‘This said, I’ve nothing against telling lies for political purposes.’

Quite

‘But I’m not sure a false apology would promote Labour objectives.  In the debased world we live in, “fiscal responsibility” does not mean higher taxes on the rich or a clampdown on the corporate welfare state created by slack procurement policies and addle-brained public-private partnerships.

‘Instead, it means cuts in jobs and benefits.’

Like the cuts in jobs Labour would have done now, if they were still in power, and which they had already begun, and the cuts in benefits they started when they introduced ESA and put eligibility in the hands of ATOS.

And thats before we get to tuition fees, PFI and money spent increasing surveillance to Orwellian levels and killing people overseas in the name of fighting terror though ‘fiscal irresponsibility’ is the least of their sins in these cases.

I never understand this line of argument. It is certainly possible for a government to embark on a spending spree unfunded by taxes, and in such a world private saving would still be the counterpart of public borrowing and you could still produce that graph. So I can’t see how that fact makes any difference to anything.

If you want causation to run from decisions by corporations, to government borrowing in response, ought we not have experienced a weak economy being propped up by fiscal expansion pre-2007? That’s not how it looked at the time. Gordon did decide to boost spending on health and education, and seeing we didn’t know what was about to hit us, that looked like a reasonable decision at the time.

But your right, I think, Labour has little to apologise for when it comes to its fiscal track record. see Martin Wolf The Economic Legacy of Mr Brown.

Shatterface

money spent increasing surveillance to Orwellian levels

If by “surveillance” you mean the spectacularly popular (on the ground) CCTV roll out then I guess that’s just another example of how vastly out of touch you are.

By this logic ( ahem) any amount of unfunded spending could be justified at any time

Utter bollocks to be polite about it

BenM,

If by “surveillance” you mean the spectacularly popular (on the ground) CCTV roll out then I guess that’s just another example of how vastly out of touch you are.

Millions of flies can’t be wrong.

Besides, my guess is that Shatterface was also referring to things like IMP, eBorders, the National Identity Register etc.

“This said, I’ve nothing against telling lies for political purposes.”

Why not?

To claim that if government borrowing goes down, then corporate finances must rise and be evidence that companies are not investing enough is to perpetuate the myth that wealth does not increase and is fixed.

It is quite possible for investors to lend more money to governments AND increase their reserves at the same time if wealth overall is rising. Which it is.

Companies invest when they see a reason to do so – no reason, no investment, and reserves rise until there is a good reason. That is prudent long term thinking.

Governments sadly tend to borrow to win the upcoming election, and rarely apply any sort of long term thinking to whether an increase of £1 billion in the health system is affordable in terms of decreasing sickness and increasing work productivity.

If you are spending today’s taxes on the NHS then you can do whatever you like with the money as it was todays voters who approved that decision – but if you are borrowing against future tax income, then you need to show that the expenditure will generate the necessary increase to repay the debt (plus interest).

Most large capital expenditures on railways and roads have to pass that sort of test before being funded, yet we do not oddly seek to apply the same test to other areas of government spending.

I wonder why?

‘If by “surveillance” you mean the spectacularly popular (on the ground) CCTV roll out then I guess that’s just another example of how vastly out of touch you are.’

Popular among the same prurient, privacy-hating people who thought tapping the phones of murder victims was a great idea. People who, oddly, think anything you do on the street is the government’s business but what you do on the motorway is between you and your speedometer.

‘Besides, my guess is that Shatterface was also referring to things like IMP, eBorders, the National Identity Register etc.’

We aren’t hearing much about the spectacularly popular ID Register these days. You’d think people would be taking to the streets demanding the Register as the only way to prevent terrorists bringing the benefit system to its knees.

I’d prefer the money to have been invested privately rather than p*ssed up the wall by govt on diversity officers, new office pods & the utterly ridiculous Future Jobs Fund :).

Have to disagree, all though ti was good we spet what we did even upto 2009-201, we new that we were out of control and that we were heading for Bust, It’s nnly made the inevitable cuts now ,more savage than they were, If laobur had apologised for it’s epnding in the atlee gov’t or the Callgahan oes we might not have been out of pwer for so long during the 50’s and the 80’s

“And that’s before we get to PFI”

Then that will be all PFI contracts the coalition has signed in less than a year which exceed by a galactic mile the entire sum of PFI contracts during Brown’s premiership.

Companies invest when they see a reason to do so – no reason, no investment, and reserves rise until there is a good reason. That is prudent long term thinking.

Not necessarily.

First, companies are investing lower as a % of GDP than before
http://www.investorschronicle.co.uk/assets/CMSlibrary/Images/Graphs%20and%20Tables/2010/12/03%20December%20issue/businv.JPG

Secondly, it is a problem for the UK is private companies aren’t investing and hiring – because it means a depressed economy.

In this case, UK govt spending didn’t “crowd out” private investment (which is the case against it, but was trying to make up the shortfall.

Thirdly – business investment may not be entirely guided by investment opportunities either. They may prefer to keep the money in off-shore tax havens than invest them or take the money abroad, or return it to shareholders for short-term reward over long-term thinking.

All good points, Sunny. Although it’s worth considering the slack in demand that’s deterring investment, too. If there’s no demand for products, companies aren’t going to want to re-invest.

Perhaps this problem is made worse by a growing rich/poor divide in the west?

Chris, fantastic article. Well done.

@9 – Yes, how dare the government try and avoid expensive lawsuits, provide deacent working conditions and generate jobs.

Instead of money NOT being invested, but sat on.

@11. Richard: “Then that will be all PFI contracts the coalition has signed in less than a year which exceed by a galactic mile the entire sum of PFI contracts during Brown’s premiership.”

In the 1980s, local councils indulged in “creative accountancy” that allowed them to pursue projects with capital/on-going costs that were formally prohibited by standard accounting practice by mortgaging or exchanging assets. It wasn’t a sustainable process — councils quickly run out of unexploited assets — but it allowed councils to muddle through, making fewer cuts.

PFI formalised the “creative accountancy” process. The team planning a new hospital know that there is an immediate capital cost and that there will be on-going cost for the life of the service. But if they roll the two into a PFI, they can borrow the money as capital and worry about renewal 25 years later. And for obvious reasons — the different interest rates that government and builders pay and loss of control of the service — PFI is something to be avoided.

New Labour did not need to use PFI. The current coalition may feel the need, but I cannot rationalise it.

The sectoral balances is basic arithmetic, the only valid argument is which way is causality running. Moreover, no matter what government spends money on whether it is diversity officers or a new road the money ends up on private sector balance sheets. Around 25% leaks abroad in overseas demand.

The problem is people fall into a trap of the ‘fallacy of composition’ So, although, an individual household or firm can choose to do as IanVisits says and,

” Companies invest when they see a reason to do so – no reason, no investment, and reserves rise until there is a good reason. That is prudent long term thinking. ”

The fallacy of composition is that every firm can’t simultaneously increase their financial balance unless the government are running a deficit. For one part of the private sector ( households and firms) to increase their financial balance requires another part of the private sector to decrease their financial balance. Therefore, if private sector investment falls or is depressed all other parts of the private sector will be poorer and they can’t have their ‘ reserves rise ‘ on a net basis. The only way that simultaneously the private sector can net increase their financial balance- the government finances to be running a surplus ( what the UK Treasury call a negative deficit) is for our overseas external trade with the rest of the world to be in surplus. A UK current account deficit means either the government or private sector will be dissaving.

As Chris says the last Labour governments deficits were the flip side of the lack of private sector investment. That spending does not disappear into the ether, but became private sector savings. The problem is not that their deficits pre-crisis were outrageously large because they were not. The real issue was that they were relying on transitory revenues, especially from the City that disappeared when the financial crisis hit. Moreover, they did not spend deficits on things that were going to be of long-term benefit to the economy. Build a new hospital and that is good for the country’s capital stock. Give doctors a pay rise totally unrelated to any productivity gains is good for doctors, not so good for the rest of us.

Increased education spending should really be looked upon as investment. However, it is still too early to say if this increased spending on education was any good. Far too much of the last governments spending was like consumption spending. They should have concentrated more of their spending in getting the long term unemployed off benefits, spent on a public transport network fit for the 21st century and provided the funding to build more social housing. I would say that they were bad spenders rather than reckless spenders.

@16 – Yes, I think THAT is an entirely apt view, and they did waste sums on pet projects like ID cards.

Of course, THIS government…grah!

Labour most certainly does not need to apologise for fiscal irresponsibility. Nor do they need to win any elections any time soon.

@16. Richard W: “Increased education spending should really be looked upon as investment. However, it is still too early to say if this increased spending on education was any good.”

Alas it was clear at the time that educational investment was misplaced. New Labour had choice about education spending from early 1998 and initially they weighted new money on primary/infant education. The stats show that early investment in education pays the most dividends, but for a four year old we have to wait at least 16 years before s/he pays any meaningful tax. And teenagers aren’t as attractive as five year olds in publicity videos.

A 14 year old in 1998 probably missed out on educational investment in secondary schools. If s/he attended university, s/he may have seen a benefit in the second or third year. There are (at least) three arguments why New Labour should have invested in teenage education in 1998.

The accountancy argument is that teenagers will become tax payers pretty soon. If they are in education, they will start paying tax six or eight years after the investment. And if your investment is wise, they’ll be paying more tax because they will be earning more.

Or we could just acknowledge that educating teenagers is how we cope with teen disorder and energy. Interested teenagers expend their energy productively and self manage their disorder; uninterested teenagers are destructive. Formal education and youth services are cheap compared to the cost of crime and disorder.

Then there is the social contract. Four year olds were given a different deal to 14 year olds; government can not retro-invest in a 14 year old, but they could have given a fairer future deal to 14-18 year olds.

#8. Shatterface

“Popular among the same prurient, privacy-hating people who thought tapping the phones of murder victims was a great idea.”

Not at all. Home Office surveys show that people on the estates where these CCTV cameras were deployed were overwhelmingly in favour of them. Here’s the clue: they cut crime. Crime hits the poor far more than the “squeezed middle” or rich, because the poor have no insurance or savings. Cutting crime is thus a very popular thing in deprived areas. I do hope Labour remember this when they come to write their next manifesto and don’t listen to the naive, well off “civil liberties” loving Lib Dems.

@20. Richard Blogger: “Home Office surveys show that people on the estates where these CCTV cameras were deployed were overwhelmingly in favour of them. Here’s the clue: they cut crime.”

CCTV cameras certainly scare off some criminals. Perhaps they commit crimes elsewhere? And perhaps residents who perceived that CCTV cameras worked solved the problem; by being more confident, by going down to the shops, being present.

But the solution is not CCTV. The problem is CCTV. People have to be confident everywhere, in the alley that is not covered by a camera. I have a vague recollection that it was called policing.

Crime hits the poor far more than the “squeezed middle” or rich, because the poor have no insurance or savings. Cutting crime is thus a very popular thing in deprived areas. I do hope Labour remember this when they come to write their next manifesto and don’t listen to the naive, well off “civil liberties” loving Lib Dems.

Apologies: I failed to trim some of Richard Blogger’s quote. The last paragraph comprised his words, not mine.

“This said, I’ve nothing against telling lies for political purposes.”

You’ve come to the right place !

tee hee rich

When this is being re-tweeted with “< key line "I’ve nothing against telling lies for political purposes". Shocking", you know you've already lost the argument. I'm surprised the line hasn't been removed from the article.

Also, when it comes to do with anything economics-related, when Richard Murphy says this is "very, very good", the truth is almost always the opposite of what Richard Murphy says.

Telling lies for political purposes is fundamentaly illiberal and anti democratic. If you don’t trust the people with the truth how can you trust them with the vote?

I’m having trouble expressing just how angry that makes me. Fascistic Elitist drivel!

“This said, I’ve nothing against telling lies for political purposes.”

Hmmm… more reasons not to join the Labour Party.

CharlieMan: “New Labour did not need to use PFI. The current coalition may feel the need, but I cannot rationalise it.”

I’m pretty sure PFI is only popular because it gives well-connected profit-seeking interests – the “public service industry” – a cut in public investment. Those companies don’t fund all that lobbying (or employ former ministers and senior civil servants in lavishly paid part time roles) for nothing. Basically, if you want a policy to see the light of day these days, then you need to find a way to shoehorn increased profits for the “public service industry” into it.

The free marketeers think that if you privatise public services, bureaucracy would reduce and become more efficient, like in a corporation. Instead with PFI they’ve created an independent corporate bureaucracy single-mindedly oriented only toward bureaucracy growth and increased profits on bureaucracy, and willing to spend huge sums on lobbying politicians to increase demand for bureaucracy at the expense of other government activities. It’s excellently efficient in terms of shareholder value, I suppose…

Telling lies for political purposes is fundamentaly illiberal and anti democratic. If you don’t trust the people with the truth how can you trust them with the vote?

Way to miss the point. He is referring to Tories, I assume, and saying people are welcome to make it (though he’s not made a moral judgement on it).

anyway – enough of the faux outrage please. I don’t delete lines just because some people start getting heated up over it.

@27. jungle: “The free marketeers think that if you privatise public services, bureaucracy would reduce and become more efficient, like in a corporation.”

I believe in mixed provision of public services. I also believe in small services, small government, big people. I identify bureaucracy with size/control rather than provision.

So I am startled that this government continues to use PFI when all of the evidence suggests that it is a short term tool to be used in sticky situations. It’s like you were talking over the garden wall to your neighbour about your plants disappearing and the grass being trampled. Something terrible is happening but for some reason neither of you can see the purple elephant in the back yard.

Unconvincing. This looks more like correlation rather than causation.

And, in any event, running up the largest UK peacetime budget deficit was deeply imprudent. And claiming to have abolished boom and bust was as arrogant as it was incorrect.

@30 – Prior to the financial crisis, the debt was very moderate, and better than the position the Tories had left us in the last time they held power.

Moreover, the Tories called for even less banking regulations.

Are you arguing that we should have allowed the economy to smash?

Sunny-
I didn’t expect you to delete the line, but it does make me wonder how reliable all the “facts” are. The outrage is not “faux”. I’ve always opposed any kind of Jacobin elitism. Though I have had to “hide sensitive truths” from the membership whilst my Union was in negotiations. But there is a difference between silince and lies.

Whatever the specifics of the lie he’s talking about he’s made an in principle statement that it’s ok to Lie – the reason the working class abandoned New Labour.

He messed up big time on banking of which he crowed out his apology on TV banking was allowed to go forth and make debt becasue of leader who could not see factories making money, for god sake my own AM felt more people should be working in banking it was the growth area, well it’s not growing now is it.

Money money money, we did not make it from factories or producing what we needed we made it from bankers or wankers thinking debt was good lets buy up debt.

banking became the make all of this world and it went bust and Brown and his ilk did nothing.

Labour are to blame with all the other morons who believed this world can live on banking and the finacial sectors using money

All good points, although this seems a little unnecessary. Luke Bozier is always wrong and this ought to be obvious by now.

30 theophrastus

And, in any event, running up the largest UK peacetime budget deficit was deeply imprudent.

Someone who – clearly not knowing what they are talking about – mixes up deficit with debt.

The “deficit” would have been “run up” under any government. So severe was the recession.