Economy question

bha100 · May 3, 2015

The tories are always banging on about how they have halved the deficit but cooper woman said this morning on the marr show that they have borrowed 200 billion more than they said they would, i replayed it back to make sure i heard the figure right.

So what is this deficit they have halved if you have borrowed 200 billion more? can you shed any light on this please.

Hatterlovesbrighton · May 3, 2015

They've halved the rate at which we borrow money. Ie the debt isn't going up as fast.

Machiavelli · May 3, 2015

There's a difference between debt and deficit. A deficit is the difference between incomings and spending in one year. Debt is deficits added up over the years. The Tories initial plan was to get rid of the deficit in the 2010-15 parliament; they actually only got rid of about half of it (which is what Labour were planning back in 2010) and this is the reason why Cooper correctly states that they've borrowed an extra £200bn than they planned.

RexCathedra · May 3, 2015

Machiavelli said:
There's a difference between debt and deficit.

And the average punter has no idea what it is. From this a great deal of mischief flows.
The notion that the government is just a greengrocer's writ large, whose profit-and-loss statement has to be in the black every 90 days, is a very pernicious one.

bha100 · May 3, 2015

Machiavelli said:
There's a difference between debt and deficit. A deficit is the difference between incomings and spending in one year. Debt is deficits added up over the years. The Tories initial plan was to get rid of the deficit in the 2010-15 parliament; they actually only got rid of about half of it (which is what Labour were planning back in 2010) and this is the reason why Cooper correctly states that they've borrowed an extra £200bn than they planned.

tar

Lord Bracknell · May 3, 2015

If you earn £40,000 a year, you'd probably be happy with outgoings of £39,000 a year (ie no deficit). You'd also be happy if you had a mortgage of £120,000, even though you were carrying a substantial debt, that you weren't going to clear for at least another 20 years.

nicko31 · May 3, 2015

Hatterlovesbrighton said:
They've halved the rate at which we borrow money. Ie the debt isn't going up as fast.

They halved it but not in absolute terms, only as a percentage of GDP.

George O has put on more than debt in this parliament than he actually inherited.

The only reason we have our head above water is some people are still prepared to lend to us at 2%

In summary the Tories have grown the economy but only with a massive increment of personal and public debt

Lord Bracknell · May 3, 2015

As for the election ... my instinct is to take no notice of any politician who uses the words "trillion" or "billion", because, invariably, they aren't telling the whole story.

RexCathedra · May 3, 2015

nicko31 said:
The only reason we have our head above water is some people are still prepared to lend to us at 2%

The Market, blessed be it, has spoken.
UK government securities are liquid, there's copious information available on them, a large number of buyers and sellers, transaction costs are very low....
It's as close to a perfect market as exists in this world.
And that's what it's priced UK gov't debt at --2%.

I'd look at the level of private debt first.

Beach Hut · May 3, 2015

RexCathedra said:
The Market, blessed be it, has spoken.
UK government securities are liquid, there's copious information available on them, a large number of buyers and sellers, transaction costs are very low....
It's as close to a perfect market as exists in this world.
And that's what it's priced UK gov't debt. at.

I'd look at the level of private debt first.

So how bad is private debt and do you mean personal or private company ?

Machiavelli · May 3, 2015

RexCathedra said:
And the average punter has no idea what it is. From this a great deal of mischief flows.
The notion that the government is just a greengrocer's writ large, whose profit-and-loss statement has to be in the black every 90 days, is a very pernicious one.

With you all the way on this (and sufficient else to concern you). The accountants have taken over.

Machiavelli · May 3, 2015

Beach Hut said:
So how bad is private debt and do you mean personal or private company ?

There's basically been a transfer from public debt to private debt (the most obvious example of this is in university tuition fees). Private debts have been escalating significantly over the past few decades.

RexCathedra · May 3, 2015

Machiavelli said:
With you all the way on this (and sufficient else to concern you). The accountants have taken over.

I'm not worried about the accountants. They're doing what they claim to do.

I'm worried about politicians -- here and in the UK -- who are able to exploit this popular misconception to drive unrelated agendas, like shredding social provision and sucking the progressivity out of the tax code.

Chicken Runner61 · May 3, 2015

The foundations of the UK economic crisis were laid in 1986 - when the tories deregulated the banks and building societies.

They then pretend they inherited the debt from New Labour (left wing tories) when in fact they were given a 1.4 % growth rate which they then took down to zero and then doubled the debt/deficit to 1.5 trillion.

and people still think then can be trusted with the economy ......... not that New Labour are any better

Machiavelli · May 3, 2015

RexCathedra said:
I'm not worried about the accountants. They're doing what they claim to do.

I'm worried about politicians -- here and in the UK -- who are able to exploit this popular misconception to drive unrelated agendas, like shredding social provision and sucking the progressivity out of the tax code.

With you all the way on this too.

Machiavelli · May 3, 2015

Chicken Runner61 said:
The foundations of the UK economic crisis were laid in 1986 - when the tories deregulated the banks and building societies.

They then pretend they inherited the debt from New Labour (left wing tories) when in fact they were given a 1.4 % growth rate which they then took down to zero and then doubled the debt/deficit to 1.5 trillion.

and people still think then can be trusted with the economy ......... not that New Labour are any better

This is a good analysis too.

RexCathedra · May 3, 2015

Beach Hut said:
So how bad is private debt and do you mean personal or private company ?

A related issue worth considering is the fact that in both the US and UK, equity issues have basically stopped. Oh, there's shiny IPO's every so often, but economy-wide, debt has eaten equity. This is not without negative social consequences (OMG, I'm linking to the Torygraph! :facepalm:

)

Hugh'sDad · May 3, 2015

RexCathedra said:
And the average punter has no idea what it is. From this a great deal of mischief flows.
The notion that the government is just a greengrocer's writ large, whose profit-and-loss statement has to be in the black every 90 days, is a very pernicious one.

Bang on...

Loved the greengrocer reference. Trouble is, it's too complicated to debate in 'sound bites '....too easy to be dumbed down by fascist Aussi propagandists.

The Optimist · May 3, 2015

There's an interesting (but long!) article on the economy and why austerity wasn't required here:

http://www.theguardian.com/business/ng-interactive/2015/apr/29/the-austerity-delusion

RexCathedra · May 3, 2015

Hugh'sDad said:
Bang on...

Loved the greengrocer reference.

You have to watch the ones in Grantham especially carefully. Or at least their daughters.

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