Bolitics The New Condem Government

[snowychap]

It's banks are bleeding like naked fat men rolling in rusty razor blades,

That's rather a grimly evocative simile.

[LondonLax]

Nope, still not convincing me.

I'd take a slow downward spiral cushioned by government support for the banks over the chaos and "every man for himself!" panic that would ensue by the collapse of the financial sector any day.

I think anyone who would have favoured the latter option has underestimated the state it would leave society in. We are absolute dependant on the banking system for modern day life to function.

[snowychap]

I'd take a slow downward spiral cushioned by government support for the banks over the chaos and "every man for himself!" panic that would ensue by the collapse of the financial sector any day.

What if the former is never ending (or eventually ends up with the latter anyway)?

We are absolute dependant on the banking system for modern day life to function.

Perhaps too dependent? Perhaps especially too dependent on a banking system that appears to be functioning primarily for itself and a few participants and then incidentally for the rest of us.

[Gringo]

I was listening to an Ed Milliband interview on radio 4 this morning and he was terrible!

He sounded really lost and didn't seem to cope well at all with any line of questioning.

He said 'Yar' a lot as well. Needs a spell with Maggie's speech therapist to get the common feel.

[LondonLax]

I'd take a slow downward spiral cushioned by government support for the banks over the chaos and "every man for himself!" panic that would ensue by the collapse of the financial sector any day.

What if the former is never ending (or eventually ends up with the latter anyway)?

We are absolute dependant on the banking system for modern day life to function.

Perhaps too dependent? Perhaps especially too dependent on a banking system that appears to be functioning primarily for itself and a few participants and then incidentally for the rest of us.

Certainly too dependant to leave it as unregulated as it has been.

And on the first point, obviously it is better to take the chance of minimising disaster rather than actively courting it.

[snowychap]

Certainly too dependant to leave it as unregulated as it has been.

And really what are we doing about it? Not very much it would appear.

What are we really likely to do? Not very much (especially if economies do recover and we can metaphorically sweep all of the crap in the system back under the carpet until the next time when we'll all vow to learn the lessons that we said we'd learn this time).

And on the first point, obviously it is better to take the chance of minimising disaster rather than actively courting it.

I accept that but are we doing it? I think part of the argument is that we may well be just building the bonfire higher for the next time (slightly ironic if it turns out to be true amongst all the apparent reasoning for attacking deficits on the basis of ruining things for future generations).

[TrentVilla]

Certainly too dependant to leave it as unregulated as it has been.

And really what are we doing about it? Not very much it would appear.

What are we really likely to do? Not very much (especially if economies do recover and we can metaphorically sweep all of the crap in the system back under the carpet until the next time when we'll all vow to learn the lessons that we said we'd learn this time).

I agree with you there but what we are doing now or not doing now is a different issue to what was done previously and the question of it was the right thing to do. In my opinion oviously. I'm inclined to believe it was right to step in to prop the banks up but more should have been/shoud be done to reform them on the back of that to stop it happening again.

I think part of the argument is that we may well be just building the bonfire higher for the next time (slightly ironic if it turns out to be true amongst all the apparent reasoning for attacking deficits on the basis of ruining things for future generations).

Sad but true

[peterms]

Nope, still not convincing me.

I'd take a slow downward spiral cushioned by government support for the banks over the chaos and "every man for himself!" panic that would ensue by the collapse of the financial sector any day.

I think anyone who would have favoured the latter option has underestimated the state it would leave society in. We are absolute dependant on the banking system for modern day life to function.

There's a run on the Irish banks. It's every man for himself. What can or should the government do about that? Borrow more money at absurdly high interest rates to shore up the collapsing banks, in the hope that they can somehow pump it in quicker than people can take it out? So that what's left is a shell comprising a lot of debt-funded government money, a pile of toxic debt, and not much else?

There is panic, and it will continue. But the scale of the problem far outstrips the ability of the government to deal with it.

The choice is this. Either let the banks collapse which deserve to and attempt to manage the situation, or else create massive public debts, hack away at public services, and still see the banks fail. It's throwing good money after bad.

The government has a clear duty in this, and that is to protect the position of the people they govern, not the owners of the banks.

So, again, there are two arguments. You may or may not agree with what I think the government should do, but I think it's becoming clear to all that trying to prop up these collapsing structures simply isn't going to work. The problem is too great, and the resources too small. The government needs to concentrate on assuring lenders that it can and will repay sovereign debt, not banks' private debts, and it should also do what it can to create conditions for growth, rather than hacking away at the budget and making a bad situation even worse.

[LondonLax]

The government has a clear duty in this, and that is to protect the position of the people they govern, not the owners of the banks.

The government protects the people best by avoiding all out chaos. In this case it was by preventing the collapse of the financial sector.

[Awol]

The government has a clear duty in this, and that is to protect the position of the people they govern, not the owners of the banks.

The government protects the people best by avoiding all out chaos. In this case it was by preventing the collapse of the financial sector.

I accept the principal of what you are saying but I think Peter's point (and mine fwiw) is that the problem is of an order of magnitude above the capacity of government's to control.

The markets already understand this which is why they are ruthlessly chasing the bad debt through the system and the various bailouts are, as Snowy suggests, fuel for the final bonfire. The system is bust full stop and when that realisation final sinks in and the politicians admit defeat I'd expect the situation to deteriorate very quickly indeed.

The best chance (imo) for our Government to avoid "chaos" is likely to be prempting this by calling time on the insolvent banksters and saving what can be saved from each under the umbrella of a new national bank. Keep the UK financial markets closed while they do it if needs be and then present them with a fait accompli.

[Gringo]

If not letting the banks fail was the right thing to do, why do we have a problem now? It was obviously the wrong thing to do, and the alternatives have never been properly thought through or discussed.

[peterms]

The government protects the people best by avoiding all out chaos. In this case it was by preventing the collapse of the financial sector.

Has it been prevented, I wonder? Or just delayed a little, at enormous cost?

The mental model that people seem to be following is one of mending something which has experienced some problems. I think it may be a little more serious than that.

[snowychap]

Interesting what yesterday's OBR report had to say about the effect of the Higher Education funding policy:

Box 4.3: Higher education funding

In November 2009 Lord Browne was asked to lead an Independent Panel to review the funding of higher education. In response to his review, the Government set out proposals in England for a basic threshold of tuition fees of £6,000 per annum as well as an absolute limit of £9,000 in exceptional circumstances for undergraduate courses with effect from the 2012-13 academic year. A White Paper covering these issues will be published by the Government this winter and it is proposed that legislation will be brought forward in due course. However, sufficient detail has been provided of the policy to enable an estimate of the effects to be quantified for this forecast in England. The Devolved Administrations will need to consider their own response to the Browne review.

The Spending Review announced a £2.9 billion real terms cut in overall funding for higher education by 2014-15, with direct grants substituted for higher fees funded by increased loans to students. This proposal will therefore increase the value of the loans that the Government makes to students to fund tuition fees. Such loans are classified in the public finances as a financial transaction. The additional cash needed to fund the loans, net of repayments, increases the Government’s cash requirement (CGNCR) in any year and adds to the stock of public sector net debt (PSND), which is measured on a cash basis. However, financial transactions do not score directly in accrued measures of the deficit such as net borrowing, because the Government’s overall net liability position has not changed.

For the November forecast the OBR has scrutinised and certified estimates of the additional loans that have been produced by the Department for Business, Innovation and Skills (BIS) for England.

As the table shows*, the impact on the CGNCR is estimated to reach £5.6 billion by 2015-16, cumulatively adding £13 billion to PSND over the forecast period.

The key assumptions that drive these estimates are: the level of average fees charged; the loan take-up rate; and the growth in overall student numbers.

For the purposes of these projections, BIS’s central estimate of the average fees charged by English universities as a result of the proposals is £7,500. The upper bound to this is a full increase in fees across the board to £9,000 per annum. However, it is possible that many universities will charge fees between the current levels and the proposed upper bound. BIS estimate that 90 per cent of students will take up loans to fund these fees, which is a slight rise on the current level reflecting the higher fee rates.

For these projections student numbers are assumed to be broadly flat. BIS analysed the effects of the introduction of variable tuition fees in 2006-07 and found little evidence of a sustained fall in HE participation. However, there are uncertainties as the counterfactual of participation rates in the absence of the reforms is unknown. Institute for Fiscal Studies research on the impact of variable tuition fees in 2006 found that increasing fees without increasing loans and/or grants by the same value or more will result in a negative impact on participation.

The proposed reforms to higher education tuition fees are also likely to have some effect on the rate of CPI inflation. This is discussed further in Chapter 3.

*Table omitted but can be seen on the link (p.129).

[HRE]

**** the Tories. I hope that loyal Villa fan David Cameron attends the Blues game tomorrow and gets bovril poured on his head from the upper Gil Merrick.

[OutByEaster?]

**** the Tories. I hope that loyal Villa fan David Cameron attends the Blues game tomorrow and gets bovril poured on his head from the upper Gil Merrick.

You mean the Agbonlahor End surely?

[blandy]

I had a tour round one of the new (to be scrapped) Nimrods today. The thing is a brand new, built, ready to go, aircraft, already paid for. In perfect working order. There are others ready, too. And they're going to spend 1 billion pounds destroying them, literally sawing them up, so that they can never be used. There are 100 engines, brand new, paid for, going to be destroyd and so it goes on.

Aside from the utter stupidity of willfully destroying, at great cost, what you've (we've all) paid for - a cost that would have kept them flying for 5 years, they are being sawn up out of spite.

The gov't decided to keep the nuclear deterrent submarines, but the Nimrods are the things which protect the subs from hunter killer threats, they clear potential enemy subs out of the way. It's mad. It's criminal.

The willful destruction so they can never be used is out of spite at the way Industry negotiated with the last gov't over shipyward closures. The last Gov't wanted to maintain a UK military shipbuilding capability, when there was not the work to keep the capability going. So they asked industry to keep the yard open and in return guaranteed work to keep the yards busy. The work could have taken either the form of smaller ships - destroyers, frigates etc, or alternatively 2 carriers. The carriers were more expensive, but over a longer time. The gov't chose the carriers and contracted to guarantee payment for the carriers.

Thus the new gov't couldn't break the guarantee given, cancel the contracts to save money, because it was there in black and white.

Because of this, is why the Nimrods are being destroyed.

Not only will it leave the country short of the defence of the Nuclear subs, short of the capability to consuct long range search and rescue (civilian as well as military) not only will it deprive the country of Maritime surveillance capability, anti terrorist reconnaissance, of a brand new state of the art airborne communications and special forces command and control platform, it will also result in communities in Scotland around Kinloss and in England in Lancashire being massively harmed through job losses. And the saving overall will be minimal, if anything when all is taken into account.

If the subs were going there'd be half an argument to do what they've done, but it's incoherent, incompetent and in many senses criminal.

The best defence the Gov't could mount against this vandalism is that they don't know what they're doing. Any other argument would be worse.

The views expressed are of course personal.

[ender4]

thats just disgraceful!

if they can't afford to run to keep them running, then can't we just sell them to another friendly govt, or even just stick them in a hangar somewhere for the next 5 years, and then see whether we want to use them or not.

[peterms]

It sounds insane, but in fact it's on a par with other things they are doing. In cost terms it's minor compared to the bank bailout, but the destruction will be more visible.

Is there any organised attempt to explain this to eg LibDems in marginal seats, or MPs on the Public Accounts Committee?

[markavfc40]

That is absolutely disgraceful. Surely this all needs looking in to.

[tonyh29]

Wonder if the latest wiki leaks are going to cause some strain in the coalition ?

With labour in disarray and the abstainers party hugely unpopular could something like tuition fees be the excuse to end the coalition and go back to the polls

It's a huge gamble but seeing as Ed couldn't even get his own people to vote for him and the obvious infighting in Labour Cameron might fancy his chances