Thursday, 27 June 2013

The Lies of UK Politicians

One graph to show you why real cuts after the election are going to be at least triple and possibly up to five times what has just been announced - whoever is in charge:

or we may have a sterling crisis, tax rates at well over 50% or pensions confiscated...we'll have to see what they dream of doing to us in due course.


Blue Eyes said...

Spending and income seem quite similar on that chart? Is that not progress of a sort?

I am heartened by the rapid change of tone of the debate. Even the Beeb is beginning to realise that while departmental spending has been falling, welfare spending has been rising and that this will be the next thing to be tackled whether we like it or not.

It's clear that the LDs have been holding back on welfare reform. If today's political backdrop stays the same, the 2015 election will be fought on the basis of who can be tougher with welfare spending. We'll end up with some fudge where existing greybeards keep much of their old-age provisions but my generation and below will get nothing.

This is as has been assumed by my age-group for just about ever. None of us expect to be supported by the state in retirement.

This change will trash the current charts which show pension provision and welfare taking up all public spending "going forward".

By the end of the *next* parliament, should the Tories win, we'll have a healthy surplus and a decent outlook ready for Labour to trash it again.

Clive said...

"(currency) crisis, tax rates at well over 50% or pensions confiscated..."

What, like what is happening in Japan ? Or the US ? Oh... wait a minute...

Please tell me one country which can print it's own currency where that is happening / has happened.

CityUnslicker said...

Clive - well the obvious one is Weimar Germany - although they had a madmen in charge who blew up the money supply.

In 1934 the US sequestered all private gold.

Argentina natioanlised its pension schemes just over a decade ago - whilst a democracy and with its own peso.

Your answer meerely provides another apocalyptic outcome - one I have written about in the past. Monetisation of debt. Which leads to a variant of hyperinflation - savers totally wiped out along with the centuries of accumulated wealth.

CityUnslicker said...


Maybe the ground is being prepared, but the table shows the futility.

At the moment I see no way the politicians can mvoe to real austerity when the current light austerity is portrayed as evil beyond belief.

The actual cuts are tiny in comparision to the task at hand.

As for the graph, the predicted deficit in 2015/16 is £30 billion - still nearly triple the cuts at what will be the height of the cycle....

DJK said...

> As for the graph, the predicted deficit in 2015/16 is £30 billion ...

And these are still fantasy numbers, the real defecit will likely be much bigger.

Blue Eyes said...

CU my point is that I think the mood has changed, very suddenly. There have been huge (departmental) cuts, but they've been offset by welfare spending increases. We're beginning to see a consensus forming around serious reform to the welfare system and I expect a bit change to pensions for now-young people.

The table shows that the stock of debt is high. I think we knew that. The table shows that the "new" round of cuts is relatively small. I think we knew this.

I have to ask you on this: did you really expect a government of any colour at all to start running a surplus this parliament?

Britain may be poorly-managed but my word it's a lot better run than many other places. At least we are starting to get to grips with this stuff rather than have it either forced on us from outside.

CityUnslicker said...

BE - but the politio's are saying they are doing a lot when they are not.
I did not expect or even promote a surplus today. But reality is there is not even a path to surplus being presented....and yet we are told this is massive austerity.

Whilst you are right that perhaps the mood music is changing it is stillin fairy land. As DJK says, this prediction will prove optimistic.

The other issue is that private debt is even worse. No de-leveraging has really taken place privately either.

The economy is incredibly weak and yet QE is over. Tough choices were avoided in 2010/11. Disaster awaits.

Plus there are no votes in any of this so we will become a Greece, where the parties lied until collpase in order to gerrymander votes. I hope that I am wrong and your are right though!

Bill Quango MP said...

Not sure about the total gloom Cu.
The USA has decided to just push the debt beyond any possibility of repayment, and then to not worry about it. Some future, as yet unknown event, will mean it all takes care of itself.

Maybe a war. Maybe the fragmentation of China into two nations. Maybe discovery of a really, really cheap power source.
Maybe new computer models replace civil servants and these 'civil robots' automatically direct every cent only to the necessary expenditure and all government waste, so all government debt, is eliminated.

Whatever, Obama seems pretty sure that something like that is going to happen. Maybe UFOs, or a magic beanstalk. Whatever...we don't know, but 'something will turn up. So no point even worrying about it. Just carry on as if debt isn't a problem and if you can be confident and convincing enough, it probably won't be.

Blue Eyes said...

CU, I think we are in danger of arguing at cross purposes (if that is even possible). There *has* been departmental spending austerity. Somewhere there's a chart showing departmental spending down quite significantly. The slack has all been taken up by welfare spending. I hadn't realise this until about yesterday, before then I thought that the government wasn't even trying.

Welfare reform is *difficult* and the LDs are totally spannering it. BUT I think there's been a political shift and that if the Tories go in to the election promising real reform they might win it and then do some of it.

I am not nearly as pessimistic about the politics as you seem to be!

I'm also fairly confident that UK productivity can sort itself out. Maybe with shale, maybe with good old-fashioned working practices getting better. We have a fairly pro-free-trade mentality and are fairly entrepreneurial compared to many other nations. We are a good investment destination for overseas profits. Our education system is finally improving.

Electro-Kevin said...

Good, positive, comments, Blue.

My WV says 'fuffocated'.

A new one for the lexicon.

We're all being *fuffocated* with this gloom.

CityUnslicker said...

BE - Absolutely, it is net austerity I am talking about and of course wlefare spending should have risen to cover unemployment etc to some extent.

It's the absolute's that get me, debt dynamics are tough when we are in this position.

BQ - The US just cut a chunk of government spending and raised taxes. It's GDP position is worse than ours, however its growth rate is so much better that the maths work as taxes will rise faster than spending over time. Plus the US has far less personal debt as deleverage there was real (mainly due to tax cuts and easier mortgage liquidations, bankruptcy; interest rate rises won't kill the US consumers like they will in the UK.

andrew said...

There are a couple of things that I can offer on the bright side.

1 One of the main reasons the US is in a better state is that it has a younger workforce / higher birthrate than Europe. One of the things many of those ~1m Polish immigrants did was go and have children.

2 The Benefit cap will not be increased and inflation is likely to be a bit over 2.5% for some years. Like the min wage, every change of that value will be fought over and used to define 'clear blue water'

3 Long Gilt yields were about 3.5% last I looked and as long as inflation is ~2.5%, it will not go up too much.

So, let time and babies do its work.

It would be good to get back to the true old tory ethos of 'if you do anything, it will just make things worse, so let's do nothing and then go to lunch'.

Clive said...

Oh no, not the old Weimar Germany chestnut again. I wondered if that would be trotted out.

Weimar Germany had to make war reparations in either foreign currency or gold. It also had a lot of its productive capacity put out of action through strikes or occupation. That myth has been debunked so comprehensively, I can't believe it's still served up.

The US made, effectively, a compulsory purchase order for gold at the prevailing market rate. This happens all the time to other assets which the state doesn't want held by the current owners for various reasons. It was ineffective then and would be similarly ineffective in future but what, exactly is it supposed to signify in terms of the doomsday thinking ? If the state wants to build a motorway (or HS3) over my house, it'll use the perfectly legal methods at its disposal and I'll lose a house which is of more value to me than it's notional price. But so what ? If they want my mother's gold wedding ring, they can do likewise.

Finally, Argentina's pension "grab". Not so. gives the facts. The previous "free market's at any cost" government made all citizens take out a private pension instead of a state pension. Thus they had the "benefit" of having to suck up big losses when markets tanked. While not without collateral damage, most of the population preferred the (flaky, admittedly) government backed scheme to an often rigged and fraudulent "free market" alternative. Where's the read across then to UK private pensions ? The state pension is already the... er... state pension.

Sorry, not convinced...

Timbo614 said...

@BE and others, This attitude about "not expecting the state to keep me in my old age".

I'm 60 in August and the point is that we were, and many still are, told that we will get this payment because we have "paid in" for 30+ years. I know its unfunded but that was not our decision nor was it what we were led to believe!

So... X amount from the state was part of the calculation. We need Y to live - X will come from the state so I need to top it up with Z - Z being the bit you saved for!!

But even if you have saved up Z the returns now on your saving are pretty miserable (I made an assumption of about 6% return while planning)... but now you need half a million in the building society to get just your £140 a week (@1.5%) four times what you needed at 6%! AND you running to walk backwards!! We guys can't make up that shortfall just like that! We're being /have been shafted.
<\Rant Mode>

Now, if they start telling people that from 2040(say) you'll get bugger all, but you still have to pay NI. Then NI will have to be scrapped and just called Tax because the illusion will finally go pop.

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