Borrow and Spend Budget

[ajohn]

??? Double post

 

[ajohn]

After WW2 debt was nearly 250% of gdp, today, it's a little over 80% of gdp.
The amount of debt after WW2 was 21 billion, today it's 1.7 trillion.

GDP was calculated the traditional way that long ago*. Imports were lower and don't matter any more anyway. Also WW2 broke the UK and made the USA a lot richer. The war debt was also split off - Wilson announced that being paid off. One of the reasons for higher taxation at the time also the need for currency exchange controls. Removing those had a big effect on the UK as it allowed money to be moved to places where the returns were higher. Lower labour rates and etc.

To make numbers look as bad as possible similar numbers are always quoted were as debt per head of population tends to be of more concern to economists. Also mentioning 21 billion and 1.7 trillion doesn't account for inflation which has been pretty considerable even over periods shorter than that. China is currently getting bad press going on it's total debt but it's peanuts when viewed per head. Figures tend to get quoted to suite the "point" being made.

These are probably the best figures available but note they are gross and not net.
https://www.imf.org/external/datamapper/GGXWDG_NGDP@WEO/OEMDC/ADVEC/WEOWORLD

LOL when you hear that Russia has collapsed look at their figures. It is a fact that they were finding it difficult to continue to support their satellite states largely due to oil prices. The comunists are now definitely doing better than the west for very obvious reasons. Something Corbyn mentioned and now the Gov is leaning in the same direction but they still have ideas that will prevent us from effectively competing,

You might like to look up the UK's foreign currency reserves just to confuse the matter further.

* To be honest I am not totally sure when imports were dropped from growth calculations but am pretty sure it was some time well after WW2.

 

[SirGalahad]

That wasn't my link, I was just quoting from it.
So, I get what you're saying that the debt would accumulate, but, if gdp increases at a faster rate, doesn't the debt (as a percentage of gdp) shrink, isn't that what the govt hopes for.

After WW2 debt was nearly 250% of gdp, today, it's a little over 80% of gdp.
The amount of debt after WW2 was 21 billion, today it's 1.7 trillion.
It's a ponzi scheme.

https://neweconomics.opendemocracy.net/magic-money-tree-dont-let-politicians-tell-otherwise/

Debt is inflated away, that's the plan by most western Governments.

Your link only confirms why everyone who was using "Magic Money Tree" as a justification not to spend were wrong. Now that the Tories are doing just that the hypocrisy is evident.

"This narrative is incredibly powerful, as it chimes with peoples’ experience of managing a household budget. But in the context of a national government, it is almost entirely wrong."

I have repeated that peoples are wrong comparing the way they budget to the way Governments budget but they kept on regardless talking about we have no money. Now that their party is "spending money it doesnt have" they are oddly indifferent or silent.

This just goes to show it's triablism.

The DM frames it as Rishi investing £30bn in the Uk economy. If that was a labour chancellor it would be along the lines of "your taxes will rise by £30bn".

The actual economic arguments are lost in the sea of tribal support.

 

[fillyboy]

This just goes to show it's triablism.

The DM frames it as Rishi investing £30bn in the Uk economy. If that was a labour chancellor it would be along the lines of "your taxes will rise by £30bn".

The actual economic arguments are lost in the sea of tribal support.

Fair points, and yes, there is tribalism, but maybe not to the degree you suggest. Off the top of my head weren't labour proposing an extra 100 billion of spending, a quarter of that raised by increasing corporation tax to 26%, bearing in mind we cant keep big business in this country with a rate of 19% that would be insanity, I'd say exactly the same if it were the tories proposing it.

 

[ajohn]

The real problem with corporation tax is that few of the big boys actually pay what they should. The curious aspect of the Labour campaign is that a single period of power wouldn't get all of it done and they didn't really explain why it was needed or the methods used to pay for it. Nationalised utilities needn't run at a loss is another area not well explained. One of the problems with those currently is that their debt is ratcheting up. It started at zero. My electricity meter is owned by a French leasing company for instance is another aspect. Looks like many of the shares are owned overseas anyway. I get sick to death of hearing privatised this and that isn't working. In some ways it's creative accounting - gov gets money coming in and none if all goes well going out. These things were being used politically to keep prices down and being topped up as needed from taxation. Getting shut of them makes gov's running costs look better and we just pay for what ever service is being provided.

Intentions now seem to be on the same line as early mutterings from Blair and Brown. Their looking after the books has nothing what so ever to do with them. Debt increase was purely down to the banks failing. Actually they were legislating banks and Cameron was running around saying no you can't do that yet it has been done. Sums up politics completely. Just criticise rather than work on the basis of need. It helps getting elected again. Low interest rates help keep the so called economy up as we borrow to spend. Financial easing is the modern equivalent of currency devaluation. Low interest rates means that the only thing that pays a decent return is buying properties and renting them. This doesn't just apply to houses.

 

[SirGalahad]

Fair points, and yes, there is tribalism, but maybe not to the degree you suggest. Off the top of my head weren't labour proposing an extra 100 billion of spending, a quarter of that raised by increasing corporation tax to 26%, bearing in mind we cant keep big business in this country with a rate of 19% that would be insanity, I'd say exactly the same if it were the tories proposing it.

I disagreed with Corbyn budget. He identified one thing - we need investment - but I disagreed with the scale.

Businesses do not invest just on the basis of the nominal tax rate. Corp tax is paid on profits not before. Payroll, employee, rates and other taxes are paid whether or not the business is profitable so waving around nominal tax rates is headline grabbing nonsense.

Can you tell me were businesses have left because the rate of corp tax has changed so signigicantly without any other economic changes?

Companies when they locate look at a myriad of reasons - access to markets, legal structures, employee recruitment etc, one of which is corp tax levels.

 

[Notch7]

, bearing in mind we cant keep big business in this country

Lots of businesses are in this country because we were inside the single market, but at the same time in the UK which is relatively low on regulations, esp employment.

Tories might make corp tax low but that isnt much benefit to smaller businesses.
Business rates and rent are more of a concern - they have to be paid even if the business makes a loss.

 

[fillyboy]

Companies when they locate look at a myriad of reasons - access to markets, legal structures, employee recruitment etc, one of which is corp tax levels.

Exactly, corporate tax levels and a decent pint of Guinness.

 

[ajohn]

There has been lots of stuff going to Dublin thanks to Brexit. Their debt per capita when I last looked at it was truly amazing, high. Talking to a local MP's minder recently many banks have sort of moved already as they must continue to trade in the EU.

One of the odd things about the EU is the fact that a lot of people in all areas aren't happy about being in it. They blame it for all sorts of things that have happened world wide irrespective of being in it. A lot boils down really to a lot of not completely happy people augment by a small group of people who have particular axes to grind. This is why Farage may bring the whole thing down over time. Once one leaves others may follow.

Swedish corporation tax is over 20%, general taxation rates are higher than many. They have an excellent health service, and education system. Their people are looked after. Their gov also reacts quickly to some changes. At one point for instance they went very nuclear quickly as needed cheap electricity.

Singapore is similar in some ways. Corporation tax 17%, personal 0 to 22% depending on income, 22% at £184,300 and over. Unemployment is a bit odd there. People get some sort of support if they retrain. Works while there are jobs but eventually there aren't enough about so talk of unemployment insurance which never works past some level of it. Seems they spend a lot on defence.

Our gov etc are fond of copying what other countries do. Believe it or not pundits have suggested one of those for the UK. Also back to the 30's, knock on the door on monday to see if wanted this week. The gig economy in real terms is like that.

 

[fillyboy]

There has been lots of stuff going to Dublin thanks to Brexit.

Companies were re-locating to Dublin long before brexit. Headline corporation tax is 12.5%, the reality is the big boys are paying between 0-3%

 

[ajohn]

True to some extent but
https://www.irishtimes.com/business...0bn-debt-burden-how-did-we-get-here-1.3943085

 

[ajohn]

What isn't mentioned there is cash back from the EU for spending on infrastructure. The UK has benefited from that too. It's generally not spent SE centric just where it's needed.

The low interest rate really is just an excuse for a change of direction as something has to be done.