What is the Economic 'Plan B' that gets talked about so much?

[CogitoErgoSometimes]

Economic 'Plan A' is pretty tough going, admittedly but the best anyone seems to come up with for an alternative is some rather nebulous 'Plan B'. Has anyone actually seen 'Plan B' written down so we can take a good analytical look at it? Give it a rigorus assessment? Or is it - as I suspect - a vague way of saying 'not this, something else, but quite what, we're not sure'

It's funny isn't it? Glasnost and people like him/her put down those who suggest that cuts are necessary. They poo poo them as idiots who believe everything they read as though the answer is so blindingly obvious. Yet they never offer the solution. If it's so obvious, what is it? I'm sure we'd all like to know, not least Cameron & Obama. If there is such a miracle solution we'd all like to hear it.

I do think that all the parties have done such a bad job of explaining that the uk has no money. The undeniable facts are that Labour spent the kitty money over its 14 years in power and the 2008 global financial crisis meant the financial services sector (the biggest contributor to UK tax revenues) didn't contribute as much taxes. A simple p&l account shows the govt either needs to bring more revenues in or cut costs. There is a fine line of what can be done to bring revenues in because increase corporation tax too much and companies will leave the UK, taking jobs and tax revenues with them. They have already done what they could on VAT so that only leaves income taxes. Here they can increase the basic rate of tax. In hindsight there was actually no need for Labour to cut the rates and it turns out we couldn't afford it. Alternatively they could have stepped increases of tax rates for higher rate earners eg at £75k you pay tax at 45% and lower the 50% rate threshold to £100k. None of these tax measures would be popular and would likely make the recession worse. If you can't do anything about tax revenues then you can only, in the short term, cut costs. That is why the cuts are necessary.

At the end of the day, if uk plc were a person who had spent money with gay abandon and had a great fantasy life built on credit cards, we would all tell them to cut the credit cards and curb the expenditure to get things under control. We would say if you want that kind of lifestyle then you need to invest in your future or change direction in some way to boost your income. I think that's why cuts are necessary in the short term but stimulating the economy is the necessary long term measure. I still think the problem is that its very hard to focus on the long term when you haven't hit rock bottom yet. Having said that I think this point isn't too far away with Greek's debt default, Italy's issues and the impact on the Euro. Just call me Novice Doom.

I'm sure we'd all like to know, not least Cameron & Obama. If there is such a miracle solution we'd all like to hear it.

Yes, because Cameron and co. are only doing what's best for the interests on the country...

Some of you seem to be missing the fundamental point. Even if we can manage to save Capitalism by reducing the deficit burden, it is still likely that we are going to have a recession or very low growth for many years ahead.

The problem is one fundamental to the Capitalist mode of production. In order to maintain the the rate of profit, our masters have consistently attacked the wages, pensions, workers rights and security of working people everywhere. Wages have been stagnating for three decades. In order to keep up demand and the machinery going, people were given easy access to credit in order so that they could keep up their living standards.

So what is going to be fixed by cutting the deficit? People will still be, on average, ten thousand pounds in debt. They'll still have crap wages and no job security. They'll still have crap pensions (which are looking to get worse), the cost of living will still be too high, house prices will still be too high, and education will be out of reach for an increasing number of people.

In fact, the cuts to public spending are only going to make the situation worse for the majority of the working (and spending) population.

Either there is fundamental change in the way the economy works, and more wealth is kept by the people who actually create it (the people who work for a wage, and create and build things, and provide goods and services), or you'll have a situation whereby we have the majority of the population simply too poor to sustain the economy.

I think some of you are missing the big picture here. We are at a crossroads. We cannot carry on like we did before. It's not sustainable, morally, economically, environmentally, or by nearly any other measure.

Your plan for much lower taxes... 'more wealth is kept by the people who actually create it'.... is something every Tory Chancellor would heartily support.

I think the analogy of the credit card fuelled lifestyle is a pretty good one.

I think that there was a sense in the country that we needed to stop spending and dump the card (or make cuts and eliminate the defecit) and the Ories are the party known to do this. They are in, and the cuts are in, because the majority of electorate knows this (and even at the local election, more people voted for a coalition party, not the others).

As pointed out, the cuts agenda is inevitable. No one would believe a party now who said it wasn't necessary. Ireland's austerity measures haven't yet totally save them, but (unlike southern Europe which didn't cut effectively) they are no longer in the most vulnerable condition.

I don't think, until we actually see a country default (eg pensions, benefits, public sector wages unpaid, services just halting) that we shall truly appreciate how damaging this debt crisis is.

The problem with the coalition is that, even in the post-electoral optimism when the cuts agenda was expected and likely to be supported, they made a total mess of it. Even though some of the worse examples do not get the airtime they should, the debacle of the CB inequalities brought home to many the total absence of fairness and continuing administrative incompetence (something more associated with Labour, but now lost all-round, it seems). And they keep stacking up more examples of incompetence.

Their support will however hold up, as there ream ins no credible alternative.

Sadly, nothing worthwhile has emerged thus far from the Labour conference - increasing public spending (the fees cap) hasn't won them much positive comment - it is too obviously an attempt to buy off an interest group (parents of 14 year olds?). And the "tax the banks" rhetoric won't cut it for much longer - given the roles that some of the stronger banks will be required to take in the Eurozone crisis.

Your plan for much lower taxes... 'more wealth is kept by the people who actually create it'.... is something every Tory Chancellor would heartily support.

That's not a plan for lower taxes. It's a plan for reducing the rate of exploitation, and giving workers a decent wage, along with job security and a secure future with a good pension.

"nothing worthwhile has emerged thus far from the Labour conference"

Actually, if this morning's 'Today Progamme' is anything to go by, we may get the rather satisfying (if not actually worthwhile) sight of a conrite Ed Balls on the podium today. He said 'sorry' for the financial cock-ups of the last government so many times in the interview I thought at one point Jim Naughtie might have to offer him counselling.... or a Kleenex. He also admitted that Labour would be making cuts and would not be restoring public services to pre-cut levels. Very illuminating

ttosca. You are right. We cannot carry on like we did before. Living in deficit for three decades is long enough and now the world has cottoned onto it.

Bizarre situations where China makes widgets, sells them to the US who then borrow money from China to buy more widgets cannot continue indefinitely.

Longer term I think a new approach is needed. Free capitalism is undesirable, just like unrestrained socialism is too. What we need though in this day & age is countries to work together. At the moment, multinationals divide & conquer governments. If you raise taxes too much, they piss off to another. Like an errant child, you can only sort this problem out if you all stand firm and leave them with no choice. Alas that sort of consensus won't be around for some time.

So here we are. We're staring down the barrel of a double dip recession & a Greek default. There isn't a plan B. We have to continue as we are in the short term to shore up our budget deficit. Longer term the government should work with others (eg. via G20) to sort out a long term plan. But for now let's just get this recession over & done with.

We've lived high on the hog for far too long. Now it's time to pay the piper.

Balls is saying they cannot lay out policies now as they don't know what it'll look like in 4 years, but has said they won't be reversing cuts. So they seem to be deliberately deciding to take the benefits of the "cuts" agenda, without having had to make any of them themselves. Bit shabby.

He also said there would be some (5?) measures announced today at the conference. I suppose that's a start in showing where their thinking lies, but I am not expecting a properly costed set of alternatives.

< see you here later today? >

Metitrina- I doubt the Labour conference will have much to offer Ttosca or Glasnost. And I do understand where they are both coming from (having read their posts & debated with them on here).

I believe they see the crash and recession as evidence of the failure of capitalism. The last government had attempted to use and control capitalism to achieve it's [socialist] aims. That eventually failed - somewhat spectacularly.

Now, after such a failure many of the far left expected a rejection of capitalism. Instead we have a government doing almost the opposite - rolling back the state, stopping universal benefits, bringing the private sector further into education and health. And a Labour opposition who are kinda agreeing with them (all be it slower & softer).

But 'get rid of capitalism' has got to be a Plan B baby out with the bathwater non-starter, surely? The communist experiment died on its arse everywhere except possibly Cuba. Russia and the other Eastern Bloc states are still trying to catch up. China was a bit better organised, has embraced capitalism with a passion and now has a more unequal society than even the US.

I do think that all the parties have done such a bad job of explaining that the uk has no money. The undeniable facts are that Labour spent the kitty money over its 14 years in power and the 2008 global financial crisis meant the financial services sector (the biggest contributor to UK tax revenues) didn't contribute as much taxes.

Your 'facts' are deniable:

www.guardian.co.uk/news/datablog/2010/oct/18/deficit-debt-government-borrowing-data#zoomed-picture

That is a link to a timeline which shows the deficit since 1979.

Some noteworthy points:

• Both parties ran deficits most of the time.

• Labour ran a larger surplus for a longer time by a small margin.

• Up until 2008 (before the crisis), the deficit was well within historical 'norms'.

• The financial crisis of 2008 caused the huge rise in deficit. This was caused by the recession and resultant loss of tax receipts, not because of a huge increase in spending.

niceguy-

We've lived high on the hog for far too long. Now it's time to pay the piper.

You're obsessed with the idea that people have been spoiled through lavish public spending and private debt.

This is not only false, but the opposite of the truth.

For the nth time:

• Public spending in the UK is not and has never been 'excessively' large. When comparing welfare and healthcare spending, for example, it is about average for europe.

Private debt has reached such levels because people need to take on debt simply to maintain the same standard of living*. Nobody is 'living high on the hog' except the tiny minority of very rich people at the top.

• Private debt was encouraged by Capitalists as a means of simultaneously reducing wages while keeping up demand. Now that debt is not so freely available, there is no demand, because people have no money.

Cogito-

But 'get rid of capitalism' has got to be a Plan B baby out with the bathwater non-starter, surely? The communist experiment died on its arse everywhere except possibly Cuba. Russia and the other Eastern Bloc states are still trying to catch up. China was a bit better organised, has embraced capitalism with a passion and now has a more unequal society than even the US.

Russia and China are state Capitalist: a tiny, authoritarian elite are in control of the means of production.

Nobody is fighting for authoritarian state Capitalism. What people want is a democratic society where the public own and are in control of the means of production. Where things are produced for need, not profit.

Private debt did not reach the level it did to maintain a standard of living. It financed all kinds of non-essentials as people aspired to copy the standard of living enjoyed by the wealthy or celebrities. 'Buy now pay later' was pushed by unscrupulous finance companies because it was a highly lucrative business and there was a big market for it - not to 'keep down wages'. The person I know that borrowed £5k from a TV loan company to take her family to Disneyland for a fortnight wasn't taking out debt to meet the gas-bill

"Where things are produced for need, not profit"

And what about imports and exports? Are we just meant to produce what we need and live off what we can produce? Never step outside of our own shores with goods & services for sale or purchase? And what about whether the people available want to do the work required to create that ideal of self-sufficiency? Didn't work in countries as vast as China and Russia which might have feasibly become self-sufficient..... really wouldn't work in a place like the UK where we have to import labour to get the work done.

I have never said we've had lavish public spending. What we (govt) are doing though is spending more money than we gain through tax receipts.....and by a ridiculous margin.

Even using your link, we've only managed to have a surplus for 6 years out of 31.

The point I am trying to make you understand is that it doesn't matter whom you compare us with. Nor how much money you believe we need to maintain a certain standard of living. The bottom line is that over an economic cycle we need to break even. Surplus during the good times, deficit during the bad. This clearly hasn't been done.

When Labour first inherited the economy, the budget balanced. They should have tucked some money aside. They didn't. They let rip on the nation's credit card and then some. Then when the bad times came we found we had our pants around our ankles and not even a fiver tucked up our arse.

Now I don't actually think New Labour alone can shoulder this blame. Successive govts have failed to tame our deficit.

We need to live within our means period. Borrowing to keep up with our neighbours is not a long term solution no matter how well intentioned it is.

niceguy-

We need to live within our means period. Borrowing to keep up with our neighbours is not a long term solution no matter how well intentioned it is.

There you go again. You have this idea in your head that everyone went crazy for the past three decades and the UK populace has been living this lavish, decadent live-style.

What Cogito says is nonsense, despite his or her personal anecdote. If you wish, I could easily provide you several links showing the abysmal situation in the UK for most working people, including:

• Child poverty (absolute and relative)
• Fuel poverty
• Old age poverty
• New buyers priced out of buying homes
• People spending 1/3 of their income on public transport

And so on, and so forth. The British public aren't 'living it'. They're in debt primarily because they're struggling to pay the bills, to pay for public transport to get to work, and for 'simple' things like owning a house or a car.

It's not that these things are 'beyond our means'. The UK is one of the richest countries on the planet. The problem is wealth inequality. People have been systematically screwed for the past three decades by neo-liberalism.

If we don't stand up and start fighting back, they'll be nothing left. We really will all then be surfs. Not only will most of us be working for subsistence wages, but we'll have none of the rights we have fought hundreds of years to obtain, like healthcare, pensions, and workers rights.

No, I'm not saying everyone in the population went on a credit card spree.

What I am saying is successive governments have failed to balance the books. Please read what I say and feel free to disagree with what I write, not what you think I wrote.

It's the government's job to wisely spend the money we have. We must live within our means. Borrowing is ok in the short term but thirty years is far from "short term".

What I don't like is the fact for too long now they've been borrowing & spending money in my children & future grandchildren's name. They are the ones who will be left to pay off our debts. I doubt they will thank us and will I one day ask us "What the fuck did you do with all that money!?!?!"

As for standing up & fighting back, i've yet to hear a sensible suggestion from you instead of just more ultra left wing nonsense which is all fur coat and no knickers.

niceguy-

Jesus Christ. I don't know how many times I have to repeat myself or provide links or evidence.

It is not the case that the UK has steadily increased more and more debt over successive governments.

We are not experiencing a debt crisis. We are experiencing a deficit crisis.

In 2002, the Debt/GDP ratio (29.33%) was almost as low as 1991 (25.257%), which was almost as low as its lowest point in the 20th Century: 25.83% in 1913.

Here is the data:

www.ukpublicspending.co.uk/downchart_ukgs.php?year=1900_2011&chart=G0-total&units=p

LOOK AT THE DATA and stop repeating the same old mantra of an increasing amount of debt accumulation. That has not happened. The deficit took a nasty turn from 2008 because of the financial crisis. Since then, debt has started to accumulate after steadily decreasing since 1950.

Do you understand the difference between a deficit crisis and a debt crisis?

If you are genuinely concerned about your children and your grandchildren's future, you wouldn't support the public services on which they will depend. You would instead demand that the richest pay their fair share of taxes, and pay for the financial crisis which they caused, not ordinary citizens.

I'm very interested in finding out more about the alternative that Ttosca sees - as a small (but hopefully growing) business owner, how would we run our business differently? You said "It's a plan for reducing the rate of exploitation, and giving workers a decent wage, along with job security and a secure future with a good pension." Could you outline some of the new laws (?) that would come into practice, and talk a little about the effects you hope they'd have?

Ttosca, you clearly didn't read what I said so I will say it again.

Fact 1: Labour spent the kitty money over its 14 years in power

When Labour came into power in May 2007 the books were on the way to being balanced. They pretty much followed the Tories fiscal plan for the first 2/3 years. The UK was in surplus. In 2000, Labour had a comprehensive spending review and that resulted in large committments to public spending. The surplus that had arisen cumulatively from 1998 to 2002 was then spent over the next few years and iirc the govt started growing after that. The 2008 global financial crisis just exacerbated the deficit that already existed because tax receipts were significantly lower.

Deny it all you want but those are the economic facts.

Fact 2: the 2008 global financial crisis meant the financial services sector (the biggest contributor to UK tax revenues) didn't contribute as much taxes.

Well you clearly agree with me given you wrote The financial crisis of 2008 caused the huge rise in deficit. This was caused by the recession and resultant loss of tax receipts, not because of a huge increase in spending.

At no point did I say that the huge increase caused the recession. And in fact if you read what I actually said in my other post, I said that Labour didn't cause the recession by which I also meant that the spending didn't cause the recession. (The Tories just positioned it that way to win the election). It is that when the recession happened there was no money in the kitty as it had all been spent. A certain Mr Ed Ball admitted yesterday that Labour had made mistakes, which is politician for "we fucked up big time". Only Gordon Brown (and maybe Alistair Darling) believes they didn't.

Ttosca, you clearly didn't read what I said so I will say it again.

Fact 1: Labour spent the kitty money over its 14 years in power

When Labour came into power in May 2007 the books were on the way to being balanced. They pretty much followed the Tories fiscal plan for the first 2/3 years. The UK was in surplus. In 2000, Labour had a comprehensive spending review and that resulted in large committments to public spending. The surplus that had arisen cumulatively from 1998 to 2002 was then spent over the next few years and iirc the govt started growing after that. The 2008 global financial crisis just exacerbated the deficit that already existed because tax receipts were significantly lower.

Deny it all you want but those are the economic facts.

Fact 2: the 2008 global financial crisis meant the financial services sector (the biggest contributor to UK tax revenues) didn't contribute as much taxes.

Well you clearly agree with me given you wrote The financial crisis of 2008 caused the huge rise in deficit. This was caused by the recession and resultant loss of tax receipts, not because of a huge increase in spending.

At no point did I say that the huge increase caused the recession. And in fact if you read what I actually said in my other post, I said that Labour didn't cause the recession by which I also meant that the spending didn't cause the recession. (The Tories just positioned it that way to win the election). It is that when the recession happened there was no money in the kitty as it had all been spent. A certain Mr Ed Ball admitted yesterday that Labour had made mistakes, which is politician for "we fucked up big time". Only Gordon Brown (and maybe Alistair Darling) believes they didn't.

We are not experiencing a debt crisis. Yes we are

We are experiencing a deficit crisis. Agreed

Your logic is flawed. What you are effectively saying is there's no debt crisis because look we've always borrowed this much money. Erm....you are in debt! And guess what....debts have to be paid eventually. That eventually is now.

What's made it worse is that we've a terrible deficit. Again you can debate the cause but ultimately we are where we are. Even your link from the Guardian shows our deficit has ballooned in recent years. So basically we're borrowing MORE money. In other words, getting deeper into DEBT. (after all when you borrow money you get into debt).

Now you may argue that well if there was no debt crisis before and we used to owe more, why is that a problem now?

Well the problem is that the market has changed. Until recently it was assumed that western nations do not default. So we could borrow money cheaply without conditions. Greece put paid to that assumption.

So markets are now insisting on higher standards when lending and as a result higher interest rates. So if you are deep in debt, continue to run a massive deficit and show no signs of changing, the interest you are then charged reflects that.

And since we need to borrow money to pay our essential public services then we're stuck in this cycle.

If we want to get out of the vicious circle, the only way out is not to borrow more or deny we don't have a debt crisis. The only way out is to cut our deficit and in the long term reduce our levels of debt.