Today’s borrowing figures show why Osborne’s plan isn’t working


3:30 pm - May 24th 2011

by Sunny Hundal    


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New figures out today show that government borrowing for the last month was the highest April figure ever recorded: £7.7bn compared to £5.3bn April last year.

So, a year after a new Conservative government promised to cut the deficit, it is still not managing that task.

What’s gone wrong? Exactly what we have been predicting: Osborne has been forced to borrow so much because tax receipts are faltering.

And why are tax receipts not growing? Well, because the economy is in doldrums, thanks to Conservative: 1) promises they would cut jobs and spending, which has increased uncertainty; 2) raising VAT; 3) being unwilling to pump money into the economy.

Most of the local cuts pushed through councils have yet to come, and so growth is expected to remain flat over the next few years.

As we have repeatedly pointed out, the best way to cut the deficit is to grow the economy and maintain confidence that the public weren’t going to suffer badly over the next year.

Gordon Brown managed it, and grow the economy. But Osborne sucked the confidence out of the economy’s future prospects, and now we have stalled economy with a high deficit.

Is that why the Tories are particularly quiet today? What happened to their fool-proof plan to reduce the deficit?

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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


No wonder he all but vetoed Gordon Brown for the IMF job – he knew what was coming and didn’t want to face the Star Chamber treatment from Gordon at some future ‘ cap-in-hand-for-a-bale-out’ hearing.

Osborne should be removed from the job forthwith – he is an ever-worsening disaster. It’s time for a change in so many departments – one of which should be an urgent change of mind regarding turning the spotlight back onto the bankers. They have the loot – they caused the crisis – hunt their assets down – like Thatcher did the miners. Oh? – and why not pray? You would like to be popular George – in spite of appearances to the contrary – as a farewell act – hit those bankers hard in the trouser pocket – and your unpopularity might bottom out – given time.

2. Luis Enrique

are tax receipts really not growing, or is this just because:

“The Office for National Statistics said the one-off bank payroll tax boosted accrued tax receipts by £3.5bn in April 2010.”

[it matters, I’ve a slap up binge from Duncan riding on this]

[ and are you really blaming tax receipts not growing on the VAT increase? ** paging Tim Worstall ** Sunny thinks the UK is to right of consumption taxes Laffer Curve peak!]

Luis I’m not even sure what you’re trying to say there.

—-
In an interview with the Guardian, Cable said the public is not ready for the effect on living standards when the spending cuts begin to bite later this year.

Cable added a 20% devaluation of sterling against other major currencies will also hit consumers.

“We have had a very profound crisis which is going to take a long time to dig out of,” he said.
—-

And it’s going to get worse.

5. Luis Enrique

Sunny,

I am trying to say two things

1. Are we really looking a falling tax receipts, or a one-off dip comparing Apr 11 with Apr 10 because of the one-off bank tax collected in Apr 10, mentioned in the Guardian article you link to. Are tax receipts in 2011 really going to be lower than in 2010? I’d like to see some data on that, because I’ve bet Duncan that won’t happen.

2. If you think that the VAT increase had a sufficiently negative impact on economic activity that it helps explain why tax receipts have fallen (as your third paragraph suggests), that is the Laffer Curve in action (tax rates go up, tax receipts go down).

[personally, I don’t think the VAT increase should be listed as a reason for low tax receipts]

6. Flowerpower

…..3) being unwilling to pump money into the economy……

Hang on……. isn’t your point that he HAS been continuing to spend at or above (an average of 4.9% above, in fact) the levels of the last Labour government?

Sunny,

Your analysis might be right, but I’ve yet to see an indication that higher government spending (not that government spending is lower…) leads to economic growth – because it has to be paid for, and that would mean even higher borrowing, with all the costs that imposes on the economy.

I think Luis’ points – that April’s borrowing figure was actually less than last April’s borrowing figure + the one-off tax windfall last April, and that your analysis partially claims we are paying too much tax and therefore revenue is falling (and therefore is on the right of a Laffer Curve, at least for indirect tax) – need addressing though. Otherwise this just looks opportunistic and unconvincing.

I read this morning that Britain’s already agreed to contribute £12.5 bn to the European bailouts. Might that have something to do with it?

Luis that it helps explain why tax receipts have fallen (as your third paragraph suggests), that is the Laffer Curve in action (tax rates go up, tax receipts go down).

VAT affects consumption much more than income tax. when VAT was reduced to 15% it lifted spending, as I pointed then. This is why I was and am against the VAT rise.

Are tax receipts in 2011 really going to be lower than in 2010?

I’m saying tax receipts aren’t growing to reduce the deficit as Osborne predicted. That is borne out by the facts.

flowerpower – err no. that isn’t my point.

watchman: but I’ve yet to see an indication that higher government spending (not that government spending is lower…) leads to economic growth

then explain this. Why did the UK economy start growing strongly again during the last months of the Lab govt and first quarter of Tory govt, even tho we’d just faced a massive recession, and flatlined after Tories unveiled their CSR?

The point on VAT also looks suspect in that an increase in tax revenues following the VAT hike seems to be one reason why borrowing last year was lower than expected.

And it does look perfectly plausible that the reason we had to borrow more this April than last April is just that we collected £3.5bn from the one-off bankers’ payroll tax last April.

…none of which, I hasten to add, is particularly good news for the Tories. Most of the credit for any deficit reduction achieved last year is plainly due to Labour, since the Tories’ policies only started to take effect later in the year (at a time when growth was flat); and if the bankers’ tax kept borrowing down last Aprl, that seems like a pretty good reason to repeat it this April.

11. Luis Enrique

Sunny

ok then: you think the UK was to the right of the Laffer curve for consumption taxes. That what the Laffer Curve means. Rates up, revenue down. Your explanation is that VAT has a large effect on consumption. [1]

“I’m saying tax receipts aren’t growing to reduce the deficit as Osborne predicted. That is borne out by the facts.”

I asked you whether “not growing” taxes was just a one-off monthly comparison, caused by the Apr 10 bank tax, or whether you think tax receipts are “not growing” in any other sense (for example, FY11 compared to FY10). I’m still not quite clear what you are claiming, but if you are claiming tax receipts are “not growing” in any other sense, I’d like to see these facts to which you refer because, as i have mentioned, there’s a meal at TGI Friday’s riding on it.

12. Flowerpower

flowerpower – err no. that isn’t my point.

No, you just noted that borrowing was up….. and didn’t mention the spending. I must have confused you with Fraser Nelson who did point out:

The truth is that Osborne has outspent Brown every month he’s been in the Treasury —

http://www.spectator.co.uk/coffeehouse/6971423/the-austerity-hasnt-started-yet.thtml

I’m saying tax receipts aren’t growing to reduce the deficit as Osborne predicted. That is borne out by the facts.

Tax receipts 2009/10 £408,509,000
Tax receipts 2010/11 £446,502,000

http://www.hmrc.gov.uk/stats/tax_receipts/tax-receipts-and-taxpayers.pdf

14. Flowerpower

Sunny

VAT affects consumption much more than income tax. when VAT was reduced to 15% it lifted spending, as I pointed then.

VAT was restored in Jan 2010 to 17.5%.

What effect did that uplift have? Clearly none, if everything was on the up for the next 2 quarters.

So, how is it that a 2.5% VAT increase under Darling had no appreciable effect, but an increase of the same size by Osborne has so large an effect?

15. Watchman

Sunny

then explain this. Why did the UK economy start growing strongly again during the last months of the Lab govt and first quarter of Tory govt, even tho we’d just faced a massive recession, and flatlined after Tories unveiled their CSR?

Well, since there were no cuts at the time, as they would come in after the CSR, and therefore at the same time as the ‘flatlining’ (actually 1%-2% growth is notable still, but I’ll let that go), it was clearly not the actual cuts. As has been repeatedly pointed out on this thread, spending is now higher, not lower, so cuts cannot so far have caused the slowdown in economic growth rates.

I’d be inclined to suggest the increased tax burden and higher costs of borrowing (you get this when your economy is highly exposed in terms of credit) are the major problems the economy now has. Plus the fact far too much of the economy is the state, which appears to act as a destimulus for economic activity.

Tim J – you forgot the operative bit: “as Osborne predicted”

Flowerpower – if Osborne is spending the same as Brown would have, what claims do the Tories have to ‘we saved the economy’?

Sunny @ 9:

“then explain this. Why did the UK economy start growing strongly again during the last months of the Lab govt and first quarter of Tory govt, even tho we’d just faced a massive recession, and flatlined after Tories unveiled their CSR?”

As several other people have pointed out, it’s unlikely to be the result of spending cuts, since those hadn’t happened yet. Might I suggest that an opposition screaming about a modest cut in government spending in terms of GDP (not even in real terms) meant a return to the Victorian era might have had some effect on consumer confidence, and in turn on the state of the economy?

18. Luis Enrique

Sunny,

fine, if what you meant to write was “as Osborne predicted” but the OP says:

“And why are tax receipts not growing?”

in which case you might have responded with something along the lines of “You’re right. What I meant to say was “And why are tax receipts not growing as Osborne predicted?”

you can hardly complain if people respond to your words as written

Just one thing Sunny should perhaps point out – forget about the discrepancy between tax receipts and government spending for a minute.

Government spending was 5% UP on this time last year – and only about 10% of that was increased interest payments.

What are they spending the money on – redundancy payments ? Because it’s not exactly ‘cuts’ on the headline figure.

20. Sean Fear

In fact between January and April of this year, the deficit was £30bn. Between January and April 2010, the deficit was £36bn. That is a reduction of 17%. Borrowing for March this year was £1.9bn lower than originally estimated, so borrowing for 2010/11 came in £6bn below the OBR forecast.

Overall, borrowing was £17bn lower in 2010/11 than in 2009/10.

21. Watchman

Sean,

You can’t expect Sunny not to present a nice isolated (and possibly explicable) fact as proof of his position, despite the fact he gets mauled from every possible angle as a result. That sort of looking at trends and things might suggest his point of view was not instantly provable to be correct!

22. Flowerpower

Sunny @ 16

what claims do the Tories have to ‘we saved the economy’?

We saved the economy = we persuaded the markets we were taking the deficit seriously and would seek to end it by 2015.

I’ll grant the righties some wiggle room on this one, only because I know (short of a miracle) that the policies will have crashed and burned by the end of the year.

It would be funny if the cuts weren’t mostly aimed at the poor and vulnerable…

“You can’t expect Sunny not to present a nice isolated (and possibly explicable) fact as proof of his position, despite the fact he gets mauled from every possible angle as a result.”

Well he has never has been mauled by moronic trolls like you dipstick, because you only repeat tory talking points.

The fist thing to remember is that the situation the tories took on was not as bad as they made out. They lied about how bad the economy was for their own selfish reasons. They talked Britain down down as they always do when they have been out of power. But they have made the situation worse with their “shrinking our way to growth” claptrap. Just like the elites in the early 1930s who tried the same idiocy and ended up with unemployment at 25% in the US. Now of course we have learned before from the sleazy tories that unemployment is a price well worth paying. They don’t care if the rate goes up because they are not interested in the plight of the poor. The deficit must be cut fast so that tax cut s for their rich backers can soon be delivered.

Why the Laffer(ble) Curve doesn’t apply to VAT is simply this.

When VAT goes up, those selling VAT-able goods add it to prices. When it goes down; they know how much their customers are already willing to pay, so they pocket the difference themselves.

Less of a curve and more of a cliff.

“It would be funny if the cuts weren’t mostly aimed at the poor and vulnerable…”

Yup, but we can thank the idiot Clegg for that. He has been the human shield that has protected the brownshirts from their dirty work. Cameron is just laughing at him now, as he has done over the Ashcroft job.

Why do you think nobody trusts him to defend the NHS.?

27. Flowerpower

So, to recap:

borrowing was £17bn lower in 2010/11 than in 2009/10. (@20)

Tax receipts were UP (@13)

Spending was up.

Anyone contest any of that?

@22

We saved the economy = we persuaded the markets we were taking the deficit seriously and would seek to end it by 2015.

Hang on, wasn’t it the Tories who were talking up the (historically unremarkable) deficit and making hysterical shreiks about how we would soon all be bankrupt.

“So, to recap:

borrowing was £17bn lower in 2010/11 than in 2009/10. (@20)

Tax receipts were UP (@13)

Spending was up.

Anyone contest any of that?”

£17bn lower is a shambles. If there had been more growth it would have come down far faster.

Yes as a matter of fact

Tax receipts April 2010 43.2 bn.
Tax receipts April 2011 42.9 bn.

Source: http://www.statistics.gov.uk/pdfdir/psf0511.pdf

31. astateofdenmark

If it hasn’t been posted, HMRC released today the monthly tax receipts schedule for April:

http://www.hmrc.gov.uk/stats/tax_receipts/tax-receipts-and-taxpayers.pdf

As can be seen at the link tax receipts were markedly higher in 10/11 compared with 09/10. Additionally, every single tax detailed by HMRC was higher in 10/11 than in 09/10, with the sole exception of the Climate Change Levy.

Comparing the month of April 11 with April 10, taxes were up overall and all of the main taxes were up, with the exception of Net Income Tax.

As the IFS states in its press release this morning:

“Central government current receipts in April were 0.8% lower than in the same month last year. However, April 2010 figures were flattered by receipts from the temporary Bank Payroll Tax, which today’s release suggests boosted revenues by £3.5bn. Excluding these receipts from the April 2010 figures suggests that underlying receipts grew by 8.0% in April 2011 compared to the same month a year ago. The OBR’s forecast at the time of the March 2011 Budget implied that central government current receipts for the whole of 2011-12 would be 7.1% above 2010-11 levels.”

http://www.ifs.org.uk/publications/5589

32. astateofdenmark

IFS has a fuller analysis here:

http://www.ifs.org.uk/pr/pubfin_may11.pdf

33. Charlieman

A question for Luis or somebody equally qualified:

The UK had an exceptional number of public holidays in April 2011; combined with annual leave, many workers used those days to create long breaks, so there will inevitably be a reduction in economic production for the month (and the start of May). Will reduced production be reflected in the April 2011 tax figures or in those for May?

34. astateofdenmark

Hmmm … seems a lot of theoretical discussion here …. as a small business owner I can tell you that anecdotally things were beginning to improve (not just for me, but for my customers,suppliers and others I meet in my line of business) in the months before the election, but got noticeably worse immediately after the election.

OK cuts hadn’t happened yet, but there was a huge confidence hit as the Tories decided to adopt an apocalyptic rhetoric. I can only hope that they deliberately chose to talk down the economy in order to keep recession going for a couple more years so that they could benefit electorally from a 2015 recovery.

36. Luis Enrique

underlying receipts grew by 8.0% in April 2011 compared to the same month a year ago. The OBR’s forecast at the time of the March 2011 Budget implied that central government current receipts for the whole of 2011-12 would be 7.1% above 2010-11 levels.

Ducan if you are reading, book a table I’m having the ribs.

Charlieman, I don’t know – there may have been more holidays this year, but everybody spent them buying Royal Wedding tea towels … GDP is estimated 3 ways – income, expenditure and production (in theory, they should all be equal). Maybe April was a month these three diverged?

@15

As has been repeatedly pointed out on this thread, spending is now higher, not lower, so cuts cannot so far have caused the slowdown in economic growth rates.

But expectations of cuts and austerity have a psychological impact. How many people will go out and spend in an uncertain economic climate? And as has been noted, public spending is still rising. So the real question is… Given that the economy is currently flatlining, what will happen to it when the cuts really start to bite?

“Just like the elites in the early 1930s who tried the same idiocy and ended up with unemployment at 25% in the US”

Under Herbert Hoover who increased government spending and told businesses not to cut wages. He wasn’t as activist as Roosevelt but nor was he an advocate of orthodox policy.

It should be obvious to anyone who has observed Sunny’s editorial output over the past few years that he is economically illiterate.

There are legitimate concerns to be raised about Osborne’s ‘management’ of the economy, many of which can be advanced from a leftist viewpoint (and several from the right – as the article you link to points out, many on the right are disappointed at Osborne’s ‘progress’ to date), but willfully-blind, short-term party political nonsense such as this is counter-productive.

In order for these figures to have any real meaning, they should be repeated over the next few months – and due to the various factors pointed out in the article you link to, it is unlikely that the numbers for, say, May or June will illustrate the point you are making.

If they do not, will you acknowledge (short-term) defeat, or will you ignore them and focus on some other meaningless set of figures?

You used the term ‘Osborne’s Plan.’ But only in your headline – I was hoping you would enlarge on the alleged ‘plan’. But no – why?

Osborne’s Plan: Camping’s Forecast ; Sod’s Law. Which of the three is not pie in the sky? ( clue; – buttered toast on the carpet).

“It should be obvious to anyone who has observed Sunny’s editorial output over the past few years …..“ ZZZZZZZZZZZZzzzzzzzzzzzzzzzzzzzzzzzz

Shorter troll “I got nothing”

42. Richard W

Duncan,

I agree with a lot of your criticism of Mr Osborne, however, using one months borrowing figures to prove a point especially when they do not say what you are claiming is not the way to go. Current spending is up 5% and tax receipts increased by 7.9%, when one disregards last years bankers bonus tax. Good to see you and others on the thread correctly acknowledging the role of expectations in the economy. There is almost nothing that the government can do to affect the economy today. However, they do affect expectations and that strongly influences the economy. Banging on about bankrupt Britain was maybe a political calculation, but it was terrible economics. On the whole the borrowing figures are not as bad as you make out on the tax receipts side.

deeply embarassing for the tories and their supporters. the media largely supportive of cameron won’t want to talk about this much.

@41 – “Shorter troll ‘I got nothing'”

In which case, you have less than nothing.

In case you didn’t realise, I am critiquing Sunny from the left. If the left in general wants to pretend that it knows shit from shite when it comes to economics then it should avoid gutter-trawling nonsense such as this – there are plenty of worthy observations to be made, but this is desperate stuff.

Why is the Banker’s tax disregarded? Was is not included in tax receipts last year?

Never mind the borrowing figures for the moment, try this in Wednesday’s FT:

OECD cuts growth forecast for Britain
http://www.ft.com/cms/s/0/7db4d788-86af-11e0-9d41-00144feabdc0.html#axzz1NMDxisJG

47. AnotherTom

The sad thing is that Sunny would have made the same claim whatever the figures were.

“As we have repeatedly pointed out, the best way to cut the deficit is to grow the economy and maintain confidence that the public weren’t going to suffer badly over the next year.”

This is one of the main arguments against the spending cuts. The argument is that by not reducing Govt spending so much GDP will grow faster thereby increasing tax receipts.

Has any analysis actually been done to show that tax revenues would incrase by more than the increase in the deficit not to mention increased interest payments on debt?

I am also sceptical that in the long term increasing Government expenditure will increase GDP.

49. Watchman

Second law of Liberal Conspiracy: if sally is supporting your argument, you can safely say you are wrong (and apparently not a troll…).

So Sunny, this is bad news:

“It should be obvious to anyone who has observed Sunny’s editorial output over the past few years …..“ ZZZZZZZZZZZZzzzzzzzzzzzzzzzzzzzzzzzz

Shorter troll “I got nothing”

“I am also sceptical that in the long term increasing Government expenditure will increase GDP.”

It depends on whether GDP growth is constrained by demand deficiency or supply-side factors. It tends to get overlooked that in Keynes’s General Theory there was an aggregate-supply function as well as an aggregate-demand function.

IMO one of the major supply-side factors tending to contrained real GDP growth on Britain is persisting skill shortages. But several commentators have previously remarked that one of the consequences of Britain’s deep recent recession – in which GDP declined by 6% to 7% – is that capacity may have closed down with the associated capital structures, enterprise and skills dispersed.

There are several accessible current texts on mainstream macroeoconomics so it’s a pity that a basic understanding of what it’s about is a bit thinly spread IMO. Here are some texts from among the best IMO, starting with the most approachable:

Manfred Gartner: Macroeconomics (3rd ed. Financial Times, 2009)

Rudi Dornbusch, Stanley Fischer, Richard Startz: Macroeconomics (11 ed. McGraw-Hill, 2011)

Olivier Blanchard, Francesco Giavazzi, Alessia Amighini: Macroeoconomics a European Perspective (Financial Times 2010)

The last carries a strong endorsement by Charles Bean, deputy governor of the BoE and previously the BoE’s chief economist. Olivier Blanchard is presently chief economist at the IMF.

52. Charlieman

@34. astateofdenmark: A belated thanks for those links.

Oh dear . .

“Barack Obama has dashed David Cameron’s hopes that he might endorse his deficit reduction strategy, instead praising the way the UK’s chairmanship of the G20 under Gordon Brown had dragged the world out of recession.”
http://www.guardian.co.uk/world/2011/may/25/barack-obama-backs-gordon-brown

@51

Isn’t this as ignificant problem though, that the majority of the public do not understand economics?

I believe most people are self interested and will vote for the party that they believe will benefit them the most, not considering what is best for the country overall.

Politicians want to get elected and therefore try to make enough promises to get enough votes to get elected, with long term considerations of what is good for the country being totally ignored.

Love it, another one of Sunny’s articles being shot down like the Luftwaffe over Kent.

Why?

Facts tend to trump propaganda.

Love it more when it’s some of the more lefty posters on here doing the shooting. Luis – you deserve those ribs.

“Facts tend to trump propaganda.”

Too true. Try the ONS figures on business investment in the first quarter just released, it seems that business doesn’t have much confidence that the government is on the right course:

Business investment for the first quarter of 2011 was estimated to be 7.1 per cent lower than the previous quarter and 3.2 cent lower than the same period last year. The quarterly decrease in business investment was mainly due to private sector non-manufacturing which fell by 8.3 per cent. This was due to decreases in other services, down by 10.5 per cent.
http://www.statistics.gov.uk/cci/nugget.asp?id=258

Private sector non-manufacturing is most of the economy nowadays.

@56 Bob

Last time i checked we were talking about borrowing/revenue…..but I will entertain your straw man argument.

Data it is true, has been mixed. Some has been worse than expected, and some better. Business investment though is a notoriously volatile data series, and you have cherry picked data – its a YoY number, and the 2010 numbers were quite high, as you would expect as a country emerges from recession. It is expected that the rate of increase in business investment (which is what this series is) will slow in such situations.

@57: “Data it is true, has been mixed.”

Mixed??? C’mon. The borrowing figures reflect the low tax revenues because the economy has stagnated. Try this report a few days ago in the Telegraph:

The latest figures from the Office for National Statistics(ONS) confirmed the initial estimate, that Britain’s economy grew just 0.5pc in the first quarter, after contracting by the same amount in the last three months of 2010.

This means the economy has effectively stagnated over the past six months – a far worse performance than Britain’s major trading partners. [25 May]
http://www.telegraph.co.uk/finance/economics/8535229/UK-economy-held-back-by-weak-consumer-spending.html

And this report in April on consumer spending:

Britain’s retailers are enduring the toughest trading conditions for at least a decade and a half, as consumer spending wilts in the face of higher inflation and the first drop in personal spending power since the slump of the early 1980s. [12 April]
http://www.guardian.co.uk/business/2011/apr/12/consumer-spending-inflation

More downbeat data on Britain’s economy:

A UK retail-sales index fell for the first time in three months in May and stores expect growth to slow in June, the Confederation of British Industry said. [24 May]
http://www.bloomberg.com/news/2011-05-24/u-k-retail-sales-gauge-falls-for-first-month-in-three-as-expansion-ebbs.html

60. Richard W

It is people like Bob living in an echo chamber that makes markets profitable for others. The retail elements of the CBI are propaganda mouthpieces. The 0.6% fall in household consumption from last quarter was entirely an inflation squeeze. The nominal value of spending actually increased on the quarter by 2.1%, to stand 5.2% higher than a year before. The echo chamber reported it as a consumer slump when in fact retail sales in terms of value are increasing. UK retailing shares actually outperformed the market by 7% last month.

It reminds me of the H1 2009 when the media was full of apocalypse just around the corner. The FTSE All-share Retail Index doubled in that April and it took to the end of June before the MSM noticed.

In case anyone is interested, here is the Treasury’s survey as of May of independent forecasts for the UK Economy:
http://www.hm-treasury.gov.uk/d/201105forecomp.pdf

In a while, we’ll be able to tell whether the optimists or pessimists were correct. Personally, I pay special regard to the forecasts by the NIESR.

“It is people like Bob living in an echo chamber that makes markets profitable for others. ”

As for being an “echo chamber”, I’m just reading and relating here the entrails of what is happening in reality, mainly for the benefit of readers unfamiliar with sources on the web – and I post the links so readers can check if they want to. Predictably, some get uncomfortable with that when reality doesn’t accord with what they want to happen or want others to believe. Tough cheese.

62. Richard W

Maybe you do Bob. Alternatively, you cherry pick stories even subconsciously to fit a preconceived narrative. Hey, I am not trying to suggest the economy is performing well or even that we are on the right track. I certainly do not believe that is the case. However, with data one has to look behind the headline numbers to see how it fits together with other data to get an accurate picture. Everyone quoted in the media does not give a worthwhile opinion. Many trade bodies are propaganda operations with an agenda so the validity of their claims can’t always be accepted at face value. I’ve always made a good living from being highly skeptical about the consensus opinion as it nearly always proves to be wrong. In my opinion, we are going through a period where the consensus is doom. Therefore, on past experience it should be profitable to bet on the opposite.

“However, with data one has to look behind the headline numbers to see how it fits together with other data to get an accurate picture.”

I agree – and also that virtue is a very good thing.

Periodically, I post up a link to the HM Treasury monthly survey of Independent Economic Forecasts so readers can assess how others are reading and forecasting the economy. IMO we need to be especially wary of Treasury spin – and not just the spin of the current government. There were many regulatory failings in the part of the last – which was one of the consequences of Gordon Brown and advisers coming to believe their own propaganda about having abolished boom ‘n’ bust.

“In my opinion, we are going through a period where the consensus is doom.”

That’s not the consensus – and it certainly isn’t the Treasury view but note what Vince Cable is saying:

Vince Cable warns of second financial emergency
http://www.independent.co.uk/news/uk/politics/vince-cable-warns-of-second-financial-emergency-2289206.html

The facts are that the planned cuts public spending have barely started and there is no sign so far of consumer spending and business investment taking up the slack the cuts will make in aggregate demand.


Reactions: Twitter, blogs
  1. Liberal Conspiracy

    Today's borrowing figures show why Osborne's plan isn't working http://bit.ly/mcrLlQ

  2. sunny hundal

    Today's figures show why Osborne's plan isn't working: he stalled the economy and now it's coming back to bite him http://bit.ly/mcrLlQ

  3. DougScott

    RT @libcon: Today's borrowing figures up by 20% in 12 months; show why Osborne's plan isn't working http://bit.ly/mcrLlQ

  4. dhugoza

    Today's borrowing figures show why Osborne's plan isn't working http://bit.ly/mcrLlQ

  5. Owen Jones

    Today's figures show why Osborne's plan isn't working: he stalled the economy and now it's coming back to bite him http://bit.ly/mcrLlQ

  6. Simon Treanor

    Today's figures show why Osborne's plan isn't working: he stalled the economy and now it's coming back to bite him http://bit.ly/mcrLlQ

  7. Nick Hider

    Today's figures show why Osborne's plan isn't working: he stalled the economy and now it's coming back to bite him http://bit.ly/mcrLlQ

  8. Paul Jakma

    Today's figures show why Osborne's plan isn't working: he stalled the economy and now it's coming back to bite him http://bit.ly/mcrLlQ

  9. Tamsin

    Today's figures show why Osborne's plan isn't working: he stalled the economy and now it's coming back to bite him http://bit.ly/mcrLlQ

  10. UNISON East Midlands

    Today’s borrowing figures show why Osborne’s plan isn’t working http://is.gd/HuiagW

  11. Natacha Kennedy

    Tories/Right-wing press has gone very silent about the deficit recently: Here's why http://bit.ly/kHCgbR

  12. Dave McDave

    Today's borrowing figures show why Osborne's plan isn't working http://bit.ly/mcrLlQ

  13. David Poole

    Today's figures show why Osborne's plan isn't working: he stalled the economy and now it's coming back to bite him http://bit.ly/mcrLlQ

  14. Daniel Pitt

    Today's borrowing figures show why Osborne's plan isn't working http://bit.ly/mcrLlQ #ConDemNation

  15. Growing tensions over the NHS, Obama’s in town, and the Big Society re-launches (again): round up of political blogs for 21 May – 27 May | British Politics and Policy at LSE

    […] stated objective of cutting the deficit. Sunny Hundal at Liberal Conspiracy outlines why Osborne’s plan isn’t working and Alexandra Kemp at Labour List offers up a Plan B. Even the OECD are getting jittery about the […]





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