Labour wants tax cuts now ??

[CogitoErgoSometimes]

Balls urges tax cuts

I can't help feeling that Balls has got wind of Treasury plans to announce some small tax-cuts in the next budget and by pre-announcing them as 'our idea' is trying to shoot the Coalition fox.

"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.

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.

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.

"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.

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.