[Closed] So the Tories have given up on reducing the deficit and in fact are borrowing...

They did that ages ago

[just people preferred to ignore the fact and rabbit on about austerity]

Well, that'll work.

It did already. You can see how the economy reacted to a loosening of policy by Austerity George quite clearly.

Hammond is just re-packaging the idea and removing the rope that Osbourne raised to hang himself with

Old news

Can someone explain the whole "Austerity" thing? I've worked in Local Govt and seen an awful lot of cuts to all services - social, transport, health across the board really. Funding to Local Authorities has been slashed and council tax rises threatened with further slashes from central Govt. So from my perspective "Austerity" is still here, has been for years and is predicted to be for years again (post Brexit).

So where's the money going? Is it big infrastructure like Crossrail and HS2? Rich folks pockets? Paying off the banks post crisis? Tax cuts? Why are they continuing to borrow too?

Sorry for the questions, just missing some big gaps in my knowledge.

Where does the money go - the largest block is pensions then health

http://www.ukpublicspending.co.uk/uk_central_pie_chart

buying the grey vote?

@tgm...so what's the difference in strategy to Labour? Seem very similar to me, which is contradictory to the rhetoric at election time...

Austerity means different things to different people

To economists and THM it means the govt not borrowing so much

To the majority of the country, it means the biggest cuts ever seen to council funding, hundreds of libraries, youth clubs, sure start centres closed, less police on our roads and street's, privatisation of education, hammering the poorest, unemployed and disabled docs striking over contacts and huge chunks of the civil service closed down with the resultant loss in services to the taxpayer.
It's basically a cover to roll back the welfare state and the post war society.

I don't see Theresa Mays government changing any of this

Thanks Kimbers and THM. Thought it'd be something simple (?) like that.

Difference? There has't been a tangible difference for decades.

Avoid headlines and lazy rhetoric and stick to the data instead.

TBF to the Tories they (deliberately or by chance, you decide) played the post crisis game of pretending to be tough on the deficit well (sensible at the time*) but on the quiet did nothing of the sort (ditto). Hammond is just pretending that he is doing something different - he isn't.

* in actual fact, what they were saying was total nonsense (You cant solve a debt crisis with more debt etc) but the markets wanted to hear it. In a balance sheet recession when households and corporates are deleveraging/running surpluses, the LAST thing governments should be doing is to do the same. Luckily, ours didnt, despite the noise...

http://www.ukpublicspending.co.uk/uk_central_pie_chart

More is spent on Defence than Education. Jeez. That's depressing.

@peyote...I agree with @Kimbers...whilst Tory and Labour appear similar now (accept the deficit for what it is - which is pretty shitty since Tories convinced the voter it was an issue and they should be voted for so they could reduce it) - Tories have an ideology of shrinking the Welfare State. So money saved on that goes elsewhere and they ignore defcit total...

Peyote - what you are describing reflects local authority spending see

http://www.ukpublicspending.co.uk/local_chart_gallery

where the trends are different to the overall. It comes down to priorities in the end or the central question of economics - [b]how do you allocate scarce resources[/b]

More is spent on Defence than Education. Jeez. That's depressing.

And wrong.

Defence 6%

Education 11%

@thm...madness. You state there hasn't been a tangible economic difference for ages yet constantly the definition of political difference (in discussions on STW) re the two big parties is their economic policies.

Tories have an ideology of shrinking the Welfare State.

Well they are not very good on execution in that case are they?

@thm...madness. You state there hasn't been a tangible economic difference for ages yet constantly the definition of political difference (in discussions on STW) re the two big parties is their economic policies.

EVB - yes rhetoric versus reality. Opinions are driven more by tribal allegiances than facts here and in the wider world. Check out any Scottish threads they are hilarious. The SNP get described a left of centre and anti-austerity when in practice they are patently neither.

Go and check the spending plans in the last few manifestos and them remember governments REACT they dont lead.

We've borrowed much more (relative to GDP)...

[img] [/img]

Still very affordable by historic standards....

[img] [/img]

longer time scale

[img] [/img]

ideology

I love the way this word gets banded about like it's an insult

*They* have an ideology, *we* have a commitment

And we defaulted, stole, repressed our way out of those past peaks too - somethings in life don't chance. We are currently taxing savers and distorting markets to do the very same thing. Free markets eh???

Did you notice the big events (clue: require lots of money) that correspond with the charts!?!

And wrong.

Defence 6%

Education 11%

are we looking at different pie charts?

@nifan...do you know the definition of ideology? I never associated it negatively..you did, which must mean you feel uncomfortable with shrinking the Welfare State. It's their policy and you'd be an egit to try to hide that fact..
they never do.

are you including health in welfare here EVB?

As with most of these things you need to read the small print, the whole "reduce the deficit" line is vaguer than you think.

It's not reducing the national debt.
Or even reducing the amount more me borrow every year.
It's reducing the rate of increase in amount we borrow every year.

It was also offical dropped as a result of Brexit.

In the financial year [b]2014/15[/b], the UK government spent £258 billion on [b]welfare[/b], which made up [b]35% of all government spending.[/b] In the financial year [b]2010/11[/b] the government spent £230 billion on welfare, around [b]33% of government spending[/b].

Source: ONS

So is it just a case of bad execution of an ideology? Ditto Health

Health spending has experienced significant growth since 1949–50, at an average annual real rate of 3.7% up to 2014–15. After uneven growth between the 1970s and the late 1990s, the last Labour government oversaw an acceleration of the increases in spending on the National Health Service, pushing up health spending to around 7% of national income prior to the recession. [b]While other departments have experienced budget cuts as part of the coalition government’s programme of austerity (sic), spending on health has been increased in real terms. [/b]This ‘protection’ nonetheless represents a tight funding environment for the NHS, not least as demographic pressure pushes up demand.

Source: IFS

are we looking at different pie charts?

Nope, but you are perhaps only looking at the central government spending on Education, not the total.

Austerity was never an attempt to do anything about the deficit. It was purely an ideological attack on state provision of services and of the terms and conditions of those who work for the state.

which is contradictory to the rhetoric at election time...

I'm no economist, but I seem to recall something happening between then and now which might make people rethink plans? Pushing on in spite of a changing situation would seem to me to be a bigger issue that actually responding to the changes.

Ah yes, thanks for the clarification cranberry.

privatisation of education

😀

hammering the poorest

ONS: Since 2006/07, the Gini coefficients for gross, disposable and post-tax income have all decreased, reflecting a fall in income inequality on these measures and resulting in some of the lowest levels of income inequality observed since the late 1980s. (ONS 2015)

These bloody Tories cant deliver on any of their ideology can they?

THM
Cuts to the DLA have a much greater impact on those that rely on them than capping child benefit for 60k+ households
No matter who saves the government the most

Changing [b]short term policy[/b] in the light of a new environment is sensible Government. Had Labour levels of borrowing and spending growth continued we wouldn't have the option to borrow more as the markets / private sector wouldn't lend us the money

Austerity was never an attempt to do anything about the deficit. It was purely an ideological attack on state provision of services and of the terms and conditions of those who work for the state.

Rubbish, its simple Economic prudence and is being followed throightout Europe. France tried to buck that trend and it was a disaster, Hollande reversed direction and is now following the same policy.

I think it's fairly clear that politicians haven't a ****ing clue.

Lord Porter, the Conservative chair of the Local Government Association, said last night that the government should consider relaxing the rules that stop councils borrowing to invest in housing. This is the policy that Jeremy Corbyn was proposing at the Labour conference last week

Jambas - we (the austerity gang) have a more expansionary fiscal policy than France (your free spending socialists) - economic prudence, seems to be for governments to offset the deleveraging of the private sector. Our nasty, ideologically-driven, enemy of the poor, privatisers of the state are doing that in contrast to nos amis en France

In the paper today it said that they'd given up on the deficit target, but were sticking with austerity, so this:

Austerity was never an attempt to do anything about the deficit. It was purely an ideological attack on state provision of services and of the terms and conditions of those who work for the state.

.. would appear to be bang on.

Rubbish, its simple Economic prudence

Except it isn't because it's not saving anything or reducing anything is it?

Actually the deficit (not the debt) has reduced by two thirds, so the deficit is reducing due to austerity.

Oh, so it has worked?

I knew there was a reason I never opted for economics, I'm rubbish at statistics too so got no hope for understanding this stuff.

Except it isn't because it's not saving anything or reducing anything is it?

Jam you have to appreciate that austerity might not always be prudent.

If you as a household stop non-essential spending, then your finances will improve. If everyone did it, the economy would plunge into recession.

You MUST understand economics better than this, surely?

Still not spending enough on healthcare, don't get ill this winter folks

molgrips - Member
In the paper today it said that they'd given up on the deficit target, but were sticking with austerity, so this:

Austerity was never an attempt to do anything about the deficit. It was purely an ideological attack on state provision of services and of the terms and conditions of those who work for the state.
.. would appear to be bang on.

On the contrary, its completely wrong as the facts tell us very clearly. But equally your headline is wrong.

Wobbliscott is closest - we still run an expansionary fiscal policy (gov spending > revenue) and this is more expansionary than many other developed economies (eg, France). That is the correct thing to do in the current climate. But we are less expansionary than in the past - hence the deficit is coming down as a % of national income and out total debt is not growing as fast as it was (but is still growing).

On the contrary, its completely wrong as the facts tell us very clearly.

Which bit? That austerity was politically motivated rather than economically?

Every bit.

Molgrips France kept spending and borrowing and the Economy kept shrinking. Suddenly you run into a debt limit and then you are really buggered. Yes I appreciate of your cuts shrink the economy that's counterproductive but that's not what the Trories did and we returned to economic growth.

BBC slant is rather different.

Hammond focuses on Housebuilding and Transport rather than deficit reduction. He hasn't abandoned it he has just stepped away from Osbourne's 2020 target date. In the light of new circumstances this makes perfect sense.

http://www.bbc.co.uk/news/uk-politics-37536943

Still not spending enough on healthcare, don't get ill this winter folks

Could't agree more, we need to have an adult conversation about how to raise spending 30% i.e. an NHS budget from £130bn to £170bn spent on healthcare (not necessarily just given to the NHS)

Molgrips France kept spending and borrowing and the Economy kept shrinking.

Would that have happened here?

Yes I appreciate of your cuts shrink the economy that's counterproductive but that's not what the Trories did and we returned to economic growth.

No - cuts retard economic growth. Other factors may have more than cancelled it out, which is why we'd still see surplus.

The other big problem with cuts is that they reduce services and hence quality of life for a lot of people. Do you agree it's an issue?

Could't agree more, we need to have an adult conversation about how to raise spending

Indeed, but how do you match up austerity and increasing NHS spending?

In the light of [s]new circumstances[/s] the ludicrous act of financial self harm this [s]makes perfect sense[/s] means a complete about face for Tory policy .

So is it just a case of bad execution of an ideology? Ditto Health

Health spending has experienced significant growth since 1949–50, at an average annual real rate of 3.7% up to 2014–15. After uneven growth between the 1970s and the late 1990s, the last Labour government oversaw an acceleration of the increases in spending on the National Health Service, pushing up health spending to around 7% of national income prior to the recession. While other departments have experienced budget cuts as part of the coalition government’s programme of austerity (sic), spending on health has been increased in real terms. This ‘protection’ nonetheless represents a tight funding environment for the NHS, not least as demographic pressure pushes up demand.
Source: IFS

Whilst funding has gone up the government also changed the National Insurance rules on the NHS so the treasury gets £5bn of the extra funding back.

Indeed, but how do you match up austerity and increasing NHS spending?

You cant - hence you are asking the wring question

According to newsnight they are going full Keynesian
It's like Cameron & Osborne never existed

Heathrow expansion is a cert (soooo glad I'm no longer under the flight path, feel very sorry for those still there- apart from Zac the racist obvs)

It seems like they are aware austerity has divided the nation, but they won't actually admit it, the question is will there be an investment in local services and education that are so desperately needed after years of cuts.

Will catch Newsnight later. Hammond was pretty clear in his speech, new circumstances and therefore a policy adjustment in the timing of budget surplus target. Without having made progress in geting the finances in order we would not have the flexibility to adjust policy now. If you saw the Andrew Neill show you'd see the majority of party members asked where still in favour of pressing ahead with balancing the budget - crack on vs ease off.

We know fiscal prudence is unpopular, of course it is people want to just keep on spendng. Paying back debt/reducing spending is painful whether this is personal or national. When Labour last made such a catastrophe of the public finances the IMF insisted on spending cuts as a condition for their loan. We can do this ourselves or we can spend, blow up and then have the IMF or others impose financial prodence on us.

Can any of the clever economists explain what this (Keynesian) means. I watched newsnight but could not understand what they were saying. What will be different now?

According to newsnight they are going full Keynesian

Only if you misunderstand what Keynesian is.

It's like Cameron & Osborne never existed

Why? They did the same - just that the rhetoric did not match the reality of what they were doing

It seems like they are aware austerity has divided the nation, but they won't actually admit it, the question is will there be an investment in local services and education that are so desperately needed after years of cuts.

Odd that something that doesn't exist has divided the nation especially at a time of lower income inequality, rising employment and economic recovery? The government has continued to spend more than it earns - which is the appropriate thing to do at the moment - and has been more aggressive in this that most developed nations.

jambalaya - Member
Will catch Newsnight later. Hammond was pretty clear in his speech, new circumstances and therefore a policy adjustment in the timing of budget surplus target.

In reali there is no policy adjustment. It's a mirage and Hammind pretending to be different.

Without having made progress in geting the finances in order we would not have the flexibility to adjust policy now.

😯

If you saw the Andrew Neill show you'd see the majority of party members asked where still in favour of pressing ahead with balancing the budget - crack on vs ease off.

They are ignorant. If the household and corporate sector are running surpluses, the last thing that governments should do is to do the same. Surpluses and deficits have to match each other. The whole fiscal debate has been shaped by people who don't understand how the economy works.

Paying back debt/reducing spending is painful whether this is personal or national.

We have done neither at the national level

Doc - there is a tendency to equate Keynesian with higher levels of government spending. This is lazy, ignorant or both. Quite simply it is wrong.

So what is it then, thm?

well im certainly economically lazy /ignorant

but as i understand it keynsian ,means spending to invest and grow the economy

THM, our definitions of austerity differ the label 'austerity' has been used as a pretext by the last 2 governments to ...
close 100s of libraries
close 100s of sure start cnetres
biggest ever cuts to police numbers and funding
biggest ever cuts to council spending (and all the infrastructure they support)
huge programme to move schools out of LA control
top down reorganisation of the NHS
benefits and DLAs severley restricted
house prices and rents still soaring waaaay above salaries
created thousands of non-jobs, that means work doesnt pay and the productivity gap is soaring
etc etc
all of these cuts have damaged our society and the legacy will be a poorer educated less cohesive and even less productive population
leaving those with the least in a far crapper place than they were pre 2008, hence the easy 'blame immigrants EU ref result'

while child benefit cap was a good thing a statistical reduction in the gini coefficient means fk all to the 1/2 million people who've used food banks to eat this year.

To oversimplify, JMK believed that the state could play a role iin managing aggregate demand and in smoothing the natural economic cycle. To do this he advocated that governments should build up surpluses (spend < earn) in good times (and therefore depress the upside) in order to allow them to run deficits (spend > earn) during bad times (and therefore limit the downside). In essence he believed in counter-cyclical government policy

He was responding to persistent high unemployment at the time.

His basic argument was sound except for the fact that governments are very bad at doing this - hence the UK had a period of what became known as the "stop-go" cycle as governments mismanaged/misjudged the economic cycle. The unfortunate result was that Keynesian economics got an undeserved bad name and went out of favour. It was replaced by a different school that was also misapplied and misunderstood - there is a trend here, which makes Auntie Theresa's comments about the role of government yesterday all the more perplexing

the least in a far crapper place than they were pre 2008, hence the easy 'blame immigrants EU ref result'

The first half is patently false. The second isn't. Hence the grotesque positions that politicians are now adopting. Sickening.

The first half is patently false.

really?

because people living in deprived areas were more likely to use libraries- especially unemployed, obviously needed sure start centres, more likely to use the NHS and now much more likely to use food banks etc

Yes really

Go check which is the only segment of the population that was better off at the end of last year than at the time of the crisis.

Sorry that facts dont match the narrative - in more ways that one

Ok thanks for the explanations kimbers and thm.
I think I get it now.
It's a weird feeling be for someone such as me working in the NHS to be thinking about investing to grow, as in the NHS the only investment that is happening is to try to save money.
The rhetoric about increasing spending in healthcare etc is all a smokescreen to hide the continuous drive to reduce spending.

Sorry that [s]facts[/s] stats dont [s]match the narrative[/s] equate to personal happines - in more ways that one

Obvs I have no measure for peoples contentment, and tbh ive just moved from a not so nice part of London to a much nicer part of bucks, so my experience of life at the crap end is based only on going back to my home town, so Im taking ref result (and those I know voted out and their reasoning) as a national poll 😉

Go check which is the only segment of the population that was better off

Some segment had more libraries?

Contentment does not equate to economic well being does it? I always believe that true wealth is having/enjoying the things that money cannot buy

Contentment does not equate to economic well being does it?

I think they are strongly correlated at the lower end of things, aren't they?