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UK PoliGAF thread of tell me about the rabbits again, Dave.
- Thread starter Chinner
- Start date
radioheadrule83
Banned
Empty said:
There's no incentive to close these loopholes because they're active elsewhere in the world, the fear being that if we close our domestic corporate tax loopholes, Barclays or whoever will simply make some other country their financial HQ. We look the other way. I'd really love there to be some multinational consensus on making these bastards pay something back, but I just don't think it's going to happen.
Meanwhile, public servants to this country - a lot of whom have been loyal for decades - will enjoy a pay freeze way below inflation, 490,000 of them will be laid off and their pensions will be attacked as such that they contribute 3% more each year themselves, and at the end of it all, because of the move from RPI to CPI - will receive less in actual pension payments in retirement. As much as £600+ less per year. Which would be great if it were just the overpaid 'mandarins' of white hall suffering - but its not. Its common council workers and administrators in various government departments, the low paid government worker, earning less than £23k per annum... they're the ones who will struggle or lose their jobs. And does it look like the private sector is doing well enough to pick up the slack and employ them? No. Inflation hitting 4%+, 2.5 million already unemployed before the public sector cuts have even been implemented, and at least five people competing for every job vacancy in Britain. There will be a cultural and societal price to pay for having a generation who want to work but can't find it.
This is the young generation, those with us and those yet to be born - being expected to pay for the baby boomer generation and recklessness of the shitty financial industry and warmongering politicians, as they themselves become elderly. Not their problem. We're not all in this together at all, certain sects of society have very slopey shoulders indeed.
The shit flows downwards, a trickle down economy of shit. The worst off in society will be practically drowning in it for the next year or so. Big society my arse. Everyone outside of 'the city' is expected to do more for far less. Work your way out of this mess (that you didn't create), you plebeian slobs!
If a popular movement started to march on the commons, Egypt style, I'd be there in a heartbeat.
radioheadrule83
Banned
You can ask the Prime Minsiter a question via Al Jazeera's YouTube page... at present people aren't taking it very seriously:
http://www.bbc.co.uk/news/business-12511912
Barclays has revealed it paid £113m in corporation tax to the UK in 2009, 2.4% of its £4.6bn global annual profit.
I'm so pissed off right now. Fuckers aren't passing on anything.
Barclays has revealed it paid £113m in corporation tax to the UK in 2009, 2.4% of its £4.6bn global annual profit.
I'm so pissed off right now. Fuckers aren't passing on anything.
zomgbbqftw
Banned
Public sector net borrowing is down YoY and there was even a surplus for the first time since Jan 2009 two years ago. Surplus of £3.7bn ($6.0bn)
http://www.ifs.org.uk/pr/pubfin_feb11.pdf
The IFS paper says that government current spending growth has slowed and tax receipts are up by over 10% YoY. All very good by anyone's measure.
In other news:
US Treasury secretary Tim Geithner has backed the UK austerity programme.
http://online.wsj.com/article/SB100...392352.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews
In the article he also criticises UK pre-crisis regulation saying that it was too lax.
http://www.ifs.org.uk/pr/pubfin_feb11.pdf
The IFS paper says that government current spending growth has slowed and tax receipts are up by over 10% YoY. All very good by anyone's measure.
In other news:
US Treasury secretary Tim Geithner has backed the UK austerity programme.
http://online.wsj.com/article/SB100...392352.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews
In the article he also criticises UK pre-crisis regulation saying that it was too lax.
zomgbbqftw
Banned
Zenith said:
Including the Guardian who have a nice little scheme to avoid taxes on disposals and the dissolution of the Scott Trust itself.
http://images.newstatesman.com/articles/2011//20110222_246117780_w.jpg
So, implementing a new voting system is tantamount to killing babies. Good to know.
So, implementing a new voting system is tantamount to killing babies. Good to know.
yeah. all the no to av posters are super melodramatic.
also what's with the ukip colours, bit of a weird choice given their minority status.
it's a bit hilarious too that they've resorted to cost. that tells me that their arguments about av being a worse system haven't been getting much traction.
someone needs to whip up a version with a "say no to democracy, she needs a cardiac system not a general election. a general election costs £100 million, who needs it. vote bnp"
also what's with the ukip colours, bit of a weird choice given their minority status.
it's a bit hilarious too that they've resorted to cost. that tells me that their arguments about av being a worse system haven't been getting much traction.
someone needs to whip up a version with a "say no to democracy, she needs a cardiac system not a general election. a general election costs £100 million, who needs it. vote bnp"
Dark Machine
Member
Long time no post in here, but I thought I'd share an interesting article I read recently about the City of London. I knew it was a powerful financial centre, but I didn't know half of it apparently. It's like it's own state almost.
http://www.newstatesman.com/economy/2011/02/london-corporation-city
(In before NS = red commie rubbish etc etc.)
I remember this bit from I, Robot as I read the last few pages:
Is there a problem with the three laws?
The three laws are perfect.
Then why would you build a robot
that could function without them?
The three laws will lead
to only one logical outcome.
What? What outcome?
Revolution.
Whose revolution?
That, detective,
is the right question.
Strange I know, but I really do feel like we're teetering on the edge of something here. Maybe.
http://www.newstatesman.com/economy/2011/02/london-corporation-city
(In before NS = red commie rubbish etc etc.)
I remember this bit from I, Robot as I read the last few pages:
Is there a problem with the three laws?
The three laws are perfect.
Then why would you build a robot
that could function without them?
The three laws will lead
to only one logical outcome.
What? What outcome?
Revolution.
Whose revolution?
That, detective,
is the right question.
Strange I know, but I really do feel like we're teetering on the edge of something here. Maybe.
radioheadrule83 said:
If the banks fucked off to a more competitive tax haven, the level of fucked we are now would be nothing.
We are suffering the brunt of a decade of over spending, the parties over, time to pay off the credit card before we fuck our credit rating and have to pay massive interest.
Dark Machine
Member
kitch9 said:
How would we be utterly fucked? The banks aren't paying their share in taxes anyway? Also stop going on about how the country's a family with a credit card bill, that's the biggest load of nonsense ever. What kind of family gets money back on everything they spend on via taxes? Does your family's income change dependant on whether the man down the road is employed? Or on whether the woman across the street bought a TV last week?
UK Government bonds are incredibly attractive to investors, they're more stable than companies and even the Japanese government bonds, plus they have a higher yield. Most government bonds are owed to UK investors, pension funds etc. Pension funds could buy up issued government bonds which would fatten all our pensions, give the government cash, and enable them to tax it BACK. Cuts of THIS nature and THIS speed are nothing but ideological. Get rid of libraries and childrens centres, and give a tax break to massive financial organisations, that DO NOT contribute as much as they should to the economy and have been dragging their feet in re-investing OUR money (from the bailout) into OUR economy. This was a robbery. We blinked, and now the propaganda machine's running to make it seem like it was our fault. Well that's bullshit. Utter, utter bullshit.
Dark Machine said:
My earnings do depend on everybody else earning yes, if everybody was jobless who would buy my services?
With regard the banks, its a difficult problem that is a global issue. Until there is a global agreement to stop them moving money around they have everybody by the balls. In the meantime until that is sorted we have to keep one of our biggest employment sectors intact as the loss of tax revenue the banks create in the form of income tax, ni, etc, etc is incomprehensible.
Osborne said he had heard that Osborne's political aspiration was to be a "blend of Nigel Lawson and Michael Heseltine". (See 11.46am.)
Ed Milliband's response in his debate speech:
"Another comparison springs to mind - the same hubris and arrogance of the early 1990s, the same broken promises, the same view that unemployment is a price worth paying. He is Norman Lamont with an iPod. And no doubt on his playlist - Je Ne Regrette Rien."
I giggled.
Ed Milliband's response in his debate speech:
"Another comparison springs to mind - the same hubris and arrogance of the early 1990s, the same broken promises, the same view that unemployment is a price worth paying. He is Norman Lamont with an iPod. And no doubt on his playlist - Je Ne Regrette Rien."
I giggled.
Your Excellency
Banned
How much will the 1p saving save me per week if I spend, say, £20 a week on petrol? I don't know how to work this stuff out.
J Tourettes
Banned
Your Excellency said:
How many litres is that?
Ps love Shannyn Sossamon.
J Tourettes
Banned
HixxSAFC said:
there was a planned 4p rise abolished as well as the 1p cut so potentially saved him more than that.
Your Excellency
Banned
Ah cool.
Dark Machine
Member
I just loved how New Labour wanted to raise petrol prices whilst at the same time doing very little to improve the shite public transport systems in this country. If you want to get people out of cars, make sure trains and buses can take them where they want. Raising petrol for Bus companies as well as car users and continuing with the ongoing farce of the rail system just creates bigger problems. Of course the Tories bungled 'privatisation' of the public transport system is the root cause. But Blair/Brown did nothing but continue their flawed plans and I don't expect anything different from this government either.
Your Excellency said:
The 1p fuel duty cut that was supposed to happen won't happen and we will get instead a fuel duty cut. But that wasn't the only measure introduced. He also said he would cancel a fuel duty escalator and delay an inflation-linked rise in duty planned for next week until next year.
So where previously it would have risen through inflation and that extra tax, now it shouldn't. at least not as dramatically.
The maths is actually pretty difficult to work out, without knowing what the prices are, market reactions to middle east situation etc.
Having said that the fact that you spend £20 per week suggests that you are not of the middle income + higher, or prominent car user perhaps, who fill up the tank once a week. If that is so, you will still be spending £1040 ( 20* 52 weeks) a year.
But you would get more fuel for your money than you would have otherwise got had there been no changes. So if fuel stayed at the average 1.30 a litre, you get what 15 ltres a week for twenty quid now, which is 780 litres a year, 780*1.29= £1006.2, thus theoretically saving you money. But since you spend the 20 quid a week still, you get more petrol than you would have otherwise got.
If you factor in inflation, and the inevitable hikes in petrol prices due to the middle east and other things, I'd say overall you'd offset enough to say that this is good news... sort of.
tlrd: the changes are good news, which should theoretically, help subdue the turbulent petrol/diesel price hikes. Hopefully it won't be as dramatic a price increase, as it has been last year, thus saving you a fairly significant amount of money, or for lack of a better phrase, get you more bang for your buck.
edit: Don't get me wrong, I think all drivers are gonna be worse off this time next year; but we've slowed down how much worse off we would have been.
try here:
http://www.bbc.co.uk/news/business-12773565
zomgbbqftw
Banned
Some of our guys at work just finished their report, it is very extensive so it will take me a while to finish reading it, but there is a lot of stuff to digest.
Firstly, this is long term budget, no real giveaway like Labour budgets of the past, with that out of the way some specific measures are important.
Downrating of growth, it was bound to happen, it means that public sector net debt will be ~ £40bn higher than previously estimated, my company have uprated growth for years 5-8 because of tax changes expected to bring more business into the country. In our report (sadly eyes only) we estimate that in the year 2015/16 the deficit will be ~ £30bn, two years later around £10bn and two years later the country should have a net surplus. Obviously projections that far out in the future are sack of salt stuff, but those figures have changed from £22bn, £18bn and £10bn deficits respectively.
The petrol cut isn't really a cut, it is a shifting of tax from the motorist to the oil companies, my guess is that the oil companies will just shift it back onto the motorist. A bit pointless really, but he got some headlines out of it.
The new corporation tax rates are very good and the overseas business rate decrease has gone down very well in the city. Our lot expect the business drain from England and Wales to go into reverse as multi-nationals will see the UK as a good option now. Not as low as Ireland, but our infrastructure and well just about everything else is better. The promise of 23% corp rates is very nice apparently.
Onto small business, our guys say the coming year will be the best time to start any business in one of the enterprise zones, the government are basically giving you money to start a business and employ people. The 5 year time limit will probably be extended if the current lot win and if they are successful in lowering the unemployment rate in the chosen areas many more will be created.
More needs to be done to help manufacturing, I haven't finished reading this part, but the gist is that manufacturing costs in this country are still to high and we need to compete better with Germany for high tech manufacturing business. To that end, the government have hinted at tax breaks for certain industries (think semi-conductors, Li-ion batteries, etc...) but didn't announce anything specific for high tech manufacturing.
Finally, before I go to bed, the budget has also hinted at future announcement, the chancellor is preparing the ground for some kind of tax break on capital investment either raising the £100k limit to something more like £100m or some valuation based limit. We believe this alone could add 0.5% to GDP from 2014 onwards if implemented correctly and early, the cost in the initial year would be high which is why we think the borrowing figures for next year are very conservative. Even with growth at 1.3% the chancellor should hit the figures, so there should be some kind of undershoot that he will use to announce this tax break. It also has the added bonus that UK companies will no longer be takeover targets like they are now. I'm not sure how that comes about but I intend to find out...
Firstly, this is long term budget, no real giveaway like Labour budgets of the past, with that out of the way some specific measures are important.
Downrating of growth, it was bound to happen, it means that public sector net debt will be ~ £40bn higher than previously estimated, my company have uprated growth for years 5-8 because of tax changes expected to bring more business into the country. In our report (sadly eyes only) we estimate that in the year 2015/16 the deficit will be ~ £30bn, two years later around £10bn and two years later the country should have a net surplus. Obviously projections that far out in the future are sack of salt stuff, but those figures have changed from £22bn, £18bn and £10bn deficits respectively.
The petrol cut isn't really a cut, it is a shifting of tax from the motorist to the oil companies, my guess is that the oil companies will just shift it back onto the motorist. A bit pointless really, but he got some headlines out of it.
The new corporation tax rates are very good and the overseas business rate decrease has gone down very well in the city. Our lot expect the business drain from England and Wales to go into reverse as multi-nationals will see the UK as a good option now. Not as low as Ireland, but our infrastructure and well just about everything else is better. The promise of 23% corp rates is very nice apparently.
Onto small business, our guys say the coming year will be the best time to start any business in one of the enterprise zones, the government are basically giving you money to start a business and employ people. The 5 year time limit will probably be extended if the current lot win and if they are successful in lowering the unemployment rate in the chosen areas many more will be created.
More needs to be done to help manufacturing, I haven't finished reading this part, but the gist is that manufacturing costs in this country are still to high and we need to compete better with Germany for high tech manufacturing business. To that end, the government have hinted at tax breaks for certain industries (think semi-conductors, Li-ion batteries, etc...) but didn't announce anything specific for high tech manufacturing.
Finally, before I go to bed, the budget has also hinted at future announcement, the chancellor is preparing the ground for some kind of tax break on capital investment either raising the £100k limit to something more like £100m or some valuation based limit. We believe this alone could add 0.5% to GDP from 2014 onwards if implemented correctly and early, the cost in the initial year would be high which is why we think the borrowing figures for next year are very conservative. Even with growth at 1.3% the chancellor should hit the figures, so there should be some kind of undershoot that he will use to announce this tax break. It also has the added bonus that UK companies will no longer be takeover targets like they are now. I'm not sure how that comes about but I intend to find out...
zomgbbqftw
Banned
Empty said:
A big bank...
Amazingly some people are still there, I took the last train home but it looks like some of our guys are going to go all night and get it done for tomorrow. Parts of our report are going to be used by a newspaper so we had to get the bulk of it done today.
Petrol taxes were shifted onto north sea oil ventures, not oil companies all over the world. so I don't know how you create a direct link, where they pass it back onto motorists. But you are right that it's budget neutral more than anything.
And wpp have already come out and said they are moving back to the uk, because of the corporate tax thing, so you are probably right there.
The big thing is the growth. I think, personally, the government is playing up optimism. But what else can you do?
And wpp have already come out and said they are moving back to the uk, because of the corporate tax thing, so you are probably right there.
The big thing is the growth. I think, personally, the government is playing up optimism. But what else can you do?
zomgbbqftw
Banned
Ashes1396 said:
Well Osborne has been on saying that the oil companies won't be able to pass the buck, but I remain sceptical. If they can't then it's great, they make billions anyway and motorists need the respite. Hopefully Gadaffi will be out of power by the end of the year and oil prices will drop once he is gone.
More than just WPP, I just spoke to one of our guys, he says there are around 20-25 multinationals that are considering moving back to the UK from Ireland in the next couple of years. If it works they will bring around 100k jobs directly and another 200k indirectly plus around £1bn in corporate taxes and another £500m in taxes from increased economic activity.
Indeed. I think this year was important, I mean look at Portugal they are now in a state of turmoil, from what I hear around the office the UK would be in a similar position begging the international community for money if Gordon had clung onto power. The country's gilt yield has fallen by a considerable amount since 2009, partly down to QE but mostly because of renewed confidence in the UK economy and the prospect and now actual Tory government taking over.
zomgbbqftw
Banned
Empty said:
Hey! We're not all bad. The banking industry has a gets a very bad rap from idiot journalists who need to do more research. We didn't force the government to borrow more than £150bn from 2003-2007, we didn't force the government to overtax business and force them to reconsider their tax residency. We didn't make doing business almost impossible for small guys with crazy employment laws. These are the reasons the UK economy is in the shitter, the banking crisis was just the trigger, what we face now was bound to happen. A boom (bubble) fuelled by public debt increases for, err, investment and private debt for home buying/improvement has very poor foundations, we didn't lower interest rates and cause the housing bubble.
Don't forget for every mortgage agreed with an unsuitable party there are two sides, the creditor (us) and the debtor (the consumer). Both are to blame for the crisis, we lent to people who wanted stuff they couldn't actually afford but low interest rates allowed to them to do so. Banks shouldn't have lent, but it is the personal responsibility of the person to not live beyond your means.
Anyway rant off. I just get very irritated by people who blame us for everything, when my job moves to Hong Kong or New York and my income (and very large tax payments) goes with it don't tell us we didn't warn you.
Better be off before the boss catches me or they find my remote desktop!
phisheep
NeoGAF's Chief Barrister
Ashes1396 said:
It always rather worries me why everyone thinks economic growth is so important.
Really, at least recently, all that economic growth has done is go along with population rise. It doesn't amount to much when it comes to GDP per head.
And it seems to me that it doesn't matter overmuch if in a hundred years time we have an economy half the size with half the population. In fact the remaining population might be a whole load better off without the overcrowding.
OK, there's a whole load of stuff about the advance commitments that are made in the way of pensions and so on that need to be funded, but it seems extremely shortsighted to base the entire economic direction on growth prospects when in the long term that ain't necessarily a good thing.
Anyone care to try explaining it to me?
zomgbbqftw
Banned
phisheep said:
You make a good point. It brings me back to the disastrous last government. Purchasing Power Parity, PPP, is the most important measure of prosperity of a nation. You can see from 2001-2007 our PPP is relatively static because economic growth was fuelled by the housing bubble and cheap immigrant labour, from 2007-2009 our PPP went down much faster than other countries because we had such a high level of immigration. Our goal should be increasing our PPP per capita, not our nominal GDP.
radioheadrule83
Banned
louis89 said:
Speaking of Andrew Lansley
http://www.youtube.com/watch?v=Dl1jPqqTdNo
I thought it was a very neutral budget with some good decisions made for the long term growth of private sector business.
What worries me lately is that the pain caused by his public sector decisions hasn't even begun. Most departments, like mine, don't put their measures into effect until April 1st... so if you think its been hunky dory so far and that things aren't as bad as you feared, think again, cuts to jobs and services begin next week. Departments are cutting services, cutting staff and operating voluntary early release schemes. The early release schemes should see people with moderate to lengthy service have enough money to get by for a few months. But if those people don't find work, or if short-serviced individuals are let go, I don't really see how that helps matters. In fact, it could concievably be quite damaging. The TUC rally on the 26th down on the Embankment should be a useful barometer of opinion / rage in the public services.
I am a pragmatic person. I understand that there is a debt problem that needs to be tackled to keep the UK in good order, to return it to solvency, with a good credit rating and so on and so forth... while some of my fellow lefties see the corporation tax cuts, and relief for major business and sneer -- I understand that such measures can go a good way towards making us more competitive on a global stage.
Having said all of that, I do not swallow the idea that things are so bad as to warrant such broad arbitrary cuts. Debt as a proportion of GDP is over 50% now, but from 1918 to 1961 it was over 100% - and in that period we nationalised major industries, built the NHS, the welfare state, and millions of council homes. I think that some of the cuts are probably justified, inevitable and necessary -- lord knows there's waste - but I know from sitting in the department where I work, that they could have been targetted better.
The civil service and ministry of defence are plagued by piss poor deals with contractors and suppliers, consultants and consortiums. The government is routinely swindled out of billions (£1.8bln a year) and these people ALWAYS over-promise and under-deliver. Certain 'brave' decisions have been made as to certain big projects in the civil service - but I don't believe that private contracts have been looked at properly. In fact, the opposite has happened. We have consultants, contractors and agency staff vying for work that regular civilians can do just as well, and at far less cost. Management is centralised in London, and it's top heavy - these are the people who cost the most. Are they really needed, and in such numbers? Outside of the capital, there is an excess of upper middle management grades. Neither of those groups will be made to suffer by these cuts, because the government ensured that those groups were the most enfranchised in the various reviews such as the Strategic Defence and Security Review. It will be the people on the lower rungs, who are already squeezed, who will find themselves on a tighter budget or looking for work.
Not enough was announced yesterday on tax avoidance. I think there's an unspoken belief in some circles that these things must be tolerated if big businesses are to continue to view the UK as a good place to do business. But surely not in all cases... knowing that 'Sir' Philip Topshop Green was able to legally dodge nearly £300m in taxes is just sickening. There is a £120bln tax gap caused by tax avoidance, evasion and uncollected taxes.
On a slightly related note: even though each tax compliance officer in the HMRC generates an average of £658k for the treasury (far outstripping the cost of their salary), the HMRC is facing the cuts like everybody else. That does NOT make sense. Osbourne's austerity budget of last year basically set lower budgets on all departments. They then had to decide what they could or couldn't do. That's not targetted, it's arbitrary. My personal political feelings aside, I will be happy if what this government is trying actually works, but from here on in - I'd like to see more targetted measures than arbitrary ones.
If you're already in the private sector, George did some things yesterday (and in the last budget) that should make life easier on your employer. He made the environment more attractive for starting a business. All that is good for private sector job creation... but will it have the impact needed, in the timeframe needed, to offset the damage being done to the public sector - which rightly or wrongly - represents 53% of the economy?
I would also like to add, I like the idea of combining NI and Income Tax. It'll take years to plan out properly and introduce and it should be interesting if it happens... because people will suddenly realise they're being taxed 30%+. To frame it as tax simplification and a matter of pragmatism is quite clever. I think it will ultimately benefit the conservatives though, as it will probably create a psychological impetus to lower taxes...
Z
ZombieFred
Unconfirmed Member
Say zomg, what would you say that is very healthy for us to be on, in terms of the budget deficit we have to break down in this parliament? Would you consider their budget plan for the next few years a good road to be on and wish for our economy and growth to obtain good results in the process?
radioheadrule83
Banned
zomgbbqftw said:
People who are struggling to get on the housing ladder will always take what they can get. It is the corporate responsibility of banks not to expose themselves to unreasonable levels of risk. I agree that banks / bankers are an easy target for journalists, but I don't think you can discount the damage that £850bln of bailouts has done to the public finances. In the long term, the treasury gets back everything it invested and more, but in the short term - the average tax payer suffers - be it from diminished services, increased cost of living, pay freezes, or even job losses. You make a good point about the conduct of the previous government though, they presided over it all and helped make it possible. Adventurism in Iraq in 2003 didn't help either.
phisheep
NeoGAF's Chief Barrister
zomgbbqftw said:
Don't know that I'd necessarily agree that PPP is the most important measure. Even that makes all sorts of assumptions about external trade relations, and the overwhelming importance of economics over other things like say pleasurable activity and talking to neighbours.
There's political decisions to be made here and it kind of miffs me that it all ends up being economics all the time regardless which party is in power.
That's not to say economics and trade and so on aren't important, they sure are, but I guess from your perspective they maybe take on more importance than perhaps they deserve.
zomgbbqftw
Banned
ZombieFred said:
This year will be around 10%, next year around 7%, the year after 4% and after that 2-3%. Those figures are actually higher than estimated in November, but it's not a problem.
Going any slower than that and the debt markets would lose confidence in our ability to pay our way which would send Gilt yields up and our interest payments would increase by a large amount which would either cause higher than expected borrowing (it has already happened this year in October and November where debt interest coming in higher than expected has caused PSNB to go up) which puts us into a vicious cycle of cutting spending to pay for debt interest which would lead to lower growth and more debt etc... See Ireland or Greece for this exact problem.
If Labour were in power we would be nailed on this path, I speak to sovereign debt traders a lot and they are certain that Labour's plan of reducing the deficit by half over the term would be too slow and the gilt yields would have forced their hand. One guy said that Labour would eventually have made the same cuts to public spending but we would have much, much higher debt interest payments (something like £100bn per year vs £60bn now) because creditors would demand a higher risk premium. People can say you can borrow your way out of debt (increasing GDP faster than debt) where debt falls as a proportion of GDP, see the USA for this example or read anything by Krugman to get a better understanding. The problem with this is that increasing government spending and borrowing more to stimulate only delays the inevitable and makes the resulting crash much larger. It is like mortgaging your future for a few years of peace. It is extremely short-termist and that is the Labour plan for the UK, it would leave us poorly placed to withstand further shocks to the world economy.
I'll put it into context, you have a house worth £100k, and other items worth a further £10k for a total of £110k and a long term debt of £60k securitised against the house. Your net position is £50k and your debt as a proportion of your total wealth is around 55% which is perfectly manageable. Over the next 5 years the value of you house increases and you decide to increase you mortgage to £100k but because the value of you home is now £200k your net debt position has actually gone down from 55% to 48%. Sadly the following year you lose your job and there is a recession. Your house price crashes from £200k to £150k and you have to sell your current assets to pay your off credit card and short term loans. Your net debt position is now 67% but you have no job to pay it down. You decide that the only way you can pay your mortgage is to borrow money and invest it yourself, the problem is that you're not very good at it, but either way you do make some money, more at least than the loans are worth. Your debt now stands at £150k (mortgage plus borrowed amount for investment) and your assets are worth around £240k so your net debt position is 62.5% which is lower than before, great, right? Well no, the problem is that when you borrowed the £50k to invest your creditworthiness was quite poor and you could only agree to interest payments of 10% per year plus you mortgage repayments at 4% interest only. Because of this you are unable to reduce your stock of debt as any money you make is spent on interest for your debts and running your house (feeding your kids, wife etc...). But life is good and you have actually decreased you net debt position so the creditors are placated.
Bad news though, another recession has come the money you had invested is now not worth as much as you thought it was and your assets are now valued at £175k and your debt is worth £150k, your net debt position is now 85%, your creditwothiness is in the toilet and you can no longer borrow from reputable lenders but your still have to pay £9k in debt interest for your mortgage and loan, luckily your wife is great at debt management and finds a way to come up with £9k by cutting household expenditure, your kids go to state school now and you have given up on your annual holiday to Africa. The problem is that you no longer have a way of making money as your creditworthiness is still in the toilet lenders are only willing to lend you small amounts of money for penal interest rates so you can't do your investment trick again and you can't find a job due to the recession. The following year you decide to borrow £20k at 20% a year interest because you need to make money your net debt position is now 95% and your interest payments are £13k per year, sadly you are very poor at investing and you repeat the same mistakes, and your investments are valued at just 50% of their original value. Your net debt is now at £170k and your assets are worth £185k, but your interest payments are £13k per year, you have no job and no way to pay the interest. You end up borrowing on your credit cards to pay the interest but that just increases your debt load for no return. Your debt is now increasing and there is no asset increase, your net debt position is now 99% and you have no way of getting it down. The only way to get the figure down is to declare bankruptcy, and fuck all of the people you owe money to.
Sorry for the long post, but that was economics 101 and how countries fall into the debt cycle.
phisheep said:
phisheep said:
Well let me tackle it from a view that hasn't been in the papers yesterday but is generally the argument from a societal point of view; You haven't for example considered relieving poverty in the UK through growth. Without redistribution of wealth from the rich, if we are to make the poor richer, without the rich getting poorer, we need growth.
From an individualistic point of view, it also means that we are better off economically, and through this there can be more chances to invest and be richer ourselves (the working, the middle classes and the richest); which of cause is not related to the above, but can be. Say for example in places where there are 90%+ people on the poverty line, or below it; welfare reforms can only do so much, we would in the cases of say areas in Sunderland, welcome manufacturing, as was argued on radio four yesterday in light of the budget. But, if smaller businesses were to also rise up, they would be more shops, they'd be more jobs, possibly even for unskilled workers or low skilled workers, and of course indicated through economic growth.