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Stephanie

Could you find time to comment on whether even at 82% the UK's level of public debt might still be a long way short of a number of other countries with our sort of economy (the US, Germany, Japan perhaps)? I know that our current account deficit is high, and getting higher, but since we were starting from a relatively low level of public debt before the banking crisis does that not give us a bit more headroom than the doomsayers might imagine? Of course, being politicians, the government always talks about the overall level of debt, while the opposition prefers us to look at the deficit - but surely they should both be more balanced in their statements?

THE GREAT SHELL/STM SCAM?

At what rate has HMG loaned billions of public money [#1] to private sector banks (at a time of record low policy rates) for free-market worshipping private sector banks to then lend to 'the public' at much higher rates?

[#1] Which 'the public' later has to fund through their children's inreased taxes?

Or is it rude to ask?

Dear Stephanie,
Can I put in a request for you to give us a measured update on the lending capacity shortfall problem. The IMF point to ailing credit markets / bad bank balance sheets as remaining a crucial factor in recovery timescales. We know that the mortgage-backed securities market is floundering - money markets are still difficult and credit agencies have downgraded building societies who may need to increase capital buffers. I thought the government were giving a 50 billion guarantee for mortgage-backed securities to kick-start matters but state-aid approvals were awaited. What stats are coming out of the Lending Panel Forum? How have interventions by BoE in bond markets helped credit flows?

JadedJean

How come most people's personal pension funds, which are mainly invested in the "managed fund", have lost 40% of their value; while at the same time US investment banks have made profits in Q1 09 from stock market trading and currency dealing?

Now, how does that happen?
How have the banks made a profit when the public hasn't?
When it comes to stocks and shares, one person's gain is another person's loss....

MrTweddy (#4) "Now, how does that happen?"

Is it a ?

MrTweedy,

It would appear that a large part of the US investment banks 1Q gains gain from a mixture of market trading, currency dealings and underwritting the re-mortgaging iniiative in the US. The majority of US banking analysts do not expect to see this performance repeated in Q2.

Stephanie
A question that we better ask once, only: what sense will the (any) budget make with no provisions taken for the immense risks buried in the banks' balance sheets? The owners' accountant might not dare to ask or speak about those, but while "Joe Blow" faces severe difficulties in staying afloat we give away cartes blanche to banks owned by ourselves. This imbalanced vicious monetary circle not only is about to destroy the private sector but inflates an obese public sector deemed to burst.
All this can help to create a wise monetary reform soon and prior to destroying human social structures. There is hope.
Christian

The Treasury leaks/briefings prior to the budget this week have as yet been entirely silent on the inflationary consequences of the actions already taken by the Bank of England (The Treasury's toothless puppet!)

It is entirely absurd not to think about the very high probability that zero interest rates and generation of a massive increase in the money supply will not have very serious consequences in a proportionately huge increase in inflation. (If this is not the case then the whole basis of the the control of inflation of the last twenty five years has been a lie.)

Everyone draws nice smooth graph going out to 2050 with a big increase in borrowing to 2015. (I regularly moan about the display of the central prediction without any error bounds and these graphs are a case in point.) This is rubbish as inflationary pressures will force far more drastic cuts in spending directly as a result of the stupidity of managing inflation to the CPI by the bank.

There is no quick way out of this problem - indeed zero interest rates and Quantitative Easing are making the hole deeper and in the end the public will notice the huge inflationary damage, and know its cause - defective central government policy for the last twenty-five years!

foredeckdave (#6) "It would appear that a large part of the US investment banks 1Q gains gain from a mixture of market trading, currency dealings and underwritting the re-mortgaging iniiative in the US."

The 1999 Gramm-Leach-Bliley (which effectively completed removal of the firewall between investment and retail arms of US banks) doesn't obstruct you or anyone else from knowing that?

#4 Mr Tweedy

www.bloomberg.com/apps/news?pid=20601039&sid=a6sv0hG.nW7g&refer=home

or look up Well Fagro Profit Bloomberg Weil

They changed the rules.

John,

There is a lot of truth in what you say. Inflation is a sought after result of present economic policy viewed solely from the perspective of managing the increased levels of debt. However, economic history also shows that we have been very poor in our management of inflation. The tools available to us are too blunt for any form of fine tuning. Therefore to assume that the Treasury or the BoE can control inflation is inherently wrong.

If HMG is to really stimulate the economy, this is not going to be achieved by continuing to prop-up the financial sector. The stimulous must be injected directly into the real economy. Merely bringing forward investment plans is no real stimulous as they have already been 'factored-in' to longer term forecasts.

Stephanie,

Welcome back - and a suggestion. I know broadcasters HATE vox pops, but after Michael Crick's recent extremely entertaining one...

Why not go 'out on the streets' to ask people how much they think the TOTAL NATIONAL DEBT is ?? Of course, that is a question in itself as to what, after all the bailouts, is actually included.

Some of the money is just a 'liability' which may never need to be paid.
Or we might lose the whole bally lot.

Of course, it might be easier to ask how much the Total National Debt is 'per capita' or 'per [taxpayer] head'.

My guess is that most people couldn't now get within an order of magnitude of what the National Debt will be by the time of the Olympics.

Of course, the tricky thing about all this is that as soon as one year's ANNUAL debt is past, it just gets chucked on the pile, and is not really relevant for 'news reporting' of what future 'budget deficits' will be.

And that point is made in this film but unfortunately that raises another problem, which is that much of this discussion is hijacked by rabid-right-wingers who would 'slash-and-burn' all social security benefits if they could.

I don't fall into that camp, but if we take our eye off the ball, we may soon find we simply CANNOT AFFORD perfectly laudable and necessary funding of the NHS and State Pensions.

Having read your piece on the budget, and ont he basis that this is founded on an inside track, two things seem apparent:

a) There will be no immediate tax increases and there may be a few spending schemes like the subsidy to trade in old bangers.

b) There will be a squeeze on public sector pay starting this year.

The latter point is the only rational explanation for the proposal to reduce spending by £15bn over the next three years. There is no way this can be achieved through reducing "Whitehall Inefficiencies" if only because "Whitehall" does not cost £15bn in the first place.

The real agenda seems to be to increase public spending by less than the rate of inflation. Thus, for example, current spending projections suggest that by 2012 it will be up to c£502bn (consistent with an annual inflation ate of 3%). If public sector pay increases by only 2% over the period then spending will rise to only £485bn.

Brilliant. A saving of £15billion, while we're spending £30+bn more than today. A classic Brownian movement: but this sleight of hand should fool no-one. The unanswered question is still, "where will the money come from?"

Even if there were tax increases (contrary to (a) above) with revenues plunging this may not answer it!

"The 1999 Gramm-Leach-Bliley repeal of the Glass-Steagell (which effectively completed removal of the firewall between investment and retail arms of US banks) doesn't obstruct you or anyone else from knowing that?"

What are you on about? The statement was made in response to MrTweedy's question in #4. I did not claim any exclusive knowledge as to how the profit was calculated. If you care to look at the US commercial press then you will find that their analysts and commentators are almost in complete agreement that these were the areas in which the 'profit' was made. It was also aided and abeted by the changes in the accounting rules.

lordBeddGelert,

I do share the thoughts expressed in your final 2 paragraphs.

In some ways it would be good if the present financial system crashed and burnt! Then we would have to properly address the issues regarding Value in more than mere monetary terms.

Stephanie:
We will be waiting patiently for your next blog

~Dennis Junior~

foredeckdave (#14) "What are you on about?"

Ah, more incomprehension. Perhaps you haven't been following?

"The statement was made in response to MrTweedy's question in #4."

Which unless I'm very much mistaken was a sardonic response to my #2, which goes way back to a question I put to Peston, Flanders and Mason about abuse of Nominee Accounts and market volitility, I believe.

"I did not claim any exclusive knowledge as to how the profit was calculated."

Glad to hear it, because unless there is new legislation to change the old which brought about the deregulation I don't see how much can change in the short-term just because someone says so. It's not how our systems work. That only happens in totalitarian systems such as Command Economies, or when The President issues Executive Orders or Parliament Statutory Instruments (which pretty much comes down to the same thing FDR resorted to such 'fascist' steps in the 30s cf. the NRA).

"If you care to look at the US commercial press then you will find that their analysts and commentators are almost in complete agreement that these were the areas in which the 'profit' was made."

Sadly, I don't put much store by what the press agrees - but if you provide a link I will look. Nor should you I suspect, as they tend to say what their owners want the public to believe.

"It was also aided and abeted by the changes in the accounting rules.

Prima facie that's quasi criminal language, so it's interesting. What change in accounting rules were those? What legislation are you referring to precisely? As MrTweedy astutely pointed out, many people have lost lots in their pension funds and Nominee Accounts, and yet some of the banks seem to have done quite well. Does that not strike you as at all odd? Does it have anything to do with the investment arms of the banks being the registered owners of the shares in Nominee Accounts and being able to short-sell the beneficial-owners' assets for the bankers' profit do you think?

It is clear that we have now entered a period of smoke and mirrors as our leaders try and convince us in colusion with the finacial majors that the worst is over and that with a little in the way of austerity measures and belt tightening that all will be well in the not to distant future.In a company any such blatant mis-reporting in the past should and would have normally earnt any director the sack but the current generation of teflon coated superstars seem impervious to any such consequence and expect us instead to marvel at their brilliance. Truth is that things will now worsen over a period of years as profit and revenue generation together with personal incomes struggles to meet the obscene demands of taxation funding required to meet the debt commitments that we have now been blessed with.The working and middle classes can have no idea yet of just how much and for how long they will have to pay and there seems to be a cosy concensus to keep them in the dark about it.The valuation of assets both real and imaginary in the system is still way to high whilst the estimation of liabilities is still way to low.Whilst the rest of the world (except the USA to which we bear an uncanny similarity in avoiding reality) is busy rebuilding for the future until we bottom out our situation the pain will continue to grow. We need to be realistic,open and transparent about the bad news before we can start on the same pathway.I fear our politicians just cannot bring themselves to be honest after so many years of falsehood.

The City of San Diego, California is almost bankrupt. Two days ago, before their budget was approved, the City Council imposed a 6% pay cut on its workers which includes firemen, the police, white-collar and blue-collar workers. This pay cut was approved by three of the five unions involved and subsequently imposed upon the remaining two. In this microcosm economy they chose a pay cut rather than redundancies and cuts in services in setting their Budget. In these very tough times, it just shows the extent this elected bodies has had to go to so as to balance their books.

While Stephanie is away, I offer the following for your amusement. The following was posted on Robert Pestons blog. I admit to having been sent it some weeks ago by a good friend who happens to be chair of his local Tory party:

· HOW THE TAX SYSTEM WORKS Suppose that every day, ten men go out for beer and the bill for all tencomes to ?100. If they paid their bill the way we pay our taxes, it would go something like this: The first four men (the poorest) would pay nothing. The fifth would pay ?1.The sixth would pay ?3.The seventh would pay ?7.The eighth would pay ?12.The ninth would pay ?18.The tenth man (the richest) would pay ?59. So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. 'Since you are all such good customers,' he said, 'I'm going to reduce the cost of your daily beer by ?20.' Drinks for the ten now cost just ?80. The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the ?20 windfall so that everyone would get his 'fair share?' They realized that ?20 divided by six is ?3.33. But if they subtracted that from everyone's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay. And so: The fifth man, like the first four, now paid nothing (100% savings).The sixth now paid ?2 instead of ?3 (33%savings).The seventh now pay ?5 instead of ?7 (28%savings).The eighth now paid ?9 instead of ?12 (25% savings).The ninth now paid ?14 instead of ?18 (22% savings).The tenth now paid ?49 instead of ?59 (16% savings). Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings. 'I only got a pound out of the ?20,' declared the sixth man. He pointed to the tenth man, 'but he got ?10!' 'Yes, that's right,' exclaimed the fifth man. 'I only saved a pound, too. It's unfair that he got ten times more than I did' 'That's true!!' shouted the seventh man. 'Why should he get ?10 back when I got only two? The wealthy get all the breaks' 'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor' The nine men surrounded the tenth and beat him up. The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill. And that, ladies and gentlemen, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier. David R. Kamerschen, Ph.D.Professor of Economics For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.
This is my reply:

HOW THE TAX SYSTEM WORKS – THE SEQUEL

Part Two – HOW THE ECONOMY WORKS

The first four chaps are called Steve, Uri (token non-indigenous worker), Colin and Kevin. They are farm labourers. They grow stuff and pick it for people to eat. They each get paid 95 pounds a week so are not required to pay any tax or national insurance contributions. They all work for the fifth chap, Eric, who manages the farm they work on. Eric is paid 104 pounds per week, to reflect his responsibilities. Because he earns so much, he is obliged to pay 1 pound per week in National Insurance tax. The sixth chap is Ron. He used to be a farm worker, but is now too old to contribute much. Last year he decided to borrow heavily from the bank and set up a service business. He now leases a tractor and trailer unit and has a contract with Eric on the farm. He is doing quite well, making 122 pounds a week, but is worried about how he can make the repayments to his banker. The 3 pounds a week he is forced to pay in National Insurance tax is not helping him.

Stephen, a tax collector, has recently befriended all six of them. Stephen earns 136 pounds a week and is quite happy to pay 4.60 in Tax and 2.40 in National Insurance on this income. As he sees it, this is going to pay his index-linked pension when he retires next year, aged 55. He is not so happy about his real role, which is to gather information about Eric and Ron who are under suspicion of tax evasion. Stephen has introduced the group to his friend, Robert. Roberts job is to inform the workers about the economy, a job he finds rather amusing. He gets paid 153 pounds a week for it and only occasionally grumbles about the 6.40 Tax and 5.60 National Insurance he is forced to contribute.

Robert has two good friends, Humphrey and Fred. They often drop a word in his ear, making his job a no-brainer. Humphrey and Fred are very important people and have both been knighted for their services to the economy. Sir Humphrey runs the Treasury, for which he receives 172 pounds a week and pays back just 6.40 in Tax and 5.60 in National Insurance. Like Stephen, Humphrey sees this as a reasonable deal in view of the enormous index-linked pension he will soon be drawing. Anyway, money worries do not exist for Sir Humphrey because his good friend Sir Fred has already promised him a lucrative non-executive role with his bank after he retires. Sir Fred earns by far the most. He is paid 304 pounds a week and generously contributes 23 pounds a week in Tax and another 36 pounds in National Insurance tax. Sir Fred tries hard to keep quiet about his share options, pension pot and all his other benefits in kind so as not to annoy the workers.
(NOTE from continuity: These figures conform to the story in Part 1).


HOW THE TAX SYSTEM WORKS – THE SEQUEL

Part Three – HOW THE ECONOMY MIGHT WORK

Steve, Uri, Colin, Kevin, Eric and Ron walk into the White Bear. Landlord, Thomas Paine greets them as he racks up their beers and pops an ashtray in front of them. Stephen rushes in and offers to buy the round. Gizza a job, he says to Eric, with a smile. Eyeing the ashtray, he says, I guess you have all heard that the coercive, intrusive, corrupt government has gone. Just saw Robert on the news. Apparently, Sir Fred was spotted boarding his jet, bound for the Caymans. There is a rumour that Sir Humphrey is with him. No more taxes, no more government, and no more jobs for me. A tear drops into Stephens beer.

Don’t blub Stephen, says Eric. What about Thomas. We all owe him for last nights beer and without Sir Humphrey, Sir Fred and Roberts contributions, how can we possibly continue to support his establishment. We are all doomed. Certainly we need such enlightened rich folk to organise things for us. I wish I hadn’t hit him so hard, and Uri, there was no need to break his window now was there?

The mood of the group becomes pensive. Thomas quickly racks up another round. Its on the house lads, Im not being forced to pay my business rates anymore so lets forget about last nights bill. Just listen to me for a second. First of all, the beer is now cheap, Ive knocked off the excise duty and the VAT. Ive knocked off the business rates, the licence fee, the cost of licence compliance and of course Ive knocked off all the taxes I had to pay. Its now only 30p a pint. For all six of you, the weekly beer bill is down to 10 pounds and I still make a profit. Wheeee!

Steve, Uri, Colin, Kevin, Eric, Ron, How much are you saving on indirect taxes? How much were you paying in bank interest? By my reckoning you are all sooooo far ahead of the game. Stephen, sorry you are unemployed but maybe you could take some time out. Think about what you might usefully do. Hey, my cellar needs tidying. How about it?

Ron looks up. But that is deflationary, Thomas. We don’t know how to deal with that.
Thomas looks at him quizzically. What is important Ron? As long as you have carrots in your fields to eat and beer to drink, what does the price matter? Hey, eventually we might deflate everything to zero cost and feed the world for free. Some guy in Venus, Florida is already working on the mechanics.

Anyway, your numbers don’t stack up, adds Eric. The rest look on dumbfounded. They didn’t teach economics too well at school.

Between us we only earn 606 pounds a week says Eric, looking at his team. Robert, Humphrey and Fred cost us 629 a week, let alone the cost of Stephen. How does that work? Err….. government borrowing, says Stephen. Your kids pay it, he adds and promptly disappears to the loo.

Look guys, says Thomas, all the money you were getting went to pay for those guys, Stephen got his wages and his pension, Robert got his licence fee, Sir Humphrey got his salary, his pension and all that influence could buy and Sir Fred got the cream. Where did the carrots come from? Are there any less carrots in the field today? What happens if you just carry on as usual? Ill tell you what happens, there will be just as many carrots as there were yesterday. The only difference is that you get to keep them all. Anyway, postage to the Caymens is just too expensive to send any more to Sir Humphrey and Sir Fred. Its commonsense lads. Drink up.

#17



Here is a lead for you from the FT - or is that to in-exact for you?



As for bank performance, as with the rest of the finacial sector, I view all of their activities and reports with a great degree of scepticism. A sector that glorifies in the tradition of heads I win/tails you lose is patently unethical despite its protestations.

As for changes in accounting practice and conventions, I believe that you will find that there are many aspects that are not clearly legislated for and therefore are subject to both interpritation and exploitation. Both the accounting and legal professions are very adept at discovering and exploiting loopholes.

Vestura,

The employees of JCB did exactly the same, however it did not ultimarely prevent a great number of them still loseing their jobs!

No.17. JadedJean wrote:
"The statement was made in response to MrTweedy's question in #4. Which unless I'm very much mistaken was a sardonic response to my #2..."

The dictionary definition of Sardonic is "grimly mocking or cynical"

Oh dear, I have become a bit short tempered of late; but the thought of hard working people losing their jobs, plus the risk of consumer price inflation, plus higher taxes to allow banks to make market profits at the expense of the public's pension funds, all coupled with cuts to public services as a result of the government running out of money, is a bit irritating. "Grim" is the word.

22 foredeckdoc

This is the forthcoming problem -

''Dr James Hughes, an economist at New Jersey's Rutgers University, is not sure how it can re-invent itself again. .....(he's talking about the current situation in NJ (my insert))......

"The question is what are the new economic locomotives? It's the big question of our era."

As far as Dr Hughes is concerned there are no signs that an economic transformation is under way.

"I don't see any transformative investment being made. I don't see any investment to create transformative industries. Nor anything to encourage private sector investment."

From

There may be a question of scale, but why should the problem be any different here as basically the same ideas have been implemented here.

You ever watch a lettuce bolt and go to seed in one last effort to beat an adverse changing environment. Thats what this lot reminds me of, the bubble was an attempt to avoid the unavoidable and it was the bolting of the economy. I think anybody wanting to think things are going anywhere near back to normal, even normal less 5 percent is far too hopeful. This recession is not the same as the last one, or the one before it, or the one before that. This recession has built on the actions of previous recessions.

I can understand the desire to be positive etc, not to talk things down etc, but I do not think the real problem is being addressed. The problem is the apparent wealth the people in this country, and other countries in the West I suspect, has been artificially levered up via private debt and public asset stripping whilst the wealth generaters have been run down and shipped out of the country(s). They are not coming back due to the barrier of relatively higher labour costs. The asset stripping is based on the old trading empire wealth, Old and New World wealth, and that flywheel has now slowed to near stop.

This is basically the Mayan 2012 by analogy. Having to face that a way of doing things has failure embedded in it. This looks to be the end game for the American Dream, as characterised by ever expanding affluence, replacing goods via built in obsolescence and marketing, ignoring environment consequences. As money regains value which is what is happening, consumers will change orientation because obsolescence is often perceptual rather than real. They are doing it already, buying smaller, looking for something which will last. That they will be comfortable with for some time. Aversion is steadily growing to short term consumerism. The problem in the East will be reduction in export markets as the whole mechanism resets. Monolithic production structures tend not to be flexible.

So the question is what is going to come through here to fit the new mentality, and mainstream activity prior to this is unlikley to be the easy provider of the solution, because they are locked into the wrong framework. Thats the problem. There will be gestation and in the meantime economic activity will not pick up markedly.

In the meantime all major economies in the world will be chasing the same strategies because they are all playing the same game so there will be similarirty between percieved solutions, there may be difference but it will be reduced. The convergence in economic strategy will reduce economic interaction because it is difference that encourages interaction and difference will be reduced.

So it comes back to innovation and in this country big business has become increasingly averse to innovation, whatever is said to the contary.

Mr T

As somebody observed at the time when Mrs Thatcher kept deliberately trying to humiliate Goeffrey Howe - The last thing you should do make an enemy of a patient man.

As interest rates are now positive when measured against current inflation (RPI) giving luck depositors a real income does this mean the BoE has scope to reduce interest rate further? lol.

rwolff wrote a load of right wing nonsense.

This is all highly, highly amusing but misses out the tiny detail of what the point of the tax system is. To pool the resources of the whole community for the good of the whole community.

As I believe someone a touch more famous than the chair of a local Tory party once said "from each according to his ability, to each according to his need".

If the Tories have now stopped believing in the tax system as a whole (there's no such thing as society after all) perhaps we should just go back to the Middle Ages, disband the police, the armed forces, schools, hospitals and let the mob have their way with the rich?

Oh, sorry - I misunderstood - the rich pay too much tax. Poor buggers. Trickle down economics has worked brilliantly at spreading the wealth around hasn't it....

No.26. Glanafon

I see the inflation rate has dropped a little; but the price of oil is much lower now (USD45 to USD50 a barrel) than it was at this time last year (USD105 to USD112) which causes the rate of inflation to be dampened down by this price difference.

It won't be until October this year that the high commodity prices from 2008 will stop having a dampening effect on inflation. In the meantime, CPI is still around 3% due to the weak sterling.

#4 / #6 - CDO returns, believe it or not

No.27. MattBLondon1975 wrote:
"....but misses out the tiny detail of what the point of the tax system is. To pool the resources of the whole community for the good of the whole community."

You should make a slight change - put the word "business" in front of "community".

The point of the public sector is to enable and support the private sector business community. A strong private sector then pays for a strong public sector.

Schools and education system exist to provide business with a good quality workforce.
NHS exists to patch up workers and get them back to work.
Police and fire brigade exist to protect property of workers and business.
Civil Service exists to help Britain's trade interests.
Armed forces exist to protect Britian's trade interests.
Transport infrastructure exists to help goods and trade move around the country.

etc....

The public sector does not generate wealth in itself, unless it pays for the development of products which are then sold abroad.
The role of the public sector is to help the private sector generate wealth.

Mr Tweedy

I wouldn't necessarily disagree with any of that even if it is a little reductive!

No.31. MattBLondon1975

I agree there is no civilisation without taxation.

If the private sector contributes a fair share of its wealth to the country at large, we will have more funds to provide help and care for those who genuinely need it. It is important that we do view the country as a community, whereby we help and support each other. The private sector must pay a fair share of its wealth to the public sector, which in turn must behave efficiently; so we can ensure a good quality of living for all.

It does annoy me when people evade tax. It also annoys me when people who could work don't work, with the State footing the bill. Both these types at either end of the economy make it harder for us to keep the country civilised.

This comment was removed because the moderators found it broke the house rules. Explain.

I do not think there is a major dilemma for the Chancellor.
1) Do not raise taxes
2) Cut some fat from public expenditure
3) Add some / Keep existing tax breaks in areas aimed to stimulate economy
4) Hint that future budgets will be tougher ONCE the economy is post-recession to send the right messages

I would expect to see a small (1-2%) increase in the tax-free income allowance, very small (if any) rises to state benefits and pensions; plus, though I would be inclined not to myself, small punitive tax increases on various duties (alcohol and tobacco).

32 MrTweedy

''It also annoys me when people who could work don't work, with the State footing the bill.''

Hmm. Well we all know somebody that causes this sort of comment. But - Pension credit is quite a bit higher than JSA. Yet pension credit is judged to be the minimum required for somebody to live on by definition. Don't you find that a bit odd. Maybe as odd as many hard working folk freshly claiming will find, some 1.5 million plus expected. And most people claiming will have worked and paid tax in an economy which takes 46 pence in the pound one way or the other. Coupled with the fact back in the 70's 80's there was a debate about how a modern economy needed some significant unemployment to function effectively, to keep labour costs down. So I don't see it as that easy. As Darling commented recently the effect in the 90s was to place many highly experience and qualified workers in long term unemployment which is social and economic madness. And vain glorious experiments with MPs living as if unemployed for a weeks or so do not uncover the problems of the long termed problem. On entry into unemployment the entrant usually carries into this situation a whole collection goods, white goods and cloths, furniture, bedding etc, which sooner or later have to be replaced, which is not seen in a short holiday experience. And with a permanemt 4 percent drop in economic activity against the bubble it looks as if a large number of people will indeed be long term unemployed. I just don't think it is an issue that can be sorted.

No.35. glanafon

It is true that full employment will never exist.
Unfortunately, there will always be some unemployed who want to work but can't. As you point out, we need to provide adequate help and support for these people.

As unemployment increases due to the recession, there will be no option but tax rises plus cuts to other areas of public spending; as our government has little money held in reserve, and the tax take is falling and welfare costs increasing.

Mr Tweedy

Indeed and given we have an economy built on the sand of consumer debt-fuelled spending tax rises will affect the economy.

Any chance of that money being 'invested' in creating actual wealth and not a re-inflated asset bubble, seems be like whistling in the wind. We'd rather spend it giving handouts to bankers in the vain hope they'll start lending again.

I'm afraid all these green shoots are a smokescreen for a diabolical situation.

glanafon,

I would agree with everything that you say in #24.

That is why I was calling for protectionism to give the nation a breathing space wherein a new economic reality can be developed. The presen policies will not solve the problems. I strongly doubt that they will be ale to even re-generate what exists in less than a decade.

Behind the majority of posts on this thead lies the understanding that a major psychological and structural change is vital. There is absolutely no reason why, with a little goodwill on all sides, this cannot be achieved. However, I believe that it will have to start on a national basis - global responses are just too slow and too complicated.

One point I would raise is that of marketing. As a philosophy in its own right, Marketing seeks to meet the needs of customers and providers. To do so it needs to be at the heart of the decision-making process and not relegated to an operational element dedicated to cost-efficiency at the cost of effectivenes. Sadly, customer needs fall a long way down the organisational pecking-order - despite the chin music!

36 Mr T

I think you will find if you look that the hard core young unemployed are the education system failures. They have a personal problem or a home environment problem, they are not necessarily stupid, although they do tend to embrace a subculture because they feel totally disenfranchised. Surveys of training providers have repeatedly advised this situation. Unpicking the problem is a major issue. The education system is a pretty much fixed speed escalator. Teachers are under real pressure for results and any problem ends up shunted to one side, that is just the way it works. Most people on JSA who have worked only want to get back to working. Just as big a problem as the young school leaver are university graduates who find their degree is unattractive in the job market, some surprising degrees can be unwanted, ones that are generally well regarded - some science or technology based. Some graduates are having to backtrack and retrain in more vocational qualifications, as university is a single pass funding. A lot of this problem comes back to the education system either pre 18 or the funnelling of school leavers onto degrees, any degree. It basically comes back to a lack on money at critical decision points or rushed decisions in the system. it is very difficult to criticism a kid from a single parent family with the parent with a drug problem who need support from the kid, rather than giving support to the kid. Hard drug users who leave rehab only have a less than five percent chance of staying clean, it is hardly the kids fault. It is also hard to criticism the graduate who has studied and gained a good degree eg in biology and then finds they have to train as a paramedic, or the top flight maths graduate who then has to part time study vocational accountancy. Anybody who thinks the majority of people out of work want to stay in that situation is misguided. There are some who play the rules but I would suggest that many who do are actually unemployable for one reason or another and know it. In a tough job market only the freshest and shiniest fruit get picked by the employer. But the media loves a caricature.

38 foredeckdoc

Low FX gives some protectionism. The euro has problems hence Sarkozy griping about the pound every so often. It is very difficult to bring new products onstream at the flick of a switch so I cannot see that happening just around the corner.

glanafon,

Sure there is always a time lag but if you don't start somewhere/sometime you'll never start - oh forgot our great and glorious politcos (all flavours) have cracked that one. They'll start when IT'S TOO LATE

No.39. glanafon

Money is limited, which means people must take a degree of responsibility for their own lives and for the upkeep of society at large. We must try not to think of ourselves as individuals, but instead think of ourselves as responsible for the maintenance of society as a whole. If we are to enjoy society's prosperity we must take responsibility for its costs.

There is too much waste at either end of the economy:
(i) tax evasion; some tax avoidance schemes; non-domiciliary; capital gains tax rather than income tax, etc
(ii) benefit fraud; fit to work but don't want to work; errors in the implementation of the benefits system itself; people not taking responsibility for their own health, as they expect the NHS to carry them; people not saving for a rainy day, and inflation eating away their savings even if they do save; people not saving enough for their retirement and pension funds not being secure even if they do

All the above means there is less money available to care properly for those people who need it.

Then we have those countries who try to lure our big earners (ie big taxpayers) away from Britain with the offer of lower tax rates.
Then we have those countries who have lower wages than Britain, which entices outsourcing which leads to downward pressure on British wages. Britain attempts to compete against this by trying to create jobs at the brainy end of design and research technology, and the brainy end of financial services. But is this strategy working?

LondonMKUltra (#346;347)"Now we are starting to go around in circles. My question is - what distinguishes between eugenic/dysgenic?"

You're evidently not interested in learning as you've already said you won't follow the which have explained all this at great length and in depth. Furthermore, once one matter is clearly explained to you, you find something else to befuddle yourself with rather than looking it up either in links I've provided, by clicking on my username for the archive with skip=10, or via Google. Your behaviour suggests to me that you are here for 'narcissistic supply', not to contribute/learn.

Clinically (and note we are all a little narcissisitic, as normal self-esteem, which is part of the development individuation processs), Narcissistic Personality Disorder (a pathology of self-esteem) and other Cluster B, Axis II Personality Disorders (and there are several posting here and to blogs in general who appear to fit at lest some of the NPD classification based on their verbal behaviour as I have tried to highlight (in order to illustrate how and why their behaviour is a problem) are incorrigible, put their own interests before those of others in a big way, and are, I fear, a very good part of why we are in the mess we are today. Unless we remove such people from positions where they cause harm to others (instead of rewarding/lauding them - see our celebritism culture, e.g. 'The Apprentice', Jade Goody etc) nothing is going to get any better in our Liberal-Democracies, it will just get worse.

It's not just IQ which has high heritability, it's personality traits too. Trying to change all this via a budget assumes that environmental (economic) contingencies are more powerful than genetic drivers (note we have had many politicians say that what happened had nothing to do with them, Blair 'jokingly' saying the good years (65 consecutive quarters of continuous growth averaging 2.5% a year) were just luck, Brown saying the crisis was attributed to 'globalism' (whilst promoting internationalism) etc).

To chnage people's behaviour, you need to change the population (genetically) as behaviour is an aggregate expression of genes. For this reason, all three main parties in the UK are essentially one and the same, i.e. anarchistic (hands-off) ineffectual talkers and ineffectual legislators (except where that's deregulative legislation, i.e pro-anarchistic regulation. The Conservatives and New Labour have passed a lot of that with teh help of the Lib-Dems, in favour of the private and Third Sector over the years without enough people noticing in my view.

Bear all this in mind as you watch The Budget.....

Brown et al are patently not anarchists because they believe in having a central government and using its power to crush dissent and support their favoured causes.

calcination (#44) "Brown et al are patently not anarchists because they believe in having a central government and using its power to crush dissent and support their favoured causes."

You jest?

Crush dissent? Like pesky, interfering, finanacial regulators, oppressive, tyranical, managed/command/planned economics, a nanny/nazi/instrusive welfare state and an elitist 'privileged' Civil Service, you mean?

Look up .

Could you not spend years/decades drafting/passing legislation to ensure that the state fell apart in pursuit of cost-efficiency? Would that not be PPP/PFI and privatisation (under a host of names like Market-Testing, competition, 'efficiency-saving')?

How about an EU doing essentially the same - all all sold as Human Rights and 'freedom'....;-) ?