The German Comedy Ambassador On Debt

I've been a big fan of Henning Wehn since I saw him supporting Stewart Lee during his If You Prefer a Milder Comedian Please Ask For One tour. I was just enjoying some YouTube clips of "The Germam Comedy Ambassador" when I was reminded of his take on the British attitude to debt. The clip below was posted in 2008. It was and is very apt at the time as we as a country, were already running up enormous public and private levels of debt. It contunues to be apt as we are continuing to do so.

However, I'd love him to do this routine today, in Greece, about the Greeks' attitude to debt. I think it would go down a storm..? He could then tour his show to Italy, Ireland and Spain. Mind you, being a German I imagine he'd want to start any European tour in Poland, regardless of whether Germany is needed to bail them out or not.*



* Cheap, lazy reference to the Second World War that was totally unavoidable. Sorry.

Darling, We Must Act Now

More renowned for his eyebrows than economic competence

Alistair Darling writes in today's Times...

"Can the eurozone survive in its present form? Not if its members carry on the way they have over the past year. Hoping that something will turn up won’t do. If we have learnt anything from the economic crisis for the past three years, it’s that if you have a problem, you need to fix it now."

Did he really learn that lesson? There's not much evidence on the deficit front from the time he was chancellor. Although, at least he planned to get round to doing something about it after the 2010 general election (if Brown/Balls had allowed him, and, indeed, if he were kept on as chancellor at all). But his replacement as shadow chancellor wasn't and isn't so keen on fixing the deficit problem "now" or even then or after that for that matter.

Such a statement is a bit rich coming from a key player in the creation of the deficit disaster, and in no way reflects his real actions while in government or his successor's intentions now.

The Spending Cuts In Context And The North/South Divide

A report by the Centre for Economics and Business Research (CEBR) tomorrow will expose the true extent of the Coalition's cuts.

It will point out that analysis of figures from the OECD reveal that the UK is cutting public spending LESS than the European average over the next 2 years. And this despite the fact that public spending increased far more sharply in this country than other major economies during the recession years.


This report is just further evidence of the myth being propagated that this country is being put through some kind of especially draconian state spending squeeze. Fraser Nelson's Coffee House blog analysis further proves the point. Fraser demonstrates with the graph below how Osborne isn't even cutting as hard or as quickly as Labour did the time they bankrupted the economy before last.


Indeed, projected spending in most departments is expected to increase by 2014/15 compared with 2009/10.


Worryingly, the CEBR report highlights that the economy in regions like the northwest, northeast, Wales and Northern Ireland will still be dominated by the public sector where it will still account for over 50% in 2015, after the spending cuts have been implemented. So we will still have large parts of our country where the sector of the economy that contributes tax income is smaller than the part that consumes it.


Of course, Ed Balls, seeing a report that undermines his economic "master plan", has already begun to spin it in his favour. It is obvious that public spending cuts will affect areas with the highest public spending the most. But rather than address the questions this report raises about his economic strategy, he prefers to point to the obvious fact that proportionately, northern areas dominated by the public sector will see bigger affects of the cuts. He ignores the government's plans to assist private enterprise in these areas so they can take up the slack and instead claims the government is attempting to exacerbate the north/south divide.

Expect a lot more of this kind of spin from Labour and the left generally. Attempts to revitalise regions of the UK to make them less dependent on the dead hand of the state will be portrayed as typical Tory attacks on traditional Labour voting areas. Labour's fear being that once freed from the employ of and dependancy on the state people there will take a more independent view when they vote. God forbid.

Ed Miliband's Credibility Deficit

"Watch my nose grow out to here when I talk about the deficit"

Ed Miliband writes in Thursday's Times newspaper that the deficit that the Government (or Conservative-led government as he insists on spinning it, in a pathetic and transparent attempt to alienate Lib Dems) is grappling with, is not the fault of the last Labour mis-led government.

In continuing his attempts to convince voters, who he clearly thinks are as gullible as 4 year olds, that this is the case, he is demonstrating what a poor leader he is and how he hasn't a clue about creating a credible narrative for his party that could return the credibility required to make them electable again.

In attempting to sell the lie that the deficit was caused by a "global economic crisis" he merely invites Coalition supporters to remind everyone, as if they needed reminding (sorry), that it is the structural deficit that is being addressed. In other words, the difference between what is spent from and earned in taxes after the economic cycle is taken into account.

The deficit wasn't created by the evil bankers, as some would have us believe. The bail outs of the banks, something Labour and Gordon Brown are quick to claim were part of their "save the world" strategy, certainly have added to the overall debt levels but not to the yearly structural overspend (a better word for deficit in my opinion). Eventually, those banks will be sold off (presumably just before the next election) and the taxpayers money spent on buying them out will be returned with interest. So, even the bank bail outs are only temporarily inflating the debt level that is being added to by the tune of £150bn a year, currently.

It is the £150bn overspend that needs eliminating if we are to start to tackle to frightening level of debt already racked up. The overspend has been caused by reckless and politically motivated structural spending increases that were unaffordable and now have to be brought back under control.

If you cast your minds back just a few years, you will remember a time when the word "cuts" was political poison. Labour's electoral strategy (something Ed Miliband was heavily involved in) was to keep spending more and more and then dare their opponents to suggest spending was too high. If they did, as the Tories had done in previous elections, the cry of "cuts in hospitals, nurses, doctors, police, schools, teachers, etc etc" would go out and voters were duly repelled. It was a successful strategy until the growing recession hit the banks and sparked the banking crisis. After that, people looked to government to spend more on supporting the economy and on social welfare for those cast into economic difficulty. But they saw a Government that had spent all the money during the good times and now had to rack up enormous debts to act to support an economy during, what was an inevitable downturn. We, the electorate, have to take some of the blame for being taken in by Labour's strategy and
the Tories learnt they had to avoid talking about cuts if they were to "detoxify" their brand.

So, the one thing Little Miliband gets right in his Times article was this lack of political clarity from Labour's opponents back then. That is regrettable but not an excuse to ignore the crisis now, as he proposes. His approach would leave us continuing to add to the £4.8 trillion debt mountain that is already a millstone around our childrens' necks.

2011 will be a testing year for the Coalition. It's on the right economic path but it starts getting rocky and is uphill for most of the rest of the Parliament. Let's hope it can keep itself together during the coming dark days of unpopularity and political tests, like the forthcoming AV referendum. The only way a clown like Ed Miliband will get elected is if the Coalition drops the ball in the middle of the game. The inbuilt electoral bias will return a Labour government with them just a few points ahead (or even possibly one or two points behind) the Tories. So, it's time for Tory and Lib Dem politicians and supporters to gird their loins and battle through the next couple of years while doing everything they can to counter the deceits put out by Labour such as "the deficit wasn't our fault"

The Great Fairness Debate

The reaction to the Comprehensive Spending Review (CSR) has been nothing if not wholly predictable. Leftists popping up all over the shop to denounce the cuts as savage, regressive and unfair. But what does constitute fairness?

Matthew Parris writes on the subject in The Times yesterday (behind a pay wall). He makes the point that fairness is more than some arithmetic calculation of who loses most or whether the cuts are "progressive" or not...

"The essential point about the word “fair” is that it doesn’t add anything to words like “right”, “just”, “reasonable” or “ought”. “Fair” doesn’t (contrary to what the IFS assumes) imply a number, a quantity, a mathematical relationship between two different portions. It doesn’t (contrary to what the Labour Party thinks) imply equality: of outcome, opportunity, pain, gain, or anything else. When a speaker says “fair” he appeals to his hearer’s sense of what people do or don’t deserve.
Without this sense of deserving, any analysis of mere numbers is sterile. The raw, unprocessed arithmetic of financial gain or loss makes no impact on the moral imagination of the public unless illustrated by real cases of real groups about whom we may have an opinion — I stress: opinion — on each group’s moral claim on welfare. Accountants’ formulae for deeming cuts “progressive” or “regressive” are counterfeit, unless weighted by moral judgment.

A crude example: many people would think that, in a queue for an expensive lung operation, it would be “unfair” to put a penniless, jobless and incorrigible chain-smoker ahead of a hard-working young mother who had never smoked — although on the IFS calculation the decision would be “progressive” because it redistributes income from a richer citizen to a poorer one."

This is an important point and, as Parris suggests in his article, not one the coalition is making very effectively. The debate needs to move on from the "progressive" / "reactive" terms, that the left have managed to keep the focus on for decades, and start thinking about what truly is "fair".

The coalition has made a rod for its back by insisting on referring to its plans to reign in Labour's budget overspend as being "progressive". This term means, to most people, that the rich pay more (not just in absolute terms but proportionately) than the poor. Surely, that is fair?

Redistribution of wealth is not, in of itself, fair. Taking from the "haves" and giving to the "have nots" may have a Robin Hoodesque romantic appeal but it doesn't follow that it is fair in all circumstances. When choosing what to cut and what to spare the Chancellor had to made many individual decisions on what was fair and what wasn't.

This is where we see the fundamental difference between the Tory and Labour approach to fairness. Leftists think the main objective should be to redistribute wealth from the better off to the poor. Thus they hope to alleviate poverty and create a more equal society. This, they tell us, is "progressive". For them it would be enough to be able to prove statistically that they were taking more from the better off than the worse off. That's fairness in their book.

Osborne's starting point was more specific; that it wasn't fair to run up unsustainable debt levels for our children's generation to pay off at great expense. In truth Labour already had, but his point is still valid. We should not continue to grow that debt level by continuing to spend more than we can afford for years and years to come. Remember, all the government is proposing is to stop adding to the national debt, they're not planning on paying any of it back before the end of this Parliament at least.

From there the Chancellor had to make a number of fairness judgements. Inevitably these judgements are influenced by the values of the people making them (which, these being politicians who want to be reelected, in turn are influenced by the broad consensus in the country). Matthew Parris describes the kind of judgements he would make and they clearly tally with the Chancellors'...

"Here are mine; and I wouldn’t trouble you with them if I wasn’t convinced they are shared by tens of millions in our country.
I say it isn’t “fair”, if you’re only on an average wage, to have something approaching half your earnings confiscated through income, council, excise, fuel and spending taxes, and redistributed, even though it was your efforts that earned the money.

It isn’t “fair” that people housed by the State at your expense should be given homes for life, rather than only for so long as they cannot afford to pay market rates.

It isn’t “fair” — from the viewpoint of those who would expect their own grown-up children to rent a room if they lacked the funds to buy a house — that a person assessed as being in housing need, once he passes the age of 25, gets a right to a home of his own rather than just a place in shared accommodation.

It isn’t “fair” that the benefits system provides an incentive to jobless people with a medical condition to claim, and stay on, incapacity living allowance, even if they have a partner in work who can support them; and it isn’t “fair” that the costs and numbers of such claimants have swelled so enormously in recent years, without any evidence that the nation has become more ill or disabled.

It isn’t “fair” that workers in the public sector — whose jobs have been safer and whose salaries have risen faster than those in the private sector — should enjoy pension provisions so much more generous than what the rest of the country gets, paid for partly from the taxes of people in less secure jobs with inferior pension rights.

In every one of the five examples I’ve just cited, I’d bet that a shift in resources away from the recipients of state welfare would be seen by a majority in Britain as “fair”. But any fiscal calculation of the “progressive” versus “regressive” effect of the shift would conclude that the cut was “regressive”."

So, fairness is in the eyes of the beholder. To my eyes the CSR has got it about right. There will be a lot more controversy to come as the details pan out over time. Hopefully the coalition can get their fairness narrative sorted before long, otherwise they'll struggle to convince people to accept the pain being inflicted.

And when you hear those leftist politicians, celebrities and journalists berating the government for their actions it would be worth remembering the glee with which many of them welcomed the recession The First Post reminds us. Follow the link and have read if you time. They were happy to accept hard times for the poor, as long as it was framed in anti-consumption, environmentalist terms.

Further to the progressive/fairness debate, I see Guido has an excellent post on the same subject that is worth a read.

Ed's First Blow

The IMF has issued a report praising the coalition government's economic strategy to reduce the deficit, calling it "strong and credible" and "essential to ensure debt sustainability".

“The plan greatly reduces the risk of a costly loss of confidence in public finances and supports a balanced recovery. Fiscal tightening will dampen short-term growth but not stop it as other sectors of the economy emerge as drivers of recovery, supported by continued monetary stimulus.”

This really couldn't have come at a worse time for new Labour leader, Ed "better than my brother" Miliband. Deficit denial may have been a position that got him the backing of the Unions and therefore the leadership, but it's looking increasingly delusional and he must now be able to see that it's an untenable position to maintain any longer.

Look out for a humiliating climb down over the next few weeks/months. If he gifts the Shadow Chancellorship to his brother he can at least make it look like a concession to his defeated sibling, in the name of party unity. But it's by no means certain brother David will accept the offer.

Surely now, Ed Balls has no chance of replacing poor old Alistair Darling. Darling's plans were woefully inadequate, leaving the government spending at a level that continued to add to the already enormous mountain of debt wracked up by Labour, even after a whole parliament. But the Eds (Balls & Miliband) seem to think even Darling was too prudent. Why not draw down a few more £100 millions on the old over-draught, if it means a few extra votes?

But Ed is not stupid. He did what he had to do to beat his brother and get elected, now he has to face up to the real world. It's difficult to see how he can change course without looking chameleonesque - saying one the to Labour and the Unions and another the the general public, but not changing his mind is worse in the long run. Unless, that is, the global downturn we've seen evidence of recently in the US and Ireland, leads the UK into another recession (no matter how short). Even though such an event would have happened regardless of government, Labour will portray it as the result of cutting public expenditure. Because for them public spending = the economy.

The IMF believe a double dip recession is very unlikely but point out that the global economy can be unpredictable.

Unless he changes course on the economy, Ed Miliband must hope the unlikely double dip comes to pass and that the British electorate will be gullible enough to believe his diagnosis of the cause. Otherwise, at the next election, he'll continue to look as irrelevant as he and his party does today.

Our House ConDem'ed - Best Thing For It

I read that Ed Balls is now suggesting that George Osborne is "removing the foundations of the house, just as the hurricane is about to hit".

A house, it should be noted, that the previous tenants conspired to leave with a criminally neglected roof, despite ample clement weather during which repairs could have been made.

To stretch the analogy much further than should be legal under the Prevention of Cruelty to Blog Post Readers Act, the house has had to be condemned and now needs to be completely rebuilt.

The foundations seem to me to be the best place to start.

Benefits With The Apple iPhone

I was amused and then slightly outraged (in a Daily Mail kind of a way) when I happened upon this app for the iPhone in the Apple iStore...

It strikes me as somewhat incongruous with the reality of people who are so hard up they need to claim benefits that they would own an iPhone (or iPad and or iTouch) in the first place. These things aren't cheap, usually come with a hefty monthly contract and are hardly staple to surviving on a pittance.

Of course, it is a sign of the times that benefits are not now limited to the hard up. In fact, the comments left by users of this app point to how helpful the app is for assisting in claiming child benefit and tax credit, benefits that are not restricted to the poor.

The (not so) slow creep of benefit dependency, so central to the political strategy of the last government, has led to many in the middle class being eligible for tax credits, universal benefits, child trust funds etc as well as generously funded government programmes like Sure Start. The less well off were supported and encouraged to stay as long as possible on benefits. Can't work or won't work? It matters not. As long as you vote Labour - cause them nasty Tories will take all this away, you know.

So, the ploy was to get people (the poor and well off alike) so accustomed to their "entitlements" that they would flock to the ballot boxes to return Labour time and time again - at least for fear of losing their money for nothing (sadly, there were no chicks for free but it did lead to Dire Straits).

Their strategy didn't work, obviously.

Instead, people saw through the bribery to the serious damage being done to the whole nation's future prospects by the enormous borrowing that was required to support this kind of spending. The challenge the Coalition government has is to start to dismantle this web of benefits for the better off, work shy and down right fraudulent, while supporting the genuinely vulnerable and keeping people focused on the necessity of the mission to save the country from Labour's deficit. It'll be no mean feat as, in politics, a week is a long time, so you can't expect the electorate to remember why they rejected the old lot for this lot when their incomes are being directly affected. But perhaps I'm being patronising. Voters haven't shown any sign of rejecting the governments bitter pill so far. I hope that will continue to be the case when the side effects start to be felt.

Perhaps what we need is an iPhone app that records how much you, as an individual, saved the tax payer by, say supporting a local school or helping with a community project or, perhaps even, not spending that money on a new iPhone but on food for your family instead. But then of course you wouldn't have an iPhone to run the app on. Gosh, this deficit reduction thing isn't as simple as it looks, is it?

Darling Loses Balls

I see the Labour leadership candidates have started to turn on each other already. It should be no surprise that it's the pugnacious Ed Balls that breaks ranks and starts blaming others for Labour's disastrous defeat at the election. How typical of anyone who models themselves on Gordon Brown to look for others to blame. Now the toady faced dissembler is calling for his party to be more robust in its opposition to the attempts by the Government to tackle Labour's debt mountain.

In his latest blog post, Ed "mini-Brown" Balls states...

Over 13 years, Labour made many big decisions on tax and spending: how to reduce the national debt in 1997, how to fund extra NHS investment in 2001, and last year how to reduce the deficit once the recovery was secured.

Let's quickly challenge the misleading suggestion that Labour made any positive contribution to how Britain reduced the national debt from 1997. They didn't, they stuck to Conservative taxation and spending plans for most of their first parliament in power and rode the wave of economic recovery that started when we regained control of our own interest rates following our exit from the disastrous Exchange Rate Mechanism and that was maintained subsequently by Ken Clarke's chancellorship. It was after that period of sensible economic management, that Labour started putting its own stamp on taxation and spending, by increasing both, a lot. But spending even more than tax, hence our current predicament.

Following this fallacious claim, his blog post goes on to make the point that at no point in Labour's 13 years did they raise VAT and that they should oppose any such move by the Government as well as opposing changes to the Child Trust Fund and tax credits to reduce their availability to better off people (or lower and middle income earners as he, again, lies about the policy). It is this approach to opposition that is the becoming a trend amongst the shadow cabinet. They have chosen to oppose the measures necessary to address the debt crisis they got this country into, but at the same time, refuse to spell out how they would clear up the mess.

Alistair Darling, one of the idiots that wouldn't listen to him and therefore lost Labour the election, according to Balls, recently claimed that Cameron would owe him a "very big apology" if the state of the public finances wasn't as bad as had been predicted. This is another line they are deploying. They point to recent figures that show that the Government didn't borrow as much as expected last year and that growth was slightly higher than expected. Let's be clear exactly what the proportions are of these "improvements" - £7bn less borrowing last year. Well, whoopy shit! That still left us having to borrow £156bn in 2009. With the IFS predicting that, of all the advanced and emerging economies, only Ireland and Latvia will borrow more than the UK, you get some idea of the mess we're in. They also predict, that once the new, independent Office for Budget Responsibility reports, we could be looking at a more honest total accumulated national indebtedness of £1.8 Trillion, taking into account PFI and pension liabilities.That's one hell of an overdraft!

Until we eliminate our yearly national overspend we will only be adding to that astronomical overdraft figure. This year's £6bn spending reduction seems pathetically small, put into context. And, of course, the larger that total amount of debt gets, the more debt interest we have to pay and therefore even less money is available for public services.

So, the next time you hear a Labour spokesman asking for an apology because one economic figure is slightly less eye wateringly disastrous than expected, you know what the answer should be from the Government on behalf of the tax payer, it starts with an "F" and ends in "uck off". And the next time you hear a Labour shadow minister or supporter criticising a specific spending cut proposal, don't take them seriously unless they explain how they would make the same saving in a different area of public spending.

UPDATE: following OBR Report

The Office for Budget Responsibility has reported and, as expected, Alistair Darling's growth forecasts are found wanting. The OBR say 2011 will see 2.6% against Darling's 3.25%.

The OBR have decided to avoid using a conservative (note the small 'c'!) central growth forecast to base their figures on. This wa the norm previously and is partly responsible for a slight drop in the overall borrowing prediction. But the most worrying aspect of today's report is the estimated growth of the structural deficit.

Read Stephanie Flanders' blog for a more knowledgable view on the figures! I love some of the delusional comment left by Labour supporters - 'This is now the coalition's mess, they cannot blame the "previous government" anymore' (Disnaymatter at 11:12am). They are so desparate for their party to be exonerated from responsibility for the debt crisis they will say and believe anything.

Here's a telling graph (lifted from the Telegraph):

Labour's Forever Blowing Bubbles

Following The Independent's front page that so effectively illustrated the scale of the task facing the new Government in tackling Labour's debt mountain, The Guardian has now come up with an interesting analysis of where our hard earned tax money gets spent.

After years of profligate Labour spending the Coalition has to decide where the axe must fall. The initial £6bn of savings this year is a very small step on the journey to balance the nations books.

Which bubbles would you burst..?

Click on the image to enlarge or follow this link for the online article.

We now have to put up with Labourites, like Alastair Campbell and Piers Morgan on BBC Question Time last night, acting as if there wasn't a problem and the evil Tory/LibDems are just hell bent on making cuts for cuts sake. Some say they are "debt deniers" in the same deluded mould as the holocaust kind. But they aren't. They know full well their party would have been forced to make similar cuts to save the economy from drowning in debt repayments and Greece style crisis (only they'd have done it later for party political expediency).

They are not deniers, they are liars. I hope voters for many years to come remember what Labour did to our economy and how they attempted to cover it up with dissembling spin, continuing even today to be utterly disingenuous in their response to the governments attempts to fix their mess.

Ponderous Borrowing Revelations

I am not looking forward to tomorrow's Pre-Budget Report (PBR). I've read several Labour types describe it as a "political" event. They are quite open about it, even excited at the prospect, as can be seen from these tweets from @BevaniteEllie (Labour activist and henchperson of the party's Twitter Tsar Kerry McCarthy)

• BevaniteEllie: RT @Jon2aylor: @BevaniteEllie I'm certainly excited, could be a massive week...PBR could reinvigorate the core.GB be bold I say #gameOn
  
  
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• BevaniteEllie: "Labour MPs are expecting the PBR to me the most political for years"...is anyone else excited for the PBR? Is it worrying that I am?
  
  
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This sums Labour up for me. They are motivated by the political fight, the petty point scoring but mostly, what's best for their party rather than the country.

So, we can look forward to a large dollop of bank bashing and promises to address the soaring budget deficit while not reducing the numbers of nurses, doctors, police, firemen, teachers... you know... people that people like. While on the other hand they will crush greedy bankers, pen pushing bureaucrats, managers and consultants - but not the medical kind of course.

Sounds great. But we all know these are politically motivated and dangerous lies. Bankers will find their way around the new bonus tax that will, no doubt, be announced tomorrow and the ones that don't will leave the country and we'll lose their (very considerable) tax contributions altogether, not to mention their talents to foreign, competitor companies. As for finding savings by getting rid of the other less popular types, Labour was responsible for the build up of their numbers to start off with and will do nothing significant to reduce them now. Well, not those employed in the public sector anyway. Gordon Brown didn't build up their numbers and that of millions of other public sector workers for nothing - he expects them to vote for him. I'm sure they have more sense, but they may well, rightfully, fear an incoming, reforming Tory government and that is what Gordon wants. 

We can also look forward to the "thick red lines" being drawn that will be designed to trap the Conservatives into unpopular counter policy positions. But people will see through these silly political games and be reminded of how much they hate this government and how much they need change.

UPDATE: Of course, this being spin city Labour, the PBR is being heavily leaked. The FT reports possible cuts of 14% in all departments but Health, Education and Police (surprise, surprise!) Oh, how I remember Labour ripping into the Tories for suggesting 10% cuts just a few months ago. You'll remember that both Labour and the Tories had the same plans for cuts (based on the previous budget predictions) but Gordon Brown insisted on lying about Labour's plans in order to differentiate Labour from their opponents, much to Alastair Darling's frustration at the time.

I tried to get a straight answer out of a few Labour MPs (including Kerry McCarthy) on Twitter at the time but the question was always avoided in favour of attacking the "evil Tories". Not surprising considering they knew what dodgy ground they were on. Now their cuts are deeper than planned (but still not nearly enough to placate the markets) I wonder if those MPs wished they'd embraced the Tory position at the time? At least they would seem more consistent now. In fact, we'll be told the Tories will "threaten the recovery" by cutting deeper and quicker. Well, at least that's a real policy argument we can have (and one Labour will lose). It's taken the best part of a year for Labour to get around to engaging in the budget deficit debate... and they say the Tories are policy light!

Another point to note is that their doesn't seem to be a commitment to protect defence spending. Yet another blow to the military covenant.