While flicking through the Sunday papers yesterday, this headline caught my eye:
Cameron has the makings of a truly great prime minister
and I wondered how anyone could be seriously making such a claim at this time.
The author of the think-piece was Peter Oborne, sometime editor of the Spectator and now a columnist on the Daily Mail, so there could be little doubt about where the author was coming from politically. But in the preamble to his contention, there was an interesting canter through post-war political history.
There have only been two great prime ministers since the Second World War: Attlee and Thatcher. Attlee achieved greatness because in barely five years he established the basis of postwar Britain: the National Health Service, a universal welfare state and a managed economy – all funded by massive personal and corporate taxation.
Attlee’s vision was so powerful that for three decades all prime ministers, whether Conservative or Labour, accepted his fundamental insights about social and financial management. By the mid-1970s, however, it had failed. Not until 1979, and the emergence of Margaret Thatcher, did Britain discover a leader capable of challenging the vicious cycle of decline.
Like Clem Attlee, Thatcher redefined the British state. By cutting taxes, taming the trade unions, and encouraging the market, she unleashed tremendous productive forces. Like Clem Attlee, her vision was so powerful that all prime ministers since have found it hard to escape from her shadow. But the Thatcher settlement could not last forever: by the time Gordon Brown was evicted from office exactly one year ago, the British state was facing a crisis of comparable’ magnitude to the 1970s.
I couldn’t find much to quarrel with there, except that one very important word seemed to be missing: nationalisation.
This was an essential ingredient of the ‘managed economy’ that Atlee created, and Oborne refers to, which some might recognise as a step towards a planned economy on the soviet model. Henceforth, ‘the people’ were to own at least some of the means of production: the energy industry and other essential public services. And there was a an inevitable spin off from this which also had far reaching consequences. A significant part of the working population became state employees overnight, and the trades unions, whose activities until the war had been confined to moderating the rapacity of private employers, could now claim a seat at the top table, with not only a brief to protect their members interests, but also the power to influence, and even dictate, government policy. At the same time they had control of productivity, or lack of it, over a vast swathe of the UK’s industrial base.
Atlee’s achievement in setting up the National Health Service and the welfare state are undeniable but, with the wisdom of hindsight, it is also clear that the policy of state interference with market economics that he initiated was a disaster. Until Margaret Thatcher dismantled the nationalised industries three decades later, and ‘tamed the trade unions’ in the process, the UK economy was hobbled by the high prices and high taxation required to keep hopelessly inefficient and uncompetitive nationalised industries afloat.
So what has all this to do with David Cameron joining Atlee and Thatcher in the tiny pantheon of ‘truly great’ post-war prime ministers? According to Oborne, it is possible that our present prime minister’s willingness to meet the challenge of mending an economy wrecked by thirteen years of mismanagement by Gordon Brown head on, allow Ian Duncan Smith to rebuild Beveridge’s outdated model for the welfare state, and encourage Michael Gove to insist on high standards in state education, Cameron may be able to implement an economic, social, and political framework that will last for a generation. If he succeeds on all these fronts, then Cameron will indeed deserve to be ranked with Atlee and Thatcher.
This blog is not the place to discuss welfare reform or the failings of state education, with the very obvious exception of JunkkMale’s fascinating thread here. However for the last year and more I have been drawing attention to the parallels between the problems posed by the old nationalised industries and the Conservatives aspiration to launch a green industrial revolution using the slogan, ‘the greenest government ever’. There is ample and growing evidence that these policies may be as misguided – and could be as long lived – as the UK’s post-war excursion into nationalisation and a managed economy.
Of course if one considers nationalisation in the context of how the world looked in the late 1940’s, it is easy enough to see why such a policy seemed attractive and feasible. In the aftermath of the great depression, the hungry thirties, and the vastly increased control that government had on people’s everyday lives during six years of war, the idea of sate ownership of energy production, transport and much more must have seemed pretty sensible. Also, at the end of the war, it was still possible to foster the illusion that in the Soviet Union a planned economy was promoting an economic miracle, whatever the human cost might be. But the fact that something looked like a good idea at the time doesn’t mean that it really was a good idea.
We are living through a period when the illusion that there is convincing – even conclusive – evidence that fossil fuel use has already altered the climate is in vogue, for politicians, broadcasters and other media types, for industrialists of course, who see no harm, and ignore the danger, of cashing in on government subsidies. It is no more difficult for Cameron to persuade people that the nation needs a green industrial revolution than it was for Atlee to win support for nationalisation. The question is whether the consequences will be as long-lasting and devastating.
It would seem that the operation of the UK energy industry in future, as conceived by the coalition, will be controlled not by market forces – supply and demand – but by government regulation, just like the old nationalised industries. In an attempt to compensate for the handicap of making the means of energy production totally uneconomic, the government will provided vast subsidies – and also rig the market by regulation, and even legislation – in order to attract investment. Which brings us to taxation.
By the late 1970s, it was the tax burden, massive level of national debt, and the cost of underwriting the inevitable losses of hopelessly inefficient nationalised industries that made the Thatcher phenomenon possible, and very, very necessary. Yet the crippling effect of successive government’s attempts to run major parts of the economy had been recognised for many years before. There is a terrible irony in our present government contemplating a policy that could probably be safely described as the most inflationary since the war while it is also facing the worst dept crisis since the war . Energy costs will inevitably rocket, and the increased subsidies that will be needed to minimise the effect will do nothing to reduce borrowing and help build a viable economy once again.
In the post-war era, the enormous tax bill for keeping the nationalised industries afloat could be passed off by governments, to some extent at least, as part of the cost of maintaining the welfare state in the aftermath of Atlee’s relatively short lived administration. Now Cameron seems content to embark on policies that will require increased taxation or borrowing in order to find the the subsidies that will entice investors into the strange, strange, world of ‘renewables’, where demand is created by political subterfuge, and profit is acquired, rather than earned, either by tapping into government subsidy, or by greatly inflating market prices with the connivance of government.
And although the trades unions may not be at the top table calling the shots these days, there can be little doubt that that the green eNGOs are rapidly replacing them, and that their single-issue campaigning is capable of being every bit as corrosive of good governance as that of the unions. What political party would have the nerve to fight a general election with Friends of the Earth, Greenpeace, WWF and a dozen other immensely wealthy operators on the political scene using their vast resources to persuade the public to vote for another party of their choosing.
Peter Oborne has chosen as his two ‘truly great prime ministers’ both the author of the ‘managed economy’ and the author of its destruction. It will be interesting to see if Cameron’s ‘green industrial revolution’ and proposals for the decarbonisation of the UK economy will continue to enjoy public acquiescence, and if he manages to turn his vision into reality, it take a generation before a new ‘truly great prime minister’ comes along to put the economy back together again.
Peter
If you actually read things instead of trying to score points by continually parsing and manipulating information you don’t like you would have read this-see items 9 10 11 12.
http://www.statistics.gov.uk/about/methodology_by_theme/public_sector_accounts/downloads/debt_history.pdf
Now read it, accept that your definition of debt is far too narrow for modern day purposes and move on. Whilst you are about it, when trying to analyse Britains finances-which it is blindingly obvious you know nothing whatsoever about-you ought to include private and corporate debt. The indebtedness of a significant proportion of the population-especially unsecured borrowing by way of credit cards at interest rates of up to 30%-directly impacts on the abilty of the economy to perform properly.
I don’t know what point you are trying to make. Britain by any modern definition of the word ‘debt’ has serious problems which we need to face up to. Going round telling people that its all a Tory lie is the height of absurdity and you have brought no evidence to the table to show otherwise..
tonyb
TonyB,
OK we’ve now got the right document. So can you show me where it
“….says that the method of calculating debt……….is no longer relevant as it doesn’t begin to cover all the types of modern debt.” ?
PeterM
Do read the documents instead of continually parsing words and phrases.
The definition of debt has officially expanded over your narrow definition. It is useful to look at other links posted, such as the one from Grant Thornton, in order to include private debt as well-now so large it is a huge impediment to growth.
Put your politics aside and accept that (unfortunately) its not a Tory lie and we have a serious (but not insurmountable) debt problem which has many strands.Then you might be able to comment on TonyN’s interesting central thesis.
As you know I’m not agaist renewables-but the costs we are racking up in order to provide a highly inefficient renewable power infrastructure in order to save a temperature increase of two thousandths of a degree, is the politics of the madhouse. It will make us uncompetitive, impoverish much of the population and drive away business-see my comments on Tata.
Now if you want to move the debate on I will respond, if you want to do nothing but parse I will not, as my spare time is reserved for writng an article that enables us to backtrack to our coldest year- 1607-In other words we can trace a warming trend that dates back over 400 years.
Tonyb
TonyB,
OK so we’ve established that this isn’t what the documentation actually says but rather its your interpretation.
So lets move on. Anyone who has had to repay any sort of loan will know that the probem isn’t so much the repayment of capital, that’s usually taken care of by inflation over a number of years, as the interest payments that are involved.
So, in your considered opinion what would be the level of payments in terms of the UK’s GDP which would be required to service the debt? I presume you have worked out what this is. Otherwise how can you know if the debt is or is not affordable?
PeteM said
“OK so we’ve established that this isn’t what the documentation actually says but rather its your interpretation.”
We’ve established nothing of the sort-what we have established is that your narrow definition of National Debt is outdated and you are using it for support to your political views.
Moving on from that, you ask me a perfectly reasonable question, but before I answer it I would like to comment on inflation. This affects the weakest and most vulnerable-for example the elderly,out of work or the prudent-who have a fixed income or savings that become eroded and which they will have no chance of recovering. Shame on you for kicking old people and the vulnerable. We are up to around 5% inflation at prsent-some might argue that a small amount is beneficial but 5% is way beyond that
The first priority must be to cut the rate of increase of our current account deficit- the difference between what the govt takes as taxes in a year and what it spends in a year. At present, despite all the rhetoric the cuts have been non existent as all that is being done is to reduce the rate of increase. Consequently spending money we haven’t got- or would have to borrow- is irresponsible in the context of climate change (see TonyN’s new thread) but may not be in terms of other spending.
We have several large projects of which one is the possible extension of a ultra fast train line between London and Birmingham. This is estimated to cost £35 billion (immediately treble any figure the Govt makes)
The net result is the destruction of quintessential English country side whilst saving the small amount of people who want to travel this route some 20 minutes. The rationale? Carbon savings amongst others. That is not to say that a much smaller general investment In rail wouldn’t be welcome, or that other capital projects wouldn’t make sense.
Until you get to grips with reducing the annual overspend i.e adding to any existing debt-you can’t make any effective plans to reduce the core Govt debt. Dealing with excessive amounts of private debt is another conundrum which needs to be tackled.
Tonyb.
and your answer is ???
PeterM
I have spent too much of my time over the years giving you answers that you don’t read. Read what I say and provide links to, then I might have time to finish my article. :)
There is an approx £700 billion annual expenditure by Govt
http://www.ukpublicspending.co.uk/government_expenditure.html
Now according to how debt is calculated we are heading for a 2 to 4 trillion pound public debt-at its most pessimistic the higher figure includes govt guarantees and unfunded public pensions
Our gdp is around £1.8trillion. Our annual budget defict is 11% of GDP
Govt income was badly affected by the recession when there was a 5% GDP reduction but expenditure continued to grow rapidly.As an example of profligacy, in 2008 the Govt introduced free theatre tickets for the under 26’s and free swimming for the over 60’s and under 16’s
There are also all the various other forms of debt we talked about-as Grant Thornton mentioned in my earlier link Private debt is now larger than Public debt, which will put an obvious brake on proceedings. We are helped by being able to borrow our shortfall at historically low interest rates, although of course that impacts on the savings of those who didn’t take on debt and who you seem to think should be thrown to the wolves of inflation.
One of the reasons we have a triple A rating is that the UK Govt has shown willing to tackle its problems-we have all seen what happens (eg Portugal and Greece) when this rating is devaliued and the Govt concered has to borrow at a higher rate or its bonds aquire junk status..Here is the UK public expenditure as a % of GDP
http://www.ukpublicspending.co.uk/downchart_ukgs.php?year=1950_2011&units=p&chart=F0-total&state=UK
That previous peak in the 1970’s (Under Labour) was when Britain had to call in the IMF (calling in the IMF again under the current world economic position and jittery markets is not an option) and the sharp drop was under Mrs Thatcher. The short rise was under John Major which was then heading towards a historically low level as Labour came in during 1998. (They agreed to contunue the outgoing govts spending plans for two years in order to appear fiscally responsible to the electorate)
So here we are again having to battle the same dragons as Mrs Thatcher did.
Now perhaps you would like to reassure me that we can continue spending at an unsustainable rate, make our deficit larger, pay out even more in interest, add to our public debt and ignore private and corporate debt without any concerns, because the financial problems are all imaginary and just a wicked Tory lie.
tonyb
TonyB,
You seem to have found a good factual website now. You will find some good information on there which if you study in a scientific fashion will give you a slightly different, and much better informed opinion than ever you will get in the sort of rubbishy newspapers I suspect you read.
You’ll find, on exactly the same link that you supplied to me, that public spending reached 48% in 1975 then fell back which I think would have been a Labour government , so they were obviously a bunch of bad guys, whereas it peaked again at 46% in 1981 under the Tories, the good guys. That 2% makes a world of difference doesn’t it!
Note these are peak figures. Of course its fair enough to argue these levels are too high for the UK and you’d prefer not to have to a Swedish style society, but its not fair enough to suggest that this would involve bankrupting the country. Many European countries average a higher level of spending and they certainly aren’t bankrupt.
But anyway back to my point about the level of interest payments. According to this graph, from the same website as you’ve chosen to link to: http://www.ukpublicspending.co.uk/debt_brief.php (near bottom of page) it shows interest on debt to be about 3% of GDP. Wish mine was always this low! What are bond rates in the UK? About 4%? What is the level of inflation? You say 5%.
So who comes out ahead? Those who are lending money at below the inflation level or those who are borrowing it?
Wicked Tory lies to justify the cuts? Well you said it, not me!
Just for PeterM’s benefit
Today see publication of the UK’s worst ever public sector net borrowing for the month of April. The key thing is Tax receipts are down, which the Government have been told will happen if they raised taxes. Raising VAT to 20% could work short term if other taxes that hinder business such as the Carbon tax and the Renewable Obligation that is a tax on everyone were repealed amongst other odious hidden taxes. It will be interesting how they move forward as at some point the lessons of the past will need to be applied. I wonder how long the knives will stay sheathed in the 1922 club.
Let me quote from Wikipedia
“The Carlton Club meeting on 19 October 1922 was a formal meeting of Members of Parliament who belonged to the Conservative Party, called to discuss whether the party should remain in government in coalition with a section of the Liberal Party under the leadership of Liberal Prime Minister David Lloyd George. The party leadership favoured continuing, but the party rebels led by Andrew Bonar Law and Stanley Baldwin argued that participation was damaging the party. The meeting voted decisively against the Coalition, which resulted in its collapse, the resignation of Austen Chamberlain as party leader, and the invitation of Bonar Law to form a Government. The Conservatives subsequently won the general election with an overall majority.”
TonyN
I gave a reply to PeterM’s comment 58 but it seems to have disappeared. I really can’t be bothered to combat his wilful silliness by doing the work needed to repeat my comment so can you see if it has gone to spam? Thanks.
tonyb
[TonyN: Not spammed. Are you sure that you are looking on the right thread?]
TonyN
The trouble is that I can’t see all the threads except on my Mozilla laptop. On my usual one the list of articles does not appear down the side until I click on ‘comments’ on whatever article is showing in the browser. I’m sure it was the right thread because I would have kept looking at Peters previous answer with incredulity to make sure I hadn’t misread it.
tonyb.
[TonyN: I seem to remember, from something you said ages ago, that your ‘usual one’ is running a version of Explorer the antiquity of which might only be established with carbon dating. I know that there are issues with the older versions of Explorer and the most recent versions of WordPress, such as the one that I have updated to. On the other hand there are issues with the older versions of WordPress and the more recent browsers.
It’s probably time to take a deep breath and download an absolutely free up-to-date version of Firefox for you ‘usual one’. This should not disturb your bookmarks and other personal settings in the antique Explorer and you can then import them to the sparkling new all singing all dancing version of Firefox.
It’s a win win situation. Good luck!]
TonyN
Ages ago was Ages ago. I bought a new laptop with a new browser only around 6 months ago. It is only since you changed your design that the problem has arisen. So its YOUR fault and I demand huge amounts of compensation :)
tonyb
PeterG,
So your government has raised taxes but revenues have fallen? Yes that’s quite likely in a recession. The irony is that the harder governments try to close the gap between revenue and spending the worse it gets !
The only chance to really close the gap is to increase the level of spending. This could either be private spending or public spending. Everyone who has a job depends on someone spending money. No spending means no VAT means no jobs means no income tax revenue etc etc That’s the way it works.
PeterM No one has any money. How can we increase spending?
TonyN, I get the same thing happening as described by tonyb with windows 7 and IE9 or Google chrome. haven’t tried the latest Firefox, but may install it on one of my Virtual Machines and give it a go. I find that IE9 is the best browser at the moment by a nose.
PeterG,
It was only a few years ago that England supporters came over to Australia crowing, in good Harry Enfield fashion, about how many dollars they got for their pounds and claiming they had “loadsamoney”. Yes very funny. So where has it gone?
The answer is it that hasn’t actually disappeared, of course it can’t have done, but its just stopped moving. There is just as much money about as ever there was but if it doesn’t do anything it might as well not exist at all. So how to get it moving again is the question that you need to ask.
PeterM
The England supporters in time honoured fashion were mostly living way beyond their means as is the country. Personal debt is even larger than ‘public’ debt, of which a substantial proportion is on unsecured high interest rate credit cards. You have seen the figures for our public and private debt and the annual current account defict. You seem at last to have accepted that your National debt graphs are out of date as the Treasury itself does not use this measure. I’m glad that at least you concede that argument.
Comparing our debt to other countries as you attempt to do is pointless, as every country calculates their debt on a different basis so we are not comparing like for like. Some hide their true indebtedness-see for example Greece, amongst others, in order to join the Euro. I am sure the UK has some hidden debts that will eventually come out in the wash. Now let’s move on
You can try to get people to spend more but this is difficult if they haven’t got any money through being hammered by tax and rising prices. So this can only be achieved by giving them more money, say by tax cuts or increasing the spending power of those with a nest egg by giving them a better rate of interest, increasing employment/pay. All that has other cosequences of course, for example the vast majority of jobs created over the last 10 years have been low paid and taken by foreigners. (France has a French first policy for employment)
You can get the Govt to borrow more and spend it, but that also has consequence (see the turmoil in the Greek markets etc)
The fact that we borrowed even more last month suggests that we haven’t actually begun to cut our spending (although you shouldn’t look at one month in isolation) so we have to borrow to make up the difference.
We have some large projects coming up, for example £30 Billion a year on renewables, £30 billion for a train journey to get you to Birmingham 25 minutes quicker and a report yesterday suggested we will need to spend an extra £80 Billion a year in order to care for the elderly.
Now let’s have your solution to the basic questions;
1) How much extra do we borrow -and for how long-in order to stimulate overall spending (and do bear in mind the size of the UK economy
2) How will it be paid back
3) Who will lend it to us
4) What will be the consequences of that course of action
We had a £200billion dose of QE which did nothing but help stoke inflation so we seem to be talking about much bigger sums than this.
Some spending/borrowing is of course entirely sensible and necessary but much of what has been going on in recent years doesn’t fall into that category.
tonyb
Tonyb #67 Good post. Leaving aside the £30 billion on renewables, the £30 billion for the high speed rail link is classic politicking on a lost cause and is indicative of the poor judgement and lack of true leadership exercised by Cameron.
There is no public clamour for this line except from pressure groups, It will not benefit business users as the terminal will be some distance from the centre of Birmingham wiping out the improved journey times, Commuters will not benefit as it will cost more and not stop at convenient locations. It will have to remove passengers form the existing line further eroding profitability and viability of the existing schedules. Operating costs are way above the estimates. This is before we start on the disruption to the local environment. This is all for a saving of 25 minutes I think not. I still think it will get canned.
Even worse is the idiot proposals for the Great West route where only the bit between Paddington and Cardiff will be electrified leaving the rest of the Great west network that has to share the track running on diesels. The justification is that we save 15 minutes between Cardiff and London. Please please tell me these idiots have actually travelled this route. I do every day, and even if the trains could travel at 300 mph it would make no difference to journey times unless they can all do it. But more importantly it is the stops in between that causes the delays. with as little as 10 minutes some stations of this “High speed route” Electrification will not save journey times and will not even save carbon emission, so why are we doing it????????????? And the vast majority of people using this line are doing so every day to commute to London from various parts of ENGLAND. Leadership I don’t think so.
But the point is this is money that we don’t need to spend, money that will not contribute to the productivity of the country, and money that could either pay debt or be invested in something the market actually wants.
You have all got to listen to this
http://www.larouchepac.com/node/18252
TonyB,
Of course you can argue that everything is out of date and nothing can be directly compared with anything else because of some slight variations in methodology. It’s a nonsense arument. Its like arguing that various changes to the cricketing lbw laws , or changes to the laws relating to where bowlers have been allowed to place their feet, have meant that cricketing records now can no longer be compared with those of the past. Yes, of course, it does mean that comparisons may not be perfect, but it doesn’t mean that they are meaningless either.
Organisations like the IMF and CIA have to try and make sense of just what one country is doing relative to another and they both come out with slightly different results, so they obviously aren’t perfect, but again that doesn’t mean they are meaningless. Just take another look at:
http://en.wikipedia.org/wiki/List_of_sovereign_states_by_public_debt
There is just no evidence that the situation in the UK is anywhere near as bad as the doom-mongers in the right wing press would have you all believe. So cheer up! That’s good news. You aren’t going to starve in your old age after all!
Peter M said
“Of course you can argue that everything is out of date and nothing can be directly compared with anything else because of some slight variations in methodology.”
SLIGHT?!
Surely even you must realise that with your cricketing analogy you are simply not comparing like for like. There are numerous ways in which each of the categoires of debt are calculated. and numerous ways in which they will be apportioned or discounted or hidden or included in another section of the economy under a different heading. Thats even without including the parlous state of many peoples private indebtedness which has a direct bearing on how they can react to exhortations to spend.
Now why don’t you show some original thought for a change and instead of parroting others tell me what YOU would do in this real world situation we find ourselves in by actually ANSWERING the four questions I posed in post 67 instead of dancing round and making diversions?
tonyb
TonyB,
You, yourself, can answer the four questions you have posed by looking at how debt has been financed in the past, from whom the money has been borrowed, the timescale required for its repayment, and what the consquences have been for the economy.
I’m not necessarily saying that the UK’s debt should be allowed to balloon out to infinity but at the same time the problem does need to be kept in perspective. Its just not anywhere near as bad as you Poms are all led to believe! All this wailing about the economic legacy that will be inherited by your grandchildren, and how they will have live in rags because all their income will be consumed by repayment of past debt is just absolute nonsense.
PeterM
Why not actually answer the questions instead of evading them all the time? Give us some ACTUAL figures, a course of action and the consequences of those actions that will support your position.Actually PROVE that its not as bad as we POMS believe.
You have provided absolutely nothing to support your contention. Facts and figures please that come from your own mind and not lifted out of some political handbook.
tonyb
TonyB,
You yourself have used this facts and figures from this website.
http://www.ukpublicspending.co.uk
I am not disagreeing with anything that’s in there and its obviously not a political handbook. Yes, naturally the UK government can’t afford to ignore the figures but they are certainly arent what you’d expect from a country with record debts and which is on the verge of bankruptcy.
So I’m just wondering why the right wing UK press, and right wing UK politicians too, are so keen to paint that picture for the general population? Why do they go in for unsubstantiated assertions? Why don’t they reference their arguments properly? Why don’t they explain that the debt position of the Uk is better than in both France and Germany and just nowhere near as bad as in Japan?
Just try out asking you friends in the pub some basic questions along these lines and see how much they really know.
Peter
My 73
Stop Dancing and just provide answerrs to the questions for goodness sake. Should we be borrowing £10 Billion a year for 2 years £500 billion a year for 10 years? More? Less? How will it be paid back?
Who will lend it to us? . What will be the consequences of that course of action
Give us some actual FIGURES.
tonyb
.