[Closed] Help me understand what the Sam Hill is going on

Two things. You missed

C) wait for the economy to grow so the tax take increases without actually raising tax rates.

And

people who are on benefits, of which only a tiny fraction are in fact employable and unemployed

That's bollocks - if you mean most people on benefits are unemployable.

But overall, yes - austerity never really works for the reasons you give. Borrowing your way out of a recession does however work, and is not as mental as the Tories would have you believe.

It's pretty normal to borrow money to get a business going or growing. However you have to make sure that the business is sound - and that is the difference between us and Greece, say.

molgrips - Member
But overall, yes - austerity never really works. Borrowing your way out of a recession does however work, and is not as mental as the Tories would have you believe.

Especially with the historically low rates we could have borrowed at until austerity cost us our AAA rating...

That's bollocks - if you mean most people on benefits are unemployable.

most people on benefits are employed.

3% of benefit payments are 'unemployment benefits'.

Clearly a lot of money is being paid out for other reasons than unemployment.

Can't help thinking Labour should be making a lot more noise about this austerity idea - unless they are willing to wait another 2 years of shit hitting fans so they can say 'I told you so'.

That's bollocks - if you mean most people on benefits are unemployable

I stand open to correction on the precise percentages and vlaues, but isn't it correct that all bar about 2 or 3 % of the benfits bill is made up of the Disabled, the Retired and people receiving Tax Credits (i.e. already employed but on low wages)? I think the total value of Job Seekers allowance out of a budget well in excess of £150 billion is about £5 billion, not insiginificant, but not the vast sink hole that they pretend it is.

Oh I see what you mean - I thought you were talking about the able-bodied out of work being useless unemployable ****-wits. I cannot agree or disagree with you in that case, because I don't know 🙂

unless they are willing to wait another 2 years of shit hitting fans so they can say 'I told you so'.

And that, my friend, is exactly what is wrong with British politics in a nut shell.

And that, my friend, is exactly what is wrong with [s]British[/s] politics in a nut shell.

FTFY

And that, my friend, is exactly what is wrong with politics in a nut shell.

See Austrailia for the alternative.

So I'm not losing my marbles then??

Nope. Your argument is that of Labour.

So whats the Tory one then? Come in **** everything up, then run away and hide shouting "it was some big boys what done it and then they ran away".......thougth that was the it was Fatcher waht dun it thread.

You aren't losing your marbles.
You are a little confused. (But not as much as George).

If this is correct:

I stand open to correction on the precise percentages and vlaues, but isn't it correct that all bar about 2 or 3 % of the benfits bill is made up of the Disabled, the Retired and people receiving Tax Credits (i.e. already employed but on low wages)? I think the total value of Job Seekers allowance out of a budget well in excess of £150 billion is about £5 billion, not insiginificant, but not the vast sink hole that they pretend it is.

Then this can't be:

However, as the Government is both the major employer and a major consumer in the UK, cutting spending also means higher unemployment and less economic activity which equals

A) Less Taxes
B) More Government spending [b](higher benefits etc)[/b]

Maybe they've realised that they're paying out more money as in-work benefits to the underpaid than they would in JSA.
So they aim to achieve mass unemployment through lack of investment in order to reduce those benefit costs.

Loum: the first statement doesn't invalidate the second one at all.

If people who used to have jobs now don't have jobs then that means they'll be receiving JSA that they weren't previously receiving.

Also if people are still in work but on lower wages then the spend on 'in work' benefits will go up.

Also fear of unemployment and / or salaries remaining static or increasing at a rate less than inflation will reduce people's confidence and ability to spend.

People with money lack the confidence to spend it.

That's why you need governments to tax/borrow and spend in these circumstances. But they can only do this if the creditors believe there is fiscal control. So governments implement "austerity" for expensive public services, and "investment" in business ventures and infrastructure. Cons ideology is focussed more on "austerity" while Labs ideology more on "investment".

Growth remains non-existent which means Cons have got the balance wrong. Osborne is trapped by his ideology. Cons need to change chancellor soon but Cam can't let his buddy down.

So whats the Tory one then?

The tory one is 'oh, we're spending more than we make and borrowing too much, so we'd better cut spending and not borrow as much'.

Which is fair enough in principle, but not if it ruins the economy in the process.

However, as the Government is both the major employer and a major consumer in the UK, cutting spending also means higher unemployment and less economic activity which equals

A) Less Taxes
B) More Government spending (higher benefits etc)

It depends what you think the fiscal multiplier is, less than one and austerity should be a good idea, more than 1 and it isn't. Capital Spending is probably more likely to have a fiscal multiplier of greater than 1, but unfortunately Darling slashed (EDIT: actually he planned to) capital spending and the new Government did not reinstate it which is retrospect could be seen as wrong. However it saved them the political difficulty of making current expenditure cuts which generally involves redundancies.

In practice we have had a very mild form of austerity, government spending has gone up but as the interest payments and welfare payments have gone up because debt and unemployment (though remarkably little) are going up, the mix of government expenditure has changed so departmental expenditure has to be decreased to pay for this increase if the deficit is to be reduced or maintained. If the deficit is reduced slower than interest payments will be even greater at current rates and there is a risk that the failure to control the deficit will increase our risk premium and thus our interest payments, and therefore our deficit will increase and therefore our debt will increase and so on. This is what is commonly referred to as a debt spiral.

The politics of it are that both Labour and the Conservatives have chosen with their use of language to exaggerate the differences between them as they believe their exaggerated version will bring them electoral success. To the extent that we are able to devine what Labour's policies are, they is relatively little between them in the overall schemes of things.

The AAA has only limited economic significance because only your relative strength in the capital markets matters and as everyone one else of note has been downgraded already, it will not make us worse off. It hurts the Tories politically because they stupidly, in hindsight, said they would protect it. Whilst the problems in the Euro has hampered our growth prospects, they have almost certainly kept our debt service costs down as we are regarded as a relative safe haven.

That is my understanding of the Coalition case with a bit of commentary.

Mefty - excellent post, but:

Fiscal multiplier?
Also - departmental spending is presumably the opposite of capital spending? And capital spending is projects like roads, buildings etc?

I could explain fiscal multiplier but [url= http://en.wikipedia.org/wiki/Fiscal_multiplier ]this link[/url] to wiki is probably better than I could do. I am not trained in economics but i know that this is a hugely debated concept among those who are.

[url= http://www.bbc.co.uk/news/uk-politics-21921089 ]Been reading up on this[/url].....and noticed this

Jonathan Portes, director of the National Institute of Economic and Social Research, told the BBC that people "coming from outside the UK, and especially people coming from outside the European Union, are significantly less likely than British nationals, and people born here, to claim benefits".

He added that the issue of "people coming from outside the UK in order to sponge off our health service may be a problem, and we should certainly deal with abuse, but the figures tell us that they impose rather small costs on the health service".

Which I kind of instinctively knew anyway, and given the comments above regarding what percentage of the benfits bill is actually claimed by people who are both employable AND not working, what the **** is he talking about???

I work in an industrial unit on a farm that is staffed by East European workers, (the farm, not the unit). I've been here for a long time, and know full well that prior to recruiting these folk the farmers business was stagnant and going nowhere, mainly due to an inability to attract staff. It is now vibrant and growing.

I really don't get it.... these "economic" migrants are coming here to work, not to scrounge. You can argue about the rights and wrongs of that, but there just is no evidence to support this bullpoo that is being spouted about benefit scrounging.

It'll be intersting to see the reaction when similar reciprocal restraints are applied to ex-pat brits who have for example chosen to retire to the Algarve or whereever.

I really don't get it.... these "economic" migrants are coming here to work, not to scrounge. You can argue about the rights and wrongs of that, but there just is no evidence to support this bullpoo that is being spouted about benefit scrounging.

Undoubtedly but...

Many economic migrants come here to work and to better themselves; there are a few though who come to abuse the system. There has to be on the law of averages (and based on the number of Poles I've had the pleasure of working with over the last few years, I'd say that probably 1 out of 10 is a bad apple).

Now unfortunately there is still a lot of closet racism in the employment market. I used to work in a town where 20% of the population was from the Indian subcontinent, yet not one person in the company (40 people) I worked for was from that ethnic group.

This being the case, many economic migrants find it hard to get work that isn't low paid (if they can find work at all) unless they are exceptionally well qualified, and thus end up claiming benefits to make ends meet, or to fund a lifestyle of any sort. Even doing this, in many cases they will be far better off than they were in their country of origin.

Add into the mix the woeful state of our immigration controls and the tabs we keep on migrants, and it's easy to see why there are so many on benefits still in the country, who should have been "returned to sender" long ago.

FWIW the first part of the answer here is to work like, erm, very hard working people to clear the backlog of migrants who shouldn't be here.

FWIW the first part of the answer here is to work like, erm, very hard working people to clear the backlog of migrants who shouldn't be here.

I guess you've not looked at the speech. Its about curbing benefits to EU migrants. Now correct me if I'm wrong, but they have two rights which make both your and his comments sound a bit daft. A) They have every right to be here, and B) they have benefit rights here, just as we do in their countries....

Migrants that "shouldn't be here" i.e. illegal immigrants can't claim without exposing their illegal status and putting themselves at risk, which I guess is probably why the director of the National Institute of Economic and Social Research, told the BBC that people "coming from outside the UK, and especially people coming from outside the European Union, are significantly less likely than British nationals, and people born here, to claim benefits". As quoted above.

So WTF???? Is it a Cameron talking ball cocks shocker?