Tag Archives: deficit reduction

Nick T

Was Vince Cable proved right on austerity?

By Nick T | Thu 18th February 2016 - 8:42 am

When the histories of the coalition government come to be written, those chapters focussing on the role of Vince Cable will be some of the most fascinating. Vince’s fierce intelligence combined with a (perhaps deliberate) flair for the enigmatic meant he was involved in some of the most interesting of the coalition’s key moments.

One area of particular significance is likely to be the analysis of his views on austerity. Throughout the coalition Vince was often portrayed in the media — and by some Liberal Democrats — as a brave warrior fighting an axe-wielding Tory-Lib-Dem cabal of ideological austerians. Yet this seems to me to be precisely wrong.

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George Kendall

When is the right time to reduce the deficit?

By George Kendall | Tue 19th January 2016 - 10:48 am

Liberal Democrats and Social Democrats have a very wide range of opinions, including economics. However, despite our differences, it’s possible to discuss them in a good-natured, honest way, without polemic.

The time to reduce the deficit has been a matter of huge controversy over the last six years. Paul Krugman is, perhaps, the best known advocate of continuing stimulus. In 2012, he attacked the UK deficit reduction programme as ‘deeply destructive’. He said, “Give me a stronger economy and I’ll turn into a fiscal hawk. But not now”.

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Mark Argent

Opinion: Deficit reduction: between a rock and a hard place

By Mark Argent | Fri 10th April 2015 - 10:25 am

In recent discussions of deficit reduction  my ear was caught by a survey or economists, organised by the Centre for Macroeconomics and the a press release from the National Institute for Economics and Social Research, both suggesting that austerity had not helped growth, and the Office for Budget Responsibility being quoted as saying that cuts reduced growth by one percentage point in each of the first two years of the coalition and by five percentage points over its lifetime.

The subtlety lies in a quote from Charlie Bean, former Deputy Governor of the Bank of England, that the main purpose of the austerity programme was to stabilise the banking system.

The banking system is vital to any country. Soon after Syriza was elected in Greece and announced an end to austerity I heard a rumour that some Greek government bonds had hit 15% interest: as government bonds are usually the at the bottom end of the range of interest rates in an economy that would point to scarily high borrowing costs for everyone. Banking is a major part of the British economy, which makes us even more vulnerable to the effects of an excessive deficit. That means it clearly makes sense to balance the budget.

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Tom Papworth

Opinion: Fiscal consolidation and the Liberal Democrats

By Tom Papworth | Thu 12th March 2015 - 11:23 am

Newly minted coins by James Cridland james.cridland.net
Over the past few days, questions have emerged about the Liberal Democrats’ proposals for fiscal consolidation. Liberal Reform felt it would therefore be helpful to clarify what the challenges are, to explain how some of the figures are derived and to help people understand what the scale of the problem is.

Which deficit are we cutting and how much does it cost?

All three political parties have committed to eliminating the budget deficit over the next parliament. There are two things that divide the parties, however:

  • The speed of the consolidation – in what year will the budget be balanced
  • The definition of the “budget deficit.”

The Liberal Democrats have committed to eliminate the budget deficit by 2018-19. The Labour Party have postponed consolidation to 2020 and the Conservatives are being vague about when in the next parliament the budget will balance. The Lib Dems position reflects current government plans.

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Caron Lindsay

Nick Clegg on the “utter nonsense” of Tory spending plans

By Caron Lindsay | Tue 2nd December 2014 - 9:29 am

In another strong demonstration of the differences between the Liberal Democrats and the Conservatives, Nick Clegg went on the Today programme yesterday to talk about deficit reduction and fiscal policy in the next parliament. While the Tories want to reduce the deficit by cutting spending alone, Liberal Democrats want to raise taxes on the wealthy.

From the Guardian:

Nick Clegg insisted taxes would have to rise in the next parliament. Speaking on Radio 4’s Today programme, he said: “What the Conservatives are saying is a complete and utter nonsense. There is not a single developed economy anywhere in the world that has balanced the books and only done so on the backs of the working-age poor, which Osborne has now confirmed several times he wants to do.”

As he set out his party’s plans to remove tax breaks for wealthy pensioners, Clegg also accepted that the public finances were not improving as fast as planned due to tax receipts failing to match forecasts, but he refused to say if this would require the coalition to put back its deficit plans.

He said: “If tax receipts are not as buoyant as predicted then of course that has an effect. Time will tell if that is a semi-permanent effect or a temporary blip, but it means it comes down a little less than predicted.”

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Joe Otten

Could it really not be any clearer than this?

By Joe Otten | Thu 25th September 2014 - 2:25 pm

Ed Balls MP, Denton - (Labour Leadership Campaign) - 2010Defending the clarity of his party’s position on the deficit after forgetting to mention it in his speech, Ed Miliband said

Ed Balls talked this week about our approach on the deficit. I have talked about our approach on the deficit. No one should be in any doubt about my approach on the deficit.

My approach is clear – we are going to get the deficit down, we are going to get the debt falling and we could not be clearer about that.

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Nick T

Uncomfortable truths from the IFS on public spending and tax cuts but cautious optimism on economic growth

By Nick T | Mon 10th February 2014 - 11:59 am

Last week, the highly-respected Institute for Fiscal Studies produced its annual “Green Budget”: its attempt to inject some realism into the national debate on the economy ahead of the chancellor’s actual budget in March.

The document makes for uncomfortable reading in parts, particularly as we head towards another general election in which the complicity of silence on deficit reduction is likely to be as deafening as it was in 2010.

IFS borrowingDeficit reduction: significant progress, but some way to go

Starting with the deficit, the IFS’s conclusions are stark. Had the government not taken steps to increase taxes and cut spending in the years since 2008, they estimate that the deficit would have reached 10% of national income by 2018-19. Because of the estimated 16.7% permanent reduction in economic capacity caused by the crash of 2008, 98% of that deficit would be “structural” – i.e. would not be expected to reduce naturally once growth picked up:

For an economy such as the UK, this level of borrowing would have been unsustainable on an ongoing basis. Public sector net debt would have increased markedly year-on-year, likely surpassing 100% of national income before the end of the current decade, and 200% within the next two decades.

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Bill le Breton

Opinion: Son of Plan A – why are we supporting?

By Bill le Breton | Thu 9th January 2014 - 3:56 pm

Economic policy is always a mixture of fiscal, monetary and political policy.

“Nick, George has come up with another of his jolly good wheezes. You remember that Plan A malarkey ..?”

Well, dear reader, you do remember Plan A, don’t you?

Eliminate the deficit by 2015; keep fingers crossed Expansionary Fiscal Contraction (EFC) works; use a 20:80 ratio of tax increases to spending cuts; provide monetary stimulus; flush out the Labour Party, and keep Vince and the ‘SDPers’ in their box.

Well, it put a spanner in the recovery-works and, with no sign of EFC or King’s stimulus working, it was pretty soon shelved …

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Nick T

Lib Dems should aim for a budget surplus not because the Tories want to, but because it is right

By Nick T | Thu 12th December 2013 - 1:54 pm

All parties have a mixture of deficit hawks and doves – those who believe in balanced budgets and those who aren’t too bothered. The Lib Dems are no exception, but I think we are different in the motivations underlying these positions.

Many Tories often seem to see deficit reduction as an end in and of itself, not even necessarily because they want to see a smaller state and lower taxes, but simply because their ideology teaches that budget deficits are Bad Things.

And in recent years, some Labour figures have begun to sound like their ideology teaches that budget deficits are inherently …

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Stephen Tall

As economy begins to recover, Lib Dem members swing in favour of Coalition’s strategy

By Stephen Tall | Thu 1st August 2013 - 9:20 am

Lib Dem Voice has polled our members-only forum  to discover what Lib Dem members think of various political issues, the Coalition, and the performance of key party figures. More than 600 party members have responded, and we’re publishing the full results.

Lib Dem members swing in favour of Coalition’s economic policies

Thinking of the current state of the economy and the Coalition’s approach, which of the following statements is closest to your own view?
(Comparisons in brackets are with the last time we asked this question in March 2013.)

    15% (-5%) – Cutting the deficit isn’t enough: alongside public spending cuts,

…

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Stephen Tall

5 points on Clegg’s admission that Coalition was wrong to cut capital spending

By Stephen Tall | Fri 25th January 2013 - 8:40 am

Nick Clegg in DublinNick Clegg has sparked a flurry of excitement with his admission in an interview for The House magazine that the Coalition cut capital spending ‘too far, too fast’ to coin a phrase. Here’s what he said to Paul Waugh and Sam Macrory:

“If I’m going to be sort of self-critical, there was this reduction in capital spending when we came into the Coalition Government. I think we comforted ourselves at the time that it was actually no more than what Alistair Darling spelt out

…

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Mark Pack

Eliminating the structural deficit is aiming for the wrong target

By Mark Pack | Mon 19th November 2012 - 10:53 am

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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Geoff Crocker

Opinion: The Conflicts of Economic Policy

By Geoff Crocker | Tue 2nd October 2012 - 8:45 am

Nick Clegg’s conference speech committed Lib Dems to manage debt out of the economy and implement a fair tax regime. But the objectives of economic policy often conflict with each other.

Let’s take it that there are three objectives for current economic policy:

  1. to reduce deficit and the debt it accumulates
  2. to inject demand into the economy
  3. to have a fair tax system

In the following table, I’ve had a try at evaluating recent and proposed economic policies against these objectives.

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Caron Lindsay

Nick Clegg says no to Tory plans for more welfare cuts

By Caron Lindsay | Tue 31st July 2012 - 10:58 am

Newspapers have been reporting for months that the Liberal Democrats were not prepared to sign up to Tory plans for £10 billion of welfare cuts in a spending review that would draw up plans for spending into the next Parliament. Today’s Independent says that Nick Clegg himself will ensure that this Government only produces spending plans for 2015-16. The electorate will then decide in the 2015 election whether they want to pursue further cuts in welfare or a heavier burden of tax on the wealthy.

 The report says;

The Liberal Democrats’ opposition means the review will have to be watered down. Before the

…

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Caron Lindsay

LibLink: David Laws MP writes about the Lib Dem ambition for fairer tax

By Caron Lindsay | Wed 22nd February 2012 - 12:53 pm

David Laws has argued at the Guardian’s Comment is Free site that the Coalition should accelerate Liberal Democrat tax cutting plans.

The government’s previous plan was for the allowance to rise in steps of £630 over the next few years, to reach £10,000 by April 2015. Clegg and chief treasury secretary Danny Alexander are rightly insisting that we look to bring forward those tax cuts. This week they seemed to attract the unlikely support of Labour’s Ed Balls. But his plan for a totally unfunded tax cut is as unlikely to convince the deputy prime minister as it is the chancellor.

The

…

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David Thorpe

Opinion: The Coalition are winning the economic argument

By David Thorpe | Fri 20th January 2012 - 12:30 pm

It’s a dark winter night in Westminster but the building from which a group of men emerge is still wreathed in light. The men clamber into a sleek car, which streaks away through the emptying streets. Their journey is short in physical distance, but it’s long on significance for all of them. They are serious of face and purpose as the vehicle stops by one of the quieter spots on the riverbank.

The heaviest of the men is the first to get out, he flashes a look along the river bank, and seeing it deserted, nods quickly to his companions, all of whom …

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