Benefit fraud - the levels are very low

ttosca I'm not one for name calling (never having resorted to it before on these boards) but you are clearly economically illiterate. Firstly, whilst I agree that most of our deficit is cyclical and caused by the recession, there is a proportion of it which is structural and has been around since 2001. Even if we got back to the (artificially created) growth that we last saw on the eve of the crash we would still need to borrow money. If you think that, despite the low costs of borrowing, it is sensible to continue piling debt upon debt and let our children pay it all back I have to disagree.

As I've said to you before, I challenge you to estimate what percentage the government will be paying to borrow at in just five years time.

Quite frankly, I don't care what the historical debt has been at various points throughout the 20th century because, as I've already explained, that money was spent in the defence of our nation and to prevent us all being a dominion of Das Vaterland. The current debt - which you accept at face value despite the hidden costs of PFI and the huge costs of unfunded pension commitments - has shown comparatively little return for our money. In many areas of Britain, the state spends a higher proportion of our wealth than the East German state spent under communism! In spite of this, you insist that not a penny should be cut and that we should be throwing more money at the government so that they can build more of their white elephants / pet projects. I implore you to look at the example of the Spanish Casas and see how they have fared - these aren't basic public services that we are talking about, these are white elephants.

Finally, there are two major reasons that we are not spending money on the high street. The first is that the poorest are being taxed too much which, when combined with a high cost of living such as mortgages / rent, disproportionally penalises them. Secondly, household debt is being repaid. All those 0% credit cards, which seemed such a great idea in the boom years, are acting as a millstone around the neck of consumers. Growth won't and can't come back until we fix this problem. Carrying on as we are, or indeed were, will not get us out of this mess.

Dotnet. It's difficult with the older generation who were brought up in the belief that the national insurance contributions they paid would be enough and that the government would in turn provide a decent pension for them upon retirement. That has turned out not to be the truth at all.

My question is if the govt website says he should be entitled to housing benefit then why is he not? We need to differentiate between when the system is getting it wrong under its own rules and the long term sustainability of the policy. In other words, is this a mistake? Or is there a reason he's being rejected?

And also...

We may not need a new aircraft carrier, but to generate growth, we do need a healthy, educated population.

I think those of you who are comparing government expenditure to family expenditure would be better off making a comparison to business. You could still argue that the government has borrowed too much money. However to argue that any borrowing at all is wrong makes you sound a little backward.

It hurts like hell for a bit but then you forget about it and life continues

I am assuming that you have made this statement because you are, for instance, a disabled person who has your benefit cut so that are now housebound (thus making you unable to personally contribute to the growth of the economy), or you have had to move your children to bed and breakfast accommodation?

In which case my sympathies.

In any other case - WTF?

If anyone knows anyone (actually I'm thinking of old people no longer in work) who seems to be struggling - look at the DirectGov benefits adviser pages. You'll find there's an 'eligibility estimator' thing you can fill in with him/her in mind, after which you'll know whether you can get things moving for the person who isn't making ends meet.
I've just written to the local benefits and advice service for a good and decent old man (80) who worked hard on the trawlers all his life and is in utter penury now. Looking at the DirectGov benefits estimator, it seems he should be getting housing benefit, but isn't. So I really hope they'll be throwing a bit of money at him before the weather starts to get cold.
It wasn't his fault that in his long life of working often in terrible conditions, his employer never set up a pension scheme. TBH nor is it his fault that he wasn't financially sussed enough to set up some sort of future provision for himself and his (now late) wife. It's unkind and unfair to expect everybody to have the ability to plan and budget in advance (I suspect niceguy might think my admirable old ex trawlerman has brought his old age poverty upon himself).
We are not all equal. This old man is a better, kinder, more decent and more hard working person than at least 90 per cent of the politicians in the House of Commons, would be my guess. He is financially naive, but that's not a sin.
As I understand it, there are many many more people evading paying tax than there are people on the benefits fiddle.

NicholasTeakozy That was a most interesting article, thanks for posting it. I think it needs to be pointed out but Mrs Sigurdardottir was overwhelmingly popular when she came to power - in stark contrast to the 'anyone but Brown' election that returned the current coalition - popularity always makes the option of taking difficult decisions easier to 'sell' to the public. The other thing that I'd take from that article is that she has done exactly what many other low taxers and I have been advocating all along.

"The cure that her government administered has hurt many of Iceland's 320,000 people and state spending has been cut sharply. However, there has been little backlash from voters who have largely accepted the need for limited austerity measures."

""Becoming more disciplined and lowering state expenses, while at the same time keeping the welfare system strong, is what needs to be done to have wide support from the public for such measures," said Sigurdardottir"

"We cut the budget but we preserved as much as possible in education, health, social security and infrastructure like law enforcement," Sigurdardottir said. "In the years leading up to the crisis, the gap between the richest and the poorest in society widened and our measures in the crisis focused on diminishing this gap, with more equality." The relief boosted consumption, lifting growth to 4.5 per cent year-on-year in the first quarter this year, in sharp contrast to stagnation or recession in much of the euro zone."

I was most interested by the line "In the years leading up to the crisis, the gap between the richest and the poorest in society widened". It is usually taken as fact that higher levels of government taxation leads to a 'fairer' redistribution of wealth, yet here is first hand evidence that this isn't necessarily so and that better redistribution can take place within a lower tax regime.

As I said, it was a most interesting article.

Iceland was never a basket case economy. Nor was it a socialist economy. It's good news that Iceland did what it did, and Britain should never have gone down the QE/bank bailout route, as I argued loudly at the time.

But don't make the mistake of assuming that just because it did that, that it's proof that other countries who have an over-heavy welfare state don't need to cut back.

As I can't be arsed to argue with right w(h)ingers again I'll just post this link.

NicholasTeakozy I don't know where you are getting your figures from but Iceland's economy is still less than three quarters the size it was in 2007 as you can see in this graph of Iceland's GDP. To claim that "their economy has recovered to almost what it was prior to the crash" is wrong. Furthermore, given their lackadaisical view towards repayment, I can't see too many people queuing up to bank with them again in the future.

In New Zealand?s case the reforms, which were unpopular at the time, have led to sustainable growth for the country and an increase of wealth for the average person. Few Kiwis would vote to turn the clock back again. Incidentally, the liberalisation of the New Zealand economy started under one of their Labour governments.

No, not like Iceland.

basket case socialist economies like Iceland perchance? Refuse to pay back the fraudulent FIAT money, arrest the bankers in charge and get control back. Rather than bailing banks out with QE, which will cause inflation in years to come they removed the problem. Sure, it made the rich a little poorer, but their economy has recovered to almost what it was prior to the crash.

New Zealand also offers a useful case study showing that when basket case socialist economies reform themselves by shrinking state interference, the standard of living for the average person shoots up, unemployment goes down and there is a virtuous circle of unforseen economic benefits.

I'm extremely interested. I'm sure I can see why that is. A lack of clear ideology from the top by Cameron and Osborne who, as far as I can tell, only wanted to be PM and Chancellor because it was a ripping wizzo thing to do, is the major problem.

I'm not sure it's a lack of ideology. I think that's there. What was missing was courage and the steel will to do the right thing even if it was going to be very unpopular. For me that's the mark of a good leader.

Back when the coalition came to power the electorate was braced for cuts. We were all aware they were needed and as always the new government had a honeymoon period. I remember reading somewhere that they'd looked at the Canadian example of cutting their debts which they'd done in the mid 90's after being branded as a economic basketcase by most analysts and being downgraded by the ratings agencies.

What the Canadian's did was cut deep and cut fast. A bit like pulling the plaster off quickly. It hurts like hell for a bit but then you forget about it and life continues. But in my opinion our leaders bottled it. Instead they've engaged on trying to find popular cuts (There are none!) then in the face of opposition they have tried to compromise. Not always necessarily a bad thing but if you keep doing it, you water down the desired results.

So what we have now 2.5 years into their term is a fraction of the cuts needed, more cuts on the horizon and a public weary of cuts who don't appreciate what's done so far barely touches the sides.

I think if they'd have cut deep and fast then we'd have taken a huge shock but be in a better place for a recovery by now.

CogitoErgoSometimes

I suppose no-one's interested that government spending hasn't actually been cut very much at all? Borrowing last month was higher than expected, for example.

I'm extremely interested. I'm sure I can see why that is. A lack of clear ideology from the top by Cameron and Osborne who, as far as I can tell, only wanted to be PM and Chancellor because it was a ripping wizzo thing to do, is the major problem.

I think the argument now is that, if reduction is proving hard to achieve and borrowing is inevitable, what should governments be spending on.

The reduction is easy to achieve if you're prepared to make hard decisions. The coalition isn't. Given the wailing and gnashing of teeth from the usual vested interests every time someone suggests spending be cut I say that the government should actually try some serious chainsaw work and suck up the complaints.

This is certainly where ideologies come into play. Gordon Brown originally believed in the Golden Rule where borrowing could only be justified for capital investment rather than current expenditure, but famously abandoned it for political reasons. Recent decisions on upgrading railway lines and so forth suggest capital investment is getting priority. A large house-building programme - the 'million new homes' that Prescott never succeeded in getting off the ground - would be the next obvious step.

Gordon Brown never believed in anything except How Amazing Gordon Brown is. If the government wants to save us some long-term misery it'll spend some money on some nuclear power stations, and fast.

I suppose no-one's interested that government spending hasn't actually been cut very much at all? Borrowing last month was higher than expected, for example. I think the argument now is that, if reduction is proving hard to achieve and borrowing is inevitable, what should governments be spending on. This is certainly where ideologies come into play. Gordon Brown originally believed in the Golden Rule where borrowing could only be justified for capital investment rather than current expenditure, but famously abandoned it for political reasons. Recent decisions on upgrading railway lines and so forth suggest capital investment is getting priority. A large house-building programme - the 'million new homes' that Prescott never succeeded in getting off the ground - would be the next obvious step.

Like them, you are attempting to exploit the economic crisis, which was not the making of the public, in order to cut government spending and reduce the size of the state

In my case I do want to reduce government spending and reduce the size of the state. The reason isn't the economic crisis but the reason is because we cannot afford it and never could.

For me it's like saying your income used to be £4000 a month because you were paid £3000 and borrowed £1000. Now you are arguing that you shouldn't stop borrowing because it will hit the economy through stopping spending and hit your family members hard and the debt isn't their fault so why should they suffer. Besides which, you can't be in trouble cos look, the bank's still willing to lend to you at a very princely rate.

It neatly ignores the fact you've been borrowing for god knows how long and the reasons why don't really matter anymore. The fact is you did and still continue to do so.

ttosca

"Both countries are have shifted the tax burden away from corporations and on to individuals."

And as I've explained to you on other threads, this doesn't really matter. But back to the original point and Britain is Britain, the US is the US. The two countries have totally different economies - one is the global reserve currency for a start - and can't be directly compared as though they are one and the same which is what you constantly try to imply.

"You've painted yourself as a poltical ignoramus when you count New Labour as social-democratic."

Better get on to Wikipedia too then - this page here'List of social democratic parties' includes the Labour Party. I know (and care even less) about the factional splits amongst the various socialist movements - together they remind me of the independent Judea movement in Monty Python's Life of Brian - so I will bow to your superior knowledge on this point. However, whatever schism you want to attribute to New Labour, my point still stands that Brown used fiscal drag and a doubling of the basic rate of tax to knobble the poorest in our country. He robbed Peter to pay Paul.

^"ttosca Our debt didn't accumulate because our GDP grew greater than our deficit.

Me Nonsense ? your own graph shows this to be patently false. In any case, that GDP growth was built on false assumptions and credit.

ttosca You don't know how to read a graph, eh? This is getting ever more ridiculous."^

Look at the graph again. I'll remind you, it's the one which shows public debt as a proportion of GDP. Between 2002 and 2007 it went up. Ergo, public debt rose as a proportion of our GDP. Now, the thing which adds to our debt is running a deficit. That deficit MUST have been growing greater than GDP. If it wasn't, the graph would be flat or going down. I suspect it is you who needs the graph reading lesson. In any case, your graph doesn't include PFI or unfunded pension commitments, thus massively underestimating the real debt / GDP ratio, I can't see what point you can possibly derive, other than Labour pissed a lot of taxpayers? money up the wall.

As for the rest of your post it boils down to 'the current lot are cutting too much, too fast and we should borrow more while we can and use it to invest in stuff'. I believe that I'm better at investing in stuff that will boost my economic performance (a new car, laptop, a house closer to work, a better pension fund etc) than the government are by building a railway, a new runway or a new aircraft carrier (all of which, we don't really need).

I still fail to see any evidence that muddling on as we are (see more details below) with high borrowing will lead us to anywhere but penury. I also fail to see any big ideas on the horizon (with the possible exception of Irish Sea shale gas extraction and exploitation) which will drag this country back into the sort of growth we need to get us out of the hole we are in.

--

I've crunched some numbers for those that are interested about what the economy would be like if we scaled it down to numbers we are all familiar with by using figures from here, here and here.

Here's what I did. I took the total government revenue (£592Bn), predicted outgoings (£682Bn), predicted deficit (£90Bn) total declared debt (£1045Bn) and the chancellors planned cuts of £81Bn over 4 years (£20.25Bn per year). I also included the undeclared Taxpayers Alliance total debt figure of £7900Bn and, by using the same ratios, worked out how this would look for a family with a combined income of £35K.

It works out like this.

Family Income, £35,000
Family Outgoings, £40,321
Amount stuck on the credit card each year, £5321
Total amount owing on the families credit card (declared), £61,782
Total amount owing on the credit card (undeclared), £467,061
Amount the family are arguing about cutting their spending by, £1,197

To continue the family theme, the deficit deniers are looking at this information and deciding that the family can afford that holiday, the rest of us are saying that even cutting that £1,197 won't add up to a hill of beans in the grand scheme of things.

I've been giving this whole thing some more thought overnight and it dawned on me that things are much worse than even I originally thought. The published borrowing rate which ttosca has been bandying around isn't the full story by quite a considerable margin. To calculate the total amount of money that we taxpayers are on the hook for, we need to include PFI and any other liabilities we may be exposed to. These include unfunded public sector pensions, unfunded state pensions, Network Rail liabilities etc.

The Tax Payers Alliance have helpfully totted up these numbers for us and arrived at the eye watering sum of £7.9 TRILLION. Details can be found here. Now I'd take these figures with a pinch of salt - for example this number includes £2.6 Trillion of RBS/Lloyds debt which, even in a real melt down scenario, would be unlikely to be called in at anywhere approaching 100% of face value. The rest of the figures - the remaining £5.3 Trillion - seems a reasonable assumption.

If this is the case, then the UK's true national debt, once all Enron accounting has been stripped away, stands at around 220% of GDP - perilously close to the most recent highest peak in the immediate aftermath of WW2. According to the Tax Payers Alliance, the real debt more than doubled over the Labour government?s tenure.

ttosca

^"ttosca I see once again that you are quoting US statistics and implying that they apply to Britain. Perhaps they do, but I doubt it.

Why do you doubt it?"^

Because, as you point out yourself, the US is moving from a small state towards a higher tax model. Whereas we in the UK have had high taxation levels for generations, the US's relationship with high taxation is still in flux. It will impinge on their businesses and households in a different way to the way it impinges on ours. Secondly, the devolved federal nature of the states, and their respective different solutions, means it is difficult enough to compare two states within the US, never mind an external country. Thirdly, America hasn't been as affected by the Euro zone collapse as we will have been. Those are just off the top of my head. Why do you think their stats would apply here?

" social-democracy (what you mean here) doesn't dump a greater share of the tax burden on the poor while giving tax breaks to corporations and the rich."

Yes it does, or did I just imagine Gordon Brown's fiscal drag and doubling the starting rate of income tax for the poor? Social Democracy works by bribing Peter with Paul's money. When Paul runs out of money the system breaks down. To a socialist, spending other people?s money is the solution for everything.

?Our debt didn't accumulate because our GDP grew greater than our deficit.?

Nonsense ? your own graph shows this to be patently false. In any case, that GDP growth was built on false assumptions and credit.

?Primarily that consumers needed to take on debts in order to maintain their standard of living, as they were getting a smaller and smaller slice of the pie. Public spending was not one of the main problems.?

Public spending wasn?t one of the problems ? how could it be. Taxation, especially hitting the lower paid through the aforementioned fiscal drag as well as the government?s policy of inflating the cost of housing, was causing people to take on debt to maintain their standards of living.

?The only way to fix the economy is to bring us out of recession and restore growth. You won't fix it by cutting spending. On the contrary, cutting public spending will harm the economy and any chance of recovery.?

If we carry on doing what we are doing, there will be no prospect of growth on the horizon for the next few years. In the meantime we will just continue racking up government debt at the rate of 10% of GDP each year until something comes along. Every time we do this, we run the risk of higher borrowing costs as the markets, rightly, lose confidence in our ability to repay those debts. When this happens, the cost of borrowing will rise dramatically and Britain will be sunk by its debts. The only sensible course of events is to reduce that borrowing in a structured way now to buy us time before the whole house of cards collapses.

?Recovering even 'just' £30 Billion in unclaimed tax would probably cover all the cuts being made in the name of reducing the deficit.?

I take it that you learned nothing from the Vodafone episode. Most of this ?so called? tax avoidance turned out to be perfectly legal. This huge rump of untaxed money that is owing to HMRC that you talk about simply doesn?t exist. By all means change the system to minimise tax avoidance wheezes in future but unless you can find something in the order of £125 Billion more each year in owed tax you will still need to add to the debt, make cuts or increase taxes elsewhere.

?The Coalition government - mainly the Tories - are exploiting the crisis to cut back the size of the state and to public spending.? Unfortunately, this ideology is not compatible with growth in the midst of a recession, because it is anti-Keynesian.?

As I mentioned before, if borrowing and spending 10-11% of GDP isn?t Keynesian, what is. It?s also funny that those on the left conveniently forget the other part of Keynes? theory which stated that government debt to GDP ratios should never exceed 25%.

?We don't "Wait for growth". We make growth happen, partially through govt. investment.?

What, like HS2 where we spend billions on a project to shave 10 minutes of a train journey, or a couple of aircraft carriers just to immediately mothball them? That isn?t investment, that is pissing your money up the wall. Look at the Spanish Casas (or the unused airports they paid for) to see what happens when governments ?invest? in stuff.

^?Our total debt burden/GDP was at a historical low point, as I have shown a million times, and which I'll show you again:

Immediately prior to the crisis, it was roughly the same point it had been for about two decades (on average), and way lower than most of the 20th Century.?^

But, ?most of the 20th century? isn?t a decent place to take your averages from. For a start, two of the biggest and costliest wars in history were fought in that time span ? the debt incurred paying for these wars skew the average so far as to make your statement meaningless. The pre-crash ratio was, in any case, increasing (from 2001) despite the country being in the longest sustained boom we?ve seen.