Recession predictions post Osborne plans

From various sources:

RBS economists: 2017/18

RBC Capital: 2018

Jones Lang Lasalle: 2017

HSBC Economist forecast: 2018/19

Of course economics forecasts are tomorrow's chip paper. But the UK Government has staked its financial credibility on their being no recession.

With one, the Country's finances will be very quickly back in the mire of 2008/12 in terms of its overall deficit.

Considering the Tory domination of the political stage, why did they make such a bold gamble that could well lose them the next election with the economic credibility in ruins a la 1997?

We will never run out of land to sell....

The Government is to try, a little bit harder, to cut the deficit. As always, the old chestnuts are brought out, dusted off and ritually burnt to impress us.

Mainly that oldest of old wheezes, the great land sale. The Ministry of Defence owns 1% of UK land dontchaknow, plenty to be sold. All the other departments too - also we need 150,000 new houses.

I am sure I have heard this before somewhere, oh, yes, from every Government ever elected in living memory. There is always a big land sell off that will raise billions in any budget.

The thing is, rather weirdly for Politicians, it turns out to be true, there is always more land to sell off. The Government owns a lot (the Queen too, another story for another time....) and can grant planning permission for anything on its own land.

Hooray - all our problems are solved.

Except of course, if you are one these holy Land Value Tax believers, then you have to have limits to land - otherwise your plans to tax everyone solely on the value of their land has big problems  - either incessant inflation as land comes to market or, more likely, huge deflation as the value of land decreases as more is released to the general market.

Either way, the evil Tories are no doubt int he gamer for killing LVT as a concept once and for all....

Why do Doctors want to kill the UK?

I have never been a big fan of the medical profession, I remember way back at University being concerned that the medical students I knew were getting by with pass rates of about 60% - so not knowing a good 40% of what they needed too! How was theat going to work out in the future....

More relevantly perhaps is that in recent years the Doctors of the UK have started to make plays which affect and potentially destabilise the whole country.

The first battle was around pay and working conditions. The EU had implemented the working time directive and this made the lives of junior doctors impossible - they had been asked to work crazy 90 hour plus weeks. Also Labour wanted to implement some reforms of the NHS which the BMA was against.

So Labour happily drew up new contracts, which managed to have both shorter hours and extensive 'overtime' for GP's. Doctors were now earning 20% more for doing the same of less work. This at a time when the UK was just beginning to spend more on the NHS but was also starting to run a deficit during the high point of the economic boom.

The second major battle has been around immigration. Not just of actual doctors, which is a separate topic, but of treating immigrants. Doctors have long claimed under the spurious 'hippocratic oath', that they be allowed to treat anyone who appears before them (less than 50% of British Medical Students 'take' this oath anyway). As immigration soared after 1997, so the costs of treating health tourists did too. Doctors want nothing to do with controlling this, but at the same time demanded more money and are always keen to stick the knife into 'hospital administrators.' This classic tactic plays well with Labour who always rant on about how many more nurses and doctors they can have. However, for everyone else, what does it matter if we have more supply of doctors and nurses (and indeed treatments and facilities) if demand grows exponentially.

Then finally today, another example raises its head. David Cameron and the Government are keen to reduce benefits of those who are able to help themselves but choose not to. So targeting Obese people and drug addicts who are in receipt of long-term benefits for their condition. This is not an article about the rights and wrongs of the policy. Here is to show Tory MP Dr. Sarah Wollaston is against this policy as it is not for Doctor's to implement Government policy and not for them to withdraw or prescribe treatments to patients without their consent.

To me this position is untenable, the Government pays the salaries of the public sector and the Government has to balance the books and make hard choices - it is why all Governments are always unpopular after all.

The above three cases show that Doctors consider themselves above the rule of Government despite working for it. The Health budget is 15%+ of Government spending and increasing out of control. Yet it is not for the Doctors to do anything at all to help, except to say 'its not my problem.' For the finances and long-term stability of the UK this is a huge imposition and not one that anyone can do anything about via the ballot box - it is a calissic case of producer caputre.

The Doctors in many areas are hold the future of the Country literally in their hands. This is a huge problem for the Country as they have the power of life and death and are vested with such moral authority - it is a great argument for privatising more of the NHS so as to remove the leaden hand of the Doctors from Government policy.

How can Labour or the Tories fight an election on the NHS?

Westminster, we have a problem it goes like this:

- Current annual deficit - £75 billion, stable and not falling due to a low rise in income taxes

- Total UK debt  - £1.225 trillion and rising rapidly

- NHS shortfall in 2014 - £2 billion

- Predicted NHS Shortfall by 2020 - £30 billion.

- Total Government spend 2014 - predicted £636.6 billion versus £720 billion spending (OBR)

In addition, Mr Milliband yesterday said that he would save our NHS , budget this year £108 billion, from the evil Tories.

And, worse than this, Mr Balls and Mr Osborne are agreed that by 2018/19 the deficit will be eliminated and therefore in real terms we need to have a further £50 billion of cuts over the next four years from 2015. To this we can add the £30 billion of NHS spending.

This £80 billlion is 12.5 of current spending - equivalent to the whole of education and defence spending.

There is simply no way of raising revenues from the economy anywhere near enough to cover this predicted hole in the NHS alone. This is before we add in social care and sweets for all that parties must promise to get elected.

The entire 2015 election according to Labour will be fought on non-economic criteria as they are so far behind on this. But the truth is, even the Tories do not want to fight on the real economic criteria becuase they too know there is no answer apart from drastic cuts to spening. Let's say, end housing benefit and tax credits, plus raise top rate of income tax and a mansion tax, with capital gains at 40%  - this would just about get you to the point where the hole would be filled.

There is a solution of course, end the NHS as it is, focus on people's basic needs and grow and insurance industry out of the nascent one that we have. Make people realise the true cost of care.

To me the NHS, wonderful that it is in so many ways, is the epitomy of the magic money tree theory - worse because we and our loved ones are all mortal in the end. As we have it, it is totally unsustainable without in short order sacrificing much of the national resources into it - but people may vote for that anyway, unaware of the reality for which they are voting.

Oil at $150?

I am surprised that even the BBC now has a story carrying the likely plans on how Israel may try and attack Iran on its website today. So expected is this event that it seems barely worth a mention on the front pages these days. Yet such a war would have a global impact putting the Iraq and Afghanistan adventures in the shade.

Back home we can already feel the heat of this growing threat. Iran supplied UK diesel through a circuitous route and this can be seen in eye-watering pump prices of nearly £1.45 a litre - not long a this rate until it is £100 to fill up your car.

Reality will really hit home if this cold war turns hot. closing the straights of Hormuz will cause a massive speculative increase in the price of oil - yes, it may come down as speculators quickly look to book profits, but a Middle Eastern war is the last thing the Western, or indeed Global, economy needs.

In the past oil at over $100 has brought recession, look at the Reuters graph above, prices near $100 are highly correlated with recessions. Let alone $150 - let's think what this might mean for the UK and eurozone alone.

Firstly, straight back into real recession is nailed on - probably at least a full 1.0% off GDP which is already flat - maybe as much as too. Same for the Eurozone. As far as our debt dynamics are concerned, this means major misses to the fiscal consolidation programme - offset a little by the high inflation such a move will cause. A Classic stagflation scenariom, nasty. The Tories could certainly kiss goodbye to hopes of winning the next election.

On our already weak UK economy though, the blow is will be felt fairly badly. Let's face it nearly all consumer goods are either made of oil or packaged in it, some powerstations are oil fired - it will be messy across the board in terms of sector performace.

Worse, as an external shock there is nothing we can really do to prepare for it as a Country - except that with high oil taxes we are at least inured to high prices more than say the US or Spain, but not enough to offset much of the pain.

Politically the showdown with Iran has to come sooner or later, although an Arab Spring type event would be much more welcome. Economically, we just can't afford it in the next 3 years. I wonder how these trade-offs are playing out in Whitehall and Washington - we'll soon find out.

Deceitful Brown deficient on deficit and debt knowledge

Now there is a Sun headline you will never read. Nonetheless it is true to say that in Prime Minister's Questions today Brown kept up his meme of conflating the National Debt with the Government Spending deficit.

One is the total amount of money the UK owes, the other is the current overspend. Here is what he said, courtesy of the Guardian:

Bill Wiggin (Con) asks Brown if he regrets the fact that Britain went into the recession with one of the largest deficits of any major economy. Does Brown regret that?

No, says Brown. Britain had the second lowest debt in the G7.

You see Britiain DID go in with a large deficit, over 3%, but we also went in with a relatively low total debt, at 40%. Of course this 40% is now nearing 60% and headed for 80% or 100% in the next few years.

That is becuase of our enormous deficit. The answer Brown gives is telling though - where is his proud boast now about the 'Golden Rule.'

The truth is this is patheic, not answering a question at all but bringing up another topic which he just hopes will make the question go away and fool those watching. I notice the BBC fell for it straight away as their journalist was also economically illiterate:

1205 Mr Brown also promises aid to help the people of Haiti recover from the "devastating" earthquake. Tory MP Bill Wiggin has the first question - about the economy. Does the PM "regret" the level of debt before the recession? Mr Brown fires back with a list of countries Britain was lower than, in terms of debt.

Of course it is also quite possible that Brown does not understand the question and so it not being underhand; he is instead just an idiot. His economic track record as PM and Chancellor make it hard to discount this analysis.....