Sunday 9 December 2012

Sunday, December 09, 2012 Posted by Jake 11 comments Labels: , , , , ,
Posted by Jake on Sunday, December 09, 2012 with 11 comments | Labels: , , , , ,

In the Autumn Statement of 2012 the chancellor’s idea of ‘more Austerity’ was not much of a surprise. To prove "we are all in it together" Osborne cut benefits for the poor and disabled and also cut pension savings allowances for the rich. 

Osborne hoped that nobody would notice that this takes money away from the poor immediately, but only reduces the incomes of the rich some time in the future when they retire to find their pensions aren't as large as they otherwise may have been. Though by that time the economy would have recovered and other wheezes will doubtless have been dreamed up to once again fatten up those elite pensions. 

Osborne decided that at the time of crisis the poor would have to make immediate sacrifices so that no significant contribution would be required from the rich in the form of higher income tax or a new wealth tax. Far from a making an extra contribution the wealthy have instead been given cuts in income tax and corporation tax

But is all this austerity for the 99% really the only option we have? This graph from a McKinsey report in 2010 illustrates the lies we are being fed to justify the austerity.

Government debt is at a historical high.
The Treasury stated that in October 2012 government net debt was 67.9% of GDP. The McKinsey graph shows that far from being a high, for most of the last three centuries government debt has been much higher. Debt generally balloons during wars, when elites pour blood and treasure into protecting their own and snatching one another’s assets. Andy Haldane, executive director of the Bank of England, speaking to BBC Radio4 in December 2012 compared the economic impact of the current crisis with that of a world war:

“In terms of the loss of incomes and outputs, this is as bad as a world war….It would be astonishing if people weren’t asking big questions about where finance has gone wrong.” “If we are fortunate, the cost of the crisis will be paid for by our children. More likely it will still be being paid for by our grandchildren. There is every reason why the general public ought to be deeply upset by what has happened – and angry.”

Haldane compares the current situation as economically equivalent to a World War. So why not grow government debt to sort it out? The reason is 'real' wars were about the British elite fighting wars to maintain and grow its own wealth. For this the elite was prepared to spend much blood and treasure, borrowing whatever was needed. On the other hand the Credit Crisis is the result of the wealthy recklessly enriching themselves. Having pocketed the proceeds, they are happy to sit tight and ride out other people's austerity.

It is wrong to leave our debts to our children and grandchildren.
The McKinsey graph shows that as a nation we have always been paying off the debts of our ancestors. And our ancestors were paying off the debts of their ancestors. In any case, the objection to our children paying off our debts is not because they are so sweet and helpless. By the time they get round to coughing up they will be as gnarled and saggy as any other grown-up Briton. The objection is presumably that it isn't fair for them to pay for other peoples' mistakes. But that is already happening. In the words of the Governor of the Bank of England, Mervyn King:

Mervyn King, Governor of the Bank of England, in evidence to the UK Parliament’s Treasury Select Committee, March 2011.

Smokescreens are being thrown up by bankers and their beneficiaries in government claiming the credit crisis is all our faults. They claim that reckless lending by them could only happen if there was reckless borrowing by us. But if a building collapses because the well paid and professionally regulated architects and engineers put it up incompetently is it also the fault of the dead residents because they chose to live in it? If a drunk driver causes a motorway pile-up, is it also the fault of all the victims for choosing to be on the motorway at that time and place? If government regulated bankers, some of the most highly remunerated and therefore presumed competent professionals, say it is just fine to borrow is it our fault if we borrow?

It seems clear that politicians of all stripe, caring more for their paymasters than their constituents, see the crisis as an opportunity not to be wasted. The crisis has provided cover for reducing what is given to the 99% in the form of pay, pensions, benefits, and services including health (NHS) and security (police). It has also provided cover for the ongoing privatisation and outsourcing of services in the name of austerity.

Particularly in the last two decades the top 1% in Britain has taken an ever growing share of national income. They have done this more so than in any other major European nation. Having collected all the wealth, the last thing the wealthy would want to do is have to give any of it back. The second last thing would be to take on more debt to help the poor.

Referring to the Occupy Movement the above mentioned Andy Haldane, executive director at the Bank of England, commented:

“Occupy has been successful in its efforts to popularise the problems of the global financial system for one very simple reason:  they are right….I do not just mean right in a moral sense……For the hard-headed facts suggest that, at the heart of the global financial crisis, were and are problems of deep and rising inequality”

Getting out of the recessionary hole will need money to restart growth in the economy. This should come from a combination of taxes on wealthy individuals and companies, plus some borrowing. Cutting the incomes of ordinary Britons is just an opportunistic attempt at using the current crisis as a smokescreen to rip off the already ripped-off.


  1. well summed up.Too many 'entitlements' and consumer aspiration-lead justifications for pure greed. But guys look at some of the CEO salaries and severance packages in the charitable sector.
    Because they feelthey are worth it....ppplease!

  2. Who is making money on these Govermental loans? The rich bankers?

  3. "Osborne cut benefits for the poor" is a lie.

  4. ??? %GDP is used by everyone. BTW as regular readers of our blog will know, all our data comes from recognised sources. The %GDP graph (I think) you refer to is sourced from Treasury, Office of National Statistics, and McKinsey.

  5. If thats left wing idiocy then i have to wonder what kind of an idiot would not recognize that debt is serviced from the output of the economy that part of it is taxed by the gvt.Thus %gdp makes a lot more sense than absolute values.The ability to service it is relative to the national income duh...

    With that said even the debt/gdp ratio is not a perfect metric.And thats because you dont service 100% of debt every year.Debt Service / gdp would be more meaningful.

  6. Why the payday loan pop in on your site?

  7. If the size of public debt were a problem AT ALL, the figure which would matter is % of GDP. It is infantile to compare the absolute number of £ in 2010 with 1810 and say this means anything at all. The value of sterling has gone down quite a bit since then - and as our economy has grown, we have greater capacity to manage our debts anyway. In reality, the great majority of UK government debt is held by UK institutions, who use it as a way to hold assets safely and earn a modest income from them - so there is absolutely no prospect of the country being worse off as a whole when the debt goes up... except of course if cretin politicians use it as an excuse to slash public spending and to redistribute income from poor to rich. That is how a public debt 'crisis' would have a negative impact on the real economy. At present, the situation is even more farcical since the Bank of England is the biggest holder of government debt, due to 'quantitative easing'. So we literally owe the money to ourselves. Presumably Osborne knows this very well, but is a cynical politician.

  8. I bet that you are the type that wouldn't let us know what your true earnings are? Bet you nice and comfortable eh? xx

  9. It's generally acceptable to run a deficit in order to fund a war (if you can get someone to underwrite it), your kids and grand kids will understand why they are paying the debt off.

    It's far harder to explain why they should pay for us wanting to consume more than we produce.

  10. You accuse others of embellishment and then publish this bullshit? We've had high debt/GDP ratios in the past because of wars. The rebuilding program after WW2 boosted GDP enormously, increasing productivity. Ally this with women coming into the workplace and it's obvious how we paid down debt and increased GDP before.

    Now if you'd just like to explain what great boost we have in store for us, and why it's acceptable for a sizable chunk of the tax take to be spent on interest payments (which apparently you'd like to see more of, despite claiming to hate banks), then the nation is all ears.

    This blog is often good at outlining places the nation must make improvements, but sometimes you're so wide of the mark and apparently clueless that I wonder if you know what you're talking about at all.

  11. I'm sure my two uncles who died fighting the Japanese would be mystified as being considered part of the elite. Your cartoons are great but your analyses are poor.


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