the morals behind it are good.

I can't help but think of you as the kind of person that would give everyone £1,000 each. Not realising it would actually hurt the poorest people the most due to the localised relative change on inflation. I'm not calling you selfish, just that you should have respect for numbers, spreadsheets, maths or any of the guises of economic theory.

[TheAnimus]

Irrelevant, wasabi.

It's always irrelevant because it doesn't back up the view of the world you'd like to have?