The next Tory recession?

[I1L2T3]

didn't labour have more than a decade to sort all those things. i seem to remember gordon brown was very big on words like prudence.

 

i keep hearing your whining that the debt has increased since 2010. it is clear to voters that the current government are cutting back labours spending commitments. i know that. everyone sensible in the country knows that. i'm pretty sure you know that, but as it's all you have to cling on to you keep on bringing it up as though it was caused by osbourne.

 

labour overspent whilst in government. we are having to make cuts now because of that.

 

---------- Post added 31-08-2015 at 10:27 ----------

 

 

isn't the ftse higher than it was in 2010? you try make the regular ripples sound like tidal waves.

 

Labour's spending commitments in 2008 were £40bn above revenue. If the deficit is now £80bn above revenue Osborne is borrowing twice as much as Labour ever committed to in order to meet his spending plans. These are not Labour's spending commitments. They're Osbornes.

 

Money that he should not be borrowing if he'd stuck to the plan he made in 2010.

[unbeliever]

Labour's spending commitments in 2008 were £40bn above revenue. If the deficit is now £80bn above revenue Osborne is borrowing twice as much as Labour ever committed to in order to meet his spending plans. These are not Labour's spending commitments. They're Osbornes.

 

Money that he should not be borrowing if he'd stuck to the plan he made in 2010.

 

The bit in bold is a lie.

You're either excluding 2009-10 if you're referring to deficit, or you've switched seamlessly from deficit to total debt and hoped nobody would notice.

 

Are you a Labour spin-doctor or something?

I'm not used to encountering this level of deliberate misdirection on the Forum.

 

YOU DO NOT BORROW DURING A LONG PERIOD OF GROWTH!

 

Brown inhered public finances which were all but balanced. Osbourne inherited a massive structural deficit.

You're crazy if you think we're going to fall for this clap-trap.

Edited August 31, 2015 by unbeliever

[I1L2T3]

The borrowing up to 2008 was not sustainable because it was based on a false and arrogant assumption of having ended boom and bust. When the inevitable bust came along, we were already borrowing too much. Had we been banking surpluses during the boom, we would've had less of a debt and deficit to deal with after the financial crisis hit. Osborne has halved the deficit already but I agree he could've gone further and cut benefits, including tax credits, a bit quicker and further.

 

Actually it was sustainable.

 

In 2008 debt as a percentage of GDP was under 40% and was lower than what Labour inherited off the Tories in 1997.

 

At under 40% it was comparable to most other western economies and if anything the debt was better managed than in other economies with lots of long-term debt and a very high percentage of it held domestically.

 

This is all pre-crisis of course.

[unbeliever]

Actually it was sustainable.

 

In 2008 debt as a percentage of GDP was under 40% and was lower than what Labour inherited off the Tories in 1997.

 

At under 40% it was comparable to most other western economies and if anything the debt was better managed than in other economies with lots of long-term debt and a very high percentage of it held domestically.

 

This is all pre-crisis of course.

 

DEFICITS!

 

You do not run a deficit during a long period of growth. It's madness.

[I1L2T3]

The bit in bold is a lie.

You're either excluding 2009-10 if you're referring to deficit, or you've switched seamlessly from deficit to total debt and hoped nobody would notice.

 

Are you a Labour spin-doctor or something?

I'm not used to encountering this level of deliberate misdirection on the Forum.

 

I think 2009-10 should be excluded as a special case. It was the year after the crisis hit and we had suffered the biggest single year drop in GDP for many, many decades. We'd had to support the banking sector. We'd had to bail out banks. We'd had to fund a rapid increase in out of work benefits. Tax receipts fell off a cliff.

 

None of that was planned spending that Labour had committed to before the crisis hit.

 

The fact is that Labour's planned borrowing in 2008 projected forward to 2010 was £40bn. Too much I agree but never did they plan to borrow £160bn. Not once ever was that in any plan. The truth is that borrowing was in reaction to events as they unfolded.

 

Now, we seem to be in a situation where people are arguing that Osborne's planned borrowing at £80bn (and his doubling of the national debt now approaching 90% of GDP) is OK while Labour were not allowed to plan to borrow £40bn while keeping the debt to GDP ratio under 40%.

 

Seriously, to argue that requires a special set of balls. Congratulations!!

 

---------- Post added 31-08-2015 at 11:32 ----------

 

DEFICITS!

 

You do not run a deficit during a long period of growth. It's madness.

 

Like I've posted I agree that Labour could have borrowed less. I don't however agree that borrowing caused the crisis. There is no credible evidence for that argument.

[unbeliever]

I think 2009-10 should be excluded as a special case. It was the year after the crisis hit and we had suffered the biggest single year drop in GDP for many, many decades. We'd had to support the banking sector. We'd had to bail out banks. We'd had to fund a rapid increase in out of work benefits. Tax receipts fell off a cliff.

 

No. I'm not excluding 2009-10 and neither should anybody else.

Labour's over-spending did not contribute to the financial crisis, but their other failures in government especially their lax rules on capital ratios did.

Global financial problems are to be expected form tie to time and should be accounted for in government planning. As has already been pointed out several times, professional economists from all over the world (leading experts in these matters) issued warning after warning after warning and Brown not only ignored them, he actually tried to bully them into silence.

 

The very, very large structural deficit left by Labour is being gradually reduced. Labour made it perfectly clear that they would have reduced it more slowly, leading to bigger total debt before it turned around.

 

I assume that you're aware of the difference between structural and cyclical deficits. As a Keynes fan I assumed that you were.

In 2008, Labour's deficit was all structural. In fact the structural deficit was larger than the total deficit because there was a cyclical surplus owing to a long period of growth.

In 1997, when Labour came into office, we were recovering from a recession and there was no structural deficit at all. Over the following 10 years, Labour built up a massive structural deficit. If Keynes were around he would have called them muppets in every available publication.

 

Like I've posted I agree that Labour could have borrowed less. I don't however agree that borrowing caused the crisis. There is no credible evidence for that argument.

 

Nobody is saying that over-borrowing caused the crisis.

Over-borrowing was one of many, many mistakes that Labour made and left us in a very weak position to cope with the crisis.

Labour helped create the crisis, but not by selling too many government bonds.

Edited August 31, 2015 by unbeliever

[I1L2T3]

DEFICITS!

 

You do not run a deficit during a long period of growth. It's madness.

 

Of course you can borrow. All governments borrow. All the time. In good times and bad.

[unbeliever]

Of course you can borrow. All governments borrow. All the time. In good times and bad.

 

Rubbish.

You do not run a structural deficit. It's stupid. Keynes agreed.

You run cyclical deficits during the bad times and cyclical surpluses during the good times.

 

Unless the "borrow"ing you're referring is debt roll-over in which case you've reached a new level of deception in your argument.

[I1L2T3]

No. I'm not excluding 2009-10 and neither should anybody else.

Labour's over-spending did not contribute to the financial crisis, but their other failures in government especially their lax rules on capital ratios did.

Global financial problems are to be expected form tie to time and should be accounted for in government planning

 

Nobody is saying that over-borrowing caused the crisis.

Over-borrowing was one of many, many mistakes that Labour made and left us in a very weak position to cope with the crisis.

Labour helped create the crisis, but not by selling too many government bonds.

 

Ah, but they are saying it. If we went back over this thread you'd see several instances were people are claiming Labour,'s overspending caused all our problems. In fact it's a centrepiece of the Tory narrative post-2010. So lots of people are claiming it. They're wrong of course.

 

Actually though, I think now we are getting somewhere with this discussion. Going back to the theme of the thread and that is the recession that is going to happen soon can we say that any lessons have really been learned?

 

1. We're still unprotected from the worst aspects of the banking sector. Light touch regulation remains. The retail/investment split in banking never happened.

 

2. Growth is fragile.

 

3. There are numerous bubbles. Bonds, London property, maybe even stocks and shares

 

4. Our debt is doubled, now at catastrophic levels. Osborne said we were like Greece. We weren't of course but he's taken us closer.

 

5. Household debt continues to rise

 

6. There seems to be a certain arrogance and sense of triumphalism now growth has returned. It's bullish, not unlike Labour pre-2007 actually

 

7. Borrowing is out of control

 

Loads of warning signs about our ability to cope, and loads of thing that could have been done but haven't to improve our ability to cope.

 

Don't underestime how fragile things are.

[unbeliever]

Ah, but they are saying it. If we went back over this thread you'd see several instances were people are claiming Labour,'s overspending caused all our problems. In fact it's a centrepiece of the Tory narrative post-2010. So lots of people are claiming it. They're wrong of course.

 

Actually though, I think now we are getting somewhere with this discussion. Going back to the theme of the thread and that is the recession that is going to happen soon can we say that any lessons have really been learned?

 

1. We're still unprotected from the worst aspects of the banking sector. Light touch regulation remains. The retail/investment split in banking never happened.

 

2. Growth is fragile.

 

3. There are numerous bubbles. Bonds, London property, maybe even stocks and shares

 

4. Our debt is doubled, now at catastrophic levels. Osborne said we were like Greece. We weren't of course but he's taken us closer.

 

5. Household debt continues to rise

 

6. There seems to be a certain arrogance and sense of triumphalism now growth has returned. It's bullish, not unlike Labour pre-2007 actually

 

7. Borrowing is out of control

 

Loads of warning signs about our ability to cope, and loads of thing that could have been done but haven't to improve our ability to cope.

 

Don't underestime how fragile things are.

 

It was always fragile and it always will be.

There will be bad times. Always have been and always will be.

Your repeated statement of the UKs current debt/GDP ratio is very misleading, because it's the all but inevitable results of Labour's great recession and their massive structural deficit.

 

The regulations on borrowing have improved. Mortgages are far better regulated now and the capital ratios at the Banks make a huge difference. They should probably be improved further.

Don't forget though that the sudden switch from very low capital requirements to much higher several exacerbated the 2008 crisis and it's no sin to deal with outstanding banking matters at a gentle pace.

 

Your characterisation of borrowing as "out of control" is very odd. The total debt is very high, but as long as we're headed toward sustainable public spending and the bond markets see that, the cost of borrowing will remain reasonably low and a reasonable rate of debt reduction can follow whatever international pressures arise and without shredding public services.

Edited August 31, 2015 by unbeliever