Tag Archives: deficit

Reducing the Government’s Deficit is not the same as reducing the UK’s Deficit.


Now that the immediate fuss over the recent Budget has died down a little it is perhaps time for some more considered reflection on the nature of any criticism on the failure of the government, and George Osborne in particular, to make anywhere near the progress promised on the question of cutting the budget deficit. Maybe we can get it right for the next time it hits the headlines. The deficit problem is not going to be solved any time soon.

Naturally, the duty of an opposition is to constructively oppose, and so if the government’s deficit does not fall and total debt does rise, when the Government has a clear policy for just the opposite, then the Lib Dems, together with the other left of centre opposition parties, need to point out the failure of that policy. However, we need to be careful. That argument can be easily turned around. So we are in favour of even higher taxes and even more drastic cuts in public spending, are we? And when we say we are not, how does that chime with the public? Will they accept we are really being constructive? Aren’t they just going to think we want it both ways?

Posted in Op-eds | Also tagged and | 8 Comments

Are we targeting the wrong deficit?

 

Keynes and his contemporaries did not share our present day casual attitude to the imbalances we see in international trade. The monthly, or quarterly, trade figures were a regular and prominent feature of our business news, at one time, but we have to look much harder to find those same figures now.

Keynes’s proposal that international trade be separated from domestic trade by the use of a separate international currency, the Bancor, formed part of the official British proposals at the 1944 Bretton Woods  conference  which set the international financial and monetary arrangements for the post war period. Unfortunately this was a step too far for the Americans at the time. The proposal, had it been adopted, would have penalised the surplus nations, making it less attractive for countries to run large export surpluses and would have encouraged the deficit nations to re-align their currencies to reduce their deficits.

Posted in Op-eds | Also tagged and | 25 Comments

“How to Pay for the War,” or, Just about Anything! – Keynes 1940

Whenever a progressive party proposes a better education system, a better NHS,  better public transport or whatever,  the killer question is always “How are you going to pay for it?” The implication is that someone will have to pay by way of an increased tax bill or the money will have to be withheld from some other worthy project to compensate.

Our parents’ and grandparents’ generation had a similar, but much harder, problem to solve when it came to the question of how to pay for the war against Nazi Germany in 1939. If the principles of ‘sound finance’ which held that government budgets must at all times be balanced had been rigidly applied then surrender would have been the only option. Fortunately, the Liberal Party, and the country, had at their disposal the best economic mind of the 20th century in John Maynard Keynes who explained, in his 1940 book “How to Pay for the War” how an inadequately armed country of 40 million people, with an economy which had been performing poorly in the inter war years, could at least start to function well enough to take on a much better performing country, at least economically, of twice its population.

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The Independent View: IFS Director Paul Johnson – Balancing the books: some unpalatable choices

Paul Johnson is Director of the Institute for Fiscal Studies. He will be speaking on ‘Balancing the books – tax and spending choices in the next Parliament’ alongside Ian Swales MP and Anne Fairpo of the Chartered Institute of Taxation, with BBC Scotland’s Business and Economy Editor Douglas Fraser in the chair, at 6.15pm on Tuesday at the SECC (Dochart 1). All conference attendees welcome.

We weren’t supposed to be here. When George Osborne delivered the Coalition’s first Budget in June 2010 the plans he set out suggested that the job of rebalancing the nation’s finances would be more or less …

Posted in The Independent View | Also tagged and | 13 Comments

Eliminating the structural deficit is aiming for the wrong target

HM Treasury logoThere is an appealing simplicity behind the idea of having a zero structural deficit. It is the policy the government is committed to, with its plans to eliminate the structural deficit. And it’s also wrong.

For all the problems in measuring the structural deficit accurately, the concept is a useful one – to measure what the deficit is, once you have allowed for where we are in the economic cycle. Or, as the FT puts it, “A budget deficit that results from a fundamental imbalance in government receipts and expenditures, as opposed to one based on one-off or short-term factors”.

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Ed Balls denies that he denied there was a structural deficit

 

(Actually, it’s worse than that, for in addition Ed Balls’s claim that it’s only with hindsight that it’s clear there was a structural deficit doesn’t really stand up to scrutiny either.)

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Opinion: Mind the gap – a sceptical view of the need for cuts

The UK’s economic position has deteriorated, government revenues are lower and welfare expenditure higher than anticipated, worsening the deficit so that austerity must continue further into this decade. Because of this deterioration a combination of increased taxes or cuts must be identified in the Autumn Spending Statement in December.

That is the orthodox view. It is based on the generally accepted proposition that the structural deficit should be eliminated. This has set off widespread debate as to whether the increased scale of the structural deficit should be eliminated by increased taxes (such as a Mansion Tax) or expenditure reductions and where these should be identified, with the Conservatives placing welfare cuts at the top of their agenda.

Posted in Op-eds | Also tagged and | 25 Comments
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