16 Comments

• Dave Page 1st Apr '11 - 2:30pm

  Hey, at least he’s learning!

• Timak 1st Apr '11 - 2:36pm

  Glad everyone now agrees there is a structural deficit.

  Now if only everyone could agree on a definition that makes sense given that there is absolutely no empirical data to support any position on the subject.

  If a government invests in the infrastructure of a country with the aim of bettering the lives of our population then it increases the “structural deficit”. Does this make improving the lives of people a bad thing?

  Of course if they then revise the GDP estimates upwards because of this infrastructure improvement then, whether GDP grows or not, the deficit is no longer structural but assigned to the “output gap” instead.

  The more you read about economics the more it sounds like tea-leaf reading mixed with political dogma.

• Timak 1st Apr '11 - 2:51pm

  Oh and another thing – structural deficit classically relates to capital expenditure – if the problem is that their is too much money going on housing benefit and wages for soldiers and nurses then it is plain deficit spending.

  Using predicted growth rates (Who is predicting? What is their track record like at predicting?) to explain away parts of the deficit is a bit silly when you think about it. The models these are based on are fairly useless.

  For example George Osbourne might think that a 4% cut in corporation tax might increase tax take by 1% so will rely on models that show this. However other people might argue that cutting taxes on businesses reporting over £1.5m in profit will actually reduce tax take by 1%.

  Both models will have wildly different outcomes over time and will therefore have a major impact on deciding if a deficit is structural or otherwise.

  In other words the whole thing is a load of tosh.

• Dan Falchikov 1st Apr '11 - 4:08pm

  Are you sure you’ve got the date right for the Staggers quote? Sure it wasn’t this morning?

• matthew fox 1st Apr '11 - 5:33pm

  Looks like Mark slept through last week, £12 billion PSBR for Feb 11

• Geoffrey Payne 1st Apr '11 - 5:41pm

  I really think it is unfair to extract 2 small sentences and not provide the overall context.

  On the point of the structural deficit, I know Labour downplay it and they are open for criticism for that.

  As for the banking crises, they do admit to making a mistake with light touch regulation, something the Tories also supported, whilst Vince Cable opposed the demutualisation of the building societies and so was not so culpable.
  That said, every major political party supported the neoliberal consensus that said deregulation is a good thing, and this government is obsessed by it, albeit not yet in banking.

• toryboysnevergrowup 1st Apr '11 - 5:47pm

  Be careful we can all play such games e.g. when did Nick Clegg realise that the invasion of Iraq was “legally ambiguous” rather than “illegal”?

• Mark Pack 1st Apr '11 - 6:17pm

  Timak: That’s a different definition from one I’ve seen many economists use – namely that a structural deficit is one that last through the economic cycle, i.e. that’s not a temporary one caused by tax revenues going down, and benefits spending etc. going up due to a recession which will disappear as taxes recover and benefit spending comes back down. On that basis, it’s possible to have a structural deficit which is based solely on spending on, to take your example, wages for soldiers and nurses and so on. A structural deficit that’s based on capital expenditure may be a rather wiser one than one based on such spending, of course.

• Mark Pack 1st Apr '11 - 6:24pm

  Matthew: And perhaps you were sleeping through the previous month’s much better figures… Though given that when you commented about one month’s bad export figures that was promptly followed by several much better months, perhaps we should take your occasional comments on a single month’s bad figures of one particular economic indicator as a good omen 🙂

• Timak 1st Apr '11 - 8:21pm

  @Mark Pack

  The thing is it is just pure guess work.

  Find me 2 economists who agree what full output is, agree where in the economic cycle we are and agree what spending and tax revenues are now and would be then and I’ll be impressed.

• matthew fox 1st Apr '11 - 8:30pm

  Mark,

  I take it your not familiar with Nov 10 PSBR of £22.8 Billion ? That figure overshoot the estimate by £6 Billion.

  So the one month’s bad figures theory doesn’t seem to hold much weight, does it Mark ?

• Mark Pack 1st Apr '11 - 10:15pm

  Matthew: And the months in between, such as January “Tax revenue pushes budget surplus to 2-year high” (http://uk.reuters.com/article/2011/02/22/uk-britain-finances-idUKTRE71L1XW20110222 )? You’re being remarkably selective in picking which months to talk about, especially as the overall trend has consistently been lower borrowing than a year previously.

• matthew fox 2nd Apr '11 - 5:27pm

  Not really Mark, your argument seems to be shifting, first you mentioned I was using just one month figures, now I am being selective, surely if the deficit plan was working, borrowings would be coming down not up?

  You also have failed to mention, the Government will be borrowing an extra £44 billion over the next four years, with £23 billion being borrowed in 2015.

  Do you remember Nick Clegg bragging that the deficit was going to be wiped out during the term of this parliament, that isn’t going to happen, but no retraction of this statement by the Deputy Prime Minister or any Liberal Democrat, why is that Mark?

  As for tax revenues, are you aware they declined in Feb 11, when compared to Feb 10.

  I take it you remember VAT was raised in Jan11, by 2.5%, so in many respects, we are not comparing like for like are we. Surely if rates are increased, revenues are bound to increase.

  And no smiley face at the end of your comment, why is that?

• Sinead Dunn 6th Apr '11 - 1:45am

  I feel you are completely undermining your readership here. Clever clipping of edited soundbites is the oldest trick in the book and i’m sure most readers are intelligent enough to spot this. I also think that most readers are intelligent enough to understand that Labour are not solely to blame for the financial collapse and that this blog is merely ‘towing the tory party line’. You are now in government – not in opposition. There are far more pressing issues for the party to address than to pull apart the arguments – thats the job of the opposition, the governing coalition should be making the arguments. The Lib Dems perhaps instead be listening to their members rather than partaking in the type of tired spin we are accustomed to by Labour and the tories.

• Mark Pack 6th Apr '11 - 8:08am

  Sinead: Sure, editing something to make it out of context is something that should be avoided. But if you look at the wider context both those quotes accurately reflect what Ed Balls said on both occasions – it’s not like there was a “no” or “not” just before either which means he said the opposite of what I’ve quoted 🙂 Quite simply, he once tried to deny there was a structural deficit and now admits there was (a sensible switch of view in some ways, but still casts rather a lot of doubt on his judgement to have denied it previously).

• Stuart Mitchell 13th Apr '11 - 11:29am

  “Sure, editing something to make it out of context is something that should be avoided. But if you look at the wider context both those quotes accurately reflect what Ed Balls said on both occasions”

  I disagree, these are silly micro-quotes which do not accurately reflect two lengthy answers on what is a very complex subject.

  As TImak rightly points out, the “structural deficit” is a nebulous concept which cannot be measured objectively in the way that an actual budget deficit can. It’s perfectly reasonable (whether he’s rightor not) for Balls to argue that Labour were not running a structural deficit up to 2007, given the data that was available at the time, but that the 2007/08 crash obviously had a massive impact on estimates of the output gap, and hence estimates of the structural deficit. Balls makes this point very clearly in both the interviews; he doesn’t make anything like the 180 degree turn you’re trying to portray.

  And if we’re going to compare and contrast views on the deficit past and present, how about quoting that bit in the 2005 Lib Dem manifesto which said that Labour wasn’t spending enough? Whatever “structural deficit” there was in 2007 would have been larger had the Lib Dems been in power, so isn’t it fundamentally dishonest for Lib Dems to be attacking Labour over the deficit? Even the Tories didn’t drop their pledge to match Labour’s spending plans until the end of 2008.

  In fact, the years 2001-2008 were probably the only period in living history where there was almost total consensus between the three main parties on the level of public spending. This is quite a remarkable thing when you think about it – and makes the Lib Dems and Tories look pretty shoddy for suddenly accusing Labour of having been profligate for 13 years.