Genuinely not to understand the government's economic policy

[Thisishowyoudisappear]

This is a genuine question, I'm not trying to start a political argument. For the record I am fairly left wing.

So GO says the govt needs to make huge cuts in order to reduce the deficit. The cuts are going to be made at least in part from 'welfare'.

I guess I am wondering what all this deficit cutting is supposed to be achieving. I don't know, in real life, anybody who's been made better off under this govt. I don't understand this idea that 'balancing the books' for the whole economy a)bears any resemblance to doing same for a household or small business; b)is doing anything for the vast majority of people.

I don't understand how 'welfare' can be cut much more without starting on pensioners, which surely isn't going to happen.

I also don't understand why anyone except the seriously well-off vote Conservative. Why would you, when they are cutting services and not giving anything in tax cuts or whatever? Genuine question again.

I'm intelligent and take more than a passing interest in politics. So AIBU (or just a bit dim) or what??

[aermingers]

Because under Labour the gap between rich and poor massively increased, we tumbled down international educational rankings, housing became incredibly expensive, wages stagnated and we had a huge financial crash. I don't believe Labour have any intention of supporting the working poor and only intend to support a non-working underclass. They created a situation where the children most likely to live in poverty were those who had working parents, not those who didn't work.

[LovleyRitaMeterMaid]

They won't touch the pensioners, no one does.

They are whipping the nation into a froth of anti welfare sentiment to detract from the real issues; their failing with the economy.

But yanbu. They don't understand their own economic policy either. But we can all untie in our hatered of the shirkers and cheats whilst ignoring the tax avoiders and ludicrous expenses claimed by those elected to serve.

Everyone had their antagonistic tax statement through? What purpose does that serve? More to the point, how much did that cost to produce?

Fucking ridiculous.

[LovleyRitaMeterMaid]

Aer we're 5 years down the line, hoe much longer can Labour be blamed? They aren't perfect, that's a certainty, but change the record. And what have this current government done to reverse these problems you speak of?

[Thisishowyoudisappear]

Thanks. aermingus I understand your points about Labour but they don't answer my question. If we agree that the things you list that happened under Labour are bad, hasn't the current govt just made them all worse?

DH got his tax statement the other day, reaction was the same as yours Rita.

BTW I'm not a tribal Labour supporter. All parties have good and bad policies IMO except UKIP obviously

[Iggly]

We've had the Tories for five years and basically they've achieved fuck all beyond making more people poor and the rich people richer.

They've had five years.

[DazzleU]

On the one hand I don't get it.

Reducing the amount of money most households had to spend - surely meant less money circulating in the economy - prolonging the recession and reducing growth. Would also image it reduced risk taking, and makes everyone more cautious - so I would image ( have no data to support that) fewer small companies starting up and growth of all companies reduced especially if finance is hard to get - which it would be if everyone confidence is low.



On other hand listen to radio 4 this morning - apparent our debt is at historically high amounts - and servicing our debt ie repayment is taking 5 % of GDP - which is very high and similar to countries like Greece and Italy in economic trouble - however we are re-finance some of our debt at really and historically nearly unprecedented good rates - so it ok at the minute. However no one can predict when these really good rates will disappear so if we haven't got over all debt down by then - we would be in trouble when rates rise.

So I get there is a problem in the economy - but suspect a lot of the cuts being made are ideologically driven and hiding under the general need to either increase money government has coming in or stop as much money going out - so they can pay debt down.

This is where my confusion comes in - figuring out what is ideologically driven and what is necessary.

[Handsoff7]

They want a smaller state. Not fixing the deficit gives them the ammunition to justify all of the cuts.

If they were serious about reducing the deficit, there are plenty of tax-raises possible.

Cuts will never close the gap without destroying the welfare state particularly as pensioners (by far the biggest expense for the state) seem to be protected. It's all very depressing.

[Andrewofgg]

Aditya Chakrabortty in today's Guardian says that "This remains a country whose erogenous zone is firmly in its property market". Give the buyers of average properties a boost and they'll stand for anything.

And I fear she's right, but that's democracy for you.

[TheChandler]

I also don't understand why anyone except the seriously well-off vote Conservative. Why would you, when they are cutting services and not giving anything in tax cuts or whatever? Genuine question again.

Without getting involved in politics, the economic thinking is that competitive markets are generally better for consumers and that markets generally resolve themselves to a more efficient situation, as long as government intervenes in the event of harmful monopolies (that is the reasoning behind breaking up state monopolies in the past). But we do live in a socialist country (that's why we have generous benefits, in world terms), so its hard to reconcile the two.

I do think though if we lived in a completely state-controlled economy, like the former Eastern bloc countries, we would be even less well off as those demonstrated.

[Thisishowyoudisappear]

I can understand, in theory, wanting a smaller state. I don't see how cutting public spending beyond a certain level actually achieves this, unless you are going to be incredibly draconian.

Services are all interlinked, so cuts to benefits or public transport for example will impose a greater burden on the health system. I would like to know whether the bedroom tax saved anything at all.

Similarly they must be paying ATOS a packet to save peanuts, surely?

Plus when privatised services such as rail companies fail they are bailed out.

The taxpayer subsidises landlords and employers.

It all seems crazy to me.

[Thisishowyoudisappear]

Had not caught up with thread before replying.

I understand the basics of the free market argument and I doubt many people would want a state-controlled economy. My point is though that in certain circumstances free market rules don't apply, or at least not properly, because there are always going to be industries where it is not really possible to have competition (I want to get from A to. B so a train that is superior but going from C to D is no use to me). Plus there will surely be a lot of health procedures that can't be made profitable enough. Just two examples that spring to mind.

Plus if they really believe that cuts are so essential there would be cuts to the pensions part of the welfare budget.

The housing argument may be true ... that is a bit depressing.

Thanks everyone for your replies.

[peggyundercrackers]

handsoff why would you keep raising taxes? we are already taxed to death on everything, including death... I don't believe the conservatives have a model which is 100% correct however I think its a way better than a labour or lib dem model. labour seem to want to give everything away and spend spend spend, they also seem to think anyone who earns over the national average is rich (a tad hypocritical me thinks), they seem to think everyone should be equal no matter what they do or what they earn and lib dems... well they aren't even worth speaking about.

lovelyrita - I actually thought the tax statement was quite good - all your income on one page, all your tax on one page. not sure why you would think its antagonistic? maybe because it shows how much the state is actually taking? as for cost, its an easy thing to pull together and send out so I think the cost would be minimal compared to some of the other things govt. spends money on.

[TheChandler]

My point is though that in certain circumstances free market rules don't apply, or at least not properly, because there are always going to be industries where it is not really possible to have competition

I agree; I think some industries are better off run by the state. As you say, railways, some others (I'm no expert, so won't attempt to list them).

I think we do not realise just how generous the benefits are in this country. Probably they are inefficiently and expensively allocated and administered? A lot of other countries in the EU put more emphasis on self responsibility and the right to benefits are linked to former employment. That's even the case in supposedly socialist countries like Sweden. I suspect we have what is called "allocative inefficiency".

Anyway, the macro-economic theory is that the state is an inefficient allocator of some resources as it tends to create state monopolies - if you think of some industries which are state-dominated and have all sorts of inefficient work practices, they are maybe not the best example of efficiency! So cutting down the state monopoly should hopefully encourage some of those former state employees to be more innovative and make a net contribution to society by being entrepreneurial, etc..

FWIW I think the UK economy is very odd. But it is I think by far the biggest in the EU, and the reason for that is the amount of money produced by the City of London.

[LurkingHusband]

LovleyRitaMeterMaid

Aer we're 5 years down the line, hoe much longer can Labour be blamed?

Weeeellll .... given that my Mil was blaming "the Tories" for the 2008 crash, you have a way to go yet. And she wasn't alone. All of her we'd-vote-for-a-bicycle-if-it-had-a-red-rosette friends were the same.

[FluffyMcnuffy]

A lot of people don't understand that um you know we have to pay interest on the national debt. When the conservatives came to power in 2010 we had in the previous year spent £42bn in interest on the national debt and £41bn on schools. That's right, we spent more on interest on the national debt then we did on education, and yet people still don't seem to understand why we need to reduce the deficit and then hopefully in future reduce the national debt .

[DazzleU]

I do get that we pay interest on the debt - it's currently 5% of GDP - which is huge.

I also understood the Chancellor hasn't been able to pay the debt down as he'd hope because they ended up with much less money than expected coming in via taxes (mainly I remember from companies taxes).

He got less money because the economy didn't grow as expect.

One possibly contributing factor to that was the biggest contributor to the economy - the government - cut their spending and talked about doing it even more - thus affecting confidence in the economy as well affecting growth.


I can understand that the debt needs to be paid down long term - while also understanding that despite the current cuts that hasn't happened yet.

[DoctorTwo]

Why is it then Fluffy that Gidiot has borrowed more in 4 years (£541Bn) than New Labour did in 13 years? National Debt has gone from approx £750Bn to around £1.4Trn. The Tories have cut public sector jobs and had to rehire people as private sector workers at a far higher cost. Cutting the deficit would require us to have a viable manufacturing industry which exports more than we import. Which we could have, but most well paid manufacturing jobs were sent overseas during the 80s and 90s.

Also, the economic illiterates have privatised a railway that was returning £200Mn+ per Year to the Treasury. Actually, they know what they're doing; they're transferring public money into private hands at the highest rate ever, rolling back the welfare state and cutting public spending to a level not seen since the 1930s. It's a big fuck you to anybody who isn't rich, just like all their policies.

[Samcro]

yanbu I don't get either
they keep saying "more cuts to welfare"
where can they cut it ??
yet they san magic up money for all kinds of thinks.
send millions abroad
and don't get me started on trains

[Tobyjugg]

There is no policy. Cameron governs by soundbite and Osborne is a 3rd eleven man in a 1st eleven job.

[Wantsunshine]

I have just received my tax statement too! I can't believe how much tax I pay for everything and they have broken it down. I think there just has to be cuts. Something needs to change as clearly some are paying so much as others are not.

[FluffyMcnuffy]

Why is it then Fluffy that Gidiot has borrowed more in 4 years (£541Bn) than New Labour did in 13 years? National Debt has gone from approx £750Bn to around £1.4Trn.

You seriously can't understand that?

You need to understand the difference between the budget deficit and the national debt.

When the conservatives came to power we were running a budget defecit I.e. We were spending more than we were earning and thus the excess of what we spend over what we earn goes into the national debt pot.

For example if we had £100 revenue and spent £120 each year for 5 years, we would have a budget deficit of £20 and after 5 years a national debt of £100.

So the conservatives inherited a budget deficit (and a national debt), that is what they are trying to cut I.e. They are trying to stop us increasing the national debt quite so much each year and eventually hope to be in a budget surplus position whereby we can start paying off the national debt.

Under labour the budget deficit would have almost certainly increased (in the short term at least), thus the national debt would have grown at a faster rate.

HTH

It does make me sigh inside when people rant on about the national debt increasing when they don't actually understand how it works.

[FluffyMcnuffy]

Also, he's borrowed more than labour because we are in a recession, a time when we should be able to run a deficit to improve the economy.

Labour ran a budget deficit during the "boom" years which is why we are unable to increase it now to fiscally boost the economy and help pull us out of recession.

Let me repeat, labour were in power during the boom years where they actually should have been running a budget surplus and not bloody borrowing anything!

[Viviennemary]

Labour's answer whether in recession or boom is spend spend spend. Give everyone a pay rise. That leads to inflation and higher prices for everyone. Tax credits only encouraged employers to pay as low a wage as they could get away with knowing it would be topped up. Same with housing benefit. No real limits on housing benefit because again it would be topped up and going straight into the pockets of landlords.

[FluffyMcnuffy]

Agree with Vivienne I think the fact Ed Miliband forgot to mention the budget deficit at the Labour Party conference says it all really .

[Thisishowyoudisappear]

Chandler yes, we probably agree on public/private ownership. Some things are better run privately, others clearly not.

Regarding the deficit, yes I do realise there is interest to pay on that. I wonder whether taking a few quid off disabled people and stopping buses (that take people out to shops etc where they spend money and improve their quality of life) is achieving anything.

I do think the very wealthy should pay more tax. Maybe not loads more, but more.

If the govt (or previous govt) wanted to stop big companies avoiding tax they could. They prefer to bleat about it as if there is nothing they can do.

WRT benefits, certainly some of them are generous. I volunteered with CAB for a while so I do have some knowledge of the system. I think it is dreadful that WTC and even CTC have to be paid at all. Wages should be enough to live on, they really should. I agree that the system needs reform but this is not achieved by tinkering at the edged surely?

At work now so will check back later. This is really interesting. Maybe you should all go on Question Time.