Twenty years ago, MI5 devoted around 20% of its effort to Hostile State Activity, which includes Russian activity alongside the hostile activity of other states, such as China and Iran.72 This allocation of effort declined, as the terrorist threat grew. By 2001/02, it had reduced to 16% and by 2003/04 to 10.7%. This fall continued until, by 2008/09, only 3% of effort was allocated by MI5 to all its work against Hostile State Activity (noting that reductions in proportion of overall effort do not translate directly into changes in resource).73 It was not until 2013/14 that effort began to increase significantly, rising to 14.5%74 – a level that MI5 says meant that slightly more staff were working on Russia than had been during the Cold War.75 The past two years have seen ***: currently, ***% is allocated to Hostile State Activity, approximately *** which is dedicated to countering Russian Hostile State Activity.76
A young blackbird is stranded on the ground outside my kitchen door. It's desperate father keeps trying to feed it a grub and constantly squawks at the poor thing.
Any suggestions?
Nature will take its course. If the parent is feeding it, should be OK. Just keep curious cats away from the kerfuffe....
Mr. Battery, if you check a long term graph the most significant shift in the last two decades was the financial crisis and 2008 recession. Before than it was around €1.45, and afterwards mostly €1.15ish, with a molehill around 2015/6.
Please can you call me Horse. Calling me Mr makes me very uncomfortable and makes me feel like you're putting me above yourself.
Morris Dancer calls everyone Mr and it is quite endearing
Nah I think it's fucking unnerving and I asked him to stop.
Just because you ask someone to stop doesn't mean they're obliged to do so. Unless it's something they're doing just to you.
But it is polite to call people by the names they want to be known as.
Equally it is polite not to react to someone by swearing at them.
Of course anyone to the left of Thatcher is a "socialist" according to many of the Tories on here. There are many shades in between.
Personally I think the best outcome for the country is some kind of Labour-LD coalition where we can see PR delivered but that looks unlikely.
I happen to think the state should spend a lot more than it does however I believe the 2019 Labour manifesto was too far for me. However I thought it was better than the Tory one which offered nothing to me at all.
The best Labour could offer for me would be 2017-lite with a massive expansion of house-building. Run the railways properly whether it's private or public I don't really care. That would make my life about 1000x better.
I think New Labour was good, not a popular view in the Labour Party but there you go. Not popular here either but that's never stopped me
Then doesn't that mean we are in net LESS real debt than we were before this hit?
The £310bn is the total that was announced in June, it won't be completed until year-end, and it includes £10-20bn of corporate bonds do gilt purchases will be a bit under £300bn. Total borrowing in FY20-21 will likely be close to £400bn so it's likely that net issuance net of BOE purchases will still be positive - although the BOE may buy more in Q1 2021 (the last quarter of the fiscal year). However, for the year to date the BOE purchases have been greater than net isduance, as they were front-loaded with aggressive buying at the start.
Thanks. So net there might be some real borrowing by the government but a tiny fraction of what is being touted in these headlines.
What a shame that no journalists seem to be economically literate or wanting to give the full picture rather than just spout off massive numbers.
Yes the standards of economic journalism in this country are pretty bad, journalism in general in fact. And then we let these ignorant hacks run the country (Johnson and Gove) and wonder why everything goes to shit. Basically, most of what is written about the economy outside of the FT and BBC is rubbish. The BOE covering most or all of net issuance is a repeat of 2009. If they do the same again, the big build up of debt net of BOE purchases will happen in subsequent years. Government borrowing will almost certainly stay elevated for several years from here.
Indeed this is what I was saying from the start of the crisis.
The impact of this crisis is so vast that realistically the only way to cope is printing money this year. The Bank will print money to cover this year's debts but can't be expected to do that indefinitely so in the future
In future years the deficit will need to be brought under control just like it had to be from 2010 onwards but the way to do that is to ensure the taxpaying base of the economy survives as best as it can this year. Not fretting over every penny and pound borrowed this year.
Not at all.
There was no problem borrowing in 2007/08 for the financial crisis.
The problem was increasing borrowing from 2002 to 2007 and not wanting to address the eyewatering legacy of the deficit in 2009/10 onwards.
During a temporary systemic shock crisis do what you need to do. Before and afterwards though you need to be responsible.
For some reason socialists seem to think that the 2007/08 financial crisis absolved them of any reason to tackle the deficit before 2007 or that it shouldn't be tackled in 2010 onwards.
What level of borrowing do you think is ok in normal times? Presumably more than 2.6% of GDP (2019) but less than 2.9% (2007)? What criteria do you use to arrive at this Thompson Rule? (What role does the fact that net debt was 34% of GDP in 2007 and 80% in 2019 play in your calculations?)
Not sure where you're getting 2.6% from, the final pre-recession, pre-pandemic economic year had a deficit of 1.2% (2019) not 2.6%.
As a rule of thumb borrowing in normal times depends upon the economic cycle but we should aim for it to be less than the year before during period of growth with an aim to bring the deficit to zero and keep it around zero. The delta, the change in the deficit is what matters most.
Looking at the last 3 recessions we had in reverse order. A deficit of 1.2% of GDP following a decade of annual reductions in the deficit from a peak of over 10%. A deficit of 2.6% of GDP following five years of growth after the deficit had been a surplus. A budget surplus when the recession hit.
Spot the odd one out.
2.6% is the OBR's number for PSNB for FY19/20. Where do you get 1.2% from? That looks like the primary balance number (excluding debt payments). The primary deficit was 1.2% in 2019 and also 1.2% in 2007. Your thesis that borrowing was out of control in 2007 but responsible in 2019 is hard to sustain with reference to the data.
You said 2019 so why are you using 2020 data, the recession had already begun in 2020? You can't use data from during the recession and claim it is before the recession.
The final full economic year before the recession hit was FY18/19.
I am using fiscal year data (April-March) because that is how it is conventionally published. Since the Covid crisis effectively started, in terms of its economic impact, in the last two weeks of March, it had virtually no effect on the public finances in FY19/20. You could say the same for 2008 - although in quarterly terms the recession started in Q2, GDP growth was already negative in March. So your clean comparison would be 2006/07 (2.6%) Vs 2018/19 (1.9%). In terms of primary deficit it's 1% Vs 0.4%. It's hard to make the case that just 0.6 or 0.7% of GDP is the difference between sound economic management and catastrophic fiscal profligacy.
Yes use economic year data but you need to use the final economic year before the recession began which is measured using quarterly growth figures.
In 2008 it was Q3 which was the first negative growth figure so that rules out 2008/09 and sets 2007/08 as the baseline. In 2020 it was Q1 which was the first negative growth figure so that rules out 2019/20 and sets 2018/19 as the baseline.
Using 2019/20 when the recession had already began in 2019/20 is like using 2008/09.
As for a 0.7% difference is it not hard whatsoever to make the case the that 0.7% is a tremendous difference between sound economic management and catastrophic fiscal profligacy. Because we also need to consider where that came from in the years before then.
As I said it is the year on year change in the deficit that matters more than what the deficit is for judging soundness. Brown managed to spend five years pissing away a budget surplus and transform it into a higher deficit than the Tories had going into the next recession coming off a 10% deficit they had inherited.
The deficit was lower as a % of GDP in both 06/07 and 07/08 than in 96/97, so Brown also reduced the deficit relative to the one he inherited from the Tories. He also reduced debt as a % of GDP over the same period.
1996/97 was a different stage of the economic cycle than 2007/08 too.
Nobody to my knowledge objects to how Brown dealt with the deficit between 1996/97 to 2001/02. He ran sound finances then and I've never seen any Tories say otherwise. Of course he was largely following Ken Clarke's plans then but that is to his credit that he did.
It is from 2002 onwards that Brown blew the deficit wide open prior to the recession.
Following Clarke's financial settlement was a mistake, it was too tight (Clarke himself said he wouldn't have followed it). As a result, public services were grossly under-resourced and public debt fell to a level that was unsustainably low given the financial system's demand for safe assets. I would agree that they over-corrected by increasing spending too aggressively subsequently, although I think they recognised that, which is why the deficit was on a declining path between 2004/05 and 2006/07. But running a deficit of 2-3% of GDP is perfectly reasonable when the economy is growing broadly in line with potential as the UK economy was during that period. Look, I understand you have a narrative about Labour profligacy that you want to sell, and you evidently believe it yourself. I just don't think it is one that most economists would recognise as a fair description of events.
No running a deficit of 2-3% of GDP without trying to reduce it while the economy is growing is a catastrophically stupid mistake that led to economic catastrophe in the public finances. It is not "perfectly reasonable".
You are entitled to your opinion of course, but you should be aware that it is not the mainstream view among people who make their living looking at these things.
Like I said, blaming Russia is giving idiot Brits too much credit.
A decent proportion of 52% of the population are idiots. To this day there is no reason to have voted for Brexit, end of story.
If you cannot understand why anyone would vote for something that gets more than a low single figure percentage of the vote then I think that says more about you than them. You may not agree with their reasons or have a different set of priorities to them, but understanding why they did it is the first step to convincing them to change their minds next time.
No I can't understand why they voted for it to this day. There was no logical reason.
Once it was voted for, it should have been far more readily accepted by the remain side than it was though - particularly after the 2017 election. Have to say I was appalled by just how many sore losers there were on my side - the British public gave their verdict on the shenanigans in 2019.
This I do agree with and I was an advocate for EEA and I would have been very happy with that.
The Remain side should have given up and went for EEA from day one, when there was political will to deliver it.
Labour should have got behind it.
The ERG prevented this from being a runner, and they prevented any Tory leader from proposing it. In the last parliament it wouldn't have got through.
The ERG never had the numbers to stop May's deal on their own. Corbyn & the Labour remainers were hard of thinking and foresight on the issue of Brexit though, culminating in that ridiculous letter Benn forced on Johnson. It was a combination of too clever by half from the remainers and thick as mince from the Corbynites. Mana from heaven for the Tories in the 2019 election campaign.
Blaming Remainers for Hard Brexit is fairly absurd, I'm afraid, as first May and then Johnson worked concertedly to close down options from July 2016 onward. The general problem was that there were not sufficient numbers for any eventual outcome that included both EEA and free movement, not that there were not enough Labour members supporting May's deal. We still don't know what Boris's eventual deal may be, but May's deal may not have been much less economically damaging in any case.
Blaming Remainers for rejecting a soft Brexit is entirely appropriate. They had the indicative votes and rejected them all.
The ERG don't deserve "blame" for a hard Brexit since blame goes to those who cause what they don't want. The ERG get credit for rejecting a soft Brexit and getting a harder one, they got what they wanted.
It is those who lost despite having the numbers to vote through a soft Brexit to ask themselves how they screwed up and gifted the ERG a harder one.
@Philip_Thompson when have you ever tried to understand why I supported (did not vote - although like I said it was tactical) Corbyn or Labour in 2019? You never have, you're gold-plated hypocrite. And it's very funny to watch.
You supported Labour because you are a left wing socialist who opposes the Tories and thought that Labour would spend more and have policies more in fitting with what you believe in. You'd rather have had John McDonnell than a Tory as Chancellor.
Am I wrong?
Not a socialist, I'm a social democrat. So that's wrong.
Distinction without a difference. You say social democrat I say socialist. Again like Mr Dancer people can use the language they like when they speak.
So apart from quibbling over a single word was the gist of what I said right or wrong?
A social democrat is not the same as a socialist. It is astonishing you don't know that.
You weren't far off the mark with the rest of what you said but that's not you trying to understand why I voted in that way. Trying to understand would be asking why I don't like the Tory Party for instance, or why I think Boris Johnson is a bad PM. These kinds of questions.
@Philip_Thompson when have you ever tried to understand why I supported (did not vote - although like I said it was tactical) Corbyn or Labour in 2019? You never have, you're gold-plated hypocrite. And it's very funny to watch.
You supported Labour because you are a left wing socialist who opposes the Tories and thought that Labour would spend more and have policies more in fitting with what you believe in. You'd rather have had John McDonnell than a Tory as Chancellor.
Am I wrong?
Not a socialist, I'm a social democrat. So that's wrong.
Distinction without a difference. You say social democrat I say socialist. Again like Mr Dancer people can use the language they like when they speak.
So apart from quibbling over a single word was the gist of what I said right or wrong?
A social democrat is not the same as a socialist. It is astonishing you don't know that.
You weren't far off the mark with the rest of what you said but that's not you trying to understand why I voted in that way. Trying to understand would be asking why I don't like the Tory Party for instance, or why I think Boris Johnson is a bad PM. These kinds of questions.
A social democrat is what socialists like yourself call yourselves because the name socialist is perceived as tarnished.
Then doesn't that mean we are in net LESS real debt than we were before this hit?
The £310bn is the total that was announced in June, it won't be completed until year-end, and it includes £10-20bn of corporate bonds do gilt purchases will be a bit under £300bn. Total borrowing in FY20-21 will likely be close to £400bn so it's likely that net issuance net of BOE purchases will still be positive - although the BOE may buy more in Q1 2021 (the last quarter of the fiscal year). However, for the year to date the BOE purchases have been greater than net isduance, as they were front-loaded with aggressive buying at the start.
Thanks. So net there might be some real borrowing by the government but a tiny fraction of what is being touted in these headlines.
What a shame that no journalists seem to be economically literate or wanting to give the full picture rather than just spout off massive numbers.
Yes the standards of economic journalism in this country are pretty bad, journalism in general in fact. And then we let these ignorant hacks run the country (Johnson and Gove) and wonder why everything goes to shit. Basically, most of what is written about the economy outside of the FT and BBC is rubbish. The BOE covering most or all of net issuance is a repeat of 2009. If they do the same again, the big build up of debt net of BOE purchases will happen in subsequent years. Government borrowing will almost certainly stay elevated for several years from here.
Indeed this is what I was saying from the start of the crisis.
The impact of this crisis is so vast that realistically the only way to cope is printing money this year. The Bank will print money to cover this year's debts but can't be expected to do that indefinitely so in the future
In future years the deficit will need to be brought under control just like it had to be from 2010 onwards but the way to do that is to ensure the taxpaying base of the economy survives as best as it can this year. Not fretting over every penny and pound borrowed this year.
Not at all.
There was no problem borrowing in 2007/08 for the financial crisis.
The problem was increasing borrowing from 2002 to 2007 and not wanting to address the eyewatering legacy of the deficit in 2009/10 onwards.
During a temporary systemic shock crisis do what you need to do. Before and afterwards though you need to be responsible.
For some reason socialists seem to think that the 2007/08 financial crisis absolved them of any reason to tackle the deficit before 2007 or that it shouldn't be tackled in 2010 onwards.
What level of borrowing do you think is ok in normal times? Presumably more than 2.6% of GDP (2019) but less than 2.9% (2007)? What criteria do you use to arrive at this Thompson Rule? (What role does the fact that net debt was 34% of GDP in 2007 and 80% in 2019 play in your calculations?)
Not sure where you're getting 2.6% from, the final pre-recession, pre-pandemic economic year had a deficit of 1.2% (2019) not 2.6%.
As a rule of thumb borrowing in normal times depends upon the economic cycle but we should aim for it to be less than the year before during period of growth with an aim to bring the deficit to zero and keep it around zero. The delta, the change in the deficit is what matters most.
Looking at the last 3 recessions we had in reverse order. A deficit of 1.2% of GDP following a decade of annual reductions in the deficit from a peak of over 10%. A deficit of 2.6% of GDP following five years of growth after the deficit had been a surplus. A budget surplus when the recession hit.
Spot the odd one out.
2.6% is the OBR's number for PSNB for FY19/20. Where do you get 1.2% from? That looks like the primary balance number (excluding debt payments). The primary deficit was 1.2% in 2019 and also 1.2% in 2007. Your thesis that borrowing was out of control in 2007 but responsible in 2019 is hard to sustain with reference to the data.
You said 2019 so why are you using 2020 data, the recession had already begun in 2020? You can't use data from during the recession and claim it is before the recession.
The final full economic year before the recession hit was FY18/19.
I am using fiscal year data (April-March) because that is how it is conventionally published. Since the Covid crisis effectively started, in terms of its economic impact, in the last two weeks of March, it had virtually no effect on the public finances in FY19/20. You could say the same for 2008 - although in quarterly terms the recession started in Q2, GDP growth was already negative in March. So your clean comparison would be 2006/07 (2.6%) Vs 2018/19 (1.9%). In terms of primary deficit it's 1% Vs 0.4%. It's hard to make the case that just 0.6 or 0.7% of GDP is the difference between sound economic management and catastrophic fiscal profligacy.
Yes use economic year data but you need to use the final economic year before the recession began which is measured using quarterly growth figures.
In 2008 it was Q3 which was the first negative growth figure so that rules out 2008/09 and sets 2007/08 as the baseline. In 2020 it was Q1 which was the first negative growth figure so that rules out 2019/20 and sets 2018/19 as the baseline.
Using 2019/20 when the recession had already began in 2019/20 is like using 2008/09.
As for a 0.7% difference is it not hard whatsoever to make the case the that 0.7% is a tremendous difference between sound economic management and catastrophic fiscal profligacy. Because we also need to consider where that came from in the years before then.
As I said it is the year on year change in the deficit that matters more than what the deficit is for judging soundness. Brown managed to spend five years pissing away a budget surplus and transform it into a higher deficit than the Tories had going into the next recession coming off a 10% deficit they had inherited.
The deficit was lower as a % of GDP in both 06/07 and 07/08 than in 96/97, so Brown also reduced the deficit relative to the one he inherited from the Tories. He also reduced debt as a % of GDP over the same period.
1996/97 was a different stage of the economic cycle than 2007/08 too.
Nobody to my knowledge objects to how Brown dealt with the deficit between 1996/97 to 2001/02. He ran sound finances then and I've never seen any Tories say otherwise. Of course he was largely following Ken Clarke's plans then but that is to his credit that he did.
It is from 2002 onwards that Brown blew the deficit wide open prior to the recession.
Following Clarke's financial settlement was a mistake, it was too tight (Clarke himself said he wouldn't have followed it). As a result, public services were grossly under-resourced and public debt fell to a level that was unsustainably low given the financial system's demand for safe assets. I would agree that they over-corrected by increasing spending too aggressively subsequently, although I think they recognised that, which is why the deficit was on a declining path between 2004/05 and 2006/07. But running a deficit of 2-3% of GDP is perfectly reasonable when the economy is growing broadly in line with potential as the UK economy was during that period. Look, I understand you have a narrative about Labour profligacy that you want to sell, and you evidently believe it yourself. I just don't think it is one that most economists would recognise as a fair description of events.
No running a deficit of 2-3% of GDP without trying to reduce it while the economy is growing is a catastrophically stupid mistake that led to economic catastrophe in the public finances. It is not "perfectly reasonable".
You are entitled to your opinion of course, but you should be aware that it is not the mainstream view among people who make their living looking at these things.
Tbh, mainstream economists are rubbish at their jobs. Their opinions are basically worthless.
It is rather sad that there are people willing to believe conspiracy theories that somehow a foreign state rigged our elections rather than simply accept not enough people agreed with them.
I've no doubt that the Russians, and others, interfere in our elections, and more generally try to sow division by promoting extremist messages. We need to guard against such actions. Assessing how effective these operations are is very difficult, it could range from little more than noise to changing the outcome. I doubt we will ever be able to say with certainty how effective such actions are, but it would be unwise to think they don't work, which is why we need to be rigourous in combatting them.
My changing from Remain to Leave was (at least) 99% verifiably down to David Cameron's actions and (at most) 1% down to Russian interference.
A young blackbird is stranded on the ground outside my kitchen door. It's desperate father keeps trying to feed it a grub and constantly squawks at the poor thing.
Any suggestions?
They are very vulnerable at that stage. Not much you can do apart from keep domestic pets away from them.
@Philip_Thompson when have you ever tried to understand why I supported (did not vote - although like I said it was tactical) Corbyn or Labour in 2019? You never have, you're gold-plated hypocrite. And it's very funny to watch.
You supported Labour because you are a left wing socialist who opposes the Tories and thought that Labour would spend more and have policies more in fitting with what you believe in. You'd rather have had John McDonnell than a Tory as Chancellor.
Am I wrong?
Not a socialist, I'm a social democrat. So that's wrong.
Distinction without a difference. You say social democrat I say socialist. Again like Mr Dancer people can use the language they like when they speak.
So apart from quibbling over a single word was the gist of what I said right or wrong?
A social democrat is not the same as a socialist. It is astonishing you don't know that.
You weren't far off the mark with the rest of what you said but that's not you trying to understand why I voted in that way. Trying to understand would be asking why I don't like the Tory Party for instance, or why I think Boris Johnson is a bad PM. These kinds of questions.
A social democrat is what socialists like yourself call yourselves because the name socialist is perceived as tarnished.
Utter bollocks. Do fuck off with your shite Philip you annoying prick
Then doesn't that mean we are in net LESS real debt than we were before this hit?
The £310bn is the total that was announced in June, it won't be completed until year-end, and it includes £10-20bn of corporate bonds do gilt purchases will be a bit under £300bn. Total borrowing in FY20-21 will likely be close to £400bn so it's likely that net issuance net of BOE purchases will still be positive - although the BOE may buy more in Q1 2021 (the last quarter of the fiscal year). However, for the year to date the BOE purchases have been greater than net isduance, as they were front-loaded with aggressive buying at the start.
Thanks. So net there might be some real borrowing by the government but a tiny fraction of what is being touted in these headlines.
What a shame that no journalists seem to be economically literate or wanting to give the full picture rather than just spout off massive numbers.
Yes the standards of economic journalism in this country are pretty bad, journalism in general in fact. And then we let these ignorant hacks run the country (Johnson and Gove) and wonder why everything goes to shit. Basically, most of what is written about the economy outside of the FT and BBC is rubbish. The BOE covering most or all of net issuance is a repeat of 2009. If they do the same again, the big build up of debt net of BOE purchases will happen in subsequent years. Government borrowing will almost certainly stay elevated for several years from here.
Indeed this is what I was saying from the start of the crisis.
The impact of this crisis is so vast that realistically the only way to cope is printing money this year. The Bank will print money to cover this year's debts but can't be expected to do that indefinitely so in the future
In future years the deficit will need to be brought under control just like it had to be from 2010 onwards but the way to do that is to ensure the taxpaying base of the economy survives as best as it can this year. Not fretting over every penny and pound borrowed this year.
Not at all.
There was no problem borrowing in 2007/08 for the financial crisis.
The problem was increasing borrowing from 2002 to 2007 and not wanting to address the eyewatering legacy of the deficit in 2009/10 onwards.
During a temporary systemic shock crisis do what you need to do. Before and afterwards though you need to be responsible.
For some reason socialists seem to think that the 2007/08 financial crisis absolved them of any reason to tackle the deficit before 2007 or that it shouldn't be tackled in 2010 onwards.
What level of borrowing do you think is ok in normal times? Presumably more than 2.6% of GDP (2019) but less than 2.9% (2007)? What criteria do you use to arrive at this Thompson Rule? (What role does the fact that net debt was 34% of GDP in 2007 and 80% in 2019 play in your calculations?)
Not sure where you're getting 2.6% from, the final pre-recession, pre-pandemic economic year had a deficit of 1.2% (2019) not 2.6%.
As a rule of thumb borrowing in normal times depends upon the economic cycle but we should aim for it to be less than the year before during period of growth with an aim to bring the deficit to zero and keep it around zero. The delta, the change in the deficit is what matters most.
Looking at the last 3 recessions we had in reverse order. A deficit of 1.2% of GDP following a decade of annual reductions in the deficit from a peak of over 10%. A deficit of 2.6% of GDP following five years of growth after the deficit had been a surplus. A budget surplus when the recession hit.
Spot the odd one out.
2.6% is the OBR's number for PSNB for FY19/20. Where do you get 1.2% from? That looks like the primary balance number (excluding debt payments). The primary deficit was 1.2% in 2019 and also 1.2% in 2007. Your thesis that borrowing was out of control in 2007 but responsible in 2019 is hard to sustain with reference to the data.
You said 2019 so why are you using 2020 data, the recession had already begun in 2020? You can't use data from during the recession and claim it is before the recession.
The final full economic year before the recession hit was FY18/19.
I am using fiscal year data (April-March) because that is how it is conventionally published. Since the Covid crisis effectively started, in terms of its economic impact, in the last two weeks of March, it had virtually no effect on the public finances in FY19/20. You could say the same for 2008 - although in quarterly terms the recession started in Q2, GDP growth was already negative in March. So your clean comparison would be 2006/07 (2.6%) Vs 2018/19 (1.9%). In terms of primary deficit it's 1% Vs 0.4%. It's hard to make the case that just 0.6 or 0.7% of GDP is the difference between sound economic management and catastrophic fiscal profligacy.
Yes use economic year data but you need to use the final economic year before the recession began which is measured using quarterly growth figures.
In 2008 it was Q3 which was the first negative growth figure so that rules out 2008/09 and sets 2007/08 as the baseline. In 2020 it was Q1 which was the first negative growth figure so that rules out 2019/20 and sets 2018/19 as the baseline.
Using 2019/20 when the recession had already began in 2019/20 is like using 2008/09.
As for a 0.7% difference is it not hard whatsoever to make the case the that 0.7% is a tremendous difference between sound economic management and catastrophic fiscal profligacy. Because we also need to consider where that came from in the years before then.
As I said it is the year on year change in the deficit that matters more than what the deficit is for judging soundness. Brown managed to spend five years pissing away a budget surplus and transform it into a higher deficit than the Tories had going into the next recession coming off a 10% deficit they had inherited.
The deficit was lower as a % of GDP in both 06/07 and 07/08 than in 96/97, so Brown also reduced the deficit relative to the one he inherited from the Tories. He also reduced debt as a % of GDP over the same period.
1996/97 was a different stage of the economic cycle than 2007/08 too.
Nobody to my knowledge objects to how Brown dealt with the deficit between 1996/97 to 2001/02. He ran sound finances then and I've never seen any Tories say otherwise. Of course he was largely following Ken Clarke's plans then but that is to his credit that he did.
It is from 2002 onwards that Brown blew the deficit wide open prior to the recession.
Following Clarke's financial settlement was a mistake, it was too tight (Clarke himself said he wouldn't have followed it). As a result, public services were grossly under-resourced and public debt fell to a level that was unsustainably low given the financial system's demand for safe assets. I would agree that they over-corrected by increasing spending too aggressively subsequently, although I think they recognised that, which is why the deficit was on a declining path between 2004/05 and 2006/07. But running a deficit of 2-3% of GDP is perfectly reasonable when the economy is growing broadly in line with potential as the UK economy was during that period. Look, I understand you have a narrative about Labour profligacy that you want to sell, and you evidently believe it yourself. I just don't think it is one that most economists would recognise as a fair description of events.
No running a deficit of 2-3% of GDP without trying to reduce it while the economy is growing is a catastrophically stupid mistake that led to economic catastrophe in the public finances. It is not "perfectly reasonable".
You are entitled to your opinion of course, but you should be aware that it is not the mainstream view among people who make their living looking at these things.
Are you including Gordon Brown in that list? After all he said that “over the economic cycle we will borrow only to invest” (his Golden Rule). Just about doing that at the peak does not bode well when the economy turns down...
Then doesn't that mean we are in net LESS real debt than we were before this hit?
The £310bn is the total that was announced in June, it won't be completed until year-end, and it includes £10-20bn of corporate bonds do gilt purchases will be a bit under £300bn. Total borrowing in FY20-21 will likely be close to £400bn so it's likely that net issuance net of BOE purchases will still be positive - although the BOE may buy more in Q1 2021 (the last quarter of the fiscal year). However, for the year to date the BOE purchases have been greater than net isduance, as they were front-loaded with aggressive buying at the start.
Thanks. So net there might be some real borrowing by the government but a tiny fraction of what is being touted in these headlines.
What a shame that no journalists seem to be economically literate or wanting to give the full picture rather than just spout off massive numbers.
Yes the standards of economic journalism in this country are pretty bad, journalism in general in fact. And then we let these ignorant hacks run the country (Johnson and Gove) and wonder why everything goes to shit. Basically, most of what is written about the economy outside of the FT and BBC is rubbish. The BOE covering most or all of net issuance is a repeat of 2009. If they do the same again, the big build up of debt net of BOE purchases will happen in subsequent years. Government borrowing will almost certainly stay elevated for several years from here.
Indeed this is what I was saying from the start of the crisis.
The impact of this crisis is so vast that realistically the only way to cope is printing money this year. The Bank will print money to cover this year's debts but can't be expected to do that indefinitely so in the future
In future years the deficit will need to be brought under control just like it had to be from 2010 onwards but the way to do that is to ensure the taxpaying base of the economy survives as best as it can this year. Not fretting over every penny and pound borrowed this year.
Not at all.
There was no problem borrowing in 2007/08 for the financial crisis.
The problem was increasing borrowing from 2002 to 2007 and not wanting to address the eyewatering legacy of the deficit in 2009/10 onwards.
During a temporary systemic shock crisis do what you need to do. Before and afterwards though you need to be responsible.
For some reason socialists seem to think that the 2007/08 financial crisis absolved them of any reason to tackle the deficit before 2007 or that it shouldn't be tackled in 2010 onwards.
What level of borrowing do you think is ok in normal times? Presumably more than 2.6% of GDP (2019) but less than 2.9% (2007)? What criteria do you use to arrive at this Thompson Rule? (What role does the fact that net debt was 34% of GDP in 2007 and 80% in 2019 play in your calculations?)
Not sure where you're getting 2.6% from, the final pre-recession, pre-pandemic economic year had a deficit of 1.2% (2019) not 2.6%.
As a rule of thumb borrowing in normal times depends upon the economic cycle but we should aim for it to be less than the year before during period of growth with an aim to bring the deficit to zero and keep it around zero. The delta, the change in the deficit is what matters most.
Looking at the last 3 recessions we had in reverse order. A deficit of 1.2% of GDP following a decade of annual reductions in the deficit from a peak of over 10%. A deficit of 2.6% of GDP following five years of growth after the deficit had been a surplus. A budget surplus when the recession hit.
Spot the odd one out.
2.6% is the OBR's number for PSNB for FY19/20. Where do you get 1.2% from? That looks like the primary balance number (excluding debt payments). The primary deficit was 1.2% in 2019 and also 1.2% in 2007. Your thesis that borrowing was out of control in 2007 but responsible in 2019 is hard to sustain with reference to the data.
You said 2019 so why are you using 2020 data, the recession had already begun in 2020? You can't use data from during the recession and claim it is before the recession.
The final full economic year before the recession hit was FY18/19.
I am using fiscal year data (April-March) because that is how it is conventionally published. Since the Covid crisis effectively started, in terms of its economic impact, in the last two weeks of March, it had virtually no effect on the public finances in FY19/20. You could say the same for 2008 - although in quarterly terms the recession started in Q2, GDP growth was already negative in March. So your clean comparison would be 2006/07 (2.6%) Vs 2018/19 (1.9%). In terms of primary deficit it's 1% Vs 0.4%. It's hard to make the case that just 0.6 or 0.7% of GDP is the difference between sound economic management and catastrophic fiscal profligacy.
Yes use economic year data but you need to use the final economic year before the recession began which is measured using quarterly growth figures.
In 2008 it was Q3 which was the first negative growth figure so that rules out 2008/09 and sets 2007/08 as the baseline. In 2020 it was Q1 which was the first negative growth figure so that rules out 2019/20 and sets 2018/19 as the baseline.
Using 2019/20 when the recession had already began in 2019/20 is like using 2008/09.
As for a 0.7% difference is it not hard whatsoever to make the case the that 0.7% is a tremendous difference between sound economic management and catastrophic fiscal profligacy. Because we also need to consider where that came from in the years before then.
As I said it is the year on year change in the deficit that matters more than what the deficit is for judging soundness. Brown managed to spend five years pissing away a budget surplus and transform it into a higher deficit than the Tories had going into the next recession coming off a 10% deficit they had inherited.
The deficit was lower as a % of GDP in both 06/07 and 07/08 than in 96/97, so Brown also reduced the deficit relative to the one he inherited from the Tories. He also reduced debt as a % of GDP over the same period.
1996/97 was a different stage of the economic cycle than 2007/08 too.
Nobody to my knowledge objects to how Brown dealt with the deficit between 1996/97 to 2001/02. He ran sound finances then and I've never seen any Tories say otherwise. Of course he was largely following Ken Clarke's plans then but that is to his credit that he did.
It is from 2002 onwards that Brown blew the deficit wide open prior to the recession.
Following Clarke's financial settlement was a mistake, it was too tight (Clarke himself said he wouldn't have followed it). As a result, public services were grossly under-resourced and public debt fell to a level that was unsustainably low given the financial system's demand for safe assets. I would agree that they over-corrected by increasing spending too aggressively subsequently, although I think they recognised that, which is why the deficit was on a declining path between 2004/05 and 2006/07. But running a deficit of 2-3% of GDP is perfectly reasonable when the economy is growing broadly in line with potential as the UK economy was during that period. Look, I understand you have a narrative about Labour profligacy that you want to sell, and you evidently believe it yourself. I just don't think it is one that most economists would recognise as a fair description of events.
No running a deficit of 2-3% of GDP without trying to reduce it while the economy is growing is a catastrophically stupid mistake that led to economic catastrophe in the public finances. It is not "perfectly reasonable".
You are entitled to your opinion of course, but you should be aware that it is not the mainstream view among people who make their living looking at these things.
That is not true.
Can you name one government ever in our postwar history before Browns that took a surplus, turned it into a consistent budget deficit at 2-3% of GDP during a sustained period of growth prior to a recession? Even one ever that had made such what I consider a catastrophic mistake but you consider mainstream?
I promised I would stop responding to one user and I've gone down the rabbit hole again. More the fool me, I do wish you could block people on this site.
As an ardent pro-European, I'm not remotely interested in the Russian report; not all of us see a conspiracy. Remain lost the referendum, narrowly, because it fought an absolutely dreadful campaign that simply failed to convince enough people of the benefits of staying in. Not because of a few Russian bots, real or imagined. Remain deserved, I'm afraid, to lose, and any outside interference, successful or not, is neither here nor there. Pro-Europeans should not be distracted by looking backwards to the referendum - it won't change a thing.
As an ardent pro-European, I'm not remotely interested in the Russian report; not all of us see a conspiracy. Remain lost the referendum, narrowly, because it fought an absolutely dreadful campaign that simply failed to convince enough people of the benefits of staying in. Not because of a few Russian bots, real or imagined. Remain deserved, I'm afraid, to lose, and any outside interference, successful or not, is neither here nor there. Pro-Europeans should not be distracted by looking backwards to the referendum - it won't change a thing.
Absolutely spot on. The Remain campaign was utter shite.
I am not at all interested in seeing socialism enacted.
I think capitalism has proved itself to be the better ideology time and time again. I have no interest in something even akin to China or Russia.
However I think capitalism as it is tried in this country is bad and we should transition to a Nordic-style model. No further than that.
So no, I am not a socialist.
These are important semantics, though. Whether or not Sweden, for instance, and particularly between about 1945-2000, can be described as "socialist", is very important for both left and right, for all sorts of critical ideological reasons. Until around 5-10 years ago in the United States, as another example, the predominant equation of socialism with developing world or eastern-bloc communism was ideologically vital to the right.
I promised I would stop responding to one user and I've gone down the rabbit hole again. More the fool me, I do wish you could block people on this site.
Utter nonsense.
All views are welcome on this site but abusive language to poster/s is another matter.
I promised I would stop responding to one user and I've gone down the rabbit hole again. More the fool me, I do wish you could block people on this site.
Utter nonsense.
All views are welcome on this site but abusive language to poster/s is another matter.
It simply is not necessary
I can do what I like, I see you're back to pretending you're the site police.
Mr. Battery, if you check a long term graph the most significant shift in the last two decades was the financial crisis and 2008 recession. Before than it was around €1.45, and afterwards mostly €1.15ish, with a molehill around 2015/6.
Please can you call me Horse. Calling me Mr makes me very uncomfortable and makes me feel like you're putting me above yourself.
Morris Dancer calls everyone Mr and it is quite endearing
Nah I think it's fucking unnerving and I asked him to stop.
Just because you ask someone to stop doesn't mean they're obliged to do so. Unless it's something they're doing just to you.
But it is polite to call people by the names they want to be known as.
Equally it is polite not to react to someone by swearing at them.
I agree. The name people want to be known as is on this site their username. If someone chooses to call me Phil, Philip or Thompson I know it is because of the username I chose. Same for Horse or Mr Battery.
I am not at all interested in seeing socialism enacted.
I think capitalism has proved itself to be the better ideology time and time again. I have no interest in something even akin to China or Russia.
However I think capitalism as it is tried in this country is bad and we should transition to a Nordic-style model. No further than that.
So no, I am not a socialist.
These are important semantics, though. Whether or not Sweden, for instance, and particularly between about 1945-2000, can be described as "socialist", is very important for both left and right, for all sorts of important ideological reasons.
Sweden, nor Norway can be considered socialist. They have vibrant mixed market economies.
There's every chance a vaccine will create as many problems as it solves, unless its compulsory for everybody (which is impossible to monitor) its largely irrelevant.
Like every other virus ever this just has to run its course as it already is. I appreciate that gets the scaredy cats in a tizz but its reality.
What?
The GP surgery has a list and you get ticked off. That covers the huge majority of people.
Mr. Battery, if you check a long term graph the most significant shift in the last two decades was the financial crisis and 2008 recession. Before than it was around €1.45, and afterwards mostly €1.15ish, with a molehill around 2015/6.
Please can you call me Horse. Calling me Mr makes me very uncomfortable and makes me feel like you're putting me above yourself.
Morris Dancer calls everyone Mr and it is quite endearing
Nah I think it's fucking unnerving and I asked him to stop.
Just because you ask someone to stop doesn't mean they're obliged to do so. Unless it's something they're doing just to you.
But it is polite to call people by the names they want to be known as.
Equally it is polite not to react to someone by swearing at them.
I agree. The name people want to be known as is on this site their username. If someone chooses to call me Phil, Philip or Thompson I know it is because of the username I chose. Same for Horse or Mr Battery.
It's critical of the lack of public health capacity; preparation; proactive decision making; strategic thinking; public communication; lines of reponsibility...
Then doesn't that mean we are in net LESS real debt than we were before this hit?
The £310bn is the total that was announced in June, it won't be completed until year-end, and it includes £10-20bn of corporate bonds do gilt purchases will be a bit under £300bn. Total borrowing in FY20-21 will likely be close to £400bn so it's likely that net issuance net of BOE purchases will still be positive - although the BOE may buy more in Q1 2021 (the last quarter of the fiscal year). However, for the year to date the BOE purchases have been greater than net isduance, as they were front-loaded with aggressive buying at the start.
Thanks. So net there might be some real borrowing by the government but a tiny fraction of what is being touted in these headlines.
What a shame that no journalists seem to be economically literate or wanting to give the full picture rather than just spout off massive numbers.
Yes the standards of economic journalism in this country are pretty bad, journalism in general in fact. And then we let these ignorant hacks run the country (Johnson and Gove) and wonder why everything goes to shit. Basically, most of what is written about the economy outside of the FT and BBC is rubbish. The BOE covering most or all of net issuance is a repeat of 2009. If they do the same again, the big build up of debt net of BOE purchases will happen in subsequent years. Government borrowing will almost certainly stay elevated for several years from here.
Indeed this is what I was saying from the start of the crisis.
The impact of this crisis is so vast that realistically the only way to cope is printing money this year. The Bank will print money to cover this year's debts but can't be expected to do that indefinitely so in the future
In future years the deficit will need to be brought under control just like it had to be from 2010 onwards but the way to do that is to ensure the taxpaying base of the economy survives as best as it can this year. Not fretting over every penny and pound borrowed this year.
Not at all.
There was no problem borrowing in 2007/08 for the financial crisis.
The problem was increasing borrowing from 2002 to 2007 and not wanting to address the eyewatering legacy of the deficit in 2009/10 onwards.
During a temporary systemic shock crisis do what you need to do. Before and afterwards though you need to be responsible.
For some reason socialists seem to think that the 2007/08 financial crisis absolved them of any reason to tackle the deficit before 2007 or that it shouldn't be tackled in 2010 onwards.
What level of borrowing do you think is ok in normal times? Presumably more than 2.6% of GDP (2019) but less than 2.9% (2007)? What criteria do you use to arrive at this Thompson Rule? (What role does the fact that net debt was 34% of GDP in 2007 and 80% in 2019 play in your calculations?)
Not sure where you're getting 2.6% from, the final pre-recession, pre-pandemic economic year had a deficit of 1.2% (2019) not 2.6%.
As a rule of thumb borrowing in normal times depends upon the economic cycle but we should aim for it to be less than the year before during period of growth with an aim to bring the deficit to zero and keep it around zero. The delta, the change in the deficit is what matters most.
Looking at the last 3 recessions we had in reverse order. A deficit of 1.2% of GDP following a decade of annual reductions in the deficit from a peak of over 10%. A deficit of 2.6% of GDP following five years of growth after the deficit had been a surplus. A budget surplus when the recession hit.
Spot the odd one out.
2.6% is the OBR's number for PSNB for FY19/20. Where do you get 1.2% from? That looks like the primary balance number (excluding debt payments). The primary deficit was 1.2% in 2019 and also 1.2% in 2007. Your thesis that borrowing was out of control in 2007 but responsible in 2019 is hard to sustain with reference to the data.
You said 2019 so why are you using 2020 data, the recession had already begun in 2020? You can't use data from during the recession and claim it is before the recession.
The final full economic year before the recession hit was FY18/19.
I am using fiscal year data (April-March) because that is how it is conventionally published. Since the Covid crisis effectively started, in terms of its economic impact, in the last two weeks of March, it had virtually no effect on the public finances in FY19/20. You could say the same for 2008 - although in quarterly terms the recession started in Q2, GDP growth was already negative in March. So your clean comparison would be 2006/07 (2.6%) Vs 2018/19 (1.9%). In terms of primary deficit it's 1% Vs 0.4%. It's hard to make the case that just 0.6 or 0.7% of GDP is the difference between sound economic management and catastrophic fiscal profligacy.
Yes use economic year data but you need to use the final economic year before the recession began which is measured using quarterly growth figures.
In 2008 it was Q3 which was the first negative growth figure so that rules out 2008/09 and sets 2007/08 as the baseline. In 2020 it was Q1 which was the first negative growth figure so that rules out 2019/20 and sets 2018/19 as the baseline.
Using 2019/20 when the recession had already began in 2019/20 is like using 2008/09.
As for a 0.7% difference is it not hard whatsoever to make the case the that 0.7% is a tremendous difference between sound economic management and catastrophic fiscal profligacy. Because we also need to consider where that came from in the years before then.
As I said it is the year on year change in the deficit that matters more than what the deficit is for judging soundness. Brown managed to spend five years pissing away a budget surplus and transform it into a higher deficit than the Tories had going into the next recession coming off a 10% deficit they had inherited.
The deficit was lower as a % of GDP in both 06/07 and 07/08 than in 96/97, so Brown also reduced the deficit relative to the one he inherited from the Tories. He also reduced debt as a % of GDP over the same period.
1996/97 was a different stage of the economic cycle than 2007/08 too.
Nobody to my knowledge objects to how Brown dealt with the deficit between 1996/97 to 2001/02. He ran sound finances then and I've never seen any Tories say otherwise. Of course he was largely following Ken Clarke's plans then but that is to his credit that he did.
It is from 2002 onwards that Brown blew the deficit wide open prior to the recession.
Following Clarke's financial settlement was a mistake, it was too tight (Clarke himself said he wouldn't have followed it). As a result, public services were grossly under-resourced and public debt fell to a level that was unsustainably low given the financial system's demand for safe assets. I would agree that they over-corrected by increasing spending too aggressively subsequently, although I think they recognised that, which is why the deficit was on a declining path between 2004/05 and 2006/07. But running a deficit of 2-3% of GDP is perfectly reasonable when the economy is growing broadly in line with potential as the UK economy was during that period. Look, I understand you have a narrative about Labour profligacy that you want to sell, and you evidently believe it yourself. I just don't think it is one that most economists would recognise as a fair description of events.
No running a deficit of 2-3% of GDP without trying to reduce it while the economy is growing is a catastrophically stupid mistake that led to economic catastrophe in the public finances. It is not "perfectly reasonable".
What you should do - apply principles to conclude whether Brown took us into the GFC with the public finances far weaker than they should have been.
What you are doing - decide that Brown took us into the GFC with the public finances far weaker than they should have been and create principles to support this.
Then doesn't that mean we are in net LESS real debt than we were before this hit?
The £310bn is the total that was announced in June, it won't be completed until year-end, and it includes £10-20bn of corporate bonds do gilt purchases will be a bit under £300bn. Total borrowing in FY20-21 will likely be close to £400bn so it's likely that net issuance net of BOE purchases will still be positive - although the BOE may buy more in Q1 2021 (the last quarter of the fiscal year). However, for the year to date the BOE purchases have been greater than net isduance, as they were front-loaded with aggressive buying at the start.
Thanks. So net there might be some real borrowing by the government but a tiny fraction of what is being touted in these headlines.
What a shame that no journalists seem to be economically literate or wanting to give the full picture rather than just spout off massive numbers.
Yes the standards of economic journalism in this country are pretty bad, journalism in general in fact. And then we let these ignorant hacks run the country (Johnson and Gove) and wonder why everything goes to shit. Basically, most of what is written about the economy outside of the FT and BBC is rubbish. The BOE covering most or all of net issuance is a repeat of 2009. If they do the same again, the big build up of debt net of BOE purchases will happen in subsequent years. Government borrowing will almost certainly stay elevated for several years from here.
Indeed this is what I was saying from the start of the crisis.
The impact of this crisis is so vast that realistically the only way to cope is printing money this year. The Bank will print money to cover this year's debts but can't be expected to do that indefinitely so in the future
In future years the deficit will need to be brought under control just like it had to be from 2010 onwards but the way to do that is to ensure the taxpaying base of the economy survives as best as it can this year. Not fretting over every penny and pound borrowed this year.
Not at all.
There was no problem borrowing in 2007/08 for the financial crisis.
The problem was increasing borrowing from 2002 to 2007 and not wanting to address the eyewatering legacy of the deficit in 2009/10 onwards.
During a temporary systemic shock crisis do what you need to do. Before and afterwards though you need to be responsible.
For some reason socialists seem to think that the 2007/08 financial crisis absolved them of any reason to tackle the deficit before 2007 or that it shouldn't be tackled in 2010 onwards.
What level of borrowing do you think is ok in normal times? Presumably more than 2.6% of GDP (2019) but less than 2.9% (2007)? What criteria do you use to arrive at this Thompson Rule? (What role does the fact that net debt was 34% of GDP in 2007 and 80% in 2019 play in your calculations?)
Not sure where you're getting 2.6% from, the final pre-recession, pre-pandemic economic year had a deficit of 1.2% (2019) not 2.6%.
As a rule of thumb borrowing in normal times depends upon the economic cycle but we should aim for it to be less than the year before during period of growth with an aim to bring the deficit to zero and keep it around zero. The delta, the change in the deficit is what matters most.
Looking at the last 3 recessions we had in reverse order. A deficit of 1.2% of GDP following a decade of annual reductions in the deficit from a peak of over 10%. A deficit of 2.6% of GDP following five years of growth after the deficit had been a surplus. A budget surplus when the recession hit.
Spot the odd one out.
2.6% is the OBR's number for PSNB for FY19/20. Where do you get 1.2% from? That looks like the primary balance number (excluding debt payments). The primary deficit was 1.2% in 2019 and also 1.2% in 2007. Your thesis that borrowing was out of control in 2007 but responsible in 2019 is hard to sustain with reference to the data.
You said 2019 so why are you using 2020 data, the recession had already begun in 2020? You can't use data from during the recession and claim it is before the recession.
The final full economic year before the recession hit was FY18/19.
I am using fiscal year data (April-March) because that is how it is conventionally published. Since the Covid crisis effectively started, in terms of its economic impact, in the last two weeks of March, it had virtually no effect on the public finances in FY19/20. You could say the same for 2008 - although in quarterly terms the recession started in Q2, GDP growth was already negative in March. So your clean comparison would be 2006/07 (2.6%) Vs 2018/19 (1.9%). In terms of primary deficit it's 1% Vs 0.4%. It's hard to make the case that just 0.6 or 0.7% of GDP is the difference between sound economic management and catastrophic fiscal profligacy.
Yes use economic year data but you need to use the final economic year before the recession began which is measured using quarterly growth figures.
In 2008 it was Q3 which was the first negative growth figure so that rules out 2008/09 and sets 2007/08 as the baseline. In 2020 it was Q1 which was the first negative growth figure so that rules out 2019/20 and sets 2018/19 as the baseline.
Using 2019/20 when the recession had already began in 2019/20 is like using 2008/09.
As for a 0.7% difference is it not hard whatsoever to make the case the that 0.7% is a tremendous difference between sound economic management and catastrophic fiscal profligacy. Because we also need to consider where that came from in the years before then.
As I said it is the year on year change in the deficit that matters more than what the deficit is for judging soundness. Brown managed to spend five years pissing away a budget surplus and transform it into a higher deficit than the Tories had going into the next recession coming off a 10% deficit they had inherited.
The deficit was lower as a % of GDP in both 06/07 and 07/08 than in 96/97, so Brown also reduced the deficit relative to the one he inherited from the Tories. He also reduced debt as a % of GDP over the same period.
1996/97 was a different stage of the economic cycle than 2007/08 too.
Nobody to my knowledge objects to how Brown dealt with the deficit between 1996/97 to 2001/02. He ran sound finances then and I've never seen any Tories say otherwise. Of course he was largely following Ken Clarke's plans then but that is to his credit that he did.
It is from 2002 onwards that Brown blew the deficit wide open prior to the recession.
Following Clarke's financial settlement was a mistake, it was too tight (Clarke himself said he wouldn't have followed it). As a result, public services were grossly under-resourced and public debt fell to a level that was unsustainably low given the financial system's demand for safe assets. I would agree that they over-corrected by increasing spending too aggressively subsequently, although I think they recognised that, which is why the deficit was on a declining path between 2004/05 and 2006/07. But running a deficit of 2-3% of GDP is perfectly reasonable when the economy is growing broadly in line with potential as the UK economy was during that period. Look, I understand you have a narrative about Labour profligacy that you want to sell, and you evidently believe it yourself. I just don't think it is one that most economists would recognise as a fair description of events.
No running a deficit of 2-3% of GDP without trying to reduce it while the economy is growing is a catastrophically stupid mistake that led to economic catastrophe in the public finances. It is not "perfectly reasonable".
What you should do - apply principles to conclude whether Brown took us into the GFC with the public finances far weaker than they should have been.
What you are doing - decide that Brown took us into the GFC with the public finances far weaker than they should have been and create principles to support this.
Mr. Battery, if you check a long term graph the most significant shift in the last two decades was the financial crisis and 2008 recession. Before than it was around €1.45, and afterwards mostly €1.15ish, with a molehill around 2015/6.
Please can you call me Horse. Calling me Mr makes me very uncomfortable and makes me feel like you're putting me above yourself.
Morris Dancer calls everyone Mr and it is quite endearing
Nah I think it's fucking unnerving and I asked him to stop.
You have a lovely way with words
You can fuck off too if you like, how's that?
I suspect the people you are arguing against will gleefully take it they have won the argument as you have resorted to such crude responses. And those who might be inclined to support you just slink away....
I am no stranger to using bad language on here, but only in the abstract and very rarely is it aimed at a specific poster. So tone it down, eh?
I am not at all interested in seeing socialism enacted.
I think capitalism has proved itself to be the better ideology time and time again. I have no interest in something even akin to China or Russia.
However I think capitalism as it is tried in this country is bad and we should transition to a Nordic-style model. No further than that.
So no, I am not a socialist.
These are important semantics, though. Whether or not Sweden, for instance, and particularly between about 1945-2000, can be described as "socialist", is very important for both left and right, for all sorts of important ideological reasons.
Sweden, nor Norway can be considered socialist. They have vibrant mixed market economies.
However, that's the european social democratic tradition, which many have considered socialist in its overall aims since the 1920s. These aren't easy questions historically or ideologically.
As the Tories are no longer either Conservative or Unionist we need a new name for them. English Populists? English Patriots? Something with English as the first word and something hypocritical as the last...
@Philip_Thompson when have you ever tried to understand why I supported (did not vote - although like I said it was tactical) Corbyn or Labour in 2019? You never have, you're gold-plated hypocrite. And it's very funny to watch.
You supported Labour because you are a left wing socialist who opposes the Tories and thought that Labour would spend more and have policies more in fitting with what you believe in. You'd rather have had John McDonnell than a Tory as Chancellor.
Am I wrong?
Not a socialist, I'm a social democrat. So that's wrong.
Distinction without a difference. You say social democrat I say socialist. Again like Mr Dancer people can use the language they like when they speak.
So apart from quibbling over a single word was the gist of what I said right or wrong?
A social democrat is not the same as a socialist. It is astonishing you don't know that.
You weren't far off the mark with the rest of what you said but that's not you trying to understand why I voted in that way. Trying to understand would be asking why I don't like the Tory Party for instance, or why I think Boris Johnson is a bad PM. These kinds of questions.
A social democrat is what socialists like yourself call yourselves because the name socialist is perceived as tarnished.
I am not at all interested in seeing socialism enacted.
I think capitalism has proved itself to be the better ideology time and time again. I have no interest in something even akin to China or Russia.
However I think capitalism as it is tried in this country is bad and we should transition to a Nordic-style model. No further than that.
So no, I am not a socialist.
These are important semantics, though. Whether or not Sweden, for instance, and particularly between about 1945-2000, can be described as "socialist", is very important for both left and right, for all sorts of important ideological reasons.
Sweden, nor Norway can be considered socialist. They have vibrant mixed market economies.
However, that's the european social democratic tradition, which many have considered socialist in aims since the 1920s. These aren't easy questions historically.
I don't think anyone is seriously suggesting the endgame of Norway is to become a full-on socialist country.
I think it's reasonable to suggest that early on that the aims of social democracy were as a "bridge" to socialism but I think over the last thirty to forty years, it has become a specific and final ideology in its own right. This is why I reject the claim that socialism and social democracy are the same.
I have absolutely no interest in socialism being enacted. Social democracy is my end state.
I've only skimmed the Russia Report, but so far it looks to be incredibly dull, contains nothing show-stopping that I've spotted, and would only surprise people who have been in a coma since the year 2000.
*edit*
These are the "Expert external witnesses". Professor Anne Applebaum – Institute of Global Affairs Mr William Browder – Head of the Global Magnitsky Justice Movement Mr Christopher Donnelly CMG TD – Head of the Institute for Statecraft Mr Edward Lucas – Writer and consultant specialising in European and transatlantic security Mr Christopher Steele – Director, Orbis Business Intelligence Ltd
You are probably better off reading the books by Applebaum, Browder, and Lucas than reading this report which appears to be devoid of anything remotely juicy.
Then doesn't that mean we are in net LESS real debt than we were before this hit?
The £310bn is the total that was announced in June, it won't be completed until year-end, and it includes £10-20bn of corporate bonds do gilt purchases will be a bit under £300bn. Total borrowing in FY20-21 will likely be close to £400bn so it's likely that net issuance net of BOE purchases will still be positive - although the BOE may buy more in Q1 2021 (the last quarter of the fiscal year). However, for the year to date the BOE purchases have been greater than net isduance, as they were front-loaded with aggressive buying at the start.
Thanks. So net there might be some real borrowing by the government but a tiny fraction of what is being touted in these headlines.
What a shame that no journalists seem to be economically literate or wanting to give the full picture rather than just spout off massive numbers.
Yes the standards of economic journalism in this country are pretty bad, journalism in general in fact. And then we let these ignorant hacks run the country (Johnson and Gove) and wonder why everything goes to shit. Basically, most of what is written about the economy outside of the FT and BBC is rubbish. The BOE covering most or all of net issuance is a repeat of 2009. If they do the same again, the big build up of debt net of BOE purchases will happen in subsequent years. Government borrowing will almost certainly stay elevated for several years from here.
Indeed this is what I was saying from the start of the crisis.
The impact of this crisis is so vast that realistically the only way to cope is printing money this year. The Bank will print money to cover this year's debts but can't be expected to do that indefinitely so in the future
In future years the deficit will need to be brought under control just like it had to be from 2010 onwards but the way to do that is to ensure the taxpaying base of the economy survives as best as it can this year. Not fretting over every penny and pound borrowed this year.
Not at all.
There was no problem borrowing in 2007/08 for the financial crisis.
The problem was increasing borrowing from 2002 to 2007 and not wanting to address the eyewatering legacy of the deficit in 2009/10 onwards.
During a temporary systemic shock crisis do what you need to do. Before and afterwards though you need to be responsible.
For some reason socialists seem to think that the 2007/08 financial crisis absolved them of any reason to tackle the deficit before 2007 or that it shouldn't be tackled in 2010 onwards.
What level of borrowing do you think is ok in normal times? Presumably more than 2.6% of GDP (2019) but less than 2.9% (2007)? What criteria do you use to arrive at this Thompson Rule? (What role does the fact that net debt was 34% of GDP in 2007 and 80% in 2019 play in your calculations?)
Not sure where you're getting 2.6% from, the final pre-recession, pre-pandemic economic year had a deficit of 1.2% (2019) not 2.6%.
As a rule of thumb borrowing in normal times depends upon the economic cycle but we should aim for it to be less than the year before during period of growth with an aim to bring the deficit to zero and keep it around zero. The delta, the change in the deficit is what matters most.
Looking at the last 3 recessions we had in reverse order. A deficit of 1.2% of GDP following a decade of annual reductions in the deficit from a peak of over 10%. A deficit of 2.6% of GDP following five years of growth after the deficit had been a surplus. A budget surplus when the recession hit.
Spot the odd one out.
2.6% is the OBR's number for PSNB for FY19/20. Where do you get 1.2% from? That looks like the primary balance number (excluding debt payments). The primary deficit was 1.2% in 2019 and also 1.2% in 2007. Your thesis that borrowing was out of control in 2007 but responsible in 2019 is hard to sustain with reference to the data.
You said 2019 so why are you using 2020 data, the recession had already begun in 2020? You can't use data from during the recession and claim it is before the recession.
The final full economic year before the recession hit was FY18/19.
I am using fiscal year data (April-March) because that is how it is conventionally published. Since the Covid crisis effectively started, in terms of its economic impact, in the last two weeks of March, it had virtually no effect on the public finances in FY19/20. You could say the same for 2008 - although in quarterly terms the recession started in Q2, GDP growth was already negative in March. So your clean comparison would be 2006/07 (2.6%) Vs 2018/19 (1.9%). In terms of primary deficit it's 1% Vs 0.4%. It's hard to make the case that just 0.6 or 0.7% of GDP is the difference between sound economic management and catastrophic fiscal profligacy.
Yes use economic year data but you need to use the final economic year before the recession began which is measured using quarterly growth figures.
In 2008 it was Q3 which was the first negative growth figure so that rules out 2008/09 and sets 2007/08 as the baseline. In 2020 it was Q1 which was the first negative growth figure so that rules out 2019/20 and sets 2018/19 as the baseline.
Using 2019/20 when the recession had already began in 2019/20 is like using 2008/09.
As for a 0.7% difference is it not hard whatsoever to make the case the that 0.7% is a tremendous difference between sound economic management and catastrophic fiscal profligacy. Because we also need to consider where that came from in the years before then.
As I said it is the year on year change in the deficit that matters more than what the deficit is for judging soundness. Brown managed to spend five years pissing away a budget surplus and transform it into a higher deficit than the Tories had going into the next recession coming off a 10% deficit they had inherited.
The deficit was lower as a % of GDP in both 06/07 and 07/08 than in 96/97, so Brown also reduced the deficit relative to the one he inherited from the Tories. He also reduced debt as a % of GDP over the same period.
1996/97 was a different stage of the economic cycle than 2007/08 too.
Nobody to my knowledge objects to how Brown dealt with the deficit between 1996/97 to 2001/02. He ran sound finances then and I've never seen any Tories say otherwise. Of course he was largely following Ken Clarke's plans then but that is to his credit that he did.
It is from 2002 onwards that Brown blew the deficit wide open prior to the recession.
Following Clarke's financial settlement was a mistake, it was too tight (Clarke himself said he wouldn't have followed it). As a result, public services were grossly under-resourced and public debt fell to a level that was unsustainably low given the financial system's demand for safe assets. I would agree that they over-corrected by increasing spending too aggressively subsequently, although I think they recognised that, which is why the deficit was on a declining path between 2004/05 and 2006/07. But running a deficit of 2-3% of GDP is perfectly reasonable when the economy is growing broadly in line with potential as the UK economy was during that period. Look, I understand you have a narrative about Labour profligacy that you want to sell, and you evidently believe it yourself. I just don't think it is one that most economists would recognise as a fair description of events.
No running a deficit of 2-3% of GDP without trying to reduce it while the economy is growing is a catastrophically stupid mistake that led to economic catastrophe in the public finances. It is not "perfectly reasonable".
What you should do - apply principles to conclude whether Brown took us into the GFC with the public finances far weaker than they should have been.
What you are doing - decide that Brown took us into the GFC with the public finances far weaker than they should have been and create principles to support this.
No my principles predated the GFC. That's why I was worried before the GFC hit. It isn't hindsight, I have always believed in sound money and that is why 2001 Labour managed to get my vote as an 18 year old but 2005 Labour did not.
As an ardent pro-European, I'm not remotely interested in the Russian report; not all of us see a conspiracy. Remain lost the referendum, narrowly, because it fought an absolutely dreadful campaign that simply failed to convince enough people of the benefits of staying in. Not because of a few Russian bots, real or imagined. Remain deserved, I'm afraid, to lose, and any outside interference, successful or not, is neither here nor there. Pro-Europeans should not be distracted by looking backwards to the referendum - it won't change a thing.
I agree. And imo the true mood of the country was more Leave than the 52/48 result implies.
Mr. Battery, if you check a long term graph the most significant shift in the last two decades was the financial crisis and 2008 recession. Before than it was around €1.45, and afterwards mostly €1.15ish, with a molehill around 2015/6.
Please can you call me Horse. Calling me Mr makes me very uncomfortable and makes me feel like you're putting me above yourself.
Morris Dancer calls everyone Mr and it is quite endearing
Nah I think it's fucking unnerving and I asked him to stop.
You have a lovely way with words
You can fuck off too if you like, how's that?
I suspect the people you are arguing against will gleefully take it they have won the argument as you have resorted to such crude responses. And those who might be inclined to support you just slink away....
I am no stranger to using bad language on here, but only in the abstract and very rarely is it aimed at a specific poster. So tone it down, eh?
Another person who is going to try and tell me what to do. Well no, you can't. Please go away
Mr. Battery, if you check a long term graph the most significant shift in the last two decades was the financial crisis and 2008 recession. Before than it was around €1.45, and afterwards mostly €1.15ish, with a molehill around 2015/6.
Please can you call me Horse. Calling me Mr makes me very uncomfortable and makes me feel like you're putting me above yourself.
Morris Dancer calls everyone Mr and it is quite endearing
Nah I think it's fucking unnerving and I asked him to stop.
Just because you ask someone to stop doesn't mean they're obliged to do so. Unless it's something they're doing just to you.
But it is polite to call people by the names they want to be known as.
Equally it is polite not to react to someone by swearing at them.
I agree. The name people want to be known as is on this site their username. If someone chooses to call me Phil, Philip or Thompson I know it is because of the username I chose. Same for Horse or Mr Battery.
As an ardent pro-European, I'm not remotely interested in the Russian report; not all of us see a conspiracy. Remain lost the referendum, narrowly, because it fought an absolutely dreadful campaign that simply failed to convince enough people of the benefits of staying in. Not because of a few Russian bots, real or imagined. Remain deserved, I'm afraid, to lose, and any outside interference, successful or not, is neither here nor there. Pro-Europeans should not be distracted by looking backwards to the referendum - it won't change a thing.
Who is the more to blame for disaster? Those who drove the bus off the cliff, or those who tried, however ineptly, to stop them?
As the Tories are no longer either Conservative or Unionist we need a new name for them. English Populists? English Patriots? Something with English as the first word and something hypocritical as the last...
With the possible exception of the Scottish Nationalist Party I can’t think of any UK party that lives up to its name: certainly not Labour or the Liberal Democrats.
Ulster Unionist Party Brexit Party Sinn Fein
Now admittedly two of these don't have MPs and the third has MPs who don't turn up, but they're all what they say on the tin.
I thought Sinn Fein was pro-EU hardly “us alone”
(As an aside I was told the other day that the first president of SF was a cousin... at the same time as the founder of the UUP was a cousin... family squabbles are such fun...)
I am not at all interested in seeing socialism enacted.
I think capitalism has proved itself to be the better ideology time and time again. I have no interest in something even akin to China or Russia.
However I think capitalism as it is tried in this country is bad and we should transition to a Nordic-style model. No further than that.
So no, I am not a socialist.
These are important semantics, though. Whether or not Sweden, for instance, and particularly between about 1945-2000, can be described as "socialist", is very important for both left and right, for all sorts of important ideological reasons.
Sweden, nor Norway can be considered socialist. They have vibrant mixed market economies.
However, that's the european social democratic tradition, which many have considered socialist in aims since the 1920s. These aren't easy questions historically.
I don't think anyone is seriously suggesting the endgame of Norway is to become a full-on socialist country.
I think it's reasonable to suggest that early on that the aims of social democracy were as a "bridge" to socialism but I think over the last thirty to forty years, it has become a specific and final ideology in its own right. This is why I reject the claim that socialism and social democracy are the same.
I have absolutely no interest in socialism being enacted. Social democracy is my end state.
Without wanting to be rude, HorseBattery, as you're an excellent poster on here, this slightly misunderstands the original marxist thinking that actually sometimes informed european social democracy as much as communism did in the east. The state removing itself from society was actually supposed to be the end state, so that giant-state communist regimes essentially hogged the middle transitional stage for ever ; so early twentieth-century european social democrats may well have said a mixed-economy was more genuinely socialist than the Soviet Union.
Mr. Battery, if you check a long term graph the most significant shift in the last two decades was the financial crisis and 2008 recession. Before than it was around €1.45, and afterwards mostly €1.15ish, with a molehill around 2015/6.
Please can you call me Horse. Calling me Mr makes me very uncomfortable and makes me feel like you're putting me above yourself.
Morris Dancer calls everyone Mr and it is quite endearing
Nah I think it's fucking unnerving and I asked him to stop.
Just because you ask someone to stop doesn't mean they're obliged to do so. Unless it's something they're doing just to you.
But it is polite to call people by the names they want to be known as.
Equally it is polite not to react to someone by swearing at them.
I agree. The name people want to be known as is on this site their username. If someone chooses to call me Phil, Philip or Thompson I know it is because of the username I chose. Same for Horse or Mr Battery.
I prefer to be called sir...
You have to earn that through respect...sir.
To be honest it can be disconcerting. I now avoid one pub in town after having three people say “hello sir” to me on the way to the bar...
"A leading scientific adviser has admitted failing to warn Nicola Sturgeon and Boris Johnson “loudly enough” about the catastrophic impact Covid-19 would have on care homes when the pandemic hit Britain.
Mark Woolhouse, an infectious disease epidemiologist at Edinburgh University, said the UK government’s Scientific Advisory Group for Emergencies (Sage), underplayed the significance of protecting the elderly from a “disease of old age” (£)
I am not at all interested in seeing socialism enacted.
I think capitalism has proved itself to be the better ideology time and time again. I have no interest in something even akin to China or Russia.
However I think capitalism as it is tried in this country is bad and we should transition to a Nordic-style model. No further than that.
So no, I am not a socialist.
These are important semantics, though. Whether or not Sweden, for instance, and particularly between about 1945-2000, can be described as "socialist", is very important for both left and right, for all sorts of important ideological reasons.
Sweden, nor Norway can be considered socialist. They have vibrant mixed market economies.
However, that's the european social democratic tradition, which many have considered socialist in aims since the 1920s. These aren't easy questions historically.
I don't think anyone is seriously suggesting the endgame of Norway is to become a full-on socialist country.
I think it's reasonable to suggest that early on that the aims of social democracy were as a "bridge" to socialism but I think over the last thirty to forty years, it has become a specific and final ideology in its own right. This is why I reject the claim that socialism and social democracy are the same.
I have absolutely no interest in socialism being enacted. Social democracy is my end state.
Without wanting to be rude HorseBattery, as you're an excellent poster on here, this slightly misunderstands the original marxist thinking that informed european social democracy as much as communism did in the east. The state removing itself from society was actually supposed to be the end state, so that giant-state communist regimes essentially hogged the middle transitional stage for ever ; so an early twentieth-century european social democrats may well have said a mixed-economy was more genuinely socialist than the Soviet Union.
I don't disagree with this. But my contention was that it has been clear for at least twenty years (much longer) that Norway and Sweden are not in a transition and being held up. It's quite reasonable - and I suspect you are correct - that initially they were. But they are no longer. They are in a defined ideology that is at the end, it is not as part of a transition to something else.
Then doesn't that mean we are in net LESS real debt than we were before this hit?
The £310bn is the total that was announced in June, it won't be completed until year-end, and it includes £10-20bn of corporate bonds do gilt purchases will be a bit under £300bn. Total borrowing in FY20-21 will likely be close to £400bn so it's likely that net issuance net of BOE purchases will still be positive - although the BOE may buy more in Q1 2021 (the last quarter of the fiscal year). However, for the year to date the BOE purchases have been greater than net isduance, as they were front-loaded with aggressive buying at the start.
Thanks. So net there might be some real borrowing by the government but a tiny fraction of what is being touted in these headlines.
What a shame that no journalists seem to be economically literate or wanting to give the full picture rather than just spout off massive numbers.
Yes the standards of economic journalism in this country are pretty bad, journalism in general in fact. And then we let these ignorant hacks run the country (Johnson and Gove) and wonder why everything goes to shit. Basically, most of what is written about the economy outside of the FT and BBC is rubbish. The BOE covering most or all of net issuance is a repeat of 2009. If they do the same again, the big build up of debt net of BOE purchases will happen in subsequent years. Government borrowing will almost certainly stay elevated for several years from here.
Indeed this is what I was saying from the start of the crisis.
The impact of this crisis is so vast that realistically the only way to cope is printing money this year. The Bank will print money to cover this year's debts but can't be expected to do that indefinitely so in the future
In future years the deficit will need to be brought under control just like it had to be from 2010 onwards but the way to do that is to ensure the taxpaying base of the economy survives as best as it can this year. Not fretting over every penny and pound borrowed this year.
Not at all.
There was no problem borrowing in 2007/08 for the financial crisis.
The problem was increasing borrowing from 2002 to 2007 and not wanting to address the eyewatering legacy of the deficit in 2009/10 onwards.
During a temporary systemic shock crisis do what you need to do. Before and afterwards though you need to be responsible.
For some reason socialists seem to think that the 2007/08 financial crisis absolved them of any reason to tackle the deficit before 2007 or that it shouldn't be tackled in 2010 onwards.
What level of borrowing do you think is ok in normal times? Presumably more than 2.6% of GDP (2019) but less than 2.9% (2007)? What criteria do you use to arrive at this Thompson Rule? (What role does the fact that net debt was 34% of GDP in 2007 and 80% in 2019 play in your calculations?)
Not sure where you're getting 2.6% from, the final pre-recession, pre-pandemic economic year had a deficit of 1.2% (2019) not 2.6%.
As a rule of thumb borrowing in normal times depends upon the economic cycle but we should aim for it to be less than the year before during period of growth with an aim to bring the deficit to zero and keep it around zero. The delta, the change in the deficit is what matters most.
Looking at the last 3 recessions we had in reverse order. A deficit of 1.2% of GDP following a decade of annual reductions in the deficit from a peak of over 10%. A deficit of 2.6% of GDP following five years of growth after the deficit had been a surplus. A budget surplus when the recession hit.
Spot the odd one out.
2.6% is the OBR's number for PSNB for FY19/20. Where do you get 1.2% from? That looks like the primary balance number (excluding debt payments). The primary deficit was 1.2% in 2019 and also 1.2% in 2007. Your thesis that borrowing was out of control in 2007 but responsible in 2019 is hard to sustain with reference to the data.
You said 2019 so why are you using 2020 data, the recession had already begun in 2020? You can't use data from during the recession and claim it is before the recession.
The final full economic year before the recession hit was FY18/19.
I am using fiscal year data (April-March) because that is how it is conventionally published. Since the Covid crisis effectively started, in terms of its economic impact, in the last two weeks of March, it had virtually no effect on the public finances in FY19/20. You could say the same for 2008 - although in quarterly terms the recession started in Q2, GDP growth was already negative in March. So your clean comparison would be 2006/07 (2.6%) Vs 2018/19 (1.9%). In terms of primary deficit it's 1% Vs 0.4%. It's hard to make the case that just 0.6 or 0.7% of GDP is the difference between sound economic management and catastrophic fiscal profligacy.
Yes use economic year data but you need to use the final economic year before the recession began which is measured using quarterly growth figures.
In 2008 it was Q3 which was the first negative growth figure so that rules out 2008/09 and sets 2007/08 as the baseline. In 2020 it was Q1 which was the first negative growth figure so that rules out 2019/20 and sets 2018/19 as the baseline.
Using 2019/20 when the recession had already began in 2019/20 is like using 2008/09.
As for a 0.7% difference is it not hard whatsoever to make the case the that 0.7% is a tremendous difference between sound economic management and catastrophic fiscal profligacy. Because we also need to consider where that came from in the years before then.
As I said it is the year on year change in the deficit that matters more than what the deficit is for judging soundness. Brown managed to spend five years pissing away a budget surplus and transform it into a higher deficit than the Tories had going into the next recession coming off a 10% deficit they had inherited.
The deficit was lower as a % of GDP in both 06/07 and 07/08 than in 96/97, so Brown also reduced the deficit relative to the one he inherited from the Tories. He also reduced debt as a % of GDP over the same period.
1996/97 was a different stage of the economic cycle than 2007/08 too.
Nobody to my knowledge objects to how Brown dealt with the deficit between 1996/97 to 2001/02. He ran sound finances then and I've never seen any Tories say otherwise. Of course he was largely following Ken Clarke's plans then but that is to his credit that he did.
It is from 2002 onwards that Brown blew the deficit wide open prior to the recession.
Following Clarke's financial settlement was a mistake, it was too tight (Clarke himself said he wouldn't have followed it). As a result, public services were grossly under-resourced and public debt fell to a level that was unsustainably low given the financial system's demand for safe assets. I would agree that they over-corrected by increasing spending too aggressively subsequently, although I think they recognised that, which is why the deficit was on a declining path between 2004/05 and 2006/07. But running a deficit of 2-3% of GDP is perfectly reasonable when the economy is growing broadly in line with potential as the UK economy was during that period. Look, I understand you have a narrative about Labour profligacy that you want to sell, and you evidently believe it yourself. I just don't think it is one that most economists would recognise as a fair description of events.
No running a deficit of 2-3% of GDP without trying to reduce it while the economy is growing is a catastrophically stupid mistake that led to economic catastrophe in the public finances. It is not "perfectly reasonable".
You are entitled to your opinion of course, but you should be aware that it is not the mainstream view among people who make their living looking at these things.
That is not true.
Can you name one government ever in our postwar history before Browns that took a surplus, turned it into a consistent budget deficit at 2-3% of GDP during a sustained period of growth prior to a recession? Even one ever that had made such what I consider a catastrophic mistake but you consider mainstream?
But Brown didn't inherit the surplus, he created the surplus by following an excessively tight fiscal policy and then unwound it by following too loose a policy. Over the period as a whole the policy was broadly appropriate as is evident from the fact that the deficit and debt both went down relative to GDP. The deficit was going down again after 2004. With the benefit of hindsight I think you might have gone into the GFC running a slightly smaller deficit, but then nobody was expecting the world economy to be hit by the biggest financial crisis since the great depression, and given the deterioration in the public finances that that crisis caused dwarfed what was happening beforehand it would have made almost no difference. If you think the deficit in 2007 was so catastrophic, you need to explain why the current government stopped reducing the deficit aggressively when it reached around the same level and has left it at around this level ever since, even though debt levels are far higher. I should add I think that is entirely the right policy, but you will note that that is a consistent view on my part.
If Labour was in power and this report was published PB Tories would be saying they were bought and paid for by the Russian state.
As usual, hypocrisy.
Would have helped if Labour supporters hadn't been building the report up as a massive smoking gun that could bring down Tories and key Brexit figures. Now it's a damp squib they appear to be reverse ferreting and suggesting its all a massive cover up and they've been bought off.
Can't win with conspiracy theorists - they'll always find an angle that suits them and never apologise.
Conspiracy Threory 101: The absence of massive smoking guns proves the existence of massive smoking guns.
Yeah, the spin going on is unbelivable. These folk are genuinly unhinged and project whatever they wanted to happen on to some incredibly innoucous reports. These folk never try and learn why other people might think or vote differently but automatically assume that something must have gone wrong with the democratic process.
Life in their echo chambers cannot be fun.
So why did Doris move heaven and earth to cover up the report?
Is calling someone a name with a gender than the one they identify with now OK then?
Doris refers to a mixture of Boris and Dom.
No its not a portmanteau it is a girl's name.
Boris isn't a girl. A long line of discarded children proves that
Maybe whilst we are discussing how we address each other on here it’s worth looking back at ones own posts and see how they come over. There is a clear lack of respect from some people to other people’s viewpoints and the arrogant certainty of what they post distracts from the message. Discussion is good, relentlessly batting for your team is boring.
As an ardent pro-European, I'm not remotely interested in the Russian report; not all of us see a conspiracy. Remain lost the referendum, narrowly, because it fought an absolutely dreadful campaign that simply failed to convince enough people of the benefits of staying in. Not because of a few Russian bots, real or imagined. Remain deserved, I'm afraid, to lose, and any outside interference, successful or not, is neither here nor there. Pro-Europeans should not be distracted by looking backwards to the referendum - it won't change a thing.
I agree. And imo the true mood of the country was more Leave than the 52/48 result implies.
By 2019 my feeling is it was about 60/40, with 8% coming from people that just wanted it over.
However much I hate him - but something we must learn on the left - is Johnson promised something very simple (and he delivered it, ish, to be fair to him).
Labour's big mistake was having the election in the first place. I think in hindsight it was unwinnable.
If Labour was in power and this report was published PB Tories would be saying they were bought and paid for by the Russian state.
As usual, hypocrisy.
Would have helped if Labour supporters hadn't been building the report up as a massive smoking gun that could bring down Tories and key Brexit figures. Now it's a damp squib they appear to be reverse ferreting and suggesting its all a massive cover up and they've been bought off.
Can't win with conspiracy theorists - they'll always find an angle that suits them and never apologise.
I never believed it would do anything of the sort. I think it is more significant than PB Tories give it credit for.
Personally I've never been convinced that it was Russia, it's moronic Brits that delivered Brexit
Once again a Labour supporter insults half of their potential voters - 'why don't they just f*** off and join the Tories?' - oh wait a minute , they did.
If Labour was in power and this report was published PB Tories would be saying they were bought and paid for by the Russian state.
As usual, hypocrisy.
Would have helped if Labour supporters hadn't been building the report up as a massive smoking gun that could bring down Tories and key Brexit figures. Now it's a damp squib they appear to be reverse ferreting and suggesting its all a massive cover up and they've been bought off.
Can't win with conspiracy theorists - they'll always find an angle that suits them and never apologise.
I never believed it would do anything of the sort. I think it is more significant than PB Tories give it credit for.
Personally I've never been convinced that it was Russia, it's moronic Brits that delivered Brexit
Once again a Labour supporter insults half of their potential voters - 'why don't they just f*** off and join the Tories?' - oh wait a minute , they did.
It's good news I am not advising Labour on policy or pitching, I would be dreadful.
Mr. Battery, if you check a long term graph the most significant shift in the last two decades was the financial crisis and 2008 recession. Before than it was around €1.45, and afterwards mostly €1.15ish, with a molehill around 2015/6.
Please can you call me Horse. Calling me Mr makes me very uncomfortable and makes me feel like you're putting me above yourself.
Morris Dancer calls everyone Mr and it is quite endearing
Nah I think it's fucking unnerving and I asked him to stop.
Just because you ask someone to stop doesn't mean they're obliged to do so. Unless it's something they're doing just to you.
But it is polite to call people by the names they want to be known as.
Equally it is polite not to react to someone by swearing at them.
I agree. The name people want to be known as is on this site their username. If someone chooses to call me Phil, Philip or Thompson I know it is because of the username I chose. Same for Horse or Mr Battery.
I prefer to be called sir...
You have to earn that through respect...sir.
To be honest it can be disconcerting. I now avoid one pub in town after having three people say “hello sir” to me on the way to the bar...
Isn't "Mr" what senior officers call junior officers when they are upset with them?
"Obey my order, MISTER".
It's what they do on Star Trek, anyway.
"Horse" is the name of an English King, is it not ... Hengist and Horse. Also, iirc, a Glider with which we invaded France.
Anyhoo, suggest that the correct tone till be set by addressing Horse as "Equus". Ideal for our in house classical enthusiast, too.
Maybe whilst we are discussing how we address each other on here it’s worth looking back at ones own posts and see how they come over. There is a clear lack of respect from some people to other people’s viewpoints and the arrogant certainty of what they post distracts from the message. Discussion is good, relentlessly batting for your team is boring.
I genuinely think there is good discussion to be had on here - and much better than say Reddit where it just becomes like an echo chamber - but I do think there are certain issues which are clearly discussed in bad faith and there is clear evidence of rank hypocrisy from some users.
There are some users I disagree with on many things but they've never attempted to tell me what to do, or order me about. Those know who they are and hope they stick around.
I am not at all interested in seeing socialism enacted.
I think capitalism has proved itself to be the better ideology time and time again. I have no interest in something even akin to China or Russia.
However I think capitalism as it is tried in this country is bad and we should transition to a Nordic-style model. No further than that.
So no, I am not a socialist.
These are important semantics, though. Whether or not Sweden, for instance, and particularly between about 1945-2000, can be described as "socialist", is very important for both left and right, for all sorts of important ideological reasons.
Sweden, nor Norway can be considered socialist. They have vibrant mixed market economies.
However, that's the european social democratic tradition, which many have considered socialist in aims since the 1920s. These aren't easy questions historically.
I don't think anyone is seriously suggesting the endgame of Norway is to become a full-on socialist country.
I think it's reasonable to suggest that early on that the aims of social democracy were as a "bridge" to socialism but I think over the last thirty to forty years, it has become a specific and final ideology in its own right. This is why I reject the claim that socialism and social democracy are the same.
I have absolutely no interest in socialism being enacted. Social democracy is my end state.
Without wanting to be rude HorseBattery, as you're an excellent poster on here, this slightly misunderstands the original marxist thinking that informed european social democracy as much as communism did in the east. The state removing itself from society was actually supposed to be the end state, so that giant-state communist regimes essentially hogged the middle transitional stage for ever ; so an early twentieth-century european social democrats may well have said a mixed-economy was more genuinely socialist than the Soviet Union.
I don't disagree with this. But my contention was that it has been clear for at least twenty years (much longer) that Norway and Sweden are not in a transition and being held up. It's quite reasonable - and I suspect you are correct - that initially they were. But they are no longer. They are in a defined ideology that is at the end, it is not as part of a transition to something else.
These are pretty difficult semantic questions, but they are important, because they legitimise or de-legitimise what happens in many other kinds of scenarios.
A Swedish socialist from 1922 could well have said Sweden has now arrived as near as politically possible to socialism, given global conditions, and a free-market guru from the 1980s could say that Sweden has had to adapt its economy slightly since the millennium, and so now has accepted that the general historical direction and truth of capitalism were in fact the right ones all along.
We might be talking about something very similar, but how you define it is extremely important for future political development in all sorts of places.
Healthy and asymptomatic young people, a new profile of the coronavirus infection. The age bracket with the highest number of infections is between 15 and 29 years old when, during the worst months of the pandemic, the patient's profile exceeded 50 years or more, according to the Carlos III Health Institute.
Then doesn't that mean we are in net LESS real debt than we were before this hit?
The £310bn is the total that was announced in June, it won't be completed until year-end, and it includes £10-20bn of corporate bonds do gilt purchases will be a bit under £300bn. Total borrowing in FY20-21 will likely be close to £400bn so it's likely that net issuance net of BOE purchases will still be positive - although the BOE may buy more in Q1 2021 (the last quarter of the fiscal year). However, for the year to date the BOE purchases have been greater than net isduance, as they were front-loaded with aggressive buying at the start.
Thanks. So net there might be some real borrowing by the government but a tiny fraction of what is being touted in these headlines.
What a shame that no journalists seem to be economically literate or wanting to give the full picture rather than just spout off massive numbers.
Yes the standards of economic journalism in this country are pretty bad, journalism in general in fact. And then we let these ignorant hacks run the country (Johnson and Gove) and wonder why everything goes to shit. Basically, most of what is written about the economy outside of the FT and BBC is rubbish. The BOE covering most or all of net issuance is a repeat of 2009. If they do the same again, the big build up of debt net of BOE purchases will happen in subsequent years. Government borrowing will almost certainly stay elevated for several years from here.
Indeed this is what I was saying from the start of the crisis.
The impact of this crisis is so vast that realistically the only way to cope is printing money this year. The Bank will print money to cover this year's debts but can't be expected to do that indefinitely so in the future
In future years the deficit will need to be brought under control just like it had to be from 2010 onwards but the way to do that is to ensure the taxpaying base of the economy survives as best as it can this year. Not fretting over every penny and pound borrowed this year.
Not at all.
There was no problem borrowing in 2007/08 for the financial crisis.
The problem was increasing borrowing from 2002 to 2007 and not wanting to address the eyewatering legacy of the deficit in 2009/10 onwards.
During a temporary systemic shock crisis do what you need to do. Before and afterwards though you need to be responsible.
For some reason socialists seem to think that the 2007/08 financial crisis absolved them of any reason to tackle the deficit before 2007 or that it shouldn't be tackled in 2010 onwards.
What level of borrowing do you think is ok in normal times? Presumably more than 2.6% of GDP (2019) but less than 2.9% (2007)? What criteria do you use to arrive at this Thompson Rule? (What role does the fact that net debt was 34% of GDP in 2007 and 80% in 2019 play in your calculations?)
Not sure where you're getting 2.6% from, the final pre-recession, pre-pandemic economic year had a deficit of 1.2% (2019) not 2.6%.
As a rule of thumb borrowing in normal times depends upon the economic cycle but we should aim for it to be less than the year before during period of growth with an aim to bring the deficit to zero and keep it around zero. The delta, the change in the deficit is what matters most.
Looking at the last 3 recessions we had in reverse order. A deficit of 1.2% of GDP following a decade of annual reductions in the deficit from a peak of over 10%. A deficit of 2.6% of GDP following five years of growth after the deficit had been a surplus. A budget surplus when the recession hit.
Spot the odd one out.
2.6% is the OBR's number for PSNB for FY19/20. Where do you get 1.2% from? That looks like the primary balance number (excluding debt payments). The primary deficit was 1.2% in 2019 and also 1.2% in 2007. Your thesis that borrowing was out of control in 2007 but responsible in 2019 is hard to sustain with reference to the data.
You said 2019 so why are you using 2020 data, the recession had already begun in 2020? You can't use data from during the recession and claim it is before the recession.
The final full economic year before the recession hit was FY18/19.
I am using fiscal year data (April-March) because that is how it is conventionally published. Since the Covid crisis effectively started, in terms of its economic impact, in the last two weeks of March, it had virtually no effect on the public finances in FY19/20. You could say the same for 2008 - although in quarterly terms the recession started in Q2, GDP growth was already negative in March. So your clean comparison would be 2006/07 (2.6%) Vs 2018/19 (1.9%). In terms of primary deficit it's 1% Vs 0.4%. It's hard to make the case that just 0.6 or 0.7% of GDP is the difference between sound economic management and catastrophic fiscal profligacy.
Yes use economic year data but you need to use the final economic year before the recession began which is measured using quarterly growth figures.
In 2008 it was Q3 which was the first negative growth figure so that rules out 2008/09 and sets 2007/08 as the baseline. In 2020 it was Q1 which was the first negative growth figure so that rules out 2019/20 and sets 2018/19 as the baseline.
Using 2019/20 when the recession had already began in 2019/20 is like using 2008/09.
As for a 0.7% difference is it not hard whatsoever to make the case the that 0.7% is a tremendous difference between sound economic management and catastrophic fiscal profligacy. Because we also need to consider where that came from in the years before then.
As I said it is the year on year change in the deficit that matters more than what the deficit is for judging soundness. Brown managed to spend five years pissing away a budget surplus and transform it into a higher deficit than the Tories had going into the next recession coming off a 10% deficit they had inherited.
The deficit was lower as a % of GDP in both 06/07 and 07/08 than in 96/97, so Brown also reduced the deficit relative to the one he inherited from the Tories. He also reduced debt as a % of GDP over the same period.
1996/97 was a different stage of the economic cycle than 2007/08 too.
Nobody to my knowledge objects to how Brown dealt with the deficit between 1996/97 to 2001/02. He ran sound finances then and I've never seen any Tories say otherwise. Of course he was largely following Ken Clarke's plans then but that is to his credit that he did.
It is from 2002 onwards that Brown blew the deficit wide open prior to the recession.
Following Clarke's financial settlement was a mistake, it was too tight (Clarke himself said he wouldn't have followed it). As a result, public services were grossly under-resourced and public debt fell to a level that was unsustainably low given the financial system's demand for safe assets. I would agree that they over-corrected by increasing spending too aggressively subsequently, although I think they recognised that, which is why the deficit was on a declining path between 2004/05 and 2006/07. But running a deficit of 2-3% of GDP is perfectly reasonable when the economy is growing broadly in line with potential as the UK economy was during that period. Look, I understand you have a narrative about Labour profligacy that you want to sell, and you evidently believe it yourself. I just don't think it is one that most economists would recognise as a fair description of events.
No running a deficit of 2-3% of GDP without trying to reduce it while the economy is growing is a catastrophically stupid mistake that led to economic catastrophe in the public finances. It is not "perfectly reasonable".
You are entitled to your opinion of course, but you should be aware that it is not the mainstream view among people who make their living looking at these things.
That is not true.
Can you name one government ever in our postwar history before Browns that took a surplus, turned it into a consistent budget deficit at 2-3% of GDP during a sustained period of growth prior to a recession? Even one ever that had made such what I consider a catastrophic mistake but you consider mainstream?
But Brown didn't inherit the surplus, he created the surplus by following an excessively tight fiscal policy and then unwound it by following too loose a policy. Over the period as a whole the policy was broadly appropriate as is evident from the fact that the deficit and debt both went down relative to GDP. The deficit was going down again after 2004. With the benefit of hindsight I think you might have gone into the GFC running a slightly smaller deficit, but then nobody was expecting the world economy to be hit by the biggest financial crisis since the great depression, and given the deterioration in the public finances that that crisis caused dwarfed what was happening beforehand it would have made almost no difference. If you think the deficit in 2007 was so catastrophic, you need to explain why the current government stopped reducing the deficit aggressively when it reached around the same level and has left it at around this level ever since, even though debt levels are far higher. I should add I think that is entirely the right policy, but you will note that that is a consistent view on my part.
Brown inherited a deficit coming down annually towards surplus as almost every government had done since World War II before the next recession hit and sends the deficit up again. It is cyclical economics and had consistently happened red or blue since WWII.
Brown blew the deficit wide open consistently running at 2% to 3% which the country could not afford while we were growing and making no effort to eliminate it.
It was unprecedented and it was a catastrophic error.
The policy was not "broadly appropriate" there was no appropriate reason to run such loose policy. Trying to average things out doesn't work either that's like saying if you put your feet in a furnace and your head in liquid nitrogen then on average you are fine.
The current government did not stop reducing the deficit at 2% to 3%. If it had I would have been annoyed. In the final full financial year the deficit was 1.2%
The coronavirus accelerates the fall in the price of used housing in Spain. The crisis generated by the coronavirus pandemic has accelerated the decline in the price of second-hand housing in Spain, which in the first half of the year, the price of a square meter of a second-hand apartment reached 2,245 euros, almost 5 % less than in the same period of the previous year, according to a report by the Pompeu Fabra University (UPF) and the Tecnocasa Group, (EFE)
I am not at all interested in seeing socialism enacted.
I think capitalism has proved itself to be the better ideology time and time again. I have no interest in something even akin to China or Russia.
However I think capitalism as it is tried in this country is bad and we should transition to a Nordic-style model. No further than that.
So no, I am not a socialist.
Interesting you say this.
I support high (and steeply progressive) tax, high public spending, strongly egalitarian social and education policy, public ownership of utilities, state investment in target sectors, no trident, sound money, open borders.
Which I like to call Hard Left Social Democracy. Not "socialist" because the economy remains mixed with a large private sector.
Then doesn't that mean we are in net LESS real debt than we were before this hit?
The £310bn is the total that was announced in June, it won't be completed until year-end, and it includes £10-20bn of corporate bonds do gilt purchases will be a bit under £300bn. Total borrowing in FY20-21 will likely be close to £400bn so it's likely that net issuance net of BOE purchases will still be positive - although the BOE may buy more in Q1 2021 (the last quarter of the fiscal year). However, for the year to date the BOE purchases have been greater than net isduance, as they were front-loaded with aggressive buying at the start.
Thanks. So net there might be some real borrowing by the government but a tiny fraction of what is being touted in these headlines.
What a shame that no journalists seem to be economically literate or wanting to give the full picture rather than just spout off massive numbers.
Yes the standards of economic journalism in this country are pretty bad, journalism in general in fact. And then we let these ignorant hacks run the country (Johnson and Gove) and wonder why everything goes to shit. Basically, most of what is written about the economy outside of the FT and BBC is rubbish. The BOE covering most or all of net issuance is a repeat of 2009. If they do the same again, the big build up of debt net of BOE purchases will happen in subsequent years. Government borrowing will almost certainly stay elevated for several years from here.
Indeed this is what I was saying from the start of the crisis.
The impact of this crisis is so vast that realistically the only way to cope is printing money this year. The Bank will print money to cover this year's debts but can't be expected to do that indefinitely so in the future
In future years the deficit will need to be brought under control just like it had to be from 2010 onwards but the way to do that is to ensure the taxpaying base of the economy survives as best as it can this year. Not fretting over every penny and pound borrowed this year.
Not at all.
There was no problem borrowing in 2007/08 for the financial crisis.
The problem was increasing borrowing from 2002 to 2007 and not wanting to address the eyewatering legacy of the deficit in 2009/10 onwards.
During a temporary systemic shock crisis do what you need to do. Before and afterwards though you need to be responsible.
For some reason socialists seem to think that the 2007/08 financial crisis absolved them of any reason to tackle the deficit before 2007 or that it shouldn't be tackled in 2010 onwards.
What level of borrowing do you think is ok in normal times? Presumably more than 2.6% of GDP (2019) but less than 2.9% (2007)? What criteria do you use to arrive at this Thompson Rule? (What role does the fact that net debt was 34% of GDP in 2007 and 80% in 2019 play in your calculations?)
Not sure where you're getting 2.6% from, the final pre-recession, pre-pandemic economic year had a deficit of 1.2% (2019) not 2.6%.
As a rule of thumb borrowing in normal times depends upon the economic cycle but we should aim for it to be less than the year before during period of growth with an aim to bring the deficit to zero and keep it around zero. The delta, the change in the deficit is what matters most.
Looking at the last 3 recessions we had in reverse order. A deficit of 1.2% of GDP following a decade of annual reductions in the deficit from a peak of over 10%. A deficit of 2.6% of GDP following five years of growth after the deficit had been a surplus. A budget surplus when the recession hit.
Spot the odd one out.
2.6% is the OBR's number for PSNB for FY19/20. Where do you get 1.2% from? That looks like the primary balance number (excluding debt payments). The primary deficit was 1.2% in 2019 and also 1.2% in 2007. Your thesis that borrowing was out of control in 2007 but responsible in 2019 is hard to sustain with reference to the data.
You said 2019 so why are you using 2020 data, the recession had already begun in 2020? You can't use data from during the recession and claim it is before the recession.
The final full economic year before the recession hit was FY18/19.
I am using fiscal year data (April-March) because that is how it is conventionally published. Since the Covid crisis effectively started, in terms of its economic impact, in the last two weeks of March, it had virtually no effect on the public finances in FY19/20. You could say the same for 2008 - although in quarterly terms the recession started in Q2, GDP growth was already negative in March. So your clean comparison would be 2006/07 (2.6%) Vs 2018/19 (1.9%). In terms of primary deficit it's 1% Vs 0.4%. It's hard to make the case that just 0.6 or 0.7% of GDP is the difference between sound economic management and catastrophic fiscal profligacy.
Yes use economic year data but you need to use the final economic year before the recession began which is measured using quarterly growth figures.
In 2008 it was Q3 which was the first negative growth figure so that rules out 2008/09 and sets 2007/08 as the baseline. In 2020 it was Q1 which was the first negative growth figure so that rules out 2019/20 and sets 2018/19 as the baseline.
Using 2019/20 when the recession had already began in 2019/20 is like using 2008/09.
As for a 0.7% difference is it not hard whatsoever to make the case the that 0.7% is a tremendous difference between sound economic management and catastrophic fiscal profligacy. Because we also need to consider where that came from in the years before then.
As I said it is the year on year change in the deficit that matters more than what the deficit is for judging soundness. Brown managed to spend five years pissing away a budget surplus and transform it into a higher deficit than the Tories had going into the next recession coming off a 10% deficit they had inherited.
The deficit was lower as a % of GDP in both 06/07 and 07/08 than in 96/97, so Brown also reduced the deficit relative to the one he inherited from the Tories. He also reduced debt as a % of GDP over the same period.
1996/97 was a different stage of the economic cycle than 2007/08 too.
Nobody to my knowledge objects to how Brown dealt with the deficit between 1996/97 to 2001/02. He ran sound finances then and I've never seen any Tories say otherwise. Of course he was largely following Ken Clarke's plans then but that is to his credit that he did.
It is from 2002 onwards that Brown blew the deficit wide open prior to the recession.
Following Clarke's financial settlement was a mistake, it was too tight (Clarke himself said he wouldn't have followed it). As a result, public services were grossly under-resourced and public debt fell to a level that was unsustainably low given the financial system's demand for safe assets. I would agree that they over-corrected by increasing spending too aggressively subsequently, although I think they recognised that, which is why the deficit was on a declining path between 2004/05 and 2006/07. But running a deficit of 2-3% of GDP is perfectly reasonable when the economy is growing broadly in line with potential as the UK economy was during that period. Look, I understand you have a narrative about Labour profligacy that you want to sell, and you evidently believe it yourself. I just don't think it is one that most economists would recognise as a fair description of events.
No running a deficit of 2-3% of GDP without trying to reduce it while the economy is growing is a catastrophically stupid mistake that led to economic catastrophe in the public finances. It is not "perfectly reasonable".
You are entitled to your opinion of course, but you should be aware that it is not the mainstream view among people who make their living looking at these things.
That is not true.
Can you name one government ever in our postwar history before Browns that took a surplus, turned it into a consistent budget deficit at 2-3% of GDP during a sustained period of growth prior to a recession? Even one ever that had made such what I consider a catastrophic mistake but you consider mainstream?
Irrelevant, since all of them had either a fixed exchange rate regime or much more demanding bond markets or both.
I am not at all interested in seeing socialism enacted.
I think capitalism has proved itself to be the better ideology time and time again. I have no interest in something even akin to China or Russia.
However I think capitalism as it is tried in this country is bad and we should transition to a Nordic-style model. No further than that.
So no, I am not a socialist.
Interesting you say this.
I support high (and steeply progressive) tax, high public spending, strongly egalitarian social and education policy, public ownership of utilities, state investment in target sectors, no trident, sound money, open borders.
Which I like to call Hard Left Social Democracy. Not "socialist" because the economy remains mixed with a large private sector.
Nordic Style model of what, though?
They are notable for free markets and multinationals, for example.
And Norway's national wealth founded on oil is hardly "green", is it?#
And Denmark is one of a very few European countries maintaining a commitment to freedom of speech when it gets difficult.
As the Tories are no longer either Conservative or Unionist we need a new name for them. English Populists? English Patriots? Something with English as the first word and something hypocritical as the last...
With the possible exception of the Scottish Nationalist Party I can’t think of any UK party that lives up to its name: certainly not Labour or the Liberal Democrats.
Ulster Unionist Party Brexit Party Sinn Fein
Now admittedly two of these don't have MPs and the third has MPs who don't turn up, but they're all what they say on the tin.
I thought Sinn Fein was pro-EU hardly “us alone”
(As an aside I was told the other day that the first president of SF was a cousin... at the same time as the founder of the UUP was a cousin... family squabbles are such fun...)
it's actually We Ourselves, ie we should govern ourselves.
I am not at all interested in seeing socialism enacted.
I think capitalism has proved itself to be the better ideology time and time again. I have no interest in something even akin to China or Russia.
However I think capitalism as it is tried in this country is bad and we should transition to a Nordic-style model. No further than that.
So no, I am not a socialist.
These are important semantics, though. Whether or not Sweden, for instance, and particularly between about 1945-2000, can be described as "socialist", is very important for both left and right, for all sorts of important ideological reasons.
Sweden, nor Norway can be considered socialist. They have vibrant mixed market economies.
However, that's the european social democratic tradition, which many have considered socialist in aims since the 1920s. These aren't easy questions historically.
I don't think anyone is seriously suggesting the endgame of Norway is to become a full-on socialist country.
I think it's reasonable to suggest that early on that the aims of social democracy were as a "bridge" to socialism but I think over the last thirty to forty years, it has become a specific and final ideology in its own right. This is why I reject the claim that socialism and social democracy are the same.
I have absolutely no interest in socialism being enacted. Social democracy is my end state.
No, social democracy was never a bridge to socialism. Rather, social democracy is one form of socialism that can co-exist within a market economy. For example, see Crosland's "The Future of Socialism" and "Socialism Now" which are regarded as seminal works of social democratic thinking. The fact that unreconstructed fringe Marxists also claim to be socialists as they simultaneously call for the overthrow of capitalism does not mean that you are forced to accept their claim to exclusive use of the term.
Mr. Battery, if you check a long term graph the most significant shift in the last two decades was the financial crisis and 2008 recession. Before than it was around €1.45, and afterwards mostly €1.15ish, with a molehill around 2015/6.
Please can you call me Horse. Calling me Mr makes me very uncomfortable and makes me feel like you're putting me above yourself.
Morris Dancer calls everyone Mr and it is quite endearing
Nah I think it's fucking unnerving and I asked him to stop.
Just because you ask someone to stop doesn't mean they're obliged to do so. Unless it's something they're doing just to you.
But it is polite to call people by the names they want to be known as.
Equally it is polite not to react to someone by swearing at them.
I agree. The name people want to be known as is on this site their username. If someone chooses to call me Phil, Philip or Thompson I know it is because of the username I chose. Same for Horse or Mr Battery.
I prefer to be called sir...
Is that Sir Fysics, Sir Underscore or Sir Teacher?
Then doesn't that mean we are in net LESS real debt than we were before this hit?
The £310bn is the total that was announced in June, it won't be completed until year-end, and it includes £10-20bn of corporate bonds do gilt purchases will be a bit under £300bn. Total borrowing in FY20-21 will likely be close to £400bn so it's likely that net issuance net of BOE purchases will still be positive - although the BOE may buy more in Q1 2021 (the last quarter of the fiscal year). However, for the year to date the BOE purchases have been greater than net isduance, as they were front-loaded with aggressive buying at the start.
Thanks. So net there might be some real borrowing by the government but a tiny fraction of what is being touted in these headlines.
What a shame that no journalists seem to be economically literate or wanting to give the full picture rather than just spout off massive numbers.
Yes the standards of economic journalism in this country are pretty bad, journalism in general in fact. And then we let these ignorant hacks run the country (Johnson and Gove) and wonder why everything goes to shit. Basically, most of what is written about the economy outside of the FT and BBC is rubbish. The BOE covering most or all of net issuance is a repeat of 2009. If they do the same again, the big build up of debt net of BOE purchases will happen in subsequent years. Government borrowing will almost certainly stay elevated for several years from here.
Indeed this is what I was saying from the start of the crisis.
The impact of this crisis is so vast that realistically the only way to cope is printing money this year. The Bank will print money to cover this year's debts but can't be expected to do that indefinitely so in the future
In future years the deficit will need to be brought under control just like it had to be from 2010 onwards but the way to do that is to ensure the taxpaying base of the economy survives as best as it can this year. Not fretting over every penny and pound borrowed this year.
Not at all.
There was no problem borrowing in 2007/08 for the financial crisis.
The problem was increasing borrowing from 2002 to 2007 and not wanting to address the eyewatering legacy of the deficit in 2009/10 onwards.
During a temporary systemic shock crisis do what you need to do. Before and afterwards though you need to be responsible.
For some reason socialists seem to think that the 2007/08 financial crisis absolved them of any reason to tackle the deficit before 2007 or that it shouldn't be tackled in 2010 onwards.
What level of borrowing do you think is ok in normal times? Presumably more than 2.6% of GDP (2019) but less than 2.9% (2007)? What criteria do you use to arrive at this Thompson Rule? (What role does the fact that net debt was 34% of GDP in 2007 and 80% in 2019 play in your calculations?)
Not sure where you're getting 2.6% from, the final pre-recession, pre-pandemic economic year had a deficit of 1.2% (2019) not 2.6%.
As a rule of thumb borrowing in normal times depends upon the economic cycle but we should aim for it to be less than the year before during period of growth with an aim to bring the deficit to zero and keep it around zero. The delta, the change in the deficit is what matters most.
Looking at the last 3 recessions we had in reverse order. A deficit of 1.2% of GDP following a decade of annual reductions in the deficit from a peak of over 10%. A deficit of 2.6% of GDP following five years of growth after the deficit had been a surplus. A budget surplus when the recession hit.
Spot the odd one out.
2.6% is the OBR's number for PSNB for FY19/20. Where do you get 1.2% from? That looks like the primary balance number (excluding debt payments). The primary deficit was 1.2% in 2019 and also 1.2% in 2007. Your thesis that borrowing was out of control in 2007 but responsible in 2019 is hard to sustain with reference to the data.
You said 2019 so why are you using 2020 data, the recession had already begun in 2020? You can't use data from during the recession and claim it is before the recession.
The final full economic year before the recession hit was FY18/19.
I am using fiscal year data (April-March) because that is how it is conventionally published. Since the Covid crisis effectively started, in terms of its economic impact, in the last two weeks of March, it had virtually no effect on the public finances in FY19/20. You could say the same for 2008 - although in quarterly terms the recession started in Q2, GDP growth was already negative in March. So your clean comparison would be 2006/07 (2.6%) Vs 2018/19 (1.9%). In terms of primary deficit it's 1% Vs 0.4%. It's hard to make the case that just 0.6 or 0.7% of GDP is the difference between sound economic management and catastrophic fiscal profligacy.
Yes use economic year data but you need to use the final economic year before the recession began which is measured using quarterly growth figures.
In 2008 it was Q3 which was the first negative growth figure so that rules out 2008/09 and sets 2007/08 as the baseline. In 2020 it was Q1 which was the first negative growth figure so that rules out 2019/20 and sets 2018/19 as the baseline.
Using 2019/20 when the recession had already began in 2019/20 is like using 2008/09.
As for a 0.7% difference is it not hard whatsoever to make the case the that 0.7% is a tremendous difference between sound economic management and catastrophic fiscal profligacy. Because we also need to consider where that came from in the years before then.
As I said it is the year on year change in the deficit that matters more than what the deficit is for judging soundness. Brown managed to spend five years pissing away a budget surplus and transform it into a higher deficit than the Tories had going into the next recession coming off a 10% deficit they had inherited.
The deficit was lower as a % of GDP in both 06/07 and 07/08 than in 96/97, so Brown also reduced the deficit relative to the one he inherited from the Tories. He also reduced debt as a % of GDP over the same period.
1996/97 was a different stage of the economic cycle than 2007/08 too.
Nobody to my knowledge objects to how Brown dealt with the deficit between 1996/97 to 2001/02. He ran sound finances then and I've never seen any Tories say otherwise. Of course he was largely following Ken Clarke's plans then but that is to his credit that he did.
It is from 2002 onwards that Brown blew the deficit wide open prior to the recession.
Following Clarke's financial settlement was a mistake, it was too tight (Clarke himself said he wouldn't have followed it). As a result, public services were grossly under-resourced and public debt fell to a level that was unsustainably low given the financial system's demand for safe assets. I would agree that they over-corrected by increasing spending too aggressively subsequently, although I think they recognised that, which is why the deficit was on a declining path between 2004/05 and 2006/07. But running a deficit of 2-3% of GDP is perfectly reasonable when the economy is growing broadly in line with potential as the UK economy was during that period. Look, I understand you have a narrative about Labour profligacy that you want to sell, and you evidently believe it yourself. I just don't think it is one that most economists would recognise as a fair description of events.
No running a deficit of 2-3% of GDP without trying to reduce it while the economy is growing is a catastrophically stupid mistake that led to economic catastrophe in the public finances. It is not "perfectly reasonable".
You are entitled to your opinion of course, but you should be aware that it is not the mainstream view among people who make their living looking at these things.
That is not true.
Can you name one government ever in our postwar history before Browns that took a surplus, turned it into a consistent budget deficit at 2-3% of GDP during a sustained period of growth prior to a recession? Even one ever that had made such what I consider a catastrophic mistake but you consider mainstream?
Irrelevant, since all of them had either a fixed exchange rate regime or much more demanding bond markets or both.
It's not irrelevant.
I am claiming that consistently running a 2-3% deficit during a period of growth from a position of having been able to have a surplus was a catastrophic and unprecedented mistake.
@OnlyLivingBoy is claiming that there was nothing unusual or against mainstream opinion in increasing the deficit to 2% to 3% and consistently keeping it there.
So if it is so mainstream there should be some precedence for it. Or was it as I said unprecedented?
Then doesn't that mean we are in net LESS real debt than we were before this hit?
The £310bn is the total that was announced in June, it won't be completed until year-end, and it includes £10-20bn of corporate bonds do gilt purchases will be a bit under £300bn. Total borrowing in FY20-21 will likely be close to £400bn so it's likely that net issuance net of BOE purchases will still be positive - although the BOE may buy more in Q1 2021 (the last quarter of the fiscal year). However, for the year to date the BOE purchases have been greater than net isduance, as they were front-loaded with aggressive buying at the start.
Thanks. So net there might be some real borrowing by the government but a tiny fraction of what is being touted in these headlines.
What a shame that no journalists seem to be economically literate or wanting to give the full picture rather than just spout off massive numbers.
Yes the standards of economic journalism in this country are pretty bad, journalism in general in fact. And then we let these ignorant hacks run the country (Johnson and Gove) and wonder why everything goes to shit. Basically, most of what is written about the economy outside of the FT and BBC is rubbish. The BOE covering most or all of net issuance is a repeat of 2009. If they do the same again, the big build up of debt net of BOE purchases will happen in subsequent years. Government borrowing will almost certainly stay elevated for several years from here.
Indeed this is what I was saying from the start of the crisis.
The impact of this crisis is so vast that realistically the only way to cope is printing money this year. The Bank will print money to cover this year's debts but can't be expected to do that indefinitely so in the future
In future years the deficit will need to be brought under control just like it had to be from 2010 onwards but the way to do that is to ensure the taxpaying base of the economy survives as best as it can this year. Not fretting over every penny and pound borrowed this year.
Not at all.
There was no problem borrowing in 2007/08 for the financial crisis.
The problem was increasing borrowing from 2002 to 2007 and not wanting to address the eyewatering legacy of the deficit in 2009/10 onwards.
During a temporary systemic shock crisis do what you need to do. Before and afterwards though you need to be responsible.
For some reason socialists seem to think that the 2007/08 financial crisis absolved them of any reason to tackle the deficit before 2007 or that it shouldn't be tackled in 2010 onwards.
What level of borrowing do you think is ok in normal times? Presumably more than 2.6% of GDP (2019) but less than 2.9% (2007)? What criteria do you use to arrive at this Thompson Rule? (What role does the fact that net debt was 34% of GDP in 2007 and 80% in 2019 play in your calculations?)
Not sure where you're getting 2.6% from, the final pre-recession, pre-pandemic economic year had a deficit of 1.2% (2019) not 2.6%.
As a rule of thumb borrowing in normal times depends upon the economic cycle but we should aim for it to be less than the year before during period of growth with an aim to bring the deficit to zero and keep it around zero. The delta, the change in the deficit is what matters most.
Looking at the last 3 recessions we had in reverse order. A deficit of 1.2% of GDP following a decade of annual reductions in the deficit from a peak of over 10%. A deficit of 2.6% of GDP following five years of growth after the deficit had been a surplus. A budget surplus when the recession hit.
Spot the odd one out.
2.6% is the OBR's number for PSNB for FY19/20. Where do you get 1.2% from? That looks like the primary balance number (excluding debt payments). The primary deficit was 1.2% in 2019 and also 1.2% in 2007. Your thesis that borrowing was out of control in 2007 but responsible in 2019 is hard to sustain with reference to the data.
You said 2019 so why are you using 2020 data, the recession had already begun in 2020? You can't use data from during the recession and claim it is before the recession.
The final full economic year before the recession hit was FY18/19.
I am using fiscal year data (April-March) because that is how it is conventionally published. Since the Covid crisis effectively started, in terms of its economic impact, in the last two weeks of March, it had virtually no effect on the public finances in FY19/20. You could say the same for 2008 - although in quarterly terms the recession started in Q2, GDP growth was already negative in March. So your clean comparison would be 2006/07 (2.6%) Vs 2018/19 (1.9%). In terms of primary deficit it's 1% Vs 0.4%. It's hard to make the case that just 0.6 or 0.7% of GDP is the difference between sound economic management and catastrophic fiscal profligacy.
Yes use economic year data but you need to use the final economic year before the recession began which is measured using quarterly growth figures.
In 2008 it was Q3 which was the first negative growth figure so that rules out 2008/09 and sets 2007/08 as the baseline. In 2020 it was Q1 which was the first negative growth figure so that rules out 2019/20 and sets 2018/19 as the baseline.
Using 2019/20 when the recession had already began in 2019/20 is like using 2008/09.
As for a 0.7% difference is it not hard whatsoever to make the case the that 0.7% is a tremendous difference between sound economic management and catastrophic fiscal profligacy. Because we also need to consider where that came from in the years before then.
As I said it is the year on year change in the deficit that matters more than what the deficit is for judging soundness. Brown managed to spend five years pissing away a budget surplus and transform it into a higher deficit than the Tories had going into the next recession coming off a 10% deficit they had inherited.
The deficit was lower as a % of GDP in both 06/07 and 07/08 than in 96/97, so Brown also reduced the deficit relative to the one he inherited from the Tories. He also reduced debt as a % of GDP over the same period.
1996/97 was a different stage of the economic cycle than 2007/08 too.
Nobody to my knowledge objects to how Brown dealt with the deficit between 1996/97 to 2001/02. He ran sound finances then and I've never seen any Tories say otherwise. Of course he was largely following Ken Clarke's plans then but that is to his credit that he did.
It is from 2002 onwards that Brown blew the deficit wide open prior to the recession.
Following Clarke's financial settlement was a mistake, it was too tight (Clarke himself said he wouldn't have followed it). As a result, public services were grossly under-resourced and public debt fell to a level that was unsustainably low given the financial system's demand for safe assets. I would agree that they over-corrected by increasing spending too aggressively subsequently, although I think they recognised that, which is why the deficit was on a declining path between 2004/05 and 2006/07. But running a deficit of 2-3% of GDP is perfectly reasonable when the economy is growing broadly in line with potential as the UK economy was during that period. Look, I understand you have a narrative about Labour profligacy that you want to sell, and you evidently believe it yourself. I just don't think it is one that most economists would recognise as a fair description of events.
No running a deficit of 2-3% of GDP without trying to reduce it while the economy is growing is a catastrophically stupid mistake that led to economic catastrophe in the public finances. It is not "perfectly reasonable".
You are entitled to your opinion of course, but you should be aware that it is not the mainstream view among people who make their living looking at these things.
That is not true.
Can you name one government ever in our postwar history before Browns that took a surplus, turned it into a consistent budget deficit at 2-3% of GDP during a sustained period of growth prior to a recession? Even one ever that had made such what I consider a catastrophic mistake but you consider mainstream?
But Brown didn't inherit the surplus, he created the surplus by following an excessively tight fiscal policy and then unwound it by following too loose a policy. Over the period as a whole the policy was broadly appropriate as is evident from the fact that the deficit and debt both went down relative to GDP. The deficit was going down again after 2004. With the benefit of hindsight I think you might have gone into the GFC running a slightly smaller deficit, but then nobody was expecting the world economy to be hit by the biggest financial crisis since the great depression, and given the deterioration in the public finances that that crisis caused dwarfed what was happening beforehand it would have made almost no difference. If you think the deficit in 2007 was so catastrophic, you need to explain why the current government stopped reducing the deficit aggressively when it reached around the same level and has left it at around this level ever since, even though debt levels are far higher. I should add I think that is entirely the right policy, but you will note that that is a consistent view on my part.
That's about the way I see it.
Brown was a very good Chancellor until he became 'political' in the latter half of his tenure. The loosening to which you refer was wholly the wrong policy for a period of financial crisis. He can't be blamed for that crisis though: it really did start in America and was due to the combination of easy credit and poor regulation there, but he might have anticipated it better which would have helped. Once the scale of the problem became apparent, he did all the right things and deserves a lot of credit for his leadership of the G20 group, including the newly elected Obama, which helped to prevent a complete meltdown of the international financial system.
It was the one huge success of his Premiership. His critics tend to gloss over this. I was never a fan and I'm not now. I think he was a poor PM but any kind of a balanced view must acknowledge his skilful handling of the crisis, even if like RichardN and other luminaries on this Site you blame him at least in part for contributing to the conflagration in the first place.
As an ardent pro-European, I'm not remotely interested in the Russian report; not all of us see a conspiracy. Remain lost the referendum, narrowly, because it fought an absolutely dreadful campaign that simply failed to convince enough people of the benefits of staying in. Not because of a few Russian bots, real or imagined. Remain deserved, I'm afraid, to lose, and any outside interference, successful or not, is neither here nor there. Pro-Europeans should not be distracted by looking backwards to the referendum - it won't change a thing.
I agree. And imo the true mood of the country was more Leave than the 52/48 result implies.
By 2019 my feeling is it was about 60/40, with 8% coming from people that just wanted it over.
However much I hate him - but something we must learn on the left - is Johnson promised something very simple (and he delivered it, ish, to be fair to him).
Labour's big mistake was having the election in the first place. I think in hindsight it was unwinnable.
I think 8% is probably underplaying it. And the election WAS unwinnable. Did not have to be 80 but it was always going to be a healthy Con majority. As soon as it was called my heart sank.
Mr. Battery, if you check a long term graph the most significant shift in the last two decades was the financial crisis and 2008 recession. Before than it was around €1.45, and afterwards mostly €1.15ish, with a molehill around 2015/6.
Please can you call me Horse. Calling me Mr makes me very uncomfortable and makes me feel like you're putting me above yourself.
Morris Dancer calls everyone Mr and it is quite endearing
Nah I think it's fucking unnerving and I asked him to stop.
Just because you ask someone to stop doesn't mean they're obliged to do so. Unless it's something they're doing just to you.
But it is polite to call people by the names they want to be known as.
Equally it is polite not to react to someone by swearing at them.
I agree. The name people want to be known as is on this site their username. If someone chooses to call me Phil, Philip or Thompson I know it is because of the username I chose. Same for Horse or Mr Battery.
I prefer to be called sir...
Is that Sir Fysics, Sir Underscore or Sir Teacher?
Just Sir...
Edit: how common is it now to call teachers Sir or Ma’m? We still do at my school but I’m not sure how many other schools do. And yes, it is a state school.
Mr. Battery, if you check a long term graph the most significant shift in the last two decades was the financial crisis and 2008 recession. Before than it was around €1.45, and afterwards mostly €1.15ish, with a molehill around 2015/6.
Please can you call me Horse. Calling me Mr makes me very uncomfortable and makes me feel like you're putting me above yourself.
Morris Dancer calls everyone Mr and it is quite endearing
Nah I think it's fucking unnerving and I asked him to stop.
Just because you ask someone to stop doesn't mean they're obliged to do so. Unless it's something they're doing just to you.
But it is polite to call people by the names they want to be known as.
Equally it is polite not to react to someone by swearing at them.
I agree. The name people want to be known as is on this site their username. If someone chooses to call me Phil, Philip or Thompson I know it is because of the username I chose. Same for Horse or Mr Battery.
I prefer to be called sir...
You have to earn that through respect...sir.
To be honest it can be disconcerting. I now avoid one pub in town after having three people say “hello sir” to me on the way to the bar...
Isn't "Mr" what senior officers call junior officers when they are upset with them?
"Obey my order, MISTER".
It's what they do on Star Trek, anyway.
"Horse" is the name of an English King, is it not ... Hengist and Horse. Also, iirc, a Glider with which we invaded France.
Anyhoo, suggest that the correct tone till be set by addressing Horse as "Equus". Ideal for our in house classical enthusiast, too.
In the British forces commissioned officers address warrant officers as Mr. In the USN anyone below the rank of Cdr can be addressed as Mr by a superior but it is dying out.
MD's penchant for doing it is fucking weird whatever the motivation.
Then doesn't that mean we are in net LESS real debt than we were before this hit?
The £310bn is the total that was announced in June, it won't be completed until year-end, and it includes £10-20bn of corporate bonds do gilt purchases will be a bit under £300bn. Total borrowing in FY20-21 will likely be close to £400bn so it's likely that net issuance net of BOE purchases will still be positive - although the BOE may buy more in Q1 2021 (the last quarter of the fiscal year). However, for the year to date the BOE purchases have been greater than net isduance, as they were front-loaded with aggressive buying at the start.
Thanks. So net there might be some real borrowing by the government but a tiny fraction of what is being touted in these headlines.
What a shame that no journalists seem to be economically literate or wanting to give the full picture rather than just spout off massive numbers.
Yes the standards of economic journalism in this country are pretty bad, journalism in general in fact. And then we let these ignorant hacks run the country (Johnson and Gove) and wonder why everything goes to shit. Basically, most of what is written about the economy outside of the FT and BBC is rubbish. The BOE covering most or all of net issuance is a repeat of 2009. If they do the same again, the big build up of debt net of BOE purchases will happen in subsequent years. Government borrowing will almost certainly stay elevated for several years from here.
Indeed this is what I was saying from the start of the crisis.
The impact of this crisis is so vast that realistically the only way to cope is printing money this year. The Bank will print money to cover this year's debts but can't be expected to do that indefinitely so in the future
In future years the deficit will need to be brought under control just like it had to be from 2010 onwards but the way to do that is to ensure the taxpaying base of the economy survives as best as it can this year. Not fretting over every penny and pound borrowed this year.
Not at all.
There was no problem borrowing in 2007/08 for the financial crisis.
The problem was increasing borrowing from 2002 to 2007 and not wanting to address the eyewatering legacy of the deficit in 2009/10 onwards.
During a temporary systemic shock crisis do what you need to do. Before and afterwards though you need to be responsible.
For some reason socialists seem to think that the 2007/08 financial crisis absolved them of any reason to tackle the deficit before 2007 or that it shouldn't be tackled in 2010 onwards.
What level of borrowing do you think is ok in normal times? Presumably more than 2.6% of GDP (2019) but less than 2.9% (2007)? What criteria do you use to arrive at this Thompson Rule? (What role does the fact that net debt was 34% of GDP in 2007 and 80% in 2019 play in your calculations?)
Not sure where you're getting 2.6% from, the final pre-recession, pre-pandemic economic year had a deficit of 1.2% (2019) not 2.6%.
As a rule of thumb borrowing in normal times depends upon the economic cycle but we should aim for it to be less than the year before during period of growth with an aim to bring the deficit to zero and keep it around zero. The delta, the change in the deficit is what matters most.
Looking at the last 3 recessions we had in reverse order. A deficit of 1.2% of GDP following a decade of annual reductions in the deficit from a peak of over 10%. A deficit of 2.6% of GDP following five years of growth after the deficit had been a surplus. A budget surplus when the recession hit.
Spot the odd one out.
2.6% is the OBR's number for PSNB for FY19/20. Where do you get 1.2% from? That looks like the primary balance number (excluding debt payments). The primary deficit was 1.2% in 2019 and also 1.2% in 2007. Your thesis that borrowing was out of control in 2007 but responsible in 2019 is hard to sustain with reference to the data.
You said 2019 so why are you using 2020 data, the recession had already begun in 2020? You can't use data from during the recession and claim it is before the recession.
The final full economic year before the recession hit was FY18/19.
I am using fiscal year data (April-March) because that is how it is conventionally published. Since the Covid crisis effectively started, in terms of its economic impact, in the last two weeks of March, it had virtually no effect on the public finances in FY19/20. You could say the same for 2008 - although in quarterly terms the recession started in Q2, GDP growth was already negative in March. So your clean comparison would be 2006/07 (2.6%) Vs 2018/19 (1.9%). In terms of primary deficit it's 1% Vs 0.4%. It's hard to make the case that just 0.6 or 0.7% of GDP is the difference between sound economic management and catastrophic fiscal profligacy.
Yes use economic year data but you need to use the final economic year before the recession began which is measured using quarterly growth figures.
In 2008 it was Q3 which was the first negative growth figure so that rules out 2008/09 and sets 2007/08 as the baseline. In 2020 it was Q1 which was the first negative growth figure so that rules out 2019/20 and sets 2018/19 as the baseline.
Using 2019/20 when the recession had already began in 2019/20 is like using 2008/09.
As for a 0.7% difference is it not hard whatsoever to make the case the that 0.7% is a tremendous difference between sound economic management and catastrophic fiscal profligacy. Because we also need to consider where that came from in the years before then.
As I said it is the year on year change in the deficit that matters more than what the deficit is for judging soundness. Brown managed to spend five years pissing away a budget surplus and transform it into a higher deficit than the Tories had going into the next recession coming off a 10% deficit they had inherited.
The deficit was lower as a % of GDP in both 06/07 and 07/08 than in 96/97, so Brown also reduced the deficit relative to the one he inherited from the Tories. He also reduced debt as a % of GDP over the same period.
1996/97 was a different stage of the economic cycle than 2007/08 too.
Nobody to my knowledge objects to how Brown dealt with the deficit between 1996/97 to 2001/02. He ran sound finances then and I've never seen any Tories say otherwise. Of course he was largely following Ken Clarke's plans then but that is to his credit that he did.
It is from 2002 onwards that Brown blew the deficit wide open prior to the recession.
Following Clarke's financial settlement was a mistake, it was too tight (Clarke himself said he wouldn't have followed it). As a result, public services were grossly under-resourced and public debt fell to a level that was unsustainably low given the financial system's demand for safe assets. I would agree that they over-corrected by increasing spending too aggressively subsequently, although I think they recognised that, which is why the deficit was on a declining path between 2004/05 and 2006/07. But running a deficit of 2-3% of GDP is perfectly reasonable when the economy is growing broadly in line with potential as the UK economy was during that period. Look, I understand you have a narrative about Labour profligacy that you want to sell, and you evidently believe it yourself. I just don't think it is one that most economists would recognise as a fair description of events.
No running a deficit of 2-3% of GDP without trying to reduce it while the economy is growing is a catastrophically stupid mistake that led to economic catastrophe in the public finances. It is not "perfectly reasonable".
You are entitled to your opinion of course, but you should be aware that it is not the mainstream view among people who make their living looking at these things.
Yes I was thinking about that too.
If the economy is growing at 2-3% of GDP then the money supply needs to grow at least at that rate to avoiding strangling growth. A deficit of 2-3% financed by the BOE would do that. It would also leave the debt as a % of GDP unchanged. Quite sustainable.
If you want to inflation to grow at a steady 2% pa (good reasons for that) then that's another 2% pa increase in money supply required (lots of assumtions here on velocity and so on).
It is not as simple as it seems. Many people make a false analogy with a housewife's budget. Mrs T certainly did.
Horse, if that's preference it's fine but I call pretty much everyone 'Mr.' (or Miss/Mrs).
I presume it's too much to suggest you do what everyone seems able to do and quote the post to which you are replying?
That would save you the trouble of getting the poster's form of address right and the rest of us the fecking ball-ache of trawling back through umpteen posts to try to understand what on earth it was you were replying to.
I am not at all interested in seeing socialism enacted.
I think capitalism has proved itself to be the better ideology time and time again. I have no interest in something even akin to China or Russia.
However I think capitalism as it is tried in this country is bad and we should transition to a Nordic-style model. No further than that.
So no, I am not a socialist.
These are important semantics, though. Whether or not Sweden, for instance, and particularly between about 1945-2000, can be described as "socialist", is very important for both left and right, for all sorts of important ideological reasons.
Sweden, nor Norway can be considered socialist. They have vibrant mixed market economies.
However, that's the european social democratic tradition, which many have considered socialist in aims since the 1920s. These aren't easy questions historically.
I don't think anyone is seriously suggesting the endgame of Norway is to become a full-on socialist country.
I think it's reasonable to suggest that early on that the aims of social democracy were as a "bridge" to socialism but I think over the last thirty to forty years, it has become a specific and final ideology in its own right. This is why I reject the claim that socialism and social democracy are the same.
I have absolutely no interest in socialism being enacted. Social democracy is my end state.
No, social democracy was never a bridge to socialism. Rather, social democracy is one form of socialism that can co-exist within a market economy. For example, see Crosland's "The Future of Socialism" and "Socialism Now" which are regarded as seminal works of social democratic thinking. The fact that unreconstructed fringe Marxists also claim to be socialists as they simultaneously call for the overthrow of capitalism does not mean that you are forced to accept their claim to exclusive use of the term.
I think it can be reasonably argued it was once a bridge to socialism for some, not all.
On the broader point though, yes that is why I think the semantic distinction is important. One user thinks I fit into the same camp as those who want to overthrow capitalism and burn everything down which is clearly nonsense.
I think social democracy is just the best form of capitalism there is. It takes some of the principles of socialism and enacts them in a workable way.
Then doesn't that mean we are in net LESS real debt than we were before this hit?
The £310bn is the total that was announced in June, it won't be completed until year-end, and it includes £10-20bn of corporate bonds do gilt purchases will be a bit under £300bn. Total borrowing in FY20-21 will likely be close to £400bn so it's likely that net issuance net of BOE purchases will still be positive - although the BOE may buy more in Q1 2021 (the last quarter of the fiscal year). However, for the year to date the BOE purchases have been greater than net isduance, as they were front-loaded with aggressive buying at the start.
Thanks. So net there might be some real borrowing by the government but a tiny fraction of what is being touted in these headlines.
What a shame that no journalists seem to be economically literate or wanting to give the full picture rather than just spout off massive numbers.
Yes the standards of economic journalism in this country are pretty bad, journalism in general in fact. And then we let these ignorant hacks run the country (Johnson and Gove) and wonder why everything goes to shit. Basically, most of what is written about the economy outside of the FT and BBC is rubbish. The BOE covering most or all of net issuance is a repeat of 2009. If they do the same again, the big build up of debt net of BOE purchases will happen in subsequent years. Government borrowing will almost certainly stay elevated for several years from here.
Indeed this is what I was saying from the start of the crisis.
The impact of this crisis is so vast that realistically the only way to cope is printing money this year. The Bank will print money to cover this year's debts but can't be expected to do that indefinitely so in the future
In future years the deficit will need to be brought under control just like it had to be from 2010 onwards but the way to do that is to ensure the taxpaying base of the economy survives as best as it can this year. Not fretting over every penny and pound borrowed this year.
Not at all.
There was no problem borrowing in 2007/08 for the financial crisis.
The problem was increasing borrowing from 2002 to 2007 and not wanting to address the eyewatering legacy of the deficit in 2009/10 onwards.
During a temporary systemic shock crisis do what you need to do. Before and afterwards though you need to be responsible.
For some reason socialists seem to think that the 2007/08 financial crisis absolved them of any reason to tackle the deficit before 2007 or that it shouldn't be tackled in 2010 onwards.
What level of borrowing do you think is ok in normal times? Presumably more than 2.6% of GDP (2019) but less than 2.9% (2007)? What criteria do you use to arrive at this Thompson Rule? (What role does the fact that net debt was 34% of GDP in 2007 and 80% in 2019 play in your calculations?)
Not sure where you're getting 2.6% from, the final pre-recession, pre-pandemic economic year had a deficit of 1.2% (2019) not 2.6%.
As a rule of thumb borrowing in normal times depends upon the economic cycle but we should aim for it to be less than the year before during period of growth with an aim to bring the deficit to zero and keep it around zero. The delta, the change in the deficit is what matters most.
Looking at the last 3 recessions we had in reverse order. A deficit of 1.2% of GDP following a decade of annual reductions in the deficit from a peak of over 10%. A deficit of 2.6% of GDP following five years of growth after the deficit had been a surplus. A budget surplus when the recession hit.
Spot the odd one out.
2.6% is the OBR's number for PSNB for FY19/20. Where do you get 1.2% from? That looks like the primary balance number (excluding debt payments). The primary deficit was 1.2% in 2019 and also 1.2% in 2007. Your thesis that borrowing was out of control in 2007 but responsible in 2019 is hard to sustain with reference to the data.
You said 2019 so why are you using 2020 data, the recession had already begun in 2020? You can't use data from during the recession and claim it is before the recession.
The final full economic year before the recession hit was FY18/19.
I am using fiscal year data (April-March) because that is how it is conventionally published. Since the Covid crisis effectively started, in terms of its economic impact, in the last two weeks of March, it had virtually no effect on the public finances in FY19/20. You could say the same for 2008 - although in quarterly terms the recession started in Q2, GDP growth was already negative in March. So your clean comparison would be 2006/07 (2.6%) Vs 2018/19 (1.9%). In terms of primary deficit it's 1% Vs 0.4%. It's hard to make the case that just 0.6 or 0.7% of GDP is the difference between sound economic management and catastrophic fiscal profligacy.
Yes use economic year data but you need to use the final economic year before the recession began which is measured using quarterly growth figures.
In 2008 it was Q3 which was the first negative growth figure so that rules out 2008/09 and sets 2007/08 as the baseline. In 2020 it was Q1 which was the first negative growth figure so that rules out 2019/20 and sets 2018/19 as the baseline.
Using 2019/20 when the recession had already began in 2019/20 is like using 2008/09.
As for a 0.7% difference is it not hard whatsoever to make the case the that 0.7% is a tremendous difference between sound economic management and catastrophic fiscal profligacy. Because we also need to consider where that came from in the years before then.
As I said it is the year on year change in the deficit that matters more than what the deficit is for judging soundness. Brown managed to spend five years pissing away a budget surplus and transform it into a higher deficit than the Tories had going into the next recession coming off a 10% deficit they had inherited.
The deficit was lower as a % of GDP in both 06/07 and 07/08 than in 96/97, so Brown also reduced the deficit relative to the one he inherited from the Tories. He also reduced debt as a % of GDP over the same period.
1996/97 was a different stage of the economic cycle than 2007/08 too.
Nobody to my knowledge objects to how Brown dealt with the deficit between 1996/97 to 2001/02. He ran sound finances then and I've never seen any Tories say otherwise. Of course he was largely following Ken Clarke's plans then but that is to his credit that he did.
It is from 2002 onwards that Brown blew the deficit wide open prior to the recession.
Following Clarke's financial settlement was a mistake, it was too tight (Clarke himself said he wouldn't have followed it). As a result, public services were grossly under-resourced and public debt fell to a level that was unsustainably low given the financial system's demand for safe assets. I would agree that they over-corrected by increasing spending too aggressively subsequently, although I think they recognised that, which is why the deficit was on a declining path between 2004/05 and 2006/07. But running a deficit of 2-3% of GDP is perfectly reasonable when the economy is growing broadly in line with potential as the UK economy was during that period. Look, I understand you have a narrative about Labour profligacy that you want to sell, and you evidently believe it yourself. I just don't think it is one that most economists would recognise as a fair description of events.
No running a deficit of 2-3% of GDP without trying to reduce it while the economy is growing is a catastrophically stupid mistake that led to economic catastrophe in the public finances. It is not "perfectly reasonable".
You are entitled to your opinion of course, but you should be aware that it is not the mainstream view among people who make their living looking at these things.
Yes I was thinking about that too.
If the economy is growing at 2-3% of GDP then the money supply needs to grow at least at that rate to avoiding strangling growth. A deficit of 2-3% financed by the BOE would do that. It would also leave the debt as a % of GDP unchanged. Quite sustainable.
If you want to inflation to grow at a steady 2% pa (good reasons for that) then that's another 2% pa increase in money supply required (lots of assumtions here on velocity and so on).
It is not as simple as it seems. Many people make a false analogy with a housewife's budget. Mrs T certainly did.
Its only sustainable if there's never going to be another recession.
If you believe (as I do) that the economy has cycles - booms and busts - then there is a requirement to have an average deficit at 2-3%. But that average will include very high deficits during a recession, gradually reducing deficits after the recession, miniscule deficits to small surpluses during the growth periods before the next recession hits, then when the recession hits the deficit goes high again.
That had happened consistently throughout our history with all governments.
Brown claimed to have "eliminated boom and bust" and made the catastrophic error of going to a 2-3% deficit during the growth period when it should have been a small surplus or balanced budget at least was taking our pre-recession baseline to what the average should be.
It was unprecedented, unaffordable, inexcusable and catastrophically wrong.
Horse, if that's preference it's fine but I call pretty much everyone 'Mr.' (or Miss/Mrs).
I presume it's too much to suggest you do what everyone seems able to do and quote the post to which you are replying?
That would save you the trouble of getting the poster's form of address right and the rest of us the fecking ball-ache of trawling back through umpteen posts to try to understand what on earth it was you were replying to.
Just saying.
Only works if you don’t run up against the character lim
Then doesn't that mean we are in net LESS real debt than we were before this hit?
The £310bn is the total that was announced in June, it won't be completed until year-end, and it includes £10-20bn of corporate bonds do gilt purchases will be a bit under £300bn. Total borrowing in FY20-21 will likely be close to £400bn so it's likely that net issuance net of BOE purchases will still be positive - although the BOE may buy more in Q1 2021 (the last quarter of the fiscal year). However, for the year to date the BOE purchases have been greater than net isduance, as they were front-loaded with aggressive buying at the start.
Thanks. So net there might be some real borrowing by the government but a tiny fraction of what is being touted in these headlines.
What a shame that no journalists seem to be economically literate or wanting to give the full picture rather than just spout off massive numbers.
Yes the standards of economic journalism in this country are pretty bad, journalism in general in fact. And then we let these ignorant hacks run the country (Johnson and Gove) and wonder why everything goes to shit. Basically, most of what is written about the economy outside of the FT and BBC is rubbish. The BOE covering most or all of net issuance is a repeat of 2009. If they do the same again, the big build up of debt net of BOE purchases will happen in subsequent years. Government borrowing will almost certainly stay elevated for several years from here.
Indeed this is what I was saying from the start of the crisis.
The impact of this crisis is so vast that realistically the only way to cope is printing money this year. The Bank will print money to cover this year's debts but can't be expected to do that indefinitely so in the future
In future years the deficit will need to be brought under control just like it had to be from 2010 onwards but the way to do that is to ensure the taxpaying base of the economy survives as best as it can this year. Not fretting over every penny and pound borrowed this year.
Not at all.
There was no problem borrowing in 2007/08 for the financial crisis.
The problem was increasing borrowing from 2002 to 2007 and not wanting to address the eyewatering legacy of the deficit in 2009/10 onwards.
During a temporary systemic shock crisis do what you need to do. Before and afterwards though you need to be responsible.
For some reason socialists seem to think that the 2007/08 financial crisis absolved them of any reason to tackle the deficit before 2007 or that it shouldn't be tackled in 2010 onwards.
What level of borrowing do you think is ok in normal times? Presumably more than 2.6% of GDP (2019) but less than 2.9% (2007)? What criteria do you use to arrive at this Thompson Rule? (What role does the fact that net debt was 34% of GDP in 2007 and 80% in 2019 play in your calculations?)
Not sure where you're getting 2.6% from, the final pre-recession, pre-pandemic economic year had a deficit of 1.2% (2019) not 2.6%.
As a rule of thumb borrowing in normal times depends upon the economic cycle but we should aim for it to be less than the year before during period of growth with an aim to bring the deficit to zero and keep it around zero. The delta, the change in the deficit is what matters most.
Looking at the last 3 recessions we had in reverse order. A deficit of 1.2% of GDP following a decade of annual reductions in the deficit from a peak of over 10%. A deficit of 2.6% of GDP following five years of growth after the deficit had been a surplus. A budget surplus when the recession hit.
Spot the odd one out.
2.6% is the OBR's number for PSNB for FY19/20. Where do you get 1.2% from? That looks like the primary balance number (excluding debt payments). The primary deficit was 1.2% in 2019 and also 1.2% in 2007. Your thesis that borrowing was out of control in 2007 but responsible in 2019 is hard to sustain with reference to the data.
You said 2019 so why are you using 2020 data, the recession had already begun in 2020? You can't use data from during the recession and claim it is before the recession.
The final full economic year before the recession hit was FY18/19.
I am using fiscal year data (April-March) because that is how it is conventionally published. Since the Covid crisis effectively started, in terms of its economic impact, in the last two weeks of March, it had virtually no effect on the public finances in FY19/20. You could say the same for 2008 - although in quarterly terms the recession started in Q2, GDP growth was already negative in March. So your clean comparison would be 2006/07 (2.6%) Vs 2018/19 (1.9%). In terms of primary deficit it's 1% Vs 0.4%. It's hard to make the case that just 0.6 or 0.7% of GDP is the difference between sound economic management and catastrophic fiscal profligacy.
Yes use economic year data but you need to use the final economic year before the recession began which is measured using quarterly growth figures.
In 2008 it was Q3 which was the first negative growth figure so that rules out 2008/09 and sets 2007/08 as the baseline. In 2020 it was Q1 which was the first negative growth figure so that rules out 2019/20 and sets 2018/19 as the baseline.
Using 2019/20 when the recession had already began in 2019/20 is like using 2008/09.
As for a 0.7% difference is it not hard whatsoever to make the case the that 0.7% is a tremendous difference between sound economic management and catastrophic fiscal profligacy. Because we also need to consider where that came from in the years before then.
As I said it is the year on year change in the deficit that matters more than what the deficit is for judging soundness. Brown managed to spend five years pissing away a budget surplus and transform it into a higher deficit than the Tories had going into the next recession coming off a 10% deficit they had inherited.
The deficit was lower as a % of GDP in both 06/07 and 07/08 than in 96/97, so Brown also reduced the deficit relative to the one he inherited from the Tories. He also reduced debt as a % of GDP over the same period.
1996/97 was a different stage of the economic cycle than 2007/08 too.
Nobody to my knowledge objects to how Brown dealt with the deficit between 1996/97 to 2001/02. He ran sound finances then and I've never seen any Tories say otherwise. Of course he was largely following Ken Clarke's plans then but that is to his credit that he did.
It is from 2002 onwards that Brown blew the deficit wide open prior to the recession.
Following Clarke's financial settlement was a mistake, it was too tight (Clarke himself said he wouldn't have followed it). As a result, public services were grossly under-resourced and public debt fell to a level that was unsustainably low given the financial system's demand for safe assets. I would agree that they over-corrected by increasing spending too aggressively subsequently, although I think they recognised that, which is why the deficit was on a declining path between 2004/05 and 2006/07. But running a deficit of 2-3% of GDP is perfectly reasonable when the economy is growing broadly in line with potential as the UK economy was during that period. Look, I understand you have a narrative about Labour profligacy that you want to sell, and you evidently believe it yourself. I just don't think it is one that most economists would recognise as a fair description of events.
No running a deficit of 2-3% of GDP without trying to reduce it while the economy is growing is a catastrophically stupid mistake that led to economic catastrophe in the public finances. It is not "perfectly reasonable".
You are entitled to your opinion of course, but you should be aware that it is not the mainstream view among people who make their living looking at these things.
Yes I was thinking about that too.
If the economy is growing at 2-3% of GDP then the money supply needs to grow at least at that rate to avoiding strangling growth. A deficit of 2-3% financed by the BOE would do that. It would also leave the debt as a % of GDP unchanged. Quite sustainable.
If you want to inflation to grow at a steady 2% pa (good reasons for that) then that's another 2% pa increase in money supply required (lots of assumtions here on velocity and so on).
It is not as simple as it seems. Many people make a false analogy with a housewife's budget. Mrs T certainly did.
Its only sustainable if there's never going to be another recession.
If you believe (as I do) that the economy has cycles - booms and busts - then there is a requirement to have an average deficit at 2-3%. But that average will include very high deficits during a recession, gradually reducing deficits after the recession, miniscule deficits to small surpluses during the growth periods before the next recession hits, then when the recession hits the deficit goes high again.
That had happened consistently throughout our history with all governments.
Brown claimed to have "eliminated boom and bust" and made the catastrophic error of going to a 2-3% deficit during the growth period when it should have been a small surplus or balanced budget at least was taking our pre-recession baseline to what the average should be.
It was unprecedented, unaffordable, inexcusable and catastrophically wrong.
Ironically your second paragraph is a summary of Brown’s Golden Rule...
Horse, if that's preference it's fine but I call pretty much everyone 'Mr.' (or Miss/Mrs).
I presume it's too much to suggest you do what everyone seems able to do and quote the post to which you are replying?
That would save you the trouble of getting the poster's form of address right and the rest of us the fecking ball-ache of trawling back through umpteen posts to try to understand what on earth it was you were replying to.
Just saying.
Only works if you don’t run up against the character lim
What character limit is that? I haven't seen one for ages on PB.com.
I am not at all interested in seeing socialism enacted.
I think capitalism has proved itself to be the better ideology time and time again. I have no interest in something even akin to China or Russia.
However I think capitalism as it is tried in this country is bad and we should transition to a Nordic-style model. No further than that.
So no, I am not a socialist.
Interesting you say this.
I support high (and steeply progressive) tax, high public spending, strongly egalitarian social and education policy, public ownership of utilities, state investment in target sectors, no trident, sound money, open borders.
Which I like to call Hard Left Social Democracy. Not "socialist" because the economy remains mixed with a large private sector.
I think you're probably social democracy with socialist elements.
I'm on board with you on mostly everything there except on the matter of education which I don't see as a priority to remove private schools (I assume this is what you alluded to), not interested in getting rid of Trident and open borders aren't at all implementable.
Perhaps I'm conflating public opinion with social democracy though.
To me the basis is a strong private and public sector, where the former supports the latter and the latter supports the former.
Horse, if that's preference it's fine but I call pretty much everyone 'Mr.' (or Miss/Mrs).
I presume it's too much to suggest you do what everyone seems able to do and quote the post to which you are replying?
That would save you the trouble of getting the poster's form of address right and the rest of us the fecking ball-ache of trawling back through umpteen posts to try to understand what on earth it was you were replying to.
Just saying.
Only works if you don’t run up against the character lim
What character limit is that?
Do you never try to reply only to be told that the text is n characters over the limit? Is it just me?
Twenty years ago, MI5 devoted around 20% of its effort to Hostile State Activity, which includes Russian activity alongside the hostile activity of other states, such as China and Iran.72 This allocation of effort declined, as the terrorist threat grew. By 2001/02, it had reduced to 16% and by 2003/04 to 10.7%. This fall continued until, by 2008/09, only 3% of effort was allocated by MI5 to all its work against Hostile State Activity (noting that reductions in proportion of overall effort do not translate directly into changes in resource).73 It was not until 2013/14 that effort began to increase significantly, rising to 14.5%74 – a level that MI5 says meant that slightly more staff were working on Russia than had been during the Cold War.75 The past two years have seen ***: currently, ***% is allocated to Hostile State Activity, approximately *** which is dedicated to countering Russian Hostile State Activity.76
Then doesn't that mean we are in net LESS real debt than we were before this hit?
The £310bn is the total that was announced in June, it won't be completed until year-end, and it includes £10-20bn of corporate bonds do gilt purchases will be a bit under £300bn. Total borrowing in FY20-21 will likely be close to £400bn so it's likely that net issuance net of BOE purchases will still be positive - although the BOE may buy more in Q1 2021 (the last quarter of the fiscal year). However, for the year to date the BOE purchases have been greater than net isduance, as they were front-loaded with aggressive buying at the start.
Thanks. So net there might be some real borrowing by the government but a tiny fraction of what is being touted in these headlines.
What a shame that no journalists seem to be economically literate or wanting to give the full picture rather than just spout off massive numbers.
Yes the standards of economic journalism in this country are pretty bad, journalism in general in fact. And then we let these ignorant hacks run the country (Johnson and Gove) and wonder why everything goes to shit. Basically, most of what is written about the economy outside of the FT and BBC is rubbish. The BOE covering most or all of net issuance is a repeat of 2009. If they do the same again, the big build up of debt net of BOE purchases will happen in subsequent years. Government borrowing will almost certainly stay elevated for several years from here.
Indeed this is what I was saying from the start of the crisis.
The impact of this crisis is so vast that realistically the only way to cope is printing money this year. The Bank will print money to cover this year's debts but can't be expected to do that indefinitely so in the future
In future years the deficit will need to be brought under control just like it had to be from 2010 onwards but the way to do that is to ensure the taxpaying base of the economy survives as best as it can this year. Not fretting over every penny and pound borrowed this year.
Not at all.
There was no problem borrowing in 2007/08 for the financial crisis.
The problem was increasing borrowing from 2002 to 2007 and not wanting to address the eyewatering legacy of the deficit in 2009/10 onwards.
During a temporary systemic shock crisis do what you need to do. Before and afterwards though you need to be responsible.
For some reason socialists seem to think that the 2007/08 financial crisis absolved them of any reason to tackle the deficit before 2007 or that it shouldn't be tackled in 2010 onwards.
What level of borrowing do you think is ok in normal times? Presumably more than 2.6% of GDP (2019) but less than 2.9% (2007)? What criteria do you use to arrive at this Thompson Rule? (What role does the fact that net debt was 34% of GDP in 2007 and 80% in 2019 play in your calculations?)
Not sure where you're getting 2.6% from, the final pre-recession, pre-pandemic economic year had a deficit of 1.2% (2019) not 2.6%.
As a rule of thumb borrowing in normal times depends upon the economic cycle but we should aim for it to be less than the year before during period of growth with an aim to bring the deficit to zero and keep it around zero. The delta, the change in the deficit is what matters most.
Looking at the last 3 recessions we had in reverse order. A deficit of 1.2% of GDP following a decade of annual reductions in the deficit from a peak of over 10%. A deficit of 2.6% of GDP following five years of growth after the deficit had been a surplus. A budget surplus when the recession hit.
Spot the odd one out.
2.6% is the OBR's number for PSNB for FY19/20. Where do you get 1.2% from? That looks like the primary balance number (excluding debt payments). The primary deficit was 1.2% in 2019 and also 1.2% in 2007. Your thesis that borrowing was out of control in 2007 but responsible in 2019 is hard to sustain with reference to the data.
You said 2019 so why are you using 2020 data, the recession had already begun in 2020? You can't use data from during the recession and claim it is before the recession.
The final full economic year before the recession hit was FY18/19.
I am using fiscal year data (April-March) because that is how it is conventionally published. Since the Covid crisis effectively started, in terms of its economic impact, in the last two weeks of March, it had virtually no effect on the public finances in FY19/20. You could say the same for 2008 - although in quarterly terms the recession started in Q2, GDP growth was already negative in March. So your clean comparison would be 2006/07 (2.6%) Vs 2018/19 (1.9%). In terms of primary deficit it's 1% Vs 0.4%. It's hard to make the case that just 0.6 or 0.7% of GDP is the difference between sound economic management and catastrophic fiscal profligacy.
Yes use economic year data but you need to use the final economic year before the recession began which is measured using quarterly growth figures.
In 2008 it was Q3 which was the first negative growth figure so that rules out 2008/09 and sets 2007/08 as the baseline. In 2020 it was Q1 which was the first negative growth figure so that rules out 2019/20 and sets 2018/19 as the baseline.
Using 2019/20 when the recession had already began in 2019/20 is like using 2008/09.
As for a 0.7% difference is it not hard whatsoever to make the case the that 0.7% is a tremendous difference between sound economic management and catastrophic fiscal profligacy. Because we also need to consider where that came from in the years before then.
As I said it is the year on year change in the deficit that matters more than what the deficit is for judging soundness. Brown managed to spend five years pissing away a budget surplus and transform it into a higher deficit than the Tories had going into the next recession coming off a 10% deficit they had inherited.
The deficit was lower as a % of GDP in both 06/07 and 07/08 than in 96/97, so Brown also reduced the deficit relative to the one he inherited from the Tories. He also reduced debt as a % of GDP over the same period.
1996/97 was a different stage of the economic cycle than 2007/08 too.
Nobody to my knowledge objects to how Brown dealt with the deficit between 1996/97 to 2001/02. He ran sound finances then and I've never seen any Tories say otherwise. Of course he was largely following Ken Clarke's plans then but that is to his credit that he did.
It is from 2002 onwards that Brown blew the deficit wide open prior to the recession.
Following Clarke's financial settlement was a mistake, it was too tight (Clarke himself said he wouldn't have followed it). As a result, public services were grossly under-resourced and public debt fell to a level that was unsustainably low given the financial system's demand for safe assets. I would agree that they over-corrected by increasing spending too aggressively subsequently, although I think they recognised that, which is why the deficit was on a declining path between 2004/05 and 2006/07. But running a deficit of 2-3% of GDP is perfectly reasonable when the economy is growing broadly in line with potential as the UK economy was during that period. Look, I understand you have a narrative about Labour profligacy that you want to sell, and you evidently believe it yourself. I just don't think it is one that most economists would recognise as a fair description of events.
No running a deficit of 2-3% of GDP without trying to reduce it while the economy is growing is a catastrophically stupid mistake that led to economic catastrophe in the public finances. It is not "perfectly reasonable".
What you should do - apply principles to conclude whether Brown took us into the GFC with the public finances far weaker than they should have been.
What you are doing - decide that Brown took us into the GFC with the public finances far weaker than they should have been and create principles to support this.
No my principles predated the GFC. That's why I was worried before the GFC hit. It isn't hindsight, I have always believed in sound money and that is why 2001 Labour managed to get my vote as an 18 year old but 2005 Labour did not.
You have just posted the following - "running a deficit of 2-3% in the year prior to the GFC led to economic catastrophe in the public finances."
As if entering the GFC with a smaller deficit would have averted the catastrophe. I should coco. It was the GFC itself that both was and led to catastrophe.
Brown can be attacked for letting the City run out of control. For profligate spending, not so much. You come across a bit off kilter on this one. Like me on Laura Pidcock.
A young blackbird is stranded on the ground outside my kitchen door. It's desperate father keeps trying to feed it a grub and constantly squawks at the poor thing.
Comments
Equally it is polite not to react to someone by swearing at them.
Personally I think the best outcome for the country is some kind of Labour-LD coalition where we can see PR delivered but that looks unlikely.
I happen to think the state should spend a lot more than it does however I believe the 2019 Labour manifesto was too far for me. However I thought it was better than the Tory one which offered nothing to me at all.
The best Labour could offer for me would be 2017-lite with a massive expansion of house-building. Run the railways properly whether it's private or public I don't really care. That would make my life about 1000x better.
I think New Labour was good, not a popular view in the Labour Party but there you go. Not popular here either but that's never stopped me
The ERG don't deserve "blame" for a hard Brexit since blame goes to those who cause what they don't want. The ERG get credit for rejecting a soft Brexit and getting a harder one, they got what they wanted.
It is those who lost despite having the numbers to vote through a soft Brexit to ask themselves how they screwed up and gifted the ERG a harder one.
You weren't far off the mark with the rest of what you said but that's not you trying to understand why I voted in that way. Trying to understand would be asking why I don't like the Tory Party for instance, or why I think Boris Johnson is a bad PM. These kinds of questions.
I think capitalism has proved itself to be the better ideology time and time again. I have no interest in something even akin to China or Russia.
However I think capitalism as it is tried in this country is bad and we should transition to a Nordic-style model. No further than that.
So no, I am not a socialist.
Can you name one government ever in our postwar history before Browns that took a surplus, turned it into a consistent budget deficit at 2-3% of GDP during a sustained period of growth prior to a recession? Even one ever that had made such what I consider a catastrophic mistake but you consider mainstream?
All views are welcome on this site but abusive language to poster/s is another matter.
It simply is not necessary
Do fuck off.
The GP surgery has a list and you get ticked off. That covers the huge majority of people.
It's not rocket science !
Any chance of a by-election in North Wales soon??
https://twitter.com/CommonsHealth/status/1285469559001174016
It's critical of the lack of public health capacity; preparation; proactive decision making; strategic thinking; public communication; lines of reponsibility...
To give one example:
https://twitter.com/CommonsHealth/status/1285496548328198148
What you are doing - decide that Brown took us into the GFC with the public finances far weaker than they should have been and create principles to support this.
It doesn’t allow you to sell in the US or other markets
I am no stranger to using bad language on here, but only in the abstract and very rarely is it aimed at a specific poster. So tone it down, eh?
I think it's reasonable to suggest that early on that the aims of social democracy were as a "bridge" to socialism but I think over the last thirty to forty years, it has become a specific and final ideology in its own right. This is why I reject the claim that socialism and social democracy are the same.
I have absolutely no interest in socialism being enacted. Social democracy is my end state.
The blunt reality is that I have ruffled a few feathers and you're angry that I called you out for posting crap or being a general arse. Deal with it.
(As an aside I was told the other day that the first president of SF was a cousin... at the same time as the founder of the UUP was a cousin... family squabbles are such fun...)
Mark Woolhouse, an infectious disease epidemiologist at Edinburgh University, said the UK government’s Scientific Advisory Group for Emergencies (Sage), underplayed the significance of protecting the elderly from a “disease of old age” (£)
https://www.thetimes.co.uk/article/coronavirus-in-scotland-elderly-died-due-to-mistakes-we-made-top-adviser-admits-c5z359nlp
With the benefit of hindsight I think you might have gone into the GFC running a slightly smaller deficit, but then nobody was expecting the world economy to be hit by the biggest financial crisis since the great depression, and given the deterioration in the public finances that that crisis caused dwarfed what was happening beforehand it would have made almost no difference.
If you think the deficit in 2007 was so catastrophic, you need to explain why the current government stopped reducing the deficit aggressively when it reached around the same level and has left it at around this level ever since, even though debt levels are far higher. I should add I think that is entirely the right policy, but you will note that that is a consistent view on my part.
However much I hate him - but something we must learn on the left - is Johnson promised something very simple (and he delivered it, ish, to be fair to him).
Labour's big mistake was having the election in the first place. I think in hindsight it was unwinnable.
Labour should absolutely not do what I say!
"Obey my order, MISTER".
It's what they do on Star Trek, anyway.
"Horse" is the name of an English King, is it not ... Hengist and Horse. Also, iirc, a Glider with which we invaded France.
Anyhoo, suggest that the correct tone till be set by addressing Horse as "Equus". Ideal for our in house classical enthusiast, too.
There are some users I disagree with on many things but they've never attempted to tell me what to do, or order me about. Those know who they are and hope they stick around.
A Swedish socialist from 1922 could well have said Sweden has now arrived as near as politically possible to socialism, given global conditions, and a free-market guru from the 1980s could say that Sweden has had to adapt its economy slightly since the millennium, and so now has accepted that the general historical direction and truth of capitalism were in fact the right ones all along.
We might be talking about something very similar, but how you define it is extremely important for future political development in all sorts of places.
Brown blew the deficit wide open consistently running at 2% to 3% which the country could not afford while we were growing and making no effort to eliminate it.
It was unprecedented and it was a catastrophic error.
The policy was not "broadly appropriate" there was no appropriate reason to run such loose policy. Trying to average things out doesn't work either that's like saying if you put your feet in a furnace and your head in liquid nitrogen then on average you are fine.
The current government did not stop reducing the deficit at 2% to 3%. If it had I would have been annoyed. In the final full financial year the deficit was 1.2%
I support high (and steeply progressive) tax, high public spending, strongly egalitarian social and education policy, public ownership of utilities, state investment in target sectors, no trident, sound money, open borders.
Which I like to call Hard Left Social Democracy. Not "socialist" because the economy remains mixed with a large private sector.
They are notable for free markets and multinationals, for example.
And Norway's national wealth founded on oil is hardly "green", is it?#
And Denmark is one of a very few European countries maintaining a commitment to freedom of speech when it gets difficult.
I am claiming that consistently running a 2-3% deficit during a period of growth from a position of having been able to have a surplus was a catastrophic and unprecedented mistake.
@OnlyLivingBoy is claiming that there was nothing unusual or against mainstream opinion in increasing the deficit to 2% to 3% and consistently keeping it there.
So if it is so mainstream there should be some precedence for it. Or was it as I said unprecedented?
Brown was a very good Chancellor until he became 'political' in the latter half of his tenure. The loosening to which you refer was wholly the wrong policy for a period of financial crisis. He can't be blamed for that crisis though: it really did start in America and was due to the combination of easy credit and poor regulation there, but he might have anticipated it better which would have helped. Once the scale of the problem became apparent, he did all the right things and deserves a lot of credit for his leadership of the G20 group, including the newly elected Obama, which helped to prevent a complete meltdown of the international financial system.
It was the one huge success of his Premiership. His critics tend to gloss over this. I was never a fan and I'm not now. I think he was a poor PM but any kind of a balanced view must acknowledge his skilful handling of the crisis, even if like RichardN and other luminaries on this Site you blame him at least in part for contributing to the conflagration in the first place.
Edit: how common is it now to call teachers Sir or Ma’m? We still do at my school but I’m not sure how many other schools do. And yes, it is a state school.
MD's penchant for doing it is fucking weird whatever the motivation.
If the economy is growing at 2-3% of GDP then the money supply needs to grow at least at that rate to avoiding strangling growth. A deficit of 2-3% financed by the BOE would do that. It would also leave the debt as a % of GDP unchanged. Quite sustainable.
If you want to inflation to grow at a steady 2% pa (good reasons for that) then that's another 2% pa increase in money supply required (lots of assumtions here on velocity and so on).
It is not as simple as it seems. Many people make a false analogy with a housewife's budget. Mrs T certainly did.
That would save you the trouble of getting the poster's form of address right and the rest of us the fecking ball-ache of trawling back through umpteen posts to try to understand what on earth it was you were replying to.
Just saying.
On the broader point though, yes that is why I think the semantic distinction is important. One user thinks I fit into the same camp as those who want to overthrow capitalism and burn everything down which is clearly nonsense.
I think social democracy is just the best form of capitalism there is. It takes some of the principles of socialism and enacts them in a workable way.
If you believe (as I do) that the economy has cycles - booms and busts - then there is a requirement to have an average deficit at 2-3%. But that average will include very high deficits during a recession, gradually reducing deficits after the recession, miniscule deficits to small surpluses during the growth periods before the next recession hits, then when the recession hits the deficit goes high again.
That had happened consistently throughout our history with all governments.
Brown claimed to have "eliminated boom and bust" and made the catastrophic error of going to a 2-3% deficit during the growth period when it should have been a small surplus or balanced budget at least was taking our pre-recession baseline to what the average should be.
It was unprecedented, unaffordable, inexcusable and catastrophically wrong.
I'm on board with you on mostly everything there except on the matter of education which I don't see as a priority to remove private schools (I assume this is what you alluded to), not interested in getting rid of Trident and open borders aren't at all implementable.
Perhaps I'm conflating public opinion with social democracy though.
To me the basis is a strong private and public sector, where the former supports the latter and the latter supports the former.
As if entering the GFC with a smaller deficit would have averted the catastrophe. I should coco. It was the GFC itself that both was and led to catastrophe.
Brown can be attacked for letting the City run out of control. For profligate spending, not so much. You come across a bit off kilter on this one. Like me on Laura Pidcock.