Question. If labour were still in charge would we be in a worse state Greece & Italy

[paddy]

Is that the OBR set up by George Osbourne after the general election, part run by the lovely Geoffrey Dicks previously chief economist of RBS?

It's the OBR which is headed by the internationally respected economist Robert Chote. Do you think a man like that would take his lead from Osbourne and thus risk a hard-won reputation built up over decades? If there were any suggestion that the Treasury were seeking to influence the OBR he would leave (indeed he has said as much). Also, the head of the OBR is subject to the approval of the Treasury Select Committee - the Labour members of that committee voted in Chote unanimously - why would they have voted in a yes man?

 

[Chicken Runner61]

not as bad as Greece and differently to Italy, but we'd be very f***ed.



If... [ insert anything ]. our growth isnt good enough, Osbourne bet on a recovery from industry which has faltered. but actually had the second highest GDP in Europe in Q2, on a par with Germany Q3 and above France and everyone else. it was a close run thing, but in the end, you cant grow your economy if your markets are all depressed.

low VAT really isnt going to help growth when you importing the goods to sell slightly cheaper, which are being price cut anyway. its a deckchair on the proverbial titanic, i dont know why Labour put such emphasis on it. ive not read an economist who backs it as the answer. meanwhile we know from whats happening in europe that the borrowing option wouldnt/isnt available and they are being told how and where they must cut their budgets. we have at least given ourself some breathing space, though thats as much to do with simply not being in the euro than Osbourne's policies.

The only way we will get growth is to export more - we can't export more if all our industry is crippled - the vat cut helped businesses here that are not reliant on exports. The vat cut together with the scrappage scheme boosted the economy (same happened to Ireland until today !) We can't rely on Europe - the Euro is F***** The rumour is that a major European bank was about to go bang which is why the Central Bank jumped in this week. We might get a twin Euro or a split EU very soon. The Uk will get dragged into any Euro crisis do not kid yourself it won't. Putting people on the dole is not going to help borrowing - we need to keep our businesses strong, Even if you say the 2.5% cut to 15% didn't do much how much damage has another 2.5% to 20% done. If goods don't sell you get 0% vat not 20%. Lots of failures in the uK will mean less tax revenues and more unemployment benefit having to be paid.

We haven't got any breathing space, we are getting to the point of no return. All debt can be restructured no matter how bad because in the end the lenders will have to take a haircut, We can't rely on European banks or Europe generally the banks are not lending to each other - something is very wrong again as in 2008

 

[Buzzer]

I only said 'including'. Jobs don't seem very wasteful to me. PFI is god awful though and just shows even the supposed left can't help feeding The City.

Sorry. Sloppiness on my part. I should have written: ...created hundreds of thousands of public sector jobs...

Their usefulness is, I think, highly debatable. My point still stands though. The vast majority of money spent by Labour was not spent on capital projects.

 

[Chicken Runner61]

Goodness me, I don't know where to begin with this one.

Firstly, we are not paying off a loan. We are trying to stop taking out more loans. We have a budget deficit - for every five pounds the government spends, one is borrowed. The budget deficit is structural. A structural deficit is one which exists irrespective of how well the economy is performing. The only way one can get out of a structural deficit is by removing the deficit and the only way to remove that deficit is through spending cuts/tax increases. Of course, it is open to debate how much of our current deficit is structural or cyclical but what is clear is that a large proportion is structural and thus can only be removed (i.e. not borrowed out of)

Secondly, it is not Osbourne's graph on growth - the graph is produced by the OBR (an independent body).

Thirdly, the price of crude oil is indeed an indicator of global economic performance, but it is precisely the reverse of what you suggest. The price of crude oil increases where there is increased demand. Increased demand can be attributed to increased economic performance. Thus, as with gold, the real time to worry is when the price of gold and oil collapse (with gold because it shows people are having to sell assets to cover losses on the markets; with oil because the economy is slowing and there is less demand for it).

I don't agree - I'm more worried that we won't be able to service our debt because our growth is so bad - thats what happened in the end game to Greece (its not the reason they got in that mess though) and thats the problem spreading throughout Europe. Spain and Italy won't be able to repay their loans because their economy is f**** thats resulting in even higher interest rates which is creating bigger debts they won't be able to pay. Its getting to the point where no one will lend anymore money. Its a European policy death vortex.

My point about the graph is that figure for the last year looked made up whoever created it!

The price of Oil and gold are not always connected - The price of crude is going up now yet economy suggests demand is falling - Its probable that Gold is going up because the Central bank jumped in to save the Euro A few weeks ago Gold slumped slightly just as crude started to go up. The price of silver crashed after massive rises in the past year - thats probably because industry uses silver but gold is mainly collected and never destroyed. Also Gold is a funny commodity you can use it for a store of money as well as a usable commodity for jewellery. The supply does not change much. You can't do that with crude - when you burn it its gone. When everyone wants to buy oil there are not loads of oil collectors that will sell what they have been hanging on to.

Also the Uk has/had one advantage over Europe when borrowing - it could let the £ drop, Greece Spain Italy couldn't do that because it is tied to the rest of Europe. A lower £ means greater exports and busier Uk companies despite the pain a weaker currency carries.

Economists warned in June about growth. The IMF ignored it and backed osbournes Cuts but told him he might need to cut taxes and not let unemployment rise. A bit strange as the cuts would cause unemployment!

 

[beorhthelm]

... We can't rely on Europe - the Euro is F*****

you speak as if this was known 18 mths ago. while it could be said the euro problem was bubbling (some would say it was obvious yearss before that, hindsight is great), it wasnt expected to get this bad. Germany's growth was the same as ours last Q and only .1 higher the quarter before, this retrenchment of all european economies just wasnt exepcted. we *are* in the Euro crisis, thats why growth has stalled, we havent done too badly relativly. upto early 2011 there were net jobs being created, albeit not necessarily the "right" jobs replacing those lost in public sector. VAT to 20% probably hasnt helped, but was probably targeted precisely because the 15% hadn't had a noticeable effect.

The breathing space we have is that the bond markets have left as alone, indeed we're considered a "safe" option. much cheaper to roll over debt when its <3% than when its >6%.

 

[Kalimantan Gull]

I disagree. The plan that Darling was following was a balance between cuts and encouraging growth which were bearing fruit. The osborne approach, whilst popular with the analysts because it talks macho about cuts actually delivers less than 10% more savings whilst causing concern and uncertainty which wrecks confidence. This increases spending on welfare and reduces tax income thus negating the additional cuts

the right answer and therefore ignored

 

[sten_super]

the right answer and therefore ignored

Lovely idea, but of course there's no such thing as a 'right' answer, because it's impossible with any certainty to say what would have happened. Incidentally I would disagree with ROSM - the economy lags behind policy and there's not a whole lot of evidence that it was actually Darling's policies that were leading to the return to growth; in fact growth dropped off almost as soon as the coalition government was appointed, before they'd announced any policies and well before the impacts of them could be felt - the country was effectively still running on Darling's views.

There's two things that can be said with a degree of confidence - under Labour market confidence (and therefore the government's borrowing rate) would probably be higher, and the economy would be performing 'somewhat' better. It's nigh on impossible to say to what degree one would counteract the other, or which would have the larger effect.

 

[Napper]

I disagree. The plan that Darling was following was a balance between cuts and encouraging growth which were bearing fruit. The osborne approach, whilst popular with the analysts because it talks macho about cuts actually delivers less than 10% more savings whilst causing concern and uncertainty which wrecks confidence. This increases spending on welfare and reduces tax income thus negating the additional cuts

This .

 

[JJ McClure]

Worse than Greece and Italy no, but probably not far short. It amazes me that whilst chaos reigns in the economies of europe there are still people who think we shouldn't be making cuts here.

 

[ROSM]

Lovely idea, but of course there's no such thing as a 'right' answer, because it's impossible with any certainty to say what would have happened. Incidentally I would disagree with ROSM - the economy lags behind policy and there's not a whole lot of evidence that it was actually Darling's policies that were leading to the return to growth; in fact growth dropped off almost as soon as the coalition government was appointed, before they'd announced any policies and well before the impacts of them could be felt - the country was effectively still running on Darling's views.

.

you would expect me to disagree with you - we had benefited from 14 months of darling policies before the election. If anything the vote came 3 months too early as the next quarter showed the increased tax revenue, benefit of initial spending reductions and economic growth. The next quarter (the first full quarter after the coalition was formed) started to show indicatations of a downward trend which we are now well and truly seeing.

 

[Albion Dan]

The Tory policy has been an unmitigated DISASTER! Did those defending it not hear that we have to borrow an additional ONE HUNDRED AND TEN BILLION pounds than he forecast in the next few years.

Plan A could only ever work if the private sector and common public SPENT enough money to drive some growth in GDP. By cutting everything to pieces and throwing just about everyone under 25 on the doll we have had no growth whatsoever, so no real cutting of the debt at all. Just years of misery.

Whatever you say. Darlings economic policy had brought growth back to our Economy and Osbourne hasc suffocated it.

 

[Seagull on the wing]

All doubts were put aside by the outgoing Labour government with their note...THERE'S NO MONEY LEFT!

 

[Albion Dan]

All doubts were put aside by the outgoing Labour government with their note...THERE'S NO MONEY LEFT!

Are you the sort of user that takes Ernests posts seriously?

 

[sten_super]

you would expect me to disagree with you - we had benefited from 14 months of darling policies before the election. If anything the vote came 3 months too early as the next quarter showed the increased tax revenue, benefit of initial spending reductions and economic growth. The next quarter (the first full quarter after the coalition was formed) started to show indicatations of a downward trend which we are now well and truly seeing.

But this is my point - the first full quarter is well before the effects of any coalition policy came into effect. I would agree that some of Darling's policies were effective and had a positive impact, but given the changing economic conditions there's no guarantee of future success.

The Tory policy has been an unmitigated DISASTER! Did those defending it not hear that we have to borrow an additional ONE HUNDRED AND TEN BILLION pounds than he forecast in the next few years.

Plan A could only ever work if the private sector and common public SPENT enough money to drive some growth in GDP. By cutting everything to pieces and throwing just about everyone under 25 on the doll we have had no growth whatsoever, so no real cutting of the debt at all. Just years of misery.

Whatever you say. Darlings economic policy had brought growth back to our Economy and Osbourne hasc suffocated it.

They are having to borrow additional funds over the life of the parliament, which Labour jumped on - but conveniently without saying how much they would have had to have borrowed under any alternative plans. The problems in the eurozone and the relatively slow growth in Asia and the US have depressed growth to some degree, which has had a negative impact on the current account. There's also the underestimation of the structural gap in economic growth (which I've always suggested was under-estimated), which means we have further to go to get back to the 'status quo'.

Note that I'm not saying that the coalition policies have been a success - there's not much evidence they have been, other than the very low interest rates on government debt - but merely that it's very easy to have a pop at the incumbents. I'm not particularly convinced that Labour would have done any better.

 

[ROSM]

But this is my point - the first full quarter is well before the effects of any coalition policy came into effect. I would agree that some of Darling's policies were effective and had a positive impact, but given the changing economic conditions there's no guarantee of future success.

I think the scaremongering during the election campaign will have had an impact from the point at which the new government was formed. Andy Coulson's now famous mantra about the economic mess inherited from labour, that he advised all cabinet members (even lib dems), to ensure was the first line of any answer on policy questions will have impacted consumer confidence.

And lets not forget that during the last government, the only policy on public spending that the Conservatives objected to was the bailout of northern rock.

 

[ROSM]

All doubts were put aside by the outgoing Labour government with their note...THERE'S NO MONEY LEFT!

as has been mentioned many times before, the exchange of notes between outgoing and incoming ministers is something that has happened for years. When Maudling left the treasury, the new chancellor james callaghan received the following note:

"Good luck, old cock ... Sorry to leave it in such a mess."

Now the issue in this case was more likely to be that David Laws who received the note would have had very little idea of the rather childish tradition and so made a public meal of it.

 

[Biscuit]

Labour were pulling us out of this mess and Gordon Brown had the econmoic pedigree that europe respected and listened to. We were getting back on our feet, it's the tories coming in with their plan to cut jobs and 'cut back to work' schemes that has been the disaster.

Let's remember it was a global crisis and GB was leading Europe out of it. Who in the EU is going to listen to anything Gorgeous Gideon has to say?

 

[sten_super]

I think the scaremongering during the election campaign will have had an impact from the point at which the new government was formed.

You were obviously watching an entirely different election campaign to me. Barely anyone mentioned anything about the cuts, because they all knew they'd have to to do it and they all knew it would be deeply unpopular. I remember at the time thinking it was completely ridiculous that the election was fought on complete non-issues because everyone was too scared of the electorate to point out what was to come.

 

[ROSM]

Labour were pulling us out of this mess and Gordon Brown had the econmoic pedigree that europe respected and listened to. We were getting back on our feet, it's the tories coming in with their plan to cut jobs and 'cut back to work' schemes that has been the disaster.

Let's remember it was a global crisis and GB was leading Europe out of it. Who in the EU is going to listen to anything Gorgeous Gideon has to say?

I'm not convinced that GB was the global economics genius that he'd like the world to believe however you are right that the us and europe did listen to his views and were happy for him to lead their efforts. We were certainly at the forefront of tackling the problem rather than peddling behind and being told to mind our own business by Merkel and Sarkosy

 

[Buzzer]

Who in the EU is going to listen to anything Gorgeous Gideon has to say?

A darn sight more people than were listening to Gordon Brown before the UK election. This is what was happening and what was being said when Brown was PM:

BBC NEWS | Business | German ridicule for UK policies


Criticising the UK government's decision to cut VAT from 17.5% to 15%, Mr Steinbruck questioned how effective this will be. "Are you really going to buy a DVD player because it now costs £39.10 instead of £39.90?" he said. "All this will do is raise Britain's debt to a level that will take a whole generation to work off."

Saying the UK government was now "tossing around billions", Mr Steinbruck questioned why Britain was now closely following the high public spending model put forward by 20th Century economist John Maynard Keynes. "The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking," he said. "When I ask about the origins of the [financial] crisis, economists I respect tell me it is the credit-financed growth of recent years and decades. "Isn't this the same mistake everyone is suddenly making again, under all the public pressure?"

EU commissioner McCreedy had also warned about our spiralling debt and such was the schism between the Germans and the British Government that Gordon Brown gave Frau Merkel the cold shoulder. This from Mark Mardell on his BBC blog at the time:

Gordon Brown is hosting a "European global economic summit" with President Sarkozy and the Commission's President Barroso at Downing Street today. When we ask Mrs Merkel's office why she is not going, the indignant reply is "Ask Gordon Brown why she hasn't been invited".

Brown was only leading Europe out of trouble in his and your imagination. It was an insistence on fiscal prudence (remember that word?) from the mainland North Europeans led by the Germans. Brown was as profligate with money he didn't have as the Greeks.

And them's the facts.