You want something to cut? Try the State!

browncameron_468x208

This will shock many of our readers however I must break my silence on this issue: I do not believe tax cuts are the answer to the current crisis. Lately it seems like the Conservatives, Labour and the Liberals are at pains to be seen as the tax cutters… Cameron proposed slashing National Insurance for all employers who hire someone who has been out of work for three years, the Liberals are proposing to slash 4p from the basic rate of income tax while Gordon Brown used his Downing Street press conference to pledge a significant tax cut in the autumn budget statement due to be made next week.

Whilst in normal circumstances I would whole heartedly endorse tax cuts, after all we have been taxed more under this government than any other in British history and substantial cuts need to be made in due course, however these are not normal circumstances. The most pressing question in my mind, and a question that has been picked up by some commentators, is where is this money for these cuts coming from? Now to be fair out of all the proposed plans Camerons is the only viable and realistic one. Surpise suprise. However I disagree that even his plan will be of any real long term benefit to the economy.

However what concerns me most is the fact that Gordon Brown has indicated that any ‘financial stimulus’ would not automatically mean a cut in state expenditure to compensate. What planet does this man live on?! Has he learned nothing from this crisis?! So if hes going to cut taxes… and hes not going to alter government spending levels… where is the money coming from?… oh yes… MORE BORROWING! Gordon Browns economic incomptence has never been clearer. After taxing and spending taxing and spending and contributing to bring the British economy to its knees… hes going to try to get us out of the mess… by borrowing and spending. He just doesn’t learn does he?

In 1979 Margaret Thatcher inherited a crippled and bankrupt economy from Labour. In order to revive it she had to raise taxes, this policy whilst initially unpopular worked and the rest is history. Her tough decisions, which on the surface stand at odds with traditional Tory tax cut rhetoric, needed to happen if we were to stand any chance of economic recovery. Gordon Brown needs to take a long hard look at history. Britain and the wider worlds finances are not an endless pot. You cannot buy friends. If you are the conviction politician you say you are you will take a lesson from real conviction politicians like Thatcher. You won’t do what is popular, you will do what is neccessary. Tax cuts funded by even more borrowing is not the answer.

‘We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists’ Former Prime Minister James Callaghan

Advertisements

11 thoughts on “You want something to cut? Try the State!

  1. I wasnt thinking of anything specific… I was merely suggesting that if taxes are going to be cut the government has to cut state expenditure to pay for it.

    Incidently the Tories will take no lessons on debt management from the Labour party. National debt is now far higher than it was in 1997even by the governments own (no doubt manipulated) statistics. At the end of August 2008, UKs National debt was £637.4 billion. This equates to 42% of national GDP… but hang on a minute does that not break Browns magic 40% rule? hmmm this is a guy that supposedly ‘never misleads the public’

    However some reports show that the national debt is 3 times higher than claimed. The report for the Centre for Policy Studies says the official Treasury figure wrongly excludes the cost of public sector pensions liabilities, the hidden costs of Labour’s flagship Private Finance Initiative contracts and debts incurred by Network Rail.
    When these are taken into account the total is £1,340 billion, which is 103.5 per cent of GDP.

    Fact is Gordon Brown is planning to borrow EVEN MORE for nothing more than a short term political stunt. I dont think for one minute that this will work, what he is doing is racking up the national debt so that he can make poncy tax cuts designed for one thing: to make the public like him for the short term. He doesnt care about the debt he will pass on to the next generation all he cares about is his short term position.

    Fact is Gordon Browns economic competence is a fallacy. End of boom and bust? No. The magic 40% rule? broken threefold. Financially prudent? Not on your life. The only thing he did was have the common sense to follow the privitisation agenda laid forth by the Tories, then New he tried to put his own unsustainable spin, tax and spend, on it resulting in the current crisis.

    It wouldnt suprise me in the slightest if he cut taxes and went to the polls early to capitalise.

  2. Hear hear Dan.

    Incidentally, I don’t think Brown will go to the polls in the spring. Labour are too far behind in the national opinion polls. Though more importantly, their own internal polling probably shows them badly behind in marginal constituencies.

  3. “This equates to 42% of national GDP” Lower than in 1997. What are you talking about?

    As to the report for the centre for policy studies, we’ve had that debate in a previous thread. Pension liablities should be considered as projected transfer payments and the fact that the network rail debt is garaunteed does not in itself amke it part of UK national debt.

    We have the second lowest burden of debt in the G7.

    Personnaly I would prefer to focus on an increase in spending as i believe it would be inprudent not to when one considers the economic situation. And how is it that you can complain about borrowing when you’ve been squeeling for tax cuts for the last few years while not “thinking of anything specific” when it comes to spending cuts.

    Dan’s talking about cutting the state but doesn’t know how and PT still hasn’t produced his ‘reverse shopping list’. I think John Richie had it 100% correct over ‘Tory Rethoric’.

  4. Gordon Brown and New Labour are as much to blame for this recession as the reckless bankers. The fact remains.. no matter how much you try to deny it jack, that the growth that we have enjoyed for the last 15 odd years… began 5 years before Labour came to power under the Tories. All Labour have had to do is ‘sit back and enjoy the show’. The fruits of OUR, the conservatives not Labours, labour has been squandered by this government.

    They have spent, taxed and borrowed their way through the last decade and encouraged record levels of public debt. Before you retort with your typical ‘ooohh it started under thatcher’ boohockey, let me make it clear I dont care whether it ‘started under thatcher’… youve had over 10 years to correct that reckless spending mentality if it did indeed start under Thatcher at all.

    The difference between Thatcher and Brown is she preached sound money, fiscal responsibility and living within your means, if some individuals did not pay heed to her advice then sod them. Its their own fault. Financially and politically we were set free by Thatcher, some responsible individuals decided that just because this money and credit was on offer doesnt automatically mean you should take it. Others werent so responsible and it has bit them in the bum.

    Brown by contrast to Thatcher has been a reckless tax, borrow and spendaholic. He does not have the moral authority to preach financial restraint and he ignored the advice of countless economists who saw this recession looming. He is as bad as any banker in this situation.

    Who ignored the debt spiral as it built up? Who weakened regulation and allowed Northern Rock to offer 125 per cent mortgages? Who diminished Bank of England control over our banking system? Who wrecked final-salary pensions with a £5 billion-a-year tax levy? Who ignored the risks of the house price and equity boom? BROWN.

    Jack are you so blind you cannot see: ‘End of boom and bust’ was one of the most arrogant and clearly inaccurate statements ever muttered and that the government is breaking even its own promises and self imposed targets? They swore not to let debt pass the 40% of national GDP… it now stands at 43.5%.. at BEST. Fact is Labours economic reputation, which was built on a pack of lies and manipulations, is dead.

  5. Dan, if it were the case that ‘all we had to do was sit back and enjoy the show’, then The conservative government would have been able to sustain the growth of the Lawson boom. We’d seen 1997 before in 1987. the difference is that in 1997 the electorate decided that they didn’t want to see you blow it again. And it’s a myth that labour just had to do nothing over this period. Oil prices more than doubled and the price of raw materials increased by nearly 50%. Under any other previous government this would have lead to a spike in inflation but Brown not only kept both inflation and interest rates low but ran budget surpluses while you and your allies were calling for tax cuts.

    “record levels of public debt” Public debt was 250% of GDP after world war 2. It’s low by both historical and international standards. The record for the highest PSBR/PSNCR is still held by a conservative government and no conservative government since the war has ever bequethed a surplus to its successor.

    “The difference between Thatcher and Brown is she preached sound money, fiscal responsibility and living within your means, if some individuals did not pay heed to her advice then sod them.”

    -The trouble is Dan that those individuals include; Geoffrey Howe, Nigel Lawson and John Major. She preached these ideas but failed to practise them in government. And while we’re on the subject of Mrs T, you seem to want to have your cake and eat it; you like to trumpet her achievements but appear to dismiss her many failings as ancient history. You say that Brown is a tax, borrow and spendaholic but as I have just said, both borrowing and debt are hardly high by international standards.

    You have preached deregulation all the time and now you whinge about ‘the weakening of regulation’. You praise Thatcher for ‘setting the people free’ but then seem to want to put the cuffs on every free citizen in sight.

    “if some individuals did not pay heed to her advice then sod them.”

    vs.

    “Who ignored the debt spiral as it built up?”

    Make your mind up.

  6. Jack… simple fact is at least in economic terms.. New Labour IS incredibly Thatcherite. You will struggle to find any credible economist or social scientist who will contradict this. So yes they had the common sense to adopt large swathes of thatcherite economics which DID lead to economic growth.

    However they made many fundamental errors in their eratic spending and taxation levels which stands plainly at odds with thatcherism (although no doubt you will deny that we are more taxed now than we have ever been). It was they not me who ‘had their cake and ate it too’. They were the ones who foolishly tried to combine ‘socialism’ and thatcherism and suprise suprise it didnt work.

    I do not dimsiss thatchers failings. I just look at the bigger picture. The bigger picture is what she interited was a broken and barren economy and what she left was a competative and almost unprecedented set of economic conditions that led to over a decade of growth. By contrast what labour inherited was a golden economic legacy which showed little signs of slowing down. What they willl leave however if a massive increase in public debt and a severely damaged economy as this recession is predicted to be worse than that of the early 90’s

    I am particularly amused by this… “record levels of public debt” Public debt was 250% of GDP after world war 2.” YES WORLD WAR BLOODY 2! You cant seriously claim that what Labour have had to deal with is anywhere near as important as the aftermath of world war 2… but if the policy group report quoted above is correct then it is unacceptable to have public debt over 100% of GDP in this day and age. Fact is noone really knows what our public debt is Jack because this is perhaps one of the most dishonest and corrupt governments to date… so noone believes a word they say.

    Incidently I do praise thatcher for setting people free… and no I don’t want to put cuffs on every free citizen in sight… I want them to put the cuffs on themselves! I want them to understand when to be frugal and when to be frivolous. I do not believe the government should regulate everything but neither do I think they should encourage reckless borrowing or spending as this government has. People shouldnt be stupid. They know what they can and cant afford… apart from the UK government it seems

    Look no matter how you spin it this government have broken even their own economic rules. They have borrowed more than most governments in our history and they have little to show for it. What has pissed me off the most is the fact that this crash has been brought about by reckless spending and borrowing… so what do they want to do to get us out of it… BORROW AND SPEND MORE!!!!!!!!! “Once burnt twice shy” doesnt seem to apply to Labour.

    You can read as many books and quotes as many bloody sources as you like jack… but you don’t have to read a book to know that Browns actions are irresponsible and will only serve to make the situation worse. Its called common sense.

  7. Well as far as debt is concerned the 43% figure is consistent with EU accounting principles. You say that government policy is basically Thatcherite but alos claim that government policy has been a blend of Thatcherism and socialism. How exactly is that possible? And could you please explain what Thatcherism is? (I know you probably can’t but at least try.)

    If Maggie’s policies were so conducive to economic growth, why didn’t we get any in the early 90s? And as for the debt, the point still stands. National debt is lower now than in 1997 and I have explained why so many of your claims on PFI are in correct and you have failed to respond on that.

    How exactly has this government encouraged people to borrow excessively?

    “…people shouldnt be stupid. They know what they can and cant afford…” Well you seem to imply that they don’t. What are you suggesting that the government has forced people to continue borrowing as they did in the 1980s?

    “…this government have broken even their own economic rules.” No one has said otherwise, but debt is still low by international and historical standards. As we have on eof the lowest burdens of debt in the G7, it is right that we should be prepared to make the necessary investments to deal with the economic crisis.

    To say that this crash has been caused by wreckless spending and borrowing is one of the worst examples of economic idiocy that I have seen for a long time on these blogs. (That’s quite an achievement.)

    Common sense is naievity with a smile on its face. i suggest you become a cab driver.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s