UK back in recession

[da-robster]

http://www.bbc.co.uk/news/business-17836624

But just think how much worse it would be without George Osbourne as our beloved chancellor.

[Wembley67]

Good show, time to get the old share portfolio updated.

[hibsbollah]

Growth please Gideon. You can't keep blaming the last Government.

[steakbake]

Growth? The UK doesn't do anything - it's a service economy based on consumerism. I mean we're so reliant on people buying s**t they can't afford, that they're looking forward to the Euro Championships and the Olympics as great spending events which will put money in the shops and give us the illusion of being solvent. Mental mental mental.

[hibsbollah]

Growth? The UK doesn't do anything - it's a service economy based on consumerism. I mean we're so reliant on people buying s**t they can't afford, that they're looking forward to the Euro Championships and the Olympics as great spending events which will put money in the shops and give us the illusion of being solvent. Mental mental mental.

Thats the preconception but its a bit exaggerated. Manufacturing is 12% of the UKs output, not a massive proportion but still valuable. Most of.it is highvalue manufacturing as well, the kinds of activities that the Koreans and the Chinese havent monopolised because of their low production costs. Manufactured goods form the bulk of our exports (83%) and have a greater importance in deprived parts of the UK (25%+ in northeast england for example), and exporting has a positive impact on the countrys foreign exchange. Just some of the reasons why stimulating our manufacturing sector through a proper apprenticeship scheme, innovation and training would give us the balanced growth that the economy needs.

But our politicians dont appear to have the requisite imagination.

[Kato]

a proper apprenticeship scheme, innovation and training would give us the balanced growth that the economy needs.

But our politicians dont appear to have the requisite imagination.

Too Un-Thatcherite for the current Wallahs.

The thought that a Govt should "interfere" in our economy in the way you describe above would have them choke on their morning muffins.

It's not for the the lack of imagination, it's their appetite for idealism.

[RyeSloan]

Thats the preconception but its a bit exaggerated. Manufacturing is 12% of the UKs output, not a massive proportion but still valuable. Most of.it is highvalue manufacturing as well, the kinds of activities that the Koreans and the Chinese havent monopolised because of their low production costs. Manufactured goods form the bulk of our exports (83%) and have a greater importance in deprived parts of the UK (25%+ in northeast england for example), and exporting has a positive impact on the countrys foreign exchange. Just some of the reasons why stimulating our manufacturing sector through a proper apprenticeship scheme, innovation and training would give us the balanced growth that the economy needs.

But our politicians dont appear to have the requisite imagination.

I agree with your comment re preconceptions and exaggerations however your number would seem a bit off according tohere (http://www.tradingeconomics.com/united-kingdom/exports) where the evidence would sugges that services provide almost 40% of exports and a significant trade surplus....so if you want to look at and support an area where we currently export more than we import then Britains ability to trade services with the rest of the world would possibly be a better place to look.

I agree however that a balanced approach is required and high end 'manufacturing' should certainly be in the mix. Manufacturing is really a bit of misnomer now as it conjures up images of huge factories packed with people building things when the current day reality is somewhat differerent and changing rapidly. The Economist states: "The Nissan Sunderland plant for example where in 1999 it built 271,157 cars with 4,594 people. Last year it made 480,485 vehicles—more than any other car factory in Britain, ever—with just 5,462 people"

Those number show that manufacturing is not a panacea to job creation and certainly not for poor deprived areas with low education success as there is cleary a very strong trend for modern manufactruing to need less people to produce the same amount. These manufactures require a value chain in terms of marketing, design, R&D etc that can and does provide significant numbers of value added jobs but jobs that need a highly skilled and educated workforce, sadly not a strong point of many areas of the UK.

[HUTCHYHIBBY]

Too Un-Thatcherite for the current Wallahs.

The thought that a Govt should "interfere" in our economy in the way you describe above would have them choke on their morning muffins.

It's not for the the lack of imagination, it's their appetite for idealism.

Morning pasties shirley?

[Kato]

Morning pasties shirley?


That was a pack of lies.

I would imagine they are well into their muffins (buttered).

Maybe a bit cold porridge, just like matron used to make, or the odd kipper here and there.

[yeezus.]

Not surprised at all, let's see if new Labour will capitalise on this and come up with an alternative... not that I'll ever vote for them again

[RyeSloan]

Not surprised at all, let's see if new Labour will capitalise on this and come up with an alternative... not that I'll ever vote for them again


Doubt it...beyond repeating and repeating "too far too fast" of course.

[yeezus.]

Doubt it...beyond repeating and repeating "too far too fast" of course.

Yeah that line is getting as repetitive as the Tories "5 more years of Gordon Brown or change with the Conservatives" one was in the 2010 English election.

Going to have to vote SSP on Thursday

[Beefster]

Yeah that line is getting as repetitive as the Tories "5 more years of Gordon Brown or change with the Conservatives" one was in the 2010 English election.

Going to have to vote SSP on Thursday

What body do the votes in an 'English election' count towards?

[One Day Soon]

Doubt it...beyond repeating and repeating "too far too fast" of course.

Well its one saving grace is that it is patently bl00dy true.

[IWasThere2016]

Doubt it...beyond repeating and repeating "too far too fast" of course.


Well its one saving grace is that it is patently bl00dy true.

Pace would - IMHO - be the only alternative, and rather than QE why not put the £££'s directly into the hands of the consumer via tax cuts. The banks are not getting the cash out into the economy to make a difference..

[RyeSloan]

Well its one saving grace is that it is patently bl00dy true.

You think? It's now unlikely that budget will be balanced before end of the this parliament so that will be roughly 10 years after the crisis first reared it's ugly head the UK will still be adding to it's borrowing pile.

Considering the above what is the correct timeline?

[bighairyfaeleith]

You think? It's now unlikely that budget will be balanced before end of the this parliament so that will be roughly 10 years after the crisis first reared it's ugly head the UK will still be adding to it's borrowing pile.

Considering the above what is the correct timeline?

It's actually possible that by cutting a bit slower tax revenues may not have decreased so much and the deficit would have cut quicker. Your right 10 years is far too long, but lets not pretend thats the only issue here, the deficit and a successful economy are not the same thing, they are linked but not the same despite what davey tells us.

[RyeSloan]

It's actually possible that by cutting a bit slower tax revenues may not have decreased so much and the deficit would have cut quicker. Your right 10 years is far too long, but lets not pretend thats the only issue here, the deficit and a successful economy are not the same thing, they are linked but not the same despite what davey tells us.


Of course anything is possible (Hibs/SC/110)!

The thing is though spending has continued to increase:

2009 = £621bn
2010 = £660bn (+6%)
2011 = £684bn (+3.5%)
2012 = £704bn (+3%) (Forecast)

So for "too far, too fast" what is really being said is "too little (borrowing), too slowly"

The idea that we can get out of a debt crisis by piling on more debt even faster seems somewhat flawed to me.


You are right in one respect though and that size of deficit is not always directly correlated to the immediate direction of the economy however I would suggest that the government simply doesn’t have enough left in the tank to ‘stimulate’ the UK economy to a big enough degree to make any significant difference.

Three things that could make a significant difference:

Resolution to Europe’s sovereign debt woes – Not likely soon and largely outwith UK control

Substantial transformation of UK competitiveness especially in our trading with non EU countries - Not an easy trick to pull off in any relevant timeframe

A concerted effort to stop the runaway train that is government tax and spend policies and to leave more money in the economy to be used in a more efficient and effective manner – No sign of any of our politician’s having the baws big enough to address this in any serious way any time soon.


So we are stuck somewhere in no mans land, unable to stimulate to any serious degree and unable to change quickly enough to offset our own and our main trading partners problems.....and probably will be for a few years yet!

[One Day Soon]

It's actually possible that by cutting a bit slower tax revenues may not have decreased so much and the deficit would have cut quicker. Your right 10 years is far too long, but lets not pretend thats the only issue here, the deficit and a successful economy are not the same thing, they are linked but not the same despite what davey tells us.

Becoming a habit this, I agree with you.

[yeezus.]

What body do the votes in an 'English election' count towards?

An English government ... thought that bit was obvious. False alarm anyway, the SSP aren't putting up a candidate in Seaton so I'll probably go 1. SNP 2. Green

[One Day Soon]

You think? It's now unlikely that budget will be balanced before end of the this parliament so that will be roughly 10 years after the crisis first reared it's ugly head the UK will still be adding to it's borrowing pile.

Considering the above what is the correct timeline?

They should have explicitly committed at the start to tackling the budget deficit over a two or even three parliament term. It would have made more sense in terms of credibility, in terms of not stifling growth and in terms of delivering achievable change in public spending and service provision. The reason for not doing so was the clear determination - now destroyed - of taking a 'see we fixed the economy' line back to the electorate at the next election. Pure politics and entirely framed in the government's own electoral interest rather than that of the economy.

There are at least two flaws in the present approach. Thie first is that the banks are still far more concerned with their own bottom lines than they are with the point of being a bank - lending. So partly the issue here is how we get money flowing through the economy. But that of course depends on confidence above all else. People won't borrow and people won't lend without confidence.

Our second issue is that the recession and the failure to see signs of recovery is what is squatting massively over the chance of confidence returning. People are paying off debt rather than spending. And fewer people are spending at all as unemployment rises. Companies are sitting on large cash stockpiles too.

So Osbourne has committed us to a fiscal position which claims to be about fixing our debt, but which actually fails to fix our debt and the price being paid for this failed policy is that we are moving back into recession. He has cut too far and too fast. And on top of that we now know that he has done so to no discernible benefit.

The ballsy position would have been a substantial switch from revenue to capital infrastructure spending. That would have given a degree of reign-in on recurring public expenditure, provided jobs and investment through the capital projects, stimulated demand, delivered long term economic benefit through improved infrastructure, leveraged private funding support, augmented the asset base and given a clear and confident economic lead to domestic and foreign investors.

Of course Gideon's policy will ultimately work. We will grow out of recession very, very slowly, we will reduce debt very, very slowly and when we finally get to recovery business will start to prosper. So who will lose out? All those people who lose their jobs on the long, long road in between. We have been here before remember - Norman Lamont thought it 'a price worth paying'.

[RyeSloan]

They should have explicitly committed at the start to tackling the budget deficit over a two or even three parliament term. It would have made more sense in terms of credibility, in terms of not stifling growth and in terms of delivering achievable change in public spending and service provision. The reason for not doing so was the clear determination - now destroyed - of taking a 'see we fixed the economy' line back to the electorate at the next election. Pure politics and entirely framed in the government's own electoral interest rather than that of the economy.

So you are suggesting that the too far too fast mantra is really saying don't take 5 years to balance the budget take 15! Really, seriously 15 years...and just how much extra debt, interest and higher borrowing costs would that approach have taken?

Considering the very nervous soverign debt market do you think any Chancellor could have laid that out as a plan and have been taken seriously?



There are at least two flaws in the present approach. Thie first is that the banks are still far more concerned with their own bottom lines than they are with the point of being a bank - lending. So partly the issue here is how we get money flowing through the economy. But that of course depends on confidence above all else. People won't borrow and people won't lend without confidence.

The banks are still trying to repair their balance sheets after over lending, it's not through choice but through requirement. Basle III is a perfect example of the pressures the banks are under to raise capital buffers. Otherwise you will continue to have an under capitalised bank system in constant risk of collapse which would of course create another spike in the credit cruch.

I agree though that the symptom of the banks need to repair their balance sheets is reduced lending which of course can and does restrict growth influencing economic activities...Can't see how Osbourne can be blamed for that 'approach' however as what powers or policies does he have to mitigate that in any substantial way?



Our second issue is that the recession and the failure to see signs of recovery is what is squatting massively over the chance of confidence returning. People are paying off debt rather than spending. And fewer people are spending at all as unemployment rises. Companies are sitting on large cash stockpiles too.

It's natural deleveraging is it not?..a nasty symptom of the after effect of credit bubbles. Again it's rather unavoidable as the bubble burst due to excessive credit, that credit then has to be paid back (or defaulted shifting the issue as we know to well onto banks and then governments). It's not pretty nor nice but ultimately it is the nasty tasting medicine that is required.


So Osbourne has committed us to a fiscal position which claims to be about fixing our debt, but which actually fails to fix our debt and the price being paid for this failed policy is that we are moving back into recession. He has cut too far and too fast. And on top of that we now know that he has done so to no discernible benefit.

So the alternative is not to even attempt to fix the debt (or to kick the can so far down the road you can't see it), to borrow more and more in the hope of what?


The ballsy position would have been a substantial switch from revenue to capital infrastructure spending. That would have given a degree of reign-in on recurring public expenditure, provided jobs and investment through the capital projects, stimulated demand, delivered long term economic benefit through improved infrastructure, leveraged private funding support, augmented the asset base and given a clear and confident economic lead to domestic and foreign investors.

You mean something like this?

http://www.hm-treasury.gov.uk/national_infrastructure_plan2011.htm

Fact is though that all infrastructure spending is still spending...it's very slow in terms of repaying the initial costs in terms of benefits to the economy, very difficult to assess what will be beneficial and what would be wasted not to mention just slow full stop when you consider planning issues etc.

I think everyone agrees that there is a lot of scope to leverage private investment (PFI anyone? :greengrin) but saying it and doing it are two different things esp. in th eUK which seems to have an inbuilt dislike of public/private partnerships and of course a rather patchy record in areas where this has been tried already (Governments tend to interfere too much, private companies get stick for profiteering from tax payers). Not denying that caital spending is not required nor that it can priovide economic stimulus I just don't see the country being in any position to do it on a scale big enough or quick enough that would have any immediate impact.

There is also the thought that switching from revenue to capital spending would mean a cut in revenue spending would it not? What sums of money would be required and who loses out?

Finally Capital spending is normally considered to provide long term benefit, what level of spending would be reuqired for it to have a meaningful impact on economic growth in the short term?


Of course Gideon's policy will ultimately work. We will grow out of recession very, very slowly, we will reduce debt very, very slowly and when we finally get to recovery business will start to prosper. So who will lose out? All those people who lose their jobs on the long, long road in between. We have been here before remember - Norman Lamont thought it 'a price worth paying'.

Yet your main counter point is to build more then we will be fine....sorry but it’s not a very compelling argument and I don’t think it’s one that anyone seriously believes would be a silver bullet even if it could be pulled off.

As ever easy to shout “too far too fast” from the sidelines (despite significant percentage increases in government spending in the last few years) yet despite your well put and thoughtful response I still don’t see any real or credible alternatives being put forward…maybe the answer is that there really isn’t and another half decade of low to no growth, continued deleveraging and balance sheet repair by the banks is simply not avoidable and is the price we all have to pay for the “good years”

[Beefster]

An English government ... thought that bit was obvious.

There's an English Government that had an election in 2010? I must really pay more attention to the news.

[Eyrie]

An English government ... thought that bit was obvious.

It was very nice of them to let us vote for their government, and even nicer that they let us have ministers in that government.

[yeezus.]

It was very nice of them to let us vote for their government, and even nicer that they let us have ministers in that government.

... We didn't vote for their government ... we overwhelmingly rejected their government. Hopefully the SNP's momentum continues in the council elections.

[Beefster]

... We didn't vote for their government ... we overwhelmingly rejected their government. Hopefully the SNP's momentum continues in the council elections.

East Lothian rejected the SNP government for the Scottish Parliament. I demand East Lothian-ian independence.

[Eyrie]

Given the options on the ballot paper yesterday, or in any election to a UK or Scottish parliament, I'm thinking that I should declare independence from Edinburgh, Scotland, the UK and the EU in one fell swoop.

I'll retain the pound, leave macro-economic and defence policies in the hands of the UK government and keep the Queen as head of state to avoid upsetting myself and get the separation vote passed. Only problems will be needing a passport to leave my house and supporting a foreign football team, but at least I won't have to worry about the trams.

[easty]

Given the options on the ballot paper yesterday, or in any election to a UK or Scottish parliament, I'm thinking that I should declare independence from Edinburgh, Scotland, the UK and the EU in one fell swoop.

I'll retain the pound, leave macro-economic and defence policies in the hands of the UK government and keep the Queen as head of state to avoid upsetting myself and get the separation vote passed. Only problems will be needing a passport to leave my house and supporting a foreign football team, but at least I won't have to worry about the trams.

How would I go about applying for citizenship?

[One Day Soon]

... We didn't vote for their government ... we overwhelmingly rejected their government. Hopefully the SNP's momentum continues in the council elections.

Fail.

Independence for Aberdeenshire maybe...

[yeezus.]

Fail.

Independence for Aberdeenshire maybe...

Oh no, next you'll be using words like "epic"

Independence for Scotland - a socialist Republic

[Beefster]

Oh no, next you'll be using words like "epic"

Independence for Scotland - a socialist Republic

Mon the SSP or Solidarity.

[marinello59]

... We didn't vote for their government ... we overwhelmingly rejected their government. Hopefully the SNP's momentum continues in the council elections.

Their Goverment? Like it or not it's our Goverment for the time being.

[Beefster]

Their Goverment? Like it or not it's our Goverment for the time being.

Andrew's not big on debate. He just likes to throw out the odd snippet of ill-informed nationalist pish that doesn't actually stand up to scrutiny.

[Eyrie]

Oh no, next you'll be using words like "epic"

Independence for Scotland - a socialist Republic

Interesting - so in your brave new world the Tories, LibDems, Labour and SNP will all be outlawed to ensure the continued triumph of true socialism. Instead the Scottish Socialist Party will become the "leading force of society and of the state" as in Cuba.

Can't wait for my re-education camp :D

[One Day Soon]

Andrew's not big on debate. He just likes to throw out the odd snippet of ill-informed nationalist pish that doesn't actually stand up to scrutiny.


Pithy and accurate as ever beefster. I did enjoy the Dear Leader choking on it all yesterday. Sometimes you can't spin or smug reality away.

[One Day Soon]

Oh no, next you'll be using words like "epic"

Independence for Scotland - a socialist Republic


Right on Wolfie. I do like a sitcom. How's Tooting these days?