UK Debt and the Cuts that have to be made!

a reply to: earthling42

I don't think it's scare-mongering at all. Some people are actually warning us this time, unlike the last crash.

Looking at the global markets and at the economic decisions some countries and organisations have made recently, they show signs of another crash looming.

originally posted by: earthling42
a reply to: Scouse100

Austerity is not a con, it is simply balancing the budget and keep spending under control.

The false assumption being that a balanced budget is a good thing.

Austerity is presented as a solution to a problem that austerity itself is creating, as an excuse to reduce the size of the state, it might not be a con but it is dishonest and damaging to the economy.

a reply to: ScepticScot

A balanced budget IS a good thing. Being able to reduce our debt means that we pay less interest on that debt, which means we can spend that money on something more useful like our NHS.

As I said before we spend more just on the interest of that debt than we do on Defence...
www.economicshelp.org...

a reply to: 83Liberty
A balanced budget restricts growth in the economy meaning the real cost the debt is higher.
Interest rates are incredibly low and un/underemployment is high. We have massive infrastructure improvement needs, poor productivity and low growth.
We don't need to reduce the deficit, we should increase it to get the economy moving.

originally posted by: earthling42
a reply to: Scouse100

Austerity is not a con, it is simply balancing the budget and keep spending under control.

It's not like a household budget where income and outgoings must be balanced, think more of a business who must take out loans and invest in order to grow.

Here's a graph from the IMF illustrating how harsher austerity leads to slower economic recovery. Osborne has sacrificed a faster recovery for the chance to push through cuts to the state under the guise of necessary austerity.

a reply to: ScepticScot

I think that you are confusing investment as capital expenditure e.g. on new roads, airports and all that, and the need to reduce recurring costs on things that have no direct economic benefit. It's convenient for people to mix the two as an argument against austerity, but it's not actually correct.

For example, a new road may have a positive impact that can be calculated to have a return on investment over time, but paying loads of cash to people who don't want to work is a waste, as is propping up some poncy quango that produces sod all.

The UK needs a balanced budget and it's foolish to think that we can live in debt as a country and let our kids inherit our stupidity.

a reply to: Phage well we did at one point have what was called the poll tax and was very unpopular, this was replaced with the council tax, which is still in place today, and also not too popular. Councils receive revenue from both local taxes (council tax) and an appointed sum from the main government, one called revenue and one called capital. One pays for the smaller things , e.g. Repairing of potholes and one for say larger repair schemes like large area carriageway patching or reconstruction. So you were not that far out with your poletax! Repairs of washing line poles would normally be covered by the housing budget portion of the council tax. We pay water and sewage rates on top of the basic council tax, though it all goes to the council in one combined bill, broken into monthly payments. Hope this helps explain the system a little more

Eta: before receiving your pay, from which you pay the council tax, you pay PAYE tax, (PayAsYouEarn) which is the income tax that goes straight to the government, along with this is national insurance contributions which are also deducted from your gross pay and also go to the government. There is also road tax that every vehicle owner must pay annually and VAT (value added tax) that is currently at 20% which is added onto the sale price of everything except food and I think kids clothes! not too sure what is tax exempt theses days. The government can also add an extra duty ( yet another tax) onto things like petrol / diesel, cigarettes, alcohol etc, which effects the end price the consumer must pay.

a reply to: 83Liberty

Then let us ask ourselves this question, if 'some people' are in the know of what will happen in the coming years, why is it not answered in action to prevent such an outcome?
Surely they will be able to explain the 'why', in my opinion every news from the financial world must be taken with a lot of salt, they benefit from volatility in the markets.

Tory economics has always been about shifting public money and national assets into private hands.

The cuts have nothing to do with national debt. The cuts are part of a long term plan to destroy the unions and put the lower classes in their place.

Cuts to services used by the working classes, operated by the working and middle classes.

National assets sold off to rich foreigners and multi-nationals.

Never mind shrink the state, they are out to destroy it.

Tory austerity policy has led to massive increases in rough sleeping. Up over 100% in London and 132% in the SE with other parts of the country seeking spikes also. Life expectancy for gen pop is 77, for rough sleepers it is 47.

www.hopehousing.co.uk...

Tory austerity also means selling off many social rent homes whilst in many areas of the country, young families are being priced out of the rental market.

www.theguardian.com...

The rise in malnutrition, deaths from suicides and hypothermia. New mothers sent home from hospital four hours after giving birth. Cuts to mental health services, cuts to disability benefits.

This government is shafting the country and hiding behind the lie of 'austerity' whilst getting away with pointing blame fingers at those taking the first stroke.

a reply to: teapot

Nailed it, I wish I had more than 1 star to give.

What is being played out is what Stiglitz referred to as the IMF riot.

originally posted by: ScepticScot
a reply to: 83Liberty
A balanced budget restricts growth in the economy meaning the real cost the debt is higher.
Interest rates are incredibly low and un/underemployment is high. We have massive infrastructure improvement needs, poor productivity and low growth.
We don't need to reduce the deficit, we should increase it to get the economy moving.

Not at all. You are mixing up a balanced budget with austerity. You can balance the books, or at least attempt to, without austerity. Things such as leaving the EU, closing down quangos, getting rid of trident, cutting foreign aid etc will all reduce our deficit.

a reply to: Scouse100

Yes agreed, they are not like household budgets.

The downside however is that year on year debt grows with deficit spending in order to boost the economy.
And of course, it should be useful, like upgrading infrastructure and government buildings.
Important is however the notion that governments cannot create jobs, they can only stimulate the economy through contracts for companies.

The other point is that almost every country has already been stimulating the economy for many years through deficit spending, a budget deficit of around 3 percent was considered normal.
When the economy declines like it did in 2008, debt to gdp takes a flight because the economy shrinks while there was already a budget deficit that with certainty will grow wider since the income through taxation declines as well.

To sum it up, a deficit of say 2,5 percent, the economy declines, no growth and less income means the deficit widens to 5 percent, then the government has to stimulate the economy by spending another 3 or 4 percent.
This is simply unsustainable in a global crisis like we have seen since 2008, with slow growth cuts have to be made to lower the deficit.
And yes, the knife cuts on both sides, spending cuts mean economic contraction so a government will want to cut on the social side and or raise taxes on several luxury.

originally posted by: earthling42
a reply to: 83Liberty
Then let us ask ourselves this question, if 'some people' are in the know of what will happen in the coming years, why is it not answered in action to prevent such an outcome?
Surely they will be able to explain the 'why', in my opinion every news from the financial world must be taken with a lot of salt, they benefit from volatility in the markets.

I've already stated that some countries have changed their economic policies to prevent the impending disaster. Japan have gone into negative interest rates and the ECB (European Central Bank) has cut its main interest rate from 0.05% to 0%, cut its bank deposit rate from minus 0.3% to minus 0.4% and expanded its quantitative easing program from €60bn to €80bn a month. Not to mention the various financial experts who have warned us.

originally posted by: paraphi
a reply to: ScepticScot

I think that you are confusing investment as capital expenditure e.g. on new roads, airports and all that, and the need to reduce recurring costs on things that have no direct economic benefit. It's convenient for people to mix the two as an argument against austerity, but it's not actually correct.

For example, a new road may have a positive impact that can be calculated to have a return on investment over time, but paying loads of cash to people who don't want to work is a waste, as is propping up some poncy quango that produces sod all.

The UK needs a balanced budget and it's foolish to think that we can live in debt as a country and let our kids inherit our stupidity.

Is that all unemployed and quango jobs you think are economically wasteful or just ones you personally disprove of?

The income of those people goes on buying things (which raises taxes) and buying things support other jobs (who also pay taxes). When you slash government expenditure and don't either spend else where or cut taxes then you cause a collapse in aggregate demand which depresses the economy and reduces tax receipts. According to your belief the correct thing to do their would be cut expenditure more (therefore starting the cycle off again).

In the absence of a external factor such as large balance of payments surplus you simply cant cut your way out of a deficit.

When the economy is no where near maximum output a balanced budget isn't just unnecessary it is actually harmful.

originally posted by: 83Liberty

originally posted by: ScepticScot
a reply to: 83Liberty
A balanced budget restricts growth in the economy meaning the real cost the debt is higher.
Interest rates are incredibly low and un/underemployment is high. We have massive infrastructure improvement needs, poor productivity and low growth.
We don't need to reduce the deficit, we should increase it to get the economy moving.

Not at all. You are mixing up a balanced budget with austerity. You can balance the books, or at least attempt to, without austerity. Things such as leaving the EU, closing down quangos, getting rid of trident, cutting foreign aid etc will all reduce our deficit.

You are correct that a balanced budget and austerity are not the same thing (as demonstrated by the Tory government post 2010). In fact it is (in the absence of an external driver) impossible to balance the budget while practising austerity.

My argument is that neither austerity or a balanced budget are a good thing in the UK's current economic situation. We still have historically high un/underemployment and we are no way near the productive potential of the economy. These things are real costs. The debt is a nominal cost denoted in a currency we issue ourselves.

originally posted by: earthling42
a reply to: Scouse100

And yes, the knife cuts on both sides, spending cuts mean economic contraction so a government will want to cut on the social side and or raise taxes on several luxury

If you cut government expenditure and at the same time increase taxes you just depress demand even more. Effectively removing money from the economy and continually reducing tax receipts.

You vote Tory yet complain about cuts, Trident renewal and the demise of the NHS.? What did you expect from a party who hate the NHS and a welfare state in general and are very much pro trident.? reap what you sow.

a reply to: earthling42

It's debatable but the general consensus has shifted to acknowledge that 'safe' levels of debt (like ours) are actually not a big deal and the measures to pay off the debt are more damaging than the debt itself. The IMF has itself admitted as much in a recent report.

Borrowing is cheap at the moment and austerity is better implemented in a boom, the Tories know this though. 

a reply to: CthulhuMythos

I was going to link him this as an indication of the dangers of a pole tax.

My local council are the most corrupt bunch I've encountered. It makes me laugh when people complain about police corruption, as if they have a monopoly on it. Haven't they seen all the plump, suntanned council embezzlers in their fancy cars?

My council have wasted immeasurable sums of money on fake green projects. If all fake green salesmen and corrupt council embezzlers were set to work fixing potholes we'd save millions. Come to think of it some of the potholes round here are big enough to take half a dozen of the flabby fools. Stuff them in and tarmac over, job done.

I'm amazed that people still believe all this bollocks about 'austerity cuts'.

Surely even the most ardent Tory supporters must realise that these are just mean and vindictive measures aimed at targeting the most needy and vulnerable in our society.

Whilst they are being sold as necessary for economic reasons they are in reality being imposed to further a political ideology and agenda which seeks to maximise profit for a select minority.

Increased tax breaks for the highest earners and the backdoor privatisation of most of our services and utilities will only serve to further this aim.

I have been saying for some time now that this government seeks to turn the UK in to some sort of modern Victorian society along with all the injustices and inequalities that went with those times.