That's not just a statement about BAs operations, that's also a statement that BA thinks other airlines won't ne around to take their LHR slots back up again.
They think Virign is fucked.
Good spot, British Airways must reckon they're the king of the ashes. What have you got Branson, what cards are you going to play.
How is Iberia looking. Have to remember that BA isn't flying solo anymore.
It is curious that IAG have only announced swingeing job cuts at BA, not Iberia or Aer Lingus - it does rather give the impression of BA trying to pull any government rug out from under the feet of Virgin!
The counter argument is that Virgin provides the international routes from Manchester.
If the Government wants a Northern Powerhouse it needs to keep that part of Virgin going or replace those flights with something else.
The routes, planes and slots will still exist, it will just be owned by someone other than Richard Branson. We shouldn't be bailing out shareholders, they've been taking dividends for years, now it's time to for them to recapitalise the companies they own.
As I said, the routes need to be protected so someone runs them. And equally BA shouldn't be handed a monopoly.
That doesn't mean I believe in bailouts for companies that paid large dividends out (I'm looking especially at Easyjet there).
Do you mean companies that paid dividends this year or previous years?
Companies can only pay dividends out of retained earnings from fully-taxed post-corporation tax profits which is the law. Companies that have paid dividends in previous years have done so because they had retained profits which they paid the Exchequer taxes on. That's not a bad thing.
This year - Easyjet paid out £174m on March 22nd (edit to correct date)
Wow. Zero sympathy for them then.
Are Easyjet still proceeding with their batshit crazy plans to pay top dollars to buy many more planes?
Essentially yes. Stelios wants the board hung, drawn and quartered. I have to say I agree with him for the first time in a while.
Can he not call a motion of no confidence in the entire board?
There's an AGM in May where he's going to. I've heard he's got lots of shareholders on side this time as well.
Well precisely. And once you've squashed the deficit then you can manage the debt via growth and interest payments and paying a keen eye on the deficit in future.
But there is a difficult reality. We went into the 08 crash with debt at 40% of GDP and a deficit of 3%. We go into this crisis with debt at 85% of GDP and a deficit of 1.2%. Meaning we are less well placed. An extra 45% on debt is a bigger drag than the 1.8% mitigating extra headroom on deficit.
Last time spending cuts took the strain - with almost everything bar the NHS squeezed until the pips squeaked. This was morally wrong because it hit the least well off very badly. It also means that in practice it cannot be done again. There's no scope. Our public realm is denuded.
What was missing in our response to 08 was tax hikes on the better off - by which I mean everyone who is doing more than "just about managing" or not managing at all. The need is for a contribution via taxation (focused more on wealth than income - but on both) which becomes sharply higher as you go up the scale of affluence. It should have happened long before now. I hope this abdication of political leadership and moral obligation is not continued.
No we are thankfully better placed now. That 1.8% difference in deficit is what matters massively more than the 45% on debt. Especially when much of that debt is owned by the Bank of England who would never call it in and don't demand interest on it either.
The deficit and interest payments are the two real elements which measure what we can afford not the debt.
Forget debt, we're never going to repay debt. We have to pay interest on debt - and the government bonds are frequently set to 30-50 year schedules so interest rate changes don't suddenly vary through to the budget.
We are going into this recession with interest being below 3% of government expenditure and the deficit being 1.2% of the government's budget. That's a lot healthier that we went into 2008 with.
What is a deficit? It is the amount by which debt is rising.
Why do we worry about a deficit? Because of its impact on debt.
So when discussing the public finances can we really "forget debt"?
Clearly not. Because if this were the case - that debt does not matter - then the thing which is causing the debt to increase would not matter either. This thing being the deficit.
No you have it backwards that is not why we worry about a deficit. We worry about a deficit because it means we are spending more than we are taking which is unsustainable, plus it leaves no headroom for changes if something goes wrong like happened in 2008.
Paying interest at 3% of our government expenditure is sustainable. Spending 4 pounds for every 3 pounds the government raises is not.
Come on Philip. Thinking cap.
If the absolute level of debt does not matter why should we worry about spending more than we take in? About the deficit? Answer - we shouldn't. Because it wouldn't matter a jot.
But you and I - and indeed all bar true esoterics - agree that the deficit DOES matter.
Why? Because if not controlled it leads to unsustainable DEBT. Which matters.
It is time for a clear and simple "Yes, I see now" and then we can continue.
*Facepalm*
An unsustainable deficit can indeed lead to unstainable debt, but how does stable debt without a deficit and with low interest lead to unsustainable debt?
Exactly! We worry about a deficit because it can lead to unsustainable debt. Ergo the level of debt matters. If it did not matter, nor would deficits.
That took longer than it should have done but no matter.
Now then, next question and it's crux. If we were to phone up Rishi Sunak and ask him which of the following fiscal positions he would prefer going into this crisis -
(i) Debt at 40% of GDP and Deficit at 2.8% (ii) Debt at 85% of GDP and Deficit at 1.2%
Which would he choose and why?
Scenario 2. Any day.
I didn't ask you! You're meant to be explaining why property taxes can't work because they reduce the value of the property.
But I must duck out for a haircut now. Wife is waving scissors at me.
Are you sure that is for a haircut?
- good question. She's not smiling.
But, look, no doubt we'll come back to this but to pose a general question to Conservative posters -
Why are you seeking to upend the laws of money and economics in order to support both Osborne's approach to the last crisis AND what you expect to be Sunak's opposite approach to this one?
If there was no Magic Money Tree back then, how come there is one now?
Delusional. Team sport is over. Finished. Done. Forever. The last (legal) game of cricket in England was played last year.
I think that is extremely pessimistic. But sports will probably need a vaccine. I am not sure this football season will start on time, for example.
We should just finish the current football season from around this time next year when there is a vaccine.
There will be no vaccine.
Yes, there will. All right: it is extremely likely that there will be a vaccine. I am certainly not an expert in the field, but people I have spoken to who definitely are experts in the field appear certain that this is doable. And it could be seen sooner than the initial estimates.
Well precisely. And once you've squashed the deficit then you can manage the debt via growth and interest payments and paying a keen eye on the deficit in future.
But there is a difficult reality. We went into the 08 crash with debt at 40% of GDP and a deficit of 3%. We go into this crisis with debt at 85% of GDP and a deficit of 1.2%. Meaning we are less well placed. An extra 45% on debt is a bigger drag than the 1.8% mitigating extra headroom on deficit.
Last time spending cuts took the strain - with almost everything bar the NHS squeezed until the pips squeaked. This was morally wrong because it hit the least well off very badly. It also means that in practice it cannot be done again. There's no scope. Our public realm is denuded.
What was missing in our response to 08 was tax hikes on the better off - by which I mean everyone who is doing more than "just about managing" or not managing at all. The need is for a contribution via taxation (focused more on wealth than income - but on both) which becomes sharply higher as you go up the scale of affluence. It should have happened long before now. I hope this abdication of political leadership and moral obligation is not continued.
No we are thankfully better placed now. That 1.8% difference in deficit is what matters massively more than the 45% on debt. Especially when much of that debt is owned by the Bank of England who would never call it in and don't demand interest on it either.
The deficit and interest payments are the two real elements which measure what we can afford not the debt.
Forget debt, we're never going to repay debt. We have to pay interest on debt - and the government bonds are frequently set to 30-50 year schedules so interest rate changes don't suddenly vary through to the budget.
We are going into this recession with interest being below 3% of government expenditure and the deficit being 1.2% of the government's budget. That's a lot healthier that we went into 2008 with.
What is a deficit? It is the amount by which debt is rising.
Why do we worry about a deficit? Because of its impact on debt.
So when discussing the public finances can we really "forget debt"?
Clearly not. Because if this were the case - that debt does not matter - then the thing which is causing the debt to increase would not matter either. This thing being the deficit.
No you have it backwards that is not why we worry about a deficit. We worry about a deficit because it means we are spending more than we are taking which is unsustainable, plus it leaves no headroom for changes if something goes wrong like happened in 2008.
Paying interest at 3% of our government expenditure is sustainable. Spending 4 pounds for every 3 pounds the government raises is not.
Come on Philip. Thinking cap.
If the absolute level of debt does not matter why should we worry about spending more than we take in? About the deficit? Answer - we shouldn't. Because it wouldn't matter a jot.
But you and I - and indeed all bar true esoterics - agree that the deficit DOES matter.
Why? Because if not controlled it leads to unsustainable DEBT. Which matters.
It is time for a clear and simple "Yes, I see now" and then we can continue.
*Facepalm*
An unsustainable deficit can indeed lead to unstainable debt, but how does stable debt without a deficit and with low interest lead to unsustainable debt?
Exactly! We worry about a deficit because it can lead to unsustainable debt. Ergo the level of debt matters. If it did not matter, nor would deficits.
That took longer than it should have done but no matter.
Now then, next question and it's crux. If we were to phone up Rishi Sunak and ask him which of the following fiscal positions he would prefer going into this crisis -
(i) Debt at 40% of GDP and Deficit at 2.8% (ii) Debt at 85% of GDP and Deficit at 1.2%
Which would he choose and why?
Scenario 2. Any day.
I didn't ask you! You're meant to be explaining why property taxes can't work because they reduce the value of the property.
But I must duck out for a haircut now. Wife is waving scissors at me.
Are you sure that is for a haircut?
- good question. She's not smiling.
But, look, no doubt we'll come back to this but to pose a general question to Conservative posters -
Why are you seeking to upend the laws of money and economics in order to support both Osborne's approach to the last crisis AND what you expect to be Sunak's opposite approach to this one?
If there was no Magic Money Tree back then, how come there is one now?
There is no Magic Money Tree, you can borrow for emergencies and you can borrow to invest in infrastructure etc but you can not borrow with a 10% deficit annually and do nothing.
In 2010 the country wasn't in recession. In fact it hadn't been in recession for a couple of years already.
The other point to bear in mind in the discussion of sky-high national debt is that the UK won't be the only one, far from it. So bondholders won't exactly be spoilt for choice. That in turn means that the UK government won't have to pay a large premium in terms of interest payments to finance that historic debt, provided that the deficit can be kept under control.
Or, if you are a glass half empty type you might contemplate a world where governments worldwide are competing for a limited pot of savings and having to pay accordingly.
We, along with many other Governments will just print money
True. QE is the only realistic way out of this mess for all its risks. Which is why I worry about the EZ.
The inability for Italy, Greece and others to devalue their currencies to escape a crisis was the biggest reason I voted for Brexit.
I didn't want to be in the EU when those crises hit.
But isn't that an argument for not being in the Euro? Why extend it to the EU? (Not having a go, it's a genuine question)
The other point to bear in mind in the discussion of sky-high national debt is that the UK won't be the only one, far from it. So bondholders won't exactly be spoilt for choice. That in turn means that the UK government won't have to pay a large premium in terms of interest payments to finance that historic debt, provided that the deficit can be kept under control.
Or, if you are a glass half empty type you might contemplate a world where governments worldwide are competing for a limited pot of savings and having to pay accordingly.
We, along with many other Governments will just print money
True. QE is the only realistic way out of this mess for all its risks. Which is why I worry about the EZ.
The inability for Italy, Greece and others to devalue their currencies to escape a crisis was the biggest reason I voted for Brexit.
I didn't want to be in the EU when those crises hit.
But isn't that an argument for not being in the Euro? Why extend it to the EU? (Not having a go, it's a genuine question)
Who's going to pay the bill for bailing out EU nations in trouble?
The other point to bear in mind in the discussion of sky-high national debt is that the UK won't be the only one, far from it. So bondholders won't exactly be spoilt for choice. That in turn means that the UK government won't have to pay a large premium in terms of interest payments to finance that historic debt, provided that the deficit can be kept under control.
Or, if you are a glass half empty type you might contemplate a world where governments worldwide are competing for a limited pot of savings and having to pay accordingly.
We, along with many other Governments will just print money
True. QE is the only realistic way out of this mess for all its risks. Which is why I worry about the EZ.
The inability for Italy, Greece and others to devalue their currencies to escape a crisis was the biggest reason I voted for Brexit.
I didn't want to be in the EU when those crises hit.
But isn't that an argument for not being in the Euro? Why extend it to the EU? (Not having a go, it's a genuine question)
The current proposed funding mechanism is via the EU general budget which means non-EMU countries are on the hook, they could also be outvoted on a QMV basis so would have to live with it, even if we were still in.
Mr. CatMan, that raises an interesting point: are the proposed corona-bonds to be funded by all EU nations or just the eurozone?
Good question but at the best of times the EU always taxes wealthier nations more and pays poorer nations more. Hence the numbers on the bus, whether you dispute the £350m figure it is indisputable that the UK transferred billions per annum from our taxes to the poorer EU nations.
If Italy etc crash once more due to the Eurozone and if we were still members or extended and got through this better the EU would automatically tax us more as a result.
We would have to pay part of the bill for their failures.
The other point to bear in mind in the discussion of sky-high national debt is that the UK won't be the only one, far from it. So bondholders won't exactly be spoilt for choice. That in turn means that the UK government won't have to pay a large premium in terms of interest payments to finance that historic debt, provided that the deficit can be kept under control.
Or, if you are a glass half empty type you might contemplate a world where governments worldwide are competing for a limited pot of savings and having to pay accordingly.
We, along with many other Governments will just print money
True. QE is the only realistic way out of this mess for all its risks. Which is why I worry about the EZ.
The inability for Italy, Greece and others to devalue their currencies to escape a crisis was the biggest reason I voted for Brexit.
I didn't want to be in the EU when those crises hit.
But isn't that an argument for not being in the Euro? Why extend it to the EU? (Not having a go, it's a genuine question)
The current proposed funding mechanism is via the EU general budget which means non-EMU countries are on the hook, they could also be outvoted on a QMV basis so would have to live with it, even if we were still in.
Going to go down well in Copenhagen and Stockholm is that.
For the zillionth time (and no doubt it will have to be repeated another infinite number of zillion times in the future): government bailouts in circumstances like this, or in the bank rescues of 2008/9, are NOT bailouts of the various companies' shareholders, they are bailouts of the companies' creditors, customers and suppliers, and therefore of the wider economy. That is why governments do them, and why the question of past dividends, ownership, or historic corporation tax payments are completely irrelevant to the merits or otherwise of such bailouts.
Well precisely. And once you've squashed the deficit then you can manage the debt via growth and interest payments and paying a keen eye on the deficit in future.
But there is a difficult reality. We went into the 08 crash with debt at 40% of GDP and a deficit of 3%. We go into this crisis with debt at 85% of GDP and a deficit of 1.2%. Meaning we are less well placed. An extra 45% on debt is a bigger drag than the 1.8% mitigating extra headroom on deficit.
Last time spending cuts took the strain - with almost everything bar the NHS squeezed until the pips squeaked. This was morally wrong because it hit the least well off very badly. It also means that in practice it cannot be done again. There's no scope. Our public realm is denuded.
What was missing in our response to 08 was tax hikes on the better off - by which I mean everyone who is doing more than "just about managing" or not managing at all. The need is for a contribution via taxation (focused more on wealth than income - but on both) which becomes sharply higher as you go up the scale of affluence. It should have happened long before now. I hope this abdication of political leadership and moral obligation is not continued.
No we are thankfully better placed now. That 1.8% difference in deficit is what matters massively more than the 45% on debt. Especially when much of that debt is owned by the Bank of England who would never call it in and don't demand interest on it either.
The deficit and interest payments are the two real elements which measure what we can afford not the debt.
Forget debt, we're never going to repay debt. We have to pay interest on debt - and the government bonds are frequently set to 30-50 year schedules so interest rate changes don't suddenly vary through to the budget.
We are going into this recession with interest being below 3% of government expenditure and the deficit being 1.2% of the government's budget. That's a lot healthier that we went into 2008 with.
What is a deficit? It is the amount by which debt is rising.
Why do we worry about a deficit? Because of its impact on debt.
So when discussing the public finances can we really "forget debt"?
Clearly not. Because if this were the case - that debt does not matter - then the thing which is causing the debt to increase would not matter either. This thing being the deficit.
No you have it backwards that is not why we worry about a deficit. We worry about a deficit because it means we are spending more than we are taking which is unsustainable, plus it leaves no headroom for changes if something goes wrong like happened in 2008.
Paying interest at 3% of our government expenditure is sustainable. Spending 4 pounds for every 3 pounds the government raises is not.
Come on Philip. Thinking cap.
If the absolute level of debt does not matter why should we worry about spending more than we take in? About the deficit? Answer - we shouldn't. Because it wouldn't matter a jot.
But you and I - and indeed all bar true esoterics - agree that the deficit DOES matter.
Why? Because if not controlled it leads to unsustainable DEBT. Which matters.
It is time for a clear and simple "Yes, I see now" and then we can continue.
*Facepalm*
An unsustainable deficit can indeed lead to unstainable debt, but how does stable debt without a deficit and with low interest lead to unsustainable debt?
Exactly! We worry about a deficit because it can lead to unsustainable debt. Ergo the level of debt matters. If it did not matter, nor would deficits.
That took longer than it should have done but no matter.
Now then, next question and it's crux. If we were to phone up Rishi Sunak and ask him which of the following fiscal positions he would prefer going into this crisis -
(i) Debt at 40% of GDP and Deficit at 2.8% (ii) Debt at 85% of GDP and Deficit at 1.2%
Which would he choose and why?
Scenario 2. Any day.
I didn't ask you! You're meant to be explaining why property taxes can't work because they reduce the value of the property.
But I must duck out for a haircut now. Wife is waving scissors at me.
Are you sure that is for a haircut?
- good question. She's not smiling.
But, look, no doubt we'll come back to this but to pose a general question to Conservative posters -
Why are you seeking to upend the laws of money and economics in order to support both Osborne's approach to the last crisis AND what you expect to be Sunak's opposite approach to this one?
If there was no Magic Money Tree back then, how come there is one now?
An outstanding question.
Not all conservatives agree with Sunak and Johnson. Today the CBI warned a third of the UK businesses had effectively ceased to function. A further third were functioning with difficulty.
I find those numbers shattering and terrifying which perhaps accounts for the sometimes shrill nature of my posts. Almost as terrifying as the blase nature of the government's attitude them,
Meanwhile NHS England reports that the number of people who have died in hospital from Corona with no pre-existing condition is 250 from age 0-60. Even for 0-80 its under 750. Out of 20,000.
For the zillionth time (and no doubt it will have to be repeated another infinite number of zillion times in the future): government bailouts in circumstances like this, or in the bank rescues of 2008/9, are NOT bailouts of the various companies' shareholders, they are bailouts of the companies' creditors, customers and suppliers, and therefore of the wider economy. That is why governments do them, and why the question of past dividends, ownership, or historic corporation tax payments are completely irrelevant to the merits or otherwise of such bailouts.
They are bailouts of both. The collapse of EasyJet, say, would wipe out their shareholder's value, whereas some of it will be saved post-bailout - even if it takes them 10 years to realise it.
Well precisely. And once you've squashed the deficit then you can manage the debt via growth and interest payments and paying a keen eye on the deficit in future.
But there is a difficult reality. We went into the 08 crash with debt at 40% of GDP and a deficit of 3%. We go into this crisis with debt at 85% of GDP and a deficit of 1.2%. Meaning we are less well placed. An extra 45% on debt is a bigger drag than the 1.8% mitigating extra headroom on deficit.
Last time spending cuts took the strain - with almost everything bar the NHS squeezed until the pips squeaked. This was morally wrong because it hit the least well off very badly. It also means that in practice it cannot be done again. There's no scope. Our public realm is denuded.
What was missing in our response to 08 was tax hikes on the better off - by which I mean everyone who is doing more than "just about managing" or not managing at all. The need is for a contribution via taxation (focused more on wealth than income - but on both) which becomes sharply higher as you go up the scale of affluence. It should have happened long before now. I hope this abdication of political leadership and moral obligation is not continued.
When the Coalition was elected in 2010 I still got a personal allowance. I still got CB. I didn't have such restrictions on my pension contributions. I didn't have to pay extra for the privilege of living in Scotland. It is frankly ridiculous to say that tax on the higher earners was not increased substantially. My bill went up roughly £20k a year over that period which was about a 50% increase. The proportion of taxes paid by the highest earners went up sharply. That is as it should be and I am not complaining but this fantasy that Osborne was somehow protecting his rich friends whilst imposing harsh cuts on the poor is really nonsense.
Well he most certainly did impose harsh cuts which impacted the poor. And there was no serious attempt to tax the wealth (assets) of the affluent. Labour raised top rate income tax. He cut it. And the big picture choice was to load most of the pain onto public spending.
Not seeing much nonsense there, David. I'm seeing the truth. It's all on the public record.
The public record shows that the tax paid by the highest earners increased substantially which was the major cause of deficit reduction. When George talked about those with the broadest shoulders having to carry the load that was no more than the truth. Public spending was constrained but overall grew each year in real terms. There was also a much, much more aggressive searching for and accounting of overseas assets including new treaties with Switzerland. In focusing on wealth taxes you are painting a highly distorted picture.
But the fundamental problem he had to deal with was the loss of £100bn of taxes from financial services/banks. This did not recover quickly (in fact it still hasn't) which meant that spending and tax had to be brought into line at a new level. This is what is relevant for present purposes. If we permanently lose a large chunk of our tax paying economy because of the virus public spending and taxes will need to be brought into line again. If it is a short term hit with a strong bounce back much less action will be required.
But the Debt Interest arising from a higher deficit was very manageable - and was always well below what faced Chamberlain as Chancellor during the National Government back in the 1930s.
Yes, but debt needs to be rolled over so it affects the net cash requirement.
Indeed - but its burden - in terms of interest rates - was manageable when Osborne took over in 2010. Just as the impact of the Covid 19 virus can be treated as a 'one off' , many would say that the same was true of the GFC in 2008 . Moreover, the deficit was already declining by 2010 and it can be argued that the deflationary impact of Osborne's austerity was to delay the continued improvement in the Public Finances.
It was not manageable when we had the deficit we had, interest rates were going up for nations that didn't bring those down and countries were going bust.
How was that manageable?
There was not upward pressure on UK interest rates when Darling left office - indeed Base Rate had already fallen to 0.5%.
Well precisely. And once you've squashed the deficit then you can manage the debt via growth and interest payments and paying a keen eye on the deficit in future.
But there is a difficult reality. We went into the 08 crash with debt at 40% of GDP and a deficit of 3%. We go into this crisis with debt at 85% of GDP and a deficit of 1.2%. Meaning we are less well placed. An extra 45% on debt is a bigger drag than the 1.8% mitigating extra headroom on deficit.
Last time spending cuts took the strain - with almost everything bar the NHS squeezed until the pips squeaked. This was morally wrong because it hit the least well off very badly. It also means that in practice it cannot be done again. There's no scope. Our public realm is denuded.
What was missing in our response to 08 was tax hikes on the better off - by which I mean everyone who is doing more than "just about managing" or not managing at all. The need is for a contribution via taxation (focused more on wealth than income - but on both) which becomes sharply higher as you go up the scale of affluence. It should have happened long before now. I hope this abdication of political leadership and moral obligation is not continued.
When the Coalition was elected in 2010 I still got a personal allowance. I still got CB. I didn't have such restrictions on my pension contributions. I didn't have to pay extra for the privilege of living in Scotland. It is frankly ridiculous to say that tax on the higher earners was not increased substantially. My bill went up roughly £20k a year over that period which was about a 50% increase. The proportion of taxes paid by the highest earners went up sharply. That is as it should be and I am not complaining but this fantasy that Osborne was somehow protecting his rich friends whilst imposing harsh cuts on the poor is really nonsense.
Well he most certainly did impose harsh cuts which impacted the poor. And there was no serious attempt to tax the wealth (assets) of the affluent. Labour raised top rate income tax. He cut it. And the big picture choice was to load most of the pain onto public spending.
Not seeing much nonsense there, David. I'm seeing the truth. It's all on the public record.
The public record shows that the tax paid by the highest earners increased substantially which was the major cause of deficit reduction. When George talked about those with the broadest shoulders having to carry the load that was no more than the truth. Public spending was constrained but overall grew each year in real terms. There was also a much, much more aggressive searching for and accounting of overseas assets including new treaties with Switzerland. In focusing on wealth taxes you are painting a highly distorted picture.
But the fundamental problem he had to deal with was the loss of £100bn of taxes from financial services/banks. This did not recover quickly (in fact it still hasn't) which meant that spending and tax had to be brought into line at a new level. This is what is relevant for present purposes. If we permanently lose a large chunk of our tax paying economy because of the virus public spending and taxes will need to be brought into line again. If it is a short term hit with a strong bounce back much less action will be required.
But the Debt Interest arising from a higher deficit was very manageable - and was always well below what faced Chamberlain as Chancellor during the National Government back in the 1930s.
Yes, but debt needs to be rolled over so it affects the net cash requirement.
Indeed - but its burden - in terms of interest rates - was manageable when Osborne took over in 2010. Just as the impact of the Covid 19 virus can be treated as a 'one off' , many would say that the same was true of the GFC in 2008 . Moreover, the deficit was already declining by 2010 and it can be argued that the deflationary impact of Osborne's austerity was to delay the continued improvement in the Public Finances.
It was not manageable when we had the deficit we had, interest rates were going up for nations that didn't bring those down and countries were going bust.
How was that manageable?
There was not upward pressure on UK interest rates when Darling left office - indeed Base Rate had already fallen to 0.5%.
Well precisely. And once you've squashed the deficit then you can manage the debt via growth and interest payments and paying a keen eye on the deficit in future.
But there is a difficult reality. We went into the 08 crash with debt at 40% of GDP and a deficit of 3%. We go into this crisis with debt at 85% of GDP and a deficit of 1.2%. Meaning we are less well placed. An extra 45% on debt is a bigger drag than the 1.8% mitigating extra headroom on deficit.
Last time spending cuts took the strain - with almost everything bar the NHS squeezed until the pips squeaked. This was morally wrong because it hit the least well off very badly. It also means that in practice it cannot be done again. There's no scope. Our public realm is denuded.
What was missing in our response to 08 was tax hikes on the better off - by which I mean everyone who is doing more than "just about managing" or not managing at all. The need is for a contribution via taxation (focused more on wealth than income - but on both) which becomes sharply higher as you go up the scale of affluence. It should have happened long before now. I hope this abdication of political leadership and moral obligation is not continued.
No we are thankfully better placed now. That 1.8% difference in deficit is what matters massively more than the 45% on debt. Especially when much of that debt is owned by the Bank of England who would never call it in and don't demand interest on it either.
The deficit and interest payments are the two real elements which measure what we can afford not the debt.
Forget debt, we're never going to repay debt. We have to pay interest on debt - and the government bonds are frequently set to 30-50 year schedules so interest rate changes don't suddenly vary through to the budget.
We are going into this recession with interest being below 3% of government expenditure and the deficit being 1.2% of the government's budget. That's a lot healthier that we went into 2008 with.
What is a deficit? It is the amount by which debt is rising.
Why do we worry about a deficit? Because of its impact on debt.
So when discussing the public finances can we really "forget debt"?
Clearly not. Because if this were the case - that debt does not matter - then the thing which is causing the debt to increase would not matter either. This thing being the deficit.
No you have it backwards that is not why we worry about a deficit. We worry about a deficit because it means we are spending more than we are taking which is unsustainable, plus it leaves no headroom for changes if something goes wrong like happened in 2008.
Paying interest at 3% of our government expenditure is sustainable. Spending 4 pounds for every 3 pounds the government raises is not.
Come on Philip. Thinking cap.
If the absolute level of debt does not matter why should we worry about spending more than we take in? About the deficit? Answer - we shouldn't. Because it wouldn't matter a jot.
But you and I - and indeed all bar true esoterics - agree that the deficit DOES matter.
Why? Because if not controlled it leads to unsustainable DEBT. Which matters.
It is time for a clear and simple "Yes, I see now" and then we can continue.
*Facepalm*
An unsustainable deficit can indeed lead to unstainable debt, but how does stable debt without a deficit and with low interest lead to unsustainable debt?
Exactly! We worry about a deficit because it can lead to unsustainable debt. Ergo the level of debt matters. If it did not matter, nor would deficits.
That took longer than it should have done but no matter.
Now then, next question and it's crux. If we were to phone up Rishi Sunak and ask him which of the following fiscal positions he would prefer going into this crisis -
(i) Debt at 40% of GDP and Deficit at 2.8% (ii) Debt at 85% of GDP and Deficit at 1.2%
Which would he choose and why?
Scenario 2. Any day.
I didn't ask you! You're meant to be explaining why property taxes can't work because they reduce the value of the property.
But I must duck out for a haircut now. Wife is waving scissors at me.
Are you sure that is for a haircut?
- good question. She's not smiling.
But, look, no doubt we'll come back to this but to pose a general question to Conservative posters -
Why are you seeking to upend the laws of money and economics in order to support both Osborne's approach to the last crisis AND what you expect to be Sunak's opposite approach to this one?
If there was no Magic Money Tree back then, how come there is one now?
An outstanding question.
Not all conservatives agree with Sunak and Johnson. Today the CBI warned a third of the UK businesses had effectively ceased to function. A further third were functioning with difficulty.
I find those numbers shattering and terrifying which perhaps accounts for the sometimes shrill nature of my posts. Almost as terrifying as the blase nature of the government's attitude them,
Meanwhile NHS England reports that the number of people who have died in hospital from Corona with no pre-existing condition is 250 from age 0-60. Even for 0-80 its under 750. Out of 20,000.
What are we doing here?
Trying to avoid the economic catastrophe of no action in 1920 which was worse. 1920 permanently wiped off 20% off the British GDP never to be recovered until WWII and sent interest payments up to 44% of government expenditure.
The other point to bear in mind in the discussion of sky-high national debt is that the UK won't be the only one, far from it. So bondholders won't exactly be spoilt for choice. That in turn means that the UK government won't have to pay a large premium in terms of interest payments to finance that historic debt, provided that the deficit can be kept under control.
Or, if you are a glass half empty type you might contemplate a world where governments worldwide are competing for a limited pot of savings and having to pay accordingly.
We, along with many other Governments will just print money
True. QE is the only realistic way out of this mess for all its risks. Which is why I worry about the EZ.
The inability for Italy, Greece and others to devalue their currencies to escape a crisis was the biggest reason I voted for Brexit.
I didn't want to be in the EU when those crises hit.
But isn't that an argument for not being in the Euro? Why extend it to the EU? (Not having a go, it's a genuine question)
FWIW for me the creation of the Euro signalled unambiguously that the intention of the EU was a monetary, fiscal and political union, however long it took. I regarded our opt out as something which one day somehow would be overcome by the circumstance of some crisis, or by the conviction politics of a SuperBlair. So in the long run the choice in the referendum was independence (to the extent any state can be in the modern world of course) v eventual political union. Which is why, despite not being in the Euro it was still the key issue.
Delusional. Team sport is over. Finished. Done. Forever. The last (legal) game of cricket in England was played last year.
I think that is extremely pessimistic. But sports will probably need a vaccine. I am not sure this football season will start on time, for example.
The obsession with trying to complete this football season is driven solely by the greed of the PL and the players with little concern for anybody else. It is not remotely a top priority. We should just be looking to start again with a new season in September at the earliest.
Corona virus? A mere bagatelle. Consider 1918. no antivirals, no antibiotics, no vaccines and no hope. But as Humphrey Bogart said … we'll always have our face mask.
The one I am still pondering about is the Hong Kong flu of 1969/70. It killed roughly 3x what we have lost to date and didn't even interrupt the football season. Different times, different mores?
"3x what we have lost to date" The Hong Kong flu started in July 1968 and had it's peak in 69 then had another outbreak in 70.
The comparison should be made with the HK Flu deaths by the end of 1968. And medicine has inproved a hell of a lot since 1970.
Well precisely. And once you've squashed the deficit then you can manage the debt via growth and interest payments and paying a keen eye on the deficit in future.
But there is a difficult reality. We went into the 08 crash with debt at 40% of GDP and a deficit of 3%. We go into this crisis with debt at 85% of GDP and a deficit of 1.2%. Meaning we are less well placed. An extra 45% on debt is a bigger drag than the 1.8% mitigating extra headroom on deficit.
Last time spending cuts took the strain - with almost everything bar the NHS squeezed until the pips squeaked. This was morally wrong because it hit the least well off very badly. It also means that in practice it cannot be done again. There's no scope. Our public realm is denuded.
What was missing in our response to 08 was tax hikes on the better off - by which I mean everyone who is doing more than "just about managing" or not managing at all. The need is for a contribution via taxation (focused more on wealth than income - but on both) which becomes sharply higher as you go up the scale of affluence. It should have happened long before now. I hope this abdication of political leadership and moral obligation is not continued.
When the Coalition was elected in 2010 I still got a personal allowance. I still got CB. I didn't have such restrictions on my pension contributions. I didn't have to pay extra for the privilege of living in Scotland. It is frankly ridiculous to say that tax on the higher earners was not increased substantially. My bill went up roughly £20k a year over that period which was about a 50% increase. The proportion of taxes paid by the highest earners went up sharply. That is as it should be and I am not complaining but this fantasy that Osborne was somehow protecting his rich friends whilst imposing harsh cuts on the poor is really nonsense.
Well he most certainly did impose harsh cuts which impacted the poor. And there was no serious attempt to tax the wealth (assets) of the affluent. Labour raised top rate income tax. He cut it. And the big picture choice was to load most of the pain onto public spending.
Not seeing much nonsense there, David. I'm seeing the truth. It's all on the public record.
The public record shows that the tax paid by the highest earners increased substantially which was the major cause of deficit reduction. When George talked about those with the broadest shoulders having to carry the load that was no more than the truth. Public spending was constrained but overall grew each year in real terms. There was also a much, much more aggressive searching for and accounting of overseas assets including new treaties with Switzerland. In focusing on wealth taxes you are painting a highly distorted picture.
But the fundamental problem he had to deal with was the loss of £100bn of taxes from financial services/banks. This did not recover quickly (in fact it still hasn't) which meant that spending and tax had to be brought into line at a new level. This is what is relevant for present purposes. If we permanently lose a large chunk of our tax paying economy because of the virus public spending and taxes will need to be brought into line again. If it is a short term hit with a strong bounce back much less action will be required.
But the Debt Interest arising from a higher deficit was very manageable - and was always well below what faced Chamberlain as Chancellor during the National Government back in the 1930s.
Yes, but debt needs to be rolled over so it affects the net cash requirement.
Indeed - but its burden - in terms of interest rates - was manageable when Osborne took over in 2010. Just as the impact of the Covid 19 virus can be treated as a 'one off' , many would say that the same was true of the GFC in 2008 . Moreover, the deficit was already declining by 2010 and it can be argued that the deflationary impact of Osborne's austerity was to delay the continued improvement in the Public Finances.
It was not manageable when we had the deficit we had, interest rates were going up for nations that didn't bring those down and countries were going bust.
How was that manageable?
There was not upward pressure on UK interest rates when Darling left office - indeed Base Rate had already fallen to 0.5%.
The government doesn't borrow at Base Rate!
10 Year Bond Yield on the date of the 2010 General Election: 3.808 10 Year Bond Yield today: 0.208
Delusional. Team sport is over. Finished. Done. Forever. The last (legal) game of cricket in England was played last year.
I think that is extremely pessimistic. But sports will probably need a vaccine. I am not sure this football season will start on time, for example.
The obsession with trying to complete this football season is driven solely by the greed of the PL and the players with little concern for anybody else. It is not remotely a top priority. We should just be looking to start again with a new season in September at the earliest.
I could not agree more
We should follow France and cancel all football until September at the earliest
Well precisely. And once you've squashed the deficit then you can manage the debt via growth and interest payments and paying a keen eye on the deficit in future.
But there is a difficult reality. We went into the 08 crash with debt at 40% of GDP and a deficit of 3%. We go into this crisis with debt at 85% of GDP and a deficit of 1.2%. Meaning we are less well placed. An extra 45% on debt is a bigger drag than the 1.8% mitigating extra headroom on deficit.
Last time spending cuts took the strain - with almost everything bar the NHS squeezed until the pips squeaked. This was morally wrong because it hit the least well off very badly. It also means that in practice it cannot be done again. There's no scope. Our public realm is denuded.
What was missing in our response to 08 was tax hikes on the better off - by which I mean everyone who is doing more than "just about managing" or not managing at all. The need is for a contribution via taxation (focused more on wealth than income - but on both) which becomes sharply higher as you go up the scale of affluence. It should have happened long before now. I hope this abdication of political leadership and moral obligation is not continued.
No we are thankfully better placed now. That 1.8% difference in deficit is what matters massively more than the 45% on debt. Especially when much of that debt is owned by the Bank of England who would never call it in and don't demand interest on it either.
The deficit and interest payments are the two real elements which measure what we can afford not the debt.
Forget debt, we're never going to repay debt. We have to pay interest on debt - and the government bonds are frequently set to 30-50 year schedules so interest rate changes don't suddenly vary through to the budget.
We are going into this recession with interest being below 3% of government expenditure and the deficit being 1.2% of the government's budget. That's a lot healthier that we went into 2008 with.
What is a deficit? It is the amount by which debt is rising.
Why do we worry about a deficit? Because of its impact on debt.
So when discussing the public finances can we really "forget debt"?
Clearly not. Because if this were the case - that debt does not matter - then the thing which is causing the debt to increase would not matter either. This thing being the deficit.
No you have it backwards that is not why we worry about a deficit. We worry about a deficit because it means we are spending more than we are taking which is unsustainable, plus it leaves no headroom for changes if something goes wrong like happened in 2008.
Paying interest at 3% of our government expenditure is sustainable. Spending 4 pounds for every 3 pounds the government raises is not.
Come on Philip. Thinking cap.
If the absolute level of debt does not matter why should we worry about spending more than we take in? About the deficit? Answer - we shouldn't. Because it wouldn't matter a jot.
But you and I - and indeed all bar true esoterics - agree that the deficit DOES matter.
Why? Because if not controlled it leads to unsustainable DEBT. Which matters.
It is time for a clear and simple "Yes, I see now" and then we can continue.
*Facepalm*
An unsustainable deficit can indeed lead to unstainable debt, but how does stable debt without a deficit and with low interest lead to unsustainable debt?
Exactly! We worry about a deficit because it can lead to unsustainable debt. Ergo the level of debt matters. If it did not matter, nor would deficits.
That took longer than it should have done but no matter.
Now then, next question and it's crux. If we were to phone up Rishi Sunak and ask him which of the following fiscal positions he would prefer going into this crisis -
(i) Debt at 40% of GDP and Deficit at 2.8% (ii) Debt at 85% of GDP and Deficit at 1.2%
Which would he choose and why?
Scenario 2. Any day.
I didn't ask you! You're meant to be explaining why property taxes can't work because they reduce the value of the property.
But I must duck out for a haircut now. Wife is waving scissors at me.
Are you sure that is for a haircut?
- good question. She's not smiling.
But, look, no doubt we'll come back to this but to pose a general question to Conservative posters -
Why are you seeking to upend the laws of money and economics in order to support both Osborne's approach to the last crisis AND what you expect to be Sunak's opposite approach to this one?
If there was no Magic Money Tree back then, how come there is one now?
An outstanding question.
Not all conservatives agree with Sunak and Johnson. Today the CBI warned a third of the UK businesses had effectively ceased to function. A further third were functioning with difficulty.
I find those numbers shattering and terrifying which perhaps accounts for the sometimes shrill nature of my posts. Almost as terrifying as the blase nature of the government's attitude them,
Meanwhile NHS England reports that the number of people who have died in hospital from Corona with no pre-existing condition is 250 from age 0-60. Even for 0-80 its under 750. Out of 20,000.
What are we doing here?
Once again: you seem to make the implicit assumption that everyone with a pre-existing condition is at death's door. This is simply wrong. Plenty of people with eg diabetes live for decades with the condition. The former Prime Minister and Shadow Home Secretary being two obvious cases in point.
They are informative. They tell us that national population density figures are misleading. Most people live in areas that are much more densely populated than the national figure. I think this is especially true of GB and the Netherlands.
They are informative. They tell us that national population density figures are misleading. Most people live in areas that are much more densely populated than the national figure. I think this is especially true of GB and the Netherlands.
I like how Paris's population density forms the Eiffel tower.
The other point to bear in mind in the discussion of sky-high national debt is that the UK won't be the only one, far from it. So bondholders won't exactly be spoilt for choice. That in turn means that the UK government won't have to pay a large premium in terms of interest payments to finance that historic debt, provided that the deficit can be kept under control.
Or, if you are a glass half empty type you might contemplate a world where governments worldwide are competing for a limited pot of savings and having to pay accordingly.
We, along with many other Governments will just print money
True. QE is the only realistic way out of this mess for all its risks. Which is why I worry about the EZ.
The inability for Italy, Greece and others to devalue their currencies to escape a crisis was the biggest reason I voted for Brexit.
I didn't want to be in the EU when those crises hit.
But isn't that an argument for not being in the Euro? Why extend it to the EU? (Not having a go, it's a genuine question)
FWIW for me the creation of the Euro signalled unambiguously that the intention of the EU was a monetary, fiscal and political union, however long it took. I regarded our opt out as something which one day somehow would be overcome by the circumstance of some crisis, or by the conviction politics of a SuperBlair. So in the long run the choice in the referendum was independence (to the extent any state can be in the modern world of course) v eventual political union. Which is why, despite not being in the Euro it was still the key issue.
Not to mention that not being in the Euro doesn't save us from Eurolaws or Eurobills which are decided by QMV.
I think that is extremely pessimistic. But sports will probably need a vaccine. I am not sure this football season will start on time, for example.
Should be possible to keep the players in a quarantine bubble, test them constantly, and hammer through the last remaining matches, 2 per week. Expensive and fiddly, but big financial consequences for not finishing major league seasons ....
Don't make me laugh, they have been breaking the current lockdown on a daily basis, partying with mates and hookers. Our PL prima-donnas really don't see themselves as mere mortals and the last thing we should be doing right now is trying to bend the rules to accommodate them when so many more less pampered people are losing their incomes and their businesses.
They are informative. They tell us that national population density figures are misleading. Most people live in areas that are much more densely populated than the national figure. I think this is especially true of GB and the Netherlands.
I like how Paris's population density forms the Eiffel tower.
In contrast, Switzerland's forms a negative relief map of the Alps.
For the zillionth time (and no doubt it will have to be repeated another infinite number of zillion times in the future): government bailouts in circumstances like this, or in the bank rescues of 2008/9, are NOT bailouts of the various companies' shareholders, they are bailouts of the companies' creditors, customers and suppliers, and therefore of the wider economy. That is why governments do them, and why the question of past dividends, ownership, or historic corporation tax payments are completely irrelevant to the merits or otherwise of such bailouts.
They are bailouts of both. The collapse of EasyJet, say, would wipe out their shareholder's value, whereas some of it will be saved post-bailout - even if it takes them 10 years to realise it.
There might be a small side-effect of saving a bit of the shareholders' shirts, depending on the structure of the bailout. But that is irrelevant to the question of whether or not they are a good idea, and to governments' reasons for doing such bailouts.
After being told we were to expect to continue WAH until at least beginning of July on Monday today the messaging has changed to "late summer at the earliest"
They are informative. They tell us that national population density figures are misleading. Most people live in areas that are much more densely populated than the national figure. I think this is especially true of GB and the Netherlands.
Striking how Scotland is effectively the central belt, between two wildernesses.
I do wonder whether it would be a good idea to introduce temporary bankruptcy measures which copy the US chapter 11 rules. Allow companies to enter it, restructure their debts and other liabilities and exit once the process is done. Seems like a good solution for the current crisis and will preserve as much of the economy as possible without hurting banks too much or having industry fall into Chinese hands.
Superb! England and North Italy have an incredibly high population density compared to most of Europe.
From having a quick scan through his renders it seems that Malmo has a higher population density than Stockholm yet a fraction of the cases. Need to check that with actual real figures rather than pretty computer graphics.
EDIT: Computer says no, Stockholm has a higher population density.
Further to my comment the other day that anyone who thinks that senior academics would change their opinions because of what a SPAD says hasn't worked with academics, here's a further up date on the on-going debate about Sweden:
They are informative. They tell us that national population density figures are misleading. Most people live in areas that are much more densely populated than the national figure. I think this is especially true of GB and the Netherlands.
Striking how Scotland is effectively the central belt, between two wildernesses.
And the coastal fringe NE-about to Inverness. Wales is just the opposite.
"Tourism – Hotels, hostels and caravan parks will reopen on a limited occupancy basis and travel will be restricted to people in the same household."
That rules out taking the mistress away for a dirty weekend. Such rules definitely wouldn't fly in France.
We've got a domestic holiday booked for the 8th. Annoyingly the (Almost certain to be delayed) delay can't yet be officially put on their site because they don't have guidance as yet ! It's just us going into a self contained accomodation (With the horse !) in lincolnshire so the viral risk is about the same as staying at home and going to the shops/seeing the horse anyway. We might postpone till late Sep. Hopefully it'll be allowed open then.
Delusional. Team sport is over. Finished. Done. Forever. The last (legal) game of cricket in England was played last year.
My prediction: everything will be back to normal within 12 to 18 months.
Normal is now. You are experiencing it. You want a vision of your future? It's your four walls. It's on your computer screen. That's it. That is now the limit of your horizons until you die. This is your life.
Rubbish, by this time next year everyone bar over 70s will be largely back to normal even without a vaccine with mass testing and tracing used to limit the virus spread.
People are not going to stop all life outside their bedroom and living room for a virus they have over a 99.5% chance of surviving if under 50 and over 90% if 50 to 70 and even most over 70s are far more likely to survive it than not
We are not going to get back to anything like "normal" until there is a vaccine.
Without a vaccine we are going get subsequent waves of infection. Things will ease a little, people will start going out more and the minute another wave hits most will immediately stop travelling, going to restaurants, football matches, pubs etc. We are going to be living with millions of extra unemployed people for a long time I suspect.
I continue to be fascinated by the disconnected between how is infected and who is dying in the Sweden death stats
Doesn’t that just tell us what we already know? It kills older people, generally with pre existing conditions, and doesn’t kill under 60s often at all.
That’s why Sweden want lots of under 60s to get it, and when the rest of the world is in lockdown again, they’ll have a big section of the population immune
After being told we were to expect to continue WAH until at least beginning of July on Monday today the messaging has changed to "late summer at the earliest"
Works for me
The guidance on Working From Home is very strong on the Gov't website. Your employer MUST use it if it is possible to complete your duties from home.
Well precisely. And once you've squashed the deficit then you can manage the debt via growth and interest payments and paying a keen eye on the deficit in future.
But there is a difficult reality. We went into the 08 crash with debt at 40% of GDP and a deficit of 3%. We go into this crisis with debt at 85% of GDP and a deficit of 1.2%. Meaning we are less well placed. An extra 45% on debt is a bigger drag than the 1.8% mitigating extra headroom on deficit.
Last time spending cuts took the strain - with almost everything bar the NHS squeezed until the pips squeaked. This was morally wrong because it hit the least well off very badly. It also means that in practice it cannot be done again. There's no scope. Our public realm is denuded.
What was missing in our response to 08 was tax hikes on the better off - by which I mean everyone who is doing more than "just about managing" or not managing at all. The need is for a contribution via taxation (focused more on wealth than income - but on both) which becomes sharply higher as you go up the scale of affluence. It should have happened long before now. I hope this abdication of political leadership and moral obligation is not continued.
When the Coalition was elected in 2010 I still got a personal allowance. I still got CB. I didn't have such restrictions on my pension contributions. I didn't have to pay extra for the privilege of living in Scotland. It is frankly ridiculous to say that tax on the higher earners was not increased substantially. My bill went up roughly £20k a year over that period which was about a 50% increase. The proportion of taxes paid by the highest earners went up sharply. That is as it should be and I am not complaining but this fantasy that Osborne was somehow protecting his rich friends whilst imposing harsh cuts on the poor is really nonsense.
Well he most certainly did impose harsh cuts which impacted the poor. And there was no serious attempt to tax the wealth (assets) of the affluent. Labour raised top rate income tax. He cut it. And the big picture choice was to load most of the pain onto public spending.
Not seeing much nonsense there, David. I'm seeing the truth. It's all on the public record.
The public record shows that the tax paid by the highest earners increased substantially which was the major cause of deficit reduction. When George talked about those with the broadest shoulders having to carry the load that was no more than the truth. Public spending was constrained but overall grew each year in real terms. There was also a much, much more aggressive searching for and accounting of overseas assets including new treaties with Switzerland. In focusing on wealth taxes you are painting a highly distorted picture.
But the fundamental problem he had to deal with was the loss of £100bn of taxes from financial services/banks. This did not recover quickly (in fact it still hasn't) which meant that spending and tax had to be brought into line at a new level. This is what is relevant for present purposes. If we permanently lose a large chunk of our tax paying economy because of the virus public spending and taxes will need to be brought into line again. If it is a short term hit with a strong bounce back much less action will be required.
I'm not a Coalition hater. They did some good things. And they had to address the public finances. You cannot just borrow or print your way out of a financial hole. If the economy and the fiscal position goes tits up you have to take a hit on living standards and personal wealth. Otherwise you could borrow or print when you are NOT in a hole, just to improve living standards and personal wealth. Nothing can alter this basic truth. It applies whatever the political complexion of the governing party.
But I sense we agree on this. What we seem to disagree on is whether Osborne choose public spending cuts as his weapon of choice. I say he did. If you take out the protected areas of NHS and Foreign Aid, the cuts he made were eye-watering. It was Darling who raised top rate IT to 50%. Osborne cut it to 45%. And there really was no serious attempt to tax wealth - much of it accrued during the credit driven boom of the years before the crash. I think this approach was wrong then and would be indefensible if repeated.
Well precisely. And once you've squashed the deficit then you can manage the debt via growth and interest payments and paying a keen eye on the deficit in future.
But there is a difficult reality. We went into the 08 crash with debt at 40% of GDP and a deficit of 3%. We go into this crisis with debt at 85% of GDP and a deficit of 1.2%. Meaning we are less well placed. An extra 45% on debt is a bigger drag than the 1.8% mitigating extra headroom on deficit.
Last time spending cuts took the strain - with almost everything bar the NHS squeezed until the pips squeaked. This was morally wrong because it hit the least well off very badly. It also means that in practice it cannot be done again. There's no scope. Our public realm is denuded.
What was missing in our response to 08 was tax hikes on the better off - by which I mean everyone who is doing more than "just about managing" or not managing at all. The need is for a contribution via taxation (focused more on wealth than income - but on both) which becomes sharply higher as you go up the scale of affluence. It should have happened long before now. I hope this abdication of political leadership and moral obligation is not continued.
When the Coalition was elected in 2010 I still got a personal allowance. I still got CB. I didn't have such restrictions on my pension contributions. I didn't have to pay extra for the privilege of living in Scotland. It is frankly ridiculous to say that tax on the higher earners was not increased substantially. My bill went up roughly £20k a year over that period which was about a 50% increase. The proportion of taxes paid by the highest earners went up sharply. That is as it should be and I am not complaining but this fantasy that Osborne was somehow protecting his rich friends whilst imposing harsh cuts on the poor is really nonsense.
Well he most certainly did impose harsh cuts which impacted the poor. And there was no serious attempt to tax the wealth (assets) of the affluent. Labour raised top rate income tax. He cut it. And the big picture choice was to load most of the pain onto public spending.
Not seeing much nonsense there, David. I'm seeing the truth. It's all on the public record.
The public record shows that the tax paid by the highest earners increased substantially which was the major cause of deficit reduction. When George talked about those with the broadest shoulders having to carry the load that was no more than the truth. Public spending was constrained but overall grew each year in real terms. There was also a much, much more aggressive searching for and accounting of overseas assets including new treaties with Switzerland. In focusing on wealth taxes you are painting a highly distorted picture.
But the fundamental problem he had to deal with was the loss of £100bn of taxes from financial services/banks. This did not recover quickly (in fact it still hasn't) which meant that spending and tax had to be brought into line at a new level. This is what is relevant for present purposes. If we permanently lose a large chunk of our tax paying economy because of the virus public spending and taxes will need to be brought into line again. If it is a short term hit with a strong bounce back much less action will be required.
But the Debt Interest arising from a higher deficit was very manageable - and was always well below what faced Chamberlain as Chancellor during the National Government back in the 1930s.
Yes, but debt needs to be rolled over so it affects the net cash requirement.
Indeed - but its burden - in terms of interest rates - was manageable when Osborne took over in 2010. Just as the impact of the Covid 19 virus can be treated as a 'one off' , many would say that the same was true of the GFC in 2008 . Moreover, the deficit was already declining by 2010 and it can be argued that the deflationary impact of Osborne's austerity was to delay the continued improvement in the Public Finances.
It was not manageable when we had the deficit we had, interest rates were going up for nations that didn't bring those down and countries were going bust.
How was that manageable?
There was not upward pressure on UK interest rates when Darling left office - indeed Base Rate had already fallen to 0.5%.
The government doesn't borrow at Base Rate!
10 Year Bond Yield on the date of the 2010 General Election: 3.808 10 Year Bond Yield today: 0.208
Which is cheaper 3.808 or 0.208?
I am well aware of that. The point is that there was no upward pressure on UK interest rates at the time - despite the political uncertainty. The Deficit had already peaked and was due to fall further without Osborne's austerity measures. I have seen no suggestion that interest rates would have climbed had Darling remained Chancellor.
I am well aware of that. The point is that there was no upward pressure on UK interest rates at the time - despite the political uncertainty. The Deficit had already peaked and was due to fall further without Osborne's austerity measures. I have seen no suggestion that interest rates would have climbed had Darling remained Chancellor.
When you say the deficit 'was due to fall further without Osborne's austerity measures', what alternative measures do you think Darling was proposing? Because - in possibly the most cynical piece of political shenanigans of a decade of cynical shenanigans - Gordon Brown cancelled the scheduled Comprehensive Spending Review that Darling would normally have carried out before the election. Now, it might perhaps be true that Darling would have done exactly the same as Osborne, and therefore achieved a similar success, but we'll never know. There was a black hole where Labour's spending plans should have been.
Well precisely. And once you've squashed the deficit then you can manage the debt via growth and interest payments and paying a keen eye on the deficit in future.
But there is a difficult reality. We went into the 08 crash with debt at 40% of GDP and a deficit of 3%. We go into this crisis with debt at 85% of GDP and a deficit of 1.2%. Meaning we are less well placed. An extra 45% on debt is a bigger drag than the 1.8% mitigating extra headroom on deficit.
Last time spending cuts took the strain - with almost everything bar the NHS squeezed until the pips squeaked. This was morally wrong because it hit the least well off very badly. It also means that in practice it cannot be done again. There's no scope. Our public realm is denuded.
What was missing in our response to 08 was tax hikes on the better off - by which I mean everyone who is doing more than "just about managing" or not managing at all. The need is for a contribution via taxation (focused more on wealth than income - but on both) which becomes sharply higher as you go up the scale of affluence. It should have happened long before now. I hope this abdication of political leadership and moral obligation is not continued.
When the Coalition was elected in 2010 I still got a personal allowance. I still got CB. I didn't have such restrictions on my pension contributions. I didn't have to pay extra for the privilege of living in Scotland. It is frankly ridiculous to say that tax on the higher earners was not increased substantially. My bill went up roughly £20k a year over that period which was about a 50% increase. The proportion of taxes paid by the highest earners went up sharply. That is as it should be and I am not complaining but this fantasy that Osborne was somehow protecting his rich friends whilst imposing harsh cuts on the poor is really nonsense.
Well he most certainly did impose harsh cuts which impacted the poor. And there was no serious attempt to tax the wealth (assets) of the affluent. Labour raised top rate income tax. He cut it. And the big picture choice was to load most of the pain onto public spending.
Not seeing much nonsense there, David. I'm seeing the truth. It's all on the public record.
The public record shows that the tax paid by the highest earners increased substantially which was the major cause of deficit reduction. When George talked about those with the broadest shoulders having to carry the load that was no more than the truth. Public spending was constrained but overall grew each year in real terms. There was also a much, much more aggressive searching for and accounting of overseas assets including new treaties with Switzerland. In focusing on wealth taxes you are painting a highly distorted picture.
But the fundamental problem he had to deal with was the loss of £100bn of taxes from financial services/banks. This did not recover quickly (in fact it still hasn't) which meant that spending and tax had to be brought into line at a new level. This is what is relevant for present purposes. If we permanently lose a large chunk of our tax paying economy because of the virus public spending and taxes will need to be brought into line again. If it is a short term hit with a strong bounce back much less action will be required.
But the Debt Interest arising from a higher deficit was very manageable - and was always well below what faced Chamberlain as Chancellor during the National Government back in the 1930s.
Yes, but debt needs to be rolled over so it affects the net cash requirement.
Indeed - but its burden - in terms of interest rates - was manageable when Osborne took over in 2010. Just as the impact of the Covid 19 virus can be treated as a 'one off' , many would say that the same was true of the GFC in 2008 . Moreover, the deficit was already declining by 2010 and it can be argued that the deflationary impact of Osborne's austerity was to delay the continued improvement in the Public Finances.
It was not manageable when we had the deficit we had, interest rates were going up for nations that didn't bring those down and countries were going bust.
How was that manageable?
There was not upward pressure on UK interest rates when Darling left office - indeed Base Rate had already fallen to 0.5%.
The government doesn't borrow at Base Rate!
10 Year Bond Yield on the date of the 2010 General Election: 3.808 10 Year Bond Yield today: 0.208
Which is cheaper 3.808 or 0.208?
I am well aware of that. The point is that there was no upward pressure on UK interest rates at the time - despite the political uncertainty. The Deficit had already peaked and was due to fall further without Osborne's austerity measures. I have seen no suggestion that interest rates would have climbed had Darling remained Chancellor.
There wasn't too much upwards pressure because the markets could see the incoming government was serious about sorting it out.
Had Darling remained Chancellor it would have gone up further as it did in other struggling European nations. We don't need to guess that we can see it.
Thanks to the hardwork of Osborne we are in a much healthier position with a much smaller deficit going into this crisis than we had in 2010. Which is part of the reason why the yield is so low now.
Comments
But, look, no doubt we'll come back to this but to pose a general question to Conservative posters -
Why are you seeking to upend the laws of money and economics in order to support both Osborne's approach to the last crisis AND what you expect to be Sunak's opposite approach to this one?
If there was no Magic Money Tree back then, how come there is one now?
All right: it is extremely likely that there will be a vaccine. I am certainly not an expert in the field, but people I have spoken to who definitely are experts in the field appear certain that this is doable. And it could be seen sooner than the initial estimates.
In 2010 the country wasn't in recession. In fact it hadn't been in recession for a couple of years already.
What species of deer is it that we have a very high number of?
If Italy etc crash once more due to the Eurozone and if we were still members or extended and got through this better the EU would automatically tax us more as a result.
We would have to pay part of the bill for their failures.
Not all conservatives agree with Sunak and Johnson. Today the CBI warned a third of the UK businesses had effectively ceased to function. A further third were functioning with difficulty.
I find those numbers shattering and terrifying which perhaps accounts for the sometimes shrill nature of my posts. Almost as terrifying as the blase nature of the government's attitude them,
Meanwhile NHS England reports that the number of people who have died in hospital from Corona with no pre-existing condition is 250 from age 0-60. Even for 0-80 its under 750. Out of 20,000.
What are we doing here?
All foreign lockdowns are crap.
Would you prefer that?
https://twitter.com/undertheraedar/status/1255605330647625728
The Hong Kong flu started in July 1968 and had it's peak in 69 then had another outbreak in 70.
The comparison should be made with the HK Flu deaths by the end of 1968. And medicine has inproved a hell of a lot since 1970.
10 Year Bond Yield on the date of the 2010 General Election: 3.808
10 Year Bond Yield today: 0.208
Which is cheaper 3.808 or 0.208?
We should follow France and cancel all football until September at the earliest
Works for me
I wonder if Tugendhat would stand if there were a vacancy at the head of the Conservative Party?
https://twitter.com/TomTugendhat/status/1255885134705950721
That rules out taking the mistress away for a dirty weekend. Such rules definitely wouldn't fly in France.
EDIT: Computer says no, Stockholm has a higher population density.
https://unherd.com/thepost/giesecke-stands-firm-swedish-death-rate-will-go-down/
Very nice maps.
I agree with Donald Trump.
Ugh.
It's just us going into a self contained accomodation (With the horse !) in lincolnshire so the viral risk is about the same as staying at home and going to the shops/seeing the horse anyway. We might postpone till late Sep. Hopefully it'll be allowed open then.
Without a vaccine we are going get subsequent waves of infection. Things will ease a little, people will start going out more and the minute another wave hits most will immediately stop travelling, going to restaurants, football matches, pubs etc. We are going to be living with millions of extra unemployed people for a long time I suspect.
SW is a wasteland from that visual. Long may the virus think so....
That’s why Sweden want lots of under 60s to get it, and when the rest of the world is in lockdown again, they’ll have a big section of the population immune
But I sense we agree on this. What we seem to disagree on is whether Osborne choose public spending cuts as his weapon of choice. I say he did. If you take out the protected areas of NHS and Foreign Aid, the cuts he made were eye-watering. It was Darling who raised top rate IT to 50%. Osborne cut it to 45%. And there really was no serious attempt to tax wealth - much of it accrued during the credit driven boom of the years before the crash. I think this approach was wrong then and would be indefensible if repeated.
https://twitter.com/EveningStandard/status/1255889649802924032
The 100k target will have saved lives by the end of this by getting the pressure on to sort it out.
*gasp*
https://twitter.com/TheStaggers/status/1255885873935081484?s=20
Poor Scots have been displaced as the "accent of trust" by whatever this accent is (Yorkshire?).
That's a physical impossibility isnt it????
Who are these people going about infecting each other???
Had Darling remained Chancellor it would have gone up further as it did in other struggling European nations. We don't need to guess that we can see it.
Thanks to the hardwork of Osborne we are in a much healthier position with a much smaller deficit going into this crisis than we had in 2010. Which is part of the reason why the yield is so low now.
https://www.theguardian.com/world/live/2020/apr/30/coronavirus-live-news-more-cases-of-covid-linked-syndrome-in-children-as-uk-deaths-top-spain-and-france