Writing in the Independent, Vince Cable says that ‘the chancellor’s rapid transition from spendthrift to Scrooge has not yet been noticed by the admiring public but a change has undoubtedly occurred’:
One of the hot stocks of 2020, British chancellor Rishi Sunak, is starting to look seriously overvalued. His political allies, having talked up Sunak earlier in the year, tipping him for the top job, are now hedging their bets. The hero of the spring offensive may be on the brink of becoming the zero of the autumn retreat.
The immediate reason is political; the deeper reason is economics. It is one thing to get the lion’s share of the credit when things are going well, overshadowing the boss with timely and generous economic handouts. It is much more dangerous to make the boss look weak and foolish through an untimely and ungenerous tightening of the purse strings.
You can read the full article in the Independent.
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13 Comments
How many people have been ill or died because of the reckless £10 off meals policy in August? He has indeed a lot to answer for. If only we had held our nerve, ignored the right wing press, the Hospitality and Travel industries and kept the lid on till late September. No doubt the same mistakes will be made again.
What greater irresponsibilty than no to again open up travel to the Canaries. Someone is going to start the whole thing off again.
Maybe if the Democrats win there will be a sea change in thinking both in the States and over here. Looks as if that will be desperately close, by my calculation Biden needs Wisconsin , Michigan and Pennsylvannia to get over the Electoral College figure of 270, I make it that gives him 272, hope I’m right. BUT Thrump will go to the Supreme Court and try to get something overturned and probably will succeed. Then what?
The whole of the government’s strategy was based on the it will all be over by Christmas theory. Now we know this can’t happen they do not have any idea whether to do.
Certainly at some stage we are going to have to change our approach to the way in which our society is organised. I certainly can’t see that happening.
Another sensible article by Sir Vince although I am not sure I agree with his description of Michael Gove.
Vince Cable writes:
“Economic conditions are quite different from those that prevailed in the wake of the 2008 financial crisis.”
They are somewhat different for obvious reasons. But not “quite different”.
“And there is suddenly a glut of savings. British households were spending almost all their income until this year; their savings now account for a quarter of our combined incomes, which depresses interest rates (and also depresses the economy unless the government offsets the loss of spending power).”
We had exactly the same problem after the 2008 GFC. Households reined in their spending and started saving. Which was probably a good thing as the levels of private debt were too high. The Government should have “offset the loss of spending power” then too. A big mistake to listen to anyone who said otherwise. That almost certainly created the conditions that led to Brexit.
“So forget about the debt, for now.”
That would be silly. There is a potential inflation risk due to the increase in private sector savings. If everyone decides to not save…….So we don’t forget about it, but neither do we obsess about it like the Coalition did after 2010.
Might it help if we knew which spending was/is in which currency?
When we are using our own sovereign money might we have a different set of contexts from when we do not?
When we are using our own sovereign money, to whom do we have to pay it back, when and how?
Might we consider more detailed and less society and economy damaging protections for our communities as presented in the Great Barrington Declaration?
https://gbdeclaration.org/#:~:text=On%20October%204%2C%202020%2C%20this%20declaration%20was%20authored,of%20infectious%20disease%20outbreaks%20and%20vaccine%20safety%20evaluations.
The printing of 350 billion quid electronically to buy govn bonds was a one off event that we got away with because other large countries did similar. This money is funding the on-going costs of Covid and will be used for various investment projects going forward. When that money runs out the Tories will go back to their normal “prudent” economic policies and how that will go down will depend on how quickly GDP and govn revenues recover.
It is true that 800 billion of the 2000 billion debt is held by the BoE and could be writen off once a balanced budget is achieved but the effect of adding to that debt by printing more excess money is to send the currency diving and prices of imports upwards. Not recommended for a county that is so dependent on imports.
The Uk being notoriously inefficient at using public funds both at council and govn level means the idea that printing money to invest in circular economic activities has little merit, unless you want Soviet Union style monopolies that allows for cartel-like prices and massive corruption amongst the rulers.
Perhaps financially sovereign governments are not dependent on revenue from taxes and from borrowing to finance spending but are restrained by inflation and levels of employment? (From “The Deficit Myth” by S. Kelton p.8)
Just to show how bad things are I have read that The Royal Stoke Hospital is reporting that today they have more COVID patients than on any day during the frist wave. Apparently Staffordshire is heading for Tier 2 this week, it is steadily coming south.
Lock up your doors in Kent and Sussex.
Seems inevitable there will have to be another full lockmdown. I keep saying, time for a National government for 12 months to get us all through this. It is going to be horrendous. Talking about a road map out of it is just daft, we are not even fully in it yet. What does our Leader say, not very much.
Theakes, probably not many. That is not the period in which cases started rising significantly. How much more death will arise from a crtiically damaged economy. Also, the moves to open up the economy in the U.K. were not so dissimilar to what was going on in the E.U. for the same reasons. In fact if I remember correctly, at the time there was a lot of criticism that the government was to slow in opening up. Do you not remember the ‘too slow in locking down and too slow in opening up’ sloganeering that was coming from the opposition at the time. Now the criticism is that we should never have even tried to open up….I’d love to have seen the opposition support the government on that one through summer🙂
@ theakes “How many people have been ill or died because of the reckless £10 off meals policy in August?”
One has to ask a further question.
How can a government (whose Chancellor took part in a publicity stunt dressed as a waiter to publicise the scheme) justify dishing out universal £ 10 off meals then refuse to listen to Marcus Rashford’s campaign to provide meals for unfortunate kids ?
No politicians are heroes at the moment. They’re wreckers, authoritarians and are destroying the country in an insane war on the microscopic world they can’t win. Extra free school meals are not going halt the continued overreach of power in a glorified police state. More and more people are waking up to this. Yet the political classes and the people who write about them are fixated on how much more harsh measures must get, rather than admit nothing they do works. They just do not have and never will have the means or power to stop a widespread, mostly non lethal, respiratory infection in a population of over 60 million people. School meals have nothing to do with anything, except as some sort of totemic issue to make the folly of what is going on look more reasonable.
Monday on Libdemvoice: “A federal solution that works for all”
Tuesday on Libdemvoice: Here is an article where former leader ignores devolution…
Example 1: “the UK was on track to see an additional one million on the dole, soon reaching 2 to 3 million – between 7 and 10 per cent of the labour force. On top of that, we now have the three-tier response to the resurgence of infections.”
Example 2: “the abject failure of which is one of the main reasons why Britain is faced with the prospect of an unnecessary and debilitating national lockdown, or “circuit breaker” – is being financed by a £10bn budget. Much of that budget is disappearing into notoriously expensive and poor quality private providers like G4S and Serco,”
Government taking on more debt to support people and businesses, makes more sense than the knock on effect of allowing more businesses to fail and personal bankruptcies to take place with people losing their homes and falling on the state for total support.
Those disruptions have a economic multiplier effect downwards, social calamities and impacts on welfare state costs. It would be better to reduce these effects and make the recession coming less deep and less long.
Governments can borrow far more cheaply and can create money electronically, which at a time of depression, will not cause inflation and will discourage a worse and more intractable problem, that of deflation. A collapsing housing market will compound the problem of people losing their mortgaged homes as they go into negative equity