Haha, win!

(or, “political observation win, depressing UK government idiocy fail”)

He did propose one or two other things….

As far as I am aware oil is still generating revenue for the country and Brown could have been stashing it away in a special fund for the last 12 years, but instead he chose to spend it on guess what?

“tax cuts for the rich, profits for private companies, closing down coal mines and out of work benefits for millions of people”

I don’t think Benn was arguing for the kind of fund which Norway has, was he?

I suspect he wanted the government to spend it (right then), while Thatcher didn’t.

But you’re right of course. Well done Norway.

And they avoided the costs of the EU too – double win for them!

I presume that the current Labour government wisely set up an oil fund that would have paid off the national debt and benefited from the recent spikes in the price of oil.

Or maybe not.

Yes, Benn wanted to ban off-shore ‘pirate’ radio stations (early 60′s) – so, perhaps not all of his nautical ideas were sound?

It would be nice to be fighting over oil money, although I doubt the cash would have remained ‘ring-fenced’ given we are now fighting x2 wars, and are committed to bailing out greedy bankers.

1. Oil is a vastly greater proportion of Norways GDP, than it ever has been in the UK. The cases are not alike. The state still gets a 1/3 of its income from the North Sea

2. If such a reserve existed, Gordon Brown would have already spent it by now. Indeed he would have borrowed against future revenues by now.

No-one saved Britain from the a good chunk of the Gold reserve being sold off at a discount price by a Labour chancellor of the exchequer so I wouldn’t be so confident that had Benn’s policy been implemented we would have had one iota more of a strategic reserve today.

I was watching the DVD extras on Michael Moore’s documentary “Sicko” and Norway’s long term strategy for the use of oil revenues featured in one of them.

Apparently they got a philosopher to advise on what best to do in the country’s interest with the funds (which was stick it away for a rainy day as detailed here) rather than relying on the -ahem – “wisdom” of accountants, lobbyists, bankers or rightwing journalists – as would have happened in Britain.

Thatcher definitely spunked it all by showering the rich with oil funded tax breaks – rather like the proverbial drunk buying rounds in a bar room. Was there no end to that woman’s flagrant hypocrisy and nefarious impact on Britian?

There was also an eye-popping piece on Norway’s very open, liberal prisons for murderers and sex criminals!

DONTMINDME is right.

One-eye McBroon would have spent the entire oil windfall on new Trident submarines and Parliamentary allowances for NuLab baronesses.

That and three-million-quid pension pots for police chiefs.

RULE BRITANNIA!

IMO when writing on taxation issues, it’s generally advisable to first consult the oracle, namely the Institute of Fiscal Studies, as with its survey: Long-term Trends in British Taxation and Spending, from which the following extract is borrowed:
http://www.ifs.org.uk/bns/bn25.pdf

“But during the 1973 reform, the very top rate of income tax on earnings was left at 75 per cent. In 1974, the top rate on earnings was actually increased, to 83 per cent. Throughout these years, the highest feasible rate on investment income was higher still. These very high tax rates became the focus for discontent over the possible disincentive effects of taxation, even though they affected very few individuals and the theoretical impact on labour supply was ambiguous.

“The top rate on earnings was cut to 60 per cent in 1979 and then 40 per cent in 1988, while the basic rate also fell, from 35 per cent in 1977 to 22 per cent in 2000. Partly to offset the costs of these reductions, a range of allowances, such as mortgage tax relief, life assurance premium relief and the married couple’s allowance, have been removed. In addition, the number of higher-rate taxpayers increased in the last two decades of the twentieth century, as the thresholds between bands were generally indexed only in line with prices (which tend to go up more slowly than incomes). Together these changes help to explain why, in spite of the cuts in ‘headline’ tax rates, the relative importance of income and capital taxes in the total was maintained over the 1980s (as we saw in Figure 2.1)” [pp.6-7]

I distinctly recall Neil Kinnock making the point in the 1992 election campaign that tax revenues as a percentage of Britain’s GDP were then much the same as when Mrs Thatcher became PM in May 1979.

Recommended reading: Optimal Taxation in Theory and Practice
http://www.economics.harvard.edu/faculty/mankiw/files/Optimal%20Taxation%20in%20Theory.pdf

Academic papers on optimal taxation by Nobel laureate James Mirrlees deserve some/much of the later blame/praise for the cutting back of top rates of income tax not only in Britain but in most developed economies. As I recall, one of Putin’s tax reforms when he became president of Russia was to cut the standard rate of income tax there to 13%.

Does anyone do a sanity check on blogs on here?

Margaret Thatcher, PM 20 years ago, is responsible for a deficit built up in the last 5. Do you even expect to be taken seriously?

What is possible in a country with 4 million people is meant to be exactly the same in a country of 60 million?

Basic facts in this piece are wrong or utterly distorted – Wilson closed pits at a faster rate than Thatcher; higher earners paid a larger share of all income tax revenues after the Thatcher period; public debt stopped growing etc etc

Here is someone who lives in such a distorted, twisted world that to have an intelligent conversation about politics with them hardly seems possible.

For a recent IFS paper on UK taxation, see this paper intended for the IFS sponsored Mirrlees Review of the UK’s tax system:
http://www.ifs.org.uk/mirrleesreview/reports/uktax.pdf

… I hope this is not part of some warm embrace of early 1980s Labour policies. If it is, can I mention the words “Alternative Economic Strategy”. Sanity, run for the hills!

Despite the fact that this piece is by Neil Clark I’ll take it as being roughly correct:

http://www.bennites.com/ARGUMENTSFORSOCIALISM.html

“Benn?s response was to set up the British National Oil Corporation, a state-owned enterprise, to ensure that the country would derive maximum benefit from the development of new oilfields and to press for a North Sea oil development fund. Benn wanted oil revenues to be ring-fenced for Britain?s industrial regeneration and not used to finance unemployment benefits or short-term tax cuts. At the time, his approach was derided as ?statist? and attacked by free market propagandists. Yet, across the North Sea, Norway did follow the path of state intervention and established a national Oil Company (Statoil) and a State Petroleum Fund for the country?s future. Norway?s reward for eschewing the Thatcherite path is to be officially accorded the distinction of the richest country in the world, with its State Petroleum Fund, (now known as The National Pension Fund), currently showing a surplus of $210bn. ”

Now, leave aside for a moment that 4 million people enjoying roughly the same total amount of oil and gas as 60 million is rather different (as mentioned above) and even the more extreme thought that closing down the coal mines was an investment that needed to be made (yes, closing down loss makers is an investment) and turn for a moment to everyone’s favourite subject: economics.

The point of a sovereign wealth fund is not to save money for the future, although that’s a nice side effect. The point is to avoid “Dutch Disease”.

That is, when there’s some huge natural resource being pulled out of the ground then the currency will appreciate. For if we sell all the oil, take the dollars (yen, Dmarks, whatever) and then sell them for pounds we’ll drive the pound up against those other currencies. Makes no difference if we price it in pounds, they have to buy the pounds, forcing the currency up, before they can buy our oil.

This makes huge amounts of domestic production expensive as compared with imported goods (and makes exports hugely difficult of course). This is “Dutch Disease” after what happened to Holland after their discoveries of natural gas. You get a roaring trade deficit and domestic industry takes a huge whack.*

So, how do you avoid it? Essentially, you don’t spend the money from the natural resource in the domestic economy. As the Norwegians have not. They keep the $, € etc they are paid for their oil and gas in $ and € and invest it *outside Norway*. For that’s the only way you can do it, make sure that all that moolah that you’re getting does not get translated into domestic currency and does not get spent in the domestic economy.

*That’s* the point of a sovereign wealth fund.

And Benn, as above, was going to spend all that moolah on sorting out British industry. That is, converting it into pounds and spending it in the domestic economy. Thus ensuring Dutch Disease.

“But, y’know, thank goodness Maggie Thatcher ’saved’ Britain from the loony left”

Quite.

(I’m not hugely convinced that what was done was the right thing either, but this particular counter factual about Benn simply doesn’t work, sorry. A wealth fund that wasn’t spent in the UK could have worked but that wasn’t what Benn was proposing.).

* As it did of course.

Tim – as usual, very interesting.

Is that the rationale for all such funds?

While Norway’s big old oil fund is indeed a wonderous thing (and now biggest outside the middle east, I seem to recall??), the recent election was a welcome relief, more than a ringing endorsement of Labour.

As can be seen from the results here:
http://www.norwaypost.no/content/view/22509/26/

The rest of their left coalition didn’t fare well at all, with the “Liberal Left” leader resigning the next day, and their overall majority is actually down by 1 seat.

The real good news is that the openly bigoted and racist Progress Party only gained fractionally, but they and their close chums in the Conservative party have 71 seats between them, to Labour’s 64.

The real ‘red’ “comrades” over there were effectively obliterated.

Also, Norway’s voting system is a wee bit bizarre – not all votes are anything like equal:
e.g. “An example of how the system from 1917 works is that a vote cast in Finnmark has 2.5 times the weight of one cast in Oslo. According to the paper, the commission who oversaw the electoral system of the time thought it natural that their vote should count less, because Oslo was closer to the organs of power. This principle has survived every revision to the system to date. ”
(http://theforeigner.no/pages/news/osce-calls-norwegian-voting-procedures-undemocratic/)

Which means that the Progress Party received a lot more votes than the final statistics show, since their support is more highly concentrated in Oslo (a city that has something like 22% of the entire national population) and urban areas.

In terms of the oil fund, Norway is, in fact, almost split in half between those who’d like to dip into more of the cash now, ta, and the folk who want to keep a longer view.

And as for the EU, all the major parties are internally divided over that, so the national debate involves very entertaining temporary allegiances, although they mostly seem to be sensibly keeping well out of it for now.

Wish my Norwegian girlfriend wasn’t in Nepal right now..she’s lovely. And wonderful.

Ho hum.

@ James

But budget deficits are characteristic of Right Wing economics! Deficits and conservative government go hand-in-hand!

Yeah, Labour are racking up huge deficits too, and that’s because they’ve governed like the worst conservative governments around the world.

There is not a scintilla of evidence that taxing low for the sake of ideology has had any long lasting beneficial effect either on the economy or the society that underpins that economy. All developed western nations today gained their current levels of prosperity during periods of high spending and higher taxation.

For once, I’m in agreement with Tim Worstall.

The danger of “dutch disease” is indeed serious enough that Britain was right not to undertake statist measures with regard to natural resource revenue, which has been the strategy of many a populist developing country government.

There is much consensus amongst academics from both sides of the ideological spectrum that natural resources should be spurned to keep your economies afloat and your democracies functioning.

Norway gambled on a new strategy, external sovereign wealth funds, and it’s worked. It hasn’t worked for anyone else, though Ghana is about to try.

Loads more in this month’s issue of Foreign Policy: http://www.foreignpolicy.com/issues/174/contents

Oh dear, looks as though what was intended as a jibe against Thatcher (who left power when exactly??) has turned into an interesting discussion.

Hi cjcjc,

“Oh dear, looks as though what was intended as a jibe against Thatcher (who left power when exactly??) has turned into an interesting discussion.”

Why is that ‘oh dear’. Interesting discussions are a good thing, right?

“Is that the rationale for all such funds?”

Yup, the current Russian one included (although they’ve been raiding that).

A lot of “whataboutery” in the comments – and “whataboutery” that is ill-informed as well.

Oil revenues were at their peak in the 1980s. The last Government had far more to draw on than the present one (£179 billion 1979-1997 in real terms, versus £79 billion 1997-2009 in real terms – all at 2008 prices).

For all those whinging about the deficit operated by this Government, a few home truths about the previous Conservatives fiscal sins.

The cumulative current budget deficit operated by the previous Conservative administration was £318 billion 1979-1997 – £17.7bn per year. This was caused by deliberate policies of unfunded tax-cuts for the rich and deliberate creation of recession and unemployment. This was funded by selling off UK PLCs assets (water, gas, telecoms, council housing – the list goes on) at a discount to their mates in the City to help them get further profit, and to a discount to those in council housing as a political bribe. Running down the states remaining assets (schools and hospitals in disrepair, antiquated hospital equipment etc) also helped prevent the situation being even worse, as did running down public services and providing public sector workers with unsustainably low pay increases.

The cumulative current budget deficit operated by the current Labour administration is £48 billion 1997-2009 – £3.9bn per year. Or – to make the comparison more meaningful – Labour have run a deficit over 12 years that is equivalent to 2 years and 9 months of a Conservative administration. They have achieved this without squandering oil revenues nor squandering massive privatisation revenues. Even with the additional projected spend in future years this deficit won’t run the 1979-1997 one close.

And yet Osborne and you right-wingers on here can lecture on how fiscally incompetent Labour are with a straight face?

Oil stats http://www.hmrc.gov.uk/stats/corporate_tax/table11_11.xls
(deflated by GDP deflators http://www.hm-treasury.gov.uk/d/gdp_deflators.xls)

All other stats http://www.hm-treasury.gov.uk/d/public_finances_databank.xls in table A.4.

“The last Government had far more to draw on than the present one (£179 billion 1979-1997 in real terms, versus £79 billion 1997-2009 in real terms – all at 2008 prices).”

Couple of questions (one serious).

OK, first, the serious one. Is that all oil revenues or all tax revenues (including royalties) from oil? Makes quite a difference as the latter number would be nett. But the first one would be pretty meaningless without knowing what the costs associated with them were….building rigs, pipelines, risk captial to go find it all….

Second, not so serious, it’s considered very naughty indeed to compare numbers using different timescales. Could you reset to per year figures so that the comparison is easier?

Would make two final points. The first is that one G. Brown lifted oil taxes so high that even The Guardian noted that he was on the wrong side of the Laffer Curve, he reduced the incentive to invest so much that tax take fell as production fell. The lower recent figures are partly his fault.

The final one is, well, let’s think about what would have happened if we had indeed had a sovereign wealth fund. Using those numbers, and assuming we really had saved it all (and assuming no investment profits) we’d have, what, £258 billion?

Yes, it’s a nice chunk of change but it’s not all that much to write home about in a £1.4 trillion a year economy, of against ~£600 billion a year of government spending, or (making the number up) the £5-10 trillion wealth of the UK economy.

The same sum saved in the Norwegian fund, because Norway is an economy of only 4 million people, is of course proportionately, vastly greater.

I stand by what I said above about the reason for having these funds, to avoid Dutch Disease. But these sums of money, in the UK context, are interesting but really not all that important. They’re just too small compared to the size of the economy. Seriously, we’re talking about 9 billion a year (which makes me think they’re tax numbers, not value of oil itself, also assuming that those numbers above are correct) which is indeed nice but we’re pissing away that much just on the NHS computer system alone (not in one year of course). Even Ed Balls has identified a quarter of that amount as annual waste just in the number of headteachers we have in the school system.

It’s of the same order of magnitude as the amount we get from taxing fags each year (actually, very close, 9 billion as against 8 billion) and no one runs around saying that Thatcher or anyone else blew that to the detriment of British industry and its much needed reinvestment now do they?

@25 Tim Worstall

“OK, first, the serious one. Is that all oil revenues or all tax revenues (including royalties) from oil?”

All oil revenues. Not sure what you’re driving at though – did the UK Government invest in all the capital infrastructure required for the oil companies profits?

“Second, not so serious, it’s considered very naughty indeed to compare numbers using different timescales.”

Generally I did that. For the oil numbers, they work out at £9.9 billion per year 1979-1997, and £6.6 billion per year for 1997-2008. The oil point was about the total amount not put in a similar fund to Norway, so justified to look at totals rather than per year figures.

“The first is that one G. Brown lifted oil taxes so high that even The Guardian noted that he was on the wrong side of the Laffer Curve, he reduced the incentive to invest so much that tax take fell as production fell. The lower recent figures are partly his fault”

Sounds irrelevant to me – even if this is the case, the oil is still in the ground and revenue can be extracted from it in the future (rather than if production was higher, in which case the revenue would have already gone.

“The final one is, well, let’s think about what would have happened if we had indeed had a sovereign wealth fund. Using those numbers, and assuming we really had saved it all (and assuming no investment profits) we’d have, what, £258 billion? Yes, it’s a nice chunk of change but it’s not all that much to write home about in a £1.4 trillion a year economy, of against ~£600 billion a year of government spending, or (making the number up) the £5-10 trillion wealth of the UK economy.”

Public sector net debt is currently £609.4 billion. If the Conservative government had lived within its means and used the £179 billion oil revenue it had to reduce the national debt, it would be £430 billion even assuming a zero real return from the investment. This is 12.5% of 2008 GDP lower – you shouldn’t be so dismissive of the impact of this. If the Conservatives had not run a £320 billion current budget deficit 1979-1997, the national debt would have been £289.4 billion – only 20.2% of GDP and 22.3% of GDP lower than it is. That latter figure is the cost of the previous administrations fiscal incompetency. This is why Labour introduced their “Golden Rule” to balance the budget over the economic cycle that they have largely kept to.

“But these sums of money, in the UK context, are interesting but really not all that important. They’re just too small compared to the size of the economy.”

Right. Can I follow that logic for the current deficit Labour are running too – a 12.5% GDP deficit – the equivalent of oil revenues 1979-1997 (which is greater than Labour are actually running) is “interesting but really not all that important. It’s just too small compared to the size of the economy”? Thought not.

I note you do not address the fact that, on average, the cumulative current budget deficit that Labour have run over 12 years is equivalent to the current budget deficit of less than 3 years of the previous Conservative administration. I’m sure you will suggest “special case” – but it does rather suggest to me that Labour have been far more fiscally competent than what went before.

Sevillista – fantastic post. Thanks for the stats. I can use them elsewhere on the net.

I knew the last Tory government was rotten to the core, but thosse numbers ram home just how bad they were!

It is galling to think of how criminally public services were run down during those awful 18 years in order to squander public money on tax cuts for the already wealthy. While that cohort went off to splurge their ill-gotten gains on a few yachts and fast cars, thousands died in hospital corridors or at home thanks to lengthening waiting lists.

All this was done to somehow fulfill an unproveable set of free-market economic theories. Theories now soundly debunked by experience.

Absolutely despicable.

“I note you do not address the fact that, on average, the cumulative current budget deficit that Labour have run over 12 years is equivalent to the current budget deficit of less than 3 years of the previous Conservative administration. I’m sure you will suggest “special case” – but it does rather suggest to me that Labour have been far more fiscally competent than what went before.”

I’m not trying to have a spitting match about L v. C. You might note that above I’m at least ambivalent about whether the Tories did do the right thing with the money.

“All oil revenues. Not sure what you’re driving at though – did the UK Government invest in all the capital infrastructure required for the oil companies profits?”

No, which is why the difference is important. If that’s all revenues then we need to take off that revenue figure the cost of making the revenue. Because of course it’s net revenue that is important.

However, I think you’re wrong: I think that number is more like government net revenue from the oil, not total oil sales.

“If the Conservative government had lived within its means and used the £179 billion oil revenue it had to reduce the national debt, it would be £430 billion even assuming a zero real return from the investment. This is 12.5% of 2008 GDP lower – you shouldn’t be so dismissive of the impact of this. If the Conservatives had not run a £320 billion current budget deficit 1979-1997, the national debt would have been £289.4 billion – only 20.2% of GDP and 22.3% of GDP lower than it is.”

And if my aunt had balls she’d be my uncle.

Look, 9 billion or so (a year) in the context of a 1.4 trillion economy (a year), or in context of 600 billion in govt spending (a year) is trivial, it’s just not a game changer. It’s somewhere between 1.5% and 2% of tax revenue.

Sure, we can all play this game, if Churchill hadn’t pissed away 2% of revenue on champagne for Number 10, or Wilson 2% of revenue on George Brown’s crazed ideas, or Pitt had just cut the costs of the Napolenic wars by 2%.

But a marginal 2% of tax revenue (or 0.6% of GDP) just isn’t a game changer: it’s a rounding error. A couple of pence on the basic rate of income tax sort of number.

Which is what makes comparison between what the UK did or didn’t do with the oil money and what Norway did or didn’t do such a silly game to play. It mattered hugely to Norway what they did, us, really not all that much, whoever pissed it away and what on.

“Look, 9 billion or so (a year) in the context of a 1.4 trillion economy (a year), or in context of 600 billion in govt spending (a year) is trivial”

as the old saying goes, if you waste 9 billion here, and 9 billion there, pretty soon it starts to add up to real money

sevillista – thanks again, outstanding comment.

@28 Tim

I’m not trying to have a spitting match about L v. C. You might note that above I’m at least ambivalent about whether the Tories did do the right thing with the money.

Ok. But that is an important point about the figures – the points we’re debating about are splitting hairs really.

However, I think you’re wrong: I think that number is more like government net revenue from the oil, not total oil sales.

The source is at the bottom if you want to check. I’m not sure.

And if my aunt had balls she’d be my uncle.

Is that an acceptable response to “why didn’t Labour reduce the national debt while the economy was growing” too?

But a marginal 2% of tax revenue (or 0.6% of GDP) just isn’t a game changer: it’s a rounding error. A couple of pence on the basic rate of income tax sort of number.

It’s not marginal though is it – the oil revenues alone 1979-1997 are £179 billion. Are you saying that the current budget deficit is “marginal”?

Which is what makes comparison between what the UK did or didn’t do with the oil money and what Norway did or didn’t do such a silly game to play. It mattered hugely to Norway what they did, us, really not all that much, whoever pissed it away and what on.

So you are saying that if the national debt was 12.5% GDP lower it would make very little difference would it?

These figures really explode the Labour as fiscally incompetent narrative that right-wingers love to run with (at least in a relative sense).

It’s a shame that incompetence of communication prevents this becoming more widely appreciated.

@BenM

Sevillista – fantastic post. Thanks for the stats. I can use them elsewhere on the net.

They will quote the national debt stats back at you (“It’s ok. We sold off a vast chunk of assets on the cheap to fund it, allowed the remaining public assets to rot and made public services crap to prevent it getting out of control. That makes the Conservatives responsible”). Of course this ignores so much (e.g. what’s the difference between increasing debt and selling of assets – we’re poorer as a result of both; what did they plan to do when there was no family silver left to sell and they found the Laffer curve arguments they used for tax reduction on the wealthy a myth etc).

I’ll make clear that these are current deficit figures i.e. current receipts (taxes – excludes asset sales) minus current expenditure (excludes capital expenditure).

“It’s not marginal though is it – the oil revenues alone 1979-1997 are £179 billion. Are you saying that the current budget deficit is “marginal”?”

In the sense that I mean it, yes. You’re adding up that 2% of tax revenue over 18 years and going “hey, presto, lower national debt!”.

You’re comparing a flow to a stock. Very much not the done thing.

We could have saved (not spent) the revenue from taxing baccy over the same time period and lowered the national debt by the same amount.

That’s what I mean by “marginal”.

You should either look at numbers year by year or you should look at them, if that’s what you want to do, over 18 years. Just for ease of calculation I’ll assume that spending over those 18 Tory years was the same as it is now, in 2008 pounds. (I know it wasn’t but bear with me).

OK, so 600 billion times 18 is: nearly £11 trillion!

Yes, £179 billion is marginal in the context of £11 trillion. It’s in that 1.5% to 2% range used above of what oil revenues are as a percentage of total tax revenues. (Obviously, because they’re both the same calculation over different time spans).

To get a grip on numbers we really ought to compare an annual sum with an annual one or a couple of decades with a couple of decades.

“Is that an acceptable response to “why didn’t Labour reduce the national debt while the economy was growing” too?”

No, but that Nigel Lawson had a public sector debt repayment during the late 80s boom is evidence that he’d absorbed the Keynesian idea that if you’re going to argue for fiscal stimulus in the bad times you’ve also got to argue for fiscal contraction in the good. As Brown didn’t. But that’s rather changing the subject.

All I’ve been trying to point out in this thread is two really rather simple points.

1) The point of a soveriegn wealth fund is *not* to invest in the domestic economy. Exactly the opposite, it’s to wall off that natural resource money from the domestic economy. Thus Benn’s idea fails while Norway’s works (and Russia, Chad and all sorts of other places that are/have trying it have failed too as the politicians couldn’t keep their hands of spending it in the national economy).

2) The sums of money involved in N Sea oil were and are, comparative to the size of the entire UK economy, marginal: not quite trivial but certainly not a Hail Mary pass which would have/could solve our problems. They’re as important to the UK economy as the taxes raised from baccy. And anything you say about the way they could have been saved, used differently, also applies to baccy taxes or any other 2% of total tax revenues over those years.

Those two points are the ones I’m trying to make. Which bunch of votestealers pissed away more or less of our money is an argument for another day.

If sevillista is arguing that the Tories were, for a lot of the time, just as bad, well it’s difficult to disagree. Thatcher never really “rolled back the state”. There were no cuts.

As Evelyn Waugh said of the Tories – they’ve never managed to turn the clock back one minute!

In a way, the lefties should be pleased about this. F*ck it – if Thatcher couldn’t do it, what hope does the boy king have?!

That doesn’t turn Brown into a hero, or solve the problem of what we do from here.

@32 Tim

In the sense that I mean it, yes. You’re adding up that 2% of tax revenue over 18 years and going “hey, presto, lower national debt!”.

So what would have happened if they saved it like Norway did? Would it have just vanished? I’ve been cautious in assuming a zero investment return.

That’s what I mean by “marginal”.

I see. It’s marginal if you consider it as a series of one-off yearly flows.

We could have saved (not spent) the revenue from taxing baccy over the same time period and lowered the national debt by the same amount.

It’s clearly different to this – it’s essentially a lucky time-limited windfall. The Conservatives were like the lottery winner who squandered it all on fast cars and fast women and ended up with nothing to show for it after a few years. Tobacco taxation is permanent income than can be counted on in the future.

Yes, £179 billion is marginal in the context of £11 trillion

Is £49 billion (Labour’s current budget deficit 1997-2008) marginal in the context of GDP 1997-2008 of £15.4 trillion? And so all this talk of “fixing the roof while the sun was shining” complete tosh? Where does this leave the Conservative strategy of saying Labour squandered money and it is this that have left the public finances in a bad state. You can’t have it both ways.

No, but that Nigel Lawson had a public sector debt repayment during the late 80s boom is evidence that he’d absorbed the Keynesian idea that if you’re going to argue for fiscal stimulus in the bad times you’ve also got to argue for fiscal contraction in the good. As Brown didn’t.

You are forgetting the late 1990s surpluses – Labour paid back £48 billion of debt 1998-2001. Lawson managed £13.6 billion 1988-89 [Public Finances Databank].

And you argue that because the Conservatives badly mismanaged the economy (deliberately creating unemployment and locking people on benefits as ‘the price worth paying’) it somehow makes running large deficits ok. Seriously?

1) The point of a soveriegn wealth fund is *not* to invest in the domestic economy.

It seems like justification after the event of what the Conservatives did.

I think there are strong arguments to save a one-off windfall rather than squander it to pay your day-to-day bills (back to my lottery winner again).

2) The sums of money involved in N Sea oil were and are, comparative to the size of the entire UK economy, marginal: not quite trivial

12.5% of GDP is marginal. I hope you stop carping about this years budget deficit then.

Those two points are the ones I’m trying to make. Which bunch of votestealers pissed away more or less of our money is an argument for another day.

It’s no argument – undeniably those in the blue corner.

“Thatcher never really “rolled back the state””

Was that ever the intention, though?

@cjcc

That doesn’t turn Brown into a hero, or solve the problem of what we do from here.

But the whole argument of the Conservatives is built on an assertion that 1979-1997 was a time of sound fiscal management and that Labour came in in 1997 and pissed away money through their fiscal incontinence.

The stats show otherwise. Conservatives failed to manage the economy well creating large benefit bills for the unemployment and disguised unemployment they created, they handed out unfunded tax cuts to their city mates, they spent their lottery winnings, they were forced to sell our assets on the cheap. The list goes on…

“Where does this leave the Conservative strategy of saying Labour squandered money and it is this that have left the public finances in a bad state. You can’t have it both ways.”

Well, there’s another error. You’re assuming that I’m a Tory. Not so, sorry.

“Is £49 billion (Labour’s current budget deficit 1997-2008) marginal in the context of GDP 1997-2008 of £15.4 trillion?”

Yes.

“And so all this talk of “fixing the roof while the sun was shining” complete tosh?”

No, it’s straight Keynes. Run up the debt in the bad times is fine, as long as you’re also doing the other side, fiscal contraction in the good. Coming off the top of a 17 year boom with a structural budget deficit may be many things, but it just ain’t Keynes.

“I think there are strong arguments to save a one-off windfall rather than squander it to pay your day-to-day bills (back to my lottery winner again).”

Fine: but that isn’t what Benn was arguing which is what got me into all this.

“It seems like justification after the event of what the Conservatives did.”

No, go look it up if you wish. The point is to avoid Dutch Disease. Please note what I said above:

“You get a roaring trade deficit and domestic industry takes a huge whack.*
* As it did of course.”

They did spend it in the domestic economy, the pound did rise and domestic industry took a huge whack. As it would if the Bennite plan had been followed.

*Only* if that money was not spent in the UK domestic economy would this have been avoided.

“12.5% of GDP is marginal. I hope you stop carping about this years budget deficit then.”

Oh good grief, 12.5% of GDP over 18 years is marginal. 12.5% of GDP in one year is not. As I’ve pointed out above.

Of course the principle disaster of the Tory years was the ERM experiment, closely followed by the post-87 Lawson boom (bit like the recent Greenspan boom only a wee tad smaller). I agree; I wouldn’t like to be running on that track record!
Well of course they did, and lost.

Fortunately for them no-one remembers that far back and elections are lost not won.

They can argue that the only period in which Brown was fiscally continent was when he was following (having pledged to follow) the Tory plans in his first term. (Of course those plans were only there to clear up the prior mess…)

I can’t wait to see the back of Brown, but I hold little hope for the boy king and his friends.

@37 Tim

You’re assuming that I’m a Tory. Not so, sorry.

Sorry – I use Tory/right-winger inter-changeably. Apologies if I hurt your feelings.

Coming off the top of a 17 year boom with a structural budget deficit may be many things

Firstly, Labour were elected to invest in public services left in a parlous state by the Conservatives while keeping the budget deficit at 40% GDP, which they did before being hit with this crisis that almost no-one expected. They were not elected to reduce the budget deficit. This is what the alternative being offered was – it was decisively rejected.

But no-one realised – not even right-wing commentators or the Conservative Party (given their pre-crisis spending and tax commitments) – that tax revenue from the city was actually based on a lie and not likely to be a permanent feature. This is largely how the structural budget deficit has emerged rather than any spending (though there was, I understand, a small structural deficit ignoring the tax revenue crash).

Oh good grief, 12.5% of GDP over 18 years is marginal. 12.5% of GDP in one year is not. As I’ve pointed out above.

Seems like smoke and mirrors to me.

@cjcjc

Fortunately for them no-one remembers that far back and elections are lost not won.

They could do with reminding.

The philosophy hasn’t changed and the future PM/Chancellor team seem to think that 1979-1997 were halcyon days for fiscal and economic management. They were not.

As an aside, it’s amazing that as a result of the post-Thatcherite economic model collapsing (low regulation, low tax on the rich, lax corporate governance, economy dominated by financial firms, increasing inequality, large bonus pay-outs to city workers) we are going to get a stronger dose of the same philosophy after the next election.

Maggie Thatcher, of course, opposed this and spent the oil money on … closing down coal mines

If Maggie Thatcher had spent less money on subsidising those coal mines in the first place, we would presumably have more money now.

Out of interest sevillista, why did you take the data from ‘Table A4′ and not the ‘Key Fiscal Aggregates Table’? This table has both nominal and % borrowing, it also shows the forecasts out to 2014.

Ah….

@astate

“Out of interest sevillista, why did you take the data from ‘Table A4? and not the ‘Key Fiscal Aggregates Table’?”

Do you have a problem with the data as a reflection of 1979-2009?

The future is susceptible to errors in economic forecasts (on the up and the downside) and changes in fiscal policy – both highly likely.

Name me another developed country that hasn’t seen massive increases in deficits and future increases in debt, due to the global depression the charlatens in the city left us in?

And table A6 has treaty debt (which Gordon can’t fudge) and makes for very interesting reading.

#41: “If Maggie Thatcher had spent less money on subsidising those coal mines in the first place, we would presumably have more money now.”

Absolutely. Check out the massive external financing of the nationalised Coal Board reported in David Butler: Twentieth Century Political Facts 1900-2000, page 444.

1979 – £600m; 1980 – £700m; 1981 – £800m; 1982 – £1,200m; 1983 – £1,000m; 1984 – £1,200m; 1985 – 1,700m; 1986 – £400m; 1987 – £900m; 1988 – £900m; 1989 – £800m; 1990 – £1,300m; 1991 – £900m; 1992 – £600m; 1993 – £800m; 1994 – £1,400m; 1995 – £700m.

That taxpayers’ money could have built or renovated a lot of schools and hospitals.

The universal amnesia which afflicts declared Leftists over the subsidies which went into propping up the nationalised coal board during the Thatcher and Major governments is truly remarkable.

And just in case there is any doubt tables A2 and A3 have charts of the budget balance and cyclically adjusted budget balance.

As they say, a picture paints a thousand words.

On Dutch disease, by the end of the 1970s, Dutch economists and policy makers were aware that the economy had become internationally uncompetitive through an appreciation of the exchange rate for the Guilder which followed the discoveries of the gas fields off the Netherlands coast.

The adjustment process in the Netherlands to recover from the Dutch disease was not painless. Try the review of the Netherlands economy by Bart van Ark and colleagues in Nicholas Crafts and Gianni Toniolo (eds): Economic Growth in Europe since 1945 (CUP, 1996) chp. 10.

Adjustment was achieved by maintaining a national consensus constraining growth in wages: ” . . the reduction in wage growth after 1973 – even to less than 1 per cent a year during the 1980s – is quite remarkable, although it should be added that between 1990 and 1992 real wages again rose by 3 to 4 per cent a year.” [p.297] The result was that the annual increase in unit labour costs 1979-90 was kept down to 0.6 per cent, in marked contrast to what happened elsewhere in western Europe at this time.

The question is how many other EU countries could have maintained such a ferocious but effective incomes policy through national consensus? “The polder model is the Dutch version of consensus policy in economics. . . ”
http://en.wikipedia.org/wiki/Polder_Model

@46

Are you going to name a country that has managed to avoid massive increases in debt as a result of the depression Thatcherite low-regulation finance-dominated economics has led us to?

Or are you just going to keep making noise to drown out the sound of £320 billion of money being pissed away by the previous government’s economic and fiscal mismanagement.

The government was warned about the house-price bubble at least as far back as April 2002 and opted to do nothing about it:

“CHARLES GOODHART, a former member of the Bank of England’s monetary policy committee [and economics prof at the LSE], warned yesterday that the Bank is failing to take sufficient account of the house price boom in setting interest rates.

“His warning comes amid growing fears among economists that house prices, fuelled by the lowest interest rates for 38 years, are getting out of control. Yesterday, new figures showed that homeowners are borrowing record amounts against the rising value of their homes. . . ”
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2002/04/06/cngood06.xml

One policy option would have been to introduce counter-cyclical changes in the capital requirements of the banks as recently proposed in the Turner Review of financial services regulations which has already been applied in Spain by the government there:

“One of the key messages from the [Turner] Review is the implementation of a counter-cyclical capital and disclosure regime requiring banks to accumulate capital reserves in ‘good years’ that could be drawn down in the ‘bad years’.”
http://www.kpmg.eu/SucceedingInTurbulentTimes/6649.htm

I think any sensible government that discovers oil should try and rid their hands of it as quickly as possible. It is not a left-or-right position to be worried about dutch disease. Anyone who remains unconvinced should just go and read Michael Ross’s slightly deterministic, but powerful paper ““Does Oil Hinder Democracy?,” World Politics 53, no. 3 (2001): 325-361.”

However, a number of interesting questions, which someone better versed in economic history would answer better:

1. Were the Norwegian and British governments aware of how much or how little oil revenue would constitute as a percentage of the economy?

2. When where sovereign wealth funds first touted in the way the Norwegians employed it?

Knowing that may help us understand the policy differences between effective fiscal conservatism (Tories avoiding dutch disease) versus a Norwegian gamble that was successful only because of a small population in a stable consensus democracy, unlikely to succomb to the well known populist-statist politics (of the type Tony Benn recommended) that undermine democracies and lower human development.

@49 BobB

Agree – a minority of the commentariat were suggesting houses were over-valued (the majority were saying “we’re in special times”).

Unfortunately the Government succumbed to the “special times” chat and the political imperative to “help people onto the housing ladder”. The Opposition were pushing for “more to be done” too (e.g. they wanted to reduce Stamp Duty to do so). I don’t see this ending anytime soon. The political attractiveness of sustaining an over-valued and rising housing market will continue.

Putting the brakes on the housing market through either ending the tax advantages housing enjoyed (taxing imputed rents, stamp duty increases, capital gains on first homes, council tax based on current year property prices), not giving support to first-time buyers (e.g. shared equity schemes), making the rented sector more attractive (e.g. giving more rights to those renting privately and re-regulating the market) or raising interest rates to combat a housing bubble were not politically feasible.

Though I’m not sure we’d have escaped the depression and crisis if the bubble was pricked (the recession was due to bankers buying “risk-free” complicated financial instruments linked to US sub-prime debt without appreciating the incentives of US homeowners to walk away from their homes once in negative equity or the lack of incomes many with these homes had, and credit markets seizing up when people realised these instruments were very risky and got scared).

You are right that it would be good if the next Government sorted out our dysfunctional housing market as it does add to volatility and distorts the economy (people invest too much time and capital in housing rather than more useful investments and work). Unfortunately I wouldn’t hold my breath, whoever wins the election.

The house-price bubble was more a symptom of the malaise in financial markets than the principal cause. But the bubble grew to bigger dimensions in Britain than almost all other major economies.

Probing why that was happening – and the IMF was warning about the house-price bubble in Britain back in 2003 – would have highlighted the huge and unsustainable rise in consumer borrowing to £1.4 trillion and the 100% and 125% mortgages, a looming recipe for disaster as soon as the bubble stopped inflating and enough to raise substantive questions about the investment risks of those financial institutions offering such mortgages and how they were funding their lending.

Warren Buffett – who knows more than a thing or two about investing in stockmarkets – was questioning the risks inherent in the derivatives trading back in 2003. But he too was ignored:

“The rapidly growing trade in derivatives poses a ‘mega-catastrophic risk’ for the economy and most shares are still ‘too expensive’, legendary investor Warren Buffett has warned.”
http://news.bbc.co.uk/1/hi/business/2817995.stm

I suppose the charitable explanation is that Brown and his advisers weren’t the only ones to maintain a touching faith in the self-correcting power of markets – Alan Greenspan has admitted to his own failings in central banking in the US:

“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.”
http://online.wsj.com/article/SB122476545437862295.html

Btw correcting the structural fiscal deficit in the government’s budget back in the early years of the decade was more complicated than just a matter of hiking taxes and/or pruning public spending. A fiscal surplus in the boom years – when the sun was shining – would have somewhat depressed aggregate demand and the Monetary Policy Committee of the Bank of England would therefore have had less need to raise interest rates to achieve its inflation target.

Other things equal, with lower interest rates, there would have been a greater market demand for mortgages and the house-price bubble would have become even larger in the absence of counter-cyclical measures to curb lending – such as raising the capital requirements of the banks in boom times as proposed in the Turner Review.

The added twist is that big risk takers, wishing to cash in on the house-price bubble, might circumvent restrictions on bank lending in Britain by raising mortgage finance abroad – which brings additional risks from any depreciation in the Pound exchange rate.

Err.. a little historical stuff, assuming anyone wants it –

The Norwegian Petroleum Fund was officially started in 1990.
It’s now part of the “Government Pension Fund” and called the “The Government Pension Fund – Global”. The other part is a continuation of the old “National Insurance Scheme Fund” (now “Govt. Pension Fund – Norway”) which was set up in the late 1960′s.

Lots of (fascinating, I’m sure) information about it, and related topics, can be found here:

http://www.regjeringen.no/en/dep/fin/Selected-topics/The-Government-Pension-Fund.html?id=1441

Hope that helps..something?

p.s. One wee point – Norway’s population is as near to 5 million as makes no odds (touch smaller than Scotland). I know, still a very small country, but these things matter )

41
Quite a lot of profitable pits were closed, Thatcher’s decision to close pits was political not economic.
45
Fortunatley I do not suffer from short-term amnesia, you have trawled these figures out before. Thatcher spent thousands of oil revenue to fight the miners, and nobody won. These figures represent the cost of subsidising coal. but the cost of unemployment, lost business, the destruction of most of our manufacturing industries is not so easy to show. Moreover, most of the jobs created to replace mining are service/retail (some of the lowest;paid jobs), most people I know within that area are receiving family tax credits, this cost, of course, does not get factored into your figures.
It is ironic that you should mention that taxpayer’s money could have been used to build schools and hospitals, because directly after the closure of pits, Rotherham was given HAZ status, this was due to the massive increase in mental health;problems within the area caused by economic deprevation and the almost, immediate loss of the culture which was created around mining areas.

@Andy Gilmour – uh oh, you mentioned Scotland. [retires to a safe distance]

Neil,

“I only mentioned it once, but I think I got away with it…”

#54: “Quite a lot of profitable pits were closed, Thatcher’s decision to close pits was political not economic.”

That’s just semantics. The Labour Party and other trade unions backed off supporting the NUM, very likely in part because of the absence of a strike ballot in Yorkshire and because of popular gossip there about whether the strike would bring down the government elected in 1983.

The Coal Board was finally privatised by John Major’s government, not by Thatcher’s government.

Both governments continued to pour billions of taxpayers’ money into supporting the nationalised Coal Board until it was privatised – see #45 above.

Issues about mine closures cannot sensibly be separated from what was happening to world oil prices, which determine the price electricity generators are willing to pay for energy-equivalent coal supplies. Curiously, this is seldom mentioned by those who claim even more taxpayers’ money should have been spent propping up the Coal Board regardless of the consequences for other public services. In the 1992 election, Kinnock was saying (correctly) that tax revenues as a percentage of Britain’s GDP were about the same then as when Thatcher become PM in May 1979.

The fact is that world oil prices about halved between 1985 (the year in which the year-long strike ended) and 1986.

Nicholas Ridley proposed a strategy for industrial relations in the coal industry in The Economist of May 27, 1978 (p.21-23):
http://www.co-opnet.coop/viewtopic.php?t=367&highlight=ridley+report

The Economist report was in the public domain and accurately predicted government policy. The NUM fell into a bear trap.

#51: “people invest too much time and capital in housing rather than more useful investments and work”

The trouble was once the house-price bubble inflated, investing in housing became a better investment punt than the stock market:

“American house prices rose 124% between 1997 and 2006, while the Standard & Poor’s 500 index fell by 8%; half of US growth in 2005 was house-related. In the UK, house prices increased by 97% in the same period, while the FTSE 100 fell by 10%.” Robert Skidelsky: Keynes – The Return of the Master (Allen Lane 2009) p.5.

According to this news report of 1 May 2002 on rising house prices, the Bank of England was not registering concern:
http://www.independent.co.uk/news/business/analysis-and-features/is-the-house-price-boom-an-unsustainable-bubble-653078.html

Some economists in Britain, with influence, were denying that there was a house-price bubble:
http://www.nuffield.ox.ac.uk/users/murphya/Bubbles.pdf

The fundamental factor is that average house prices rose from a long-term average of about 3.8 times average earnings to nearly 6 times average earnings at the peak of the bubble in late 2007. It was therefore unsuprising when more and more first-time buyers got priced out of the market.

I must say that I’ve been very unimpressed by the quality of analysis of these issues coming from George Osborne and colleagues.

steve b. When considering coal one should understand production costs compared to coal from other parts of the Wold and other energy sources. I think oil reached an all time low of $8 a barrel( below the production costs of that from the N Sea). The large and shallow open cast mines in the USA which were close to large river /canal systems which barges could carry 100,000T or more meant USA coal could compete with that produced in Europe. Polish coal is also cheap to produce. British coal is often at more expensive end to produce ( like N Sea oil comapred to that from Saudi/Gulf).

If Scargill had carried out a vote and been prepared to undertake whatever modernisation was required we would still have an underground coal mining capability. NACODS whose members were the skilled personnel responsible for safety never supported the NUM. Nottingham Miner’s did not because they wanted a vote before strike action. Scargill was a dictator who refused the NUM the democratic principal of the vote.

It should be remembered open cast mining ws largely out of the influence of the NUM.

Scargill, like many on the left, ignore technological progress and developments elsewhere in the World. The development of large gas fields(Qatar) and gas powered electrical generation, made UK coal far less attractive, especially as coal could be mined cheaper elsewhere.

I’m genuinely interested in this.

But how do the left square coal mining and climate change?

@60 astateofdenmark

Get back under your bridge.

How do the right square fiscal responsibility with blowing £320 billion on economic and social failure while running down public services, wasting all the receipts from all the UK’s assets they sold over the 1980s and 1990s?

And how do they square that with criticising the current Government’s fiscal record of a current budget deficit of £49 billion while improving public services quality and output and beginning to rectify the social cost of Thatcherism?

61

Thanks for that informative post. I like that ‘current budget deficit of £49 billion’ line. I sincerely hope a senior Labour minister, preferably the PM, uses it in public.

As to my question. The tories shut down most of the coal mines and replaced a lot of coal power plants with gas ones. Now the left criticised this. So lets imagine the tories never shut them all, or lost a GE before they could shut them. Labour would now be in government with a large coal capacity. They would also be committed to cutting CO2 emissions quite drastically.

So, the left would either have to shut the coal mines or ignore the CO2 question. What would it be?

@62 astate

I like that ‘current budget deficit of £49 billion’ line. I sincerely hope a senior Labour minister, preferably the PM, uses it in public

It is true. Are you disputing the figures?

The current budget deficit between 1997-2009 was £49 billion.
The current budget deficit between 1979-1997 was £320 billion.

The current governments deficit is going to increase due to the global depression (rather than the self-inflicted recessions faced only by the UK that the previous government gave us), but even then it is not going to reach anything like the *impressive* figures Thatcher and Major gave us. You may have noticed (if you actually looked at figures rather than listening to Tory propoganda) other countries have current budget deficits almost as large due to this depression – and also have higher levels of debt.

And the current government have actually achieved improved public services for their money, rather than just purchased high levels of worklessness, unemployment and social failure.

I don’t know where you get those figures, so allow me to assist.

If you go to table A5 of your spreadsheet, you will find a column headed ‘Memo: Treaty Deficit’. Now if you add up 79-97 and divide by the number of years you should get 17 billion. If you do the same 97-09 you get 25 billion. That’s before you add the 12% deficits we will have the next 2 years. (note there is not much value in these figs, but it is what your doing so I’ll play).

Now, for debt figures, the Economist have put together a handy little interactive map, which can be found here:

http://buttonwood.economist.com/content/gdc

You’ll see that by 2011 we’ll have debt just under 100% of GDP. I can see just five countries with higher debt: Japan, Italy, France, Belgium and Iceland. By 2012 we would have overtaken France as well.

This despite the fact that public debt in 2003 was less than 40%. That’s Gordon’s legacy. Under the last tory government, it never got above 50% and that was after the ERM debacle, for which they paid a deserved high price.

Why didn’t he run a balanced budget? If he wanted to spend extra on public services, why didn’t he raise taxes? If he had then perhaps we would now be looking at 50% debt instead of 100%.

The current governments deficit is going to increase due to the global depression (rather than the self-inflicted recessions faced only by the UK that the previous government gave us)

Um, which would those be? The early 1980s recession, that was sparked by a collapse on Wall Street and ensuing American recession, the 1987 recession, that was sparked by a collapse on Wall Street and ensuing American recession or the early 1990s recession which was to all intents and purposes a continuation of the global economic downturn of the late 1980s that led to curency runs on first the Far Eastern economies and later the collapse of the ERM?

Each of the three recessionary periods of the 1979-97 Tory Governments was every bit as much a global recession as the current one is. Unless you can point me to a ‘self-inflicted recession suffered only by the UK’.

@64

I don’t know where you get those figures

I point you my post at 24 which gives the source, and your post at 42 in which you clearly state you do know where I got the figures. You even refer to it later in the very next paragraph of your post 64.

Why pretend?

If you go to table A5 of your spreadsheet, you will find a column headed ‘Memo: Treaty Deficit’.

Are you suggesting that the UK was somehow not left worse off by financing 1979-1997 fiscal incontinence by flogging of our assets on the cheap.

Really?

The lower deficit in the 1980s/1990s was because we sold assets rather than issuing debt.

Ditto with debt – and I’m sure debt will not rise that high as these projections are based on current polcies continuing, which they undoubtedly will not. There’s more fiscal tightening to come that the budget does not acknowledge.

Why didn’t he run a balanced budget?

There were two golden rules that Labour were elected to meet, while at the same timerescuing the public services from the parlous state they were left in in 1997:

1. Balance the current budget over the economic cycle
2. Keep net debt lower than 40% of GDP

Both were met until the depression hit in 2008.

Why did the Conservatives run a £320 billion current budget deficit during their time in office? If you define this as fiscal responsibility (as Conservative politicians and right-wingers seem to do), the current Government perform relatively well.

If he wanted to spend extra on public services, why didn’t he raise taxes?

I actually partly agree with this. For all the whinging about tax from the right-wing press, Labour have not raised them much at all.

However, the current budget balanced until this catastrophic global depression. With the assumption that bankers weren’t all clueless idiots (which the Conservatives also held), the budget did balance and would’ve balanced into the future (HMT was tightening even before the recession hit)

And doesn’t the increase in debt have more to do with all the support needed for banks and the financial sector and the collapse in tax revenues due to the global depression than any increased spending on public services?

66

The current government has borrowed 297.3 billion upto and including the 2008/9 financial year. That’s 25 billion a year. If I could be arsed sitting down and factoring in inflation, the tory years and Labour years to date, would be almost identical.

So if those tory years are fiscal incontinence, Labour’s are as well. And all this before we start counting 12% budget deficits this year and the next.

Debt was 55% of GDP in 1979 and 50% in 1996%. So no real change.

In 1997 it was 47% and in 2010 it will be 72%. All taken from Table A8 of your spreadsheet. I won’t put the figures for 2011 and 2012, they’re just too depressing.

One positive thing I hope comes out of this, is future governments running balanced budgets and the electorate holding them to it. That goes for taxes and spending. I’m not holding my breath.

Now I really must be of.

57
‘The Coal Board was finally privatised by John Major’s government’
You don’t believe that Major took this decision – how naive
As before you do not address my comments about the real cost of closing the pits as against keeping the profitable ones open. I suppose it’s because there isn’t a nice cosy website that you can direct us to. I also note that you haven’t provided a list of revenues received from coal, but, of course, this makes the subsidies look less scary. On average, in Yorkshire at least, the profitable pits subsidized the non-profit making pits.
59
I accept that the nationalization of coal and other industries was a product of Keynsian economic policy and social policy representing the post-war settlement, which was never really meant to compete in a free-market. That being so, there were plenty of pits which could compete We now purchase coal from countries like Poland and Germany, which initially had a larger government subsidy than UK coal
So 57 and 59, could you enlighten me as I am confused as to why you believe the pitts were closed, was it:-
a Huge taxpayer subsidies
b Market forces
c The absence of a strike ballot
d Gossip from pit-villages
e Scargill was a dictator
f Scargill wasn’t a modernizer
60
The UK energy requirement is still reliant upon a certain amount of coal, but instead of it being home produced it is shipped from Poland and Germany, thus adding to its’ carbon footprint.

#68: “You don’t believe that Major took this decision – how naive”

Do reveal unto us then who really made the decision if John Major’s cabinet didn’t.

“As before you do not address my comments about the real cost of closing the pits”

Of course, there are social costs of closing down any employment activity, whether steel works, ship yards, mines, car plants, offices or stores. But then there are also costs to the public finances of continually subsidising loss-making enterprises when there is no shortage of valued public projects on which taxpayers’ money could be better spent instead.

Prior to the current financial crisis, total employment in Britain at 29+ millions was running at record levels. By the last quarter of 1995, the standardised ILO unemployment rate in Britain was lower than in France, Germany or Italy and the employment rate of working-age people higher.

69
As I thought, you are still skirting around my comments
It was Thatcher who engineered the closure of the pits, it was her government which stock-piled coal and it was her government who had prepared the Met long before the strike started. She even betrayed the Nottinghamshire miners who refused to strike. I suppose their only consolation is that she (Thatcher), became the subject of the same betrayal from her own party, I guess that’s what we call poetic justice.
Well, you have admitted that there were social costs but I actually discussed economic costs. What about the profitable pits?. the low paid jobs which replaced a family wage, the massive increase in health spending the high unemployment, residual maintainence such as preventing the escape of methane gas. the re-building of a whole village because of it, Perhaps these are the valued projects of which you believe the taxpayer should subsidise,
And finally, your trademark red-herring,- the current financial crisis,- actually I think we were discussing pit closures.

That to me reads paranoid.

The historic fact is that the Major government decided to privatise the nationalised coal board.

It is fairly widely known that Major disliked Mrs Thatcher and his government undid some of her legislation, such as repealing the unpopular poll tax. The Major government also privatised the railways when Nicholas Ridley had consistently advised Mrs Thatcher against that course. We shall never know whether she would have privatised the coal board had she remained as PM beyond 1990. I can’t see that issue matters much except for conducting pointless hate campaigns.

I’m unconvinced that pit closures occasioned greater social – or economic – costs than other plant closures or large scale job loses in the 1980s – such as the thousands who lost jobs with British Telecom – and suspect one reason other trade unions backed away from supporting the 1984/5 mining strike was lack of popular support among members of other trade unions for the notion that mining was a special case.

As for red herrings, the thread is about public spending of which the billions of taxpayers’ money poured into supporting the coal board by the Thatcher and Major governments was only one aspect. The current financial crisis connects with the thread because of the impact the crisis will have on the need for public spending cuts to curb government borrowing.

71
You are still skirting around my comments, the economic cost to the taxpayer of closing profitable pits was greater than keeping them operating.
In case you do not remember, the reason for the strike was the leaked document showing that the Thatcher government was about to close several pits. I am still convinced that the leak was orchestrated to stir-up trouble creating hostility with the public, the press had a field day and, of course, we had the BBC’s somewhat inaccurate reporting. I cant’t prove this,but I will always have my suspicisons.
Back to the economic cost, in fact the coal extracted from the profitable pits, at true market value, cost less than the coal extracted from Poland and Germany (at true market value), but those governments gave much bigger subsidies, although the economic world has changed since 1984, the profitable pits could have competed. Instead several were taken over by private operators and then they were left to run down when further investment was required, but that is the nature of the quick-buck merchants, not making reference to oujr current financial crisis, of course
Like many others who were pro-privatization, you quote the cost to the taxpayer but never mention the revenues from those industries, Perhaps if we had not sold-off our housing stock there would have been a good income from that source in view of the housing-bubble, and then when it burst there would be an even greater demand. Shame we dont’t have crystal balls.

BTW I predict the government will be back for the remaining coal, because even with the necessity for complete clearing and redevelopment. there is a massive amount left.

And LOL – Major disliked Thatcher. well that must be true because he repealed the poll tax, blow me, I thought it was because it was so unpopular and would end-up losing them the next election.

@73 – the irony is, when we do start mining the stuff again, it’s going to be easiest to recruit the necessary expertise from China. Which will be worth it just to watch Thatcherite heads asploding.

@73 – the irony is, when we do start mining the stuff again, it’s going to be easiest to recruit the necessary expertise from China. Which will be worth it just to watch Thatcherite heads asploding.

#71: “You are still skirting around my comments, the economic cost to the taxpayer of closing profitable pits was greater than keeping them operating.”

That’s a silly observation IMO – especially so in the light of what led to the bank failures last year and the current financial crisis.

It was and is often true that the cost to taxpayers of subsidising plants and enterprises (including coal mines) to keep them from closing is less than the cost to taxpayers of the social security payments (and any redundancy compensation) to those made redundant plus the loss of tax revenues they previously contributed, depending on how long those who lose their jobs remain out of work.

The apparently impelling conclusion is that governments should therefore subsidise virtually all loss-making enterprises – and the 1970s Labour government came close to doing just that.

Predictably, enterprises on the verge of failing then queued up for government handouts and the normal business incentive to improve efficiencies and cuts costs evaporated. During the 1970s, productivity in several then important industries – including coal mining and the motor industry – declined on trend. British Steel was being subsidised to the tune of £1m a day by the end of the 1970s. The standard rate of income tax increased to 33p.

Of course, there are those who believe falling productivity is just what is needed to cut unemployment. Unfortunately, the sad fact is that improvements in our average living standards ultimately depend very largely on raising productivity.

The relevant connection with the causes of the current financial crisis is that once banks come to believe or hope governments will bail them out if they fail, the banks and their traders have less incentive to desist from reckless lending in pursuit of profits. We failed to learn the appropriate lessons from the Savings and Loan Association debacle in America:

“The US Savings and Loan crisis of the 1980s and 1990s was the failure of several savings and loan associations in the United States. More than 1,000 savings and loan institutions (S&Ls) failed in ‘the largest and costliest venture in public misfeasance, malfeasance and larceny of all time.’ The ultimate cost of the crisis is estimated to have totaled around USD$160.1 billion, about $124.6 billion of which was directly paid for by the U.S. government, which contributed to the large budget deficits of the early 1990s.”
http://en.wikipedia.org/wiki/Savings_and_Loan_crisis

By the time the Rover Group in Britain was sold off to BAE by the Thatcher government in 1988, it had cost taxpayers about £3.3 billions, in then current prices, subsidising the company and British Leyland, its predecessor. In the light of what eventually became of the Rover Group in the West Midlands, we could reflect on whether that was worthwhile or whether the money could have been better invested in alternative projects, such as updating the railways.

The Thatcher government adhered fairly closely to the strategy set out in The Economist of May 27, 1978 but the NUM failed to notice that:
http://www.co-opnet.coop/viewtopic.php?t=367&highlight=ridley+report