Election

[tony84]

Hi,

I know there is another Election thread but this was a little different and i didnt want to take over that thread.

Ive never really been bothered about voting going with the whole "theyre all as bad as one another" saying. However i found this on the bbc website.

After reading it, ive decided im going with 1 of the parties which is not one of the big 3. Is anyone else planning on going with anything other than Labour/Conservative?

 

[MASSEY]

If you dont vote for labour or the conservatives then it will be a vote wasted,

Go back to when the conservatives were in power and look at the stupid things they sold that were making good money remember how much income tax went up and mortgage interest rates,

Labour have made mistakes and cameron is saying he can do better but as far as im concerned the working man will never be better off with cameron,

The only thing i can see messing labour up is the war which had to happen,

 

[Paul Norman]

I am always intrigued by the use of the word working man.....I work for a living, but sit in a tax band that the Labour party are hitting very hard indeed.

However, I will not be voting based on who gives me a few extra pounds in my pocket. I will be voting on who is the best qualified to manage the economy, because that is the job here, not feathering my personal nest.

And that will NOT be Mr Darling. The challenge is, finding someone who is qualified, because at the moment, non of them seem to really understand economic management.

 

[Dawg]

If you dont vote for labour or the conservatives then it will be a vote wasted,

Go back to when the conservatives were in power and look at the stupid things they sold that were making good money remember how much income tax went up and mortgage interest rates,

Labour have made mistakes and cameron is saying he can do better but as far as im concerned the working man will never be better off with cameron,

The only thing i can see messing labour up is the war which had to happen,

Do you have examples of these "stupid things", and by how much income tax went up? Which Government? Thatcher? Major?

 

[directmarketingadvice]

I will be voting on who is the best qualified to manage the economy, because that is the job here, not feathering my personal nest.

Well said.

Protecting the future of the country is, IMO, the most important thing.

Labour's strategy of "we must keep spending until the economic recovery is on a firm footing" is what we gamblers call "gambler's ruin".

It's the idea that, if you keep raising your stakes until you win, you'll come out a winner in the end.

The reason it's called "gambler's ruin", rather than "gambler's success" is that your stake money increases rapidly and there's a serious danger of running out of money before you place that winning bet.

And that's the question no-one seems to be asking Brown: what happens if we can't spend our way out of this? What happens if the debt becomes so large our credit rating goes down the toilet and we're left in a situation where the government can't borrow money anymore and can't pay the interest on the debt?

What then?

Does the Government just ruin the currency and wipe out the value of everyone's savings?

Steve

 

[Paul Norman]

Steve is totally right. Darling's and Brown's plan is to risk everything on a spend driven recovery. This is economic theory peddled and discredited many years ago, and it is is a one level control mechanism with no safety valve.

At the moment, the government are living beyond your means. You cannot afford to pay for what they are proposing to do. That is the bit no one is being open about.

We need someone who is prepared to explain this kind of truth to the electorate. That is most certainly not the Labour party in its current guise. After years of talking about prudence, Brown sold out to his true loyalties and is now spending recklessly on a total gamble.

 

[GeorgeM]

The last thirteen years have proved beyond all doubt surely that Gordon Brown and the Labour Party do not understand economics and how to manage public money, and promote private enterprise - which surely is a core duty of Government ?

They think that the private sector will always be able to come up with cash from somewhere, either from the day to day business, or stashed away somewhere.

But actually, the private sector needs to be looked after too. If simply drained of money it will wilt and die - as it has done in Britain. It is not a bottomless pit. That is what GB never understood and never will - and explains why he cannot continue as Prime Minister.

 

[JonM]

Well said.

Protecting the future of the country is, IMO, the most important thing.

Labour's strategy of "we must keep spending until the economic recovery is on a firm footing" is what we gamblers call "gambler's ruin".

It's the idea that, if you keep raising your stakes until you win, you'll come out a winner in the end.

The reason it's called "gambler's ruin", rather than "gambler's success" is that your stake money increases rapidly and there's a serious danger of running out of money before you place that winning bet.

And that's the question no-one seems to be asking Brown: what happens if we can't spend our way out of this? What happens if the debt becomes so large our credit rating goes down the toilet and we're left in a situation where the government can't borrow money anymore and can't pay the interest on the debt?

What then?

Does the Government just ruin the currency and wipe out the value of everyone's savings?

Steve

Don't agree with your interpretation I'm afraid.

Surely you have borrowed money to invest in long term growth? That is how the government sees it's strategy - they are supporting the economy through a rough time and we will pay it back when we are more able to do so.

 

[JonM]

Well said.

Labour's strategy of "we must keep spending until the economic recovery is on a firm footing" is what we gamblers call "gambler's ruin".

It's the idea that, if you keep raising your stakes until you win, you'll come out a winner in the end.

The reason it's called "gambler's ruin", rather than "gambler's success" is that your stake money increases rapidly and there's a serious danger of running out of money before you place that winning bet.

Steve

Don't agree. The government are supporting the economy through a rough period and we will pay our loans back when we are more able. This is actually precisely the same strategy that many individuals and businesses adopt to get them through a rough period.

What would you suggest the new government does - cut its borrowing, make lots of people unemployed as a result, and thus destroy consumer spending (which will in turn destroy the economy)?

Sorry - didn't mean to double post

 

[directmarketingadvice]

Surely you have borrowed money to invest in long term growth? That is how the government sees it's strategy - they are supporting the economy through a rough time and we will pay it back when we are more able to do so.

Firstly, has the govenrment spent this money on long term growth? It doesn't seem to be that way.

For example, how is the car scrappage scheme "long term growth"? It's just a short-term stimulus.

Secondly, you're making the very assumption I'm questioning: the assumption that there will inevitably be be some day where we're able to pay this money back.

I don't believe that's the case. We could easily either (a) run out of creditors or (b) hit a tipping point where the debt burden sucks us into a hole we can't escape from.

Steve

 

[Paul Norman]

That is exactly the problem.

Let me pick up on the analogy. Yes, in business, you might borrow money to invest in growth. But the government has borrowed money to attempt to prime the pump of the economy.

This is not totally wrong. But the issue here is the extent. The level of borrowing is too high. It will take more than an entire generation to pay back the borrowing we currently are needing.

The burden of taxation needed to repay this will be a drag on the economy for many years.

You are right to say this is how the government sees its strategy. But it has proved it cannot read economic indicators. It has proved it does not understand the business world. It has proved it does not realise that taxing people and businesses at these levels is not sustainable.

 

[JonM]

My replies in blue

Firstly, has the govenrment spent this money on long term growth? It doesn't seem to be that way.

For example, how is the car scrappage scheme "long term growth"? It's just a short-term stimulus.

Point taken. I expressed it better in my second post (my first post was submitted accidently) where I commented that it was supporting us through a 'rough period'.

Secondly, you're making the very assumption I'm questioning: the assumption that there will inevitably be be some day where we're able to pay this money back.

I don't believe that's the case. We could easily either (a) run out of creditors or (b) hit a tipping point where the debt burden sucks us into a hole we can't escape from.

Seems rather depressing to me, and I suspect not correct. In fact I think (and I suspect that most would agree with me) that the economy moves in cycles of peaks and troughs. There are already faint signs that we are coming out of recession - the rest of the world already has, and we'll follow that sooner or later.

Again I come back to what I wrote in my second post, what should have been done instead?

Steve

 

[JonM]

My replies in blue below

That is exactly the problem.

Let me pick up on the analogy. Yes, in business, you might borrow money to invest in growth. But the government has borrowed money to attempt to prime the pump of the economy.

This is not totally wrong. But the issue here is the extent. The level of borrowing is too high. It will take more than an entire generation to pay back the borrowing we currently are needing.

So what should the level of borrowing have been? A quarter? A half? I do have some sympathy with your view (I'm a taxpayer so I can expect higher rates after all), but the fact remains the government borrowed what was needed to negate any public sector unemployment. I put it to you that your view would have led to redundancies and thus reduced consumer spending, at a time when the economy couldn't sustain this.

The burden of taxation needed to repay this will be a drag on the economy for many years.

You are right to say this is how the government sees its strategy. But it has proved it cannot read economic indicators.

Really? What indicators are you talking about here?

It has proved it does not understand the business world.

In what way?

It has proved it does not realise that taxing people and businesses at these levels is not sustainable.

Are you suggesting that it's tax that is driving business under? Where's your justification for that view? Once again I suggest that the reduced consumer spending that your view would have led to would have been a catastrophe for business - far worse than the current tax burden.

 

[Matt1959]

However, I will not be voting based on who gives me a few extra pounds in my pocket. I will be voting on who is the best qualified to manage the economy, because that is the job here, not feathering my personal nest.

.

I'm also going to quote this and agree with it because I am amazed how short sighted people are. It seems all people can think of is whats in it for them personally and its usually in the form of how much money they'll get in their pocket. I know for a fact that I do better under Labour, yet I've never voted for them - makes me feel like a bit of a mug sometimes

 

[directmarketingadvice]

Let me pick up on the analogy. Yes, in business, you might borrow money to invest in growth. But the government has borrowed money to attempt to prime the pump of the economy.

To use a football analogy...

Arsenal have a high level of debt. However, that debt is the result of building a new stadium and, as long as the increase in matchday receipts are greater than the mortgage payments, their borrowing will pay for itself.

(i.e. it will be a "self-liquidating loan")

Chelsea, on the other hand, borrowed hudreds of millions of pounds (interest-free loan from Abramovich*) and spent the money on big-name players. Those players will depreciate in value and Chelsea will only get a fraction of their money back.

That's a short-term stimulus and unsustainable.

(Abramovich only has so much money)

Proper government investment in the economy will increase tax revenues over the long-term.

But that's not what Labour are doing. When you're paying out more to people on benefits than you're getting in in income tax revenues, you're not investing in the future.

Steve

* Abramovich subsequently turned most or almost all of that loan into equity. As a result, Chelsea are now more financially secure.

 

[directmarketingadvice]

I don't believe that's the case. We could easily either (a) run out of creditors or (b) hit a tipping point where the debt burden sucks us into a hole we can't escape from.

Seems rather depressing to me, and I suspect not correct. In fact I think (and I suspect that most would agree with me) that the economy moves in cycles of peaks and troughs.

It does, but that doesn't affect my point... unless you think it doesn't matter what the government does (or how much it spends) during those peaks and troughs.

If anything, the "inevitable peaks and troughs" model supports the idea that the attempt to avoid the trough by endless spending is little more than a "King Canute" fantasy that's just pissing away money.

There are already faint signs that we are coming out of recession

It's government spending that's getting the country out of recession. But what happens when the government has to cut back?

Take a look at this post, where there's a graph of govt v private spending in the US:

http://www.ukbusinessforums.co.uk/forums/showpost.php?p=1091866&postcount=82

That's not a sustainable economic model.

Again I come back to what I wrote in my second post, what should have been done instead?

We should put the economic safety of the country first.

We should forget about these childish notions that, by some form of alchemy, getting deeper into debt will somehow transform itself into real wealth. And we should sack up and take the medicine - i.e. start balancing the books.

Steve

 

[JonM]

We should put the economic safety of the country first.

We should forget about these childish notions that, by some form of alchemy, getting deeper into debt will somehow transform itself into real wealth. And we should sack up and take the medicine - i.e. start balancing the books.

Steve

I suspect that we're going to have to agree to disagree. My one worry over your view is what the consequences would have been without government borrowing. We were facing serious depression, and in all fairness that hasn't happened because of what the government did.

I agree that we're going to have to pay back the debt, but better that (and in a period of economic growth which will come) than what we were facing.

 

[JonM]

But that's not what Labour are doing. When you're paying out more to people on benefits than you're getting in in income tax revenues, you're not investing in the future.

This is an interesting comment, and will inevitably depend upon your point of view. I was unemployed for a few months in the recession of the early 1990's (under the Conservatives!) The benefits I then received tided me over until I was able to find work. I've now been working since those dark days and have paid much more back in tax.

Arguably the government invested in me until I was able to pay them back. I appreciate that won't be the case for everyone, but it does illustrate the complexity behind these sorts of statements.

 

[GeorgeM]

Some interesting points raised in this discussion.

One question asked was what should the level of Government borrowing be ?

Usually Governments would seek balance between borrowing and revenues over the medium term - say one to two terms of Parliament. Otherwise there's a risk that debt could get out of hand and become uncontrollable.

That is what has happened under the present Government - because they have not been able to develop the economy to achieve their goals, so instead they have just borrowed more and more, instead of cutting back on their aspirations - as any individual would have to do, to avoid bankruptcy.

Now certainly a significant slice of this debt arose from the banking failures - and the Government cannot take sole blame for that. A sizeable part must be taken by the banking sector - and they must make good their debts to the state (plus interest).

Generally when Governments do more, it means the private sector must do less, and vice-versa.

It is now time for the Government to do less, and allow the private sector (which means individual people and businesses) to do more for themselves. Then they will be able to produce more wealth, which will allow the Government debts to be repaid.

Any other approach will just end in permanent poverty for a large part of the population.

 

[JonM]

Some interesting points raised in this discussion.

One question asked was what should the level of Government borrowing be ?

Usually Governments would seek balance between borrowing and revenues over the medium term - say one to two terms of Parliament. Otherwise there's a risk that debt could get out of hand and become uncontrollable.

That is what has happened under the present Government - because they have not been able to develop the economy to achieve their goals, so instead they have just borrowed more and more, instead of cutting back on their aspirations - as any individual would have to do, to avoid bankruptcy.

Now certainly a significant slice of this debt arose from the banking failures - and the Government cannot take sole blame for that. A sizeable part must be taken by the banking sector - and they must make good their debts to the state (plus interest).

Generally when Governments do more, it means the private sector must do less, and vice-versa.

It is now time for the Government to do less, and allow the private sector (which means individual people and businesses) to do more for themselves. Then they will be able to produce more wealth, which will allow the Government debts to be repaid.

Any other approach will just end in permanent poverty for a large part of the population.

Eventually of course you are correct, and government will have to reduce the debt burden. However I would suggest to you that now is the wrong time; growth in the last quarter was 0.1% according tothe figures I've seen and we still need more time for the recovery to set in.

What indeed is the correct level of debt? This wikipedia page compares government debt around the world (figures from CIA yearbook 2009) http://en.wikipedia.org/wiki/List_of_countries_by_public_debt. It shows our current level is around 69% of annual GDP. This isn't good, but is lower than most of our European competitors. As just one example, Japan knocks along at over 190% of annual GDP.

No one is suggesting that we go any where near those levels. HMT figures see us reaching 80% by 2014, and it is well known that government spending is going to rapidly fall from 2011 onwards. What I'm therefore getting at is that Government isn't being as reckless as some on this board are indicating, and that debt levels aren't as bad as are being made out.

Indeed I would go so far as to argue that they have done a good job, and we would all have been a lot worse off without them!

 

[directmarketingadvice]

No one is suggesting that we go any where near those levels. HMT figures see us reaching 80% by 2014

Really? How on earth do they come up with that number?

If it was 68.5% last year, up from 47.2% and the government's plan is to halve the deficit over 4 years, how do they end up with only 80%?

Let's assume they reduce the deficit by even amounts: 87.5%, 75%, 62.5% and 50%, that totals 275%.

And, if the defcit was enough to increase the debt from 47.2% to 68.5% (i.e. by 21.3%), then the increase in debt would be something like 2.75 x 21.3 = 58.57% of GDP.

Leaving the country with a national debt of 127% in 2014.*

To turn that into 80%, the GDP would have to increase by over 50% in 4 years - i.e. by more than 12% p.a.

Personally, I'd be more inclined to listen to the Bank of International Settlements' prediction that it'll be 83% this year and 94% the year after.

Steve

* And that's based on the incredibly optimistic assumptions of the government which are, frankly, laughable.

 

[GeorgeM]

Indeed I would go so far as to argue that they have done a good job, and we would all have been a lot worse off without them!

Jon

The question I would ask is what plan has the Government got to pay for the debts they are racking up ?

They don't generate any wealth themselves so shouldn't they be giving serious consideration now to where that money is coming from ?

If I miss one or two payments on my mortgage the provider will be asking me to find the cash or risk losing my property. The Government is way into the red and has no idea how it will repay its debts - and the time for excuses has run out !

It has definately NOT been prudent by any shape of the imagination.

I don't see how that can be described as a 'good job' ?

 

[dagr]

I don't think the level of debt has sunk in. Interesting to mention Japan, a country that's been waiting on a real pick-up in the economy for around 20 years.

What the government should have done is to let one or two banks go to the wall, preferably the worst performing ones. Then, they should have prepared for a deep recession, with limited, targeted injections of public funds - all with strings attached (e.g. "We'll save your bank, but we want to see current shareholders dig into their pockets too"). The government actually acted like a headless chicken.

It is much better to have a hard, deep shock for a limited period than what we are going to have, which is many, many years of drawn out, debt-ridden chugging along. See Japan's record from the early 90s till now. And they're still saddled with debt!

 

[JonM]

Indeed I would go so far as to argue that they have done a good job, and we would all have been a lot worse off without them!

Jon

The question I would ask is what plan has the Government got to pay for the debts they are racking up ?

They don't generate any wealth themselves so shouldn't they be giving serious consideration now to where that money is coming from ?

If I miss one or two payments on my mortgage the provider will be asking me to find the cash or risk losing my property. The Government is way into the red and has no idea how it will repay its debts - and the time for excuses has run out !

It has definately NOT been prudent by any shape of the imagination.

I don't see how that can be described as a 'good job' ?

George

The government's plan is here: http://www.hm-treasury.gov.uk/budget2010_graphics.htm. As you might expect, it's a mixture of selected tax rises and "efficiency savings". The key argument of course is whether reducing the current annual deficit of 11.8% in 2009/10 to an annual deficit of 5.2% in 2013/14 is enough.

It's interesting to compare it with the Conservatives plan which is here http://www.conservatives.com/Policy/Where_we_stand/Economy.aspx. If you're interested have a look at the pdf link on the right hand side of the page "Reconstruction - Our plan for a strong economy". The tories position is one of balancing the books; however they are unfortunately being a little vague about the numbers and how they will do this, which I guess is understandable if frustrating. Having said that their proposed Office for Budget Responsibility which will sort of (it will have no legal power) force future Chancellors to deliver balanced spending looks interesting. I note they are also promising some minor tax cuts which I doubt whether they will be able to deliver.

You pays yer money and takes yer choice!

Jon

 

[JonM]

Really? How on earth do they come up with that number?

If it was 68.5% last year, up from 47.2% and the government's plan is to halve the deficit over 4 years, how do they end up with only 80%?

Let's assume they reduce the deficit by even amounts: 87.5%, 75%, 62.5% and 50%, that totals 275%.

And, if the defcit was enough to increase the debt from 47.2% to 68.5% (i.e. by 21.3%), then the increase in debt would be something like 2.75 x 21.3 = 58.57% of GDP.

Leaving the country with a national debt of 127% in 2014.*

To turn that into 80%, the GDP would have to increase by over 50% in 4 years - i.e. by more than 12% p.a.

Personally, I'd be more inclined to listen to the Bank of International Settlements' prediction that it'll be 83% this year and 94% the year after.

Steve

* And that's based on the incredibly optimistic assumptions of the government which are, frankly, laughable.

Steve

I'm pretty sure those figures are too high, but in all fairness I think that the thrust of what you are saying is correct. The current annual budget deficit is actually 11.8% of GDP, which will reduce to 5.2% of GDP by 2013/14 as I mentioned in my reply to George above. If the total debt burden is 68.5% of GDP, I don't see how it will reach your figure. However it may be somewhere between 80% and the 127% you calculated - say perhaps 100%.

This is where you and I come closer. I would in all honesty prefer a lower amount than perhaps the 100% or so a median figure would produce. Having said that I still wouldn't reduce the debt figure for this year, but I might do it quicker than Labour are promising from 2011 onwards.

Jon

 

[JonM]

I don't think the level of debt has sunk in. Interesting to mention Japan, a country that's been waiting on a real pick-up in the economy for around 20 years.

What the government should have done is to let one or two banks go to the wall, preferably the worst performing ones. Then, they should have prepared for a deep recession, with limited, targeted injections of public funds - all with strings attached (e.g. "We'll save your bank, but we want to see current shareholders dig into their pockets too"). The government actually acted like a headless chicken.

It is much better to have a hard, deep shock for a limited period than what we are going to have, which is many, many years of drawn out, debt-ridden chugging along. See Japan's record from the early 90s till now. And they're still saddled with debt!

Really interesting comment David - it's nice that someone has actually offered an alternative strategy. The problem is that your policy would have been harsh and not necessarily short-term. The situation we were facing was worse than even the mid 80's with depression looming. It's easy to talk about letting selecting banks go bust, but that would have wiped an enormous number of people's savings.

Borrowing has meant that it hasn't been anywhere near that bad. However no one disputes that it needs to be paid back. I've commented on the rival Party's policies for doing this above...both are pretty vague and it may be that we can expect more swingeing cuts to come in from the Conservatives and Labour once the election is out of the way.

 

[dagr]

Jon, it would be VERY, VERY harsh, but a lot, lot quicker than the quicksand we'll have to wade through for the coming years, if not decades. The difference is that one solution has a lot of visible pain, while the other will just make the country numb, but worse, stop it from ever being able to take off.

What's proposed by Labour is akin to a seriously over-laden plane that can barely taxi along the runway, let alone take off, with the pilot saying "all we need is a really good headwind, whenever that may come along". A better comparison would be the post-war debt to the USA that the UK held for some 30-odd years, holding it back compared to other EU countries till into the 80s. A case of hope over proper action, I'm afraid.

But you should never despair over people's ability to avoid the pain now and stick with hope*, however unrealistic. And that's why, amazingly, Labour has a reasonable chance of getting a fair chunk of the seats.

* Hope: The pathological belief in the impossible.

 

[GeorgeM]

The government's plan is here:

Jon

Based on past performance - do you think it wise to believe what they are saying ?

I'm not saying that other parties plans are any more believeable. But we do know that the Labour Government's love of spending and their past performance, rules them out as being fit to recover economic balance, and on that basis they don't need to be considered further.

 

[JonM]

The government's plan is here:

Jon

Based on past performance - do you think it wise to believe what they are saying ?

Yes. In fact on digging further into these issues, I noticed that the Government are legally obliged to meet these targets under the Fiscal Responsibility Act 2010. I'm not so fool to believe everything any politician says, but you can take this one as read.

It's also worth mentioning that their record until 2008 was actually very good (year on year growth, rises in overall standard of living etc). Far better than their predecessors I would suggest. They also can't be blamed for the crash - that was the result of UK banks becoming over-exposed to products based on the US subprime market.

If they got something wrong, it was that they were complacent with regards to financial regulation.

Last post for today!

Jon

 

[GeorgeM]

A few years ago my local council increased Council Taxes by 25% in one year. That was during the term of the Labour Government. They didn't give a dam whether taxpayers had the ability to pay up they just did it !

Since then, the Council has changed from Labour to Conservative, and they have frozen council tax rises.

Yet I still wrote to the new Council Leader to tell him that it would take a long time for me to ever have confidence that they (the Council) could manage their financial affairs in a wise and prudent manner - and I still hold to that viewpoint.

Besides racking up hugh debts, the Labour Government has caused many millions of taxpayers to lose all confidence in the financial management abilities of politicians - and that will take a long time to win back.

In the meantime we'll question every thing they say and do, and doubt their word.

In short, the trust has gone !

 

[JonM]

The government's plan is here:

Jon

I'm not saying that other parties plans are any more believeable. But we do know that the Labour Government's love of spending and their past performance, rules them out as being fit to recover economic balance, and on that basis they don't need to be considered further.

Definitely totally last post this time. I hear what you're saying but it is worth metioning that Labour ran a public surplus between 1997 - 2002 (hence "Prudence" Brown). This was after several years of Conservative deficits in the mid 1990's. It was only after 2002 that Mr Brown let spending go - and it rose from 29% in that year to 37% in 2007.