It is time for the UK to think like an emerging market

[gryffron]

The worst of the rot set in around 2010 with the Osbourne/Cameron era when they backed austerity which turned out to be the wrong horse

But that’s Labour propaganda nonsense. Cameron inherited a 10% budget deficit from Brown. Fixing that wasn’t “austerity”, it was common sense. They couldn’t possibly continue spending at that rate.

Labour’s spend, spend, spend hadn’t succeeded in boosting the real economy as they had promised. It never does! It just created a whole heap of taxpayer funded non-jobs like diversity coordinators and street play organisers.

Gryff

[Steveam]

Cameron/Osbourne taken out of context - the economy was on its knees but Brown also taken out of context - have we forgotten the GFC? One can argue that years of light touch regulation (fought for by the city) had left us vulnerable but the world picture was dire and the U.K. could easily have collapsed had Brown (financially competent) been at the wheel.

Back to the article. We are where we are … does the article make sense?

Best wishes, Steve

[CliffEdge]

Labour got the blame for what the US did. This time, will Labour get the credit for what the US is doing?

[swill453]

...and the U.K. could easily have collapsed had Brown (financially competent) been at the wheel.

Is that really what you meant to say?

Scott.

[Nimrod103]

Cameron/Osbourne taken out of context - the economy was on its knees but Brown also taken out of context - have we forgotten the GFC? One can argue that years of light touch regulation (fought for by the city) had left us vulnerable but the world picture was dire and the U.K. could easily have collapsed had Brown (financially competent) been at the wheel.

Back to the article. We are where we are … does the article make sense?

Best wishes, Steve

Was Brown financially competent? That's debateable.

The GFC (both in the US and UK) was caused by too many people borrowing too much which they could not afford to pay back. In the UK it is evidenced by the rise in average real house prices between 1997 and 2006, from £120,000 to £320,000. Interest rates were too low and lending too lax. Brown should have prevented this by giving the BoE/MPC a different remit and forcing higher interest rates, but he didn't.

The error was then compounded by 13 years of emergency zero (or near zero) rates, the lowest in our 300 year history. No wonder the financial situation in the country is now chaotic.

[Bubblesofearth]

The GFC (both in the US and UK) was caused by too many people borrowing too much which they could not afford to pay back. In the UK it is evidenced by the rise in average real house prices between 1997 and 2006, from £120,000 to £320,000. Interest rates were too low and lending too lax. Brown should have prevented this by giving the BoE/MPC a different remit and forcing higher interest rates, but he didn't.

The error was then compounded by 13 years of emergency zero (or near zero) rates, the lowest in our 300 year history. No wonder the financial situation in the country is now chaotic.

I don't understand why, if banks are too big to fail, lending is not more tightly regulated. 2.5X joint or 3X individual used to be the norm for mortgage lending. That was not returned to even after the GFC.

BoE

[Nimrod103]

The GFC (both in the US and UK) was caused by too many people borrowing too much which they could not afford to pay back. In the UK it is evidenced by the rise in average real house prices between 1997 and 2006, from £120,000 to £320,000. Interest rates were too low and lending too lax. Brown should have prevented this by giving the BoE/MPC a different remit and forcing higher interest rates, but he didn't.

The error was then compounded by 13 years of emergency zero (or near zero) rates, the lowest in our 300 year history. No wonder the financial situation in the country is now chaotic.

I don't understand why, if banks are too big to fail, lending is not more tightly regulated. 2.5X joint or 3X individual used to be the norm for mortgage lending. That was not returned to even after the GFC.

BoE

The more the instutions lend, the more interest income they can levy, and the more tax revenue the Govt of the day can levy. What's not to like?

[gryffron]

Cameron/Osbourne taken out of context - the economy was on its knees but Brown also taken out of context - have we forgotten the GFC?

Labour inherited a surplus from Major
Labour had already created the deficit long before the crisis.
Labour told us that govt "investment" (aka deficit spending) would build a strong economy able to withstand future shocks - it didn't
Labour repeatedly claimed that Cameron's "austerity" would cause a recession - it didn't.

Conclusions: Govt spending is not the primary driver of the economy. Governments (of all colours) are poor "investors".

Gryff

[XFool]

Cameron/Osbourne taken out of context - the economy was on its knees but Brown also taken out of context - have we forgotten the GFC? One can argue that years of light touch regulation (fought for by the city) had left us vulnerable but the world picture was dire and the U.K. could easily have collapsed had Brown (financially competent) been at the wheel.

Yes. But we mustn't spoil the 'story', must we? Like "Blair lied about the 45 minutes, WMD and started the Iraq war" etc.

[XFool]

Cameron/Osbourne taken out of context - the economy was on its knees but Brown also taken out of context - have we forgotten the GFC?

Labour inherited a surplus from Major
Labour had already created the deficit long before the crisis.
Labour told us that govt "investment" (aka deficit spending) would build a strong economy able to withstand future shocks - it didn't
Labour repeatedly claimed that Cameron's "austerity" would cause a recession - it didn't.

It just wrecked all out public services - which is where we are now.

Conclusions: Govt spending is not the primary driver of the economy. Governments (of all colours) are poor "investors".

Correct conclusion: A government with a political ideology that believes public services do not matter, or are even harmful, got us into this mess.

[XFool]

But that’s Labour propaganda nonsense. Cameron inherited a 10% budget deficit from Brown. Fixing that wasn’t “austerity”, it was common sense. They couldn’t possibly continue spending at that rate.

There's "propaganda nonsense" and then there is propaganda nonsense...

Labour’s spend, spend, spend hadn’t succeeded in boosting the real economy as they had promised. It never does! It just created a whole heap of taxpayer funded non-jobs like diversity coordinators and street play organisers.

Interestingly, those "diversity coordinators and street play organisers" got the NHS its biggest public approval rating in years. Still, they must have gone now, which is why the NHS is proving so much more "efficient" these days.

[Steveam]

...and the U.K. could easily have collapsed had Brown (financially competent) been at the wheel.

Is that really what you meant to say?

Scott.

Whoops! So sorry … I left out the critical word. I meant to write: … and the U.K. could easily have collapsed had Brown (financially competent) not been at the wheel.

Apologies and thanks for pointing out the error.

Best wishes, Steve

[gryffron]

Labour’s spend, spend, spend hadn’t succeeded in boosting the real economy as they had promised. It never does! It just created a whole heap of taxpayer funded non-jobs like diversity coordinators and street play organisers.

Interestingly, those "diversity coordinators and street play organisers" got the NHS its biggest public approval rating in years. Still, they must have gone now, which is why the NHS is proving so much more "efficient" these days.

Terrific. So the only way we can have the public services we want, is to borrow from future generations to pay for them. Looks like the public wants a whole lot more than we can afford. No surprise there.

Just stop trying to sell us the lie that all this government spending will "boost the economy" and pay for itself. It never has. It never will.

NHS cash demands have increased by 3% above GDP for the last 75 years. How much longer do you think that can continue? Under any colour government.

Gryff

[XFool]

Interestingly, those "diversity coordinators and street play organisers" got the NHS its biggest public approval rating in years. Still, they must have gone now, which is why the NHS is proving so much more "efficient" these days.

Terrific. So the only way we can have the public services we want, is to borrow from future generations to pay for them. Looks like the public wants a whole lot more than we can afford. No surprise there.

Just stop trying to sell us the lie that all this government spending will "boost the economy" and pay for itself. It never has. It never will.

So, how has all this government "cost cutting" boosted our economy? After all the years of cutting, why is our economy not yet a super efficient, dynamic force, leading the world? Will more of the same guarantee this outcome - at some unspecified time in the future? (Rather like the 'Benefits of Brexit')

[Nimrod103]

Terrific. So the only way we can have the public services we want, is to borrow from future generations to pay for them. Looks like the public wants a whole lot more than we can afford. No surprise there.

Just stop trying to sell us the lie that all this government spending will "boost the economy" and pay for itself. It never has. It never will.

So, how has all this government "cost cutting" boosted our economy? After all the years of cutting, why is our economy not yet a super efficient, dynamic force, leading the world? Will more of the same guarantee this outcome - at some unspecified time in the future? (Rather like the 'Benefits of Brexit')

Since you claim there was cost cutting, can you remind me in which years government expenditure actually went down?
When expressed as a % of GDP, public expenditure post GFC and pre Covid never went as low as it was during Tony Blair's first term as PM. There really is no evidence for post GFC austerity.

The point, as ever, is that public expenditure is only a good thing when it enhances productivity. Just spending on the idle and feckless is a waste of resources, and the UK continues to do far too much of that.

[XFool]

So, how has all this government "cost cutting" boosted our economy? After all the years of cutting, why is our economy not yet a super efficient, dynamic force, leading the world? Will more of the same guarantee this outcome - at some unspecified time in the future? (Rather like the 'Benefits of Brexit')

Since you claim there was cost cutting, can you remind me in which years government expenditure actually went down?
When expressed as a % of GDP, public expenditure post GFC and pre Covid never went as low as it was during Tony Blair's first term as PM. There really is no evidence for post GFC austerity.

So clearly, somebody is making things up.

United Kingdom government austerity programme

https://en.wikipedia.org/wiki/United_Kingdom_government_austerity_programme

[Nimrod103]

Since you claim there was cost cutting, can you remind me in which years government expenditure actually went down?
When expressed as a % of GDP, public expenditure post GFC and pre Covid never went as low as it was during Tony Blair's first term as PM. There really is no evidence for post GFC austerity.

So clearly, somebody is making things up.

United Kingdom government austerity programme

https://en.wikipedia.org/wiki/United_Kingdom_government_austerity_programme

Austerity in name only. From your link:
Between 2010 and 2013, the Coalition government said that it had reduced public spending by £14.3 billion compared with 2009–10.[17] Growth remained low during this period, while unemployment rose.

In contrast from the ONS, public spending in 2010 was £700 billion, and in 2013 was £723 billion (https://www.economicshelp.org/blog/5326 ... -spending/). So called austerity was a PR exercise for public consumption.

[XFool]

So clearly, somebody is making things up.

United Kingdom government austerity programme

https://en.wikipedia.org/wiki/United_Kingdom_government_austerity_programme

Austerity in name only. From your link:
Between 2010 and 2013, the Coalition government said that it had reduced public spending by £14.3 billion compared with 2009–10.[17] Growth remained low during this period, while unemployment rose.

In contrast from the ONS, public spending in 2010 was £700 billion, and in 2013 was £723 billion (https://www.economicshelp.org/blog/5326 ... -spending/). So called austerity was a PR exercise for public consumption.

I draw your attention to the chart "Total spending compared to Nominal GDP" in your linked to article.

It shows plots of "Nominal GDP" and also "Total Managed Expenditure". I notice that the latter plot is on a fairly steady gentle upward trend (inflation?) between 1997-98 to 2009-2010. It is still on a fairly steady upward slope from that date, up to 2019-2020 (pandemic?). But - the slope of the second part of that plot is noticeably less steep than the former part.

Are you trying to argue, as the government does, that "We are spending more money now on [whatever] than ever before"? Which, of course, is always true - just as my pensions (whether company or state) are always "Higher now than they have ever been".

[Nimrod103]

Austerity in name only. From your link:
Between 2010 and 2013, the Coalition government said that it had reduced public spending by £14.3 billion compared with 2009–10.[17] Growth remained low during this period, while unemployment rose.

In contrast from the ONS, public spending in 2010 was £700 billion, and in 2013 was £723 billion (https://www.economicshelp.org/blog/5326 ... -spending/). So called austerity was a PR exercise for public consumption.

I draw your attention to the chart "Total spending compared to Nominal GDP" in your linked to article.

It shows plots of "Nominal GDP" and also "Total Managed Expenditure". I notice that the latter plot is on a fairly steady gentle upward trend (inflation?) between 1997-98 to 2009-2010. It is still on a fairly steady upward slope from that date, up to 2019-2020 (pandemic?). But - the slope of the second part of that plot is noticeably less steep than the former part.

Are you trying to argue, as the government does, that "We are spending more money now on [whatever] than ever before"? Which, of course, is always true - just as my pensions (whether company or state) are always "Higher now than they have ever been".

I don't dispute your point that spending during the Blair-Brown tenure rose steeply upwards, on what was quite clearly an unsustainable path, and that the rise in spending post Brown was much less steep. However it was still a rise in spending. Looking at the definition of austerity:

Austerity, a word that characterizes severity or sternness, is used in economics to refer to austerity measures. These are economic policies implemented by a government to reduce public-sector debt, by significantly curtailing government spending, particularly when a nation is in jeopardy of defaulting on its bonds.(Investopedia).

It says "significantly curtailing government spending". I can't see evidence of that.

[funduffer]

If you look at UK debt/GDP ratio over the last 120 years, then is it characterised by sharp increases during economic shocks, followed by stabilisation and decline - usually a couple of years after the crisis has passed. The largest shocks were obviously WW1 and WW2 where debt/GDP ratio reached 187% and 251% respectively. More recently we had smaller peaks following the GFC (82%) and Covid (103%).

https://www.statista.com/statistics/282 ... as-gdp-uk/

Whether a government exercises "austerity" or not depends on the budget deficit, not the amount of debt. Running a high deficit means it is stimulating
demand to grow GDP (or so Keynes would have us believe!). I can't find budget deficit data before 1970 but after WW2 I believe there was a high deficit which led to debt/GDP peaking on 1947/48, followed by a large drop as the economy grew.

The post 1970's budget deficit/GDP ratio data shows the two highest peaks in 2009/10 (10%) following the GFC, and in 2020/21 (15%) following the Covid pandemic.

https://commonslibrary.parliament.uk/re ... s/sn06167/

The 2010-2019 "austerity years" show the deficit/GDP falling from 10% to 2%, but there was low growth so debt/GDP ratio didn't fall away like it did in the WW1 & WW2 post-war periods. If the government had spent a bit more, it may have grown the economy faster and brought down the debt/GDP ratio, but it didn't, despite this being a period of almost zero interest rates. So I think this is what is meant by "austerity" due to the 2010-19 governments.

FD