Which exactly my point: why are the Tories the nasty party when Labour were just as bad?

I was not a great fan of New Labour but they did not impose all the pain of the cuts on the poor like the Tories. In the latest Autumn statement by the Chancellor the first group to suffer will be the top 10% then followed by the bottom 10% and then the next bottom 10%. Since the top 10% can easily afford such changes and the bottom 20% are least able to cope it is clear that the Nasty Party is appropriate.

But they did all that by spending money that we don't have any more. I'm all for spending out of a recession, but you've got to have money to do it.

I'm not necessarily saying it's being cut in the right places, but the budget needs cutting somewhere, surely?

Balancing the books also includes increasing the income. For a government that means extra taxes, which again are aimed at the masses and have barely any impact on the super rich. I am not even thinking of mansion taxes which is a stupid idea. We have had thirty years of cuts to taxes yet the first major problem in the economy and taxes are ignored as a solution.

You'll never cut the deficit if the cuts lead to falling tax receipts and falls in GDP. In that case the debt to GDP ratio and deficit can actually increase, making the problem worse.

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Which is actually what we've seen - the cuts have depressed the private sector along with the public sector, since (at least in simple terms) a large chunk of the private sector has the public sector as one of it's major customers. Jobs have been created but they aren't jobs that create enough value in the economy to replace the ones lost. If you get the balance right, you stand a chance of this plan working out OK because you shrink the public sector just enough and the private sector can escape the pull while benefitting from the cheaper labour market the cuts create, thus compensating for the depressive effect. However George Osborne has no more chance of getting the balance right than a pig on a unicycle.

The other plan is you finance growth in the private sector by cutting the public sector and diverting some of the savings you make into public infrastructure spending. Thus the private sector gains some of the money you're cutting from the public sector along with the effect above, and thus you get more growth for your money. However the current administration don't follow that model. They obviously think virtually every other developed economy in the world is doing it wrong.

For obvious reasons this claim doesn't apply to most of the Eurozone, if it applies to any of them at all. So that's a sizable chunk of the developed world excluded right there.

It doesn't apply to Canada, Australia or Norway, whose growth in recent years can be explained by commodities exports that we don't have. Also none of those countries has the kind of debt problems that we have to work through (ok, Canada has a bit of a housing bubble at the moment).

It certainly isn't true of America, where fairly decent economic performance is mostly a result of their system's ability to flush debt more quickly than anywhere in Europe (non-recourse mortgages; relatively simple and forgiving bankruptcy laws), plus payroll tax cuts.

Japan is no guide to how to do anything.

I really don't see any merit to the "virtually every other developed economy" part of your claim, I think virtually none is far more accurate.

Aside from the exaggeration, your analysis suffers by being one-dimensional. The balance of strengths and weaknesses in any developed economy is always going to be unique. The idea that you could even have a solution that worked in virtually every developed economy is unreasonable.

I would say that generally, it seems to make sense for government spending as share of GDP to average somewhere around 40% through the economic cycle. A bit higher in the bad times is ok if you can go a bit lower when there is good growth. This rule of thumb doesn't apply to all countries though - the USA has to be lower as their health spending is outside that calculation. And the French would probably get by ok with a higher number (although the one they have now will definitely bankrupt them because it's insane).
I suspect that our current chancellor would prefer to bring that average down, but he hasn't, which could indicate that he is more sensible than you give him credit for. In either case, I doubt he is aiming for a very much lower number than I favour, and I suspect you wouldn't go very much higher (if any).

If he tries too hard to double down on the austerity, I think that would be bad. But right now, I would suggest that the numbers don't back up any claim that he is mad or evil. He is cutting a bit deeper and sooner than I would like, but if you dare to remove your ideological filter and look honestly at the data, you will see he at least has a point, and at least deserves that much respect.

They are trying but the figure for infrastructure spending is no where near enough to offset the other cuts. So even allowing for a very generous multiplier effect on that investment it is simply not enough. It is also not as labour intensive a way to get us out of the crisis. The governments philosophy has been that too much government has crowded out the private sector, and by slashing the state that the economy will become vibrant as private enterprise will flourish without the burden of government taxation. Well it has never worked. The recoveries in the past relied on a increase in debts to stimulate the economy yet that cannot be applied now as the corollary is that as the debt is repaid it holds back the recovery.


Actually Australia has a big housing problem as well. If it were to go tits up there then they would suffer because they have three very big banks with huge mortgage books which could hit them hard. Though they have their own currency so can depreciate their way back to health which the EU countries cannot do as they are currency users not currency issuers.


In the US there are interim forms of bankruptcy which keep the business going. It forces write downs of commercial property pretty rapidly, yet the housing market there is still over valued but way less than the UK. We have some of the same advantages but in Ireland bankruptcy haunts you for 12 years so that means that either people will be shut out for more than a decade either way. If they are avoiding bankruptcy they will struggle to spend for many years. If they do go bankrupt then they have to wait for 12 years before they reenter the housing market.


Japan was able to cope because of its huge domestic savings rate, which only Italy in Europe is close to matching. The savings rate in the UK was closer to zero because of the housing bubble.


There will be some significant differences but there are a couple of solutions that would work, but not necessarily for the Eurozone, because they cannot depreciate their currency. The only workable solution will be get the economy growing again then make the cuts kick in every time the economy grows above 1%.


The same applies to debt but I think that total debt levels should be much lower and government debt was not that bad prior to the crisis. It was private debt that was the problem. If governments had been more strict over the levels of private debt then we would not have had the bubble that hid all our structural problems for so long. Then if we had hit the financial crisis with lower private debt then we would not have had to bail out our banks and would not have had a problem with a credit crunch. The credit crunch had no impact in some countries because they had no housing bubbles. Too many western economists think that housing inflation is good for the economy, as it stimulates other spending like DIY and refurbishments. Problem is that it is based on a bubble and bubbles burst and someone has to accept those losses. The are also problems with what governments do to mask their debts via derivatives and off balance sheet liabilities like PFI. In that respect the UK is no better than Greece.


Well extending the period of austerity to 2018 or 2025 will mean that it will be a stagnant future for most. So I expect the emigrations to start before long. The migration from Ireland, the baltic states, Spain and Greece has been underway for a long time. Ireland is losing 50 000 citizens a year. Many of whom will never return. That will leave the debt burden even higher for those that stay.

So the 50% tax rate on their income is not enough for you? How much would you say is fair to tax them?
60%? 70%? 100%?

50% is more than enough. Don't forget that we did have marginal taxes in the past of 98%, and that benefit claimants are hit by effective rates already of 60 to 70% as they earn more. The problem is that there are too many loopholes and some are completely abused. End the loopholes first then look at other taxes. Personally I would prefer an end to all the other stealth taxes and recover most taxes through income and corporation taxes. Then maybe we could eliminate VAT, or stamp duty on homes.

So Starbucks have agreed to pay £20m over the next two years - http://www.bbc.co.uk/news/business-20624857

My that's mighty generous of them!

On a multibillion pound turnover it does seem insignificant.

Yeah, I'm sure if I sent HMRC a nice letter with a tenner stapled to it, they'd let me off the rest of my tax liability too.

Where did you get "multibilion turnover" from?
According to BBC they had £400m sales in 2011.

£20m in taxes over two years is £10m per year. That implies £42m taxable profit (at 24% rate of corp. tax) on £400m sales.
Pretty reasonable, don't you think?

Better latte than never.