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

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.

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.

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.

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?

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’.

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%.

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.

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?

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?

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

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.

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.

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.

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