OBR: Can it live up to its billing?

Oh, please...another governmental pretense of fairness and a shield to make it look like the bankers don't run everything. Another curtain for the bankers to hide behind and for the elected officials to pretend that these decisions are not theirs. They used to say things like : closing the barn door after the horse has run away to describe such actions.
Budget responsbility would be to give the banks back their bad loans to reduce the deficit and the tax burden on the people.

Did anyone believe that a body set up by a political party (and presmumably paid for by that party) was ever going to be independent or Independent if that party came to power. What would it be saying, pray, if the Lib Dems had joined JGB since presumably it would still exist.

Incidentally Steph I see you mention AD's plans. Could sometime we have an analysis of the these plans and GO's compared. (and which cuts are AD's and which GO's )

For example the University and CURRENT Health Service cuts are AD's I think but the former we annouced by the Tories.

I fear that when I see the phrase "changes to modelling assumptions" I see scope for political interference. That's exactly the sort of phrase used by previous Governments to justify politically-influenced estimates. I do believe that the OBR is a good idea, but it needs greater independence. The next Head of the OBR will be a critically important appointment. If it's an ex-Civil Servant or less than big-hitting economist, I think we'll all know which way the wind is blowing. It's a very brave government that provides the opposition with potentially a large stick to beat it with - and while it may be feasible (if not always honest) to blame the previous government, that trick won't work indefinitely, especially if, for instance, the economy looks as though it's moving into a double-dip recession next year.

No of course it can't! Even to ask the question shows a lack of basic comprehension of he who pays the piper gets the tunes he wants!

Even now the cadaver of Mrs Thatcher is re-emerging from its grave and pulling the stake out of its heart and switching health service management structure back to the failed structures of the 1990s.

You question is I hope rhetorical - and the answer you and everybody knows is 'no'.

It really doesn't matter whether the OBR is truly independent or not. Osborne & Co will say it is, and then when their (= Treasury's) forecast is wrong, Osborne will blame the OBR, just as he will blame the Bank of England for not controlling the banks and, now, he is going to pinch ideas from civil servants to save money, and when they don't work, Osborne will blame them as well.

It's all about keeping HIS hands 'clean'. But then what can you expect from a politician - and one with no knowledge of economics, especially macro economics??

There is no way that the OBR is independent. It is based within the Treasury, is appointed by the Chancellor, reports to the Chancellor and even has its media obligations handled by the Treasury (or so I have read).

I don't buy that Alan Budd was always going to leave after three months.

“Whether I thank him in a couple of years’ time is another matter – but that is the whole point." hardly implies that George Osborne's man was likely to jump ship after little more than 8 weeks. Definitely something fishy going on there.

It does not matter if it is independent or not. Why should it matter?

"I'm prepared to believe that Nixon wasn't a crook
I'm prepared to believe 'Love Story's a readable book
I believe that the Dirty Dozen was really dirty
I believe that Lucille Ball is under thirty...
I believe that the Devil is ready to repent
But I can't believe the OBR is independent

With apologies to Not The Nine O'Clock News

At 6:12pm on 09 Jul 2010, Oblivion wrote:
It does not matter if it is independent or not. Why should it matter?

Because Osborne has trumpeted on about it being free of political influence.

It's no surprise that Sir Alan Budd wanted to retire just as soon as the OBR was set up. He knows from past experience that forecasting is a mug's game. And he knows that the underlying idea is to shove political embarrassment onto the OBR's head when Frog spawn's hoped-for outcomes fail.
First rule of forecasts and plans is that none ever survives contact with reality. Nobody knows what the growth rate of either export or domestic markets will be. Nobody knows how consumers will react to the uncertainties launched by the 'emergency' budget. Nor do we know how much commercial decision-makers will invest in conditions of such profound uncertainty. Since together they're 75+% of national spending, their actions will speak much louder than either Sir Alan's or Frog spawn.
Unlike the MPC, the OBR is a naive conceit. Only the gullible could ever believe its forecasts were worthwhile.

Mr squeaky clean, butter wouldn't melt in his mouth, David Cameron misled the HoC by comparing chalk with cheese, surely not? He is such a decent chap (went to Eton & Oxford, don't you know), he wouldn't lie or mislead - would he?

Oh! Shock horror, he did.

What other nasty little creepy crawlies will come blinking into the light in due course.

If Mr Gove can be made to make an official apology to the HoC for an administrative error, what can we expect from the Dear Leader. My guess is - not a lot. For a new administration that seems content to fiddle with the constitution unilaterally by changing the "vote of confidence" procedures, misrepresenting statistics must feel like a breeze by comparison.

One can only expect that this is the start of a not so beuatiful friendship between the Master and the vast majority of us, his frozen wage slaves.

Yep, the OBR is a Great Idea, for lets see now how does it work, Ah' Yes - do away with ALL the Nu-Labour Quangos and start - up a Con-demed Quango. Simple.

But, will it be Fit - for - Purpose, Only if the Con-dems say it will.
Happy, "NO" - Oh' well, at least they tried and as usual FAILED.

The OBR and the Treasury will both use models, either mental or in software, for their predctions. Anyone who has done any modelling of this sort will know that the output depends not only on the input data, but also on all the underlying assumptions and simplifications that have been made. Some will have minor effects, others will significantly alter the output. Are all these assumptions valid within all the parameters set for the model? When were they last validated and by whom?

So for the sake of transparency, both organisations should publish all the input data and the models' assumptions etc. Can we see the models' log book in which all this is recorded? [Does a logbook actually exist?] Then bright sparks can give a more informed opinion of what it all means. [May be all this does exist and is published, if anyone knows where it is, can you tell us where it can be accessed please].

Trouble is, the output from a model can be sort of right, but its highly unlikely to be on the button - often it will be wrong enough to be misleading! Some politicians like to have their information on a single sheet of paper and they then make a decision; I hope the current set are properly and fully briefed and have been told of the models' limitations.

So uncertainty rules. An error of less than 10% in public sector jobs, might not seem a lot. But its people, their lives hopes and aspirations; destroy these and you will get a 'grumpy' population. Eventually, more and more will feel they have had enough.

Let's find another way of dealing with the financial crisis; who really believes that what is proposed now will really work [excepting the Government and their diehard supporters]. The current policies have resonances with 1929 and we all know where that led!

If you have a leg with gangrene it matters not how many advisers you have or whether they are independent. The foot must come off or the patient dies. Forecasts regarding the pain involved could range from mild to excruciating, it matters not.

Zombie nation.

The zombie is waking up to his demise. He is thrashing about, he knows his time is short unless he can get stimulus. Fresh taxpayer blood. Will we pump the zombie full of stimulus it he groans loud enough? I think we will.

That's a very philosophical question Stephanie. Is anything truly independent?

I would suggest people wait a while before lambasting it. In a couple of years so the OBR will actually have a track record you can start to be judgemental about. Harriet Harman had no problem quoting from the OBR report in her response to the budget.

In principle it is an excellent idea. An independent body would have been extremely useful to advise against Brown's spending splurge if indeed that is part of its intended remit.

15. At 7:02pm on 09 Jul 2010, Dr_Doom wrote:
That's a very philosophical question Stephanie. Is anything truly independent?

I would suggest people wait a while before lambasting it. In a couple of years so the OBR will actually have a track record you can start to be judgemental about. Harriet Harman had no problem quoting from the OBR report in her response to the budget.

In principle it is an excellent idea. An independent body would have been extremely useful to advise against Brown's spending splurge if indeed that is part of its intended remit.

-----------------------------------------------------------------

The problem with ANY Quango however Independently run it might be, is not really the point here - whether its general reporting of the issues are classed as being excellent, or otherwise.

For the resulting issue is that this OBR Quango WILL have to Report to Government whereby any issues therein again, WILL be changed to fit in with the over-riding direction in which the current Con-demed Government wants to go.

This, or ANY Quango at best therefore, is nothing better than Window - Dressing for Public constumption.

The very name of the OBR is a political statement in itself and a cheap and un-merited dig at the Labour Party.

There is absolutely no way that it could be independent.

They might as well be honest and call it the office for spending cuts.

Alan Budd the person in charge (like most of the Conservative cabinet) has connections to Oxford University and therefore cannot be trusted to be independent.

Geoffrey Dicks who is on the OBR committee is a former chief economist for RBS. With the record of RBS he is hardly qualified for the role.

All involved are economists, there is no one who comes from a social sciences background.

This independent body is not only biased, it is also highly offensive and should be broken up.

It is always interesting that elected officials say with great pride that they are establishing independent this or that when these very bodies will be doing the jobs the elected were elected to do. The modern politician wants not part of decisions, no accountability for actions and certainly no participation in difficult decisions. It would be nice if very time our boss gave us a difficult task we could request an independnt person to do it because after all we are part of the business and that may influence the outcome. If the elected are unwilling or unable to deal with the current fiancial crisis, that they facilitated, and the decisions toward resolution than they should step down and let someone in office who is willing to do so. My assumption is that the current ruling party is saying that corruption and self-interest are so pervasive that they can't possibly do what is right. That is encouraging.

What is wrong with the media at the moment? They clearly have run out of things to talk about. No doubt when the Pontiff visits us soon you will all be asking if His Holiness is a Catholic?

The OBR is an organ of government manned by people whose salaries and probably their pensions as well are paid by the government. Is that independent?

The OBR can only be at best a sounding board for the government. Not a bad idea for the formulation of policy but forget the word independent.

7. At 6:12pm on 09 Jul 2010, Oblivion wrote:
It does not matter if it is independent or not. Why should it matter?

-------------------------------------------------------------------

On the one hand, if it doe's not matter to you what it Reports, then there is NO purpose as to this Quango, or it being otherwise Independent.

On the other hand, if it has to Report to Government then any results can be changed to fit in with agreed pre-agreed Con-demed Policies.

Therefore either way, the whole idea of the OBR [ aka: for being part of the Department of Con-demed Cuts ], is a complete waste of Public money simply to under-pin and support the already pre-arranged setting out of Government Policy, for either - way with or without the the OBR you will get in reality the same Government Policies.

This will also be the Case with the other rolling - outs by the Con-dems, since they are currently asking People views as to what to Cut back on, for as again this is ALL a Smoke-Screen since whatever the Con-dems will finally end up Cutting HAS already been pre-arranged PRIOR to any so-called consultations of the many.

I am reminded that there are two groups of professionals who make money from uncertainty: journalists and investors.

I thought the purpose of elections was for _us_ to decide about budget responsibility.

It probably can be indendent but won't be until its members are appointed according to the Nolan rules and not hand picked by the Conservative Party which is what the existing OBR members were. Remember it was set up by them last year in 'shadow' form and it currently has NO statutory basis.

Three members is not enough. There needs to be the same as the Bank of England MPC - so 9 members.

Minuets of meetings need to be published.

Above all it needs to produce its reports when it wants to and it should certainly avoid rushing out a new forcast just because there was a treasury leak and the PM needed something to say at PMQs

#13 SleepyDormouse – woluld you take it as an answer? Modelling has its limits and not the least of them is “anticipation of an intelligent and informed agent”. Let's start with a simple assumption of an uninhibited by any circumstance despot: even in this case we land with a situation where intelligent and as for this case rather © poorly informed agents still make anticipations about the despot action and other intelligent agents anticipations (Keynes' beauty pageant). The level of self – resonance of this loop is tremendous because some of the players in this game (banks and insurance companies spring to mind) have models at least as sophisticated as the Treasury. Some of the informational loops tend to be faded out on mutual agreement of the major players, some are unduly amplified... Interestingly there is no public to this game (we are a world player of considerable weight) only some very poorly informed players (dcaf)

Surely the answer is to publish all of the raw data, the details of the assumptions made in the modeling and the raw output, so that, like the reported results of a scientific experiment, it could be tested for repeatability and any of the assumptions could be challenged.

Within a few days after the budget statement being made in the House, we might then have a truly independent assessment or perhaps even several.

"I thought the purpose of elections was for _us_ to decide about budget responsibility."

Hmmm.

This country is in for a lot of pain however you dress it up.

Pain is not a problem if it is equitable (i.e. shared out fairly).

Here is a pointer to the future.

"Right Hon, Sebastian Richard Edward Cuthbert James has been apoointed to review spending in state schools".

Late of Eton and Oxford and a chum of Cameron, also a member of the Bullingdon Club.

Says it all.

I am glad I have dual nationality and can cherry pick the bits about the UK I like (not a lot).

This country is stuffed - it has never begun to address the main issue in the 70 odd years since WW2.

My work here is done.

You lot certainly have been.

So the doubts are creeping in! well what a surprise that is. up to now this unelected Government has demonstrated a shamefull lack of understanding about how Governemnt works. I understand that Civil Servants had to point out to them that the Disability Living Allowance is also for severly disabled children. The politicians thought it was just for Adults when in fact the bulk is targeted at the most vulnerable in our society. So the Governments projected savings by slashing the DLA have no hope of being reached! Just another example of life at Number ten!!!

I have just thought of a great way of cutting future government expenditure.......

ABOLISH THE OBR!

PRE-ELECTION IT COST NOTHING, ALREADY IT IS BECOMING AN OVERBLOWN QUANGO ACCOUNTABLE TO NO-ONE EXCEPT ITS TORY PUPPETMASTERS.

End this farce!

Independent or not, the public sector will still bear the brunt while the bankers swan off on holiday financed by immoral salaries and bonuses.

It isn't independent and never was going to be - nothing has changed Cameron is just a reincarnation of Thatcher and his party every bit as anti society, conniving and evil as hers. LibDem politicians have sold their souls for 30 pieces. Everything this lot say will be a contortion of the truth and the damage this lot will do - which of course is someone else's fault, will take a very long time to repair. The only hope is that 2 anti the people Tory governments so close together will this time stick in peoples mind at election time rendering them unelectable ever

16 London Harris

"The problem with ANY Quango however Independently run it might be, is not really the point here - whether its general reporting of the issues are classed as being excellent, or otherwise.

For the resulting issue is that this OBR Quango WILL have to Report to Government whereby any issues therein again, WILL be changed to fit in with the over-riding direction in which the current Con-demed Government wants to go.

This, or ANY Quango at best therefore, is nothing better than Window - Dressing for Public constumption."

We will be able to talk about this properly in a few years. At the moment, comments on whether it is independent or not is pure conjecture.

26 RD

""Right Hon, Sebastian Richard Edward Cuthbert James has been apoointed to review spending in state schools".

Late of Eton and Oxford and a chum of Cameron, also a member of the Bullingdon Club.

Says it all."

What is your point exactly? Why should a clueless toff who has never stepped foot in the real world be given responsibility for reforming our bog standard comprehensives?

Another (more positive) way of looking at that, is that somebody who has first hand experience from attending two centres of academic excellence in the UK, a fresh perspective and is obviously bright will be able to make a start to reverse the culture of under achievement cultivated by Labour.

If you don't like someone because of their background, does that make you a bigot?

"This country is stuffed - it has never begun to address the main issue in the 70 odd years since WW2."

Thanks for your constructive comments, now go away.

rusty, zippo, coco, gideon, comedydave send in the clowns. Kevin b you're boys are taking one hell of a beating

What did anyone expect? The OBR is a quango -something that Cameron and Osborne detest - yet it was created under the pretence of independence by those who wanted it to do a particular job. Why would they appoint a former Thatcher adviser to run it if they wanted its integrity and independence to be beyond doubt?

32. At 11:21pm on 09 Jul 2010, Dr_Doom wrote:
26 RD

""Right Hon, Sebastian Richard Edward Cuthbert James has been apoointed to review spending in state schools".

What is your point exactly? Why should a clueless toff who has never stepped foot in the real world be given responsibility for reforming our bog standard comprehensives?

Another (more positive) way of looking at that, is that somebody who has first hand experience from attending two centres of academic excellence in the UK, a fresh perspective and is obviously bright will be able to make a start to reverse the culture of under achievement cultivated by Labour.
/////////////////////////////////////////////
And your evidence for him being obviously bright? Attendance at two elite institutions one of which is freely available to to anyone with enough money and the other which is freely available to someone of moderate intellect and enough money? A proven ability to behave bizzarely at the invitation of his peers? Someone with no experience of any state school?

Sure he offers a fresh view, but when even the Daily Mail describes the appointment as "Top Whitehall job for Prime Minister's Bullingdon club chum" it appears that my scepticism is even shared by the right wing press.

#32
"responsibility for reforming our bog standard comprehensives? "

And so you reveal yourself.

State schools do not mean 'bog standard comprehensives'. They represent the educational platform that propels this country forward.

'..,obviously bright will be able to make a start to reverse the culture of under achievement cultivated by Labour. '

bright or privileged. ?

As for 'under achievement cultivated by Labour'. Education and the NHS are New Labour success stories (even if paid for by money we did not have).

Any attack on private education seems to elicit accusations of 'bigot', 'chip on shoulder', etc.

I happen to feel very strongly that the level playing field of an excellent state education system is one of the platforms of a modern successful country. Look to Europe. I for one am happy to pay a marginal tax of 50% if it is spent wisely.

That is my point.

This board seems to be dominated by sad Tory 'coffin dodgers' enjoying a last hurrah.

Honestly, this country is broke but why. Mainly due to a failure to face reality since WW2.

All this pointless hot air over the OBR being independent or not is completely irrelevant. Much like arguing over how many fairies can dance on the end of a pin head.

This country...

has been going round in circles since WW2
has an unbalanced economy
is broke
still has a ruling class
has a dysfunctional democracy
can't export to save it's life

This country is going south and so am I (but where the sun shines).

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

If some good comes out of this cosy stitch-up between Tory and Tory-Lite it will be a very swift return of the Labour Party in 2011 (the Coalition has got 12 months max) this time with some real mould breaking policies.

If any mould needs breaking it is the one that has constrained this country for the past 70 years.

It is obvious that the current incumbents have an agenda and are using the deficit as an excuse to implement it. The LibDems part in this is shameful and will finish them once and for all.

Just heard tonight that the Reported figure Numbers of People expected to be made Unemployed over the full term of this Con-demed Government as previously reported by the OBR should have been stated to be at over 750.000 and more, and not the dumbed - down figure previously issued by Government of 600,000. underminding it own OBR Quango estimates.

Don't you just love a useless Government Quangos such as the OBR to NOT be able by being powerless to determine and enforce that our Con-demed Government tells the truth in relation to reported satistical numbers of predicted Job losses, or is this the beginning of a renewal of Spin, Deception and Sleeze making a quick return to Daily Politics from now on under our current Con-demed Administration.

31. At 11:10pm on 09 Jul 2010, Dr_Doom wrote:
16 London Harris

"The problem with ANY Quango however Independently run it might be, is not really the point here - whether its general reporting of the issues are classed as being excellent, or otherwise.

For the resulting issue is that this OBR Quango WILL have to Report to Government whereby any issues therein again, WILL be changed to fit in with the over-riding direction in which the current Con-demed Government wants to go.

This, or ANY Quango at best therefore, is nothing better than Window - Dressing for Public constumption."

We will be able to talk about this properly in a few years. At the moment, comments on whether it is independent or not is pure conjecture.

---------------------------------------------------

There is nothing therein contained with regarding to the question of conjecture about this issue at all, since the latest information available suggests that this OBR Government Quango is anything but Independent right now, - Today, nevermind simply sitting around for some ministerial inquest in the future to blurr the rules of the engagement and remit this body is supposingly under.

Leaked treasury figures put public sector job loses way over the million and this sounds much more likely to me, given 40% cut target and the probable 20-30% cut for the non ringfenced departments - cutting this deep this quickly can only be done by scything the headcount.

But the real issue is the incredible OBR forecast for the private sector in generating up to 2.7M new jobs, in investing billions in new capacity in the UK and in generating huge export growth - all within the parliament.

None of this is credible - all of it flies in the face of experience, commonsense and the state of our export markets - particularly EuroLand. The growth projections in the OBR forecast outperform any UK previous growth figure - they infer the UK will do better than the best growth economies like China, Brazil and India - this prompts the McInroe response: "You cannot be serious, Man?"

And if unemployment mushrooms out of control, the tax take plummets whilst the bill skyrockets - and we end up with a BIGGER DEBT having savaged public spending and committed ourselves to pay off debts but with no way to inject demand into the economy other than Quantitative Easing, as no more borrowing is possible and interest rates are effectively negative already - to coin a phrase, we will be stuck in the "debt liquidity trap". Remember, the justification for the cuts is to reduce the debt - if it's going to going up, the policy is untenable. Weimar, here we come!

Is this policy deluded or deceitful? Alan Budd smells strongly of supply side dogma to me - I think the Tories only real aim is to clobber public spending to shrink the state as a matter of ideological belief and to hell with the consequences - I think the LibDems need to be all things to all men - caring and liberal but responsible and tough on the perceived problem. Budd is in there under the old pals' act to offer a veneer of respectability - he's heading for the hills so he's not left holding the baby. The LibDems face being wiped off the face of the planet when the wheels come off amd the Tories will suffer a crisis of ideology as the dominant libertarian ideology unravels. Weimar again...

Where will this leave us? With a smaller state sector, but a big black hole where British manufacturing used to be, then this was replaced by financial services, now under Cameron there is supposed to be a renaissance of small business "cut free" of government and no longer "crowded out" by the public sector. This is another dangerous delusion - we need an industrial policy aimed at big manufacturing and import substitution backed up by incentives to invest in the real economy and the threat of import controls on goods coming from places like China that rigs it exchange rate, terrorises its workforce and runs an unsustainable trade surplus with the West - and to pull the plug on OPEC.

The left needs to ditch the devil's compromise of "New" Labour and reforge Britain around the concept of "sustainable Britain" - a sustainable economy that broadly produces what it consumes, a sustainable society that has productive jobs for its people in both sectors and an environmentally sustainable lifestyle that generates its own energy, recycles what it consumes and reduces its dependence on fossil fuel.

Cometh the day, cometh the Milliband? Let's hope one of them has read their dad's seminal works on macroeconomic policy.

John Redwood endless chants that "it's nopt the business of government to pick winners". But the venture capital and banking industries lost their shirts, trousers and underware - it os only government that is still able to reforge UK PLC. Get to it!

Hype from the Coaltion Government surrounding econonmic planning in general and the OBR in particular is matched in announcements about decentralisation and freeing us up to run things locally. Regretable but inevitable, I guess.

If Pickles and Co are to be believed then meeting a dire shortage of housing, regenerating services-based, non-manufacturing local economies, achieving a step-change upwards in aspiration and attainment in education, lifting the under-privileged out of hereditary deprivation and providing the transport infrastructure to carry all this activity - in short, sustainable growth - can be left to suitably incentivised councils.

It is not uncommon to find localism translated into NIMBYism on a District-wide scale or to find neighbouring authorities, even of similar political complexion, differing markedly in their approach to managing things on their own patch. When the NIMBY authorities are seen to be shirking responsiblity and foisting essential development onto their neighbours then 'localism' will glow less bright and someone will have to re-invent regional strategies to meet national objectives.

One suspects that the Secretary of State for Local Government, like his colleague at the Treasury, is really engaged in a re-badging exercise and is relying heavily upon party wordsmiths to sustain the illusion whilst the apparatchiks experiment with ways and means to deliver the dream.

Alan Budd had to leave I guess as presumably he has quite a lot on his plate already with Credit Suisse and the IG Group. Of course those roles make him highly independent.
Forgive me but surely the Bank of England has forecasters working for it. I'm guessing they predict social outcomes of monetary decisions. I'm also guessing they therefore duplicate the OBR.

#43 "Forgive me but surely the Bank of England has forecasters working for it. I'm guessing they predict social outcomes of monetary decisions. I'm also guessing they therefore duplicate the OBR."

Come on get real. The OBR = SPIN. This government will be just like any other in that respect.

All the column inches devoted to this topic takes away from the central issue which is that the UK is essentially dysfunctional from top to bottom and needs radical re-building; transport infrastructure, housing and education in particular.

It won't happen of course because my comment above 'the UK is essentially dysfunctional' is not true for the small sect (no more than 10% of the population) that pull the levers of power and enjoy the benefits; for them life is good and their 'if it aint broke don't fix it' mentality has prevailed for generations.

For the rest of the population who depend on state schools, the NHS and public transport they will find their lives cut to pieces. It is starting already.

We arrive where we are now essentially because of the failure of successive Labour administrations to bite the bullet; they know what needs doing but lack the guts to carry it out. As for the Tories, they satisfy their remit well, to protect the wealthy and privileged. One nation Toryism is a myth and always has been.

On the subject of forecasting it would make sense for all governments to base their assumptions on forecasts made by the IMF, after all we exist in a highly globalised economy.

If this spin (the OBR, delayed GDP results, austerity measures, etc) is recognised as such by the so-called markets (institutional investors), then the result will be a sell off of GBP and UK gilts.

This will mean that the GBP will devalue rapidly and the UK will quickly have to switch to becoming domestically independent. Also, the UK will be compelled to sell off it's foreign assets to pay for debts - this means that US t-bill holdings will diminish. This could spark off a t-bill run in the US.

#45
" This could spark off a t-bill run in the US."

The Chineese would buy them. You overestimate the importance of our basket case of an economy.

#41 Remember, the justification for the cuts is to reduce the debt"

The justification or the excuse most certainly.

The real reason is ideologically driven. Savage state reduction would be fine if the private sector stepped up to the plate; it will not do so, it cannot do so and has no track record of doing so.

Running down state education and the NHS serves a purpose; they can then turn round and say state provision of these services does not work.

Election next year almost certainly. Clegg is a national disgrace and his thirst for Office was not even subtle. Shameful.

#46
...or in light of current events, perhaps the Russian would buy them.

36 RD

""State schools do not mean 'bog standard comprehensives'. They represent the educational platform that propels this country forward."

>>There are some good comprehensives including some excellent grammar schools (ask Tony).

"As for 'under achievement cultivated by Labour'. Education and the NHS are New Labour success stories (even if paid for by money we did not have)."

>>I would have to contest Education being considered as a success story. Some schools may have been rebuilt but for all the money that has been put in, I can't haven't seen much evidence of standards improving.

"Any attack on private education seems to elicit accusations of 'bigot', 'chip on shoulder', etc.

I happen to feel very strongly that the level playing field of an excellent state education system is one of the platforms of a modern successful country. Look to Europe. I for one am happy to pay a marginal tax of 50% if it is spent wisely."

>>Fair enough, although one of Labour's first acts was to abolish assisted places so that the less well off could afford to go to private schools.

"This country...

has been going round in circles since WW2
has an unbalanced economy, etc"

>> Blah, blah, blah, thank you very much.

It is quite correct to probe independence of these institutions. The contrast with the MPC is apt as it owns £200 billions of government gilts, causing it to struggle against inhaling I would imagine. Its QE policy must have regard to the Debt Management Office, sensibly people would say.

I never quite understood the rush to set up a make-do OBR days before the June emergency budget. There were bound to be teething problems in the rush and a statute is needed to embed their function.

I hope you will raise the same questions of a much more powerful committee coming down the track, the BoE Financial Policy Committee. I await your future posts on this with interest.

Many of the comments here are substance-free, class-based, bitter rants. It makes me tired just reading them.

#38 If any mould needs breaking it is the one that has constrained this country for the past 70 years

You've mentioned this 'mould' more than once and I have read all of your comments but I have yet to work out what it is. You said this country:

has been going round in circles since WW2
has an unbalanced economy
is broke
still has a ruling class
has a dysfunctional democracy
can't export to save it's life

...which you can apply to almost any western country, since most of it is subjective. Most notably you can apply it to the EU - the 'ruling class' being the political elite of many nationalities that drives decision-making in the EU.

#41 Where will this leave us? With a smaller state sector, but a big black hole where British manufacturing used to be, then this was replaced by financial services

On the 'Today' program a couple of weeks ago, an economist from the Engineering Employers' Federation (I think - certainly some engineering organisation) pointed out that manufacturing had been growing continuously in the UK for the past many years, just not as fast as the service sector. There is no 'black hole' and to be honest I don't really understand your sentence quoted above anyway.

#43 Forgive me but surely the Bank of England has forecasters working for it. I'm guessing they predict social outcomes of monetary decisions. I'm also guessing they therefore duplicate the OBR

Why would the social outcomes of monetary decisions be of interest to the Bank of England ? The rise in unemployment would be, for economic reasons. Social policy is a matter for politicians.

#45 If this spin (the OBR, delayed GDP results, austerity measures, etc) is recognised as such by the so-called markets (institutional investors), then the result will be a sell off of GBP and UK gilts.

You don't think large scale buyers of gilts have their own analysts ? Gilt spreads and the pound have both moved favourably recently.

#47 Savage state reduction would be fine if the private sector stepped up to the plate; it will not do so, it cannot do so and has no track record of doing so

Evidence ? We have never had an export-dominated economy like Germany or Japan but nor have we had much of a deficit until now. Somebody must have been stepping up to the plate. Who was it ?

#51
"You've mentioned this 'mould' more than once and I have read all of your comments but I have yet to work out what it is. You said this country:

has been going round in circles since WW2
has an unbalanced economy
is broke
still has a ruling class
has a dysfunctional democracy
can't export to save it's life

...which you can apply to almost any western country, since most of it is subjective. Most notably you can apply it to the EU - the 'ruling class' being the political elite of many nationalities that drives decision-making in the EU."

Come on now you can do better than this.

Every EU country with the exception of Club Med and Ireland has a lower deficit.
The UK lies behind Germany, Italy, France and Belgium (this one surprised me) when it comes to exporting.
The UK has a manufacturing base of just 16% of GDP compared to Germany (31%) - conventional wisdom holds that this too small - hence unbalanced.
The deficit, certainly part of it, is due to the necessity of borrowing (from future tax revenues) to pay for public services run down by 18 years of Tory rule, rather than from a tax take from the underperforming private sector.
True, this country does boast some of the worlds biggest and most successful multinationals but has a very poor track record on supporting and nurturing SMEs which are the life-blood of most modern economies.

By going round in circles this should be obvious. Tory attacks on public services followed by a Labour period where they try and put it right (by running up debt) followed by Tory attacks... and so.

There is no genuine concensus. This is due in part to our style of democracy. The first past the post system promotes swings from one extreme to the other. PR systems have conscensus built in. As an example all main German political parties support the market economy and stakeholder philosophy.

38. At 00:31am on 10 Jul 2010, Richard Dingle wrote:

If some good comes out of this cosy stitch-up between Tory and Tory-Lite it will be a very swift return of the Labour Party in 2011 (the Coalition has got 12 months max) this time with some real mould breaking policies.

-------------------------------------------------------------------------
Some Labour people are talking about the next election being in five years time. Margaret Hodge MP is one of them.

In addition, Labour don't have a leadership and don't look like getting one. If Abbott is elected - probably the most 'presentable' and 'winsome' (and winnable?) of the candidates, I can see a chunk of the party not being willing to follow her lead. The Millibands have some big question marks over their heads. Major's judgement and strategic thinking is under question. Minor doesn't suffer from that but some of his pronouncements have been, at best, poor. Balls seems to generate hostility - is that true also within the party? That leaves Burnham who with Abbott starts as an outsider. I was not impressed by him as a Minister. Like Abbott, it seems difficult for him to get R4 'air time'.

If I took BBC R4 as guide, (bearing in mind the summer 'silly-season' has started a month early) Labour and their leadership race are off the map. [I haven't had the chance for a recent trawl through the broadsheets.] Apart from the almost obligatory putting up of a contrary voice from Labour, they are getting no coverage at all. The likely publicity arising from the Mandelson book may also do them no favours.

re #41
It is true that New Labour lost a lot of jobs in manufacturing but, as I understand it, the manufacturing sector has held up well in proportion to the rest of the economy.

Government had to provide support for car manufacturing over the last couple of years. In addition, manufacturing will have been boosted by military requirements in the past ten years. The numbers would not have looked so good without those two things.

It doesn't really matter whether you talk invisibles, manufacturing, financials, or any other sector of the economy, we now need to reduce employment costs including living costs to make UK PLC competitive in the world.

44. At 07:48am on 10 Jul 2010, Richard Dingle wrote:

All the column inches devoted to this topic takes away from the central issue which is that the UK is essentially dysfunctional from top to bottom and needs radical re-building; transport infrastructure, housing and education in particular.
----------------------------------------------------------------------
Agree with you in general on this one. In education, I suspect a large part of the problem is the DFE&S and LEAs.

51. At 11:10am on 10 Jul 2010, Clive Hill wrote:
Many of the comments here are substance-free, class-based, bitter rants. It makes me tired just reading them.
/.../
Why would the social outcomes of monetary decisions be of interest to the Bank of England ? The rise in unemployment would be, for economic reasons. Social policy is a matter for politicians.


Unqualified as I am I still can imagine myself sitting on this MPC session and striving for some social modelling underpinning likely economical outcomes... All the glitches in models are proves of King's “unintended consequences” at play – people subjected to a policy (monetary or otherwise) playing it one anticipation further than the policy maker cared to consider “palyable”. In Russia they have a nice mental shortcut for it taken from checkmate – a highly popular game there. So, it is not only of interest what “my model against my model” outcome would be, but it is highly interesting to imply some crude “inferior” modelling of some other players... (don't we always take our models for “superior”?). OBR as another player on the scene might be partial to total upgrade in quality of modelling. Their “independence” then would be measured as adding to or subtracting from a number of unintended consequences.

#45 If this spin (the OBR, delayed GDP results, austerity measures, etc) is recognised as such by the so-called markets (institutional investors), then the result will be a sell off of GBP and UK gilts.

You don't think large scale buyers of gilts have their own analysts ? Gilt spreads and the pound have both moved favourably recently.



So you came close to contradict yourself: Yes they do have analysts who in turn have models and play them against other market participants, and the model makers try hard to build relevant social factors into the model. The key factor here is our share of global debt and their ability to park their claims elsewhere


 We have never had an export-dominated economy like Germany or Japan but nor have we had much of a deficit until now. Somebody must have been stepping up to the plate. Who was it ?

??????????? What was happening then since the reign of Henry VII till Qeen Victoria? And quite recently somebody was pushed away from the plate before trying to step up again and in a stealth way.


As a general thought: It isn't too bad that our actions are modelled and anticipated. We know much more than John Stuart Mill about what our scope of free choice can be. Serious questions emerge when rich measures are being used to make agents' behaviour fit the models...

Don’t fret. Trust the posters who appear to work in digital electronics. It is a ‘0’ or it is a ‘1’. If the OBR is in the public sector, it is wrong. If it is in the private sector, it is right. Decision made in an efficient, private sector way avoiding brain ache and waste of mental resources. If only we could do the same with parliamentary elections and avoid having them. They are wasteful. Oh, the Coalition Government are working on that. They are increasing the vote required to pull down a government and they are fixing parliaments to five years. But, didn’t Cameron spend a lot of time challenging Gordon Brown to call an election. Has he done a U turn?

Similarly, relax over unemployment. There will be no increase in unemployment. David Cameron, backed by a range of CEOs, told us on television that they are the party of employment – as opposed to the Thatcher party of course. So relax. Though, to think of it, Sir Stuart Rose did seem to have changed his mind on ‘Any Questions’ last week because he warned of hard times to come. Doh! I had forgotten that the Liberals are not the party of employment and they will cause the unemployment. Oh, if only I had voted Tory, my job would be safe.

55 Up2.... There are four reasons why children are not as well educated as they could be:
1. Children hardly read; there are now far too many distractions
2. Children are not disciplined at home
3. Central Government overfilling the curriculum
4. Quality of teaching
Answer isn't more money. It's educating the parents. Perhaps that's too late but it's not impossible.
51 Clive.... you are a laugh a minute. The OBR cannot be independent. The Bank of England has a higher chance of being so. Of course social outcomes are part of forecasting or don't you consider the costs of crime, unrest, strikes, sickness rates, increased NHS costs, unemployment, go slow, work to rule etc part of any forecasting. Please explain why you think they would be excluded.

We would expect and certainly hope, (faith and charity fell in love (with each other) and are currently personas non grata) that those doing the squeezing of the public current account, dear George & the right wing, have ensured that their own dangly bits are safely beyond harms reach, fully withdrawn to the land that raises tone and pitch. This perfectly normal human reaction, nee instinct, is a deserved and certain order of the day.

Beyond this pail, let us delve into pitches and hubris. Not so very long ago, during the near but oh, so distant past, that has become the future, our dearly beloved leaders, who were not leaders at the time, quaffed finest Merlot with rarely done Angus and squid, in company of those who are altitudinally challenged and motivated purely by a word that sounds like breed. This honour was given the short people for mutually beneficient fees commencing at 25K for lunch time sessions which were unrelated to John but had much to do with ye olde traditions stemming from Southwark, 1066 and a gent named Ansgar. Those lost at this instance, are directed to matters ornithologic in relevance to progination of stray eggs. Voila! here ya go go!

Right pitch - the squid has eaten and the futures are foretold, those doubting George (the squid) can have those doubts firmly rebutted by his prediction for the result of third place at the 2010, 'we are not the champions but 3rd place will have to do'. Sundays' doings are foretold and eight, very elegant legs being so much more desirable than the two usually availabe - bend over darling. Reference follows to the 'Jolly Roger'.

Tilting, very briefly to obscurities - what is the name of St. Georges mount? Hmmmmm.......... :) The Bonk of England! !!
Is it necessary to be a prefect before becoming perfect? ouch!, right, you can stand up now. What - no tears............. hmmm.

It will be apparent to those who are able to see further than the end of their noses and learnt and remember a little of Lizzie the first, that an albeit non Italian or Spanish deity, will shortly be deifying Thor's world and might just wear a sneaky smile. It would be awfully decent of the chap, if he could and would, during a very popular visit, arrange for the return of Harold's battle standard that was taken at Senlac. William forwarded it to Rome with deepest regards and it is time for it to be returned to Harold's heirs.

In celebrating the certainty that descendants of the Armada will finally achieve a victory, might l suggest, that, the customary salute (by those euphoric at the last whistle and in prospect of collecting hard earned winnings from William and Paddy and the spread) should not use the bubbling produce of La Liberte. Oh no! One of Santanders finest products is the little known and oh so seriously underated - CAVA. Shampoo of highest quality and available very every where, bottled in black with exploding cork tops, for appropriations between 650 and 1100 pennies. It is the mutts nuts for those who know its secret, which is to drink from Ye olde english straight half pint glasses and down in one. A neat trick for those able to so do - it is true worship of bubbles and a stairway to heaven. All negativity, bad attitude and anti social tendency, instantly evaporates, well.. within five or so minutes. Those able to to quaff methusalah's equivalent, will truly forget a day never to remember. It is outstanding stuff that will truly get you stuffed, depending on gender and persusion. Those of this nation who truly wish to celebtate Sundays sporting extravagaza should not forget to wear a pirates patch and head scarve, carry a rugby ball and hockey stick and remember the Spanish Maine. Your day should begin with black coffee, light crust, butter, Steak & eggs and for those with a sweet tooth, some marmalade.

When the proxy shenaigans subside, on monday morning, bright and early, l hope that those able to see through the fog of bigotries and insensibility that is our political wasteland, will begin to question those weilding axes to public expenditure and find out what is to be done about the balance of payments deficits which were and remain the root of the curse that threatens this countries existence and profitability. That was and is OUR problem and it seems to be invisible to one, all and anyone, except those making hansom profit in the margins of our trade with the world who don't care about what is done with cabers.
-----------------------------------------------------------------------------------------------------------------------------------------------
An aspect of the disasters wrought upon trade in all its wonderousness, is finance. In particular, commercial finance and its utter horror story of illogical greed during the past twenty years. Here lies a tale of utter corruption and disgrace.

Let there be no mistake, accounting, accountancy is a battlefield of will and influence and an unhappy median of contrary greeds, tensions between l want more and l want more, shareholders and management, in a word Enron and its fallout, ever repeated, the latest in spotlight being Mr. Made off with tens of billions. More are to follow, probably very soon as the black holes that are modern slush, whoops, hedge funds, reach critical lack of mass. Our watchdogs have all but promised it is to hapen again.

Central banks have proved, beyond doubt, their ability to step up to the plate and hold the line during crisis. What they have done, should become mainstream everyday practice on a global scale and sod commercial finance which can scurry back to fringe activity or compete at reasonable rates for a fair and reasonable return and not the outright ***** that occurs today.

The role, purpose, practices, rewards and influence of commercial finance should now be the topic of discussion everywhere and anywhere on earth because the returns derived by this industry and its influences are utterly corrupted and corrupting and out of control and beyond control and dominant. These high flying and low lying :) commercial financiers need two fingers pointed towards them, where it will do some good. They do not create wealth, they redistribute it and do so quite pathetically. Commercial finance is a pathetic practice, an industry way to big for its boots. It needs a powerful competitor and a kick in the teeth. Redistribute that. The pensions industries in all forms are utter joke, complete and utter rip off. It is la la land.

No business, anywhere, expects to make its return on investment in 25 years time, over 25 years - ok, ho hum. In 25 years time, haha, so what is this joke with mortgage terms and ripoff interest rates.

As everyone knows, spend more than you earn and there will be painful problems of adjustment, that is a very simple equation derived from facts of life. People are running around talking up risk, risk, risk as though there actually really are risks. There are not, everybody pays for success and failure. Everyone pays because all risk is spread around the world by all players. Everyone is actually playing or paying for insurance to negate risk and clean up the messes. One way or other that is how it all works. Where that insurance is too expensive, business does not take place or prices become extortianate or a huge con occurs. United Kingdom plc needs to reverse its balance of trade imbalance and that is the problem faced here for the last seventy years or so. It is that simple. Doing it will require a miracle and people that probably haven't been born yet and that is how daft our governments have been for far, far, too long. That is the adjustment that must be made and the rest is Robin Hoodland or 'give me that back, it's mine'.

The financial world got its self into a knicker twist of greed and enmity between people making way to much and wanting more. Trying to sort that conundrum out, destroyed world trade during 2006 and the mess continues but has not even half played itself out yet. Huge wealth was destroyed, asset wealth, paper wealth. Assets were massively devalued and everything else in the feeding chain will follow and it has only just begun to manifest into the real economy. Huge asset devaluations remain to occur as real wealth contracts in all economies with perhaps a single exception that proves the rule. Lets not even bother with the wonders that is pensions and 8 to 15 billion a month trade deficits. Say what! Got an i-pad yet have you?

Diminished tax income, diminished personal wealth, diminished employment, diminished incomes, diminished commerce, continuing financial commitments and liabilities. The period of time required for modest growth economies to recover from problems that exist is insufficient to prevent continuing contraction of those economies which will continue to shrink and shrink and shrink. The game is in the order of 25-30%. 30 percent of what existed on paper and underlay all economic activity was vaporised and at say 2% annual growth will be recovered or renewed over 12-15 years but, the impact and ramifications of the devaluation have not completed working through economies and continue to shrink economies. The numbers being put out, even those by the august IMF are poppycock optimism based on unreality. You can grow paper asset values all you like - no one will lend against them now, now it's all cash flow and it is.............. diminishing. Exponentially.

The assessments are incredibly easy to quantify and study and it will flip about from retreat, which is certainly what the UK economy is doing, when all the cheese melts. Until then, idiots are at play, fiddling their way to disaster. Years ago, water was privatised, the industry leaks a lot but no one should worry about cracked pipes, the problem that actually exists is private business managing resources to make unrealitic (vast) returns when what is needed is (vast) new capacity. It is the same everywhere in business. This is an optimistic outlook. If you think the UK has got problems, then just take a long hard and honest look at Uberland. Oh, momma, Yo momma!

Consumer societies need to consume, that entails growing personal wealth, per capita. That isn't going to happen anytime soon for a very many number of reasons which are an accumulation of a thousands cuts. The Uk economy has been shrinking for four years, the different elements in different ways over different ranges of time. These disparate elements will accelerate to a unison that will be very interesting. Time is accelerating. and with it UK's trade defecit, which the financial (crunch) adjusted against the UK's favour by somewhere in the region of one third. Revenue shrank, expenditure is shrinking and the defecit in trade is a black hole, one that cannot for ever more be funded. The problems it brings will arrive in the blink of an eye, the snap of fingers, the collapse of ............. creditability. Sell the silver, sell the gold, fiddle the accounts, raid the piggy banks - very suddenly and without slightest warnings - the holy ship is sinking. First though it shrank.

Sorry folks, but I'm not going to reference all the relevant blog comments above.
Consider splitting the whole domestic economy into two parts; Government and private. We are all in the private bit. Government spends and taxes.
There is a simple accounting identity [you cannot get away from this]

Government Deficit = Private sector saving
and the other way round
Government surplus = Private sector deficit

Hence, result of what is happening now is that the government is sqeezing the private sector. Higher unemployment will result and will only be corrected when the government sector goes back into deficit and it will as it has to pay out on social security. It will then try reduce these payments because it won't want to go into deficit. Heaven help us but we all end up poorer and we will have lost a lot of time when the unemployed could have been productive. We will have lost productive capability just as we did in the 80's. Of course as the deficit grows, as it will, industry, or whats left of it will then start investing and hiring

"O look" the Government will say "our medicine worked!"
WRONG! a simple accounting identity did it - they just didn't understand economics. Government macro economics is not the same as household economics. They have freedoms and levers the private sector cannot have. Trouble is they don't understand it!

Oh yes, one final comment; the country cannot go broke, irrespective of the size of the deficit denominated in £ sterling. It cannot happen, but we can see the exchange rate slump and inflation take off if they really get it wrong. Back to stagflation for those old enough to remember those days.

Had the Government created the Office of Budgetary Responsibility along the model of the Glass-Steagal Act of 1933 then there might be some basis for claiming independence of OBR and Treasury. If it were a criminal act, along the lines of treason, for the independence of the OBR to be compromised (either from the Government side or the Business side) then the whole arrangement would begin to rise above petty criticisms.

The OBR was not created with any great power to make economic pronouncements regardless of incumbent politicians' policies or business owners' plans.

Perhaps misters Osbourne, Clegg and Cameron would care to bring legal frameworks of that kind forward for the OBR. Until they do, there is no question of the OBR being a Government Quango. There are questions about how frequently the OBR will be caught out pandering to their political masters. There are questions about how damaging that will be to the general economy. There are questions about why the Government need an organisation to make economic pronouncements. Surely that separates those elected from their responsibilities.

The OBR was a nice idea. It was subverted from the start by having no powers to discipline politicians, but it did give the politicians a way to pretend to their electoral masters that "their hands were tied".

The OBR is not "given" independence. It is devised to the appearance of independence. It is a very slick, very expensive and very mendacious assault on the electorate who elected politicians to take responsibility for their actions. If the OBR can make good predictions then so can the Treasury. The Treasury just needs to be honest.

We can all make private predictions. The ConDem alliance wish everybody except themselves to make those predictions. It is the oily swindling of the schoolboy who wishes to avoid responsibility for bad decisions. Osbourne and the OBR are a double act that deceives Parliament, deceives the Electorate and deceives the Markets.

The sooner they do something honest and resign the better.

No.60 Sleepy Doormouse

(i) Public debt is a result of huge accumulated private deficits, as private debt became public debt. The stock of private debt as a result of these private accumulated deficits is still high, and is now being paid down from the private surpluses of 2009 onwards.
The private surpluses can reduce the public deficit or the private debt; they can't do both.
(ii) Public deficit borrows money from China, Japan, Germany and Oil nations and then uses it to employ UK citizens to buy goods made in China, Japan, Germany, etc
(iii) Some UK private surpluses get invested abroad and produce investment income rather than UK jobs.

Isn't the acid test on this the OBR's terms of reference and their accountabilities? And in regard to the latter, to whom are they responsible?

On the face of things it looks like a step in the right direction. Time will tell. I am patient.

Perhaps now that Mr Budd has seen enough figures ... he is doing a runner rather than sign off his own reduced 'growth' forecast.

'Growth' what a stupid phrase ... sounds like something that will flower and wither away in the garden.

Millions of us working hard to pay taxes so that pen pushers in suits can lounge around talking about a word that makes little real sense to anybody... the only thing that is growing is our imports ... and the idiotic GDP model that is apparently still in use at the OBR ... is still being used to measure and include all UK imports as 'gross domestic product'

Ha! Ha! Ha! - Chapman, Cleese, Gilliam, Jones and Palin ... eat your hearts out!

No 60 Mr Tweedy

Mr Tweedy, many thanks for your comment. I am not sure how best to answer without writing a book, but there is a reference source you may be interested in .............

My I draw your attention to https://bilbo.economicoutlook.net/blog/?p=332
This is a blog written by Prof W Mitchell Newcastle University Australia

In the article he wrote:
"While typically obfuscated in standard textbook treatments, at the heart of national income accounting is an identity – the government deficit (surplus) equals the non-government surplus (deficit). Given effective demand is always equal to actual national income, ex post (meaning that all leakages from the national income flow is matched by equivalent injections), the following sectoral flows accounting identity holds

(G-T) = (S-I) – NX

where the left-hand side depicts the public balance as the difference between government spending G and government taxation T. The right-hand side shows the non-government balance, which is the sum of the private and foreign balances where S is saving, I is investment and NX is net exports. With a consolidated private sector including the foreign sector, total private savings has to equal private investment plus the government budget deficit."
My comments are based around this identity. It is his work not mine.

His ideas, expressed in his blog will take work and overthrow cherished ideas. They have drastically altered my views of economics and those who practice the profession since I found the site about 6-7 weeks ago. I've begun to realise that there are alternative views. Please read carefully whilst forgetting any preconceptions. It seems to me that is line of thought accords better with the reality of macro-economics and provides a better basis for decisions about how the economy should be controlled than those in use by our current leaders [not sure about the culpability of our dear friends within the Treasury]. I still have many problems with this area, but I cannot at present shake the fundamental concepts he puts forward within the '101' area near the top of his 'one page archive'. He is not alone, he has supporters in other countries. I do not see these ideas as crackpot, they need careful analysis and to be refuted with real evidence. Trouble is economics is not like a science where experiments may be done in carefully conrtolled conditions. I wish it were so. There's a whole lot more in the blog

These ideas have a long history and have picked up names which are not in fashion, making the ideas easy to dismiss. Please do not do this, read and wonder if there might not be some underlying lessons for use at this difficult time. Even if you don't accept these ideas, I urge you to ask questions of the way economics is taught and its underlying basis. Does the mainstream thought form a good / only basis on which decisions are made that will affect the lives of all in this country? A few will benefit, most will suffer in my view - not good, when I believe that the Government should be doing all it can to protect and sustain all in this country.

I'll be interested to hear how you get on. I'll look out for you in future posts - good luck

#60 MrTweedy

PS I would like to stimulate real discussion and consideration of the underlying basis on which decisions are made about our economy. Maybe Mr Cameron et al are right, but we must question and examine and then, where necessary, call to account. If a change of direction is needed and none is forthcoming we must use the ballot box and then have very very long memories

#65 and 66

Ooops MrTweedy is at 62; its me at 60 so sorry!!

SleepyDormouse - The clue to how these "equations" of GDP work or not work is what is a constant, what is a parameter and what is an independent variable. To make it anecdotal: my dog, when young, used to run after a stick or a carrot to bring it back to me and get a bit of beef as a reward. When older it refused to run and fetch anything concentrating exclusively on my back pocket with the beef inside. I quit giving the beef out for free only to my peril - on one of the walks the dog snatched a sheep and I was to pay for it (not to mention of the social inconveniences in the neighbourhood).

SleepyDormouse

Thanks for the reply. I have not read the link you posted yet; so I apologise for that, but I will read it later.

The basic equations are:
GDP = G + I + C + (X-M)
T + S + M = G + I + X
T + S + M + DR = G + I + X + B
where B is borrowing from abroad and DR is debt repayment to foreigners.
If your external debt repayments outstrip your external borrowings then a GDP reduction (recession) is unavoidable.

The equation holds true for any given year or fixed period of time, and it is therefore similar to a profit and loss account. However, to understand a nation's full financial position, one needs to look not only at its annual P&L surplus or deficit, but more importantly at its balance sheet and cashflow. On top of this, one must understand realised and unrealised gains and losses, asset carrying values, off balance sheet liabilities, distributable reserves, timing differences, foreign assets and liabilities, and the currency denomination of foreign assets and liabilities.

In a nut shell, the economic crisis was caused by overstating asset values. This lead to surpluses being overstated, as they included unrealised gains but ignored unrealised losses, and these surpluses were distributed by way of employee bonuses, dividends, and taxation. These distributions were spent on consumables, which were consumed to destruction. If that weren't bad enough, the overstating of asset values allowed greater gearing/leverage, which meant that liabilities far exceeded assets by an enormous amount. This gearing allowed asset values to be overstated for years, as borrowing brought forward income surpluses from the future. When private balance sheets eventually collapsed, the government stepped in and propped them up. Therefore, some of the private debt was replaced by public debt.

The private sector still has weak balance sheets; ie they still contain unrealised future losses/ overstated asset values which means they are still in a net liability position. So, the private sector is using its surpluses to repair its balance sheet, rather than giving them to the government.

The UK and the USA both have net foreign liabilities on their Net International Investment Positions, but they earn net investment income from this, due to the yield differential between assets and liabilities.

Therefore, the USA and UK can carry on borrowing, even though they do have net foreign liabilities, but this cannot go on forever. Both countries need to create domestic jobs. Therefore, they need to get away from reyling on net investment income from abroad and become more self sufficient by importing less and exporting more. If they don't do this then the USA and UK are effectively borrowing from China, Japan, Germany, and the oil nations and then spending the money to buy imports from China, Japan, Germany and the oil nations.

sleepyD and Mr T - thank you for some thought provoking posts. And so MMT; Modern Monetarist Thinking and Prof Mitchell; some very interesting reading, I also found this link contained some thought provoking items too https://www.3spoken.co.uk/2010/04/primer-on-modern-monetary-theory-mmt.html
Would it be fair to say Brown was a neo-chartalist? And that Euroland countries cannot because they do not have a fiat currency? And what does Cameron believe... certainly not MMT/neo-chartalism?

#70 Ilkeston_Tim
I am no economic expert, but prefer to try to understand from the root upwards, so I've a lot to learn. However, I believe that the eurozone is in a class on its own. For MMT, the sovereign government must be the issuer of its currency. If not each member of the eurozone has to fudge, make do and mend as best it can. Hence their problems; eventually, it would appear that the strains will blow it apart. I now see no future for the euro. The lack of government control of its own currency, as seen from the MMT viewpoint, is the best argument against joining the euro. Don't know about Mr Brown, sorry. My best description for him now is maybe well-meaning, but muddled and suffering from the hubris of the two offices he held. I hope he enjoys his retirement with his family.

#69 MrTweedy

Many thanks for your full response, its given me a lot to think about. At first sight I would not contradict much that you have written about our road to perdition.

However, the point I was making is that when the government does not spend and run a deficit, the private sector will go into decline. The offset can only be from exports being greater than imports and foreign income. For the near future the world seems to be coordinating its fiscal measures to cutback. Given this, the private sector will decline. We will see the promised reduction in public sector employment Plus private sector jobs also. The OBRs estimate of private sector job creation is incredible/unbelievable in current circumstances. And this from professional economists! I will not say here my real opinion of them.

So the government do not seem to me to be giving the private sector a chance to rebuild. The Government are grabbing the resources or at least failing to supply the resources for industry [with friends like this, who needs enemies]. Its going to be a long haul and in the process, many comapnanies will go to the wall unnecessarily. It all leaves me very worried.

#52 From an earlier comment, you gave this list of UK woes:

has been going round in circles since WW2
has an unbalanced economy
is broke
still has a ruling class
has a dysfunctional democracy
can't export to save it's life

Which I attempted to refute, you said of that:

Every EU country with the exception of Club Med and Ireland has a lower deficit.

Except that the deficit is not one of the items in your list.

The UK lies behind Germany, Italy, France and Belgium (this one surprised me) when it comes to exporting.

There are 40 countries in Europe alone and many more in the 'developed world'. Our position does not merit the remark can't export to save it's life. OECD statistics indicate that we are above the USA and Japan in Trade to GDP ratio

The UK has a manufacturing base of just 16% of GDP compared to Germany (31%) - conventional wisdom holds that this too small - hence unbalanced.

We have a large service sector. Part of that is the 'knowledge economy' so beloved of Gordon Brown. I believe that's desirable. The service sector has always been disliked by the left, possibly because it has little union penetration. That does not make it unprofitable, quite the contrary.

The deficit, certainly part of it, is due to the necessity of borrowing (from future tax revenues) to pay for public services run down by 18 years of Tory rule, rather than from a tax take from the underperforming private sector.

I recall that during the Major years the government attempted to keep the public sector below 40% of GDP with limited success. In fact according to this site UK public spending as a % of GDP in 1995 was just over 40%, it was brought just below 40% by 1997. Then in the years 1997-2002 was around 35%. Then it started to rise until in 2008 it was 45%.

Until a couple of years before the 'Credit Crunch' and subsequent recession, there was little or no 'structural deficit'. It was caused by overspending on the public sector during the Gordon Brown prime ministership and lately the loss of tax revenues from the damaged service sector. The point is, it is a recent phenomenon.

True, this country does boast some of the worlds biggest and most successful multinationals but has a very poor track record on supporting and nurturing SMEs which are the life-blood of most modern economies.

I don't know what our record on supporting small to medium enerprises is relative to the rest of the world. Do you ? I know that there have been many tax and regulatory breaks for them and they have one of my favourite industry spokesmen in Stephen Alambritis. According to the Federation of Small Businesses annual report for 2009, 50% of UK GDP comes from small businesses and 59% of employment comes from the SME sector.

Incidentally, according to OECD statistics We have more people employed in manufacturing SMEs than the USA or Germany but the nation with the most employed in this area is Greece, so it presumably confers dubious benefits.

By going round in circles this should be obvious. Tory attacks on public services followed by a Labour period where they try and put it right (by running up debt) followed by Tory attacks... and so.

It is true to say that we have been in 'boom and bust' for a long time. I believe that is in large part due to housing bubbles the latest of which was also the largest. Now that that has also happened in the USA - and is also beginning to happen in China, perhaps someone will come up with an objective, apolitical solution to it. That probably will not come from the USA soon since Barack Obama was part of the cause of the problem over there.

There is no genuine concensus. This is due in part to our style of democracy. The first past the post system promotes swings from one extreme to the other

Not now. We have a coalition. You might note that while the politicians of the coalition want consensus on many issues - viz. the appointments of Frank Field and John Hutton, the opposition and their supporters plainly do not. I realise that this helps to make your point - my point is that things are changing to a form of 'issue consensus'.

You have only to look at some of the vitriolic comments directed at the coalition from the comments on this blog ('condem' is a favourite) and the description of those Labour politicians cooperating with the coalition as 'traitors' by John Prescott.

It is not obvious that general consensus is desirable. It certainly breeds corruption when you have anything resembling a one-party state. I am happy with the 'issue consensus' the coalition seems intent on.

PR systems have conscensus built in. As an example all main German political parties support the market economy and stakeholder philosophy.

...and if you are German and you don't, you're screwed. How does the system ever change ? It breeds a political elite - on which the EU is modelled - which 'leads' with its ideas of what society should be. Those ideas, curiously, also perpetuate that elite in power.

You chose Germany which has relatively stable coalitions because the FDR invariably arbitrates power. What about Israel, or Italy in times gone by ? Do you think the minority policies of the religious parties in Israel do the state any good ? Did the Italians benefit from having something like a different government every year ?

No.71. SleepyDormouse

I think you are right that there are no concrete plans for sustainable job creation in the UK. This is true of all the political parties. The government hopes that by making a strong signal that the state will shrink, it will fill the private sector with the confidence to invest.
However, export growth will be very difficult and Britain cannot easily avoid imports; so X-M seems the weak part of the equation. The evidence for this is that imported price inflation has been the result of sterling's depreciation, not a boost in exports.
If Japan and Germany printed new money and used it to buy UK goods and services it would help, but the chances of this happening are slim to say the least, and it is not a sustainable way of creating UK jobs.

#72 Clive Hill,

An interesting repost, some of which I would like to take issue with.

(1) I think you will find that RD was refering to EU countries and there are not 40 of them.

(2) OECD figures. Here you have to be very careful ie when is an export really an export and where does the profit from that trade finally rest i.e. is it really wealth generating for the exporting country?

(3) Service Sector. Here I believe that RD has a good point concerning balance. For the general stability of the economy we need to end the over-reliance upon service (in particular financial services) for the long term health of the economy.

Equally we need to more closely examen the 'off-shoring activities of the service sector.

The point regarding unionisation I will take as a side-swipe. In manufacturing, the percentage of employees in union membership has continually fallen. Now we can debate the relative benefits or otherwise of union membership but there is no way that you can claim that union membership has influenced the growth/decline of any of the sectors.

Public Services. Please tell me how the reference to the housing bubble answers RD's point?

COALITION. What is wrong with describing the present government as the CONDEMs? After all the Tories have been refering to NuLabour as Socialists for over 15 years!

It will be interesting to see what commitment there actually is to ISSUE CONSENSUS. I doubt that any administartion can cope for very long with a constantly shifting less controllable political audience.

Apart from that we appear to be ingeneral agreement - just like the coalition government!

In my #72 Apologies, in the last paragraph I meant the Free Democrats, the FDP.

FDR was someone else altogether.

#73 MrTweedy
An example of the UK service sector crumbling in a speech from a Tory shadow minister in October 2009

I believe the Labour government may have been opposed to the service sector for pragmatic reasons - union penetration is negligible, as I mentioned above.

'Spin' from various left wing sources has it that 'manufacturing industry' is the only means of export.

What is wrong with selling software licences abroad ?

Half a million public sector jobs to go....

Plus a huge number of businesses that sell their products to schools, colleges, hospitals...

I've been selling services to schools for 10 years. I was made redundant on Friday which I believe is no more than a couple of weeks since Mr Gove's announcement.

It won't be long until we're all applying for the one last job available.

Clive Hill

Any exports should be gratefully accepted. Hugh Pym wrote a reasonable article the other day on services v manufacturing, where he concluded that both are important, and it's not a choice of choosing one over the other, although UK services would probaly grow faster than UK manufacturing.

Due to technology, finite natural resources and the rise of the developing nations, 'employment' in the developed world will struggle to grow. Germany, for all her trade surpluses and positive NIIP still has an official unemployment rate in excess of 8%.

Britain cannot 'recover' until it tackles its Balance of Payments deficit which is flooding the country with cheap imports of the type that keep British people on the dole and in debt on their credit cards. We're consuming foreign import products at a rate that has us caught in a dangerous downward spiral of having very low levels of natural resources, over-sized public and service sectors, oversized population and undersized home production capability.

Until something is done about this with a well directed import tariff programme the UK domestic economy will remain weak, there will be zero spare revenue to invest in critical manufacturing sectors and UK will continue to stagnate as throttled with crippling debts and bad policies including our ridiculous GDP model.

The OBR 'growth' and other forecasts are themselves to be ridiculed until our government starts to tackle the probelms that hold us back. I think that the OBR members recognise this themselves.

If the Coalition government allows free market doctrines to get in the way of doing what are the right things to do for the UK ... we are still in big economic trouble.

The UK may have to 'go its own way' and make itself more unpopular with some internationally ... if we are to avoid stagnation. It is not a matter of left or right wing politics ... it is now simply a matter of what does or can work and what does not or cannot work.

Simples ... we can stagnate or we can buzz?

#72
"Not now. We have a coalition. You might note that while the politicians of the coalition want consensus on many issues - viz. the appointments of Frank Field and John Hutton, the opposition and their supporters plainly do not. I realise that this helps to make your point - my point is that things are changing to a form of 'issue consensus'. "

Yes. On this I agree. The coalition is forcing proper cabinet government - or concensus.

"Except that the deficit is not one of the items in your list."

It is. Under 'broke'.

"Incidentally, according to OECD statistics We have more people employed in manufacturing SMEs than the USA or Germany but the nation with the most employed in this area is Greece, so it presumably confers dubious benefits."

You make my point for me. The higher up the value-added tree a country is (think paper-clips versus nano-technology (a German success story)) the less people employed but the greater the wealth generated. This country has some very fine high-tech companies but not enough to achieve critical mass; in Germany you can't move for them. A thriving high tech economy derives from strong R&D spend (UK has below EU average), an excellent education system and the right culture.


"You chose Germany".

Apologies if my constant references to Germany grate but I look to write about countries I know well. Also I would have thought the UK has more in common with Germany than any other country in Europe. A bit like a sibling rivalry between an under achiever and over achiever. Funny how the football pitch mirrors real life; I will leave that one to the sociologists.

"We have a large service sector. Part of that is the 'knowledge economy' so beloved of Gordon Brown. I believe that's desirable."

Germany has a large service sector (70% of GDP). The UK is too large (at 85%) and we are paying the price. This is one of the myths of the Thatcher era that the clever Brits are breaking new ground, the post industrial age. There is a critical relationship between a vibrant service sector and a vibrant manufacturing sector; if one part is not vibrant the relationship does not work. Incidentally if you define service sector as where people are suited and booted then most of German manufacturing should be reclassified as it is so high-tech. Incidentally the worlds biggest (or one of the biggest) service sector companies is Allianz (insurance and banking); the second biggest software company is SAP. Both are German. Forget the unions, they are not an issue any more, we have moved on. The human animal has and always will be in love with artefacts (round the block queues for iPhone 4, yes I know that is not made in Germany), which is where Communism fell down. This is why despite some very real problems Japan has a rosy future.

The UK has also some very real problems and peer behind these you have, er, very real problems.

Need to shatter the mould and build a new UK.

Technology

Investors seek to understand a potential investment as completely as possible. They achieve this by narrowing the scope of the potential technology and by carrying out thorough analyses. This due diligence involves consultation of experts in the field.

The net effect of this approach is a conservative approach to investment in technology. Either states collaborate on speculative technology, or large corporations do this. Large corporations take out patents to protect their core business models. Academic groups hunt for grants that are likely to get funded, again resulting in a fairly timid approach to progress.

All successful ideas have a golden dawn where adoption is explosive, before maturing and then becoming overapplied. It is disappointing, for example, that over a century later our transport infrastructure is still largely petrochemical fueled internal combustion motors, which have not progressed radically from their original designs. The real changes have been in manufacturing processes.

In order to accelerate the ocurrence of positive, unexpected events, a different approach to technology investment is required. The ideas of Nassim Taleb in Black Swan - that investments should be scattered across many slow loss makers with potentials for high return - should be adopted more widely.

For example, my recent research into thermoacoustic generators showed me that the sole reason why this technology is not more widespread is because it requires a combination of skills and expertise that is extremely rare. There are probably no more than tens of people in the world capable of advising investors on it.

...and for anyone who might be interested in the above example: https://www.io.com/%7Efrg/taceng.html

#81 Oblivion

Finance for NEW innovations is always going to be problematic when the 'investors' (market) have little or no comprehension of the viability of succesful commercialisation. This is an area wherein the State needs to act as a catylyst.

However, the conservatism (please note the small 'c') of politicians regading the unknown and the beaurocracy of the State also have to be overcome.

Whilst it would appear better to have a State/private partnership to take on this role you already know that it will suffer from the same tensions that bedevil most joint-ventures along with differing outcome expectations.

In the present circumstancs it may be more approriate for the State to pick general areas in which to seed research rather than trying to pick individual winners.

# 77. At 12:09pm on 11 Jul 2010, randall8 wrote:
"Half a million public sector jobs to go....

Plus a huge number of businesses that sell their products to schools, colleges, hospitals...

I've been selling services to schools for 10 years. I was made redundant on Friday which I believe is no more than a couple of weeks since Mr Gove's announcement.

It won't be long until we're all applying for the one last job available."

You have my sympathies randall8, I work on the other side of the fence and I've been saying for ages there is a serious knock on effect of slaughtering the public sector. All of my budget goes to the private sector, some goes to properties owned by pension funds, some to construction and some to facilities provision. This will all cease as my department is now being scythed with a loss of around twenty posts. One effect so far has been to put forty private sector employed cleaners and fifty maintenance fitters out of work so a ratio of 4.5:1 more jobs lost in private sector land than public to date. Doesn't bode well does it.

To be honest the more I'm becoming aware of proves to me there is an indiscriminate agenda here and this government is morally corrupt. It's the lies and damned lies I can't stand using the deficit to justify their cull where in reality it is Conservatism at its worst. The OBR are part of this corruption if they think 2.5 million jobs will come out of this economy in the next five years.

We must stick together in this and not be fooled into a divide and fall mentality. And remember this - don't believe a single word you read in the press or hear on TV, the propaganda machine is at full throttle, its the only machine in the UK that is at present.

#83 FDD

Yes, hence for example Obama's multibillion solar investments.

Technologies can be selected while subsidies and other incentives to encourage their adoption and further development can be introduced. The state could do this with the aim of creating a snowball effect to increasingly transform existing infrastructures. The state should be able to devise a method of ensuring that the initial subsidies and other stimuli are paid for by the increase in activity as more become involved in the transformation of existing infrastructures.

This bandwagon effect is a common trait and should be simple to initiate. The difficulty would come in making sure that the kind of asset bubbles such as the recent dotcom and housing examples do not ensue.

Here's a reason why you shouldn't believe everything you read at first sight as mentioned in my blog at #84. This is supposed to be good news.

https://news.bbc.co.uk/1/hi/business/10591469.stm

But think on, why are company profit wanings at their lowest since 2003?

. All the vulnerable companies are bankrupt already.
. The remaining companies have acquired vulnerable competiton on the cheap.
. There is less competition due to acquisition and bankruptcy of rivals.
. Companies have downsized to minimum operating levels to survive.
. Assets are being sold or mothballed.
. The markets need some good news.
. The criminal banks have got all our money

It's a bit like saying the army winning the battle are taking less casualties now, of course they are, as the battle progresses there are less and less of the enemy left to kill them, they've still lost a lot of troops on the way and may not be fit to fight another day.

86 NorthSea.... I would agree with your general thread but isn't it also true that many private companies got their house in order in advance of the government's latest cutbacks. I suppose that's a good thing because they may be in a better position to weather the coming storm.

re: 51

Read my post more carefully.

I'm saying that in the 1980s we were told that a massive contraction in private sector manufacturing didn't matter, that "Big Bang", the deregulation of the financial services would set business free, grow its share of UK PLC output and therefore replace manufacturing - "metal bashing" and militant trade unions had had their day in the UK - let china/japan/korea/e.Europe do it for less cost - we'd more than pay for imports out of our invisible exports - the consumer would also reap the benefit in lower prices - to be fair we did benefit short term, but now we're in hock to our eyeballs and we cannot afford to import manufactured goods anymore and the dangerous delusion of "light touch" financial sector regulation has now cost every man, woman & child £40,000 each in the bailout costs to prevent the financial system going belly up.

Now we're told we can rely on growth in small business to take up the slack and replace the (failed and dangerous) financial services industry -so cut the state back - and create space for SMEs to grow as the State would no longer be "crowding out" the private sector. If you seriously believe this one, you're beyond help.

I agree with many posters here who indentify the imbalance in our economy as the problem - hell, even Cameron accepts that we have too much big a financial services sector and too little manufacturing!

The key issue is do you seriously believe the SME sector will grow and deliver 2.7m new jobs, £200Bn+ investment and a 33% increase in exports?
I think this is libertarian moonshine: only a combination of import controls and government intervention to rebuild our manfacturing base will work - the venture capital/investment banking business is bust - government is the only actor left on the stage able to perform.

Unfortunately it's going to take 5 million+ unemployed to give us a hell of a hard lesson that finally makes us wake up to the fact that the Bankers' Party is now running the state in the shape of Cameron's regime, by which time the libdems will be back to being able to hold a parliamentary party meeting in the back of a London taxi before the British people understand the real nature of the problem.

Blair & Brown thought they could ride the tiger - let the City of London rape and pillage around the globe, bringing their ill-gotten gains back to the UK and in return hand over a share to HMG to spend on good causes - they could then use the cash to create a utopia in the UK of free trade, cosmopolitan globalisation, London as the epicentre of culture, sport and big business - the "knowledge economy" meets "cool Britannia", a theme park of British history combined with borne-again Christianity: "things could only get better."

Another massive delusion - dogma over reality.

The bitter truth is that for every job cut in the public sector, the government only saves about £2k net when you take into account the benefits bill and lost tax revenue, but the impact that job loss has on the economy is huge - I estimate a TRILLION POUNDS of demand will be removed from the UK market in this parliament. If this was to divert resources into developing manfacturing, it might be worth the price - but as there is a snowball's chance in hell of the private sector achieving the required grown targets, it's simply squandering resources and peoples' lives at the expense of the quality of life for the poorest in our society, sacrificed on the alter of Cameron's little Englander delusion or deception - or both.

#88 Richard Bunnning
I agree with almost everything you've said. There is no chance of the private sector filling the productivity gap now, and 3M unemployed by christmas (yes even before most of the cuts have taken affect) seems likely.

Your history seems correct - the banks (and financial services industry) persuaded Thatcher to follow this route, and then New Labour were equally weak.

Whoever had won the election would have been following pro-cyclical policies (to some extent), and these have never worked in a recession. The IMF actually believe that growth will be slowing because there is not enough austerity - clearly illogical! And the reason why the economy relied on consumer credit, was because there was insufficient demand (low real wages, high unemployment, under-employment), so this government is actually going to make things worse.

I do believe that manufacturing needs to grow (for reasons of social diversity), but I do not believe we need to be a net exporter. A priority should be to reduce our dependence on imports of food and energy, though we can recover substancially without this in the short-medium term, because the problem is lack of domestic demand.

We need research into better use of land for agriculture, and improved energy security. Food and energy security is important to shield us from supply-shocks and to enable us to import less inflation - though, like I say, we can already recover without this in the short term.

"Delusion or deception - or both", yes, that's the question - will we ever know?

Kind Regards
Charlie

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

#88 Richard Bunning's post sums things up for the UK very nicely indeed.

I think many here recognise this already and are looking for the next step. I really believe the time is long overdue for intelligent and motivated actors to step up to the plate and insist on new models: I think the only hope is new technology involving a transformation of the energy infrastructure and new ideas need to be presented.

Thanks for the kind words.

So what should HMG do?

1. Identify the problem and point the finger @ the slave labour, rigged exchange rate model being operated by the Communist Party of China and their allies in the multinational brands (and other similar unfair traders) - demand fair exchange rates and that importers must comply with our environmental protection, safety and social welfare standards where they manufacture, or face import controls.

2. At the next EU summit the issue of reforging a new trade system must be the highest priority - not fortress Europe, but a new system of balanced trade is needed to create a sustainable system.

3. Move decisively on energy - drive hard for energy use reduction in homes through insulation and small scale renewables (e.g. photovoltaic) and expand wind & wave power to slash our oil & gas use. Use a dual track approach - exploit UK coal reserves BUT do this with carbon capture and sequestration of CO2 into depleted North Sea oil/gas fields, whilst buying time to expand renewables/energy saving. This will cut our gas and oil imports bill whilst creating work without releasing the CO2.

4. Shift UK agriculture away from massive grain imports to feed livestock and incentivise farmers to produce more grain here and to expand the market garden sector, whilst educating the public to shift towards a lower meat/dairy centred diet.

5. Tell the private sector that import controls will be phased on over three years, so if they want to sell in the UK, they need to move rapidly to manfacture in the UK or lose the market.

6. Carry out a UK manufacturing audit and target government investment towards quick-win import substitution development to invest in new production to replace imported goods, in a framework of bilateral and multilateral trade deals with the EU and other countries.

7. Set up a Strategic Industries Commission to rebuild the key materials and tooling sectors - e.g. renationalise and invest in British Steel, invest in the energy sector etc. to ensure we have the infrastructure to grow.

8. Use public sector procurement to ensure UK companies are given first bite at supplying HMG.

9. Encourage regional and local government to get involved in local enterprise schemes and reforge the power of communities to come together to create industrial capacity - the UK gas, water, health & transport systems were in large part developed in this way - community enterprise should be put back on the agenda.

10. Take GATT head on - refute the claims that globalisation is "a good thing", demand sustainable, balanced trade and assert the sovereign right of nations to ensure that their people have jobs, that the environment is protected through sustainable exploitation and that countries should not be allowed to run massive balance of payments surpluses or deficits in the medium term that are not sustainable.

11. Start a further round of international cooperation to control international speculation on currencies and irresponsible bank speculation.

12. Stop paying people to do nothing and put in place a short term initiative to expand employment, e.g. social housing development, environmental protection and recycling.

That's twelve things that would get the ball rolling right now and would begin the process of building:

A SUSTAINABLE SOCIETY,
A SUSTAINABLE ECONOMY
AND AN ENVIRONMENTALLY SUSTAINABLE FUTURE.

Are you listening, Milliband I/Balls/ Millband II ?

re #66
Amen baby and goodbye

"The chancellor seems to think that "independence" consists solely in not taking instruction from him. " Correct.
Its heartening to see that the majority of bloggers are doubtful of anything the government (whatever its colour) says, produces or creates e.g. OBR. No longer are the public willing to swallow what they are told on face value, for they are more intelligent than that. We should give ourselves a collective pat on the back. We will continue to unpick what we are told in persuit of the truth.

A degree of self-sufficiency is unavoidable, given the unrealised losses in the banking systems of China, Japan, Eurozone, USA and UK.

Read the signs folks the OBR cannot save us now.

https://www.telegraph.co.uk/finance/markets/7884272/Secret-gold-swap-has-spooked-the-market.html

The sovereign crisis deepens....when you have to sell off the family jewels to pay the bills then you know you're in trouble.

#96 WOTW

Take a look at the Partnerships UK database if you want to know what has been 'sold off'.

Here is an example - a thirty year contract for the A13 Thames Gateway

https://www.partnershipsuk.org.uk/PUK-Case-Study.aspx?Region=London&SubRegion=&Project=11110

You can find over 900 examples

Look at the shareholders for these deals.

And here are the shareholders of PUK


https://www.partnershipsuk.org.uk/PUK-Shareholders.aspx

No, they are not independent; not yet anyway. They have been created and its members appointed by politicians with a particular agenda. Same as the Labour did with the MPC for years. Its what politicians do, did and always will do.

Remember Thomas Becket and King Henry II. They were friends at one point until Becket took his idenpendence literally.

What matters is if they produce credible predictions. Only time will prove their worth. The MPC proved for years to be unable to predict anything right and did little to warn the government about dangerous money expansion. If the OBR do well then their influence and independence will grow possibly to the detriment of their creators. If not then we will all correctly conclude that they are governments stooges producing a narrative to help legitimise the extensive cuts to the public sector which are happening with or without the OBR.

#80 Richard,

It might have escaped your version of history but one of the reasons Britain has been broke for the last 70 years is that we spent every last penny we had and then borrowed heavily against the tax revenue of those 70 years, fighting a war propogated by your adopted nation.

To hear you boasting that that same country is an economic success compared to "broke Britain" is rather hard to take.

Did Germany ever repay the rest of the world for the damage it caused? Might give a clue to their "economic success".

Forgive me if I am wrong, but sometimes it seems to me that the war never really ended, it is just that these days the violence is not measured in blood, but in gilt.

Remind me again which nation hosts the central bank which controls the Euro?

Garmany Calling...Garmany calling...

===========================
For those who remember, Britain was just as broke in the 1970's as she is now. Suffering from stagflation and unable to compete in the global marketplace. Successive governments were unable to find a Keynesian solution to the problem of "No Money", and even an IMF loan was not enough. So the decision was taken to allow an injection of liquidity from private Banks into the economy (a sort of QE in the private sector). This came with the price of deregulation, so there was no way to ensure that the money was invested in long-term capacity. This gave us the breathing space that brought us to where we are now, but that liquidity which was never invested in "growth" has now been used up and is sitting on balance sheets as "property value" or filling up holes in the ground as "last year's gadgets".

It seems to me that if there is to be "Growth" in anything except a nationalistic sense, a new supply of money and/or raw materials will have to be found. (i.e. Germany can grow at Europe's expense, but that just increases the imbalance, and therefore isn't "growth".)

If Mr Prudence realised this, couldn't find any other sources of money and deliberately borrowed against the future tax-take to try to keep Britain solvent, then the electorate should have been informed that we were in a last desperate throw of the dice.

Anyway, this mushroom has often puzzled himself, asking, "Was there any other way out of the debt in the 1970-1980 crisis?" Keynesian didn't work then, and doesn't look like it worked in 2000-2010 either.

Might give us a clue about where to go from here?