I was reminded this morning of this comment in a review of the impartiality of BBC coverage of taxation, public spending, government borrowing and debt by Michael Blastland and Andrew Dilnot, published in November 2022.
I think they understate their case.
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UK government debt excluding debt owed to itself is approximately 200% of income. We went past 100% over 15 years ago. Fact. We’re still ok. Austerity (?), where did all the extra spending go.
Your figures are totally inaccurate. They are wildly overstated.
Agreed.
They need to dig deeper, they need to be more curious. There are better reasons to poo-poo the ‘state as household’ lie and also do their duty and tell us who lied
– people like Margaret Hilda Thatcher for instance?
She said she was a conviction politician as though it gave her permission to lie.
Saying the state is a household is to say that voters are children. And just like children we should be silent and leave economics to the adults in the room.
This comes back to the rank stupidity of presenting crude, single-point ratios or made-up “fiscal rules” as if it represented hard, provable evidence; they are trying to sell a cheap trick, as ‘science’. So desperately irrelevant nonsense like this is, rather a terrible indictment of all the people; politicians, journalists and institutions that peddle this rubbish.
Lydia Prieg, of NEF (8th February, 2024) proposes an analysis of Conservative/Labour/Neoliberal guff about ‘fiscal rules’ that is at least written with some awareness of, and genuine respect for facts and evidence:
“the UK has had nine sets of fiscal rules since 1997. Our fiscal rules are not immovable laws of nature – they are invented and decided by our politicians. Chancellors simply change their fiscal rules when they become too difficult to meet – they are a political tennis ball, not a tool of effective policy. Even Jim O’Neill, the former chairman of Goldman Sachs Asset Management, and the Treasury’s commercial secretary under then-chancellor George Osborne, has since urged this government to “drop such petty and arbitrary fiscal rules that magically claim the deficit in five years’ time will be lower.” While Rachel Reeves appointed O’Neill as an advisor, she doesn’t appear to have taken this advice to heart…….
if a UK government is determined to fixate on an arbitrary debt-to-GDP target, they are a few things they can do to take into account the positive impacts of smart investment. First, they should extend the time-period over which the fiscal rules apply. A government cannot implement vital economic renewal over a five-year period.
Second, they should extend the time horizon of OBR forecasts, so that costs and benefits of tax and spending decisions that occur in more than five years can be considered. Currently it is assumed that tax and spending decision have no impact on the economy after five years, which means we underestimate the benefits of investing in climate policies, education and skills.
Third, the government should ask the OBR to explore what sorts of investments would have stronger positive economic impacts per pound spent (known as ‘multiplier effects’). The IMF has found evidence that green investments have significantly higher multiplier effects than their carbon-intensive equivalents.
And finally, the government should ask the OBR to take into account evidence that that multiplier effects for certain investments may increase over time, as the original cost of funding through taxation and borrowing wears off and the benefits of the policy are experienced in full. The IMF finds that for infrastructure and green policies, multipliers increase for 20 years.
Every ‘fiscal rule’ is a political choice. It’s time for our politicians to start making the right ones.”
How could anyone, armed with basic common sense even consider voting for Labour or Conservative; oh, and you can forget the limp weeds in the LibDems who blow with the wind, when the ‘chips’ are down, every single time (Thorpe, Steele, Clegg – need I say more?).
Thanks
And Lydia is good.
I don’t have her level of confidence in the OBR.
I posted a few days ago copy email sent to Rachel Reeves & dinosaur-like omitted to remove permission restrictions which Richard pointed out. So here goes again. The file appended relates to email to Sky News – it is a barely distinguishable variant of the one sent to Reeves.
https://drive.google.com/file/d/1KULP-_riSIXVni4kVhOJlKqbqptalX1_/view?usp=sharing
Richard
Excellent find on household analogies. I feel obligated to read the entire link 🙂
This is a bit repetitive but Vickrey and Eccles add to your case:
Vickrey in Fifteen fatal fallacies of financial fundamentalism:
“Government debt is thought of as a burden handed on from one generation to its children and grandchildren.
Reality: Quite the contrary, in generational terms (as distinct from time slices), the debt is the means whereby the present working cohorts are enabled to earn more by fuller employment and invest in the increased supply of assets, of which the debt is a part, so as to provide for their own old age. In this way the children and grandchildren are relieved of the burden of providing for the retirement of the preceding generations, whether on a personal basis or through government programs.”
https://www.pnas.org/doi/full/10.1073/pnas.95.3.1340
Eccles’ in his amazing 1939 radio broadcast responding to the ‘debt ceiling’ types of his day:
Why not worry also about the burden of all of the private debts on our
children and their children, because these debts will also be passed along
to future generations who will have to pay the cost of servicing or paying
these debts just as in the case of the government debt. We should know
that all debts, both public and private, are passed along from one generation
to the next, just as all assets, both public and private, are handed down from
one generation to the next. It may be that Senator Byrd would be less worried
if there were no debts, but in that case, there would be no banks, insurance
companies, or other financial institutions.”
https://fraser.stlouisfed.org/files/docs/historical/eccles/Eccles_19390123.pdf :