Thursday, March 19, 2009

Brown's Scorched Earth Policy on Budget Deficit

I have just seen the news that the UK budget deficit has grown to £9 billion. A year ago it was just over £1 billion. Do I really need to comment further? OK then, I will.

I genuinely believe that Brown is adopting a scorched earth policy on public borrowing and debt. He's got nothing to lose, apart from his reputation, but that's already down the swanney. So expect more huge fiscal stimuli in the budget and more reckless bailouts. Sadly it will be the Tories who have to dig us out of this mess and the country's taxpayers who will pay for it all. As per usual. What a fiasco.

30 comments:

Tom said...

"Scorched earth" is about the least appropriate metaphor I can think of for your argument. You're complaining that he's spending too much money. That's the precise opposite of scorched earth. It's a funny old scorched earth policy that attempts to prop up manufacturing and build more schools and hospitals, isn't it?

Chalcedon said...

But it's what Labour always does. It ends up with high unemployment and bankrupts the country. It's only because people have short memories, weren't born then or were conned and or bored with the previous conservative admin that these bozos were voted in during 1997. They have no chance next year so I agree about the scorched Earth policy. Can they be prosecuted by a new government?

no longer anonymous said...

We should cancel it. That will stop the government borrowing large sums of money ever again.

JuliaM said...

"It's a funny old scorched earth policy that attempts to prop up manufacturing and build more schools and hospitals, isn't it?"

'Build more schools and hospitals'...?

I take it you have seen the news...?

Jonathan Cook said...

Looking at the news on Bloomberg - three comments back up your 'scorched earth' concerns:

"Economists say the gap may reach 10 percent of GDP, putting pressure on Prime Minister Gordon Brown to refrain from a further fiscal stimulus. Whereas Brown seems determined to spend more"


"Net debt stood at a record 49 percent of GDP, or 717.3 billion pounds, in February."


"Debt my rise by as much as 1.5 trillion pounds, equal to 100 percent of economic output, when nationalized lenders Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc are taken the government books, the statistics office estimates."

http://www.bloomberg.com/apps/news?pid=20601102&sid=ajlmIlv8hV_I&refer=uk


Brown is not following the same policy as Obama. I believe that Obama has committed to reduce US deficit from a peak of $1.5Trn to $533Bn by 2013.

titus-aduxas said...

Scorched Earth policy: "A military strategy or operational method which involves destroying anything that might be useful to the enemy while advancing through or withdrawing from an area."

ZaNu Labour are destroying as much of the fibre of Britain as they can (and what they haven't already destroyed).

Gareth said...

I disagree that it is intentional. I think he has just doesn't know what he is doing.

Part of the problem is that he believes he must be seen doing things (whether they eventually get done is not the point with him). A serial intitiative launcher. Review upon review. Plan upon plan. Seemingly desparate for a good headline, a moment of sunshine. Has he ever stopped to consider the risk of doing the wrong thing as opposed to solely considering the risk of doing nothing?

Perhaps his biggest fault is that for all his supposed power and authority, he really has been run ragged by the civil service. For more than a decade the civil service have been enlarging and moving us towards a less and less democratic nation. Even when Ministers assure us this is not the case we can see it with our own eyes. Gershon savings that aren't. Mandarins out of reach of our democratically elected representatives. Services increasingly being manoeuvred away from the oversight of Parliament. A ballooning of public sector employment with little beyond far larger bills to see for it. Massive waste on consultants and white elephants.

Whether they are socialist or conservative, big or small State politicians, no Minister can surely and honestly want taxpayer's money to be wasted like it is. So is it now largely out of their control? It certainly didn't start in 1997. We've been heading that way for decades but it has progressed rapidly under Labour.

strapworld said...

Iain,

Are you talking about the same Gordon Brown whom some Italian, who works for the Pope, says should be awarded the Nobel Prize for economics ?

Victor, NW Kent said...

Strapworld - some of us remember exactly how badly the Vatican Bank was run and it is still not healthy.

So when one has one incompetent lauding another you know that it has been a meeting of two fools.

Alfred T Mahan said...

I don't think Gareth's all that far off the mark, but we may both be being naive. I think that our Great Helmsman is still at heart the undergraduate Socialist - that's why he talks of this being an opportunity and privately welcomes state control of the banks. He can't understand why the rest of us see enlargement of government as a bad thing.

He has also swallowed the Keynesian Fallacy hook, line and sinker, so he fails to see that government spending doesn't stimulate an economy, it merely redistributes spending from the private to the public sector.

By the time all this is over, Keynesianism will be dead except in the minds of unreconstructed lefties.

subrosa said...

At March 19, 2009 6:35 PM , Gareth said...

In part I don't think he realises the damage he's doing to England and Wales, but he has this hatred of the SNP being in government in Scotland and, at the expense of England an Wales, he's quite prepared to ensure Scottish independence can't happen. "I will do everything in my power to make sure Scotland never leaves the union" has been his mantra since May 2007.

He knows well he's useless as a PM and also that his chancellorship is now being exposed as more than useless.

Roger Thornhill said...

I agree Iain.

Dave is AT LAST speaking out about not making promises on spending, but we will of course get all the same old in-denial Socialists bleating on about "tory cuts", blaming "free markets" and "greedy bankers" from now until 2100.

If you thought the blame shifting to Thatcher was bad, "you ain't seen nothin' yet!"

Sobers said...

I think a scorched earth policy is a precise description of what is going on here. Any fiscally prudent government of any political hue would be honest with the electorate at this point and say 'look we've spent too much in the good years, we can't really afford to pay the automatic stabiliser amounts (ie higher benefits etc as employment falls) but we will muddle through. However large tax rises, and spending cuts are just over the horizon as soon as the economy shows any sign of recovery. We have to cut expenditure and raise more tax to balance the budget.'

Labour know they are out on their ear in June 2010. It will be a replay of 1997 in reverse. By spending every bit of money they can now, and even printing it, with not a peep as to how it can be repaid, they know that there will follow 5 years of grindingly hard Tory govt, as they try desperately to combat low tax revenue, low growth, repaying debt, higher inflation.

After 5 years of that, given 30% of the population will vote for a shaved chimp with a red rosette, it won't take many disillusioned Tory defectors to return for Labour to get at minimum a hung parliament, and even their own majority, with a much improved economy and fiscal position.

If Cameron had any sense he would opt out of the next election. Say to Labour ' You got us in this mess, you get us out of it'. And sit on the sidelines for 5 years watching them deal with their own mess. Then step in in 2014/5 in a much better position.

But he won't. Because the Tories (generally) do what they think is best for the nation, not their own party. No Labour govt would have ever let the opposition get into power with such a good fiscal position as 1997.

Mirtha Tidville said...

Sobers is right.....just think they could come back in 2014 with Mad Hattie at the helm......Yikes..lets hope for a complete wipe out next year then...

Eddie said...

1970's Old Labour = Old Bankrupt Britain
2000's New Labour = New Bankrupt Britain

Oliver Drew said...

If Gordon Brown is undertaking a "scorched earth" policy it is risky because there is a chance (no matter how minute) that the economy turns around and Labour get re-elected with a tiny majority at the next election.

If that does happen they would be in serious serious trouble.

As it happens the most likely outcome is a Conservative victory which makes this strategy a fairly solid one from Brown's POV.

If the Tories get elected I think the electorate would give them a one term "free pass" though given the circumstances, but the Tories would have to come clean immediately with regards to what they were gonna do - cutting spending and tax rises.

Plato said...

Yep scorched earth is about it - spend like f*ck to prop up your own vote and make life after your demise virtually impossible.

Tories should start talking now about living within your means, the impact this debt splurge will have on your children and your retirement.

People aren't stupid and know that things were too good to be true.

Dave needs to be straight and positive way ahead of the 'cuts' curve so that its worn out by the time of a GE.

My 2p :)

wv wisicat - probably a lot smarter than this old goat.

Sobers said...

@ Oliver Drew:

I don't think the electorate would give any party a 'free' term in office and vote them back in after 5 years if those 5 years had been unmitigated horror.

Especially as the electorate don't love Dave particularly, they hate Gordon and Labour (at the moment), because the illusion of effortless wealth generation via rising house prices and mortgage equity withdrawal, and BLT, has been smashed. If Dave & chums can't 'fix' that (which of course they can't as the whole economic model is broken, and we are facing a sea change in our economic circumstances) the floating voters will soon change back to whichever lying politician promises to get the good times rolling again.

The nation is in denial about the level of wealth we generate, and what level of consumption (both private and public) is compatible with that wealth generation.

Things will have to get a lot worse (massively falling currency, 10% and rising inflation, capital flight, refusal to buy gilts by foreign investors, effective bankrupcy of the government - ie no cash to pay the state sector wages) before the penny will drop.

Oliver Drew said...

@Sobers - perhaps you are right. But do you not think that the Conservatives could rightly get the message across that Labour broke the nation, not them?

I think that you are right with your last comments - about things needing to get a lot worse before the penny drops - I hope they don't for all our sakes, but unfortunately I think its just round the corner.

And what with the budget now being on April 22 (my birthday), that will make for an "interesting" day!

Lola said...

Sobers and drew - whatever rationale we speculte that is behnd Brown's behaviour it is to my view traitorous. He must by now realise that his whole project has failed and would never has succeded under any circumstances so to persist with the current spending policies is just deliberately destructive. It is not dis-similar to what went on in the Third Reich as the Allies closed in on Berlin. He'll take down the UK with him, and not bat an eyelid.

Sobers said...

The Tories have one shot at getting it right in 2010. Everything must be done after the election. Immediate Emergency Budget. Taxes to go up at once, heavily, spending must be axed across the board (avoiding the schools'n'hospitals shibboleths of course). Deep cuts in the quangos, local govt, changes to public sector pensions, benefits etc etc. There will be uproar, but it all can be blamed on the previous incumbents. 'We've looked at the books and its worse than we ever imagined' etc etc. Get all the bad stuff out of the way ASAP.

Then they have 4 years to hope the economy improves enough to allow tax cuts into the 2014/5 election, and some sort of feel good factor.

Otherwise, hello hung Parliament, or even Prime Minister Gordon Brown (part deux). He'll never resign. They'll have to prise his hands of the Labour Party leadership finger by finger.

@Lola: I think its obvious by now that GB is not the full ticket. His version of reality is very different to everyone else's. Classic cognitive dissonance. He can't square what is happening with what he thought should happen, and rather than admit he was wrong, he changes the external reality to fit. You can see it in the tension with Alistair Darling. Darling realises the damage being done to the nations finances and wants to stop digging. Gordon's response is 'Bring more shovels!'.

The Grim Reaper said...

Is there anyone who doesn't now believe that Brown needs to be sectioned?

Man in a Shed said...

The solution is straight forward.

In his response to the budget speech David Cameron should announce a limit on borrowing that a future Conservative govt will not honour the debt for, without an immediate general election being called.

The basis for this is that the current government has no democratic mandate. Its leader was appointed unopposed and it stood for the last general election on the basis that Blair would serve a full term. At no point did they stand on a platform of enslaving the whole nation to debt and selling us into bounded slavery to foreign powers.

Gordon Brown will then be unable to raise the debt he needs to try to keep Labour MPs, and perhaps himself, of the dole.

Lola said...

Man in a shed. Hmmm. Good idea but would it work? Putting aside for the moment the political dimension and the opportunity for mega spin it would present to new labour I am not sure that he could actually do that. For a start we are a democratic country and we agree to be bound by what the elected government does even though some of us (a lot of us?) may not agree with them. And I woulod not want to be associated with a country that did not pay its debts, especially to foreign peopls and their governments.

Sobers said...

Interesting concept, but unworkable I suspect. Lets say PSBR 08/09 turns out to be £90bn, and Cameron says the Tories will not honour debt above that for 09/10. Labour then borrow £120bn in 09/10. How do you decide which bond holders don't get paid? Or do they all get a 25% haircut? The govt constantly issues new gilts and repays old ones. Ascribing any particular issue to a particular level of borrowing is impossible. All it would do is frighten the buyers and push borrowing costs up massively, at a point when we need to borrow large amounts, whoever is in power.

Tone made me do it - he's a bad influence said...

The Smoking Gun?
http://www.ft.com/cms/s/0/069577d8-14d9-11de-8cd1-0000779fd2ac.html

not an economist said...

Iain,

I dont think this is scorched earth policy. Rather I think Brown genuinely believes his policies are spot on and they are what is needed to avert recession. We may think its madness but there are a lot of economists out there who think massive injections of money into the economy is the right thing to do.

CityUnslicker said...

It is scorched earth and has been for a long time.

Thatcher nearly did not turn it around in 83. Many said she would have lost but for the Falklands; i think this is the history lesson Brown is looking too.

acadman said...

Whether this is a scorched Earth policy or not, Brown is certainly completely tribal in his thinking and never does anything which may damage the Labour vote or its supporters livelihoods. Neither does he make difficult decisions that may damage his own position (e.g. opposition to public sector reform, no building of Nuclear Power stations). Cutting public spending now would do both.

For all his supposed intellect I think he is a one trick pony - his one instinct is to increase public spending and government control in every situation. Good times - increase public spending, bad times - increase public spending.

Its clear that those who said he may be autistic in some way were not exaggerating.

davidc said...

victor nw kent@- 'Strapworld - some of us remember exactly how badly the Vatican Bank was run and it is still not healthy.'

but didn't the head of the vatican bank end his days hanging from the underside of a london bridge rather than commuting part of his pension to a very healthy cash lump sum ?