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Osborn fucks up as Britain loses triple A rating

(53 Posts)
edam Sat 23-Feb-13 11:28:21

Osborne and Cameron said the triple A rating was the key test of their policies so now what? Any danger of them admitting they've got it badly wrong and screwed the economy?

ttosca Wed 27-Feb-13 12:59:05


> When the wars ended, and as debt was paid off, public debt as a percentage of GDP went into a sustained decline. This happened pretty much automatically, as there wasn't much non-military public spending anyway.

> This isn't the case now. The public sector is massive and insatiable.

If you actually look at the chart for the 20th Century, the debt did indeed decline steeply after the wars, and then leveled off in the mid 1970s. It remained roughly the same until 2008, when the financial crisis hit.

Secondly, your statement: "The public sector is massive and insatiable." is a non-sequitor.

The chart shows debt, not public sector spending. As I pointed out, the debt skyrocketed after the financial crisis, not because of years of public sector spending.

> There are estimates of total national debt (public plus private and things like unfunded public sector pension liabilities) that approach 1000% of GDP, which puts us in 3rd place in the world behind the Republic of Ireland and Japan (just).

Which would be nonsense.

> Incidentally I would be rather more exercised about the prospect of major NHS reform if the UK was coming near the top of European league tables instead of round about number 15. But of course the NHS is the "envy of the world" isn't it so it can't possibly be changed.

It comes in number 14. You should also bear in mind that:

a) Before the Nasty Party came in to power, satisfaction with the NHS was at an all-time high.

b) Pound for pound, the NHS is better value than many private systems, like the American system.

Of course the NHS can be improved, but cutting funding is not likely to produce better outcomes.


It's also remarkable that some people complain about essential public services like health, education and pensions being 'unsustainable'. Rather, they're essential. If the state cannot provide health, education and pensions, then it is is failing as a state.

You might want to consider the fact that wealth inequality has reached such gross extremes that a small percentage of the population owns the vast majority of the wealth. Corporate taxes are being cut, and many corporations evade or avoid tax altogether. Tax avoidance and evasion together cost the treasury tens of billions of pounds per year - maybe even £100 billion.

The fact is, it's not that there isn't enough wealth in the world or the UK. We have never been richer. We have enough wealth to feed, cloth and educated every child in the UK. Instead we have a situation where the use of food banks has increased massively.

It's not because the UK is undeveloped that we're using foodbanks. It's not that we don't have enough food. Our economic system is just so insane that it has nearly ceased to function altogether. We are now mired in a decade of depression and unemployment.

Why not fight to ensure that everyone has access to the essentials in life, rather than making excuses for politicians and the wealthy to further enrich themselves?

ttosca Wed 27-Feb-13 13:02:09

George Osborne hasn't just failed – this is an economic disaster

Coalition austerity has delivered depression and a lost decade. Labour has to avoid locking itself into more of the same

It would be comic if the consequences weren't so grim. There is no economic failure, it turns out, which cannot be hailed by George Osborne as a vindication of the policies that brought it about. Faced with the decision by the credit agency Moody's to scrap Britain's AAA rating, the chancellor declared it was yet another reason to stick to austerity – and the "clearest possible warning" to anyone who might think of breaking with it.

No evidence from the real world, it seems, can divert Osborne and David Cameron from their chosen course. The pronouncements of agencies such as Moody's, which gave the US investment bank Lehman Brothers a ringing endorsement just as it was about to bring down the global financial system five years ago, shouldn't be taken too seriously in themselves.

But for Osborne and the coalition, safeguarding Britain's credit rating has been a central justification for the most swingeing programme of cuts and tax increases for 90 years. Along with slashing the deficit, cutting borrowing and bringing down debt within five years, it was a central test of market confidence that Osborne and the coalition set for themselves.

And they have failed on every single one. The structural deficit and debt targets have had to be abandoned, as austerity plans have been extended to 2018. Borrowing is now forecast to be £212bn higher than planned over this parliament. Moody's downgrade report gives a clue as to why that might be: "sluggish growth" is now expected to "extend into the second half of the decade" with a consequent "high and rising debt burden".

In other words, Cameron and Osborne have failed in their central goal of cutting the deficit and debt precisely because their austerity policies – combined with a refusal to get a grip on the banks, falling real wages and the boomerang effect of the eurozone crisis – are squeezing the life out of the economy.

"Sluggish growth" is a polite way of putting it. Britain isn't just facing the possibility of a triple-dip recession, after the economy shrank in five out of 10 quarters since the summer of 2010. It's now in a fullblown depression. We're no longer talking about the risk of a Japanese-style "lost decade". The country is in the middle of one, and it stands to be worse than Japan's in the 1990s, according to the Office for Budget Responsibility's own projections.

The economy is stagnating at best, delivering the second-worst performance of the G7 economies in the past two years – after Italy. There has already been a fall in living standards unmatched since the 1920s, with the average worker losing around £4,000 in real terms over the last three years. On current forecasts, real wages will still be at their 1999 level in 2017.

Now the falling value of the pound will intensify that squeeze, with little chance of the benefits for exports in a hollowed-out industrial economy where investment is still 15% below its pre-crash peak. That failure to invest, by corporations sitting on a £777bn cash mountain, has also fed into an alarming drop in productivity.

In these conditions, a fall in unemployment to 7.8% is treated as good news. But that has depended both on a sharp increase in involuntary part-time working and the productivity slump, which threatens to entrench lower living standards in the longer term – while the much-vaunted "rebalancing" of the economy has yet to materialise.

When you add in the cuts to core public services, tax credits, housing and disability benefits that will hit the poorest hardest, this isn't just an economic disaster. It's a human one measured out in blighted lives for years to come, delivered in the service of a programme that has already failed in its own terms – while shrinking the state and cosseting the corporate sector.

The Tories and their Liberal Democrat allies naturally still blame their predecessors' profligacy. New Labour must of course share the blame – along with the entire City-bedazzled political class – for promoting a deregulated, private debt-fuelled financial system which crashed and burned across the western world. But the claim that its own spending (with a deficit of less than 3% when the crisis hit) caused the crisis itself is an absurdity.

Polls show most people in Britain realise that, and increasingly oppose the government's reckless austerity. But without the unequivocal promotion of a decisive alternative, the risk is that falling living standards and deteriorating privatised services come to be seen as the new normal.

The shape of that alternative is clear enough: a large-scale public investment programme in housing, transport, education and green technology to drive recovery and fill the gap left by the private sector, underpinned by a boost to demand and financed through publicly-owned banks at the lowest interest rates for hundreds of years.

There's no evidence that extra borrowing for growth – as opposed to increased borrowing to pay for contraction, which the bond markets have barely blinked at – would lead to a confidence crisis. And the government already owns controlling stakes in two of Britain's biggest banks that it could use right now to boost lending and finance expansion.

Instead, ministers are arguing about how to sell off the 82% public stake in RBS, when even Margaret Thatcher's former chancellor Nigel Lawson wants it fully nationalised. Meanwhile the restive Tory right is pressing for still deeper cuts. Osborne is expected to announce some new infrastructure spending in next month's budget just as tax cuts for the richest and the corporate sector are about to kick in.

None of that is going to turn round the scale of the coalition's economic failure – which leaves Ed Miliband with a crucial choice. Even if growth picks up in the next couple of years, there's no prospect of a full recovery under the coalition. And after years of falling living standards, Labour's chances of re-election are clearly growing,

So far Miliband has backed a limited stimulus, slower cuts and wider, if still hazy, economic reform. Given the Cameron coalition's legacy and the cuts and tax rises it's planning well into the next parliament, the danger is that Labour locks itself into continuing austerity in a bid for credibility. As the experience of its sister parties in Europe has shown, that would be a calamity for Labour – but also for Britain.

Twitter: @SeumasMilne

somebloke123 Wed 27-Feb-13 17:05:41

I really can't be bothered ploughing through all this stuff. Can't you express yourself more succinctly?

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