Labour wants tax cuts now ??

actually ttosco there are a number of aspects of your posts that are incorrect although understandable as they have now through repetition become accepted knowledge

1. "The problem is that Labour - mostly Labour, although previous governments started the trend - encouraged the financial sector to become such a huge part of the economy. It now comprises 25% of tax revenue. The second thing they did wrong was to deregulate this financial sector."

There's nothing wrong with the financial sector becoming a large part of the economy. A number of countries around the world have very established financial sectors - the problem is when that sector becomes dominated by a few "too big to fail" companies. We are in a better situation than say Finland that has a large manufacturing sector but has one single company - Nokia - dominating corporate tax revenue and output. The issue is how a sector is dominated not its %.

It is also a myth that the financial crisis was called by deregulation. It wasn't. The city has never been more regulated, the financial tools at the heart of the crisis - mainly the processes of securitisation and creation of derivatives have always been legal an no-one suddenly made them so.

2. Relating to debt, that graph is deliberately misleading, comparing 2011 with the immediate postwar period is a little silly given the huge debt built up in the 1910's and 40's due to wartime spending. The Govt also had access to extremely low interest sources of finance, such as war bonds which aren't around now. In addition, todays figures hide huge levels of PFI expenditure, unfunded pension commitments etc. In comparison to other developed countries, we had the highest g7 deficit in 2010. There was an opportunity following the 1997 election to build a sustainable economy based on genuine growth, but it wasn't, it was built on an unholy trinity of government, public and corporate debt which has now reached the tipping point - the failure to run a Government surplus in that period is a pretty damning indictment of Labour economic policy.

3. The crisis we are now entering is a sovereign debt crisis caused by the market fearing sovereign defaults and a reduction in the capacity in the markets to fund deficits - not debts. The financial crisis was just the trigger that exposed reckless Government expenditure across the developed world.

4. This govt. is ideologically committed to cutting state spending anyway, so they would be cutting public services regardless. FYI, contrary to public opinion, Thatcher increased spending in every year in the 80's except for one.

"b) The fundamental problem with our economy wasn't overspending by successive governments."

You are quite right, there's only one government that comprehensively overspent.

No, every government for the past 50 years or so has run a deficit most of the time:

static.guim.co.uk/sys-images/Guardian/Pix/photobylines/2011/2/22/1298400212637/Budget-deficits-graphic-008.jpg

One of the problems our government faces is a structural deficit - money they thought they would be getting which, once the economy tanked, they would never get and are now in the hole for. That's a pretty good definition of spending too much.

No, it's a pretty bad definition, because even if you run a surplus, you can still experience a structural deficit once a recession or depression hits. The last government ran a deficit of 3%. This is high, but not unprecedented. Even if they ran a balanced budget at 0%, the financial crisis would have still put us at 8% in deficit.

If you want to shit on the last government for not being 8% in surplus, then you'd have to criticise every government for the last 50 years for running deficits most of the time, in this country and most countries in europe.

Also, have a look at overall government debt from the early Major years to today. It's clear that when most of our European neighbours (the economically sensible North Europeans, not the South European basket cases) where squirreling away money, we were pissing it up the wall on things like PFI etc. If we'd entered the financial crisis with government coffers in the same state that they were circa 1997-2000 we'd have been in a much better position all round.

a) The period from 1997-2000 was a Labour govt.

b) The crisis would still have occurred, and we'd still be up shits creek

c) This govt. is ideologically committed to cutting state spending anyway, so they would be cutting public services regardless.

I think it also needs to be shouted from the rafters that not only did Labour increase the national debt but they also flogged off our gold reserves whilst at the same time increasing the percentage of GDP that they took in tax. They spent, spent, spent and our austerity today is the price of that mismanagement. A pox upon them all.

Do you work for the Conservative party or something? You're terribly misinformed.

This is a charge of net Debt, as a percentage of GDP:

www.ukpublicspending.co.uk/downchart_ukgs.php?chart=G0-total&year=1692_2011&units=p&state=UK

As you can see, net Debt has declined steadily since 1950 (even though most governments ran deficits most of the time - this is because the economy also grew in terms of GDP).

Debt plateaued around 1985:

www.ukpublicspending.co.uk/spending_chart_1920_2011UKp_11s1li011mcn_G0t

(Same chart, zooming in to more recent times)

It then started to increase rapidly around 2007. Guess what happened in 2007? The financial crisis hit.

It was not spending which increased national debt, it was the financial crisis.

Hope this helps. Please stop repeating a false narrative.

The fundamental problem with our economy was squandering the revenue from the finance boom and borrowing money on top to pay for the wrong things. Brown promised the 'Golden Rule' ie. only borrowing to finance capital projects and other long-term measures to create growth. He then quietly abandoned it in favour of creating a massively overblown public sector that could never survive the bust that the boom would inevitably result in.

Well, you're half right. The problem is that Labour - mostly Labour, although previous governments started the trend - encouraged the financial sector to become such a huge part of the economy. It now comprises 25% of tax revenue. The second thing they did wrong was to deregulate this financial sector.

The combination of these two things made us all the more vulnerable to the financial meltdown.

Growth in public spending during the final years of the Brown government was large, but not incredibly so. Before the crisis the deficit was at 3% of GDP. The UK still spends relatively less on public sector spending, as a percentage of GDP, than many european nations.

ttosca "a) short-term borrowing is perfectly feasible if it is spent on stimulus, which will promote long-term growth."

In the current climate borrowed money isn't being spent on Keynesian projects (CAPEX) though is it? It's being spent on welfare spending, public sector salaries and all the other stuff that the government always spends its money on (OPEX) in good times and bad. None of that will produce any long-term growth. Also, someone mentioned the markets reaction to a chancellor announcing that he's going to rack up spending. Even if we have got currently low borrowing rates, they won't be low for long if the chancellor of H.M. government announces his intention to start sluicing money around like it's going out of fashion again.

"b) The fundamental problem with our economy wasn't overspending by successive governments."

You are quite right, there's only one government that comprehensively overspent. One of the problems our government faces is a structural deficit - money they thought they would be getting which, once the economy tanked, they would never get and are now in the hole for. That's a pretty good definition of spending too much. Also, have a look at overall government debt from the early Major years to today. It's clear that when most of our European neighbours (the economically sensible North Europeans, not the South European basket cases) where squirreling away money, we were pissing it up the wall on things like PFI etc. If we'd entered the financial crisis with government coffers in the same state that they were circa 1997-2000 we'd have been in a much better position all round.

I think it also needs to be shouted from the rafters that not only did Labour increase the national debt but they also flogged off our gold reserves whilst at the same time increasing the percentage of GDP that they took in tax. They spent, spent, spent and our austerity today is the price of that mismanagement. A pox upon them all.

"a) short-term borrowing is perfectly feasible if it is spent on stimulus, which will promote long-term growth".

This is unlikely to be true in the current climate. But conceptually it could be. The only way to know is if Ball shows us the figures. Which so far he has been unwilling or unable to do.

a) short-term borrowing is perfectly feasible if it is spent on stimulus, which will promote long-term growth.

b) The fundamental problem with our economy wasn't overspending by successive governments.

Yes Balls did admit to his plans being unfunded

And that to me is why I will find it very difficult to ever take Labour seriously again. At this point the Labour solution is to cut taxes and borrow more.......

I'd support a costed tax cut either by reducing spending further or targeted taxation (ie. tax the rich, cut taxes for poor)

But Labour proposing an unfunded tax cut just makes me think they still haven't grasped the fundamental problem in our economy was overspending by successive governments (across the western world).

Still, with any luck, when we're really poor, we'll get aid from India, because it will delight in giving us peanuts.

I know - cut tax for the wealthy and increase cuts in benefits for the poor! Hurrah! Oh, wait, even better: cut benefits for the poor and introduce Workfare schemes run by large, profit-making businesses. That way you can keep a technical minimum wage but bypass it at the same time. And then encourage wealthier people to do non-profit making voluntary activities in their spare time in an attempt to cover the real needs of the local community, beyond shelf stacking at the local supermarket - because although necessary, they really are tiresomely unprofitable and therefore not worth spending much time or effort on. And with a large, cheap labour force, this country will look very attractive to big businesses, although there will be fewer and fewer well paid jobs to go around as time goes on, because the roads and essential services are beginning to fall to bits, so the well off will have to live in little protected enclaves and do a lot of jetting off to more agreeable climes (where they keep their tax-free profits) when they want to relax and spend money.

Yes Balls did admit to his plans being unfunded, which seems mad given the warning from Moody's. Surely any tax cuts would have to be matched with revenue raising elsewhere?

"What makes you think they're unaffordable?"

The absence of a costed plan to pay for them. Balls needs to show the figures.

If we embark on additional borrowing to a for tax cuts, the cost of borrowing will not remain low. And it isn't clear we can afford more borrowing anyhow, it's bad enough with what we've got anyhow.

We've read of some of these big corporations not paying much tax in this country, so I am not sure if they really need any further tax cuts.

I agree that it would be morally wrong to prioritise tax cuts for big corporations and the wealthy, and would prefer to see a more progressive VAT cut.

But I wonder if there are any statistics about which tax cuts generate the biggest economic benefit, would be interesting I think.

Yes, I agree that tax cuts should go to the lowest earners in the first instance. They are more likely to spend their money in this country in local shops rather than jetting abroad and spending it on holidays abroad.

David Davis was quoted in the Telegraph as saying that the tax cuts that would most benefit the economy are also the ones that would be the most politically unpalatable - the 50% top rate, corporation tax and capital gains.

Indeed, and he is wrong, and that's why tax cuts shouldn't be given towards the highest earners and corporations, but those on the bottom end of the scale who will stimulate demand.

Meanwhile the LibDems are pushing to increase tax for higher earners so that they can take more low earners out of tax altogether.

Right. And Milliband's proposed tax cuts (AFAIK), concentrate on the lowest earners and VAT -- which hits the poorest hardest, and directly relates to consumer spending.

David Davis was quoted in the Telegraph as saying that the tax cuts that would most benefit the economy are also the ones that would be the most politically unpalatable - the 50% top rate, corporation tax and capital gains.

Meanwhile the LibDems are pushing to increase tax for higher earners so that they can take more low earners out of tax altogether.

Edith-

What makes you think they're unaffordable? The UK has one of the lowest borrowing costs in europe. The increase in tax revenue will, if successful, more than make up for the cost.

And the cost for not stimulating the economy and sitting in a recession is far, far, worse.

Cogito-

Because it's out of character for Labour to propose tax-cuts and, as Claig points out, far more typical of Conservative economics. If Osborne was to announce anything like this in a budget the Labour front bench would normally be waving their papers, shouting him down for looking after the wealthy or bribing voters. They know that approach wouldn't go down well this time around. If Osborne now announces anything similar in the budget, Balls will say 'it was our idea first' and, if Osborne's tax cuts are lower, Balls will say 'we'd have done more'.

So the conclusion is that Balls knows there will be tax-cuts in the budget and is trying to steal Osborne's thunder. Pure politics.

Your perception is obviously based on a strawman. Cutting taxes isn't necessarily good or bad, or regressive or progressive. It's a matter of how they are done.

Of course the Tory scum would typically be criticised for cutting taxes, because they would tend to cut taxes for the wealthiest, and they would do so in the name of 'trickle-down' economics; that idea which started in the 1980s, and which has shown, not only to be false, but to have precipitated a massive rise in wealth inequality.

Cutting taxes for the poorest is not a Tory idea. It's not a right-wing idea. It's a Keynesian idea.

It's Keynesian because it concentrates on stimulating demand during a recession, and it concentrates on the demand, rather than the supply side. That is to say, rather than trying to make it easier for jobs to do business in the UK (this is not a problem, the UK already being relatively deregulated and low-tax environment), one tries to put more money into people's pockets, so that they can spend and get the economy going again.

ttosca: yes, I get that as the long term aim, but how does one afford the costs of initial implementation? For in the short term, it's more expenditure and it's not clear how expensive it would be nor how that expense would be covered.

pandering to the people who don't feel disenfranchised you mean.

there is no real thought for the poor when considering power

If it carries on like this, there will be no real opposition at the next election, as all sides move closer to agreement.

It looks like Ed Balls and co are possibly beginning to agree that we are in good hands with Osborne at the helm.

Agree it is mainly a lack of demand due to not enough income and surplus cash. The Tories always believe in letting people keep more of their money in their pockets and believe in letting people make their own free choice about how to spend their own money rather than letting the state decide for them. So the more quantitative easing for the people by allowing them to keep more cash, the more hope there is of increased spending which will increase demand. That way teh nbottleneck of banks holding onto cash and not lending it out may be broken and the economy may begin to recover as goods and services begin to experience increased demand.