This exchange took place this afternoon in Parliament:
Sajid Javid (Bromsgrove) (Con)
I commend my right hon. Friend's statement and the actions he has taken to ensure that we get the strongest possible recovery. He has been absolutely right thus far to spend “whatever it takes”–something he set out clearly back in March–but he will be acutely aware that interest rates will not stay low forever and that we will eventually need to bring our national debt back under control in order to sustain recovery, continue to create jobs and keep taxes low. So may I encourage him to set out new fiscal rules in his autumn Budget with the aim of getting our national debt down as a proportion of our national income by the end of this Parliament
Rishi Sunak
I thank my right hon. Friend for his kind support and also his advice. He is of course absolutely right, and I hope that he was heartened by what he heard me say in the statement about the importance of returning our public finances to a sustainable footing in the medium term. We can and will do exactly that. He is right to highlight the sensitivity of our debt to interest rates, which was why he was right to introduce into our fiscal framework the notion of an interest service rule, and that is something that I will look at keenly in the coming months.
So what we have is an agreement that debt as a proportion of GDP must fall.
The debt they are referring to is, no doubt, gross debt, i.e. before QE.
That's up £300bn at least this year, and maybe by more now
GDP, meanwhile is going to be down, and take a very long time indeed to recover.
As Annaliese Dodds also rightly said for Labour today, this is not the time for tax increases.
So, if Sunak and Javid - both ex-City bankers whose only interest is in keeping their chums in EC1 happy - want to bring down the ratio of so-called debt (which is no such thing, but that's another story) to GDP down they have to cut government spending dramatically.
And that means more austerity is going to be planned as we head for 6 million or more unemployed.
The above exchange is, then, in that case the shortest agreed commitment to an economic suicide note presented to parliament for some time.
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I’m bemused by what is happening. The furlough scheme has created an alternate reality, one in which the crisis doesn’t exist, and soon enough everything will be as ever it was before. Sunak’s self proclaimed radicalism, supposedly unconstrained by ideology, amounts to little more than more financial gifts for preferred parties (Tory party voters, and financial backers). Nothing will sway the likes of Sunak from his unshakable faith in his economic religion, absolutely nothing. The swings and arrow of outrageous fortune are as nothing, when set against unbreakable dogma. It’s terrifying, like being under attack, having weapons with which to defend yourself, but opting to lay them down, lest they become sullied in combat.
‘The £2bn jobs plan for young people’ – I quote R4’s 6pm news immediately after the bongs. So, I’m thinking, this is all about capturing the love and loyalty of young people (by the Tories and the Beeb, both of whom are struggling on that front). But that line cannot hold, nor the ‘love and loyalty’ of the young when jobs and job opportunities fall away before their very eyes.
And we are encouraged to ‘spend, spend, spend’ as per Viv Nicholson!! It would be funny if it wasn’t so tragic. And Rishi Sunak is being held up as a more than credible successor to Boris Johnson. God help us.
Indeed
No surprise. They are locked into an ideology. Even if they understood how the macro-economy functions they would/could not act in violation of the Neo-liberal creed which they have signed up for. As Upton Sinclair said: “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
We’ve got over 4 more years of this dangerous nonsense. And probably another 5 years after that.
I have to hope….
Both extra government spending and tax cuts increase the deficit.
I would guess direct investment by a government is going to be better at creating jobs and assets than tax cuts where a proportion is likely to be saved rather than spent.
It fell on deaf ears. Nobody in Parliament noticed. Such is the standard of our parliament.
Too true.
‘VATman and Robbing’ – the Tory dynamic dodgy duo.
The other thing I noted was that we are effectively being bribed/paid to go out and contract and spread Covid-19 in order to boost the economy. As you have said, the Tories have chosen death. Its callous. Telling us that it is only fear. With a crap testing regime.
I can tell you though that where I work/live, many don’t buy it – they will not be going to the pub or eating out.
Stephen Barclay on Channel 4 has just said that the austerity they brought in in 2010 has enabled us to have debt now and retain market confidence!!
John Snow is still saying that the furlough is funded by ‘tax payers’ money!!
They’re all mad Richard – they’re all completely insane!!
They’re slaves of dead economists
I listened to that too – Barclay with Jon Snow and also Krishnan Guru-Murthy. All trotting out the old tax and spend lines. Though Id rate Channel 4 News as the best of the bunch at the moment, on economics they are no further forward.
Getting at some of the top journalists might be a priority, to influence wider attitudes. Perhaps we should start a co-ordinated letter writing campaign…
I imagine the second wave will be going strong by the autumn. All thoughts of prudence will have to be be abandoned accordingly. Then, soon after, there’ll be Brexit… we might see austerity again but I doubt it. Well… the survivors might see it.
Providing special financial incentives to encourage us to maximise the second wave of infection?
I was thinking of an analogy with cancer treatment. If you want to eliminate the cancer, you have to treat it early and hard.
The Westminster strategy seems to be, whenever the virus seems to be getting under control, to relax, and allow it to spread again. The paradox is that more aggressive action will give a smaller economic hit
Richard
Do you or any of the other readers of this blog think its a worthwhile exercise to distribute copies of the Deficit Myth to Sajid Javid, Rishi Sunak, Jon Snow, Laura Kuenssberg, Robert Peston, Andrew Bailey, Andrew Sentance and many others who appear to share similar views on public debt and role of governments.
For what its worth, I think there is no time like the present to engage and discuss – strike while the iron is hot.
I think it’s a good idea
It just needs £10,000 or more
Thanks Richard – if readers of this blog can suggest ideas for raising funds to make this happen, it would be much appreciated.
As a start we could ask readers of the blog to send a copy to their local MP (if they have the means and urge to do so).
It would be about as useful as giving Pope Paul III a copy of Copernicus’ “De revolutionibus orbium coelestium”.
Richard I’ve been thinking is our Chancellor’s stimulus package of £30bn sufficient?
Germany has 130bn euro package which Merkel has announced which has an across the board VAT cut from 19% to 16%, funds for Innovation, Climate Change and what they call digitalisation. This has been combined with support for German families of 300 euros per child and a car exchange scheme in favour of electric vehicles. This is on top of the income support I believe the 7 million workers are still getting what we have called Furlough support.
As for the French Macron has announced a 45bn euro package (35bn reduced social security contributions for business, 8.5bn for those workers forced into part time working and needing to claim unemployment benefits; 2bn for the self-employed and shopkeepers). This is accompanied by up to 300bn euros in guaranteed business loans.
It reads like the French and the Germans have taken a different view of the economic and social situation. Why are the media not raising these points of comparison? Where is the evidence that our response is appropriate when compared to similar economies with whom we trade or have close relationships?
The Resolution Foundation have looked at this today…..
Email begging.
Every time I open my email just now, and even more so than not long ago, I am bombarded with organisations begging for funding for worthy aspirations. There are also countless beggings to join petitions, also in the main for worthy cases, but practically all being ignored by government and thus nugatory. So much of the funding for many of the worthy causes should actually be shouldered by our legitimately elected governments in our names. Now why is it that we are being exhorted to pay individually for things which sensibly should be paid for by the community? Some would say, incorrectly, that taxes should be raised for much of these requirements but it should be the government’s responsibility to pay what is necessary, thereby increasing employment and benefiting the economy, and, if necessary, later adjusting taxation to control inflation. Instead, we have endless misery caused by bigoted neo-liberal policies. What a shower!