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.
There is a character limit but quoting my post which was about six words won't go near to meeting it.
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?
I used to get that and it was very irritating (not as irritating as @Morris_Dancer's replies to unknown posts) but I haven't seen that limit for months.
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?
It's if you have lots of quotes within quotes. It's quite easy to fix, remove some of the quotes your quote is quoting.
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.
To be honest, it's Labour supporters than moan about austerity, so really they're the ones that need to learn the lessons of the borrow and bribe era of government. If you don't want to, that's your problem.
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.
There is a character limit but quoting my post which was about six words won't go near to meeting it.
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.
This is pretty complex terrain, which I think is linked to how much more socially acceptable Marxism was in Continental Europe. Many continental rather than British social democrats have viewed social democracy as a bridge to an idyllically ultimately socialist society, but with the ending vaguely deferred forever ; marxist determinism has been less acceptable in Britain, so social democracy has sometimes been considered a form of "actually functioning socialism" in the way described above.
On one level this is all semantics, but semantics and symbolism are extremely important in politics, and of multiple uses to people.
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?
I used to get that and it was very irritating (not as irritating as @Morris_Dancer's replies to unknown posts) but I haven't seen that limit for months.
I mentioned above, it's because of quoting. If you quote a massive quote pile you will go over the limit. Easy to fix, just reduce the amount you quote.
As for @Morris_Dancer, I posted the discussion above, for your benefit.
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?
leave it alone unless you see a cat
Yes, the "just leave animals where you find them" advice faces difficulties when you've found a bird or rodent in your front room.
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?
Re quote limit: Since I can quote this, I'd suggest the limit has either been removed or is now so high as to be immaterial.
Click the 'show previous quotes' and see an immortal argument laid out in all it's glory.
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?
It's if you have lots of quotes within quotes. It's quite easy to fix, remove some of the quotes your quote is quoting.
Sometimes though it is easier to just start again from scratch which is why one might want to name some one, which is where we came in!
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.
It would have. The catastrophe would have been averted. The GFC would have happened and we would have moved on.
The catastrophe I am referring to is the 10% deficit in the years after the GFC had happened. As I said always throughout our history previously we had gone into the recession with below-average deficits and come out of it with them above-average and then gradually brought it back down.
Had we gone into the recession with a balanced budget then we would have come out of the recession with say a 7% budget instead of a 10% one. That would simply have been a recession then as normal rather than a fiscal catastrophe. It was the pre-existing deficit that converted having a recession into a catastrophe.
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.
This is pretty complex terrain, which I think is linked to how much more socially acceptable Marxism was in Continental Europe. Many continental rather than British social democrats have viewed social democracy as a bridge to an idyllically ultimately socialist society, but with the ending vaguely deferred forever ; marxist determinism has been less acceptable in Britain, so social democracy has sometimes been considered a form of "actually functioning socialism" in the way described above.
On one level this is is all semantics, but semantics and symbolism are extremely important in politics, and of many uses to people.
Good discussion.
I am afraid I don't know if many Norway politicians would argue they are transitioning to socialism? I suspect they'd say they're social democrats, I confess I don't know.
My contention isn't with social democracy vs socialism (which is clearly different despite some saying to the contrary), my contention is with this idea that today social democracy is still a transition to socialism in Norway, Sweden.
My honest belief is it was a transition, then they got stuck, decided they liked it and they've been set there ever since.
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.
My template is not Nordic. Not sure I have a template. Germany is always worth a look. They do a lot of things very well.
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?
leave it alone unless you see a cat
Yes, the "just leave animals where you find them" advice faces difficulties when you've found a bird or rodent in your front room.
Finding a bird or rodent in my house is always down to a cat, so Malcom’s exertion applies.
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?
Re quote limit: Since I can quote this, I'd suggest the limit has either been removed or is now so high as to be immaterial.
Click the 'show previous quotes' and see an immortal argument laid out in all it's glory.
No you just haven't reached it. Believe me it is there, just very long.
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.
My template is not Nordic. Not sure I have a template. Germany is always worth a look. They do a lot of things very well.
Germany isn't really social democratic though; it is however fascinating.
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?
Re quote limit: Since I can quote this, I'd suggest the limit has either been removed or is now so high as to be immaterial.
Click the 'show previous quotes' and see an immortal argument laid out in all it's glory.
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.
@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
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.
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.
I don't think anyone has sworn at you today. If you don't want to be respectful that says more about you than others.
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.
It would have. The catastrophe would have been averted. The GFC would have happened and we would have moved on.
The catastrophe I am referring to is the 10% deficit in the years after the GFC had happened. As I said always throughout our history previously we had gone into the recession with below-average deficits and come out of it with them above-average and then gradually brought it back down.
Had we gone into the recession with a balanced budget then we would have come out of the recession with say a 7% budget instead of a 10% one. That would simply have been a recession then as normal rather than a fiscal catastrophe. It was the pre-existing deficit that converted having a recession into a catastrophe.
7% or 10% makes not much difference. The issue was the way Osborne and Cameron decided to use it as an excuse to further their neoliberal small-statism and in the process slowed our recover and extended the pain.
At least that lesson appeared to have been learnt by the Tories in recent years; even pre-Covid the damage to public services was becoming clear and the low-spending mantra had been abandoned.
Hopefully, that lesson will help a bit in the next few years.
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.
My template is not Nordic. Not sure I have a template. Germany is always worth a look. They do a lot of things very well.
No: they don’t have an NHS so they must be evil...
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.
@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
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.
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.
I don't think anyone has sworn at you today. If you don't want to be respectful that says more about you than others.
Is this relevant?
I was accused of swearing at Morris, I did not.
If swearing is against the site rules then the moderation team - of which I note, you are not one despite your arrogant claims to the contrary, along with Big G - can let me know.
I will not apologise for anything I said there, it was all spot on. I don't sit here and tell you how to behave.
If you don't like what I have to say, there's a very simple solution, don't respond. I am not telling you either way, if you want to respond that's fine, I will call you out each and every time.
What I am fed up with here is people pretending they are the site police. You aren't, you clearly have issues with people calling out your crap.
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?
Re quote limit: Since I can quote this, I'd suggest the limit has either been removed or is now so high as to be immaterial.
Click the 'show previous quotes' and see an immortal argument laid out in all it's glory.
I think there are elements we can steal from across Europe that would do us much better than trying to emulate the USA at every turn.
One problem is that any attempt to change the NHS to something resembling a more usual European model would be denounced as being the same as the US version. The same happens in the US where any attempt at a sane health system is compared to ours rather than (say) the Canadian one.
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.
My template is not Nordic. Not sure I have a template. Germany is always worth a look. They do a lot of things very well.
No: they don’t have an NHS so they must be evil...
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.
It would have. The catastrophe would have been averted. The GFC would have happened and we would have moved on.
The catastrophe I am referring to is the 10% deficit in the years after the GFC had happened. As I said always throughout our history previously we had gone into the recession with below-average deficits and come out of it with them above-average and then gradually brought it back down.
Had we gone into the recession with a balanced budget then we would have come out of the recession with say a 7% budget instead of a 10% one. That would simply have been a recession then as normal rather than a fiscal catastrophe. It was the pre-existing deficit that converted having a recession into a catastrophe.
7% or 10% makes not much difference. The issue was the way Osborne and Cameron decided to use it as an excuse to further their neoliberal small-statism and in the process slowed our recover and extended the pain.
At least that lesson appeared to have been learnt by the Tories in recent years; even pre-Covid the damage to public services was becoming clear and the low-spending mantra had been abandoned.
Hopefully, that lesson will help a bit in the next few years.
It makes a massive difference. With compound growth the further you get away from the average of 2-3% that is affordable the worse it gets. 7% at a peak is nothing like 10% years after the recession.
There is no evidence the recovery slowed, the UK grew faster under Cameron and Osborne than our continental peers on average.
Pre-COVID the roof had been fixed while the sun was shining. The UK deficit was down to 1.2% in the final Financial Year before the recession. Below average giving us more slack to go above average afterwards without it being catastrophic.
The UK's deficit should be similar to a sine curve running at an average of 2-3% but peaks at recessions and troughs in boom times. The problem is that Brown put the trough at where the average was meant to be and called it "affordable" - it was not. It never could be, unless we were never going to have another bust.
I think there are elements we can steal from across Europe that would do us much better than trying to emulate the USA at every turn.
One problem is that any attempt to change the NHS to something resembling a more usual European model would be denounced as being the same as the US version. The same happens in the US where any attempt at a sane health system is compared to ours rather than (say) the Canadian one.
I don't trust the Tory Party to do that, quite frankly. I think more broadly reform isn't something that can't be discussed, I just don't trust certain parties to do it.
The Lib Dems are probably the most clean, I would think
What some users do would be considered trolling on other sites and nothing happens to them, therefore I think it's fair game to tell people to F off if they're causing a nuisance. If you can't take a bit of swearing or get angry when people call you out, then that's really not my problem
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.
@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
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.
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.
I don't think anyone has sworn at you today. If you don't want to be respectful that says more about you than others.
Is this relevant?
I was accused of swearing at Morris, I did not.
If swearing is against the site rules then the moderation team - of which I note, you are not one despite your arrogant claims to the contrary, along with Big G - can let me know.
I will not apologise for anything I said there, it was all spot on. I don't sit here and tell you how to behave.
If you don't like what I have to say, there's a very simple solution, don't respond. I am not telling you either way, if you want to respond that's fine, I will call you out each and every time.
What I am fed up with here is people pretending they are the site police. You aren't, you clearly have issues with people calling out your crap.
I have no problems being called out, I respond in 'back and forth's on this site more than I probably should.
I object to being sworn at or seeing others sworn at. I don't do it myself. I have asked @PBModerator to weigh in on whether such foul and abusive language is appropriate, I never "arrogantly" claimed to be a moderator myself.
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.
Here are the deficits as % GDP over the last 30 years Year Deficit %GDP 1980 1.07 1981 1.98 1982 0.58 1983 0.69 1984 1.12 1985 1.26 1986 0.6 1987 0.91 1988 0.81 1989 -0.8 1990 -0.57 1991 0.22 1992 2.13 1993 5.12 1994 5.68 1995 4.45 1996 3.25 Average over Tory years 1.7% deficit 1997 2.75 1998 0.66 1999 -0.42 2000 -1.44 2001 -1.72 2002 -0.45 2003 1.49 2004 1.71 2005 1.76 2006 1.31 2007 0.95 2008 1.2 2009 4.53 Average over Labour years 0.9% 2010 7.23 2011 6.24 2012 5.41 2013 5.28 2014 4.22 2015 3.23 2016 2.48 2017 0.85 2018 0.58 2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96. Compare with the Labour deficits 2003-08 before the GFC.
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.
Here are the deficits as % GDP over the last 30 years Year Deficit %GDP 1980 1.07 1981 1.98 1982 0.58 1983 0.69 1984 1.12 1985 1.26 1986 0.6 1987 0.91 1988 0.81 1989 -0.8 1990 -0.57 1991 0.22 1992 2.13 1993 5.12 1994 5.68 1995 4.45 1996 3.25 Average over Tory years 1.7% deficit 1997 2.75 1998 0.66 1999 -0.42 2000 -1.44 2001 -1.72 2002 -0.45 2003 1.49 2004 1.71 2005 1.76 2006 1.31 2007 0.95 2008 1.2 2009 4.53 2010 7.23 Average over Labour years 0.9% 2011 6.24 2012 5.41 2013 5.28 2014 4.22 2015 3.23 2016 2.48 2017 0.85 2018 0.58 2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96. Compare with the Labour deficits 2003-08 before the GFC.
I honestly think trying to argue about the deficit with certain Tories is a complete waste of time.
Their esteemed leader obviously disagrees as they've given up any semblance of "balancing the books".
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.
It would have. The catastrophe would have been averted. The GFC would have happened and we would have moved on.
The catastrophe I am referring to is the 10% deficit in the years after the GFC had happened. As I said always throughout our history previously we had gone into the recession with below-average deficits and come out of it with them above-average and then gradually brought it back down.
Had we gone into the recession with a balanced budget then we would have come out of the recession with say a 7% budget instead of a 10% one. That would simply have been a recession then as normal rather than a fiscal catastrophe. It was the pre-existing deficit that converted having a recession into a catastrophe.
7% or 10% makes not much difference. The issue was the way Osborne and Cameron decided to use it as an excuse to further their neoliberal small-statism and in the process slowed our recover and extended the pain.
At least that lesson appeared to have been learnt by the Tories in recent years; even pre-Covid the damage to public services was becoming clear and the low-spending mantra had been abandoned.
Hopefully, that lesson will help a bit in the next few years.
It makes a massive difference. With compound growth the further you get away from the average of 2-3% that is affordable the worse it gets. 7% at a peak is nothing like 10% years after the recession.
There is no evidence the recovery slowed, the UK grew faster under Cameron and Osborne than our continental peers on average.
Pre-COVID the roof had been fixed while the sun was shining. The UK deficit was down to 1.2% in the final Financial Year before the recession. Below average giving us more slack to go above average afterwards without it being catastrophic.
The UK's deficit should be similar to a sine curve running at an average of 2-3% but peaks at recessions and troughs in boom times. The problem is that Brown put the trough at where the average was meant to be and called it "affordable" - it was not. It never could be, unless we were never going to have another bust.
I think all assessments of Gordon Brown should start with his oft repeated boast of “abolishing Tory boom and bust”. How well did he do on that?
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.
My template is not Nordic. Not sure I have a template. Germany is always worth a look. They do a lot of things very well.
It's worth looking at all the economically successful countries with relatively strong social welfare systems administration asking what they have and haven't got in common.
The German welfare state goes back to Bismark, and was intended as one of the foundations of its economic development.
State capacity (infrastructure; science base; public health; welfare systems etc) really isn't the same thing as socialism - and to an extent is orthogonal to left/right politics. The early South Korea, for example, had what one might consider a right wing dictatorship, but pretty strong state capacity in relation to the resources available to it.
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.
Here are the deficits as % GDP over the last 30 years Year Deficit %GDP 1980 1.07 1981 1.98 1982 0.58 1983 0.69 1984 1.12 1985 1.26 1986 0.6 1987 0.91 1988 0.81 1989 -0.8 1990 -0.57 1991 0.22 1992 2.13 1993 5.12 1994 5.68 1995 4.45 1996 3.25 Average over Tory years 1.7% deficit 1997 2.75 1998 0.66 1999 -0.42 2000 -1.44 2001 -1.72 2002 -0.45 2003 1.49 2004 1.71 2005 1.76 2006 1.31 2007 0.95 2008 1.2 2009 4.53 2010 7.23 Average over Labour years 0.9% 2011 6.24 2012 5.41 2013 5.28 2014 4.22 2015 3.23 2016 2.48 2017 0.85 2018 0.58 2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96. Compare with the Labour deficits 2003-08 before the GFC.
Not sure where you are getting those numbers from, 2007 was not 0.95% but as I said, a sine curve going up and down depending upon the stage of the economic cycle.
The catastrophe was putting it up to nearly 3% before the recession hit. What was it before the last recession hit under the Tories?
Reading through the spats on the posts on here this morning is more chav than reading about the Johnie Depp/Heard case. This site has definitely gone downhill in terms of disrespect over the years
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.
Here are the deficits as % GDP over the last 30 years Year Deficit %GDP 1980 1.07 1981 1.98 1982 0.58 1983 0.69 1984 1.12 1985 1.26 1986 0.6 1987 0.91 1988 0.81 1989 -0.8 1990 -0.57 1991 0.22 1992 2.13 1993 5.12 1994 5.68 1995 4.45 1996 3.25 Average over Tory years 1.7% deficit 1997 2.75 1998 0.66 1999 -0.42 2000 -1.44 2001 -1.72 2002 -0.45 2003 1.49 2004 1.71 2005 1.76 2006 1.31 2007 0.95 2008 1.2 2009 4.53 Average over Labour years 0.9% 2010 7.23 2011 6.24 2012 5.41 2013 5.28 2014 4.22 2015 3.23 2016 2.48 2017 0.85 2018 0.58 2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96. Compare with the Labour deficits 2003-08 before the GFC.
Why are you putting 2010 in the Tory column not the Labour one? At worst it should be split between the two. Also, what is your source for these?
Easy - the report stated that the Scottish referendum was targeted - the report did not look into the EU referendum so there is no evidence to say Russia targeted it
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.
It would have. The catastrophe would have been averted. The GFC would have happened and we would have moved on.
The catastrophe I am referring to is the 10% deficit in the years after the GFC had happened. As I said always throughout our history previously we had gone into the recession with below-average deficits and come out of it with them above-average and then gradually brought it back down.
Had we gone into the recession with a balanced budget then we would have come out of the recession with say a 7% budget instead of a 10% one. That would simply have been a recession then as normal rather than a fiscal catastrophe. It was the pre-existing deficit that converted having a recession into a catastrophe.
Your prejudices are in the driving seat. With a smaller deficit going into the catastrophe we'd have been a bit better placed to cope with it. The facts cannot in good conscience support a more lurid conclusion than that.
An interesting list would be an [accurate] list of budget deficits as percentage of GDP marking when the recessions were. IE showing the economic cycle which is what matters.
Reading through the spats on the posts on here this morning is more chav than reading about the Johnie Depp/Heard case. This site has definitely gone downhill in terms of disrespect over the years
Really ? Seems to me as though it goes in regular cycles.
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".
bWhat 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.
It would have. The catastrophe would have been averted. The GFC would have happened and we would have moved on.
The catastrophe I am referring to is the 10% deficit in the years after the GFC had happened. As I said always throughout our history previously we had gone into the recession with below-average deficits and come out of it with them above-average and then gradually brought it back down.
Had we gone into the recession with a balanced budget then we would have come out of the recession with say a 7% budget instead of a 10% one. That would simply have been a recession then as normal rather than a fiscal catastrophe. It was the pre-existing deficit that converted having a recession into a catastrophe.
Your prejudices are in the driving seat. With a smaller deficit going into the catastrophe we'd have been a bit better placed to cope with it. The facts cannot in good conscience support a more lurid conclusion than that.
The GFC was not a catastrophe, it was a recession. Recessions happen. It is boom and bust and a natural part of the economic cycle that sound governments need to prepare for.
The catastrophe in the public finances was the 10% deficit that followed the GFC and that was caused by going into a recession with a maxed out deficit. That catastrophe would have been averted had we gone into a recession with a balanced budget as we had the prior recession.
Have a look throughout our history at how much trough-to-peak the budget deficit changes when recessions happen. The ~7% change trough-to-peak change in the deficit during the GFC was not extraordinary. What was extraordinary was having a 3% trough and that is what caused the catastrophe.
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.
Here are the deficits as % GDP over the last 30 years Year Deficit %GDP 1980 1.07 1981 1.98 1982 0.58 1983 0.69 1984 1.12 1985 1.26 1986 0.6 1987 0.91 1988 0.81 1989 -0.8 1990 -0.57 1991 0.22 1992 2.13 1993 5.12 1994 5.68 1995 4.45 1996 3.25 Average over Tory years 1.7% deficit 1997 2.75 1998 0.66 1999 -0.42 2000 -1.44 2001 -1.72 2002 -0.45 2003 1.49 2004 1.71 2005 1.76 2006 1.31 2007 0.95 2008 1.2 2009 4.53 Average over Labour years 0.9% 2010 7.23 2011 6.24 2012 5.41 2013 5.28 2014 4.22 2015 3.23 2016 2.48 2017 0.85 2018 0.58 2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96. Compare with the Labour deficits 2003-08 before the GFC.
No context of economic growth there which makes the comparison worthless, unless you're suggesting that Tory governments should cut more spending after recessions?
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.
@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
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.
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.
I don't think anyone has sworn at you today. If you don't want to be respectful that says more about you than others.
Is this relevant?
I was accused of swearing at Morris, I did not.
If swearing is against the site rules then the moderation team - of which I note, you are not one despite your arrogant claims to the contrary, along with Big G - can let me know.
I will not apologise for anything I said there, it was all spot on. I don't sit here and tell you how to behave.
If you don't like what I have to say, there's a very simple solution, don't respond. I am not telling you either way, if you want to respond that's fine, I will call you out each and every time.
What I am fed up with here is people pretending they are the site police. You aren't, you clearly have issues with people calling out your crap.
I have no problems being called out, I respond in 'back and forth's on this site more than I probably should.
I object to being sworn at or seeing others sworn at. I don't do it myself. I have asked @PBModerator to weigh in on whether such foul and abusive language is appropriate, I never "arrogantly" claimed to be a moderator myself.
ROFL, foul and abusive?
I told somebody to fuck off, are you honestly telling me you feel abused by that? I told them to fuck off by the way, because of what was clearly an attempt at trolling.
You then posted some utter shite about social democracy vs socialism and what it meant for me, which you know to be wrong, just in an effort to bait me. I told you to fuck off with that too.
If there was any moderation, it should be removing your very poor attempts at trolling, not my calling them out.
Pretending you got offended because I said fuck a few times is just pathetic. I didn't personally attack you or anyone else, I just don't told you to fuck off with your shite. I feel sorry for you if you are offended by that and I also think it shows the level of arrogance you have.
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.
At all the schools I visited during my abortive attempt to become, ahem, a physics teacher a few years ago, the teachers were uniformly addressed as Sir or Miss (regardless of marital status).
Reading through the spats on the posts on here this morning is more chav than reading about the Johnie Depp/Heard case. This site has definitely gone downhill in terms of disrespect over the years
You weren’t here in the Tim days then (I was a lurker in those days).
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.
Here are the deficits as % GDP over the last 30 years Year Deficit %GDP 1980 1.07 1981 1.98 1982 0.58 1983 0.69 1984 1.12 1985 1.26 1986 0.6 1987 0.91 1988 0.81 1989 -0.8 1990 -0.57 1991 0.22 1992 2.13 1993 5.12 1994 5.68 1995 4.45 1996 3.25 Average over Tory years 1.7% deficit 1997 2.75 1998 0.66 1999 -0.42 2000 -1.44 2001 -1.72 2002 -0.45 2003 1.49 2004 1.71 2005 1.76 2006 1.31 2007 0.95 2008 1.2 2009 4.53 2010 7.23 Average over Labour years 0.9% 2011 6.24 2012 5.41 2013 5.28 2014 4.22 2015 3.23 2016 2.48 2017 0.85 2018 0.58 2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96. Compare with the Labour deficits 2003-08 before the GFC.
Not sure where you are getting those numbers from, 2007 was not 0.95% but as I said, a sine curve going up and down depending upon the stage of the economic cycle.
The catastrophe was putting it up to nearly 3% before the recession hit. What was it before the last recession hit under the Tories?
It didn't go up to nearly 3% before the GFC hit. You can check what it was before the last recession hit under the Tories.
Just look at the data dispassionately without an agenda. Reverse the roles. Suppose the years 1989-96 were under a Labour Government and 1997-2009 were under a Tory government. Would you be saying the same things?
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%
You keep saying it was 1.2%, but as I have pointed out you are looking at the wrong numbers. The correct figure is 1.9% for FY18/19 and it would have been around 2.3% in FY19/20 even without the virus hitting in the last month of that FY rather than the 2.5% actually recorded (OBR says 2.6% but those data are out of date). The point about looking at the whole period is that if the policy in the first period of Labour's period in office was too tight (as most commentators including Ken Clarke agree) then loosening the fiscal stance was the right thing to do, at least up to a point. I am not saying that Labour did not make mistakes. Following Clarke's initial fiscal plans was a mistake. They should have increased public investment more especially in transport infrastructure and housing. They should have kept the deficit a bit lower, maybe about 2% maximum outside of recessions. They certainly should have kept a closer eye on RBS. But your hyperbolic attacks on Brown's record simply don't stack up, they just expose your overt partisanship.
Catalonia: The number of positive Covid-19 reported drops for the fifth consecutive day and 590 new infections were recorded in the last 24 hours, half the number reported on the 15th, according to data released by the Health Department of the Generalitat . EFE
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.
At all the schools I visited during my abortive attempt to become, ahem, a physics teacher a few years ago, the teachers were uniformly addressed as Sir or Miss (regardless of marital status).
How did you manage not to become a Physics teacher? You do have a pulse don’t you?
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.
Here are the deficits as % GDP over the last 30 years Year Deficit %GDP 1980 1.07 1981 1.98 1982 0.58 1983 0.69 1984 1.12 1985 1.26 1986 0.6 1987 0.91 1988 0.81 1989 -0.8 1990 -0.57 1991 0.22 1992 2.13 1993 5.12 1994 5.68 1995 4.45 1996 3.25 Average over Tory years 1.7% deficit 1997 2.75 1998 0.66 1999 -0.42 2000 -1.44 2001 -1.72 2002 -0.45 2003 1.49 2004 1.71 2005 1.76 2006 1.31 2007 0.95 2008 1.2 2009 4.53 2010 7.23 Average over Labour years 0.9% 2011 6.24 2012 5.41 2013 5.28 2014 4.22 2015 3.23 2016 2.48 2017 0.85 2018 0.58 2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96. Compare with the Labour deficits 2003-08 before the GFC.
Not sure where you are getting those numbers from, 2007 was not 0.95% but as I said, a sine curve going up and down depending upon the stage of the economic cycle.
The catastrophe was putting it up to nearly 3% before the recession hit. What was it before the last recession hit under the Tories?
It didn't go up to nearly 3% before the GFC hit. You can check what it was before the last recession hit under the Tories.
Just look at the data dispassionately without an agenda. Reverse the roles. Suppose the years 1989-96 were under a Labour Government and 1997-2009 were under a Tory government. Would you be saying the same things?
The outcome would be the same, the Tories backed Labour's spending plans!
Presumably Philip was against the spending at the time, as he is all knowing. I guarantee he backed the Tories at the time and all the deregulation and spending they wanted.
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.
We all have our idiosyncrasies; some quirkier than others.
Reading through the spats on the posts on here this morning is more chav than reading about the Johnie Depp/Heard case. This site has definitely gone downhill in terms of disrespect over the years
You weren’t here in the Tim days then (I was a lurker in those days).
Come on guys, did you never meet Colin W or Martin Day?
Tim was at least coherent. CW and MD sprayed insults and abuse randomly and chaotically in all directions.
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.
Here are the deficits as % GDP over the last 30 years Year Deficit %GDP 1980 1.07 1981 1.98 1982 0.58 1983 0.69 1984 1.12 1985 1.26 1986 0.6 1987 0.91 1988 0.81 1989 -0.8 1990 -0.57 1991 0.22 1992 2.13 1993 5.12 1994 5.68 1995 4.45 1996 3.25 Average over Tory years 1.7% deficit 1997 2.75 1998 0.66 1999 -0.42 2000 -1.44 2001 -1.72 2002 -0.45 2003 1.49 2004 1.71 2005 1.76 2006 1.31 2007 0.95 2008 1.2 2009 4.53 Average over Labour years 0.9% 2010 7.23 2011 6.24 2012 5.41 2013 5.28 2014 4.22 2015 3.23 2016 2.48 2017 0.85 2018 0.58 2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96. Compare with the Labour deficits 2003-08 before the GFC.
Why are you putting 2010 in the Tory column not the Labour one? At worst it should be split between the two. Also, what is your source for these?
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.
Here are the deficits as % GDP over the last 30 years Year Deficit %GDP 1980 1.07 1981 1.98 1982 0.58 1983 0.69 1984 1.12 1985 1.26 1986 0.6 1987 0.91 1988 0.81 1989 -0.8 1990 -0.57 1991 0.22 1992 2.13 1993 5.12 1994 5.68 1995 4.45 1996 3.25 Average over Tory years 1.7% deficit 1997 2.75 1998 0.66 1999 -0.42 2000 -1.44 2001 -1.72 2002 -0.45 2003 1.49 2004 1.71 2005 1.76 2006 1.31 2007 0.95 2008 1.2 2009 4.53 2010 7.23 Average over Labour years 0.9% 2011 6.24 2012 5.41 2013 5.28 2014 4.22 2015 3.23 2016 2.48 2017 0.85 2018 0.58 2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96. Compare with the Labour deficits 2003-08 before the GFC.
Not sure where you are getting those numbers from, 2007 was not 0.95% but as I said, a sine curve going up and down depending upon the stage of the economic cycle.
The catastrophe was putting it up to nearly 3% before the recession hit. What was it before the last recession hit under the Tories?
It didn't go up to nearly 3% before the GFC hit. You can check what it was before the last recession hit under the Tories.
Just look at the data dispassionately without an agenda. Reverse the roles. Suppose the years 1989-96 were under a Labour Government and 1997-2009 were under a Tory government. Would you be saying the same things?
On those figures the best governments in terms of having no deficit were the last two years of the Thatcher government and the 3rd, 4th and 5th years of the Blair government
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.
Here are the deficits as % GDP over the last 30 years Year Deficit %GDP 1980 1.07 1981 1.98 1982 0.58 1983 0.69 1984 1.12 1985 1.26 1986 0.6 1987 0.91 1988 0.81 1989 -0.8 1990 -0.57 1991 0.22 1992 2.13 1993 5.12 1994 5.68 1995 4.45 1996 3.25 Average over Tory years 1.7% deficit 1997 2.75 1998 0.66 1999 -0.42 2000 -1.44 2001 -1.72 2002 -0.45 2003 1.49 2004 1.71 2005 1.76 2006 1.31 2007 0.95 2008 1.2 2009 4.53 Average over Labour years 0.9% 2010 7.23 2011 6.24 2012 5.41 2013 5.28 2014 4.22 2015 3.23 2016 2.48 2017 0.85 2018 0.58 2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96. Compare with the Labour deficits 2003-08 before the GFC.
No context of economic growth there which makes the comparison worthless, unless you're suggesting that Tory governments should cut more spending after recessions?
I'm pointing out that the average deficit over the last 30 years has been about 2% of GDP. It varies by the cycle. Tories have a worse track record than Labour. The big Tory deficits 1992-96 can't be blamed on Labour.
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%
You keep saying it was 1.2%, but as I have pointed out you are looking at the wrong numbers. The correct figure is 1.9% for FY18/19 and it would have been around 2.3% in FY19/20 even without the virus hitting in the last month of that FY rather than the 2.5% actually recorded (OBR says 2.6% but those data are out of date). The point about looking at the whole period is that if the policy in the first period of Labour's period in office was too tight (as most commentators including Ken Clarke agree) then loosening the fiscal stance was the right thing to do, at least up to a point. I am not saying that Labour did not make mistakes. Following Clarke's initial fiscal plans was a mistake. They should have increased public investment more especially in transport infrastructure and housing. They should have kept the deficit a bit lower, maybe about 2% maximum outside of recessions. They certainly should have kept a closer eye on RBS. But your hyperbolic attacks on Brown's record simply don't stack up, they just expose your overt partisanship.
For Labour since they had a balanced budget in 2002 then loosening to keep it as a balanced budget would have been fine. Loosely using all the proceeds of growth for expenditure instead of getting a bigger surplus. Instead they used all the proceeds of growth and then some more to splash out and increase the deficit pre-crash. It was a catastrophic failure of judgement that had never been done before.
If my attacks on Brown don't stand up then please show ANY prior government INCREASING the deficit to 2-3% after a period of growth and in the years before a recession. Or please acknowledge what I am saying that what Brown did was 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.
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.
Here are the deficits as % GDP over the last 30 years Year Deficit %GDP 1980 1.07 1981 1.98 1982 0.58 1983 0.69 1984 1.12 1985 1.26 1986 0.6 1987 0.91 1988 0.81 1989 -0.8 1990 -0.57 1991 0.22 1992 2.13 1993 5.12 1994 5.68 1995 4.45 1996 3.25 Average over Tory years 1.7% deficit 1997 2.75 1998 0.66 1999 -0.42 2000 -1.44 2001 -1.72 2002 -0.45 2003 1.49 2004 1.71 2005 1.76 2006 1.31 2007 0.95 2008 1.2 2009 4.53 Average over Labour years 0.9% 2010 7.23 2011 6.24 2012 5.41 2013 5.28 2014 4.22 2015 3.23 2016 2.48 2017 0.85 2018 0.58 2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96. Compare with the Labour deficits 2003-08 before the GFC.
No context of economic growth there which makes the comparison worthless, unless you're suggesting that Tory governments should cut more spending after recessions?
I'm pointing out that the average deficit over the last 30 years has been about 2% of GDP. It varies by the cycle. Tories have a worse track record than Labour. The big Tory deficits 1992-96 can't be blamed on Labour.
I'm trying to correct some myths with evidence.
You've upset the Tory hive mind now, they're coming for you
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.
Here are the deficits as % GDP over the last 30 years Year Deficit %GDP 1980 1.07 1981 1.98 1982 0.58 1983 0.69 1984 1.12 1985 1.26 1986 0.6 1987 0.91 1988 0.81 1989 -0.8 1990 -0.57 1991 0.22 1992 2.13 1993 5.12 1994 5.68 1995 4.45 1996 3.25 Average over Tory years 1.7% deficit 1997 2.75 1998 0.66 1999 -0.42 2000 -1.44 2001 -1.72 2002 -0.45 2003 1.49 2004 1.71 2005 1.76 2006 1.31 2007 0.95 2008 1.2 2009 4.53 Average over Labour years 0.9% 2010 7.23 2011 6.24 2012 5.41 2013 5.28 2014 4.22 2015 3.23 2016 2.48 2017 0.85 2018 0.58 2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96. Compare with the Labour deficits 2003-08 before the GFC.
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.
Here are the deficits as % GDP over the last 30 years Year Deficit %GDP 1980 1.07 1981 1.98 1982 0.58 1983 0.69 1984 1.12 1985 1.26 1986 0.6 1987 0.91 1988 0.81 1989 -0.8 1990 -0.57 1991 0.22 1992 2.13 1993 5.12 1994 5.68 1995 4.45 1996 3.25 Average over Tory years 1.7% deficit 1997 2.75 1998 0.66 1999 -0.42 2000 -1.44 2001 -1.72 2002 -0.45 2003 1.49 2004 1.71 2005 1.76 2006 1.31 2007 0.95 2008 1.2 2009 4.53 Average over Labour years 0.9% 2010 7.23 2011 6.24 2012 5.41 2013 5.28 2014 4.22 2015 3.23 2016 2.48 2017 0.85 2018 0.58 2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96. Compare with the Labour deficits 2003-08 before the GFC.
No context of economic growth there which makes the comparison worthless, unless you're suggesting that Tory governments should cut more spending after recessions?
I'm pointing out that the average deficit over the last 30 years has been about 2% of GDP. It varies by the cycle. Tories have a worse track record than Labour. The big Tory deficits 1992-96 can't be blamed on Labour.
I'm trying to correct some myths with evidence.
Are you familiar with a sine wave? Do you understand that the average will include peaks above the average and troughs below the average?
An average of 2-3% is perfectly reasonable I 100% agree on that.
But what Brown did was not set the UK's average to 2-3%. He set the UK's pre-recession "trough" to 2-3% with inevitable consequences. If you are running 2-3% deficit before the recession hits then how on earth do you expect to have an average of 2-3% of it after it hits?
EDIT: PS are you aware that 1992 etc was the period after the recession? What was the deficit the Tories had before the recession?
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.
At all the schools I visited during my abortive attempt to become, ahem, a physics teacher a few years ago, the teachers were uniformly addressed as Sir or Miss (regardless of marital status).
How did you manage not to become a Physics teacher? You do have a pulse don’t you?
I decided after a couple of months of teacher training that it wasn't for me. There were a number of reasons for my decision, but first among them was the fact that I also wanted a life outside work. Granted, all new careers are tough to begin with, but one can usually see light at the end of the tunnel after a month or two. I'm glad I gave it a go, but also glad that I gave it up.
Reading through the spats on the posts on here this morning is more chav than reading about the Johnie Depp/Heard case. This site has definitely gone downhill in terms of disrespect over the years
You weren’t here in the Tim days then (I was a lurker in those days).
Come on guys, did you never meet Colin W or Martin Day?
Tim was at least coherent. CW and MD sprayed insults and abuse randomly and chaotically in all directions.
And more importantly for this site, Tim was a punter.
‘... But, really, the Russia report is not about Brexit. Instead it paints a picture of a country which has become the plaything of Russian oligarchs and elites, who have twisted and manipulated Britain’s systems, processes and institutions to their will with impunity...’
Reading through the spats on the posts on here this morning is more chav than reading about the Johnie Depp/Heard case. This site has definitely gone downhill in terms of disrespect over the years
You weren’t here in the Tim days then (I was a lurker in those days).
Come on guys, did you never meet Colin W or Martin Day?
Tim was at least coherent. CW and MD sprayed insults and abuse randomly and chaotically in all directions.
Wasn't it Colin's Mum who sprayed the abuse?
What a shame old comments are no longer accessible. Perfect for insomnia, I'd say. Maybe OGH has private access to them.
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".
bWhat 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.
It would have. The catastrophe would have been averted. The GFC would have happened and we would have moved on.
The catastrophe I am referring to is the 10% deficit in the years after the GFC had happened. As I said always throughout our history previously we had gone into the recession with below-average deficits and come out of it with them above-average and then gradually brought it back down.
Had we gone into the recession with a balanced budget then we would have come out of the recession with say a 7% budget instead of a 10% one. That would simply have been a recession then as normal rather than a fiscal catastrophe. It was the pre-existing deficit that converted having a recession into a catastrophe.
Your prejudices are in the driving seat. With a smaller deficit going into the catastrophe we'd have been a bit better placed to cope with it. The facts cannot in good conscience support a more lurid conclusion than that.
The GFC was not a catastrophe, it was a recession. Recessions happen. It is boom and bust and a natural part of the economic cycle that sound governments need to prepare for.
The catastrophe in the public finances was the 10% deficit that followed the GFC and that was caused by going into a recession with a maxed out deficit. That catastrophe would have been averted had we gone into a recession with a balanced budget as we had the prior recession.
Have a look throughout our history at how much trough-to-peak the budget deficit changes when recessions happen. The ~7% change trough-to-peak change in the deficit during the GFC was not extraordinary. What was extraordinary was having a 3% trough and that is what caused the catastrophe.
"The Global Financial Crisis was not a catastrophe, it was merely a natural part of the economic cycle."
"Entering the GFC with a smaller deficit would have averted most of the pain."
Thank you. 2 more for the list. It is now a nice round 10.
I suggest you get back to posting about Boris's muscly legs. You add much value and insight on that topic.
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.
Here are the deficits as % GDP over the last 30 years Year Deficit %GDP 1980 1.07 1981 1.98 1982 0.58 1983 0.69 1984 1.12 1985 1.26 1986 0.6 1987 0.91 1988 0.81 1989 -0.8 1990 -0.57 1991 0.22 1992 2.13 1993 5.12 1994 5.68 1995 4.45 1996 3.25 Average over Tory years 1.7% deficit 1997 2.75 1998 0.66 1999 -0.42 2000 -1.44 2001 -1.72 2002 -0.45 2003 1.49 2004 1.71 2005 1.76 2006 1.31 2007 0.95 2008 1.2 2009 4.53 Average over Labour years 0.9% 2010 7.23 2011 6.24 2012 5.41 2013 5.28 2014 4.22 2015 3.23 2016 2.48 2017 0.85 2018 0.58 2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96. Compare with the Labour deficits 2003-08 before the GFC.
No context of economic growth there which makes the comparison worthless, unless you're suggesting that Tory governments should cut more spending after recessions?
I'm pointing out that the average deficit over the last 30 years has been about 2% of GDP. It varies by the cycle. Tories have a worse track record than Labour. The big Tory deficits 1992-96 can't be blamed on Labour.
Reading through the spats on the posts on here this morning is more chav than reading about the Johnie Depp/Heard case. This site has definitely gone downhill in terms of disrespect over the years
You weren’t here in the Tim days then (I was a lurker in those days).
Come on guys, did you never meet Colin W or Martin Day?
Tim was at least coherent. CW and MD sprayed insults and abuse randomly and chaotically in all directions.
And more importantly for this site, Tim was a punter.
Yes, he was an astute punter.
I wouldn't want to drive anyone off the site, but I have little time for posters who contribute nothing on either politics or betting. Generally they are easy to avoid though, and that I find is the most effective response.
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.
Here are the deficits as % GDP over the last 30 years Year Deficit %GDP 1980 1.07 1981 1.98 1982 0.58 1983 0.69 1984 1.12 1985 1.26 1986 0.6 1987 0.91 1988 0.81 1989 -0.8 1990 -0.57 1991 0.22 1992 2.13 1993 5.12 1994 5.68 1995 4.45 1996 3.25 Average over Tory years 1.7% deficit 1997 2.75 1998 0.66 1999 -0.42 2000 -1.44 2001 -1.72 2002 -0.45 2003 1.49 2004 1.71 2005 1.76 2006 1.31 2007 0.95 2008 1.2 2009 4.53 Average over Labour years 0.9% 2010 7.23 2011 6.24 2012 5.41 2013 5.28 2014 4.22 2015 3.23 2016 2.48 2017 0.85 2018 0.58 2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96. Compare with the Labour deficits 2003-08 before the GFC.
No context of economic growth there which makes the comparison worthless, unless you're suggesting that Tory governments should cut more spending after recessions?
I'm pointing out that the average deficit over the last 30 years has been about 2% of GDP. It varies by the cycle. Tories have a worse track record than Labour. The big Tory deficits 1992-96 can't be blamed on Labour.
I'm trying to correct some myths with evidence.
Are you familiar with a sine wave? Do you understand that the average will include peaks above the average and troughs below the average?
An average of 2-3% is perfectly reasonable I 100% agree on that.
But what Brown did was not set the UK's average to 2-3%. He set the UK's pre-recession "trough" to 2-3% with inevitable consequences. If you are running 2-3% deficit before the recession hits then how on earth do you expect to have an average of 2-3% of it after it hits?
EDIT: PS are you aware that 1992 etc was the period after the recession? What was the deficit the Tories had before the recession?
I don't know where you are getting the 2-3% Brown deficit from. Look at the figures. The average deficit 2005-2008 was 1.3%. Then look at the Tory figures before and after previous recessions. Are you familiar with the actual pattern of GDP growth by year? They don't look like a sine curve! That's a model you have in your head.
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".
bWhat 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.
It would have. The catastrophe would have been averted. The GFC would have happened and we would have moved on.
The catastrophe I am referring to is the 10% deficit in the years after the GFC had happened. As I said always throughout our history previously we had gone into the recession with below-average deficits and come out of it with them above-average and then gradually brought it back down.
Had we gone into the recession with a balanced budget then we would have come out of the recession with say a 7% budget instead of a 10% one. That would simply have been a recession then as normal rather than a fiscal catastrophe. It was the pre-existing deficit that converted having a recession into a catastrophe.
Your prejudices are in the driving seat. With a smaller deficit going into the catastrophe we'd have been a bit better placed to cope with it. The facts cannot in good conscience support a more lurid conclusion than that.
The GFC was not a catastrophe, it was a recession. Recessions happen. It is boom and bust and a natural part of the economic cycle that sound governments need to prepare for.
The catastrophe in the public finances was the 10% deficit that followed the GFC and that was caused by going into a recession with a maxed out deficit. That catastrophe would have been averted had we gone into a recession with a balanced budget as we had the prior recession.
Have a look throughout our history at how much trough-to-peak the budget deficit changes when recessions happen. The ~7% change trough-to-peak change in the deficit during the GFC was not extraordinary. What was extraordinary was having a 3% trough and that is what caused the catastrophe.
"The Global Financial Crisis was not a catastrophe, it was merely a natural part of the economic cycle."
"Entering the GFC with a smaller deficit would have averted most of the pain."
Thank you. 2 more for the list. It is now a nice round 10.
I suggest you get back to posting about Boris's muscly legs. You add much value and insight on that topic.
Its true. Put them on 'the list' both claims are entirely accurate.
Recessions happen it is a fact of life. It is Brown's hubris that led him to fail to prepare for the next recession. The fact that a recession happened on his watch is not the problem - the problem is what he did BEFORE the recession hit.
Reading through the spats on the posts on here this morning is more chav than reading about the Johnie Depp/Heard case. This site has definitely gone downhill in terms of disrespect over the years
You weren’t here in the Tim days then (I was a lurker in those days).
Come on guys, did you never meet Colin W or Martin Day?
Tim was at least coherent. CW and MD sprayed insults and abuse randomly and chaotically in all directions.
And more importantly for this site, Tim was a punter.
Yes, he was an astute punter.
I wouldn't want to drive anyone off the site, but I have little time for posters who contribute nothing on either politics or betting. Generally they are easy to avoid though, and that I find is the most effective response.
Reading through the spats on the posts on here this morning is more chav than reading about the Johnie Depp/Heard case. This site has definitely gone downhill in terms of disrespect over the years
You weren’t here in the Tim days then (I was a lurker in those days).
Come on guys, did you never meet Colin W or Martin Day?
Tim was at least coherent. CW and MD sprayed insults and abuse randomly and chaotically in all directions.
Wasn't it Colin's Mum who sprayed the abuse?
What a shame old comments are no longer accessible. Perfect for insomnia, I'd say. Maybe OGH has private access to them.
You were obviously paying closer attention than me. All I can remember is his state of permanent apoplexy.
None of our current contibutors are in the same class.
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.
Here are the deficits as % GDP over the last 30 years Year Deficit %GDP 1980 1.07 1981 1.98 1982 0.58 1983 0.69 1984 1.12 1985 1.26 1986 0.6 1987 0.91 1988 0.81 1989 -0.8 1990 -0.57 1991 0.22 1992 2.13 1993 5.12 1994 5.68 1995 4.45 1996 3.25 Average over Tory years 1.7% deficit 1997 2.75 1998 0.66 1999 -0.42 2000 -1.44 2001 -1.72 2002 -0.45 2003 1.49 2004 1.71 2005 1.76 2006 1.31 2007 0.95 2008 1.2 2009 4.53 Average over Labour years 0.9% 2010 7.23 2011 6.24 2012 5.41 2013 5.28 2014 4.22 2015 3.23 2016 2.48 2017 0.85 2018 0.58 2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96. Compare with the Labour deficits 2003-08 before the GFC.
No context of economic growth there which makes the comparison worthless, unless you're suggesting that Tory governments should cut more spending after recessions?
I'm pointing out that the average deficit over the last 30 years has been about 2% of GDP. It varies by the cycle. Tories have a worse track record than Labour. The big Tory deficits 1992-96 can't be blamed on Labour.
I'm trying to correct some myths with evidence.
Are you familiar with a sine wave? Do you understand that the average will include peaks above the average and troughs below the average?
An average of 2-3% is perfectly reasonable I 100% agree on that.
But what Brown did was not set the UK's average to 2-3%. He set the UK's pre-recession "trough" to 2-3% with inevitable consequences. If you are running 2-3% deficit before the recession hits then how on earth do you expect to have an average of 2-3% of it after it hits?
EDIT: PS are you aware that 1992 etc was the period after the recession? What was the deficit the Tories had before the recession?
I don't know where you are getting the 2-3% Brown deficit from. Look at the figures. The average deficit 2005-2008 was 1.3%. Then look at the Tory figures before previous recessions. Are you familiar with the actual pattern of GDP growth by year? They don't look like a sine curve! That's a model you have in your head.
Yes I have to say read when I read sine curve I confused
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.
At all the schools I visited during my abortive attempt to become, ahem, a physics teacher a few years ago, the teachers were uniformly addressed as Sir or Miss (regardless of marital status).
How did you manage not to become a Physics teacher? You do have a pulse don’t you?
I decided after a couple of months of teacher training that it wasn't for me. There were a number of reasons for my decision, but first among them was the fact that I also wanted a life outside work. Granted, all new careers are tough to begin with, but one can usually see light at the end of the tunnel after a month or two. I'm glad I gave it a go, but also glad that I gave it up.
What is this “life outside work” of which you speak?
More seriously it is tough for the first few years, but Physics teachers have it easier than most as what we teach doesn’t change much from year to year even through the many revisions to the curriculum. English teachers have to do new books and plays every couple of years (and there are stories most summers about teachers who don’t check and teach the wrong book), history teachers have to teach different periods of history, but the Physics specification I’m teaching now is 80% the same as the one I was teaching back in the early 90’s. It’s one of the reasons the lock down was a pain: I couldn’t do what I normally do and let the lesson flow through interactions in class, which might look to the uninitiated as if I am making it up as I go along, but I cover all the points I need to and am able to answer questions as I go. Instead I had to prepare detailed notes before the lesson which took far longer.
Reading through the spats on the posts on here this morning is more chav than reading about the Johnie Depp/Heard case. This site has definitely gone downhill in terms of disrespect over the years
You weren’t here in the Tim days then (I was a lurker in those days).
Come on guys, did you never meet Colin W or Martin Day?
Tim was at least coherent. CW and MD sprayed insults and abuse randomly and chaotically in all directions.
And more importantly for this site, Tim was a punter.
Yes, he was an astute punter.
I wouldn't want to drive anyone off the site, but I have little time for posters who contribute nothing on either politics or betting. Generally they are easy to avoid though, and that I find is the most effective response.
Sadly I won't be going anywhere
Lol! I would never be so presumptious as to produce a list but if I did you wouldn't even be a candidate.
Reading through the spats on the posts on here this morning is more chav than reading about the Johnie Depp/Heard case. This site has definitely gone downhill in terms of disrespect over the years
Dunno, it's been a while since I was called a paedophile or cunty. Perhaps I've just got less paedophilic and/or cunty.
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.
Here are the deficits as % GDP over the last 30 years Year Deficit %GDP 1980 1.07 1981 1.98 1982 0.58 1983 0.69 1984 1.12 1985 1.26 1986 0.6 1987 0.91 1988 0.81 1989 -0.8 1990 -0.57 1991 0.22 1992 2.13 1993 5.12 1994 5.68 1995 4.45 1996 3.25 Average over Tory years 1.7% deficit 1997 2.75 1998 0.66 1999 -0.42 2000 -1.44 2001 -1.72 2002 -0.45 2003 1.49 2004 1.71 2005 1.76 2006 1.31 2007 0.95 2008 1.2 2009 4.53 Average over Labour years 0.9% 2010 7.23 2011 6.24 2012 5.41 2013 5.28 2014 4.22 2015 3.23 2016 2.48 2017 0.85 2018 0.58 2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96. Compare with the Labour deficits 2003-08 before the GFC.
No context of economic growth there which makes the comparison worthless, unless you're suggesting that Tory governments should cut more spending after recessions?
I'm pointing out that the average deficit over the last 30 years has been about 2% of GDP. It varies by the cycle. Tories have a worse track record than Labour. The big Tory deficits 1992-96 can't be blamed on Labour.
I'm trying to correct some myths with evidence.
Are you familiar with a sine wave? Do you understand that the average will include peaks above the average and troughs below the average?
An average of 2-3% is perfectly reasonable I 100% agree on that.
But what Brown did was not set the UK's average to 2-3%. He set the UK's pre-recession "trough" to 2-3% with inevitable consequences. If you are running 2-3% deficit before the recession hits then how on earth do you expect to have an average of 2-3% of it after it hits?
EDIT: PS are you aware that 1992 etc was the period after the recession? What was the deficit the Tories had before the recession?
I don't know where you are getting the 2-3% Brown deficit from. Look at the figures. The average deficit 2005-2008 was 1.3%. Then look at the Tory figures before and after previous recessions. Are you familiar with the actual pattern of GDP growth by year? They don't look like a sine curve! That's a model you have in your head.
I know its not a since curve! I wasn't being literal, it was an analogy. Like that, a curve that goes up and down though the up part of the deficit (down part of GDP) is steeper than the down part of the deficit (up part of the GDP).
The problem was that 2002-2007 were pre-crisis years. Pre-crisis we should have been running a balanced budget or better because it was a period of economic growth. Instead we ran a deficit in the pre-crisis years that is supposed to be the average.
The consequences post-crisis were inevitable. Absolutely inevitable. It doesn't matter what triggered the recession. The GFC itself is irrelevant, if it wasn't the GFC something else would have inevitably triggered a recession since recessions happen as part of the economic cycle. Going into the recession with what is supposed to be an average deficit at the peak of our growth period . . . that was the catastrophe and it was 100% avoidable, 100% foreseeable and 100% preventable and 100% unprecedented.
PS I'm getting 2-3% deficit for Brown because that is what it was.
I don't know who at Apple decided Mac vs PC but they are a genius.
Apple's advertising campaign on that theme a few years ago was a total disaster, though.
It was a UK version of a US advert portraying the "PC guy" as a nerdy loser, and "Mac guy" as a cool creative. Unfortunately, they cast David Mitchell as PC and Robert Webb as Mac at the peak of Peep Show, not properly appreciating that Mitchell was (broadly) the sympathetic underdog and Webb the lazy narcissist. A bit of a case of the comedy being lost in translation.
The campaign was fairly quickly dropped, and Robert Webb at least has claimed the market research indicated a lot of people not only thought better of PC and worse of Mac on viewing it, but many genuinely believed it was a Microsoft rather than Apple advert.
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.
At all the schools I visited during my abortive attempt to become, ahem, a physics teacher a few years ago, the teachers were uniformly addressed as Sir or Miss (regardless of marital status).
How did you manage not to become a Physics teacher? You do have a pulse don’t you?
I decided after a couple of months of teacher training that it wasn't for me. There were a number of reasons for my decision, but first among them was the fact that I also wanted a life outside work. Granted, all new careers are tough to begin with, but one can usually see light at the end of the tunnel after a month or two. I'm glad I gave it a go, but also glad that I gave it up.
What is this “life outside work” of which you speak?
More seriously it is tough for the first few years, but Physics teachers have it easier than most as what we teach doesn’t change much from year to year even through the many revisions to the curriculum. English teachers have to do new books and plays every couple of years (and there are stories most summers about teachers who don’t check and teach the wrong book), history teachers have to teach different periods of history, but the Physics specification I’m teaching now is 80% the same as the one I was teaching back in the early 90’s. It’s one of the reasons the lock down was a pain: I couldn’t do what I normally do and let the lesson flow through interactions in class, which might look to the uninitiated as if I am making it up as I go along, but I cover all the points I need to and am able to answer questions as I go. Instead I had to prepare detailed notes before the lesson which took far longer.
Yeah, but you're in dead trouble if the laws of the universe change.
I don't know who at Apple decided Mac vs PC but they are a genius.
Apple's advertising campaign on that theme a few years ago was a total disaster, though.
It was a UK version of a US advert portraying the "PC guy" as a nerdy loser, and "Mac guy" as a cool creative. Unfortunately, they cast David Mitchell as PC and Robert Webb as Mac at the peak of Peep Show, not properly appreciating that Mitchell was (broadly) the sympathetic underdog and Webb the lazy narcissist. A bit of a case of the comedy being lost in translation.
The campaign was fairly quickly dropped, and Robert Webb at least has claimed the market research indicated a lot of people not only thought better of PC and worse of Mac on viewing it, but many genuinely believed it was a Microsoft rather than Apple advert.
Yes I recall the short-lived UK version although the US version was very successful and ran for many years.
Reading through the spats on the posts on here this morning is more chav than reading about the Johnie Depp/Heard case. This site has definitely gone downhill in terms of disrespect over the years
You weren’t here in the Tim days then (I was a lurker in those days).
Come on guys, did you never meet Colin W or Martin Day?
Tim was at least coherent. CW and MD sprayed insults and abuse randomly and chaotically in all directions.
And more importantly for this site, Tim was a punter.
Yes, he was an astute punter.
I wouldn't want to drive anyone off the site, but I have little time for posters who contribute nothing on either politics or betting. Generally they are easy to avoid though, and that I find is the most effective response.
Sadly I won't be going anywhere
Lol! I would never be so presumptious as to produce a list but if I did you wouldn't even be a candidate.
That's kind but I am sure I am already on many lists and I welcome it.
Tory feather ruffler, perhaps I should add that to my bio
Reading through the spats on the posts on here this morning is more chav than reading about the Johnie Depp/Heard case. This site has definitely gone downhill in terms of disrespect over the years
Dunno, it's been a while since I was called a paedophile or cunty. Perhaps I've just got less paedophilic and/or cunty.
You haven't been done until you have receive the full blast of SeanT's original and carefully worded invective. Sadly he is no longer with us.
Reading through the spats on the posts on here this morning is more chav than reading about the Johnie Depp/Heard case. This site has definitely gone downhill in terms of disrespect over the years
You weren’t here in the Tim days then (I was a lurker in those days).
Come on guys, did you never meet Colin W or Martin Day?
Tim was at least coherent. CW and MD sprayed insults and abuse randomly and chaotically in all directions.
And more importantly for this site, Tim was a punter.
Yes, he was an astute punter.
I wouldn't want to drive anyone off the site, but I have little time for posters who contribute nothing on either politics or betting. Generally they are easy to avoid though, and that I find is the most effective response.
I think the point to remember is that while most posters of course are right or left leaning to some degree, there are few genuine neutrals here, this is not a political campaign blog but a political analysis and betting blog yes.
So while you can present the case for your side and point of view you also have to do at least some reflection on what will happen electorally in a reasonably objective fashion from time to time.
I would highlight Nick Palmer and indeed yourself as two examples of people who are always unfailingly polite and able to give shrewd analysis without getting personal and overly aggressive, despite Nick's political views being well to the left of mine I find him one of the easiest to converse with on here
The Donlad's best poll for a long time. If it were more representative and from a less questionable source it might have moved the betting but he remains a 15/8 chance.
Edit: That was a genuine typo but I kind of like it.
Comments
I'll re-post it for your benefit.
https://politicalbetting.vanillacommunity.com/discussion/comment/2953649#Comment_2953649
Me: Please can you call me Horse. Calling me Mr makes me very uncomfortable and makes me feel like you're putting me above yourself.
Big G: Morris Dancer calls everyone Mr and it is quite endearing
Me: Nah I think it's fucking unnerving and I asked him to stop.
So even though I was accused of swearing at Morris_Dancer, actually I didn't.
On one level this is all semantics, but semantics and symbolism are extremely important in politics, and of multiple uses to people.
like in the song.
As for @Morris_Dancer, I posted the discussion above, for your benefit.
Click the 'show previous quotes' and see an immortal argument laid out in all it's glory.
The catastrophe I am referring to is the 10% deficit in the years after the GFC had happened. As I said always throughout our history previously we had gone into the recession with below-average deficits and come out of it with them above-average and then gradually brought it back down.
Had we gone into the recession with a balanced budget then we would have come out of the recession with say a 7% budget instead of a 10% one. That would simply have been a recession then as normal rather than a fiscal catastrophe. It was the pre-existing deficit that converted having a recession into a catastrophe.
I am afraid I don't know if many Norway politicians would argue they are transitioning to socialism? I suspect they'd say they're social democrats, I confess I don't know.
My contention isn't with social democracy vs socialism (which is clearly different despite some saying to the contrary), my contention is with this idea that today social democracy is still a transition to socialism in Norway, Sweden.
My honest belief is it was a transition, then they got stuck, decided they liked it and they've been set there ever since.
Edit: you could be right!
At least that lesson appeared to have been learnt by the Tories in recent years; even pre-Covid the damage to public services was becoming clear and the low-spending mantra had been abandoned.
Hopefully, that lesson will help a bit in the next few years.
I was accused of swearing at Morris, I did not.
If swearing is against the site rules then the moderation team - of which I note, you are not one despite your arrogant claims to the contrary, along with Big G - can let me know.
I will not apologise for anything I said there, it was all spot on. I don't sit here and tell you how to behave.
If you don't like what I have to say, there's a very simple solution, don't respond. I am not telling you either way, if you want to respond that's fine, I will call you out each and every time.
What I am fed up with here is people pretending they are the site police. You aren't, you clearly have issues with people calling out your crap.
The same happens in the US where any attempt at a sane health system is compared to ours rather than (say) the Canadian one.
There is no evidence the recovery slowed, the UK grew faster under Cameron and Osborne than our continental peers on average.
Pre-COVID the roof had been fixed while the sun was shining. The UK deficit was down to 1.2% in the final Financial Year before the recession. Below average giving us more slack to go above average afterwards without it being catastrophic.
The UK's deficit should be similar to a sine curve running at an average of 2-3% but peaks at recessions and troughs in boom times. The problem is that Brown put the trough at where the average was meant to be and called it "affordable" - it was not. It never could be, unless we were never going to have another bust.
The Lib Dems are probably the most clean, I would think
I object to being sworn at or seeing others sworn at. I don't do it myself. I have asked @PBModerator to weigh in on whether such foul and abusive language is appropriate, I never "arrogantly" claimed to be a moderator myself.
Year Deficit %GDP
1980 1.07
1981 1.98
1982 0.58
1983 0.69
1984 1.12
1985 1.26
1986 0.6
1987 0.91
1988 0.81
1989 -0.8
1990 -0.57
1991 0.22
1992 2.13
1993 5.12
1994 5.68
1995 4.45
1996 3.25 Average over Tory years 1.7% deficit
1997 2.75
1998 0.66
1999 -0.42
2000 -1.44
2001 -1.72
2002 -0.45
2003 1.49
2004 1.71
2005 1.76
2006 1.31
2007 0.95
2008 1.2
2009 4.53 Average over Labour years 0.9%
2010 7.23
2011 6.24
2012 5.41
2013 5.28
2014 4.22
2015 3.23
2016 2.48
2017 0.85
2018 0.58
2019 -0.22 Average over Tory years 3.5%
Look at the Tory deficits 1992-96.
Compare with the Labour deficits 2003-08 before the GFC.
Their esteemed leader obviously disagrees as they've given up any semblance of "balancing the books".
Somebody want to try and explain this away?
The German welfare state goes back to Bismark, and was intended as one of the foundations of its economic development.
State capacity (infrastructure; science base; public health; welfare systems etc) really isn't the same thing as socialism - and to an extent is orthogonal to left/right politics.
The early South Korea, for example, had what one might consider a right wing dictatorship, but pretty strong state capacity in relation to the resources available to it.
The catastrophe was putting it up to nearly 3% before the recession hit. What was it before the last recession hit under the Tories?
Also, what is your source for these?
Seems to me as though it goes in regular cycles.
I’m on Vanilla using an iPad. What about you?
The catastrophe in the public finances was the 10% deficit that followed the GFC and that was caused by going into a recession with a maxed out deficit. That catastrophe would have been averted had we gone into a recession with a balanced budget as we had the prior recession.
Have a look throughout our history at how much trough-to-peak the budget deficit changes when recessions happen. The ~7% change trough-to-peak change in the deficit during the GFC was not extraordinary. What was extraordinary was having a 3% trough and that is what caused the catastrophe.
I told somebody to fuck off, are you honestly telling me you feel abused by that? I told them to fuck off by the way, because of what was clearly an attempt at trolling.
You then posted some utter shite about social democracy vs socialism and what it meant for me, which you know to be wrong, just in an effort to bait me. I told you to fuck off with that too.
If there was any moderation, it should be removing your very poor attempts at trolling, not my calling them out.
Pretending you got offended because I said fuck a few times is just pathetic. I didn't personally attack you or anyone else, I just don't told you to fuck off with your shite. I feel sorry for you if you are offended by that and I also think it shows the level of arrogance you have.
https://www.ukpublicspending.co.uk/download_multi_year_1980_2021UKp_17c1li111mcn_H1t
It didn't go up to nearly 3% before the GFC hit. You can check what it was before the last recession hit under the Tories.
Just look at the data dispassionately without an agenda. Reverse the roles. Suppose the years 1989-96 were under a Labour Government and 1997-2009 were under a Tory government. Would you be saying the same things?
The point about looking at the whole period is that if the policy in the first period of Labour's period in office was too tight (as most commentators including Ken Clarke agree) then loosening the fiscal stance was the right thing to do, at least up to a point.
I am not saying that Labour did not make mistakes. Following Clarke's initial fiscal plans was a mistake. They should have increased public investment more especially in transport infrastructure and housing. They should have kept the deficit a bit lower, maybe about 2% maximum outside of recessions. They certainly should have kept a closer eye on RBS. But your hyperbolic attacks on Brown's record simply don't stack up, they just expose your overt partisanship.
Catalonia: The number of positive Covid-19 reported drops for the fifth consecutive day and 590 new infections were recorded in the last 24 hours, half the number reported on the 15th, according to data released by the Health Department of the Generalitat . EFE
Presumably Philip was against the spending at the time, as he is all knowing. I guarantee he backed the Tories at the time and all the deregulation and spending they wanted.
Tim was at least coherent. CW and MD sprayed insults and abuse randomly and chaotically in all directions.
Source https://www.ukpublicspending.co.uk/download_multi_year_1980_2021UKp_17c1li111mcn_H1t
I'm trying to correct some myths with evidence.
https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicspending/bulletins/ukgovernmentdebtanddeficitforeurostatmaast/march2019
For Labour since they had a balanced budget in 2002 then loosening to keep it as a balanced budget would have been fine. Loosely using all the proceeds of growth for expenditure instead of getting a bigger surplus. Instead they used all the proceeds of growth and then some more to splash out and increase the deficit pre-crash. It was a catastrophic failure of judgement that had never been done before.
If my attacks on Brown don't stand up then please show ANY prior government INCREASING the deficit to 2-3% after a period of growth and in the years before a recession. Or please acknowledge what I am saying that what Brown did was unprecedented.
This gives a more balanced look at the topic I think (even if it is from Cambridge)
http://www.econ.cam.ac.uk/MMPM/s-papers/Paul-Johnson-fiscal-pre-crisis-slides.pdf
An average of 2-3% is perfectly reasonable I 100% agree on that.
But what Brown did was not set the UK's average to 2-3%. He set the UK's pre-recession "trough" to 2-3% with inevitable consequences. If you are running 2-3% deficit before the recession hits then how on earth do you expect to have an average of 2-3% of it after it hits?
EDIT: PS are you aware that 1992 etc was the period after the recession? What was the deficit the Tories had before the recession?
Headline - 15 - last Tuesday was 26
7 Days - 7 - lots of back dating
Yesterday - 0
As every last 3-5 days subject to revision etc....
https://www.thelondoneconomic.com/opinion/the-russia-report-is-not-about-brexit/21/07/?amp&__twitter_impression=true
What a shame old comments are no longer accessible. Perfect for insomnia, I'd say. Maybe OGH has private access to them.
"Entering the GFC with a smaller deficit would have averted most of the pain."
Thank you. 2 more for the list. It is now a nice round 10.
I suggest you get back to posting about Boris's muscly legs. You add much value and insight on that topic.
I wouldn't want to drive anyone off the site, but I have little time for posters who contribute nothing on either politics or betting. Generally they are easy to avoid though, and that I find is the most effective response.
The average deficit 2005-2008 was 1.3%.
Then look at the Tory figures before and after previous recessions.
Are you familiar with the actual pattern of GDP growth by year? They don't look like a sine curve! That's a model you have in your head.
Recessions happen it is a fact of life. It is Brown's hubris that led him to fail to prepare for the next recession. The fact that a recession happened on his watch is not the problem - the problem is what he did BEFORE the recession hit.
None of our current contibutors are in the same class.
More seriously it is tough for the first few years, but Physics teachers have it easier than most as what we teach doesn’t change much from year to year even through the many revisions to the curriculum. English teachers have to do new books and plays every couple of years (and there are stories most summers about teachers who don’t check and teach the wrong book), history teachers have to teach different periods of history, but the Physics specification I’m teaching now is 80% the same as the one I was teaching back in the early 90’s.
It’s one of the reasons the lock down was a pain: I couldn’t do what I normally do and let the lesson flow through interactions in class, which might look to the uninitiated as if I am making it up as I go along, but I cover all the points I need to and am able to answer questions as I go. Instead I had to prepare detailed notes before the lesson which took far longer.
The problem was that 2002-2007 were pre-crisis years. Pre-crisis we should have been running a balanced budget or better because it was a period of economic growth. Instead we ran a deficit in the pre-crisis years that is supposed to be the average.
The consequences post-crisis were inevitable. Absolutely inevitable. It doesn't matter what triggered the recession. The GFC itself is irrelevant, if it wasn't the GFC something else would have inevitably triggered a recession since recessions happen as part of the economic cycle. Going into the recession with what is supposed to be an average deficit at the peak of our growth period . . . that was the catastrophe and it was 100% avoidable, 100% foreseeable and 100% preventable and 100% unprecedented.
PS I'm getting 2-3% deficit for Brown because that is what it was.
It was a UK version of a US advert portraying the "PC guy" as a nerdy loser, and "Mac guy" as a cool creative. Unfortunately, they cast David Mitchell as PC and Robert Webb as Mac at the peak of Peep Show, not properly appreciating that Mitchell was (broadly) the sympathetic underdog and Webb the lazy narcissist. A bit of a case of the comedy being lost in translation.
The campaign was fairly quickly dropped, and Robert Webb at least has claimed the market research indicated a lot of people not only thought better of PC and worse of Mac on viewing it, but many genuinely believed it was a Microsoft rather than Apple advert.
Tory feather ruffler, perhaps I should add that to my bio
Perhaps his bastard offspring LadyG could assist.
So while you can present the case for your side and point of view you also have to do at least some reflection on what will happen electorally in a reasonably objective fashion from time to time.
I would highlight Nick Palmer and indeed yourself as two examples of people who are always unfailingly polite and able to give shrewd analysis without getting personal and overly aggressive, despite Nick's political views being well to the left of mine I find him one of the easiest to converse with on here
Edit: That was a genuine typo but I kind of like it.