According to many newspapers George Osborne will be announcing tonight that it is his intention to run long term budget surpluses in the UK so that ha can reduce government debt and put state finances back on what he calls a sound footing, because he believes that only by running surpluses and reducing debt can he deliver long term prosperity for this country. He is actually going to say the government should only borrow in exceptional circumstances, but is declining to say what they are.
As Larry Elliott describes this in the Guardian, this is an exercise in returning to Victorian values in economic management. Indeed, a committee that has not met for 150 years is, apparently, to be reconvened to oversee the task. Larry notes that:
Osborne will drive home his desire to bring back the days of sound finance by announcing he will convene the first meeting in more than 150 years of the committee of the commissioners for the reduction of the national debt.
Set up by William Pitt the Younger to help repair the damage to the public finances caused by the Napoleonic wars, the body last met in 1860 when William Gladstone was chancellor.
And let's have no doubt that what Osborne is doing is seeking to change the whole tone of government economic (and so social and any other) policy by moving back to another era. Osborne will say:
The result of this recent British election — and the comprehensive rejection of those who argued for more borrowing and more spending — gives our nation the chance to entrench a new settlement.
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This further strengthens the myths about money and Government finance which will lodge in the brains of the already dumbed-down public as an unalterable metaphysical truth. I knew this would happen and that things will have to get FAR worse before the light bulb goes on in peoples’ brains that a 50 year bad joke is being played out on them. There’s just enough ‘I’m-allright-Jackists’ out there to maintain this for a bit before social unrest follows -the stupidity and waste of it all is blinding.
Osborne has returned us fully to the Gold Standard mentality we might as well go back on the Gold Standard and shrink the money supply and concentrate it in a few hands-which is what we’ve effectively got.
As a housing Association resident, I fully expect the landlords to be coming for me – will people lie down and take this – or can we rise out of our slumber like the southerrn Europeans?
All good questions
The alternative view is that by making the welfare state based on sustainable tax contributions, and not debt, makes it more viable in the longer term. Afterall, debt must be paid back by future tax payers. It is therefore a redistribution from taxpayers who don’t hold bonds to those that do. Ie from poor taxpayers to those who have have cash to buy bonds. That will mean less tax money in the future being used to pay for public services than would otherwise be possible. The greatest threat to the welfare state is out of control debt, not fiscal prudence.
National debt has never been repaid
And it never will be
It just rolls over until inflation whittles it away
Get your facts right
“debt must be paid back by future tax payers”
I wonder if these ‘future tax payers’ (that’s every adult by the way, especially with VAT at 20% and our entitlement as British citizens to the tax receipts from business etc) would want to stop paying towards national debt repayments (money they won’t even notice) if it means we have to go without the NHS, decent public services and the safety net the vast majority of us will need at some point in our lives — even in the unlikely event we never need the safety net, we have a much better society if others can use it when they need it.
When the economy was on the Gold Standard, aspects of that sort of logic made sense at times. But the economy isn’t on the Gold Standard. Nixon kicked that into touch on August 15 1971. For the nostrums sometimes appropriate to the state economics of a previous era to be applied today requires the destruction of the state’s requirement to look after its citizens, something we’ve already seen in relation to social care. This implies minimal privatised provision of social services and healthcare. You will have to go into debt, or be extremely wealthy, or die.
“Pay or perish” should be inscribed on the banner flying over Parliament.
Someone should tell Norway that this is a mental idea – those crazy Nordics have been running a budget surplus for years. It’s bound to all go bad for them, with a state that is smaller than the UK’s (as a percentage of GDP) their people are sure to be suffering? Anyway, their prudence driven luck will run out one day!
Politely, stop being crass
Have you noticed their oil surplus and what they do with it?
If you can’t offer intelligent comment don’t bother
As George Monbiot points out, this is what it means for our children as parents scurry to get them in the queue:
“The number of children admitted to hospital because of self-harm has risen by 68% in 10 years, while the number of young patients with eating disorders has almost doubled in three years. Without good data, we don’t have a clear picture of what the causes might be, but it’s worth noting that in the past year, according to the charity YoungMinds, the number of children receiving counselling for exam stress has tripled.
An international survey of children’s wellbeing found that the UK, where such pressures are peculiarly intense, ranked 13th out of 15 countries for children’s life satisfaction, 13th for agreement with the statement “I like going to school”, 14th for children’s satisfaction with their bodies and 15th for self-confidence. So all that pressure and cramming and exhortation — that worked, didn’t it?”
Great article by George
It is truly shocking that here we are exporting jobs abroad to remain competitive (i.e. producing things cheaply) or employing immigrant labour here in the UK and yet we expect our children to work harder than any generation before and for what? So that we can tun around and tell many of them – ‘You have failed’?
I heard a comment that in good times like these we should be fixing the roof for a rainy day. If these are good times, what would be a bad time? And if times are so good, why does the country need all the cutbacks in the government sector?
Of course the reason is as you state…a desire to return to a smaller government.
Back to basics, they have always longed for the past with defining lines drawn between the differing classes. But the peasants have had an education and have contributed hugely to society. If we come out of the EU the UK will be at risk of a return to a more upstairs downstairs way of life. There would be enough money for a nice welfare, safety net pot is farm subsidies to wealthy landowners were drastically reduced. So reform from within the EU please.
Seems like an inexorable slide to depressingly hard times, we in kibbutz dwellings, they back in the big house.
As long as the Patient will suffer, the cruel will kick.
Sydney Smith
The one thing he won’t deliver – and probably does not intend to- is a reduction in the national debt.
Remember: the debt is a rent exacted by the wealthy on the ordinary taxpayer-citizen.
There is a great deal of good that can and should be financed by the issuance if debt: and if that’s creating economic growth, it’s an excellent investment for pensions.
But the architects of latter-day Mugabe economics see it an income stream for a non-taxpaying aristocracy.
Well Richard, for the past five years you and many commentors on your blog have argued that the aim of the Tories was to return the country to a contemporary version of 19th century governmental and economic and social conditions. We were largely dismissed as mad and it was never admitted. But now at least we have it from the horse’s mouth.
Yes, we were right
I wish we weren’t
Osborne isn’t a horse… horses have a socially useful function in modern society… although he does express a large amount of ordure…
🙂
And the witless Labour front benchers are right behind him. See http://order-order.com/2015/06/09/burnham-booed-as-hes-bounced-on-benefit-cap/#_@/YG_BFhGvvGAZDA. There is no way that they will allow Jeremy Corbyn on the leadership ballot.
I am sure Jeremy has no chance
Which is a shame: I know him and he is a decent and clever man
“he is a decent and clever man”
Which is why he won’t be on the ballot. You don’t get ahead in politics nowadays by being decent AND clever.
Agreed!
Incidently, the one-firm building I work in has some 650 employees and we all have the same IP address.
Amazing how many people comment from there then
I don’t believe that
Good article, I am equally concerned. I think part of the problem is that most people (inc me) don’t fully understand economics. It is a belief system not an exact science and the Tory/neo-con ideology is one of scarcity and punishment. They say they want to support the NHS and reward hard working families and produce sound bites which are hard to disagree with. Their actions say the opposite but it is an amazing con trick they have pulled off. Most people also don’t understand money, money supply and debt. The simplistic idea of government spending being like a domestic budget is nonsense and yet one that has taken hold in the national psyche. Those of us who say a national debt is a reasonable price for a decent society are now seen as extremists – Owen Jones starts to explain how this happened in The Establishment. What I really don’t understand is why anyone would want to live in such a divided society, even if you are loaded and will never have to worry about money again, do you really want to see people sleeping on the streets, dying of cold, children going hungry and all the horrors of a society before the welfare state.
“Most people also don’t understand money, money supply and debt. The simplistic idea of government spending being like a domestic budget is nonsense and yet one that has taken hold in the national psyche.”
Indeed. The Tories have come up with something that is easy for the average member of the electorate to visualise (the household debt nonsense). Someone needs to counter it with an argument that is also easy for people to understand. Bear in mind at the leaders’ debate one of the most googled terms was “what is the deficit?”. This is tricky ground.
The closest I’ve managed to get to a one sentence explanation of why the national economy is not like a household one is this;
in a national economy, to a vast extent, one persons’ expenditure is someone elses income. That is not true in the household setting. Sorry, two short sentences 🙂
But very good ones
I will remember them
Between INCOME and THAT you could insert a semi-colon to make one sentence!
Thank you. So we’ll try this;
In a national economy, to a vast extent, everyones output is everyone elses income; that is not true of a household.
Good
‘output’ not ‘expenditure of course.
This will sound like a very strange comment, but please bear with me. Some years I ago I played a game called Half Life 2. In part of the game, you emerge from a train station into the street through large double doors.
The moment you emerge outside, you are confronted by a controlled and cruel society. Police state soldiers in full combat gear patrol the streets. All civilians wear the same coveralls. surveillance is all pervasive, drones follow you around taking pictures.
Earths resources are controlled by an elite group called the “combine”. Of course like all elites, they are in gravy, while the rest suffer.
On seeing this scene in the game, it was if I had a revelation that this was the future for myself, and many others. I have never had an experience like that. Its as if some deep knowledge had come to the surface.
The sad thing for me, is that many (not all) people seem to be like zombies these days. As long as they are ok, nothing else, or anyone else matters.
Perhaps media like games, or art and literature can bring out what we already deeply know to be true.
Cheers.
So 37% of the vote represents a “comprehensive rejection” of rival policies. I always doubted his macroeconomics, but such a shaky grasp of arithmetic is a bit worrying for a Chancellor.
He has a degree in modern history. One assumes then that he will be aware of social conditions in previous history?
He’s obviously a fan of the 19th Century when Gladstone talked of the ” intoxicating augmentation of wealth” of the financial world whilst others rotted to death for fear of the workhouse – only psychopathology can explain this ‘nostalgia.’
Is it time to physically express opppostion. I think so. I am going to be on the march 20th June. I guess you will regard it as futile but in the absence of another medium, I feel that it is the only thing that might make them think twice. A mass protest.
I think peaceful opposition is entirely legitimate
I think physical opposition is not
Pob – It seems you are protesting against democracy given that we just had an election. Protest about the voting system by all means (although I imagine most changes would leave a UKIP/Tory coalition as a very strong player).
If you just protest “physically” about the fact your party didn’t win then you will look childish and people will just ignore you.
Kitty Ussher (a Treasury minister who was forced to resign after avoiding paying up to £17000 in tax on the sale of her constituency home) said on R4 this morning that Labour should accept the budget surplus law and go further…
I have met Kitty Ussher a number of times and have always felt she’d feel quite at home in the right wing of the Conservative Party
How she ever came to be in Labour bemused me. I guess it was just opoortunistic career choice at the time
“The nineteenth century carried to extravagant lengths the criterion of what one can call for short the financial results, as a test of the advisability of any course of action sponsored by private or by collective action. The whole conduct of life was made into a sort of parody of an accountant’s nightmare. Instead of using their vastly increased material and technical resources to build a wonder-city, they built slums; and they thought it right and advisable to build slums because slums, on the test of private enterprise, ‘paid’, whereas the wonder-city would, they thought, have been an act of foolish extravagance, which would, in the imbecile idiom of the financial fashion, have ‘mortgaged the future’ ; though how the construction today of great and glorious works can impoverish the future no man can see until his mind is beset by false analogies from an irrelevant accountancy. Even today we spend our time – half vainly, but also, I must admit, half successfully – in trying to persuade our countrymen that the nation as a whole will assuredly be richer if unemployed men and machines are used to build much needed houses than if they are supported in idleness. For the minds of this generation are still so beclouded by bogus calculations that they distrust conclusions which should be obvious, out of a reliance on a system of financial accounting which casts doubt on whether such an operation will ‘pay’. We have to remain poor because it does not ‘pay’ to be rich. We have to live in hovels, not because we cannot build palaces, but because we cannot ‘afford’ them.
The same rule of self-destructive financial calculation governs every walk of life. We destroy the beauty of the countryside because the unappropriated splendours of nature have no economic value. We are capable of shutting off the sun and the stars because they do not pay a dividend. London is one of the richest cities in the history of civilisation, but it cannot ‘afford’ the highest standards of achievement of which its own living citizens are capable, because they do not ‘pay’.”
John Maynard Keynes
National Self-Sufficiency
(1933)