The economy, a sensible debate in advance of the budget

[malumbu]

@Sephiroth you made some interesting points on the economy, on the Lammy thread.

Thought it worth broadening the discussion.

Reeves (irrespective of her financial competence) clearly was too downbeat on things when Labour came into power.

But could there have been more honesty on the liklihood of taxes going up (which they have done, and will do in any case due to the freezing of personal allowances).  It may have been a silly commitment not to do this, but were you damned if you do and damned if you don't?

[Earl Aelfheah]

Yes, they should clearly have been more honest on taxes before the election and not backed themselves into a corner. After 14 years of mismanagement and decline, they have to invest and at the same time start to bring borrowing down (otherwise they continues to be at the mercy of the bond markets). Continued cuts / degrading of public services is counter productive (a successful economy and society needs good infrastructure, education and health care). 

The single biggest thing they could do to immediately improve growth would be to rejoin the single market, but I appreciate that is difficult politically. 

So if you can't significantly boost growth short term, can't cut too much further, and need to raise money without borrowing, that only really leaves taxation. 

 

Of course, where best to target those taxes - that's the real question.

Edited Tuesday at 14:51 by Earl Aelfheah

[Angelina]

or cut costs. 

The cost of debt is a huge burden, it cannot be increased.

[Spartacus]

Today we are seeing the impact of increased taxes (employers NI) with tje UK unemployment rate rising 

https://www.bbc.co.uk/news/articles/cdxrp7znkdlo

Unfortunately, to increase tax burdens will see the economy stall or a recession, as Angelina says, cutting spending, whilst painful short term, is a good way to bring down government borrowing. 

True, we don't want to see cuts to services but there are other areas of government spending that can be reduced and with AI impacting all jobs across all businesses, maybe it will also reduce overall staffing costs. 

Edited Tuesday at 15:01 by Spartacus

[Sephiroth]

3 hours ago, Angelina said:

or cut costs. 

The cost of debt is a huge burden, it cannot be increased.

After 15 years of austerity I’m not sure where you would find costs to cut 

I mean it’s been 15 years - “short term” isn’t the word I would use 

Edited Tuesday at 18:00 by Sephiroth

[Angelina]

There is a vast difference between cutting costs and not being wasteful.

We cannot have the equivalent of not having the money to insure your car, while buying lunches in Waitrose everyday.

You can have all the money in the world, and be a fool with how you spend it.

Now, it's completely out of control. It has been for a long time.

 

[Earl Aelfheah]

1 hour ago, Spartacus said:

Unfortunately, to increase tax burdens will see the economy stall or a recession, as Angelina says, cutting spending, whilst painful short term, is a good way to bring down government borrowing. 

I think one could argue that degrading public services / infrastructure is what's led to our current, slow economic decline. We've spent 14 years trying austerity, and it's proven counter productive to growth and productivity. A successful economy and society needs good transport, education and early intervention health care.

On taxes, it depends how you target them. Tax funded spending may be a positive fiscal multiplier. Taxes on work aren't great, or when they hit the poorest (who tend to spend most of what they earn, boosting economic activity). We need a well designed wealth tax (on idle assets), and stronger measures to target avoidance. 

Edited Tuesday at 16:46 by Earl Aelfheah

[Sephiroth]

50 minutes ago, Angelina said:

There is a vast difference between cutting costs and not being wasteful.

We cannot have the equivalent of not having the money to insure your car, while buying lunches in Waitrose everyday.

You can have all the money in the world, and be a fool with how you spend it.

Now, it's completely out of control. It has been for a long time.

 

This is to conflate household budgets with government budgets. They are very different things 

a large part of the anger felt across the country is the decline in public services after a decade and a half of austerity.  You cut more you get more ugly anger 

Of course people need to be persuaded to pay more - but that is only realistic path. You cut more you will find out the hard way 

[Angelina]

we actually need growth. It may be counter intuitive, but we need investment.

 

my example is about poor financial management, be it personal or central. I'm referring to poor government financial management.

Edited Tuesday at 17:11 by Angelina

[Earl Aelfheah]

We do need growth and investment. But cutting spending, is the opposite of investment - degrading transport, increasing waiting lists, etc. The analogy of government spending as a household budget is a very poor one. 

Government financial management is probably poor, but every single prospective government says they'll find billions in efficiencies and then fail to find them. I don't believe there is as much waste as people think. 

We need to tax unproductive assets, raising money to invest in public services / paying down debt, (or else encouraging people to move their money in to productive investments). 

Edited Tuesday at 17:42 by Earl Aelfheah

[Sephiroth]

I would also suggest if we all care about growth and investment as we claim, we should be looking to rejoin single market and customs union - if not  reversing Brexit in its entirety 

Otherwise we are all cake and eat it merchants 

[Angelina]

My point is exactly that, cutting spending isn’t the answer, reducing wasteful spending and improving financial management is. They are not the same.

[Earl Aelfheah]

Every politician says they’ll find loads of money cutting frivolous spending. Reform had their own ‘DOGE’ team at Kent council who were going to go in and save huge amounts’ of money. They disbanded very quickly having realised that the mountains of waste didn’t actually exist.

[CPR Dave]

Its no good harking back to 15 years ago. The current administration was gifted the fastest growing economy in the G7 and within 15 months they have destroyed it. 

Dismal figures released today on economic growth. Dismal figures released yesterday on unemployment. 

Inflation has doubled since Labour took office and will likely stay at such grossly high rates when the next figures are announced next week.

And things are only going to get worse this winter. Higher tax, higher unemployment, and higher emigration of wealth generators to Milan and Dubai have put the economy into a terrible doom loop. 

[Sephiroth]

Can we get more data about this “fastest growing economy” thing. I’ve googled but can’t   find anything concrete 

I do recall a bunch of unaffordable tax cuts which gave impression of boosting economy in short term in full knowledge they would have to deal with fallout.  So there’s that 

but hey. If you are in the market for reasons why uk economy is in a doom loop might I point you to Brexit. And then I watch as people go “stop wanging on about that” and then they go back to complain my about doom loops and wondering why Tories lost so massively 

Edited 1 hour ago by Sephiroth

[CPR Dave]

These were the figures for the economy that Labour inherited.

https://www.bbc.co.uk/news/articles/c6p2r9xzde4o

The figures released today show growth of one tenth of a per cent. That's shocking. 

It's also been announced today that UK exports to the US have now hit their lowest levels since the Covid lockdown. More appalling mismanagement of teh economy. 

[Sephiroth]

None of that reads particularly impressively - and for sure, things on growth and GDP under Labour have not improved 

but the idea that the Tories retained power in 2024 and the U.K. would be doing better than it is now? I really really don’t think so 

[CPR Dave]

You could have just said thank you and possibly admitted you were wrong.

[Sephiroth]

Why would I do that? Thanks for a bbc article that doesn’t post any impressive figures and the you ignore my counterpoints?

if nothing else the shockwave to global economy since Trump got reelected should give pause to anyone on any side

saying fastest growing when the numbers are so tiny is meaningless. As that article basically says 

and if it did mean anything the there would be a graceful electorate.  There was not a grateful or happy electorate 

[CPR Dave]

1 hour ago, Sephiroth said:

Can we get more data about this “fastest growing economy” thing. I’ve googled but can’t   find anything concrete 

 

You asked for this and when you got it you ignored it. You should have said thanks.

 

You'd probably already found that article yourself though. I can see you are just a sealioning troll not interested in debate on the woeful state of affairs that is the Labour government's economy.

[Sephiroth]

I didn’t ignore it - as is obvious by reference to its content.  But fine. Thanks for posting the bbc link Dave 

and well done you you big big man for ignoring 14 years of mismanagement to score cheap points about a bit longer than 1 year government.  A government think is doing badly but not for the reasons you cite 

and I’ve been on this site for 20 years and I will happily take every single person calling me a gobshite.  But a troll I am not.  I have literally met hundreds of people face to face from this forum - sometimes one to one after online arguments. I troll no one.  If I disagree with you I can be blunt and sometimes wrong. But I’m never ever trying to get a rise out of anyone 

Edited 15 minutes ago by Sephiroth