Richard – under what conditions would you ever advocate cutting overall government spending?

So you think the government should just spend more, take more debt? That is insane.

You won’t get significantly more tax revenue, whatever you do. The businesses and rich people – who you would like to target – simply don’t have the amounts of money this spending spree would require. Even if they had, you couldn’t collect it.

You won’t be able to take significantly more debt without breaking a lot of other things. Western governments already have too much debt, and you cannot expect the Chinese and other hard-working people to continue “investing” (i.e. donating) into European state bonds.

And the British government isn’t even doing any real “cuts”. They are still taking too much debt, they are just not continuing in the same stratospherical trajectory of debt curve as before. The promises made by previous governments (regarding public sector pensions etc) are simply unsustainable, and now is the time you find this out.

@2 – Sure you can. You start by radically simplifying the tax system. Remove much of the possibility of evasion. Oh hey, revenues shoot up, and a few percent leave the UK. The UK is still much better off, of course.

Oh, and shut down the British tax havens, and stop allowing tax havens to flourish.

“And the British government isn’t even doing any real “cuts”. ”

*spits* Tory SCUM. There are massive and ongoing cuts, primarily targeted on the poor. Simply because the Tories are spending on THEIR pet projects and on pork-barrel projects for their areas doesn’t mean for a second that the cuts are not VERY, VERY real.

Public sector pensions ARE sustainable. They won’t be if the government unilaterally make them into a scam by touching them, at all, without proper agreement. They’ll be viewed, rightly, as a piggy bank for the government and SENSIBLE people will stop supporting the scam since they’ll be repeatedly raided by the Tories for ready cash.

Leon @ 3:

“*spits* Tory SCUM. There are massive and ongoing cuts, primarily targeted on the poor. Simply because the Tories are spending on THEIR pet projects and on pork-barrel projects for their areas doesn’t mean for a second that the cuts are not VERY, VERY real.”

In terms of how much money the government is actually spending, and therefore of the impact on the economy, I think you’ll find it does.

We could cut out the middleman and just let the Chinese run infrastructure projects for us. Naturally they’d bring their own engineers etc., but there’d be a bit of casual local labour, and it would keep the Green QE specie out of the bankers’ mitts.

Can we expect a lot of these inane Murphy stocking fillers over the festive period?

@4 – Oh really, so punishing the poor and taking away the cash they’d spend on little non-essentials like rent, utilities and food provides the same sort of spending as pork-barrel projects which HAVE no meaningful return and doubling the administration cost of the NHS, among other pet projects?

…

Tory SCUM. Keep on arguing for punishing the poor for existing.

@5 – Ah right. So not satisfied with arguing that the Government should forcibly sell charity’s assets to the Chinese, you want to do away with bidding rules and damage this country even further. The depths of hatred you have for Britain are amazing.

“Tory SCUM”

Grow up, this isn’t Guido’s comment section.

“Cutting now, as Osborne plans,”

Hmmm. Whilst Osbourne is certainly cutting parts of government even further at the moment, he has also done a major U-turn.

The plans for infrastrure projects, potentially of 25 billion – but funded in a creative “this isn’t debt – honest guv” manner that are being mooted about now would simply not have happened had the original plans stayed on track. You may as well have called his growth plan “I can’t believe it’s not a stimulous”.

We’ve won the argument about whether a stimulous was needed, and arguing over this with right wing morons simply makes all parties look like they are not paying attention to what’s happened (you can’t rely on the labour party to pay attention either – their competance is rock bottom) The issue we need to focus on now, is whether the plans for road building etc are really what we need. Do roads really produce growth?

@3 – you’re being funny. I’m not Tory. I’m not even British. I’m just observing you from across some water, from the eurozone, which sure has its own problems (like Greeks striking against “austerity”. What freaking austerity? It’s not austerity, it’s that they’re bankrupt. And you want to follow? Not very wise.)

If you look at the actual spending, you fill find that the British government is not really cutting. They are simply finding out that the decade-long spending spree has come to an end.

I wouldn’t like Britain to fail because I think Europe should be a prosperous economic area. Now the powers-that-be are using this crisis to make it a federalist single state.

@ pjt

“So you think the government should just spend more, take more debt? That is insane.”

The government *will* spend more and take more debt. As Osborne is now discovering, there’s no way around that fact. The question is: do we borrow and spend in a controlled way on useful things that promote growth – infrastructure, house building, tax credits to incentivise work, targeted tax cuts, etc. – or do we let borrowing and spending run out of control as the costs of failure (unemployment benefits etc.) get ever higher?

“You won’t get significantly more tax revenue, whatever you do. The businesses and rich people – who you would like to target – simply don’t have the amounts of money this spending spree would require.”

Yes they do. Businesses are sitting on very large amounts of cash, but don’t have the confidence to invest it.

“Even if they had, you couldn’t collect it.”

Hence the need to borrow (though it would nice if a balance could be struck). In any case, nobody thinks all the spending that’s needed to promote growth has to come from the government. The government just has to spend enough, on the right things, to give businesses the confidence to start spending themselves.

“You won’t be able to take significantly more debt without breaking a lot of other things.”

See above; this is just as much of a problem for Osborne (borrow-to-pay-for-redundancies-and-unemployment-benefits) as for his opponents (borrow-to-promote-growth).

“And the British government isn’t even doing any real “cuts”.”

So what you’re saying is that the government is just spending roughly the same amount, but on different things? I won’t argue with that. The whole problem is that spending is being shifted from things that promote jobs, growth and confidence to things that don’t (see above).

“The promises made by previous governments (regarding public sector pensions etc) are simply unsustainable, and now is the time you find this out.”

No, we found this out in the mid-2000s when it became apparent that the cost of public sector pensions was going to rise from the current 1.2% of GDP to 1.5% and beyond from 2015 onwards. That’s why we took action in 2007 to bring the cost back down to 1.2% of GDP for the foreseeable future.

@7 – What, stung by the accuracy of the comment, asset stripper? Got more ideas like your gem of forcibly selling off charity property at firesale prices?

You’re the Tory troll here to disrupt debate, rather than going back to ConHome and agreeing sagely that Nothing Will Go Wrong with your ideological brothers, and planning new ways to hurt the poor.

@9 – Well, I’m sure can find poor people suffering funny. Me, I find it shocking that one of the world’s richest countries would permit that kind of thing to happen. This will be remembered, and rightly, as a dark age.

And you’re plain SCUM, attacking the poor for existing. 1%ers around the world are the same.

We’ve won the argument about whether a stimulous was needed, and arguing over this with right wing morons simply makes all parties look like they are not paying attention to what’s happened

But the argument wasn’t only whether a stimulus was needed, it was whether it was possible. In order to make their analysis work, the left need to argue that increased public spending pays for itself (and more than pays for itself) through increased economic activity. That simply isn’t the case. Look at the research on the multiplier effect in open economies.

And if the increased public spending (and for it to be a stimulus, it would need to be substantially increased public spending) doesn’t pay for itself, then you’re looking at increasing the deficit in the short to medium term. And that would lead, according to the institutions that set credit ratings, to a credit downgrade for the UK, an increased cost of borrowing and the death-spiral of public finances that Italy is falling into.

And none of this would have affected commodity price rises (which is what is predominately driving inflation) meaning that real incomes would still be falling, and we’ll still be in the trouble we’re in now, except with that much greater debt.

I need to correct my figures on pensions. Following the 2007 changes, the cost was set to fall from its present peak of around 1.9% of GDP to around 1.4% of GDP in 2060 – slightly lower than the 1.5% cost in 1999/2000.

Oh, and that is not allowing for the fact that the size of the public sector workforce is about to shrink by 10%. Or the fact that the salaries of the remaining workers will be around 10% lower than we would have assumed from 2015 onwards, following a four-year pay freeze. (I would like to see those numbers re-crunched in light of those facts, actually; it’s really pretty implausible that the Johnson reforms of 2007 PLUS the decimation of the workforce PLUS a four-year pay freeze don’t bring the long-term cost of public sector pensions down to a sustainable level.)

This is true, but trivial. If you divide the economy up into four components, C I X G, growth in the economy necessitates growth in at least one component.

Better to remember that growth in workers real incomes can come from, I think, another 4 ‘engines’

1. Increase in their share of output at expense of captial income
2. Putting unemployed resources to work – increasing output
3. Raising the productivity of employed resources – increasing output
4. Accumulating extra resources – net capital investment – increasing output

Although I think increasing G is part of the answer, always worth remembering it is possible to grow G without achieving any of the above.

Leon @ 6:

“Tory SCUM. Keep on arguing for punishing the poor for existing.”

I think it reasonable, in reply to an article which claims that lack of government spending is damaging the economy, to point out that government spending is, in fact, increasing.

@13 – Remember that the fact that there are less public workers mean less is being paid in as well, so it’s not all one-way. I’m sure losing three quarters of a million workers will have a significant difference, though.

@15 – And not at all reasonable to act in complete denial of the very real cuts being made to the basic social infrastructure of the country, and the very real pain being inflicted onto poor people with cuts.

It’s downright revisionist to try and ignore them, actually. Again, simply because you approve of this government’s pork-barrel spending and major projects like doubling the NHS’s bureaucracy to allow private companies to syphon off funds for healthcare doesn’t mean that that isn’t exactly what they are.

Cut denial from the Tories – what a world!

@ Leon – I think it rather unlikely that those pointing out that government expenditure has increased would also fall into the pro pork barrel spending camp, it’s rather the opposite in fact.

@18 – They’re trying to say that there have been “no cuts”. As there have been cuts in many areas, they are thus defending the extra spending…

@19 – Leon Wolfson

Since this government is borrowing more than the last government how can it be called “cutting”?

What they are doing is “diverting” at best but if you borrow more then that is an INCREASE in spending and not a cut.

Just like Thatcher claimed she was cutting taxes but spent more than the previous government on public services as well.

The sooner this government does actually start cutting the better. People aren’t stupid and they know you can get out of a debt crisis by borrowing more money on the idea future taxes will pay it off.

Either a job is real and required in which case someone else can pay for it or it’s not in which case it shouldn’t exist.

Governments should be elected to govern not bribe the electorate with non existent phoney jobs that shouldn’t exist in the first place…

Since this government is borrowing more than the last government how can it be called “cutting”?

Bit of a red herring this one. Overall Govt Spending is going up largely because interest payments are rising. Within that overall figure, most departmental spending is coming down.

Add to this the tendency of the left to refer to reductions in increases, or the cancellation of planned future projects as ‘cuts’ and the apparent contradiction is pretty easily cleared up.

@21 – Tim J

You say: “Add to this the tendency of the left to refer to reductions in increases, or the cancellation of planned future projects as ‘cuts’ and the apparent contradiction is pretty easily cleared up.”

Nicely put fella!

Leon @ 19:

“They’re trying to say that there have been “no cuts”.”

Nobody, at least on this thread, has said that no departments have seen their budgets cut. What we are saying is that government expenditure as a whole is going up, therefore blaming the state of the economy on declining government spending is wrong.

“And if the increased public spending (and for it to be a stimulus, it would need to be substantially increased public spending) doesn’t pay for itself, then you’re looking at increasing the deficit in the short to medium term. And that would lead, according to the institutions that set credit ratings, to a credit downgrade for the UK, an increased cost of borrowing and the death-spiral of public finances that Italy is falling into.”

It’s as if the tories on here haven’t realised what Osbourne’s policy this week has been.Osbourne’s plans now involve a longer deficit in the short to medium term. Plus a new off balance investment programme using pension funds in a “I can’t believe it’s not a stimulous” policy.

So if you are correct, osbourne has just sent us into an Italian Death sprial.

Alternatively it may be that the biggest factors behind the credit rating of states are: (1) political willingness to re-pay and history of re-payment – something the UK has over the med, (2) economic growth levels that enable re-payment – something we don’t currently have, and something that self-evidently concerned osbourne.

The difference is now over how to use the deficit.

@23 – And? The statement was “no cuts”.

That the government is spending on things which don’t produce growth and then turning round to try and claim that this somehow excuses the fact they’ve driven consumer confidence into the toilet with the cuts, and are actively punishing the poor…

…well, it’s the usual denial, lies and Tories. But I’m being recursive.

@20 – It’s called cutting when THERE ARE CUTS. That’s right, it’s called LOGIC. I know this is hard for you to understand.

Let me spell it out for you?

HAVE THERE BEEN CUTS? YES
HAS THERE BEEN OTHER SPENDING ON SHITE WHICH HAS BROUGHT THE SPENDING BACK UP? YES

The proper response is NOT to make more cuts to useful services and benefits, incidentally, it’s to CUT THE SHITE. You can start by putting the NHS’s admin costs back from 12% to 6%.

But no, you want more people staving and freezing. Death, murder, kill, the constant refrain of the far right.

“But no, you want more people staving and freezing. Death, murder, kill, the constant refrain of the far right.” A new version of Godwin’s law has just emerged.

Government spending is still rising on a nominal basis. It’s less than some previous projections, and some previous spending plans were unfunded or mis-funded (ie FE colleges), and these have been shorn back.

The tax take has reduced (though fluctuates quite widely) partly because of a fall-away in transactions such as housing, and other financial deals. What has happened over the last 18 months would have occurred whatever stripe of government was in power, give or take a tweak or two here and there.

There are actually five main contributors to growth from the perspective of how the OBR see the economy. Inventories is the one missed by the UK’s No 1 economics blogger. If you look at the outturns to what actually happened in the economy compared to what the OBR predicted last year. Government consumption was predicted to be a net -0.2 per cent drag on GDP growth. It actually contributed 0.5 per cent to GDP. Net trade 0.9 per cent predicted and the outturn was 1.1 per cent. Therefore, it makes no sense to say the poor state of the economy is because the government cut spending or the contribution from net exports did not materialise. Both sectors outperformed the prediction.

The poor performance of the economy was through private consumption: 0.9 per cent predicted versus an outturn of -0.5 per cent. The UK’s No 1 economics blogger appears to be making this part up, ” demands for more pension contributions from public sector workers “. See government consumption contribution to growth. Investment : 0.6 per cent predicted against an outturn of – 0.4 per cent. Therefore, the OBR are not downgrading because borrowing was higher but they are in fact, downgrading the growth potential of the UK economy and implying that the structural deficit could be larger. Whether their bearish forecast for next year is warranted in light of an improved performance by private consumption as 2012 inflation falls time will tell. Certainly the current monetary figures that operate with a six months lag suggest that they are too cautious. However, the EZ is a huge risk capable of blowing everything out of the water and the current slowdown in UK manufacturing does not bode well for net trade.

Anyone know what the “Green New Deal” is, and will Mr Murphy be running it?

(my comment: “This is true, but trivial.” was not terribly intelligent under a post entitled “stating the obvious on the economy”)

28 Richard W

Green New Deal was cooked up by the New Economics Foundation. Mr Murphy was responsible for ideas about how to finance it, including a bizarre idea that QE (which he thinks is government borrowing) should be diverted to fund green investment. Relevant links are here:

http://www.neweconomics.org/publications/green-new-deal (pdf download)

http://www.financeforthefuture.com/GreenQuEasing.pdf

@26 – Leon Wolfson

You say: “Death, murder, kill, the constant refrain of the far right.”

After Iraq and Afganistan embarked on by the Labour government in their desperation to suck up to George W Bush – are you serious?

Perhaps you’d care to tell us when the “right wing” Tories went to war based on a pack of lies…

30. Easy one. Suez ’56.

“Anyone know what the “Green New Deal” is”

What the “green new deal” advocated by Murphy and the green movement above is, is a vastly bigger project than the ‘green deal’ which is coalition policy.

The green deal involves a number of schemes, with different anacronyms, starting in the UK soon whereby the government is providing some of the finance for the installation of micro-generation and home insulation technology, to be re-paid through some of the savings on energy bills that occur as a result. There is also the creation of a green investment bank to get some private finance in (see “I can’t believe its not a stimulous!”)

“and will Mr Murphy be running it?”

No, its coalition policy – which means you’re allowed to support it

What ‘the Green New Deal’ is basically the above, but on a far bigger scale and with far more infrastructure. Think of the difference as merely one of ambition and willingness to piss off the climate change deniers.

@31 – Devon Chap

Remind me when Eden told lies to the commons as an excuse to go to war to follow a republican US president – quite the reverse in fact I’d say given what happened with our “closest ally”…

I support good policies to pragmatically deal with the world as it is, Planeshift. Not interested in how the world ought to be, I will leave that to the ideologues. I hate party politics. I even managed to once agree with Leon in one of his more lucid days. Nothing is important including seemingly the GND until it has its own acronym.

@27 – Nope, you’re just another troll troll out to yell “murder, death, kill” and expect it to pass muster in civilised society, hiding behind conversational rules which don’t apply, the usual false appeal to authority from the right.

“Government spending is still rising on a nominal basis”

And? This does make the actual cuts, in this thing called reality, any less savage. You’re protecting pork-barrel spending, and such strokes of genius as doubling the administrative costs of the NHS. That’s you, right there.

Your lies about the inevitability of people’s death from preventable causes is just that. It’s excuses, for cuts which have deliberately put consumer confidence in the toilet, while you enthusiastically flush. Not carrying out the VAT rise alone would have made a huge difference, and there’s no way that Labour would have doubled the administration cost of the NHS!

Smoke and mirrors from the far right, as usual. Of course what governments do makes a difference, it’s why you can’t stand polite, reasoned conversation among the left unencumbered by Tory trolling.

@31 – I’m sorry, you’ve mistaken me for a centralist. I’m a left winger, BNP man. Also, the Tory voting record…ah, right, yes, no grounds for you as usual!

@35 – Nope, you agreed with what your construct of reality told you that I said, not what I said in reality. And of course you’re not interested in anything but your vision of the Tory Domination of All, that’s been clear for a long time. Debate is a wasted effort…

And when inflation rises again, don’t worry, you can deny being wrong ever again!

I even managed to once agree with Leon in one of his more lucid days.

Oh dear, not a lucid day.

@37 – Right, well, go away until you have another lucid day then.

Leon, you’re clearly a far-right Tory brownshirt fascist 1%er concern troll who comes on here to disrupt debate and make left-wingers look bad through association with you. You should go off back to Con Home with the rest of your kind and leave us to discuss matters in peace.

@39 – Yawn, when you’re quite done acting your age as your shoe size…

@ 40:

Typical brownshirt, disrupt the conversation then pretend everybody else is at fault when your trolling is revealed for what it is. 1%er scum.

@41 – Do go right on proving that you view the left as interchangeable shadows on the wall, by your total inability to differentiate between people who disagree with you.

Explains why hurting the poor comes so easily for you…they’re not “real”.
This is all quite typical far-right behaviour, of course.

Are people on hear really trying to claim nominal increases at a time of over 4% inflation are a sensible way to assess whether government spending is being cut?

Really?

GCSE economics anyone?

C’mon!