Bolitics The New Condem Government

[Jon]

So once again the Liberal party drop their beliefs as well as their trousers and bend over for the Conservatives, unlimited tuition fees lovely. Do they really think any of their traditional voters will still be behind them the next time they come to cast a vote?

The death of the Liberal party FTL :-(

On the plus side, this arguably strengthens Labour, as the dissafected Lib Dem supporters will in all probability drift to them in large numbers ...

[TrentVilla]

So once again the Liberal party drop their beliefs as well as their trousers and bend over for the Conservatives, unlimited tuition fees lovely. Do they really think any of their traditional voters will still be behind them the next time they come to cast a vote?

The death of the Liberal party FTL :-(

On the plus side, this arguably strengthens Labour, as the dissafected Lib Dem supporters will in all probability drift to them in large numbers ...

Its ironic really, they finally get some power and it could be the worst thing that ever happens to them. In their eagerness to govern they have seemingly forgotten those who voted for them and gave them a semi mandate to do so, I don't though think those voters will be so quick to forget.

You are right they will likely lose voters to Labour and I suspect Labour will be waiting with open arms to welcome them and that it will come at the same time as Labour moves away from the Blair centre back towards the left.

The consequences of this coalition will last far longer than the government itself and for the Liberal party I fear they could be very damaging.

[Awol]

So once again the Liberal party drop their beliefs as well as their trousers and bend over for the Conservatives, unlimited tuition fees lovely. Do they really think any of their traditional voters will still be behind them the next time they come to cast a vote?

The death of the Liberal party FTL :-(

On the plus side, this arguably strengthens Labour, as the dissafected Lib Dem supporters will in all probability drift to them in large numbers ...

Its ironic really, they finally get some power and it could be the worst thing that ever happens to them.

I disagree with that. For the last 80 odd years the Liberals have been an opposition party with no realistic hope of gaining power independently. This enabled them to tailor their policies to target specific demographics and give themselves the highest possible number of MP's. In this case it was chasing the student vote in University towns and it worked well - giving them enough seats to form a coalition.

LibDem MP's pandering to special interest groups was fine when they never expected to implement the policies, but when it comes to delivering them in Government the unaffordability of what they've offered becomes obvious. They've caught themselves out by making unrealistic promises because we never could afford to send 50% of the population to uni on the taxpayers dime. That's why Labour introduced fees in the first place, despite campaigning specifically on a manifesto promise not to do so.

The test is whether they can admit that it is unaffordable and act pragmatically while in Government. Cable has already made that call in favour and the only confirmed opponent so far is that waste of skin Simon Hughes (who I predict will cross the floor at some point).

[mykeyb]

I wish someone would explain it to me too as i cannot see how spending millions of pounds on repaying the debt we have at the moment is a good thing.

When did we not spend millions of pounds on interest?

Not really sure that I would call that an explanation.......more of an excuse really.

[Ads]

So once again the Liberal party drop their beliefs as well as their trousers and bend over for the Conservatives, unlimited tuition fees lovely. Do they really think any of their traditional voters will still be behind them the next time they come to cast a vote?

The death of the Liberal party FTL :-(

On the plus side, this arguably strengthens Labour, as the dissafected Lib Dem supporters will in all probability drift to them in large numbers ...

The death of the Lib Dems internal coalition maybe. Its very early days yet, we're in the maelstrom of events right now and things may well look very different in five years time.

[Gringo]

So once again the Liberal party drop their beliefs as well as their trousers and bend over for the Conservatives, unlimited tuition fees lovely. Do they really think any of their traditional voters will still be behind them the next time they come to cast a vote?

The death of the Liberal party FTL :-(

On the plus side, this arguably strengthens Labour, as the dissafected Lib Dem supporters will in all probability drift to them in large numbers ...

The death of the Lib Dems internal coalition maybe. Its very early days yet, we're in the maelstrom of events right now and things may well look very different in five years time.

Yeh - in 1983 we had the death of the labour party, in 2001 the death of the tory party.

[snowychap]

I wish someone would explain it to me too as i cannot see how spending millions of pounds on repaying the debt we have at the moment is a good thing.

When did we not spend millions of pounds on interest?

Not really sure that I would call that an explanation.......more of an excuse really.

An excuse? I don't get you.

Your comment seemed to suggest that the payment of interest was something new in terms of government spending, that our situation in terms of having debt and repaying interest upon that debt is unique.

As a proportion of GDP (assuming that we don't move in to a calamitous double-dip recession), the interest payment (even if it were to get to the IFS figure of £70,000 million which was based upon Darling's deficit reduction plan, I believe) will still be around the same level as 1981/2.

An explanation? I'll have to go back 20 years to a badly taught economics 'A' level but I think it goes roughly like this:

A country borrows money (for a number of possible reasons including counter-cyclical spending in a recession, expansionary spending in other times or because a public sector deficit is a counterweight to a private sector surplus); it pays interest on that money borrowed; it rarely pays down debt.

Whether or not a country ought to engage in deficit spending is, I believe, a large matter of debate amongst economists; that we have, on the whole, run a deficit rather than a surplus (even in 'good times') is a matter of record.

I think we've got a few people with economics degrees (and others with a better grasp of the intricacies) who will gladly point out the errors in the above.

[blandy]

Why is it necessary to reduce our huge deficit? Seriously?

No, that was not the question I asked.

In response to Blandy saying, "...it absolutely is necessary to stop spending (in totaL) exceeding total income..." (which I read as him saying that we absolutely have to run a balanced budget and not run any kind of deficit), I asked why?

I think that Blandy's statement on expenditure versus income was in the context of our huge and crippling deficit.

Thanks Risso, yes it was.

Other than Snowy and Peter ms, I am not aware of anyone, any political party or economist, or anyone else who doesn't think that the debt needs to be addressed and presumably Snowy and PMS despite their postings think it needs sorting too, really.

All we're talking about is how to do it. At what pace to or when to cut spending back, and how to grow income.

The Tories seem hell bent on cutting spending harshly and immediately, others think it should be cut more gently, or "mañana".

But if we don't address the deficit by paying back the money we owe, then there are all kinds of diabolical consequences.

Firstly you can't keep on borrowing, if people believe you won't pay the money back - the interest rates go up, to counter the level of risk of non-repayment, then you end up paying more interest on the debt you have, leaving less for things you need. So you end up worse off than if you'd sensibly started re-paying.

You end up with the assets of the nation owned by other countries (even more so than now). You end up with the Chinese, or the Russians deciding the future of various Industries and people. You get little or no say in the running of your own country.

You end up with hyper inflation, as people come to realise that your currency is becoming worthless. You end up unable to afford imported goods and services - from energy, to steel , to bananas. You end up with the people who have the skills and abilities to create wealth for the country legging it off to other countries.

You end up ruined, with rampant unemployment, ill health, social disorder, crumbling infrastructure and dependent on aid from abroad for basic survival. You end up with endemic corruption, crime and a completely split society.

But other than that, there's little reason not to keep on spending more than we can afford and to ignore the mess the country is in.

[mykeyb]

I wish someone would explain it to me too as i cannot see how spending millions of pounds on repaying the debt we have at the moment is a good thing.

I don't get you.

Your comment seemed to suggest that the payment of interest was something new in terms of government spending

Which part of my comment seemed to suggest it was something new?

[snowychap]

Which part of my comment seemed to suggest it was something new?

Specifically, this: 'the debt we have at the moment'.

[Risso]

There's running a deficit, and then there's the situation we have now, whereby the interest payments alone are enough to almost ruin the country. Our debt is over 60% of GDP, surely it doesn't need explaining how bad that is.

Some interesting figures

[snowychap]

To blandy:

It doesn't really matter in what context you wrote what you did, it still appears that you said that you thought it was absolutely necessary not to run a deficit.

You appear in your post to conflate net debt and the deficit (even after indicating, previously, that these two things are different). They are connected, sure, but so is the deficit to the private sector surplus, for example.

I haven't said that I don't think the deficit needs to be reduced (quite the opposite) but I have specifically said that deficit hysteria is not helpful (indeed I think it is most likely to be very counter-productive to any constructive approach).

As far as people having a different opinion to the received wisdom allowed in the mainstream media and mainstream politics then you might like to cast your eye over this FT column, for example (the FT ask that articles are not cut/reproduced/posted to the web) or this (another FT article but on Samuel Brittan's website)

So you end up worse off than if you'd sensibly started re-paying. .

The UK is a country not an individual, a household or a business.

For the avoidance of doubt, I am not recommending any position. To expand on my earlier analogy with the farmer giving directions, not only would I say that I wouldn't start from here but I'd add that I wouldn't go there if I were you.

[Demitri_C]

On the plus side, this arguably strengthens Labour, as the dissafected Lib Dem supporters will in all probability drift to them in large numbers ...

i wouldnt say its a plus taht helps labour!

does anyone actually think it will be any different under them? same shit different colours

[snowychap]

Some interesting figures

Some more interesting figures:

[table]

Interest payments over the last forty years (GDP and first interest figure in thousands of millions of pounds, second interest figure is as a percentage of GDP):

[row][col]Year [col] GDP [col]Interest [col] Interest

[row][col]1970 [col]51.696 [col] 2.12 [col]4.10

[row][col]1971 [col] 57.67 [col] 2.24 [col] 3.89

[row][col]1972 [col]64.621 [col] 2.29 [col]3.54

[row][col]1973 [col]74.545 [col] 2.74[col] 3.67

[row][col]1974 [col] 84.513 [col] 3.61[col] 4.27

[row][col]1975 [col] 106.717 [col] 4.21[col] 3.95

[row][col]1976 [col]126.274 [col] 5.39 [col] 4.27

[row][col]1977 [col]146.973 [col] 6.37 [col]4.33

[row][col]1978 [col] 169.344 [col] 7.21[col]4.26

[row][col]1979 [col]199.22 [col] 8.96[col]4.50

[row][col]1980 [col]233.184 [col] 11.36[col] 4.87

[row][col]1981 [col]256.279 [col] 13.22[col] 5.16

[row][col]1982 [col]281.024 [col] 14.27[col] 5.08

[row][col]1983 [col]307.207 [col] 13.90[col]4.52

[row][col]1984 [col]329.913 [col] 14.40[col]4.36

[row][col]1985 [col]361.758 [col] 16.00[col]4.42

[row][col]1986 [col] 389.149 [col] 17.80[col]4.57

[row][col]1987 [col]428.665 [col] 17.60[col]4.11

[row][col]1988 [col]478.51 [col] 18.00[col]3.76

[row][col]1989 [col]525.274 [col] 18.50[col]3.52

[row][col]1990 [col]570.283 [col] 18.80[col]3.30

[row][col]1991 [col] 598.664 [col] 18.60[col]3.11

[row][col]1992 [col] 622.08 [col] 16.80[col] 2.70

[row][col]1993 [col]654.196 [col] 18.00[col]2.75

[row][col]1994 [col]692.987 [col] 19.80[col]2.86

[row][col]1995 [col]733.266 [col] 23.50[col]3.20

[row][col]1996 [col]781.726 [col] 26.70[col]3.42

[row][col]1997 [col]830.094 [col] 28.10[col]3.39

[row][col]1998 [col]879.102 [col] 30.00[col]3.41

[row][col]1999 [col]928.73 [col] 29.30[col]3.15

[row][col]2000 [col]976.533 [col] 25.24[col]2.58

[row][col]2001 [col]1021.83 [col] 26.33[col]2.58

[row][col]2002 [col]1075.56 [col] 22.40[col]2.08

[row][col]2003 [col]1139.75 [col] 21.18[col]1.86

[row][col]2004 [col]1202.96 [col] 22.52[col] 1.87

[row][col]2005 [col]1254.06 [col] 24.32[col]1.94

[row][col]2006 [col]1325.8 [col] 26.25[col]1.98

[row][col]2007 [col] 1398.88 [col] 28.10[col]2.01

[row][col]2008 [col]1448.39 [col] 30.65[col] 2.12

[row][col]2009 [col]1396 [col] 31.09[col] 2.23

[row][col]2010 [col]1451.5 [col] 30.96[col]2.13

[row][col]2011 [col]1520 [col] 43.28[col]2.85

[/table]

And a pretty graph :

[mykeyb]

Which part of my comment seemed to suggest it was something new?

Specifically, this: 'the debt we have at the moment'.

How does that make it a new thing. This debt we have at the moment is bigger than in recent times but as you said has been there since lord knows when. Not a new thing at all.

OK just so to more precise and clear up any misunderstanding:

Can some explain how having to pay millions of pounds in interest to service a debt when the millions of pounds could actually be spent on things like Education, NHS, Policing etc can be a good thing. So thats any debt the government has now or has had in the past.

[Jon]

On the plus side, this arguably strengthens Labour, as the dissafected Lib Dem supporters will in all probability drift to them in large numbers ...

i wouldnt say it's a plus that it helps labour!

Depends what side of the political divide you sit, I guess Dem!

[chrissmith921]

So once again the Liberal party drop their beliefs as well as their trousers and bend over for the Conservatives, unlimited tuition fees lovely. Do they really think any of their traditional voters will still be behind them the next time they come to cast a vote?

The death of the Liberal party FTL :-(

On the plus side, this arguably strengthens Labour, as the dissafected Lib Dem supporters will in all probability drift to them in large numbers ...

Amusing... Labour (correct me if I'm wrong) are the ones who started all this off re tuition fees.

[snowychap]

OK just so to more precise and clear up any misunderstanding:

Can some explain how having to pay millions of pounds in interest to service a debt when the millions of pounds could actually be spent on things like Education, NHS, Policing etc can be a good thing. So thats any debt the government has now or has had in the past.

If the benefits of the deficit spending (i.e. the reason for the interest payments) outweigh the opportunity costs of those interest payments.

[blandy]

To blandy:

It doesn't really matter in what context you wrote what you did, it still appears that you said that you thought it was absolutely necessary not to run a deficit.

To you maybe. I'm not sure that anyone else manages to extrapolate that conclusion from what I wrote.

You appear in your post to conflate net debt and the deficit (even after indicating, previously, that these two things are different). They are connected, sure, but so is the deficit to the private sector surplus, for example.

Do I? Dunno where you get that from - you said last time that I didn't need to point out to you that they were not the same thing.

I haven't said that I don't think the deficit needs to be reduced (quite the opposite)...For the avoidance of doubt, I am not recommending any position.

All in all a bit of a mish mash. you think the deficit should be cut, but don't have a position on it, but criticise measures and thought on how to address the deficit - which is all your perogative of course.

But what was helpful is you explaining that the UK is not a person. I must confess I hadn't noticed that until just now

[peterms]

OK just so to more precise and clear up any misunderstanding:

Can some explain how having to pay millions of pounds in interest to service a debt when the millions of pounds could actually be spent on things like Education, NHS, Policing etc can be a good thing. So thats any debt the government has now or has had in the past.

If the benefits of the deficit spending (i.e. the reason for the interest payments) outweigh the opportunity costs of those interest payments.

Yes. For example, bailing out the banks in order to prevent a possible wider collapse of the financial system, or trying to maintain economic demand to avoid a worse recession.

It would be good not to have to meet the level of interest payments we are currently paying, but the alternative of not having borrowed and facing the consequences of not having done so would be worse.

Of course the debt should be reduced, at a pace which doesn't cause bigger problems. The current political debate is about the rate of reducing it, and to what level, and specifically about the things which are sacrificed to bring this about.

I don't think many people argue that there should be no national debt. It's hard to imagine a global economy without it. The point is that it shouldn't be so big that it can't be repaid, and that it shouldn't therefore continually rise. Our debt has gone up and down for many, many years. Recently, it's gone up, and the situation needs managing. But that's not the same as the scenarios of imminent doom which some are portraying.