The left should follow John McDonnell and stop being anti-austerity

When we use the word ‘austerity’, what do people hear?

Do they hear a reasoned argument for why Tory cuts are ideological and unnecessary? That cutting slower will prevent the economy stalling, will allow a faster recovery, and will reduce the deficit faster.

I fear not.

More likely, they hear someone who wants to get us into a never-ending spiral of debt.

Have you heard the quote: “If you’re putting the rent on the credit card month after month, things need to change”.

If you think that’s rightwing nonsense, have a read of who said it.

To many in the UK, “anti-austerity” means failing to follow the warnings of Mr Micawber. Spending for today, and ignoring ruination tomorrow.

Perhaps a slower rate of deficit reduction is a good idea. Perhaps now is the right time for a massive increase in capital spending.

But if ordinary people are going to believe these arguments, progressives need to start using language they understand.

The above is a summary of an article an article on Compass here.

What do you think? Should we stop using the term anti-austerity? Does the term mean people misunderstand the argument? Or doesn’t it matter?

* George Kendall is the acting chair of the Social Democrat Group. He writes in a personal capacity.

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84 Comments

  • I suggest we all read the book ‘the moral consequences of economic growth’ by Benjamin Freeman. (Published in 2008) Its analysis of how social cohesion is cracked if people do not have sense of ‘getting ahead’ is to my mind a better insight into todays discontents that the party-political rhetoric on austerity.

  • Sorry, George, but listening to one taxi driver isn’t sufficient evidence to design an economic policy based on radical Liberal principles…. and I think you’re quoting McDonnell out of context.. I also seem to remember a cavalcade of taxi drivers supporting Enoch Powell.

    What the party needs to do is to formulate a radical economic policy based on equality of opportunity and real social justice and then to get the leadership to expound it with real conviction. As we saw last year, a timorous chorus of “Me, too” rarely convinces.

  • Ah, taxi drivers; a group well know for reasoned moderate views…

    What next; golf club musings on social services?

  • For the five years of the coalition The Labour party was blamed for a worldwide recession started in the American housing market. It was a quite ploy to discredit critics of right wing economics and to nobble them as an opposition force. That is why Labour are not trusted with the economy and the rhetoric of benefit cuts feeds into some people’s prejudices as do attacks on the public sector. Weirdly, Anti Austerity seems to be perfectly well understood in Scotland and wales and Greece, but seems to confuse some section of the English electorate!
    The thing is it’s an argument about semantics. However, when or if the term changes it simply means the attack on the idea will change with it. Owen Jones, like a lot of people on the left seems to think that if you change the language then perception changes with it. But it doesn’t seem to work like that. It’s like the fashion for calling IS daesh , it doesn’t really alter anyone’s perception at all,

  • Glenn is quite right. It was those two extreme American left wing reds under the beds sub prime lenders Freddie Mae and Fannie Mae who kicked of the world economic crisis in September 2008. Now I would expect the Tories to practice Porkie Pies about this by blaming the Labour Government – but to their eternal shame our lot jumped on the band wagon too. So much for evidence based politics.

    It will be interesting to see what a Tory Government will do if it all goes pop again. It looks like raising its head again given the latest news. Headlines on 2 May 2016 :

    Freddie Mac may need another taxpayer bailout this week …
    http://www.marketwatch.com › Economy & Politics

  • Peter Watson 3rd Jun '16 - 2:04pm

    @Simon Shaw “One of the things that frequently gets ignored is the responsibilty of American politicians on the left for that housing market crash.”
    Were there any American politicians on the left?
    Still, it gives me some insight into what you might have meant in the past when you described Lib Dems as being in the “centre”. 😉

  • Yes, the party should develop some economic policy of its own.
    Austerity is a broad term – much of what has passed for austerity has not been about cutting government expenditure but tokenistic political messages. If austerity is about eliminating the budget deficit, then the question is how this is done, rather than whether that is a good thing. Having signed up to Osborne’s policies to eliminate the deficit by 2015 that failed even to half the deficit by 2015 (the aim set by Labour in 2010 which remember Osborne/Clegg said would be economic disaster) The Lib Dems have done no economic thinking since May 2010.

  • @ Simon Shaw ” the responsibilty of American politicians on the left for that housing market crash.”

    So is George W. Bush (President, 2001 to 2009) left wing in Southport ?

    You also go on to say – re. The Labour party was blamed for a worldwide recession started in the American housing market. “I don’t think they were, really”.

    Interesting you say that, Simon. The Huffington Post, 16 January 2014 reports :

    ‘ Nick Clegg has accused Labour of being “single-handedly responsible” for the 2008 banking crash, in an attack that has been met with derision by actual experts. Speaking this morning on his LBC 97.3, the Liberal Democrat leader poured scorn on Labour’s attempt on Wednesday to urge the government to stop RBS paying its bankers twice their pay in bonuses.

    “I almost admire the chutzpah of these people who created this mess going around to tell people how to clear it up. It was verging on the bizarre that the Labour Party thought they had anything to teach anyone about the banks because they are single handedly responsible for the biggest collapse in our banking system in the postwar period.”

    Samuel Tombs, UK economist at Capital Economics, told the Huffington Post UK that Clegg had offered ‘quite an extreme interpretation of the financial crisis, which had various causes”. “You could say he’s letting the bankers off lightly with this assessment. But he’s clearly making it for political reasons.”

  • petermartin2001 3rd Jun '16 - 11:16pm

    “If you’re putting the rent on the credit card month after month, things need to change”

    Yes, they do if, the credit card is owned by a currency user. However, the UK government is a currency issuer. If the government can be said to have a credit card, it is a Platinum ++++ card issued by the central bank which it owns anyway.

    No-one can force the government to clear its bill. In fact, the pound is just an IOU of the British government. We all own some pound denominated assets and so someone, usually and ultimately government, has to accept liability.

    Sovereign governments have, therefore, to always be in debt!

  • petermartin2001 3rd Jun '16 - 11:35pm

    George,

    In my experience Taxi drivers have a tendency to say things like :

    “If I ran my taxi business like politicians run the country, I’d go bankrupt!”

    Ok but is the Government like a business? It really isn’t. The purpose of a business is to accumulate capital. Or pounds, in the UK.

    But why would government want to do the same? Why would government want to collect its own IOUs? It can write out as many as it likes!

    Of course, it shouldn’t write out too many or else we’d have high inflation. On the other hand if it doesn’t write out enough we have high levels of business failures and unemployment.

  • I’d say if you were putting the rent on the credit card month after month, it’s probably because you’re not being paid enough to live on. In the long run it has more to do with handing control of money to the banking system than not living within ones means. Banks are built on turning debt into profit. They need people to pay by credit so they can collect interest. Interest rates are low to ensure that folks keep borrowing.

    In current sense, at least to me, austerity is cutting public debt by shifting as much as possible to private debt. So the government lets services slide. puts pressure on councils or whatever to balance the books. Thus instead of paying for things like higher education through taxation or even money creation people are encouraged to borrow privately on earning potential, which inevitably spirals the cost upwards and is the kind of thing that causes problems in the first place.

  • Denis Mollison 4th Jun '16 - 12:07am

    I’m not sure what point you were trying to make, George.

    I would like to see us engage with alternative economic views in the way John McDonnell is doing.

  • Just seen Denis’ post – has answered the point and said it for me.

    Not sure that a sectoral balances focus leaflet would create a huge groundswell of new support.

  • @Dennis Mollinson. The point is that George is trying to address our electability and make us appeal to the dort of voters who get concerned when they see borrowing every year that amounted to £1 in every £4 the government spends.

    They know that that level of borrowing is unsustainable because eventually interest payments grow so large that they overshadow every other item of expenditure and it becomes impossible to borrow more.

    George rightly recognises that those are the voters who would have voted for us in 2015 but were more worried by a Miliband/SNP coalition. He also knows that chasing left wing voters who are attracted to Corbyn, the Greens or the Nats is a hiding to nothing.

    So that is the point. We won’t outflank Labour from the left so we need to talk the language of the centre.

  • Sue Sutherland 4th Jun '16 - 1:26pm

    Austerity is the word the media use so I think a lot of people understand it means being hard up because they are relying on food banks, have no home, have to choose between heating and eating etc so they know the Government is trying to balance the books by spending less.
    I think it’s far more important for us to do some vigorous economic thinking, questioning what has become an almost reflex reaction by the Tories and rigorously examining whatever evidence they use to back up their policies. For example is it true that raising taxes reduces the revenue from those taxes? It sounds like a highly convenient bit of data to me which enables them to get the sort of society they want. We must look at alternatives which would help us to arrive at a Liberal Democrat society not try to patch up the edges of a Tory vision.
    An economics working party will soon be set up because Mark Pack has been telling members that the role of Chair is being advertised. I do hope that those members of the working party will be prepared to think the unthinkable and use economics as a creative tool rather than as an excuse for treating the most vulnerable in our society so cruelly.

  • @Sue Sutherland “For example is it true that raising taxes reduces the revenue from those taxes? It sounds like a highly convenient bit of data to me which enables them to get the sort of society they want.”

    This is called the Laffer Curve and there are plenty of articles about it searchable on the net. Put it this way, if you knew that for every extra £1 you earned or realised in profit on disposal 98p was going to the Treasury, would you make the effort to earn that money or invest time in ways to not make that profit taxable?

  • Austerity derives from the rather joyless word – austere. Most people know fine well what it means. As for sectoral balances, it can’t have been much fun in the pub last night.

    Dictionary definitions of austere :

    Severe or strict in manner or attitude. synonyms: stern, strict, harsh, unfeeling, stony, steely, flinty, dour, grim, cold, frosty, frigid, icy, chilly, unemotional, unfriendly, formal, stiff, stuffy, reserved, remote, distant, aloof, forbidding, grave, solemn, serious, unsmiling, unsympathetic, unforgiving, uncharitable; having no comforts or luxuries. strict, self-denying, self-abnegating, moderate, temperate, sober, simple, frugal, spartan, restrained, self-restrained, self-disciplined, non-indulgent, ascetic, puritanical, self-sacrificing, hair-shirt, abstemious, abstinent, celibate, chaste, continent; More
    having a plain and unadorned appearance.

    In other words its not a Laffer minute but a miserable way of life. I’m surprised TCO wouldn’t be much happier in the company of the Redwoods of this world.

    As a traditional social Liberal and unrepetentent Keynsian I don’t need to do a net search to know it’s a convenient theory to give the rich an excuse to keep their hands in their pockets.

  • Dave Orbison 4th Jun '16 - 3:36pm

    @ George Kendall “I don’t really know what the anti-austerity movement are arguing for.”

    Recently a new LibDem member posted of his despair with Wirral Council (Lab) decision to close a respite centre.
    As a Wirral resident, I received the council’s public consultation pack listing a range of priority budget options. It was a most depressing document. The ‘choice’ was between closing or charging for essential services or other ideas such as scrapping school crossing patrols, abandoning park maintenance, closing libraries etc.
    There wasn’t one option I could support. So George, what do I want? Well not this. I do not want to be faced with choices driven by an ‘austerity’ agenda as a fait accompli. I want to see services protected not decimated. I do not want to see public services that have served the communities starved of resource or closed down such that future generations will never benefit from what has been built up over decades. This isn’t progress.

    Should we given another choice to maintain these services? In my opinion, yes, of course we should!
    As a new earner in the 1970’s I remember Tory and Labour budgets where taxes, especially income tax, varied as and when needed from budget to budget. It was expected.

    But it seems to me that from the 1990’s onwards all parties have colluded to duck honest and responsible budgetary control. They all want to be elected on a ‘No increase in income tax guaranteed’ basis and have long since abandoned campaigning honestly. Not only do that, they want us to believe that whilst holding income down income tax no matter what, they can simultaneously improve services. Of course when pushed they fall back on using vague language to disguise intended cuts or alternatively they muddy the waters by hiding in the budget small print, the assumption that huge efficiency savings will be made knowing full well, as in the NHS, these are simply unachievable.

    Don’t get me wrong. I am not against looking for efficiencies. I am not against low taxation. But I am most certainly against austerity programmes that cut vital services to the point where they cannot possibly deliver what need. Given the choice I would rather pay to save these services than watch them
    Up until Corbyn’s election and possibly Tim Farron’s too, we simply have never been given the choice. Hope it’s not too late.

  • @ Dave Orbison. Great post, Dave. I share your anger about political parties being unable to think outside the box. The Atlee Government certainly could despite all the problems they inherited – and so, to a point, did the Asquith government.

  • @David Raw “I’m surprised TCO wouldn’t be much happier in the company of the Redwoods of this world.

    As a traditional social Liberal and unrepetentent Keynsian I don’t need to do a net search to know it’s a convenient theory to give the rich an excuse to keep their hands in their pockets.”

    Perhaps you would care to enlighten us as to where the taxes come from to pay for all these public services if there is no private sector economic activity to be taxed?

    And why is it that it’s always the “traditional social liberal [s] [sic]” who want to place economic liberals in another party?

  • Stephen Howse 4th Jun '16 - 4:31pm

    “I share your anger about political parties being unable to think outside the box.”

    Sadly whenever a Lib Dem dares to do so, some commenters inevitably tell them they’re Tories and should go away and join that party. If those in positions of power in the party and the shouties on social media are constantly screaming about Yellow Tories, you shouldn’t be surprised when there’s consequentially a dearth of thinking within the party that in any way deviates from the tired, tried and tested policies and ideas of the comfortable ‘left’.

  • @TCO
    “Perhaps you would care to enlighten us as to where the taxes come from to pay for all these public services if there is no private sector economic activity to be taxed?”

    Has David argued in favour of communism? I don’t think so. I think he believes in a mixed economy like any sensible person does.

    As for “where taxes come from” – they come from anybody who is helping to create wealth in the economy, public and private sector alike :-

    http://timharford.com/2011/12/youre-wrong-we-are-all-wealth-creators/

  • TCO 4th Jun ’16 – 1:57pm……………This is called the Laffer Curve and there are plenty of articles about it searchable on the net. Put it this way, if you knew that for every extra £1 you earned or realised in profit on disposal 98p was going to the Treasury, would you make the effort to earn that money or invest time in ways to not make that profit taxable?…………
    Oh, the Laffer curve; that ‘supposed’ gospel for the wealthy to hang on to more money….They ignore later work that tends to show that raising taxes would raise further revenue and that, if tax loopholes and tax shelters are readily available, the point at which revenue begins to decrease with increased taxation is likely to be lower……

    BTW…I’m old enough to remember that 98% rate…The argument used by, ‘those at the top’, was that they needed massive salary increases because they received so little of any rise…Amazingly, when the tax rate dropped, their salary increases remained much the same…

  • @Stuart “Has David argued in favour of communism? I don’t think so. I think he believes in a mixed economy like any sensible person does.”

    I never said he was a communist – you’ve raised that point.

    He does seem to be arguing in favour of the sort of punitive tax regime favoured by the Labour government of the 1970s (and which the current Labour leadership seems to want to return to).

    That worked out well if I recall correctly.

  • @expats let me ask you the same question: if you knew 98% of any increase in your income generated by extra productive effort was going to the Treasury, would you make that effort?

  • @Stephen Howse “Sadly whenever a Lib Dem dares to do so, some commenters inevitably tell them they’re Tories and should go away and join that party.”

    Yes, I’ve always found that rather puzzling. You’d think that if “traditional social liberals [sic]” such as Mr Raw were secure in their beliefs they would feel confident in their ability to win the argument without feeling the need to expel anyone with a different point of view.

    Personally I welcome a strong challenge to my perspective on the world that I get from the different groups within the party as this healthy debate and challenge makes our policies stronger. It’s when you get groupthink that you end up with unworkable policies like free tuition fees.

  • Lorenzo Cherin 4th Jun '16 - 7:42pm

    David Raw

    Your comments re TCO and Redwood are insulting , not because to be associated with a Tory is discreditable , I would happily be so with Sir John Major , Lord Hesiltine , or Ken Clarke on specific attitudes or ocassional policy, but your implying he does not or should not be in our party .

    Why are you , if following that approach , not with Corbyn or like your favourite Democratic Socialist , Bernie Sanders , not an independent socialist ?!

    I am on the centre left on economics , the radical centre on most things and on the centre right on crime and punishment for the wicked .I am a Mill supporting , harm principle oriented Liberal Democrat !

  • Stephen Howse 4th Jun '16 - 8:12pm

    Me too Lorenzo, you’re not alone.

  • Mick Taylor 4th Jun '16 - 8:24pm

    As someone who has always been on the left of the party and thinks of himself as a social Liberal I am appalled at the constant snide attacks on those in our party who want to have a different view or who actually make an attempt to develop economic policy that takes account of the need to keep deficits down. People who quote Keynes very often know little about his views. He was actually very much against high debt by government or anyone else. That is why he argued for paying for the war through high taxation rather than borrowing. His policy of spending in times of hardship to keep up employment was never designed to lead to high government deficits as it was supposed to be followed by higher taxation and lower spending when times were good. Of course this is the bit governments were never keen on! One of the reasons we got into the mess we did was that the last Labour government borrowed heavily even when times were good to avoid putting up taxes.
    So I would make a plea to David Raw and others of his ilk. Stop categorising people as Orange bookers or yellow Tories and try dealing with the arguments instead. Lib Dem Voice would be a much better place than it is now where insult and name calling far too often replaces debate.

  • TCO
    what makes you hit on 98% and if low taxation increases productivity by incentivising high earners why is productivity going down? What if the productivity it increases is dodgy like, say, I dunno, pushing sub-prime loans.
    The other thing about the Laffer curve is it doesn’t actually state what the ideal tax rate is as it is based on the idea that at one end of the scale a 0% rate of tax raises no tax and that the other end 100% tax raises no tax. So the ideal rate of Tax according to the Laffer Curve is somewhere unspecified between 0 and 100 %

  • nvelope2003 4th Jun '16 - 9:27pm

    Austerity is an inappropriate word in the context of public or private expenditure. From the private individual to the largest organisation there is always a need to review spending to ensure that it is still relevant. Things that were once necessary often become pointless as needs and circumstances change. Ordinary people see stupid and wasteful use of public money, for instance maintaining bus services where the need for them has vanished because the users have moved away and the affluent incomers all have nice cars. I can understand authors campaigning to keep local libraries open but even years ago they were often little used and now they are sometimes virtually empty. We have to look at ways to serve people’s needs which are relevant to modern life, not live in a past which has long gone. There are lots of steam railways operated by enthusiast volunteers but mercifully we do not still use filthy steam engines on commuter trains.

    On another point, at what level of income would a 98% tax rate seem immoral, let alone counter productive?

  • Sue Sutherland 4th Jun '16 - 9:47pm

    TCO I think we are far away from the problems of 98% rate of tax, so far away that the argument is about 50% rate of tax on higher earners. When someone is told they are fit for work, when they later win an appeal, they lose 100% of the income they need to scrape by. Do I want this to happen? No, I do not and if it requires me to pay more tax then I will do so. Thatcher legitimised greed and the rich will always resent taxation. I remember the “brain drain” that resulted from higher levels of taxation, clever people who preferred to emigrate rather than pay those taxes, but most people stayed and paid because in those days most people understood what it meant to have a fairer society. We will have to persuade people that a Liberal Democrat society is worth paying for, it won’t be easy but it will surely be worth it.

  • @ Lorenzo Cherin

    It’s characteristically noble of Lorenzo to defend TCO, but I’m afraid it reveals a lack of knowledge about the Laffer Curve, it’s main protagonist John Redwood and the importance of Laffer to the right wing of the Tory Party.

    For example, on 14 August, 2010 the Conservative Home website led with the headline, “Happy Birthday, Arthur Laffer !” Mr Cherin is clearly unaware that Redwood is Laffer’s chief proponent in and out of the Commons (e.g Question Time, 2 March 2012). Did you know Lorenzo that Sir John Major had a choice epithet for Redwood classing him and others in his cabinet as of doubtful legitimacy. Redwood is a brexiter and member of the Tory right.

    Redwood has serious critics amongst reputable economists. Laffer concluded that cutting income tax encourages people to work harder, and increase revenue. We now know where on the curve revenue is maximised – it’s far away from 50 per cent.

    In 2012, Romer & Romer found the maximizing rate on the highest earners is extremely high—over eighty percent. Either way, if you want to maximise revenue, the 50p tax rate is about 25p too low. Among the top 0.05 percent of the income distribution they find an elasticity of taxable income of 0.19 percent which implies “that tax revenues would be maximized with a tax rate of 84 percent; that is, you could raise taxes up to 84 percent before people’s reduced incentives to make money would compensate for the higher tax rates.”

    Diamond and Saez (2011) put the peak yield closer to 76 per cent.

    If TCO wants to support right wing Tory economics that’s his privilege. I ask only that he reflects on where he would feel most comfortable.

    As for Lorenzo I suggest he reflects on Denis Healey’s comments about an attack by Geoffrey Howe. I don’t share a birthday with Denis, Lorenzo, but I went to the same school.

  • PS I don’t want astronomical rates of income tax. I do believe in a mixed economy – BUT I ALSO BELIEVE THE TOP 1% SHOULD PAY THEIR SHARE. Tax Havens and non doms want everybody else’s cake as well as their own to eat. Philip Green and his tax arrangements with his wife in Monaco are a recent case in point.

  • @Lorenzo thanks for your kind words of support. I am relaxed if Mr Raw wants to call me a Tory; that is his prerogative if he to desires and appears to be based on an understanding of politics formed in the 1930s and not modified subsequently. I know that I am a Liberal and that is sufficient.

    The party needs to be challenged out of a tendency to head to its comfort zones, one of which is a reflex to tax and spend without thinking about the effect of that taxation and the utility of the spending.

  • Lorenzo Cherin 5th Jun '16 - 2:05am

    David Raw you are a Laffer minute !

  • Bill le Breton 5th Jun '16 - 5:28am

    In June 2010 there were compelling arguments against increasing the pace of fiscal consolidation – ie ‘austerity’ set by Alistair Darling’s March Budget and supported by the Lib Dems in their election manifesto. These arguments were ignored and Tories and Lib Dems argued that ‘fiscal consolidations can be expansionary. The result was the reverse. Recovery was delayed and in fact the countries debt grew by more than it would have done had Lib Dems stuck to their guns.

    Here http://www.imf.org/external/pubs/ft/fandd/2016/06/ostry.htm is how an IMF paper regards the arguments
    “Austerity policies not only generate substantial welfare costs due to supply-side channels, they also hurt demand—and thus worsen employment and unemployment. The notion that fiscal consolidations can be expansionary (that is, raise output and employment), in part by raising private sector confidence and investment, has been championed by, among others, Harvard economist Alberto Alesina in the academic world and by former European Central Bank President Jean-Claude Trichet in the policy arena. However, in practice, episodes of fiscal consolidation have been followed, on average, by drops rather than by expansions in output. On average, a consolidation of 1 percent of GDP increases the long-term unemployment rate by 0.6 percentage point and raises by 1.5 percent within five years the Gini measure of income inequality (Ball and others, 2013).¬”

    We should not alter our opposition to ‘austerity’ because we are losing the argument, we should argue it better and more forcefully. We should also recognize the potential for monetary policy to increase the pace at which the nominal economy grows and therefore bring down more quickly the debt to GDP ratio.

    And of course dismiss the siren voices of those who supported accelerated deficit reduction in 2010.

  • Bill le Breton 5th Jun '16 - 5:35am

    The IMF paper linked to above is well worth reading – especially the section on ‘Size of the State’ where it is clear that in a country like the UK the cost of ‘austerity’ far outweighs the benefits. Here is an extract:

    “It is surely the case that many countries (such as those in southern Europe) have little choice but to engage in fiscal consolidation, because markets will not allow them to continue borrowing. But the need for consolidation in some countries does not mean all countries—at least in this case, caution about “one size fits all” seems completely warranted. Markets generally attach very low probabilities of a debt crisis to countries that have a strong record of being fiscally responsible (Mendoza and Ostry, 2007). Such a track record gives them latitude to decide not to raise taxes or cut productive spending when the debt level is high (Ostry and others, 2010; Ghosh and others, 2013). And for countries with a strong track record, the benefit of debt reduction, in terms of insurance against a future fiscal crisis, turns out to be remarkably small, even at very high levels of debt to GDP. For example, moving from a debt ratio of 120 percent of GDP to 100 percent of GDP over a few years buys the country very little in terms of reduced crisis risk (Baldacci and others, 2011).¬

    “But even if the insurance benefit is small, it may still be worth incurring if the cost is sufficiently low. It turns out, however, that the cost could be large—much larger than the benefit. The reason is that, to get to a lower debt level, taxes that distort economic behavior need to be raised temporarily or productive spending needs to be cut—or both. The costs of the tax increases or expenditure cuts required to bring down the debt may be much larger than the reduced crisis risk engendered by the lower debt (Ostry, Ghosh, and Espinoza, 2015). This is not to deny that high debt is bad for growth and welfare. It is. But the key point is that the welfare cost from the higher debt (the so-called burden of the debt) is one that has already been incurred and cannot be recovered; it is a sunk cost. Faced with a choice between living with the higher debt—allowing the debt ratio to decline organically through growth—or deliberately running budgetary surpluses to reduce the debt, governments with ample fiscal space will do better by living with the debt.¬”

  • @George “Re: Laffer Curve … The curve was named after Laffer, but the theory existed long before him. I believe the concept is widely accepted, what is disputed is what the peak tax rate is to maximise revenue.”

    Indeed, which is why I’m struggling to understand why when I responded to Sue”s point that she didn’t believe there was a relationship between tax rates and tax take with a reference to the Laffer Curve, that it should trigger such opprobrium.

    It’s clear that there is such a relationship and that it needs to take into account all taxes (not just income ) and that specific individuals will react in different ways.

    To the poster above who commented that all rich people are greedy I would respond that that is stereotyping; some are, some aren’t, a’s is the case for people at all income levels.

  • Peter Watson 5th Jun '16 - 10:10am

    The technical details of this whizz over my head.
    However, what comes across is that before the election in May 2010 the party recommended one approach to deficit reduction, between that and the election in May 2015 it supported a different approach, and since the 2015 election, as with a number of important issues, it is very unclear what its position is.

  • @David Raw”If TCO wants to support right wing Tory economics that’s his privilege. I ask only that he reflects on where he would feel most comfortable.”

    I don’t want to feel comfortable in a party, and no party should feel comfortable with itself if it wants to be elected.

    The Tories tried comfort with Hague, IDS and Howard and kept getting defeated. Labour won three elections with the distinctly uncomfortable Blair.

    Labour is now trying the comfort zone approach, first with Miliband and now, supremely, with Corbyn. The members love him and can’t understand why nobody else does; they think it’s a media conspiracy.

    Parties that want to appeal to a broad enough constituency to be elected need to feel uncomfortable. Your path of expelling anyone who’s views you disagree with leads to irrelevance.

    Lastly, rather than giving the knee-jerk “economic liberalism = neo liberalism = Tory” response to anything I write, may I respectfully request that you a) read up on the subject so you can have an informed debate and b) engage with the arguments and not the person.

  • @Peter Watson as I understand it the approach to deficit reduction actually followed 2010 to 2015 was what was advocated by Vince pre 2010. This also tied in with what Darling proposed in 2010, but for their own reasons the Tories and Labour both painted it as tougher than it was.

  • @petermartin2001 “Allow me to put the question of the deficit another way. If the Government are borrowing then the rest of us are lending. Simply, that means we are saving.”

    is that necessarily true? Can’t UK government bonds be bought by foreign nationals, companies and institutions?

  • Petermartin2001
    We know what happens with tobacco. Some smokers stop, others move to the black market or to vaping. The tax return thus falls and in turns leads too further hikes to the point where it becomes counter productive. Puritan taxation is probably less effective as a means of stopping anything than legal changes like smoking bans. Ditto for drinking. Upping the price in pubs damages social drinking and pubs, but ups home drinking. Upping the tax on home drinking will increase duty free and other markets, so will ultimately will only damage the local drinks industry. It’s like sugar tax and green taxation. They don’t really work to decrease demand, but makes some people feel that they are doing a public good by punishing what could loosely be termed immorality.

  • @petermartin2001 so if government debt is partly in the hands of overseas holders then UK holders cannot spend their way out of the problem.

  • Richard Underhill 15th Feb '19 - 9:41am

    Shadow Chancellor John McDonnell was asked “Who’s your favourite Tory?” thought briefly and replied “Next”.
    So, does he have a regular pair? If so, have pairing promises always been kept?
    Did he advise Jeremy Corbyn not to meet Theresa May?
    He was then asked about Winston Churchill “Hero or villain?”
    This provided the current shadow chancellor to comment on Winston Churchill’s performance as Chancellor of the Exchequer (although that has already been done by former Chancellor Roy Jenkins.)

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