Unions - they just dont get it do they
14 September 2010, 02:19 PM
#61
Generally, the Public Sector are paid very little - not much more than the legal minimum in many cases.
The costs of employing these people is actually very little more than paying for them to be on the dole. The other costs of living on the dole are far higher (lack of interest in life, feeling of isolation, depression, lack of worth, no 'buy-in' to society) .... it is a disaster for the low paid Public Sector worker.
So, yes, the Public Sector is bloated ... but the savings are not really there as you would think.
Much better to hit the big earners in the City/Banks/Boardrooms .... make it illegal, for example, to pay the highest earner in a company more than 10x the lowest paid!
Let's get the balance right - not simply nail the Public Sector worker!
The costs of employing these people is actually very little more than paying for them to be on the dole. The other costs of living on the dole are far higher (lack of interest in life, feeling of isolation, depression, lack of worth, no 'buy-in' to society) .... it is a disaster for the low paid Public Sector worker.
So, yes, the Public Sector is bloated ... but the savings are not really there as you would think.
Much better to hit the big earners in the City/Banks/Boardrooms .... make it illegal, for example, to pay the highest earner in a company more than 10x the lowest paid!
Let's get the balance right - not simply nail the Public Sector worker!
Do the same with banks and it would become too expensive to operate in the UK and the top revenue earners will move abroad. As a free market economy, the UK will loose its status as an international financial hub for business will be damaged and would have more far reaching consequences for the UK ecomony, especially since the UK does not have any other significat industry to fill the hole.
14 September 2010, 03:12 PM
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Daryl's link is interesting and I'm glad he posted it as I hadn't seen anything in the press suggesting the unions had a better idea than cutting public expenditure. Before I pick up on a couple of interesting things in the union document, let me paint a picture of how it is (and I'm deliberately being unbiased - we all need to know what the problem is before we can even hope to agree how to solve it).
Today we have a deficit of approx. £170bn a year. i.e. our country spends £170bn more a year than it receives as (net tax) income. Let's pretend that's us - we're all spending more than we earn each year. Included within that is the cost of servicing our debt - no-one really knows what that figure is but I've seen various estimates with some putting it higher than £3tn (£3,000bn) with various off-balance sheet liabilities included (long term pension liabiltiies, public/private partnerships etc). There is some work being done with PwC / ICAEW on this but I'm not sure it's in anyone's interests to ever formally release it - shaking the confidence of the nation doesn't feel like a smart thing to do!
The publicly stated (i.e. under-stated) figures show an annual deficit (loss) of 11% of GDP and national debt of about 78% of GDP (£1.2bn of about £1.8bn). i.e. the debt is climbing. In a league table of 28 developed nations, the UK has the third worst deficit (behind only Ireland and Greece at 14% and 13% respectively). For reference, the best is Norway with an annual surplus of 10%, the US is at a high 11% (but is more deiverse with stronger fundamentals than the UK) and Germany is at 3.5%. On the same basis, our 'official' public debt is firmly mid-table (17th) but national debt isn't really done on a like for like basis (very different pensions across countries, for example).
So what? That's what happens in a downturn, right? Sort of. But not to this level, and not as fast. Since the early 90s, the net tax take (the country's income) has not varied much at between 35% and 38% of GDP. The swings are driven by election timings and various chancellors games at playing with the make-up of it, but the overall take is pretty static as a %.
Now this is where it gets interesting - you'd expect national spend as a % of GDP (public sector) to also be pretty stable, right? After all, our income is on a steady trend, so why should we mess around with our expenditure? Note that I deliberately say expenditure - this is not 'investment' - this is geunine expenditure. Wrong - the % of public sector spend vs GDP dropped to 35% in the late 80s, peaked at 40% in the early 90s recession (tax take dropped in the downturn) but has climbed inexorably since 2000, peaking at 45% (!) at the peak of the market in 2008. Remember that our national tax take has only peaked at 38% in the last 20 years - so the recent government spent more on public expenditure every year from 2002.
So, we now have a 'structural deficit' - i.e. we're spending more than we have and, more importantly, more than we can sustain spending - and that's before we work out how to reduce our national debt to levels we're comfortable with.
What's the answer? We tax more (assuming that the private sector can stand more than the 51% tax already being levied on successful entrepreneurs) or we reduce expenditure - or a mix of both.
What does history show in terms of what works? Well for starters, let's quickly dispel the inflation myth. No developed country has ever inflated it's way out of debt. The UK is largely linked to overseas interest rates - i.e. inflation would also inflate our debt. So that's not an option.
The long term sustainable tax-take is generally accepted as being in the mid 30s%. Let's say 35% for the sake of understanding this. It's currently at about 37% and is forecast to build to 38% if not slightly higher. So that's already unsustainable. Raising it more (and I don't mean the emotive 'banker-bashing', 'make the bosses hurt' type rhetoric as that doesn't raise much in practice. I mean middle england - i.e. most of the people on this forum) will hurt the economy and quickly become a negative spiral.
So that means we have to cut costs - I for one don't recall public services being dreadful back in 2000 (in fact, it was a buoyant time - dot com wave, millennium etc). The spend at that point was 35% of GDP. 45% is, arguably therefore, 30% higher than it should be - assuming we should match our annual spend with the annual sustainable tax take to keep the economy strong. In reality, we have to spend less to repay the debt and to drive economic growth. i.e. we need to reduce the spend from 45% to 35% or lower (a reduction in expenditure of 22% or greater).
What have other countries done historically? Few countries have managed to address a structural deficit successfully - and none have done it via mainly tax increases. The most successful have been Finland (96-00), Sweden (94-98), Canada (94-97) and Denmark (83-86). All cut hard and fast and strengthened their economies markedly as a result, with long term benefits.
So, is there another option? I fear not. It hurts, and everyone will be an economic NIMBY, but it has to come.
I said I'd come back to the union document. There are positives and negatives in its thinking, but overall it comes across as understandably unbalanced and impartial.
Some points I think are interesting:
- "If the government cuts jobs it will exacerbate the deficit as more will be unemployed". This is true in the immediate term, but very wrong in the medium to long term. The net impact on society is that it's cheaper to have people on the dole than paying them more for a service we arguably don't need (controversial, but it's true - only in a downturn do you identify where the excess is in any busienss - the same is true of the public sector)
- "public sector spending is an investment, not a debt". No, it's spending.
- "The deficit is due to the recession". Only partly true - some of it, but most (and almost all of the national debt increase) was during the growth period, not the downturn.
- "there aren't enough jobs for those already unemployed" - true, but raising taxes will make that worse - there's no easy answer here.
Finally, to those focused on the banking bail out, please don't confuse a capital investment (which is what it has become - though initially it was an urgent rescue to stop the wider collapse of the UK economy) with annual running costs. The capital investment should come back and, hopefully, with some return. It is not at all comparable with the structural running costs of the country. Note that the figures I list above for e.g. national debt do not include the bail-out investments for the banks - they're investments, not debt, in the figures we have.
Hopefully all of that helps to clear up some misconceptions (I work in finance, btw, but am not a banker, a politician etc and have no specific agenda). The financial picture is depressing, but we can't ignore it, and it's going to involve pain. Striking is understandable but won't help.
I'll stop rambling now - back to work!
Gordo
Today we have a deficit of approx. £170bn a year. i.e. our country spends £170bn more a year than it receives as (net tax) income. Let's pretend that's us - we're all spending more than we earn each year. Included within that is the cost of servicing our debt - no-one really knows what that figure is but I've seen various estimates with some putting it higher than £3tn (£3,000bn) with various off-balance sheet liabilities included (long term pension liabiltiies, public/private partnerships etc). There is some work being done with PwC / ICAEW on this but I'm not sure it's in anyone's interests to ever formally release it - shaking the confidence of the nation doesn't feel like a smart thing to do!
The publicly stated (i.e. under-stated) figures show an annual deficit (loss) of 11% of GDP and national debt of about 78% of GDP (£1.2bn of about £1.8bn). i.e. the debt is climbing. In a league table of 28 developed nations, the UK has the third worst deficit (behind only Ireland and Greece at 14% and 13% respectively). For reference, the best is Norway with an annual surplus of 10%, the US is at a high 11% (but is more deiverse with stronger fundamentals than the UK) and Germany is at 3.5%. On the same basis, our 'official' public debt is firmly mid-table (17th) but national debt isn't really done on a like for like basis (very different pensions across countries, for example).
So what? That's what happens in a downturn, right? Sort of. But not to this level, and not as fast. Since the early 90s, the net tax take (the country's income) has not varied much at between 35% and 38% of GDP. The swings are driven by election timings and various chancellors games at playing with the make-up of it, but the overall take is pretty static as a %.
Now this is where it gets interesting - you'd expect national spend as a % of GDP (public sector) to also be pretty stable, right? After all, our income is on a steady trend, so why should we mess around with our expenditure? Note that I deliberately say expenditure - this is not 'investment' - this is geunine expenditure. Wrong - the % of public sector spend vs GDP dropped to 35% in the late 80s, peaked at 40% in the early 90s recession (tax take dropped in the downturn) but has climbed inexorably since 2000, peaking at 45% (!) at the peak of the market in 2008. Remember that our national tax take has only peaked at 38% in the last 20 years - so the recent government spent more on public expenditure every year from 2002.
So, we now have a 'structural deficit' - i.e. we're spending more than we have and, more importantly, more than we can sustain spending - and that's before we work out how to reduce our national debt to levels we're comfortable with.
What's the answer? We tax more (assuming that the private sector can stand more than the 51% tax already being levied on successful entrepreneurs) or we reduce expenditure - or a mix of both.
What does history show in terms of what works? Well for starters, let's quickly dispel the inflation myth. No developed country has ever inflated it's way out of debt. The UK is largely linked to overseas interest rates - i.e. inflation would also inflate our debt. So that's not an option.
The long term sustainable tax-take is generally accepted as being in the mid 30s%. Let's say 35% for the sake of understanding this. It's currently at about 37% and is forecast to build to 38% if not slightly higher. So that's already unsustainable. Raising it more (and I don't mean the emotive 'banker-bashing', 'make the bosses hurt' type rhetoric as that doesn't raise much in practice. I mean middle england - i.e. most of the people on this forum) will hurt the economy and quickly become a negative spiral.
So that means we have to cut costs - I for one don't recall public services being dreadful back in 2000 (in fact, it was a buoyant time - dot com wave, millennium etc). The spend at that point was 35% of GDP. 45% is, arguably therefore, 30% higher than it should be - assuming we should match our annual spend with the annual sustainable tax take to keep the economy strong. In reality, we have to spend less to repay the debt and to drive economic growth. i.e. we need to reduce the spend from 45% to 35% or lower (a reduction in expenditure of 22% or greater).
What have other countries done historically? Few countries have managed to address a structural deficit successfully - and none have done it via mainly tax increases. The most successful have been Finland (96-00), Sweden (94-98), Canada (94-97) and Denmark (83-86). All cut hard and fast and strengthened their economies markedly as a result, with long term benefits.
So, is there another option? I fear not. It hurts, and everyone will be an economic NIMBY, but it has to come.
I said I'd come back to the union document. There are positives and negatives in its thinking, but overall it comes across as understandably unbalanced and impartial.
Some points I think are interesting:
- "If the government cuts jobs it will exacerbate the deficit as more will be unemployed". This is true in the immediate term, but very wrong in the medium to long term. The net impact on society is that it's cheaper to have people on the dole than paying them more for a service we arguably don't need (controversial, but it's true - only in a downturn do you identify where the excess is in any busienss - the same is true of the public sector)
- "public sector spending is an investment, not a debt". No, it's spending.
- "The deficit is due to the recession". Only partly true - some of it, but most (and almost all of the national debt increase) was during the growth period, not the downturn.
- "there aren't enough jobs for those already unemployed" - true, but raising taxes will make that worse - there's no easy answer here.
Finally, to those focused on the banking bail out, please don't confuse a capital investment (which is what it has become - though initially it was an urgent rescue to stop the wider collapse of the UK economy) with annual running costs. The capital investment should come back and, hopefully, with some return. It is not at all comparable with the structural running costs of the country. Note that the figures I list above for e.g. national debt do not include the bail-out investments for the banks - they're investments, not debt, in the figures we have.
Hopefully all of that helps to clear up some misconceptions (I work in finance, btw, but am not a banker, a politician etc and have no specific agenda). The financial picture is depressing, but we can't ignore it, and it's going to involve pain. Striking is understandable but won't help.
I'll stop rambling now - back to work!
Gordo
Last edited by Gordo; 14 September 2010 at 04:16 PM.
14 September 2010, 03:55 PM
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Daryl's link is interesting and I'm glad he posted it as I hadn't seen anything in the press suggesting the unions had a better idea than cutting public expenditure. Before I pick up on a couple of interesting things in the union document, let me paint a picture of how it is (and I'm deliberately being unbiased - we all need to know what the problem is before we can even hope to agree how to solve it).
Today we have a deficit of approx. £170bn a year. i.e. our country spends £170bn more a year than it receives as (net tax) income. Let's pretend that's us - we're all spending more than we earn each year. Included within that is the cost of servicing our debt - no-one really knows what that figure is but I've seen various estimates with some putting it higher than £3tn (£3,000bn) with various off-balance sheet liabilities included (long term pension liabiltiies, public
rivate partnerships etc). There is some work being done with PwC / ICAEW on this but I'm not sure it's in anyone's interests to ever formally release it - shaking the confidence of the nation doesn't feel like a smart thing to do!
The publicly stated (i.e. under-stated) figures show an annual deficit (loss) of 11% of GDP and national debt of about 78% of GDP (£1.2bn of about £1.8bn). i.e. the debt is climbing. In a league table of 28 developed nations, the UK has the third worst deficit (behind only Ireland and Greece at 14% and 13% respectively). For reference, the best is Norway with an annual surplus of 10%, the US is at a high 11% (but is more deiverse with stronger fundamentals than the UK) and Germany is at 3.5%. On the same basis, our 'official' public debt is firmly mid-table (17th) but national debt isn't really done on a like for like basis (very different pensions across countries, for example).
So what? That's what happens in a downturn, right? Sort of. But not to this level, and not as fast. Since the early 90s, the net tax take (the country's income) has not varied much at between 35% and 38% of GDP. The swings are driven by election timings and various chancellors games at playing with the make-up of it, but the overall take is pretty static as a %.
Now this is where it gets interesting - you'd expect national spend as a % of GDP (public sector) to also be pretty stable, right? After all, our income is on a steady trend, so why should we mess around with our expenditure? Note that I deliberately say expenditure - this is not 'investment' - this is geunine expenditure. Wrong - the % of public sector spend vs GDP dropped to 35% in the late 80s, peaked at 40% in the early 90s recession (tax take dropped in the downturn) but has climbed inexorably since 2000, peaking at 45% (!) at the peak of the market in 2008. Remember that our national tax take has only peaked at 38% in the last 20 years - so the recent government spent more on public expenditure every year from 2002.
So, we now have a 'structural deficit' - i.e. we're spending more than we have and, more importantly, more than we can sustain spending - and that's before we work out how to reduce our national debt to levels we're comfortable with.
What's the answer? We tax more (assuming that the private sector can stand more than the 51% tax already being levied on successful entrepreneurs) or we reduce expenditure - or a mix of both.
What does history show in terms of what works? Well for starters, let's quickly dispel the inflation myth. No developed country has ever inflated it's way out of debt. The UK is largely linked to overseas interest rates - i.e. inflation would also inflate our debt. So that's not an option.
The long term sustainable tax-take is generally accepted as being in the mid 30s%. Let's say 35% for the sake of understanding this. It's currently at about 37% and is forecast to build to 38% if not slightly higher. So that's already unsustainable. Raising it more (and I don't mean the emotive 'banker-bashing', 'make the bosses hurt' type rhetoric as that doesn't raise much in practice. I mean middle england - i.e. most of the people on this forum) will hurt the economy and quickly become a negative spiral.
So that means we have to cut costs - I for one don't recall public services being dreadful back in 2000 (in fact, it was a buoyant time - dot com wave, millennium etc). The spend at that point was 35% of GDP. 45% is, arguably therefore, 30% higher than it should be - assuming we should match our annual spend with the annual sustainable tax take to keep the economy strong. In reality, we have to spend less to repay the debt and to drive economic growth. i.e. we need to reduce the spend from 45% to 35% or lower (a reduction in expenditure of 22% or greater).
What have other countries done historically? Few countries have managed to address a structural deficit successfully - and none have done it via mainly tax increases. The most successful have been Finland (96-00), Sweden (94-98), Canada (94-97) and Denmark (83-86). All cut hard and fast and strengthened their economies markedly as a result, with long term benefits.
So, is there another option? I fear not. It hurts, and everyone will be an economic NIMBY, but it has to come.
I said I'd come back to the union document. There are positives and negatives in its thinking, but overall it comes across as understandably unbalanced and impartial.
Some points I think are interesting:
- "If the government cuts jobs it will exacerbate the deficit as more will be unemployed". This is true in the immediate term, but very wrong in the medium to long term. The net impact on society is that it's cheaper to have people on the dole than paying them more for a service we arguably don't need (controversial, but it's true - only in a downturn do you identify where the excess is in any busienss - the same is true of the public sector)
- "public sector spending is an investment, not a debt". No, it's spending.
- "The deficit is due to the recession". Only partly true - some of it, but most (and almost all of the national debt increase) was during the growth period, not the downturn.
- "there aren't enough jobs for those already unemployed" - true, but raising taxes will make that worse - there's no easy answer here.
Finally, to those focused on the banking bail out, please don't confuse a capital investment (which is what it has become - though initially it was an urgent rescue to stop the wider collapse of the UK economy) with annual running costs. The capital investment should come back and, hopefully, with some return. It is not at all comparable with the structural running costs of the country. Note that the figures I list above for e.g. national debt do not include the bail-out investments for the banks - they're investments, not debt, in the figures we have.
Hopefully all of that helps to clear up some misconceptions (I work in finance, btw, but am not a banker, a politician etc and have no specific agenda). The financial picture is depressing, but we can't ignore it, and it's going to involve pain. Striking is understandable but won't help.
I'll stop rambling now - back to work!
Gordo
Today we have a deficit of approx. £170bn a year. i.e. our country spends £170bn more a year than it receives as (net tax) income. Let's pretend that's us - we're all spending more than we earn each year. Included within that is the cost of servicing our debt - no-one really knows what that figure is but I've seen various estimates with some putting it higher than £3tn (£3,000bn) with various off-balance sheet liabilities included (long term pension liabiltiies, public
rivate partnerships etc). There is some work being done with PwC / ICAEW on this but I'm not sure it's in anyone's interests to ever formally release it - shaking the confidence of the nation doesn't feel like a smart thing to do!The publicly stated (i.e. under-stated) figures show an annual deficit (loss) of 11% of GDP and national debt of about 78% of GDP (£1.2bn of about £1.8bn). i.e. the debt is climbing. In a league table of 28 developed nations, the UK has the third worst deficit (behind only Ireland and Greece at 14% and 13% respectively). For reference, the best is Norway with an annual surplus of 10%, the US is at a high 11% (but is more deiverse with stronger fundamentals than the UK) and Germany is at 3.5%. On the same basis, our 'official' public debt is firmly mid-table (17th) but national debt isn't really done on a like for like basis (very different pensions across countries, for example).
So what? That's what happens in a downturn, right? Sort of. But not to this level, and not as fast. Since the early 90s, the net tax take (the country's income) has not varied much at between 35% and 38% of GDP. The swings are driven by election timings and various chancellors games at playing with the make-up of it, but the overall take is pretty static as a %.
Now this is where it gets interesting - you'd expect national spend as a % of GDP (public sector) to also be pretty stable, right? After all, our income is on a steady trend, so why should we mess around with our expenditure? Note that I deliberately say expenditure - this is not 'investment' - this is geunine expenditure. Wrong - the % of public sector spend vs GDP dropped to 35% in the late 80s, peaked at 40% in the early 90s recession (tax take dropped in the downturn) but has climbed inexorably since 2000, peaking at 45% (!) at the peak of the market in 2008. Remember that our national tax take has only peaked at 38% in the last 20 years - so the recent government spent more on public expenditure every year from 2002.
So, we now have a 'structural deficit' - i.e. we're spending more than we have and, more importantly, more than we can sustain spending - and that's before we work out how to reduce our national debt to levels we're comfortable with.
What's the answer? We tax more (assuming that the private sector can stand more than the 51% tax already being levied on successful entrepreneurs) or we reduce expenditure - or a mix of both.
What does history show in terms of what works? Well for starters, let's quickly dispel the inflation myth. No developed country has ever inflated it's way out of debt. The UK is largely linked to overseas interest rates - i.e. inflation would also inflate our debt. So that's not an option.
The long term sustainable tax-take is generally accepted as being in the mid 30s%. Let's say 35% for the sake of understanding this. It's currently at about 37% and is forecast to build to 38% if not slightly higher. So that's already unsustainable. Raising it more (and I don't mean the emotive 'banker-bashing', 'make the bosses hurt' type rhetoric as that doesn't raise much in practice. I mean middle england - i.e. most of the people on this forum) will hurt the economy and quickly become a negative spiral.
So that means we have to cut costs - I for one don't recall public services being dreadful back in 2000 (in fact, it was a buoyant time - dot com wave, millennium etc). The spend at that point was 35% of GDP. 45% is, arguably therefore, 30% higher than it should be - assuming we should match our annual spend with the annual sustainable tax take to keep the economy strong. In reality, we have to spend less to repay the debt and to drive economic growth. i.e. we need to reduce the spend from 45% to 35% or lower (a reduction in expenditure of 22% or greater).
What have other countries done historically? Few countries have managed to address a structural deficit successfully - and none have done it via mainly tax increases. The most successful have been Finland (96-00), Sweden (94-98), Canada (94-97) and Denmark (83-86). All cut hard and fast and strengthened their economies markedly as a result, with long term benefits.
So, is there another option? I fear not. It hurts, and everyone will be an economic NIMBY, but it has to come.
I said I'd come back to the union document. There are positives and negatives in its thinking, but overall it comes across as understandably unbalanced and impartial.
Some points I think are interesting:
- "If the government cuts jobs it will exacerbate the deficit as more will be unemployed". This is true in the immediate term, but very wrong in the medium to long term. The net impact on society is that it's cheaper to have people on the dole than paying them more for a service we arguably don't need (controversial, but it's true - only in a downturn do you identify where the excess is in any busienss - the same is true of the public sector)
- "public sector spending is an investment, not a debt". No, it's spending.
- "The deficit is due to the recession". Only partly true - some of it, but most (and almost all of the national debt increase) was during the growth period, not the downturn.
- "there aren't enough jobs for those already unemployed" - true, but raising taxes will make that worse - there's no easy answer here.
Finally, to those focused on the banking bail out, please don't confuse a capital investment (which is what it has become - though initially it was an urgent rescue to stop the wider collapse of the UK economy) with annual running costs. The capital investment should come back and, hopefully, with some return. It is not at all comparable with the structural running costs of the country. Note that the figures I list above for e.g. national debt do not include the bail-out investments for the banks - they're investments, not debt, in the figures we have.
Hopefully all of that helps to clear up some misconceptions (I work in finance, btw, but am not a banker, a politician etc and have no specific agenda). The financial picture is depressing, but we can't ignore it, and it's going to involve pain. Striking is understandable but won't help.
I'll stop rambling now - back to work!
Gordo
There is clearly an element of political ideology locked up in the numbers you stated, previous Conservative governments have actively sort to ‘encourage’ people you look elsewhere for healthcare and education. In 1997 the UK spent less (as a % of GDP) than just about any other industrialised nation, a similar situation existed in education. Was this economically correct…well only if you didn’t need healthcare or want a good state education!
Enter New Labour offering a non-dogmatic, non-ideological third way politics, presenting themselves as economically sound (well compared to the previous Tory government’s perception anyway), promising to re-invest in our failing Health and Education systems, whilst growing the economy.
The only problem with New Labour was ‘old’ Labour! New Labour won the argument with the electorate, poured the money into public sector, the issue was, spending more money was only part of the problem. The public sector needed radical reform (and still does), but it was ‘old’ Labour (in the form of Gordon Brown and the Unions) that prevented this. For me this was the previous governments biggest failing. They had their chance and blew it!
In summary, it’s very easy to point the finger at Labour for the deficit, but the truth is far more complex, BOTH major partys should shoulder some of the blame.
14 September 2010, 07:29 PM
#64
Scooby Regular
Daryl's link is interesting and I'm glad he posted it as I hadn't seen anything in the press suggesting the unions had a better idea than cutting public expenditure. Before I pick up on a couple of interesting things in the union document, let me paint a picture of how it is (and I'm deliberately being unbiased - we all need to know what the problem is before we can even hope to agree how to solve it).
Today we have a deficit of approx. £170bn a year. i.e. our country spends £170bn more a year than it receives as (net tax) income. Let's pretend that's us - we're all spending more than we earn each year. Included within that is the cost of servicing our debt - no-one really knows what that figure is but I've seen various estimates with some putting it higher than £3tn (£3,000bn) with various off-balance sheet liabilities included (long term pension liabiltiies, public/private partnerships etc). There is some work being done with PwC / ICAEW on this but I'm not sure it's in anyone's interests to ever formally release it - shaking the confidence of the nation doesn't feel like a smart thing to do!
The publicly stated (i.e. under-stated) figures show an annual deficit (loss) of 11% of GDP and national debt of about 78% of GDP (£1.2bn of about £1.8bn). i.e. the debt is climbing. In a league table of 28 developed nations, the UK has the third worst deficit (behind only Ireland and Greece at 14% and 13% respectively). For reference, the best is Norway with an annual surplus of 10%, the US is at a high 11% (but is more deiverse with stronger fundamentals than the UK) and Germany is at 3.5%. On the same basis, our 'official' public debt is firmly mid-table (17th) but national debt isn't really done on a like for like basis (very different pensions across countries, for example).
So what? That's what happens in a downturn, right? Sort of. But not to this level, and not as fast. Since the early 90s, the net tax take (the country's income) has not varied much at between 35% and 38% of GDP. The swings are driven by election timings and various chancellors games at playing with the make-up of it, but the overall take is pretty static as a %.
Now this is where it gets interesting - you'd expect national spend as a % of GDP (public sector) to also be pretty stable, right? After all, our income is on a steady trend, so why should we mess around with our expenditure? Note that I deliberately say expenditure - this is not 'investment' - this is geunine expenditure. Wrong - the % of public sector spend vs GDP dropped to 35% in the late 80s, peaked at 40% in the early 90s recession (tax take dropped in the downturn) but has climbed inexorably since 2000, peaking at 45% (!) at the peak of the market in 2008. Remember that our national tax take has only peaked at 38% in the last 20 years - so the recent government spent more on public expenditure every year from 2002.
So, we now have a 'structural deficit' - i.e. we're spending more than we have and, more importantly, more than we can sustain spending - and that's before we work out how to reduce our national debt to levels we're comfortable with.
What's the answer? We tax more (assuming that the private sector can stand more than the 51% tax already being levied on successful entrepreneurs) or we reduce expenditure - or a mix of both.
What does history show in terms of what works? Well for starters, let's quickly dispel the inflation myth. No developed country has ever inflated it's way out of debt. The UK is largely linked to overseas interest rates - i.e. inflation would also inflate our debt. So that's not an option.
The long term sustainable tax-take is generally accepted as being in the mid 30s%. Let's say 35% for the sake of understanding this. It's currently at about 37% and is forecast to build to 38% if not slightly higher. So that's already unsustainable. Raising it more (and I don't mean the emotive 'banker-bashing', 'make the bosses hurt' type rhetoric as that doesn't raise much in practice. I mean middle england - i.e. most of the people on this forum) will hurt the economy and quickly become a negative spiral.
So that means we have to cut costs - I for one don't recall public services being dreadful back in 2000 (in fact, it was a buoyant time - dot com wave, millennium etc). The spend at that point was 35% of GDP. 45% is, arguably therefore, 30% higher than it should be - assuming we should match our annual spend with the annual sustainable tax take to keep the economy strong. In reality, we have to spend less to repay the debt and to drive economic growth. i.e. we need to reduce the spend from 45% to 35% or lower (a reduction in expenditure of 22% or greater).
What have other countries done historically? Few countries have managed to address a structural deficit successfully - and none have done it via mainly tax increases. The most successful have been Finland (96-00), Sweden (94-98), Canada (94-97) and Denmark (83-86). All cut hard and fast and strengthened their economies markedly as a result, with long term benefits.
So, is there another option? I fear not. It hurts, and everyone will be an economic NIMBY, but it has to come.
I said I'd come back to the union document. There are positives and negatives in its thinking, but overall it comes across as understandably unbalanced and impartial.
Some points I think are interesting:
- "If the government cuts jobs it will exacerbate the deficit as more will be unemployed". This is true in the immediate term, but very wrong in the medium to long term. The net impact on society is that it's cheaper to have people on the dole than paying them more for a service we arguably don't need (controversial, but it's true - only in a downturn do you identify where the excess is in any busienss - the same is true of the public sector)
- "public sector spending is an investment, not a debt". No, it's spending.
- "The deficit is due to the recession". Only partly true - some of it, but most (and almost all of the national debt increase) was during the growth period, not the downturn.
- "there aren't enough jobs for those already unemployed" - true, but raising taxes will make that worse - there's no easy answer here.
Finally, to those focused on the banking bail out, please don't confuse a capital investment (which is what it has become - though initially it was an urgent rescue to stop the wider collapse of the UK economy) with annual running costs. The capital investment should come back and, hopefully, with some return. It is not at all comparable with the structural running costs of the country. Note that the figures I list above for e.g. national debt do not include the bail-out investments for the banks - they're investments, not debt, in the figures we have.
Hopefully all of that helps to clear up some misconceptions (I work in finance, btw, but am not a banker, a politician etc and have no specific agenda). The financial picture is depressing, but we can't ignore it, and it's going to involve pain. Striking is understandable but won't help.
I'll stop rambling now - back to work!
Gordo
Today we have a deficit of approx. £170bn a year. i.e. our country spends £170bn more a year than it receives as (net tax) income. Let's pretend that's us - we're all spending more than we earn each year. Included within that is the cost of servicing our debt - no-one really knows what that figure is but I've seen various estimates with some putting it higher than £3tn (£3,000bn) with various off-balance sheet liabilities included (long term pension liabiltiies, public/private partnerships etc). There is some work being done with PwC / ICAEW on this but I'm not sure it's in anyone's interests to ever formally release it - shaking the confidence of the nation doesn't feel like a smart thing to do!
The publicly stated (i.e. under-stated) figures show an annual deficit (loss) of 11% of GDP and national debt of about 78% of GDP (£1.2bn of about £1.8bn). i.e. the debt is climbing. In a league table of 28 developed nations, the UK has the third worst deficit (behind only Ireland and Greece at 14% and 13% respectively). For reference, the best is Norway with an annual surplus of 10%, the US is at a high 11% (but is more deiverse with stronger fundamentals than the UK) and Germany is at 3.5%. On the same basis, our 'official' public debt is firmly mid-table (17th) but national debt isn't really done on a like for like basis (very different pensions across countries, for example).
So what? That's what happens in a downturn, right? Sort of. But not to this level, and not as fast. Since the early 90s, the net tax take (the country's income) has not varied much at between 35% and 38% of GDP. The swings are driven by election timings and various chancellors games at playing with the make-up of it, but the overall take is pretty static as a %.
Now this is where it gets interesting - you'd expect national spend as a % of GDP (public sector) to also be pretty stable, right? After all, our income is on a steady trend, so why should we mess around with our expenditure? Note that I deliberately say expenditure - this is not 'investment' - this is geunine expenditure. Wrong - the % of public sector spend vs GDP dropped to 35% in the late 80s, peaked at 40% in the early 90s recession (tax take dropped in the downturn) but has climbed inexorably since 2000, peaking at 45% (!) at the peak of the market in 2008. Remember that our national tax take has only peaked at 38% in the last 20 years - so the recent government spent more on public expenditure every year from 2002.
So, we now have a 'structural deficit' - i.e. we're spending more than we have and, more importantly, more than we can sustain spending - and that's before we work out how to reduce our national debt to levels we're comfortable with.
What's the answer? We tax more (assuming that the private sector can stand more than the 51% tax already being levied on successful entrepreneurs) or we reduce expenditure - or a mix of both.
What does history show in terms of what works? Well for starters, let's quickly dispel the inflation myth. No developed country has ever inflated it's way out of debt. The UK is largely linked to overseas interest rates - i.e. inflation would also inflate our debt. So that's not an option.
The long term sustainable tax-take is generally accepted as being in the mid 30s%. Let's say 35% for the sake of understanding this. It's currently at about 37% and is forecast to build to 38% if not slightly higher. So that's already unsustainable. Raising it more (and I don't mean the emotive 'banker-bashing', 'make the bosses hurt' type rhetoric as that doesn't raise much in practice. I mean middle england - i.e. most of the people on this forum) will hurt the economy and quickly become a negative spiral.
So that means we have to cut costs - I for one don't recall public services being dreadful back in 2000 (in fact, it was a buoyant time - dot com wave, millennium etc). The spend at that point was 35% of GDP. 45% is, arguably therefore, 30% higher than it should be - assuming we should match our annual spend with the annual sustainable tax take to keep the economy strong. In reality, we have to spend less to repay the debt and to drive economic growth. i.e. we need to reduce the spend from 45% to 35% or lower (a reduction in expenditure of 22% or greater).
What have other countries done historically? Few countries have managed to address a structural deficit successfully - and none have done it via mainly tax increases. The most successful have been Finland (96-00), Sweden (94-98), Canada (94-97) and Denmark (83-86). All cut hard and fast and strengthened their economies markedly as a result, with long term benefits.
So, is there another option? I fear not. It hurts, and everyone will be an economic NIMBY, but it has to come.
I said I'd come back to the union document. There are positives and negatives in its thinking, but overall it comes across as understandably unbalanced and impartial.
Some points I think are interesting:
- "If the government cuts jobs it will exacerbate the deficit as more will be unemployed". This is true in the immediate term, but very wrong in the medium to long term. The net impact on society is that it's cheaper to have people on the dole than paying them more for a service we arguably don't need (controversial, but it's true - only in a downturn do you identify where the excess is in any busienss - the same is true of the public sector)
- "public sector spending is an investment, not a debt". No, it's spending.
- "The deficit is due to the recession". Only partly true - some of it, but most (and almost all of the national debt increase) was during the growth period, not the downturn.
- "there aren't enough jobs for those already unemployed" - true, but raising taxes will make that worse - there's no easy answer here.
Finally, to those focused on the banking bail out, please don't confuse a capital investment (which is what it has become - though initially it was an urgent rescue to stop the wider collapse of the UK economy) with annual running costs. The capital investment should come back and, hopefully, with some return. It is not at all comparable with the structural running costs of the country. Note that the figures I list above for e.g. national debt do not include the bail-out investments for the banks - they're investments, not debt, in the figures we have.
Hopefully all of that helps to clear up some misconceptions (I work in finance, btw, but am not a banker, a politician etc and have no specific agenda). The financial picture is depressing, but we can't ignore it, and it's going to involve pain. Striking is understandable but won't help.
I'll stop rambling now - back to work!
Gordo
Very well put. As a matter of personal interest I was fascinated that you said that no country has ever inflated it's way out of debt. I've read this a lot that the western countries (USA in particular) are trying to inflate their way out of debt. Why do you believe that this is not a real possibility?
Thanks
14 September 2010, 08:13 PM
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... Very well put. As a matter of personal interest I was fascinated that you said that no country has ever inflated it's way out of debt. I've read this a lot that the western countries (USA in particular) are trying to inflate their way out of debt. Why do you believe that this is not a real possibility? ...
Dave
14 September 2010, 08:16 PM
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Oh, and as this thread is all about the unions do you think they'll stand up and berate Fidel then? http://www.bbc.co.uk/news/world-latin-america-11291267
"... Cuba has announced radical plans to lay off huge numbers of state employees, to help revive the communist country's struggling economy. The Cuban labour federation said more than a million workers would lose their jobs - half of them by March next year. ... Cuba's communist government currently controls almost all aspects of the country's economy and employs about 85% of the official workforce, which is put at 5.1 million people. ..."
Makes the UK *cuts* look minuscule. Oh, but the UK isn't cutting, as it will be spending 15% more than now at the end of this parliament.... ummmm ...
Dave
"... Cuba has announced radical plans to lay off huge numbers of state employees, to help revive the communist country's struggling economy. The Cuban labour federation said more than a million workers would lose their jobs - half of them by March next year. ... Cuba's communist government currently controls almost all aspects of the country's economy and employs about 85% of the official workforce, which is put at 5.1 million people. ..."
Makes the UK *cuts* look minuscule. Oh, but the UK isn't cutting, as it will be spending 15% more than now at the end of this parliament.... ummmm ...
Dave
14 September 2010, 08:57 PM
#67
Few countries have managed to address a structural deficit successfully - and none have done it via mainly tax increases. The most successful have been Finland (96-00), Sweden (94-98), Canada (94-97) and Denmark (83-86). - Gordo
Finally, to those focused on the banking bail out, please don't confuse a capital investment (which is what it has become - though initially it was an urgent rescue to stop the wider collapse of the UK economy) with annual running costs. The capital investment should come back and, hopefully, with some return. It is not at all comparable with the structural running costs of the country. Note that the figures I list above for e.g. national debt do not include the bail-out investments for the banks - they're investments, not debt, in the figures we have. - Gordo
but overall it comes across as understandably unbalanced and impartial. - Gordo
.
14 September 2010, 10:08 PM
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'The net impact on society is that it's cheaper to have people on the dole than paying them more for a service we arguably don't need '
Didnt the last tory government implement this strategy
Didnt the last tory government implement this strategy
15 September 2010, 06:27 AM
#69
Didn't hear them complaining too much if I remember correctly.
Maybe if they took heed, they would still be in power.
15 September 2010, 09:24 AM
#71
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We're in the EU - there's no escaping it.
Had we been using the Euro we may have been in more trouble.
Labour did us proud in the disaster of the world economy - they have built the bedrock that the Tories can build on ..... trouble is, the Tories being Tories, the bedrock will be made up from the bones of the working man (while the toffee nosed Tories and Bosses remain with their noses fixed in the trough!)
Whichever way you cut it, a PrimeMinister and MP's who have massive personal wealth cannot hope to understand what the man-in-the-street is feeling ...... "We're in it together"? **** off Cameron!
Had we been using the Euro we may have been in more trouble.
Labour did us proud in the disaster of the world economy - they have built the bedrock that the Tories can build on ..... trouble is, the Tories being Tories, the bedrock will be made up from the bones of the working man (while the toffee nosed Tories and Bosses remain with their noses fixed in the trough!)
Whichever way you cut it, a PrimeMinister and MP's who have massive personal wealth cannot hope to understand what the man-in-the-street is feeling ...... "We're in it together"? **** off Cameron!
15 September 2010, 09:41 AM
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Pete, please discuss the "bedrock" of Labour's increase of the government deficit from 5% in 2008 to 11.4% in 2009, and how that will allow the Tories to "build on" that record.
I'll assume if you don't answer that you don't understand the question. Which isn't great when you're making repeated vacuous rhetorical statements, is it?
I'll assume if you don't answer that you don't understand the question. Which isn't great when you're making repeated vacuous rhetorical statements, is it?
15 September 2010, 10:51 AM
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We're in the EU - there's no escaping it.
Had we been using the Euro we may have been in more trouble.
Labour did us proud in the disaster of the world economy - they have built the bedrock that the Tories can build on ..... trouble is, the Tories being Tories, the bedrock will be made up from the bones of the working man (while the toffee nosed Tories and Bosses remain with their noses fixed in the trough!)
Whichever way you cut it, a PrimeMinister and MP's who have massive personal wealth cannot hope to understand what the man-in-the-street is feeling ...... "We're in it together"? **** off Cameron!
Had we been using the Euro we may have been in more trouble.
Labour did us proud in the disaster of the world economy - they have built the bedrock that the Tories can build on ..... trouble is, the Tories being Tories, the bedrock will be made up from the bones of the working man (while the toffee nosed Tories and Bosses remain with their noses fixed in the trough!)
Whichever way you cut it, a PrimeMinister and MP's who have massive personal wealth cannot hope to understand what the man-in-the-street is feeling ...... "We're in it together"? **** off Cameron!
Why are you saying we are stuck in it anyway? What is to stop us declining further membership apart from a trading agreement? What would they be able to do to us if we did? Would we see an invasion along the lines of the last plan which failed anyway?
Lets see an answer for once Pete instead of your usual disappearance.
Les
15 September 2010, 11:09 AM
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Interesting data from the Office of National Statistics today (ONS). Those who don't like the inconvenient truth (yes, PS Lewis and Bob Crow, I mean you!) will ignore this, but it's worth knowing.
The average public sector worker is paid MORE than the private sector.
Ignoring pensions the figures are £539 per week vs £469 (15% more)
Include pensions and the gap widens to £615 vs £475 (29% more)
The TUC have instantly denied the data, saying that there are 'far more skilled people in the public sector than the private sector, so the averages are meaningless' - really?
It's hard to feel much sympathy for the pay freezes and generous final salary schemes when those of us in the private sector have had our pensions removed and pay frozen repeatedly.
Ho hum.
Gordo
The average public sector worker is paid MORE than the private sector.
Ignoring pensions the figures are £539 per week vs £469 (15% more)
Include pensions and the gap widens to £615 vs £475 (29% more)
The TUC have instantly denied the data, saying that there are 'far more skilled people in the public sector than the private sector, so the averages are meaningless' - really?
It's hard to feel much sympathy for the pay freezes and generous final salary schemes when those of us in the private sector have had our pensions removed and pay frozen repeatedly.
Ho hum.
Gordo
15 September 2010, 12:55 PM
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I certainly support the need for having unions. Especially in these days of more and more exploitation of working people by the fat cats.
I think they should keep out of politics though.
Les
I think they should keep out of politics though.
Les
15 September 2010, 01:13 PM
#76
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Pete, please discuss the "bedrock" of Labour's increase of the government deficit from 5% in 2008 to 11.4% in 2009, and how that will allow the Tories to "build on" that record.
I'll assume if you don't answer that you don't understand the question. Which isn't great when you're making repeated vacuous rhetorical statements, is it?
I'll assume if you don't answer that you don't understand the question. Which isn't great when you're making repeated vacuous rhetorical statements, is it?
You have bought a house with a Mortgage, I assume? Well ....
It's the same as doubling your borrowings to buy a larger house - the larger house will increase in value thus making your borrowings worth the extra payments.
Saving the country by borrowing was building a bedrock for the Tories to build upon.
Do you understand now?
15 September 2010, 01:18 PM
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I'll attempt to help you understand, with the use of an analogy.
You have bought a house with a Mortgage, I assume? Well ....
It's the same as doubling your borrowings to buy a larger house - the larger house will increase in value thus making your borrowings worth the extra payments.
Saving the country by borrowing was building a bedrock for the Tories to build upon.
Do you understand now?
You have bought a house with a Mortgage, I assume? Well ....
It's the same as doubling your borrowings to buy a larger house - the larger house will increase in value thus making your borrowings worth the extra payments.
Saving the country by borrowing was building a bedrock for the Tories to build upon.
Do you understand now?
If the government had genuinely invested in assets that might grow and provide additional wealth for the country, I'd agree with you. Instead they did the equivalent of (borrowing your analogy) living beyond their means in their existing house and hosing the money away on a cleaner, a gardener, a swimming pool and bloke to clean it, a nanny etc etc. i.e. they haven't invested it in an asset, they've spent it living it up to make them look good. No other reason to consistently spend way above the average tax take, particularly through the boom times when governments should be reducing debt in anticipation for an inevitable downturn.
This is not political, it's what has actually happened. See my post above.
15 September 2010, 01:18 PM
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Pete, that's lamentable and i know you know it, but for the sake of entertainment, what object of "value" has UK plc gained from Labour's recklessness? Where's the "house"?
Come on, you can do better than that. Or maybe you can't.
Come on, you can do better than that. Or maybe you can't.
15 September 2010, 01:24 PM
#79
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The 'house' is the UK Economy ........ if you look around it still exists, and in reasonable shape.
Without the borrowing there would be no house left, no land, no money in the Banks, nothing ......
Everyone, and I mean everyone, would have lost their savings - would have lost everything, Pension Funds would be empty and the UK would be an economic wasteland.
Quite why you struggle to see that what needed to be done, was done, for the greater good.
Now that the Economy has been saved by the prudent work of Labour ... the Tories (who voted to do nothing remember?!) can try to build on the bedrock secured by the sacrifice Labour made.
Labour lost the Election for doing the right thing ... they knew that, but still did it. That's a Party of the people ... we now have a Party of the Bosses, Bankers and Rich.
Without the borrowing there would be no house left, no land, no money in the Banks, nothing ......
Everyone, and I mean everyone, would have lost their savings - would have lost everything, Pension Funds would be empty and the UK would be an economic wasteland.
Quite why you struggle to see that what needed to be done, was done, for the greater good.
Now that the Economy has been saved by the prudent work of Labour ... the Tories (who voted to do nothing remember?!) can try to build on the bedrock secured by the sacrifice Labour made.
Labour lost the Election for doing the right thing ... they knew that, but still did it. That's a Party of the people ... we now have a Party of the Bosses, Bankers and Rich.
15 September 2010, 01:31 PM
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The 'house' is the UK Economy ........ if you look around it still exists, and in reasonable shape.
Without the borrowing there would be no house left, no land, no money in the Banks, nothing ......
Everyone, and I mean everyone, would have lost their savings - would have lost everything, Pension Funds would be empty and the UK would be an economic wasteland.
Quite why you struggle to see that what needed to be done, was done, for the greater good.
Now that the Economy has been saved by the prudent work of Labour ... the Tories (who voted to do nothing remember?!) can try to build on the bedrock secured by the sacrifice Labour made.
Labour lost the Election for doing the right thing ... they knew that, but still did it. That's a Party of the people ... we now have a Party of the Bosses, Bankers and Rich.
Without the borrowing there would be no house left, no land, no money in the Banks, nothing ......
Everyone, and I mean everyone, would have lost their savings - would have lost everything, Pension Funds would be empty and the UK would be an economic wasteland.
Quite why you struggle to see that what needed to be done, was done, for the greater good.
Now that the Economy has been saved by the prudent work of Labour ... the Tories (who voted to do nothing remember?!) can try to build on the bedrock secured by the sacrifice Labour made.
Labour lost the Election for doing the right thing ... they knew that, but still did it. That's a Party of the people ... we now have a Party of the Bosses, Bankers and Rich.
The response should be why did Labour NEED to spend so much on the public services - you'd be on much firmer ground then
15 September 2010, 01:33 PM
#82
Well there's a turn-up. A few minutes googling, and I managed to track down the R4 interview I was talking about, which was in fact with Göran Persson, Swedish Finance Minister from '94 to '96 and then PM up until 2006.
http://www.bbc.co.uk/blogs/pm/2010/0...n_person.shtml
Well worth a listen IMO, but the main points he makes are:
- you have to start making cuts early, or your small window of opportunity of public support on the one hand and breathing-space from the IMF and/or mahoosive interest rates on the other could vanish before you know it.
- you have to cut across the board. If you make a list of holy cows before you start, you'll just get nowhere.
- you have to share some of the pain with the better off. Govt spending cuts will inevitably hit the worst-off hardest, so some tax increases for the better-off are only fair and reasonable.
- you have to face the reality that talking about the cuts isn't when the pain hits, it's when you actually make them.
So, will the Coalition bottle it, or are they going to start wielding the knife soon?
http://www.bbc.co.uk/blogs/pm/2010/0...n_person.shtml
Well worth a listen IMO, but the main points he makes are:
- you have to start making cuts early, or your small window of opportunity of public support on the one hand and breathing-space from the IMF and/or mahoosive interest rates on the other could vanish before you know it.
- you have to cut across the board. If you make a list of holy cows before you start, you'll just get nowhere.
- you have to share some of the pain with the better off. Govt spending cuts will inevitably hit the worst-off hardest, so some tax increases for the better-off are only fair and reasonable.
- you have to face the reality that talking about the cuts isn't when the pain hits, it's when you actually make them.
So, will the Coalition bottle it, or are they going to start wielding the knife soon?
15 September 2010, 01:34 PM
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it's a pity labours 'house' didn't have a safe to put some money away just in case it rained. Truth is we were bust before the recession because of labours 'i've got a new credit card' philosophy and left the UK in a perilous position just at the wrong time, believing Browns 'end of boom and bust' BS.
15 September 2010, 01:34 PM
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Labour won power because folk were fed up with crumbling public services which had been starved of 'investment' under the Tories. Until you can aknowledge this fact, you cannot possibly put Labour policies and all their mistakes into proper context
15 September 2010, 01:35 PM
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15 September 2010, 01:38 PM
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it's a pity labours 'house' didn't have a safe to put some money away just in case it rained. Truth is we were bust before the recession because of labours 'i've got a new credit card' philosophy and left the UK in a perilous position just at the wrong time, believing Browns 'end of boom and bust' BS.
The Public Services did very well out of the good years - and that's right and proper - yes, there was/is waste but that is the nature of the beast.
The essential basic principles were right ... deliver Services to the people ...
15 September 2010, 01:44 PM
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Pete, you're confusing the bank bail-out (which was the right thing to do - and which I deliberately excluded from the numbers in my post above) with the fact that Labour spent more than the country could afford on long term excess public spending.
It's always an emotional one - we'd all like perfect public services - the best educated kids in the world, the healthiest population, zero crime, beautiful public buildings etc etc, but the challenge is always where to draw the line on funding it all. We'd all like to live in a massive house with grounds and staff but we know what we can afford and live within our means (well, most of us try to!).
Unfortunately the flaw within our political system is that governments are positively incentivised (to both win votes and because they enjoy the power) to spend our money. The NHS, defence, schooling, DWP etc all need long term funding plans (20 years +) but politicians insist on pursuing their own short term, often quite amateurish, agendas which cost us all money and make those services less effective than they should be. The fact that it's usually the left wing governments that spend and the right wing governments that then have to under-spend to compensate (replicated around the world) is not a political statement but a rather inevitable consequence.
Contrast all of that with business - if a business is loss making (spending more on costs than its net income) then it either goes under or, more often, will take steps to protect the business and the wider workforce. Lots of businesses have had pay freezes, no bonuses, final salary pension schemes closed etc. The problem is that the public sector has not only not addressed this, but actually done the opposite, creating more jobs, increasing pay, protecting pensions. That's now creating a much greater disparity in society for those non-public sector workers who are having to pay for it all than the 'fat cats' or bankers that the media (and Labour) would like everyone to point to instead.
It's a shame that everyone insists on politicising this - it's simple economics, not the 'them and us' that people will naturally herd toward.
Gordo
It's always an emotional one - we'd all like perfect public services - the best educated kids in the world, the healthiest population, zero crime, beautiful public buildings etc etc, but the challenge is always where to draw the line on funding it all. We'd all like to live in a massive house with grounds and staff but we know what we can afford and live within our means (well, most of us try to!).
Unfortunately the flaw within our political system is that governments are positively incentivised (to both win votes and because they enjoy the power) to spend our money. The NHS, defence, schooling, DWP etc all need long term funding plans (20 years +) but politicians insist on pursuing their own short term, often quite amateurish, agendas which cost us all money and make those services less effective than they should be. The fact that it's usually the left wing governments that spend and the right wing governments that then have to under-spend to compensate (replicated around the world) is not a political statement but a rather inevitable consequence.
Contrast all of that with business - if a business is loss making (spending more on costs than its net income) then it either goes under or, more often, will take steps to protect the business and the wider workforce. Lots of businesses have had pay freezes, no bonuses, final salary pension schemes closed etc. The problem is that the public sector has not only not addressed this, but actually done the opposite, creating more jobs, increasing pay, protecting pensions. That's now creating a much greater disparity in society for those non-public sector workers who are having to pay for it all than the 'fat cats' or bankers that the media (and Labour) would like everyone to point to instead.
It's a shame that everyone insists on politicising this - it's simple economics, not the 'them and us' that people will naturally herd toward.
Gordo
15 September 2010, 01:45 PM
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Tel - this too is a pretty one-eyed view of what has happened.
Labour won power because folk were fed up with crumbling public services which had been starved of 'investment' under the Tories. Until you can aknowledge this fact, you cannot possibly put Labour policies and all their mistakes into proper context
Labour won power because folk were fed up with crumbling public services which had been starved of 'investment' under the Tories. Until you can aknowledge this fact, you cannot possibly put Labour policies and all their mistakes into proper context
But were they "starved" or were they, given the colossal problem we've now inherited from a program of Labour's profligate over-spending, actually funded at sensible levels, with just the British population not grasping that we're not now the global powerhouse we once were, and accordingly can't expect Division 1 living standards and free handouts any more?
15 September 2010, 01:47 PM
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as ever labour, like every single other labour government has left this country potless but it's not just that. The vast financial imput into the economy was not on schools and hospitals it was on wages, we will be paying for PFi and other building programmes for the next 20 years as well as £38 billion of unfunded future MOD labour contracted spending.
15 September 2010, 01:50 PM
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But were they "starved" or were they, given the colossal problem we've now inherited from a program of Labour's profligate over-spending, actually funded at sensible levels, with just the British population not grasping that we're not now the global powerhouse we once were, and accordingly can't expect Division 1 living standards and free handouts any more?
We still only spend around the average % of GDP on healthcare (which is a massive improvement on where we were 15 years ago).
If the UK isn't Division 1, then it's a pretty small division, afterall no matter how much you want to run the country down, we're still the 5th or 6th biggest economic power on earth!