Why the cuts are good...

[Totally_Baffled]

I'm not sure whether I would count as a "pro-cuts" person. But unlike most PSers, I remain to be convinced that the cuts are primarily ideological.

The Tories know that this we are in a mess too deep for us to get out of, and that once the oil downslope hits, all bets are off. I doubt that they even want to be in government right now. Any responsible government would be making cuts now, and those PSers who claim otherwise are indulging in doublethink - on the one hand claiming that BAU can't go on, but on the other castigating a government for policies that acknowledge that fact!

I don't believe that the cuts will "work" and lead us back into ultimate prosperity - but all of us here know that that can't happen anyway. The question is whether the cuts will mitigate the pain when TSHTF.

The worst thing that could happen would be for a collapse in the pound, due to unmanageable public debt, to put a stop to all imports. Global warming or no global warming, the simple fact is that once we can't import oil, we will start to starve. Look at what happened to North Korea.

+1

[Ludwig]

The reason it's not worked for Ireland is that the private sector bank debt dwarfs the economy, I think it was 4 x GDP? Think it might be getting worse still, just saw Max Keiser going bananas about 'off-balance sheet' liabilities now emerging. They appear to be shackled to bailing out the banks by the pressure from Europe and their own compliant political class.

Whereas in Iceland, they washed their hands of the criminal Ponzi banks and are prosecuting politicians too for regulatory failure, and their economy is now recovering.

Isn't that due largely to a (relatively) big Russian loan?

http://news.bbc.co.uk/1/hi/business/7720614.stm

[Mean Mr Mustard]

The Tories know that this we are in a mess too deep for us to get out of, and that once the oil downslope hits, all bets are off. I doubt that they even want to be in government right now.

The only reason they want to be in Government right now is for what they personally can gain from it. Just like a self-serving Board of Directors fleecing a company they know faces imminent bankruptcy.

[contadino]

The worst thing that could happen would be for a collapse in the pound, due to unmanageable public debt, to put a stop to all imports. Global warming or no global warming, the simple fact is that once we can't import oil, we will start to starve. Look at what happened to North Korea.

...and that's the only reason that sterling is safe (for now.) Unlike attacking the Euro, which just weakens but hasn't caused a collapse which would be disastrous for speculators, attacking Sterling would mean any companies who report in sterling would go tits up.

[Lord Beria3]

The worst thing that could happen would be for a collapse in the pound, due to unmanageable public debt, to put a stop to all imports. Global warming or no global warming, the simple fact is that once we can't import oil, we will start to starve. Look at what happened to North Korea.

...and that's the only reason that sterling is safe (for now.) Unlike attacking the Euro, which just weakens but hasn't caused a collapse which would be disastrous for speculators, attacking Sterling would mean any companies who report in sterling would go tits up.

Wrong. Sterling is safe for now because rightly or wrongly international investors have looked at Britains cuts agenda and think that the government is serious about paying of its debt.

Whether without growth the country could actually pay of its huge debts is anather matter, but for the next 5 years or so, sterling is safe.

Longer term, the general insolvancy of the West will force interest rates up (gilt yields) for UK government bonds and this will drive our interest payments up. The only way to reasure the markets in that situation is far more severe spending cuts (on Irelands model) with a emphasis on the salaries on the public sector.

In a emergency the government can declare void any existing contracts leaving the way for 50% cut in GP and NHS consultant salaries, a 25% cut in teachers salaries and a 50% cut in higher management salaries across the public sector.

[Mean Mr Mustard]

...which will provoke a collapse and race to the bottom by the private sector. You're just trolling now...

Which other groups should we scapegoat? How about atrocious spellers?

I think I already made a good case for punishing the elite criminals still apparently in charge.

[Lord Beria3]

Not when the private sector is far bigger than the public sector.

The government spends money on the PUBLIC sector, not the private. Cutting salaries rather than services is the best way of cutting costs and miminising the impact on the poor.

A GP who earns £60,000 rather than £120,000 is poorer but not the end of the world for the rest of us.

You don't seem to get that when the countries interest costs spiral out of the country, the country HAS to cut. There is no option.

[biffvernon]

Any responsible government would be making cuts now, and those PSers who claim otherwise are indulging in doublethink - on the one hand claiming that BAU can't go on, but on the other castigating a government for policies that acknowledge that fact!

My point is that although there are good reasons for cutting energy use (and that, realistically, means shrinking the economy) cutting public spending from social services to nature reserves does not have to come before cutting private spending on cars and plastic toothpicks.

The government is using the state of the economy as an excuse to shift society to the right.

[Totally_Baffled]

Any responsible government would be making cuts now, and those PSers who claim otherwise are indulging in doublethink - on the one hand claiming that BAU can't go on, but on the other castigating a government for policies that acknowledge that fact!

My point is that although there are good reasons for cutting energy use (and that, realistically, means shrinking the economy) cutting public spending from social services to nature reserves does not have to come before cutting private spending on cars and plastic toothpicks.

The government is using the state of the economy as an excuse to shift society to the right.

What do you mean Biff?

The private sector funds the public sector.

Cars and toothpicks are just part of many private industries that generate tax revenues (to the tune of circa £650 billion) so we can have social services and nature reserves!!

As for your shift to the right comment, that is not quite fair as all the main parties acknowledge the need to get the budget back into balance, its only the timing/phasing that is up for debate.

[madibe]

+1 Biff

[Mean Mr Mustard]

LB3,

Highly paid public sector tend to be concentrated in military and medical areas. Even there, they represent a small percentage of the overall public sector paybill, so the saviings would be small, but the implications would be massive.

We couldn't reduce banker's bonuses because they were contracturally sound, but you say the same shouldn't hold true for Doctors? Good luck getting any care in casualty or at your local clinic, once all the Doctors retire or move to private practice. And medical students with their 5 years+ of student debt will bail out without finishing their courses, or go overseas if there is no reasonable pay on offer to compensate for the study and responsibility, so there won't be any downstream replacements either.

That's just some of the unintended consequences from your daft false economy notion...

Maybe someone will soon halve your income for the greater good.

[biffvernon]

What do you mean Biff?

The private sector funds the public sector.

Cars and toothpicks are just part of many private industries that generate tax revenues (to the tune of circa £650 billion) so we can have social services and nature reserves!!

As for your shift to the right comment, that is not quite fair as all the main parties acknowledge the need to get the budget back into balance, its only the timing/phasing that is up for debate.

Stop thinking about money flows and start thinking about energy flows. Do we allocate the energy flows to social services and nature reserves, public goods, or do we allocate them to cars and toothpicks, private goods.

There will be less energy in total, whatever, but within that total the distribution is a political choice, left or right.

(And, as we have seen, the Tories do not have the monopoly of right wing politics.)

[AndySir]

The private sector funds the public sector.

I've heard that phrase a few times and it's never seemed right to me. It's certainly not always true as we've already seen. Is it true here and now? UK government income 2008 was primarily made up of income tax (29%), National Insurance (19%), Value Added Tax (15%) with Corporation Tax coming in at (9%). Looks like most of our tax comes from wage-earners, and, from an earlier thread, the majority of that is from wage-earners in the £30-50k bracket. How many of them are in the private sector? I don't know, but I think it's about half.

I suppose then that that statement could only be true if we assumed all the country's wealth was created by the private sector - which seems the most likely given the context in which it is used. That's a problem too, though, since every single one of those private companies relies on transport networks, sewage and water networks, policing, healthcare, education... a whole lot of business externalities. By externalities I mean things which benefit all the businesses in that area but would benefit your business more if someone else paid for it. So it looks as though the public sector also finances the private sector.

[Totally_Baffled]

Stop thinking about money flows and start thinking about energy flows. Do we allocate the energy flows to social services and nature reserves, public goods, or do we allocate them to cars and toothpicks, private goods.

There will be less energy in total, whatever, but within that total the distribution is a political choice, left or right.

Money, Energy - one thing they have in common is that you can allocate them how you like, once you have earned them! Nobody (or country) will give them away for free, even more so in the future as energy becomes scarce.

To get a share of the shrinking energy pie, Britain, like all other countries who will rely on imports, are going to have to earn it.

This is where the private sector comes in. Ok its cars and toothpicks now, but in the future - demand will change as expensive energy changes consumers priorities.

The private sector will need generate tax revenue by providing goods and services of the low energy future. This will range from wind turbines, to more efficient just about anything electrical, electric cars, newer cleaner power plants etc etc.

Governments can aid the private sector do this via legislation, tax breaks, subsidies, education, etc etc - but the public sector otherwise will not generate the money or provide access to the energy required to provide for all the public services we require.

How else do you anticipate providing the access to the energy Biff?

I've heard that phrase a few times and it's never seemed right to me. It's certainly not always true as we've already seen. Is it true here and now? UK government income 2008 was primarily made up of income tax (29%), National Insurance (19%), Value Added Tax (15%) with Corporation Tax coming in at (9%). Looks like most of our tax comes from wage-earners, and, from an earlier thread, the majority of that is from wage-earners in the £30-50k bracket. How many of them are in the private sector? I don't know, but I think it's about half.

Would those public sector jobs paying tax exist if they were not created from tax revenues from the private sector in the first place?

It is a virtous circle, when the economy is growing and the private sector is doing well - you can spend more on the public sector.

If the private sector is declining whilst the public sector is growing (in other words you are spending more money on it) - then that is when you get the deficits we are struggling with at the moment! (150 billion per year)

If you think about it - if the taxation generated from the public sector aided the budget deficit - then all we would need to do is borrow a shed load a money - employ EVERYONE in the public sector and then the books would balance! But alas this isnt the case - we just end up bankrupt....

suppose then that that statement could only be true if we assumed all the country's wealth was created by the private sector - which seems the most likely given the context in which it is used. That's a problem too, though, since every single one of those private companies relies on transport networks, sewage and water networks, policing, healthcare, education... a whole lot of business externalities. By externalities I mean things which benefit all the businesses in that area but would benefit your business more if someone else paid for it. So it looks as though the public sector also finances the private sector.

Those public facilities have been funded by the tax on the wealth generated by the private sector. If it wasnt for the latter they wouldnt exist in the first place? Where else would the money of come from?

[Ludwig]

The private sector funds the public sector.

I've heard that phrase a few times and it's never seemed right to me. It's certainly not always true as we've already seen. Is it true here and now? UK government income 2008 was primarily made up of income tax (29%), National Insurance (19%), Value Added Tax (15%) with Corporation Tax coming in at (9%). Looks like most of our tax comes from wage-earners, and, from an earlier thread, the majority of that is from wage-earners in the £30-50k bracket. How many of them are in the private sector? I don't know, but I think it's about half.

No way. According to http://www.statistics.gov.uk/cci/nugget.asp?id=407, about 4 times as many people are employed in the private as in the public sector.

I suppose then that that statement could only be true if we assumed all the country's wealth was created by the private sector - which seems the most likely given the context in which it is used. That's a problem too, though, since every single one of those private companies relies on transport networks, sewage and water networks, policing, healthcare, education... a whole lot of business externalities. By externalities I mean things which benefit all the businesses in that area but would benefit your business more if someone else paid for it. So it looks as though the public sector also finances the private sector.

So how is the public sector's wealth created? Two ways, and two ways only: taxes, and public debt.