The Budget

Urmstongran

Maybe Truss & Kwarteng actually had the right idea perhaps?
Stimulating growth.
But the markets didn’t like it so she got the chop.

The markets knew very well that 'stimulating growth' by giving tax cuts to high earners doesn't stimulate growth at all.

The only 'growth' it was likely to stimulate was increased share and house prices. Which do nothing for the domestic economy.

They didn't like that there was no actual plan. It was dependent on a miracle...

But, but ... tax cuts were to encourage entrepreneurs too who would then employ people. The experts are saying that Hunt’s Budget (sorry, Autumn Statement) is a “doom loop”. Was there an alternative in the middle somewhere? Because as things stand, both approaches are wrong. One too guns-ho and the other too cautious.

Have I just heard on the radio that Keir Starmer has accepted Jermy Hunt's figures? Will this mean that he will bring in cuts to public services if Labour win the next election?

What did you hear it on Ilovecheese. If we can find it, it would be good to hear exactly what is said.

Apparently, Jeremy Hunt said that lowering trade barriers with the EU would be good for growth. Was that in yesterday's speech?

Worth reading the detail on Hunt's comments: www.euronews.com/2022/11/18/brexit-jeremy-hunt-admits-uk-eu-trade-barriers-but-rejects-rejoining-single-market

I will have heard it either on P.M. on radio 4 or on the radio 4 news. About 5.30 pm (shopping delivery had just arrived)
Don't know about the trade barriers remark

Have just copied this from the BBC news website.

"The Labour leader Sir Keir Starmer has said he accepts that there is a £55bn gap in the public finances, a figure provided by the Office for Budget Responsibility (OBR).

Whether or not there is a "black hole" that must be filled with tax rises or spending cuts has been a point of debate.

Sir Keir said he did not dispute the OBR's calculations.

He said Labour would try to "repair the damage" if it won the next election.

Speaking to the BBC, Sir Keir said: "We will have to face that challenge, and therefore we don't quarrel with the number that the OBR put out as a target or trying to get the debt down."

Some, mostly left of centre, economists have suggested that different approaches to calculating government's finances would result in a much smaller or even no shortfall.

Forecasting economics is notoriously difficult and small changes to the predictions for economic growth or interest rates can make a big difference to how the public finances are expected to look in two or three years' time.

In addition, if the target to have debt falling as a proportion of economic output is extended beyond the chancellor's five years, that could also reduce the shortfall between government revenues and expenditure.

These calculations matter as they strongly influence whether the government believes it has scope to spend more on public services such as health and education, or whether it needs to raise taxes.

The Labour leader made clear that he and the shadow chancellor, Rachel Reeves, would use the £55bn fiscal gap as a baseline for their policies in any future manifesto.

This is the first time Sir Keir has publicly accepted the gap, and it will now put pressure on any future Labour government to stick to policies that are consistent with the OBR's figure."

Thank you Ilovecheese.

This is an interesting read:

institute.global/policy/our-response-autumn-statement?utm_campaign=36081-&utm_medium=email&utm_source=Institute%20Interests

It's the Tony Blair Institute for Global Change's reply to the Chancellor

Urmstongran

But, but ... tax cuts were to encourage entrepreneurs too who would then employ people. The experts are saying that Hunt’s Budget (sorry, Autumn Statement) is a “doom loop”. Was there an alternative in the middle somewhere? Because as things stand, both approaches are wrong. One too guns-ho and the other too cautious.

I will try to make this simple, Ug. The entrepreneurs who were going to employ people are the same ones that George Osborne said the same thing about. It's part of the 'trickle down' theory and it has been proven not to work, over and over again.

Besides which. entrepreneurs need to know that there will be people willing to buy whatever goods or services they are offering. They don't just go blindly into a new enterprise, they do their research and establish what their market will be and how much their target market is likely to spend.

Unfortunately for these magical beings who were going to provide new employment there is very little spare money in the domestic economy for them to gain any profit from, what with inflated food and energy prices, and the Bank of England's insane interest rate rises which have pushed up the cost of mortgages.

There are also fewer people in the country in employment, either long term sick, or just left the employment market after covid after deciding that they could live on what money they already have. It's doubtful whether those will have much spare cash, either.

So, all in all, the UK domestic market looks like a poor prospect. Export trade with our nearest very large market doesn't look very promising, either. Europe is suffering from the same inflationary shocks as the UK and exporting to the EU is far more difficult than it was before we left. In fact, said entrepreneurs are more likely to try to establish a business in the EU because it offers a far bigger market and no trade barriers. They will employ EU citizens, not Brits.

This isn't rocket science...

P.S

Truss's tax cuts were going to the already wealthy. Why would they go to the bother of setting up new enterprises when they could easily make the extra money 'earn' more for them by buying shares, or bonds or property?

DaisyAnne

Worth reading the detail on Hunt's comments: www.euronews.com/2022/11/18/brexit-jeremy-hunt-admits-uk-eu-trade-barriers-but-rejects-rejoining-single-market

No change then, they are totally deluded, the more we diverge from the EU standards the harder it’s going to be to rejoin anything. They really believe their own propaganda, if it comes to a tug o war with the EU there is only going to be one winner.
Starmer has also ruled out rejoining, he certainly isn’t going to run a pro EU election is he

Thank you MaizieD for your sensible and rational explanation of the "black hole" theory which is, I accept, no more than a political stratagem to shaft the electorate.

I do not believe that this country is governed by the politicos in whitehall. Rather it is the sinister global "money men" who call the tune and everyone is afraid to upset them.

Have you ever encountered economist Ann Pettifor? I think you'd like her ideas.

Here she is talking about the global financial markets

annpettifor.substack.com/p/the-sudden-paralysis-of-the-system

And this:

annpettifor.substack.com/p/why-are-western-governments-impotent

I've been reading Adam Smith's 'The Wealth of Nations'. He is held to be one of the founding fathers of the 'free markets' system, the right wing think tank named after him was apparently a big influence on Margaret Thatcher. Unfortunately they don't seem to have read him particularly closely.

This extract should have been carefully considered

“The proposal of any new law or regulation of commerce which comes from this order (i.e those who live by profit) ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the publick, who have generally an interest to deceive and even to oppress the publick, and who accordingly have, upon many occasions, both deceived and oppressed it.”

“those who live by profit”

Our lifestyle is paid for by them, we can only have it by exploiting resources, including labour, some in the UK, widespread in overseas suppliers.

Katie59

“those who live by profit”

Our lifestyle is paid for by them, we can only have it by exploiting resources, including labour, some in the UK, widespread in overseas suppliers.

I don't think you've understood what Smith is referring to.

He is saying that we should make sure we are not exploited by profit
Yet that’s exactly what is happening because our lifestyle depends on it, resources, the environment and labour. Our way of life in the west cannot exist without exploitation, there is not much exploitation in the UK because we are importing much of our goods.

Let’s not kid ourselves there is at least as much exploitation as in Adam Smiths day 250 yrs ago, when slavery was in its heyday and persisted for another 100yrs. His principles are good, society does not take much notice of them.

Have bought second hand copy of Economics for Dummies by Peter Antonioni and Sean Flynn.
My first thought is that does Downing Street need a copy? Should mps be required to have some economic literacy if they are to vote on budgets? This country is being administered by the equivalent of driving test examiners who don’t know how to drive…..

He is saying that we should make sure we are not exploited by profit
Yet that’s exactly what is happening because our lifestyle depends on it

There's more to it than that these days, Katie59. As Ann Pettifor points out in the second of the articles I linked to, there is a whole 'market' that exists with the sole objective of making profits from their money without contributing in any way to providing the goods and services which produce our lifestyle. In fact, they distort supply and prices because have no connection with, or interest in, the wellbeing of the societies which depend on the resources whose prices they manipulate for their own profit.

Yet these 'markets' are feared and bowed to because they can seriously, and adversely. affect domestic economies. IMO, an underlying reason for them to have developed such power is the fact that governments, contrary to Smith's warnings, have allowed their interests too much influence when legislating (or failing to legislate.

Have bought second hand copy of Economics for Dummies by Peter Antonioni and Sean Flynn.

Oooh, do let us know how you get on with it, ronib

I bet it doesn't tell you that taxation doesn't fund spending

To me, that is the first major error that sends everyone off down the wrong path when it comes to a national economy...

Maizie am expecting my grandchildren over this weekend but shall certainly return to reading itfor their benefit at least!

I absolutely get the need to re-pay our huge national debt and to control inflation - however do I think freezing tax thresholds at the lower level til 2028, cutting public services, lessening help for those always caught in the “earn too much for help” trap the right way to go - no sorry I don’t !! So much to put right and this government and their many different ministers have been in power for over 12 years and all things just getting worse and worse !! Time for some radical changes and I agree with Rachel Reeve !!

Although the Tories would love to pin all the blame for the mess on Putin and the pandemic, Paul Johnson, Director of the highly respected Institute for Fiscal Studies, today identified three UK own goals - lowering investment spending especially in vocational and further education under the last Labour government and continued by Osborne, Brexit - especially the hard Brexit which cut us off from the single market, and the damage done by the Truss mini-budget. And of course the political merry-go-round of Prime Ministers and Chancellors driven by Tory incompetence has not helped perceptions of UK financial stability in the rest of the world. So much for Global Britain. Boosterism claims by Hunt about the UK being a world leader, a new Silicon Valley, are risible. I don't relish the next few years of becoming poorer and I know where the blame lies.

I thought you would be interested in this story from The Times

La Serenissima by Jonathan Keates review — the decline and fall of Venice

www.thetimes.co.uk/article/b1fdc666-64f2-11ed-9c3b-2d9184d0076f?shareToken=a1fdb2da3d6bf48f66b93168b65164b5

Chilling comparison with the British Empire. We are in decline but will not acknowledge the fact.

MaizieD

P.S

Truss's tax cuts were going to the already wealthy. Why would they go to the bother of setting up new enterprises when they could easily make the extra money 'earn' more for them by buying shares, or bonds or property?

I think this is a key point.
Allowing already rich people to have more money in their pockets is more likely to boost sales of shares etc. Allowing poor people to have more money in their pockets will mean they are more likely to spend the money in the economy (food for instance).

There is a lot of talk about the “black hole”, our national debt.
Around 75% is borrowed from ourselves, UK pension funds, other investments and QE held by BoE.
The Borrowing is around 100% of GDP, higher than we would like, mostly because of Covid, compared with other nations it’s not especially high, US borrows 150%, Japan over 200%. Chancellor Hunt decided that borrowing more to grow the economy was not likely to benefit the Tory party before the next GE, so we have a ultra austere outlook for the next 5 yrs.