Saturday, March 21, 2009

Boom and Bust

Following on the heels of two million unemployed, yet another worrying econmic statistic was published today. The nation's public sector debt is set to grow to a colossal £180bn as the recession worsens in the next financial year.

The prediction by a leading independent forecasting body, suggests the Government will have to borrow some 12.6% of GDP in 2009/10 to counter a rapid surge in unemployment, a sharp increase in spending and a plunge in tax receipts. Today's Times newspaper comments that "Unless the government wants to do something politically suicidal - like protect all public spending and raise the basic rate of income tax by 9p - then spending cuts are going to have to be on the agenda."

So what does this mean for you and me, other than the very real threat of much higher direct and indirect taxation than we have previously experienced in our lives ? In real terms it implies huge cuts in the welfare dependent economy that such a large proportion of the population have come to depend on after ten years of Labour government.

A local resident wrote to me this week and asked why she pays three times more council tax here in Thanet than her relations in Scotland. I replied that is very likely,along with free prescriptions, university fees and more, that her relations are generously subsidised, North of the border, by those of us living further South. I rather wonder how long this level of subsidy - averaging, we are told, £1,500 a year per person - will be sustainable now that Scotland's ruling SNP, following the expensive collapse of its two proudest and largest financial institutions, is a little quieter in its calls for independence.

Here at the very oposite end of the country, we need to be realistic about the future. Local Government across the UK is now looking into a financial abyss and yet the population at large expects that the hundreds of services that Local Government provides on an almost invisible, daily basis, should continue uninterrupted.

Every Town Hall now has to consider what it can or can't afford over the next two years and the impact of the financial chaos that surrounds us on fast shrinking reserves. So next time you read in the 'Blogs', the council should spend money on this or that, consider whether the council can actually afford to indulge in any project that isn't necesary without, cutting back on more important services?

Businesses can go bust and they are doing so with alarming regularity at present. Councils can't go into adminstration in the same way and can only plan and exist within their means.

While Government tries very hard to rearrange the deckchairs on the Titanic, the ship is now showing an unhealthy list. Meanwhile, the Captain and First Officer still refuse to consider the prospect of it sinking on their watch. Passengers too are in a state of denial. This is after all one of the greatest economies in the world, how could it sink; it's unsinkable isn't it?

Whether we find ourselves in the freezing water or not is increasingly looking like a matter of luck and so all of us who have become very comfortable with the safety net of a generous welfare economy need to start asking where the lifeboats are kept because there will not be room enough in them for all of us without a very cunning plan to refloat a very damaged economy.


Tony Beachcomber said...

Simon, a very predictable Conservative response, the only disappointment being that you failed to mention "would the last person to leave the uk please turn the lights off". You have remembered rearranging the deckchairs on the Titanic, so that does make up for it.
The economic recession has severely disrupted the tax and spend cycle of both national and local government. But at a national level should it mean cuts in public spending when there is so much tax avoidance. For example the world economy is predicted to shrink this year. Yet throughout the world there are tax havens. Perhaps the time has come to end these havens throughout the world and end banking secrecy. The same should apply in the UK instead of cutting spending, tax avoidance should be tackled.

DrMoores said...

Tony, the expression that first springs to mind is "wake up and smell the coffee""

The tax avoidance issue is a red herring and in turn, a predictably socialist excuse for a failed economy!

I'm assuming Tony Blair now has part of his growing fortune quite legitimately squirreled away in an offshore trust somewhere!?

While Caribbean tax havens certainly need attention I can't see the likes of Dubai giving a damn and even if the greedy, wasteful, incompentent organisation that calls itself HMRC (really serious & organised crime, as described by Prof Ian Angel of the LSE) increased its efficiency and tax take - which it won't - it's hardly likely to have any short-term significant impact on the financial chaos that now surrounds us.

In fact, God help all small businesses as Government and the HMRC become increasingly desparate to raise funds. That said, you may have seen BBC's Panorama last week which showed that Government's efforts to recover money from Serious & Organised Crime under new legislation is unsuprisingly costing us more than it recovers.

The grand quasi socialist experiment that started under Tony Blair is defunct and shattered and now we face seven years of bad luck and the prospect of having to pick up the pieces of a broken and dysfunctional, benefits-dependant society in the process!

Anonymous said...

And that really is the rub. A sophisticated and able country that has been brought to its knees by incompetence, dogma and the burden of a benefit culture that rewards a lazy population, and where individual rights are more important than responsibilities.

This is socialism for you. And the sadness is that those of us who have the ability and desire to create wealth, and who want to support those who can't support themselves, must now look to save themselves before considering how to help the poorest in society.

Will this recession become depression? Will the need to pay back our debts through the massive tax increases that Simon refers to in the future create the second wave of business closures and unemployment just as we think we have turned the corner? How will we get out of this?

Who knows? And that is the really frightening thing.

Tony Beachcomber said...

Am I to take it, that should the Conservatives win the next general election. People who are unemmployed, disabled or whatever living on meagre state benefits will feel the full force of the unpleasant Conservative jackboot, and will be made to pay for this breakdown in the capitalist system.

Anonymous said...

You mistake "New" Labour Party policies, whatever they choose to call them, for socialism Anon 8.09.

There is no room in a socialist community for the idle and workshy, and individual rights depend upon the individual fulfillment of responsibilities to the community.

DrMoores said...

Many of us would agree that LibDem Vince Cable invariably speaks sense!

Here's what he says today:

"The consequences of large-scale unemployment will be profound and painful. The biggest casualties will be among two-earner households, where one has lost a job but both incomes are needed for the mortgage. They cannot get housing benefit and, unless they have payments insurance or a very tolerant bank, they are on the road to the loss of their home. No wonder unemployment, particularly when prolonged, can lead to stress and mental illness.

I really worry about the youngsters. As many as half of graduating students will emerge this year without jobs to go to. Some can do research or train as teachers. But many will join an angry army of graduate unemployed. Less educated teenagers face even bigger obstacles: always last in and first out of a job. Some will be drawn into crime."

DrMoores said...

Wake-up Tony, it's the 21st century, not the 19th or even the Thatcher era.

Conservative thinking stands for the acceptance of personal responsibility and smaller, less intrusive Government. Perhaps you failed to notice the steady growth of what increasingly looks like a police state and the steady erosion of our personal liberties under New Labour?

The last decade has been a failure. there are still millions of children in poverty, immigration is out of control, organised and violent crime are a massive problem and our education system is a source of concern to all parents. Labour has failed and failed badly and the rest of us, not secured by a public sector or Parliamentary pension will now suffer the consequences of rash and ill-judged decisions.

DrMoores said...

In answer to Tony's concerns surrounding tax avoidance, here's one from today's Sunday Times:

"THE government minister in charge of stamping out corporate tax avoidance has himself set up a business in the tax haven of Bermuda. Lord Myners, already under fire for approving Sir Fred Goodwin’s massive pension from Royal Bank of Scotland (RBS), was part-time chairman of an offshore company which avoided more than £100m a year in taxes"

Anonymous said...

The local Labour political fanatics in the form of Green, Harrison, Hart, Johnston, Nicolson, Nottingham, etc.are beginning to look like crazy wild eyed religious zealots that we see on our screens so regularly these days. It is only with slight exaggeration that you can develop the argument that Marxists and Fascists share similar strategies and tactics, such as erosion of civil liberties in supposed exchange for rights, to win control over the rest of us. Maniacally resolved to change the world in an image they desire, they willingly trample on everything that the majority hold dear to "save" us. The ends always justify means and anything goes. They are willing to lie and cheat, or do anything they consider necessary, to achieve their goals.

Those of us who are in the middle, neither right wing nor left wing, are the backbone of any political system and we are the ones who make the economic wheels turn and try to do the best we can to support our families. We are the long forgotten Mr. and Mrs. Average who are losing our jobs, homes, families, hope and sense of self.

Until they impose their own system of control the fanatics need to win over people like us in any political debate. We must resist the bullying we increasingly see to make us think and act like they do. The more we allow them to tell us what is right and wrong, against common sense and our own better judgement, the more we will be fodder to the next stage of the socialist agenda.

There has never been a more important time to vote Tory.

Anonymous said...

Surely as a nation we have no option than to vote Tory. The Nu-Lab legacy will be remembered as a disaster for the country.

The day when the post-colonial guilt-ridden, middle-class, polytechnic-indoctrinated, clean-fingernailed un-thinkers wrestled the labour party from its genuinely working class creators was the begining of the end for this country.

Sadly they appear to have won.

Anonymous said...

Tony. I am afraid that Simon's analysis is correct. It is close to the hearts of most people that the harder and cleverer you work the more money you should make and that there should be provision only for the genuinely needy.

His recent analysis, do the Tories really want the poison chalice of power, was also on the button.

We have seen in Thanet the simplistic blame game. A journalist, who objected to the epithet "Nazi Nick", blamed dole fiddlers. Yet this same journo seems oddly silent on issues of major employers in Thanet polluting the water supply or a geberously grant aided company supplying defective equipment to NHS Hospitals.

An incoming tory party has to shake off "It's the rich what gets the pleasure and the poor what gets the blame".

For all his wealth Mr Cameron suffered the most terrible tragedy. Our hearts go out to him.

But I also wonder if he is being forged and may become "Cometh the hour cometh the man".

I used to think David Davis was the better potential leader.

I now wonder if "hug a hoodie as long as he will work" is the better approach ?

New Labour can only buy its way to a new government by playing on the fears of those on benefits and tax credit.

It is a time for serious politics. For these are dire times.

Anonymous said...

This country, in my view, lost its way after WW2 actually for the best of motives. The welfare state, care from cradle to grave Nye Bevin concept "In place of Fear". Worthy dreams.

But from the outset there was a flawed philosophy in means tested benefits. To maintain a claimant at the levl they had reached.

This led to the self evidently immoral position that the homeless man was maintained homeless by daily cash payments. The man with a large mortgage could apply for periods of time to have his mortgage interest payments met in full to maintain him in his luxurious home. No levelling up no levelling down.

One of the major problems now is that principle is in breach. All the time.

If someone goes on to benefits at the level they have reached. Say one child. That is the level at which, by founding principles, they should be maintained. IE If they have three more kids whilst on benefits there should be no increase of benefits to pay for them.

A person in work does not get to call on his employer "Just had another kid guv put my pay up".

I have told this story on threads before but I think it may illustrate that there is a huge problem and that people are adapting against it.

A lady owned 41 buy to let houses on mortgages. Last year equity in this area dropped 10.6%. Of her 41 DSS tenants 16 were not paying rent. The guideline cost to obey New Labour tenants rights to get the little darlings out is five months more rent lost plus £800. Multiply that by 16.

If any of those 16 tenants (once she accepts rent direct from housing benefits) is caught fiddling the council can recover their fiddled benefits against her or against the housing benefits of her honest tenants. This is a clear breach of the principles in Magna Carta. Since when has it been lawful to punish the innocent for the untried sins of the accused ?

She took advice and followed it. Declared herself bankrupt and sent 41 sets of keys back to the Building Societies.

New Labour removed her 300 year old rights to enforce rent payments by distraint. So let New Labour house 41 families when the Building Societies use our public subsidy funds to pay lawyers to get possion orders against the tenants.

You go to Entitled To website Tony and plug in the numbers for a couple with two kids and a rent of £500 pcm. They are a lot better off than working for a living or trying to be owner occupiers paying their own way. Plus New Labour has made it easy for them to steal benefits paid to them in trust to pay over as rent.

I hope the lady, no longer a socially responsible landlady, now no longer a victim of Labour's unbalanced view of rights will not be too discomforted over the next twelve months after which she will be discharged from bankruptcy.

That Insolvency Practitioner is administering 4 bankruptcies per week self petitioned.

If Gordon had given every person who had never availed a right to buy council house and given each the same sum as ex tenants copped from public funds in discount (£38000 each) then the banks could have been recapitalized by people paying off credit.

But it seems that the clever people may be refusing to pay the banks twice. Once through taxation given to the banks and once through banks pushing up interest.