Thursday 7 November 2019

Labour's spending insanity - UPDATE

I really struggled for a title for this short post, insanity is not the best word. But splurge has been over-used as have many others.

However, I thought it best we try and keep an overall tabs on Labour spending commitments...

"A hundred billion here, a hundred billion there, pretty soon your talking about real money" paraphrase Everett Dirksen.

So far with Environmental green wash, NHS and new homes I get to around £250 billion.

This is a mere 25% increase in Government spending. To raise this kind of money in tax would be some serious effort, 10p on income tax a wealth tax at 5% might make a little dent in it, but likely 25% VAT too.

Of course, they won;t do any of that and instead will just test the limits of the market for Gilt issuance and let future generation worry about penury.

It is an amazing start, the pure chutzpah is incredible but in many ways I think this is a good thing for the Country, we might actually start a debate on Government Spending, tax and debt again which should always be front of mind but which Brexit has allowed to drift.

We shall see, of course it could end with Corbyn in Downing St need to put in capital controls very quickly indeed.

UPDATE: So since this morning John McDonnell has come out to say £250 billion on Green stuff and £150 billion on Housing and NHS. So now just £400 billion of extra spending - a 50% increase in Government spending. Now I really am lost for words!


Swiss Bob said...

Add on more for nationalisations too where shareholders would be given debt in return for their equity. If they do this at a punitive rate you can imagine investors heading for the exit too, not just for the utilities but on Gilts and the Pound too.

It's not easy for the Conservatives to argue against Labour. The Tories are breaking their own fiscal rules and rewriting them now with big spending increases that don't seem to come with quid pro quo reforms, it looks like spending for the sake of headlines about spending increases.

All these billions may sound astronomical but they're equally abstract to many voters. There ought to be a debate about public spending and the tax base but I doubt it'll happen.

Wigner’s Friend said...

Perhaps “spending incontinence” would be appropriate?

andrew said...

I think calculations are being made.

- How many will vote for what is portrayed as a hard-left govt.

- Despite the polls, can Lab win?

- If Lab gets fewer seats than '17 what happens

- If the price of a majority in '20-24 is scottish independance and then no more Lab majority ever again, is this a deal that can be done

Tom Watson has worked something out.

Charlie said...

The Viv Nicholson strategy.

Nonny said...

Remember, since 2008 and QE none of this matters. Either the £445bn+ spent on QE was effectively debt cancellation (as it was used to buy Gilts) or it was borrowing needing to be "unwound"; Either way a precedent has been set.
That doesn’t mean to say the targets for Labour largesse are not very silly or misguided, but that is another discussion. To say that increasing per se is bad thing is politically untrue, and economically not too far from where we already are.

Scrobs. said...

And we haven't actually arrived at the bit where every kid will receive a free Ipod, mobile phone, accommodation in a 'uni' of their choice, Ipad as well as a state of the art lap top and the promise of a 'job' for life with the council of their choice.

They will be told that they can all have an electric car at the age of sixteen, when they'll be able to vote in six month's time.

An automatic 'degree' in 'vegan gender studies' will ensure that they will all qualify for a three-day week in perpetuity. Their parents will be shot.

Anonymous said...

Where are the billionaires to defend themselves? Why does anyone need to do the job they are clearly able to do themselves.

Or are you all just bots.

CityUnslicker said...

Anon - what do you mean?

Nonny - QE has had a deleterious effect on government finance and if you look at it the cost of debt has taken billions away that could have been spent on better investments. Making this situation even worse is illogical...when you are in deep, you need to stop digging etc.

Anonymous said...

A Marxist win would result in an immediate drop in the value of the pound, leading to severe inflation.

Those billions may well end up being just about enough to buy a loaf of bread.

Don Cox

DJK said...

It was actually 250 bn over ten years plus 150 bn over five, so about 55 bn/year extra, on top of the current 850 bn.

Raedwald said...

Zero interest rates, QE, a massive assets bubble, £500tn in global derivatives all mean that these promises are meaningless. We're still due for a massive financial shock that will devastste fiat currency, prick those asset bubbles and throw everything into the wind. The old economics is dead - promises mean nothing. Within the term of the next government we could be fighting for national economic survival - or subjugated under authoritarian socialist 'emergency measures' as they destroy Britain.

Let Boris promise the moon; this is an existential election.

E-K said...

A pact with TBP is the only way to keep them out.

Nonny said...

CU: I dont no believe QE will ever be unwound, so it is money creation out of thin air. Agreed it has distorted things massively and real price discovery is not functioning so we see massive misallocation of capital.

Politically the barrier to these levels of spending has been broken. It is now no longer feasible to play the oh look its wasteful spending card. Sound money is nowhere to be seen and pretending to pay it back is futile, especially politically.

I recall the BoE was not handing back the interest on Gilts thereby reducing interest payed by the Govt. (A quick google sees this was around 2012 so I am not sure if still in operation, even if not again this in no longer new ground politically or economically).

So I fully understand where your position comes from but believe it no longer holds water as a point scoring in this election - people no longer care.

Raedwald - whose socialist authoritarian measures are you talking about, the Tories or Labour? Two cheeks of the same arse, Boris is just cuddlier than Corbyn but still Globalist to his bones.

Anonymous said...

It's all fantasy economics now and as Nonny says the wasteful spending card doesn't work any more. Coming off the gold standard was the start and QE is the end game. There is a massive credit deflation to come and any entity (companies/households) with high debt will be in trouble. The zombies will be wiped out.

I recommend the Kaiser report on RT for the macro picture although he does rather like bitcoin which I'm still not convinced by.

Anonymous said...

"a massive credit deflation to come and any entity (companies/households) with high debt will be in trouble"

I've been expecting that since the early 1980s, and it hasn't happened yet. Admittedly we are now starting to run out of fixes - interest rates at rock bottom.

But in those 35 years people who borrowed to buy assets have made out like bandits, while savers have and are being stuffed.

"£40,000 for a 3-bed semi in Crouch End?" I said to a friend in the early 80s. "You could get a Georgian farmhouse in an acre for that round my way!". But it was I who was wrong, not her.

Anonymous said...

Don Cox: Those billions may well end up being just about enough to buy a loaf of bread.

Are you really that dense? Do you think they hold their billions in sterling cash??