The Guardian has reported today that:
George Osborne's plan to repair Britain's public finances has received a fresh setback from official figures showing that the budget deficit in November was 10% higher than in the same month in 2014.
The Office for National Statistics said the gap between spending and revenues last month was £14.2bn - an increase of £1.3bn on November 2014.
It added:
Borrowing during the first eight months of 2015-16 has been £66.9bn, only £2bn short of the total expected by the Office for Budget Responsibility for the whole of the financial year.
Analysts said it would require a big improvement in the remaining four months of the year to hit the OBR forecast. In the same months of 2014-15, the government borrowed £16bn.
Regular readers of this blog will hardly be surprised: I have been suggesting for some time that it will be impossible for the deficit targets Osborne has been setting and which the OBR has been approving to be met, and that is proving to be the case.
At some time the reality that the UK's deficit cannot be reduced without forcing the household and business economies into massive debt and without a massive improvement in UK trade and investment balances with the overseas sector taking place is going to have to be faced by all thsoe who cling to the absurd idea that the government can cut its way to a surplus as if it was a household economy.
Osborne will have to eat humble pie in the face of this reality sometime soon. So too will those from all other political parties who have bought into this utterly incorrect economic myth (including many in the Labour Party). The question is, what happens then?
First, there will need to be a recognition that cutting in the current situation is not just unnecessary, it is also harmful and counter-prouctive: any cuts increase the deficit, and do not reduce them because each pound cut reduces GDP by a greater sum.
Second, there will need to be a frank recognition that government debt is, right now, one of the strongest underpinnings there is for private wealth and that there is considerable demand for it for this reason which makes the demand for cuts absurd even within the context of market economics: what the government is conciously seeking to do is deny the financial markets precisely what they want.
Third, a policy on how to use deficits creatively will be needed. The investment programme long proposed by the Green New Deal group (of which I am a member) remains probably the most coherent suggestion in this respect. That this just so happened to underpin much of Corbynomics is one of those things that we may also have to get used to.
To put it another way, until the economic reality of the situation we are in at present, where deficits are needed, and meet consumer, business and financial sector demands, is accepted the government will continue with an economic strategy that is most akin to fighting shadows, or myths, of its own creation. That is in fact, not a plan, or economic, or long term. It's just a shambles. And the sooner that the eivdence that this is the case is appreciated the better.
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Told you so, re Ozymandias Osborne. There can be no long term plan when there is no long term.
Meanwhile household debt is starting to look like yet another bubble waiting to be burst…
http://www.theguardian.com/uk-news/2015/dec/22/economy-concerns-as-household-debt-rises-to-40bn-in-latest-figures
I feel a bit more pessimistic than you, Richard. (Could be my gloomy Christmas mood). I’m not sure the realisation that Osbormonics is crazy is going to hit any time soon despite the evidence and warnings. I wonder even if we’ll get a more sensible response whenever the next crash happens.
I’ve found that the economic beliefs of the dominant forces in the eurozone continuing to be held for so long quite mind boggling (especially with relation to Greece).
I do hope for change, of course, and it’s got to come at some point. But I’m not sure when or how bad things have to get.
It will get worse first, I agree
The timescale is uncertain
I suspect that we will have to wait for another crash….and even then we’ll be told that it’s all a part of the ‘new’, ‘natural’ business cycle….as, I think Ann Petiffor wrote in her book ‘just Money’, the banking system is already paving the way for the ‘crash as a business model’ appraoch……the despairing side of me thinks the public will say ‘oh , that again and continue watching X Factor.
There is a long-term plan: 2020
Or as Shaun puts it: “So we have a fiscal boost via a redistribution towards pensioners. Of course there are always exceptions but whilst falling savings income made it look as if they would have a bad credit crunch other changes have meant that they have had a relatively good one. You would think that they are more likely to vote or something!”
https://notayesmanseconomics.wordpress.com/2015/12/22/how-austerity-morphed-into-a-fiscal-boost-in-the-uk/
As long as the press/media has owners that support the government…..
Osborne could issue gilts, invest the money in performing assets (take your pick of any infrastructure) & generate a return for UK Limited, whilst offering empolyment rather than McJobs to the UK pop. What does he do? He sits on his hands. An Osbornshambles? Or perhaps he just sees UK citizens as peasants/serfs in which case – why would he bother?
Indeed- the population, as Marx put it, is ‘surplus’, or rather drones of financialisation.
The DWP is now like a Greek god fiddling with the fates of the broad populace laughing as they see them running from pillar to post trying to avoid the food bank/homelessness/crap job.
Im not hopeful for a wake-up call anytime soon. In Spain, there has been over 50% youth unemployment and over 400,000 evictions and yet 28% voted for the party of austerity-this alone should tell us that it is going to be a slow grind, more so in the case of the viral ‘I’m-alright-Jackism’ propuned in the UK
The phrase “each pound cut ( of public spending ) reduces GDP by a greater sum” is intriguing. It’s a bit like saying that punting will cost you money, or an e-bike uses some electric power. It’s quite close to being the definition of the thing being said.
By that I mean that when the statisticians measure GDP they don’t look at the market value of all the government’s activities. The essential ones can’t be measured that way anyway. Instead they save time and just measure the government spending part of GDP by how much is spent.
So government could do better things with less money, or worse things with less money and it wouldn’t matter to the GDP number crunchers. The government contribution to GDP is recorded as having gone down.
I suggest you go and read about the multiplier
It is clear you have no clue what I am talking about
You could start with my paper with Prof Ronen Palan
How much higher does government spending need to be for the multiplier to work and generate proper growth? Does the government need to be above 50% of the economy?
Please go and read about the multiplier
Then you would realise your question makes no sense, at all
Baxter
If you want to peddle you own (ahem…) wares then why don’t you start your own blog?
You could call it:-
‘Lax Research UK’ or even ‘Lacks Research UK’ – both would be eminently appropriate in your case.
I agree Osborne’s economic plan is indeed a shambles. But what on earth is he doing to the UK? I’m not worried about Osborne – I’m worried about us! Can Labour please shout hard and loud about their alternative – which I’m afraid, so far, I don’t hear..
It really is time for Labour to shout long and hard, and not at each other
That would be good Richard but expect a nasty civil-war before the austerian/Tory-lite decide to find another party. I suspect that will be the only way which would hopefully leave a ‘rump’ labour party able to get the message across which is as you said:
“At some time the reality that the UK’s deficit cannot be reduced without forcing the household and business economies into massive debt and without a massive improvement in UK trade and investment balances with the overseas sector taking place is going to have to be faced by all thsoe who cling to the absurd idea that the government can cut its way to a surplus as if it was a household economy. ”
That’s all they need to say and flash the appropriate accounting identities.
I propose a fun festive game for all the family. Find the target which Gideon HASN’T missed.
Osborne doesn’t have an economic plan, long term or otherwise. He has a political plan, which is the ultimate destruction of the post 1945 (and possibly even the post 1909) welfare state and the redirection of whatever rump state spending remains to rent seeking corporations like Capita, Maximus and G4S. He is using “economics” as a weapon to achieve these aims, ably assisted by his friends and useful idiots in the press (yes I’m looking at you here Guardian) who willingly adopt his framing of economic discussion in the bogus terms of household budgets and living within our means (and see especially here the BBC talking of NHS trusts in deficit and debt rather than being underfunded).
In this respect John McDonell has been spot on, consistently saying that Osborne’s austerity is ideological and not an economic necessity. Now if only we could get the right of the PLP on board (I know, fat chance) this message might start getting a little bit more traction
Your analysis is sound
And the Guardian are also reporting that UK household debt is rising – £40bn more has been borrowed this year http://www.theguardian.com/uk-news/2015/dec/22/economy-concerns-as-household-debt-rises-to-40bn-in-latest-figures
I watched a rather twee but nonetheless heartbreaking film last night about poor kids in Mumbai, struggling to make something of themselves, but almost certainly doomed to fail.
It occurred to me that the level of inequality prevailing there is precisely what this Tory government would like to see for the UK – a tiny and fabulously weathy elite lording it uncaringly over a teeming mass of desperate human misery; indebted, homeless, uneducated, starving, and grateful for any tiny scraps that may come their way.
If you think that this could never happen in the UK, simply look back two hundred years….
Although just a few of the lower orders will be allowed to escape their miserable situation, so that they can be held up as an example to the rest, whose failure to do the same will be ascribed to their moral failings.
Fritz Lang made a film about that in the 1920’s called Metropolis!
Yes, I saw it again last month, with live musical accompaniment to boot, but at the end you can still go home to a fairly reasonable life, as, for now, it’s just a movie.
The scary thing is, that much of the world actually lives in a variation on this model, as did we in the UK up until the early twentieth century, and what progress the UK and Europe made in the last couple of hundred years to eradicate endemic poverty and inequality is being unwound by Tories and their other neoliberal counterparts.
And not just unwound by accident or incompetence, but deliberately, and with powerful determination and enthusiasm.
That’s the appalling and terrifying truth.
@ Mr Shigemitsu
“If you think that this could never happen in the UK, simply look back two hundred years”
Those of you who have heard me “drone” on before about Thatcher’s plan to re-feudalize society, will know that I have said the present Government is seeking to take us back 200 years, to 1815, when belonging to a Union earned you transportation to the Colonies, and public dissent earned you death at the hands of the Hussars (as at the Peterloo Masscre of 1819), so thank you for picking on the same figure as I have.
In truth the Tories really do NOT give a damn about the 99%: this REALLY is Government BY the 1%, FOR the 1%. What other complexion can one put on such scandals as this:
Only frack in Labour seats, pleads Tory peer
http://www.thetimes.co.uk/tto/business/industries/naturalresources/article4089014.ece
Osborne’s Father-in Law spoke in the Lords some time back about Fracking in the North East saying that ‘there wasn’t much there.’ When objections arose he just guffawed like a public school boy. I agree with you Andrew-their view is that we have what Marx called ‘surplus population.’
Is this an iteration by covert means towards a revival of the odious Thomas Nixon Carver:
“Thomas Nixon Carver, professor of Political Economy at Harvard (1902 — 1935), well-known “Republican Brain Truster” and President of the American Economic Association. He was very keen to wield the neutering knife. The Daily Washington Merry-Go-Round reports Point 2 of his economic plan of 1936 as reading, “Reduction of the supply of labor by sterilization of the palpably unfit; […] Marriage would be barred until the parties could afford to buy and operate an automobile”. By “palpably unfit” he meant people earning less than $1,800 per year, which is to say half the population of the United States at the time. Castratio plebis, to put it mildly.”
I spoke to a person in a train recently, late 50s, from other conversations clearly a successful business person
He aked me what I did
I told him
He then proceeded to tell me that the problem with the UK was there were too many people
I expected racism to follow but he explained he meant unproductive people not making enough or too old
If they could not support themselves the state should not he said
I asked – in front of a packed carriage who were no doubt listening – if he was suggesting euthanasia
He could not answer
He was saved by arrival in Kings Cross
““compulsory sterilisation of all those who have a second, (or third, or whatever) child while living off state handouts.”
John Ward
Tory councillor
Medway
http://www.counterpunch.org/2014/09/12/disparaging-the-poor/
I think that rather than castrate the poor/disabled/sick, they have decided to go for broke.
In the US around 45000 die every year because of no health care (I consider that a low number, and am looking for the amount who die because their healthcare funding no longer exists because the health policy ended)
We already know the 400,000+- that die because of medical errors…
Britain: Following the US in “died from lack of money”
It looks like a shambles because it is one.
It is a shambles on purpose – designed to create more chaos in order create a false consciousness of a need for change as a precursor to more privatisation, more cheaply acquired assets which means more ‘work’ and attendant fees for the financial sector.
RE Your discussion above on the train.
I would have loved to have been there.
I hear the same old rhubarb all of the time from similar aged people ( I am now 50 myself).
Such things indicate just how inculcated market thinking has become but also how much people have been dumbed down by the narrow focus on productivity.
It also testifies to just how well another message has been drilled into us – that the older members of our society are some sort of burden – never mind that their output has made a contribution to where we are today.
My final observation is that this person fell for the oldest excuse in the book: to blame the people – and not the systems they try to live or work in. He must have been a manager or director of some sort so unfortunately is typical of his type – more’s the pity.
He was a director
He had also established a trust fund to help his daughter at PWC buy her first home
He told the whole carriage that
The OBR were interviewed and said all would be well by the end of this year:
“November’s public sector net borrowing of £14.2 billion was up on a year earlier, largely reflecting the timing of various spending items and that the boost to receipts from last year’s bank fines was not repeated. We continue to expect year-on-year falls in the deficit to be bigger over the final months of 2015-16” see more http://budgetresponsibility.org.uk/category/topics/monthly-public-finance-data/
. is there any truth in this position?
In a word, yes for the month, and no in the bigger sense
This is not a one month blip. The annual overspend may be £14 bn now – or more than 20% of the very recent forecast
This is just excuses in that case
That’s the problem-there’s never any ‘bigger sense’ just spun statistics-I sometimes wonder why we bother with monthly statements, perhaps every six months would be better as the stocks and flows could be better analysed.
I didn’t know he had a long-term economic plan.
I have noted a lot of short-term economic responses to things his economically inept actions have caused.
But then…he is not a chancellor much interested in the economy AS an economy, but is more interested in his economic model used solely for his political ends.
I see Cameron as a useful, acceptable, pretty face; fronting for the extremely ambitious chancellor who is much less comfortable in public speaking.
Very like Blair and Brown in some respects.
It will be interesting in a few years, when Cameron departs, to see who is the acceptable face, of unacceptable politics, that has to front for the government?
It will be even more interesting to see whether people remain as glove puppets of a variety of media owners. The evidence is that the printed media is fast losing both sales and influence. So I suppose we should be looking at possible control of digital media to guarantee the correct political message continues?
So the rise of peoplesmomentum is of interest to me…I wonder what the response of the slightly-left-of-total-dictatorship parties will be…