From Left Foot Forward:

 

The Coalition’s £100bn gamble on growth without the state

 

At the weekend Compass launched a new report which calculated the extent of this Government’s reckless gamble on our economy. The report estimates that the government is making the equivalent of a £100 billion gamble on growing while the public sector is cut, which is supported by “no reputable economic theory”.

 

If the coalition government loses this gamble then nearly £100 billion could be lost from the economy over the course of just one parliament.

 

As the report argues everyone is agreed that growth is the only way out of this economic situation, but the government’s hope is that this will come about by simply creating ‘space’ for private initiative. The Chancellor believes that the public sector is crowding out private growth – yet all the evidence suggests that far from crowding it out, public spending is propping up anemic private sector growth.

 

The economic recovery is still fragile, as demonstrated by falling house prices, high unemployment, and low consumer confidence levels. In this environment the cuts agenda of this government will ensure we experience a lost decade – much like Japan did in the 1990s.

 

Such an economic policy has no sound economic basis and as the report shows the government’s economic agenda can and must be challenged. Chancellor George Osborne argues that the state is the problem, that we must deal with the deficit immediately, that if the state is cut back the private sector will flourish and that cuts can be progressive.

 

The report contests each of these with economic facts and evidence showing that opposition to the cuts is essential. In the short term growth must be the priority and in the medium to long term there is an alternative to the cuts involving a renewed fiscal stimulus to encourage growth and a long term fiscal policy designed to reduce the deficit through a fairer tax regime.

 

A fairer tax regime in the medium to long term could include the following measures:

 

50% Income Tax band at £100,000 £2.3 billion

 

Uncap NICs and make them payable on investment income £9.1billion

 

Introduce minimum income tax bands £14.9 billion

 

Reintroduce 10% tax band and 22p basic rate -£11.5 billion

 

Abolish tax havens and tax ‘non-doms’ £10.0 billion

 

Introduce a sterling Financial Transactions Tax £10.2 billion

 

Public sector Cost cutting measures (Trident/Titan Prisons) £5.3 billion

 

Total £59.8 billion

 

There is a growing consensus that the Chancellor’s cuts will not promote growth and will jeopardize the future of our economy. As the report shows, this is not just coming from the left or the unions, but can be seen on the pages of the Financial Times and that hot bed of left wing radicalism, the City.

 

Mr Osborne argues that cuts and growth aren’t an either-or situation and that he can scalpel away somewhere between a quarter and half of departmental budgets without effecting growth. This is a false economy – this government has an agenda for cuts but not for growth.

 

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Full Compass report is very long, but it's here if anyone's interested.

Osbourne shouldn't be allowed near our economy. The ConDems are basically going to murder our economy and cause damage it'll take decades to recover from.

 

I'm sure i'm not going to be the only person buying a one way ticket out of Heathrow in the next 3years.

Our economy even with the cuts is tipped to grow more strongly in Q3 and Q4 than America and Japan in a report that was published on BJ recently

 

The country can't spend what it hasn't got, the people and the government it is totally the right thing to zap the defecit

 

Leaving the public sector alone and simply soaking the rich instead would be ridiculous, the public sector is top heavy with waste and over bureaucracy and too many layers of management it is utterly right to have a slimline public sector and a society where people can make their own decisions and run their own lives free from the nanny state.

 

You only have to look at the SEVEN layers of management in the NHS to see that the public sector is a fat overblown beast and it is right to leave no stone unturned in streamlining the public sector

 

I want to see a low tax low public spending society with a small public sector and people in control of their own lives

Our economy even with the cuts is tipped to grow more strongly in Q3 and Q4 than America and Japan in a report that was published on BJ recently

 

The country can't spend what it hasn't got, the people and the government it is totally the right thing to zap the defecit

 

Leaving the public sector alone and simply soaking the rich instead would be ridiculous, the public sector is top heavy with waste and over bureaucracy and too many layers of management it is utterly right to have a slimline public sector and a society where people can make their own decisions and run their own lives free from the nanny state.

 

You only have to look at the SEVEN layers of management in the NHS to see that the public sector is a fat overblown beast and it is right to leave no stone unturned in streamlining the public sector

 

I want to see a low tax low public spending society with a small public sector and people in control of their own lives

As was mentioned to you, that report got our growth predictions wrong for the last two quarters anyway, and Japan's growth has been stagnant since the early 90s.

 

The country CAN spend what it hasn't got, you're economically illiterate. Ever heard of the Golden Rule? Brown broke it for the recession to prop up the economy, but the idea that we can borrow for capital spending is one that's accepted the world over (except in Australia, where they seem to have some difficulty accepting the idea that it's OK to borrow for stuff that will generate a profit) - it's even the principle behind Clegg's announcement that councils could borrow against generated income for local projects, and that was a speech screened by Cameron for crying out loud!

 

You want to see a low tax, low public spending society with a small public sector and people in control of their own lives? Go to Estonia or Latvia and just look at how unequal society is there after the cuts and the refusal to stimulate the economy (to a similar degree as the ones here). A fall in GDP of 20% in Latvia. TWENTY PER CENT. Go to Texas and see how the poor are doing there. The world over, it's always the same - low tax, low public sector involvement = massive inequalities whilst the rich siphon off the rest of society.

and Japan's growth has been stagnant since the early 90s.

 

And the reason it's been stagnant for so long is because, after their vicious recession in the 90s, they kept trying to slash spending and reduce their deficit too quickly, which in the end has led them into their deflationary cycle with one of the highest deficits in the world.

 

Craig, can you use solid economic facts or history to back up your point of view, in the way that the people like Balls and Blanchflower have precedent to draw on their view that cutting spending leads to higher deficits and prolonged economic stagnation?

As was mentioned to you, that report got our growth predictions wrong for the last two quarters anyway, and Japan's growth has been stagnant since the early 90s.

 

The country CAN spend what it hasn't got, you're economically illiterate. Ever heard of the Golden Rule? Brown broke it for the recession to prop up the economy, but the idea that we can borrow for capital spending is one that's accepted the world over (except in Australia, where they seem to have some difficulty accepting the idea that it's OK to borrow for stuff that will generate a profit) - it's even the principle behind Clegg's announcement that councils could borrow against generated income for local projects, and that was a speech screened by Cameron for crying out loud!

 

You want to see a low tax, low public spending society with a small public sector and people in control of their own lives? Go to Estonia or Latvia and just look at how unequal society is there after the cuts and the refusal to stimulate the economy (to a similar degree as the ones here). A fall in GDP of 20% in Latvia. TWENTY PER CENT. Go to Texas and see how the poor are doing there. The world over, it's always the same - low tax, low public sector involvement = massive inequalities whilst the rich siphon off the rest of society.

 

Another piece of good news that was not reported on here today till now, Britain has retained its Triple A credit rating along with a glowing report of it's plans to cut the deficit.

 

I compare Britain to a cancer patient, the cancer being the overwhelming debt that this country is in, with cancer if the patient is going to survive then the cancer has to be blasted away with radiation/chemo and not allowed to fester or it will overwhelm the patient and eventually kill them, this debt is an economic cancer, without the radiotherapy to blast away the cancer (steep spending cuts) the cancer will grow and grow, the radiotherapy will stop the cancer in its tracks and the patient makes a full recovery, now as anyone knows radiotherapy/chemo has very nasty side effects and this next 2 years will be the equivalent of those side effects, painful, unpleasant but necessary for long term survival.

Another piece of good news that was not reported on here today till now, Britain has retained its Triple A credit rating along with a glowing report of it's plans to cut the deficit.

 

I compare Britain to a cancer patient, the cancer being the overwhelming debt that this country is in, with cancer if the patient is going to survive then the cancer has to be blasted away with radiation/chemo and not allowed to fester or it will overwhelm the patient and eventually kill them, this debt is an economic cancer, without the radiotherapy to blast away the cancer (steep spending cuts) the cancer will grow and grow, the radiotherapy will stop the cancer in its tracks and the patient makes a full recovery, now as anyone knows radiotherapy/chemo has very nasty side effects and this next 2 years will be the equivalent of those side effects, painful, unpleasant but necessary for long term survival.

Except we've had this, ahem, 'cancer', for the last four hundred years, and even with the recession it's still at one of the lowest proportions of GDP it has been since the 1700s. This 'cancer' hasn't killed us up until now, so why do you think it's going to do so now?

I compare Britain to a cancer patient, the cancer being the overwhelming debt that this country is in, with cancer if the patient is going to survive then the cancer has to be blasted away with radiation/chemo and not allowed to fester or it will overwhelm the patient and eventually kill them, this debt is an economic cancer, without the radiotherapy to blast away the cancer (steep spending cuts) the cancer will grow and grow, the radiotherapy will stop the cancer in its tracks and the patient makes a full recovery, now as anyone knows radiotherapy/chemo has very nasty side effects and this next 2 years will be the equivalent of those side effects, painful, unpleasant but necessary for long term survival.

 

So I'll assume the answer is no, you don't have any rational economic evidence to support this mantra that debt is bad, and that all you have to fall back on are absurd and inappropriate metaphors.

 

A more appropriate metaphor is to think about someone with chronic depression, and to imagine the high public spending right now as the Prozac to the economy's depression. If you take a depression patient off the Prozac too quickly, the likelihood is that their mental state will plummet back to a low, and they'll have to start the treatment all over again. If you keep on the Prozac for a good length of time, they might be cured.

Except we've had this, ahem, 'cancer', for the last four hundred years, and even with the recession it's still at one of the lowest proportions of GDP it has been since the 1700s. This 'cancer' hasn't killed us up until now, so why do you think it's going to do so now?

 

The amount of interest we are paying on this debt alone let alone beating the debt would pay for huge tax cuts

 

I would rather see tax cuts as opposed to servicing a debt, it is criminal that money that could be spent elsewhere is instead earmarked for debt repayment, the priority should be to get rid of the debt entirely or at the very least get it down to a modest manageable level so that money can go on tax cuts.

 

The billions that are going on debt repayment and debt interest could pay for a lot of schools, hospitals, police officers, tax cuts but instead it is just disappearing down a big black hole

Actually Craig, we can stick with your cancer analogy, but you got several things wrong - the economy's cancer isn't the debt, it's the threat of a double-dip recession or a depression. The chemotherapy for this cancer is the high public spending, while the deficit/debt is simply the cancer patient's hair loss - an unfortunate but necessary and ultimately harmless side-effect of the treatment.

So I'll assume the answer is no, you don't have any rational economic evidence to support this mantra that debt is bad, and that all you have to fall back on are absurd and inappropriate metaphors.

 

A more appropriate metaphor is to think about someone with chronic depression, and to imagine the high public spending right now as the Prozac to the economy's depression. If you take a depression patient off the Prozac too quickly, the likelihood is that their mental state will plummet back to a low, and they'll have to start the treatment all over again. If you keep on the Prozac for a good length of time, they might be cured.

 

Like I said many a time I do not have fancy degrees in economics but what I do is run a business that is doing reasonably well and spend hours daily communicating with business people and I would not be exaggerating when I say 9/10 BUSINESS people that I speak to (everything from small family run businesses to senior directors of giant corporates) agree that the debt is out of control and needs to be ruthlessly cut down to size

 

 

Actually Craig, we can stick with your cancer analogy, but you got several things wrong - the economy's cancer isn't the debt, it's the threat of a double-dip recession or a depression. The chemotherapy for this cancer is the high public spending, while the deficit/debt is simply the cancer patient's hair loss - an unfortunate but necessary and ultimately harmless side-effect of the treatment.

 

There will be a double dip recession or at the very least stagnant growth in the next year or 2 but then when the debt is blitzed we will see the rewards in the form of sweeping tax cuts and tax cuts are the most important thing for me

The amount of interest we are paying on this debt alone let alone beating the debt would pay for huge tax cuts

 

I would rather see tax cuts as opposed to servicing a debt, it is criminal that money that could be spent elsewhere is instead earmarked for debt repayment, the priority should be to get rid of the debt entirely or at the very least get it down to a modest manageable level so that money can go on tax cuts.

 

The billions that are going on debt repayment and debt interest could pay for a lot of schools, hospitals, police officers, tax cuts but instead it is just disappearing down a big black hole

 

How many times do you need to have this point slapped down? ALL evidence suggests that slashing spending when economic growth is fragile (and yes, Craig, it IS fragile, no matter how many irrelevant anecdotes you have to tell about Waitrose or Prada sales booming) only increases deficits while holding back economic growth - this is what happened in Japan. Why do you have no response to this?

How many times do you need to have this point slapped down? ALL evidence suggests that slashing spending when economic growth is fragile (and yes, Craig, it IS fragile, no matter how many irrelevant anecdotes you have to tell about Waitrose or Prada sales booming) only increases deficits while holding back economic growth - this is what happened in Japan. Why do you have no response to this?

 

We will see what happens in 5 years time

 

Osborne and Cameron are not on a political suicide mission, they screw up this next 5 years the tories will be out of power till I am drawing my old age pension and they know that, they have spent years and years fighting to get where they are in the party and they would not sink their own party by screwing things up, they know what they are doing

There will be a double dip recession or at the very least stagnant growth in the next year or 2 but then when the debt is blitzed we will see the rewards in the form of sweeping tax cuts and tax cuts are the most important thing for me

 

But this simply isn't going to happen. Like we've been saying, the experience of Japan shows us that, if the government's spending cuts are as harsh they say, the reality will be that in 2-3 years' time, the deficit will still be very high due to the collapse in tax revenue and increase in unemployment benefits, while economic growth will have completely stagnated, meaning the government will have no option but to start stimulating the economy again, thus increasing the deficit even further and wasting a lot more money than would be wasted if we went about this sanely and rationally.

We will see what happens in 5 years time

 

Osborne and Cameron are not on a political suicide mission, they screw up this next 5 years the tories will be out of power till I am drawing my old age pension and they know that, they have spent years and years fighting to get where they are in the party and they would not sink their own party by screwing things up, they know what they are doing

Really? Because the last time I checked they were about to gerrymander the constituency borders so that even this year's result would've notionally gotten them a majority.

We will see what happens in 5 years time

 

Osborne and Cameron are not on a political suicide mission, they screw up this next 5 years the tories will be out of power till I am drawing my old age pension and they know that, they have spent years and years fighting to get where they are in the party and they would not sink their own party by screwing things up, they know what they are doing

 

Really? Because I bet if this board was around 8 years ago, a lot of New Labour fanboys would be saying words to this effect about Iraq (possibly even including myself, at first). 'Blair is not on a political suicide mission, he wouldn't be going in if he wasn't sure there are WMDs, they know what they are doing '. Would you have believed them then? The fact is that politicians are so arrogant that they refuse to believe they're wrong, even when evidence is staring them in the face.

But this simply isn't going to happen. Like we've been saying, the experience of Japan shows us that, if the government's spending cuts are as harsh they say, the reality will be that in 2-3 years' time, the deficit will still be very high due to the collapse in tax revenue and increase in unemployment benefits, while economic growth will have completely stagnated, meaning the government will have no option but to start stimulating the economy again, thus increasing the deficit even further and wasting a lot more money than would be wasted if we went about this sanely and rationally.

 

There are plenty of ways to generate money/ save money that the government should be exploring such as means testing benefits (initial increased bureaucracy yes), stripping huge chunks of waste out of the NHS, not replacing Trident, faster pullout of Iraq/Afghanistan, windfall taxes on thieving energy and oil companies, private companies taking over more services that the government provide, taxes on banks that pay excessive bonuses, those kind of things would make considerable inroads into the debt

Really? Because the last time I checked they were about to gerrymander the constituency borders so that even this year's result would've notionally gotten them a majority.

 

Rightly so, the last boundary review favoured Labour heavily plus there is a small chance that the voting system that the Lib Dems want will be won in the referrendum

Really? Because I bet if this board was around 8 years ago, a lot of New Labour fanboys would be saying words to this effect about Iraq (possibly even including myself, at first). 'Blair is not on a political suicide mission, he wouldn't be going in if he wasn't sure there are WMDs, they know what they are doing '. Would you have believed them then? The fact is that politicians are so arrogant that they refuse to believe they're wrong, even when evidence is staring them in the face.

 

We were puppets of Bush, whatever Bush did Blair would do so it was effectively Bush running this country so I would have said the same thing as Bush is a complete re****