National Debt still rocketing upwards.. where are the cuts?

[-:Undertaker:-]

http://www.dailymail.co.uk/news/article-2271961/Cameron-gets-ticking-statistics-watchdog-boasting-TV-hed-cut-national-debt-risen-289billion.html

Cameron gets ticking off from statistics watchdog after boasting on TV that he'd cut the national debt (it's risen by £289billion)

- PM boasted in party political broadcast that the government was 'paying down Britain's debts'
- National debt has risen from £811 billion in 2010 to £1.1 trillion at the end of last year
- The deficit - the gap between Treasury spending and taxes received - has fallen
- Head of UK Statistics Authority writes to Number 10 stressing the importance of knowing the difference


David Cameron was today accused told off by the official statistics watchdog for claiming the government had cut the nation’s debts.

The Prime Minister boasted in a Tory party election broadcast that he was ‘paying down Britain's debts’.

But the UK Statistics Authority today wrote to Number 10 pointing out that public net debt has actually risen by £290billion since the coalition was formed.

Labour’s Rachel Reeves said the slapdown was ‘hugely embarrassing’ for the PM.

The row centres on the difference between the national debt and the deficit.

Total national debt – the amount that the UK public sector owes – has risen from £811 billion in 2010 to £1.1 trillion at the end of last year.

However, the deficit – the gap between what the Treasury spends and what it receives in taxes – has fallen, from £159.0 billion in 2009-10 to £121.6 billion for 2011-12.

In a strongly-worded letter, today Andrew Dilnot, chairman of the UK Statistics Authority, said politicians must be clear about the difference between the two.

‘It is clearly important for all parties to public debate in this area to understand the relevant statistical definitions and to distinguish changes in the level of debt outstanding from changes in borrowing per period, and to reflect these in their communication of the statistical trends involved,’ he wrote in a letter to the Labour party which he also sent to Downing Street.

‘Public sector net debt is a measure of how much the UK public sector owes at a given time. Public sector net borrowing is the difference between total accrued receipts and total accrued (current and capital) expenditure over a specified period; this measure is frequently used by commentators to summarise the extent of any public sector 'deficit'.’

He added that he was sending a copy of the letter - with accompanying graphs setting out the relevant data - to Mr Cameron's chief of staff, Ed Llewellyn.

Miss Reeves, shadow chief secretary to the Treasury, said: ‘It is hugely embarrassing for David Cameron that he has had to have the difference between borrowing and debt explained to him by the chair of the UK Statistics Authority.

‘Now that his false claims have been exposed, it's time the Prime Minister stopped deliberately misleading people about his economic record.’

The Lib/Lab/Con are committed to higher and higher state spending (and bear in mind the figures above and from the ONS don't include the likes of PFI and Pensions) and it's exactly what we've got, despite the pretence of the Conservatives and Labour that there are tough cuts being made - spending is still increasing. We're actually spending more now than we have at any other time, even under Labour.

I saw a poll though that stated only around 3% of the public knew that there weren't actually any meaningful cuts in public spending, and that the debt is actually rising. I stated before the last election that the EU would be the issue in this parliament, well just wait until we go broke - because that's when people really wake up to the reality of whats happening.

Still though, I expect we'll go into the next election with the Tories arguing that they've made the 'tough decisions' and made harsh cuts (which appeals to the Tory base) and Labour will say the same but with a negative spin on it (which in turn appeals to their supporters). But the fact remains, none of them are anywhere near addressing the debt issue and we're running out of time - thats if we haven't already.

Thoughts?

[Chippiewill]

Not really very important, sure David Cameron's been found just outright lying to the general public, then again don't all politicians do that?

It's not surprising that they haven't cut down the national debt, it's simply not practical. Whilst you may suggest sweeping cuts to benefits, NHS etc. no proposal to dramatically cut and eliminate the deficit is actually feasible when the country is on financial rocks, you do not want to put the economy into a perpetual depression. Borrowing money is simply a fact of most modern countries and it's actually more cost effective for a country to be in debt anyway (Admittedly though, £1tn in debt is not a good place to be). You can suggest leaving the EU right this second as a proposal however the short term drop in tax revenue through trade restrictions would hardly be beneficial and you'd again be in the same boat with basically trashing the economy to pay back a debt that isn't particularly significant.

As you said neither labour or the tories are making an significant effort to combat the debt, and in reality they're just posturing. Probably because it's not all that helpful to eliminate the debt.

[-:Undertaker:-]

Not really very important, sure David Cameron's been found just outright lying to the general public, then again don't all politicians do that?

The fact that we're over £1tn in debt is very important.


It's not surprising that they haven't cut down the national debt, it's simply not practical. Whilst you may suggest sweeping cuts to benefits, NHS etc. no proposal to dramatically cut and eliminate the deficit is actually feasible when the country is on financial rocks, you do not want to put the economy into a perpetual depression.

This is a false keynesian argument thats always put forward. The key thing to remember is that the money the state spends does not stimulate the economy, it removes liquidity from the real economy and thus damages economic growth. The less state spending and the more thats given back in tax cuts, the higher the growth rates - because thats where growth comes from, as demonstrated by the Thatcher Ministry in the 1980s (some cuts, mainly deregulation & many tax freezes/reductions) and Canada in the 1990s (mainly cuts).

We have perpetual depression or recession because we have perpetual high state spending.


Borrowing money is simply a fact of most modern countries and it's actually more cost effective for a country to be in debt anyway (Admittedly though, £1tn in debt is not a good place to be). You can suggest leaving the EU right this second as a proposal however the short term drop in tax revenue through trade restrictions would hardly be beneficial and you'd again be in the same boat with basically trashing the economy to pay back a debt that isn't particularly significant.

As you said neither labour or the tories are making an significant effort to combat the debt, and in reality they're just posturing. Probably because it's not all that helpful to eliminate the debt.

So what, we just sit back and say "hey let it continue"? are you aware of how serious this issue is? it needs to be sorted, as does the debt in the United States - and it can be sorted, the Paul debt plan for the US (http://rt.com/usa/news/debt-paul-santorum-budget-053/) for example would have eliminated most of the deficit without much touching the welfare state. In the United Kingdom we're in a different boat, and the cuts are going to have to come from welfare similar to the ones enacted in Canada in the 1990s.

I also have no idea where you get the notion from that being in debt is beneficial for a country, never heard that one before.


You can suggest leaving the EU right this second as a proposal however the short term drop in tax revenue through trade restrictions would hardly be beneficial

But we're not going to leave this second and consquently won't have trade barriers put up against us thanks to Article 50 protocol. I don't see what this has to do with the issue at hand anyway, most trade is internal and of the small percentage that is external the EU is down to 38%.

[dggood]

Some very interesting points being raised here.. (at least the parts i could read, its late, im tired, there are some long paragraphs O_O )
I would just like to add, that yes tax cuts are good because it can create consumer confidence and lead to consumer spending, but problems still arise. Even if you increase consumer confidence, consumer spending may not follow as they may not know how long it will last and wish to save still for the next financial issue.
Stimulus injections are also good, as long as you control who you give them to. For example Australian government gave $1,000 to every student in Australia (a few other requirements) back in 2009/2010 to help stimulate the economy. With the statement of who you give it too in play here. how many of the students do you think would save $1,000 if they were just GIVEN it. A small percent, it is easier to spend something when you know nothing of what it is like to work for it, therefore the government almost knew that this stimulant would go into the economy. In general monetary stimuli has a multiple effect where if you inject $50mil it stimulates the economy and turns into $100mil
Anther issue with tax cuts is that, they are generally the main source of revenue for a government, if they lower their revenue they will not be able to lower the debt, which means they will still have higher interest rates due to risk of defaults, which means people can't take home loans because they are too expensive which will just cycle back and strain the economy after a brief moment that will most likely only benefit corporations for a short time.
These are all just different economical theories, in my opinion i think they SHOULD cut welfare. I know it may sound horrible but, humans use to be a survival of the fittest race... not so much anymore. I think welfare can be the biggest drain in government revenues, it gets used and abused, and the money they get, they dont not spend it on things that would stimulate local businesses.

[dbgtz]

However, the deficit – the gap between what the Treasury spends and what it receives in taxes – has fallen, from £159.0 billion in 2009-10 to £121.6 billion for 2011-12.


there's the cut.

[Chippiewill]

The fact that we're over £1tn in debt is very important.
..because? Eliminating debt is not even close to being relevant, any attempt to pay back the debt now will wreck the economy.


This is a false keynesian argument thats always put forward. The key thing to remember is that the money the state spends does not stimulate the economy, it removes liquidity from the real economy and thus damages economic growth. The less state spending and the more thats given back in tax cuts, the higher the growth rates - because thats where growth comes from, as demonstrated by the Thatcher Ministry in the 1980s (some cuts, mainly deregulation & many tax freezes/reductions) and Canada in the 1990s (mainly cuts).

We have perpetual depression or recession because we have perpetual high state spending.

In the UK we have had austerity cuts, fact, maybe very little compared to what you would like but still a lot. Prior to the austerity cuts our economic recovery was in line with America, we can hardly say that we're still in the same boat. Maybe long-term reducing government spending is a good thing. But short term it does not serve a purpose.


So what, we just sit back and say "hey let it continue"? are you aware of how serious this issue is? it needs to be sorted, as does the debt in the United States - and it can be sorted, the Paul debt plan for the US (http://rt.com/usa/news/debt-paul-santorum-budget-053/) for example would have eliminated most of the deficit without much touching the welfare state. In the United Kingdom we're in a different boat, and the cuts are going to have to come from welfare similar to the ones enacted in Canada in the 1990s.
The plan might have been sound but unless it could get through congress it would be absolutely pointless.


I also have no idea where you get the notion from that being in debt is beneficial for a country, never heard that one before. We borrow at such a low rate that borrowing boosts our economy ahead. At the same time we borrow in our own currency, thanks to the wonders of inflation we can reduce debt by just sitting on it. £1tn certainly isn't a good amount to sit on however the idea that all debt is made on a macro-economic scale is ridiculous.

[-:Undertaker:-]

Anther issue with tax cuts is that, they are generally the main source of revenue for a government, if they lower their revenue they will not be able to lower the debt

Tax cuts are the only good stimulus, you spoke about stimulus earlier on - stimulus is only any good when it's the peoples own money spent by the people who earnt it, that way it's saved and invested and not spent (because spending, unlike what the media have told everybody, does not run the economy - production of products and services does).

Thatcher managed in the 1980s to encourage growth by having some cuts but she mainly focused on deregulation and tax cuts. It worked.


there's the cut.

That's not a 'cut' - its only future spending thats being cut, and you can't cut something thats not yet been spent.

If my household budget today is £500 a week and I can only afford to spend £300 a week - well i'm £200 a week in debt. So whats the sensible thing to do? cut it back to £300 a week or lower to pay back what I owe. This government however looks at the books and says "hm, obviously this spending can't go on - and I was going to start spending £900 a week next week, so i've decided we'll cut back to £700 when the time comes". Meaning obviousy that the debt is going to get even worse, as it has under this Ministry.


..because? Eliminating debt is not even close to being relevant, any attempt to pay back the debt now will wreck the economy

So we shouldn't attempt to pay it back then? is that what your saying?

Do you not understand that we're reaching the point now where the debt is becoming so large (and thats not including all of the stuff off the books) that we're not going to be able to pay it back? and what happens then? lenders stop borrowing altogether and the economy crashes.


In the UK we have had austerity cuts, fact, maybe very little compared to what you would like but still a lot. Prior to the austerity cuts our economic recovery was in line with America, we can hardly say that we're still in the same boat. Maybe long-term reducing government spending is a good thing. But short term it does not serve a purpose.

The cuts are a myth, as shown by government spending. So the idea that cuts have stunted growth is absolutely ridiculous, infact its the opposite - the government is following the route you propose (more spending) and the economy is getting worse.

It's the same in America and across Europe - there's a lot of talk of cuts, but they're only talking about cutting plans for future spending increases. That's not a cut, thats simply reducing the amount you were planning to spend and keeping it roughly the same as now.

Which of course is fruitless, as spending levels now are what is bankrupting us.


The plan might have been sound but unless it could get through congress it would be absolutely pointless.

Yes, which is why we and the United States are stuffed.


We borrow at such a low rate that borrowing boosts our economy ahead. At the same time we borrow in our own currency, thanks to the wonders of inflation we can reduce debt by just sitting on it. £1tn certainly isn't a good amount to sit on however the idea that all debt is made on a macro-economic scale is ridiculous.

The idea that government spending boosts an economy is utterly ridiculous, government spending only removes money from the real economy by either a) taking it directly out of the economy today via taxation or b) taking it out in the future to pay off the debts then. What you've written in this thread about state spending being essentially good for the economy is unbelievable.

But hey, within a few years we'll hit reality (like Greece, like Argentina, like Spain). The sad fact is though, that those of us who warned that we needed to make massive cuts whilst we still could (before debt interest payments spiral out of control) will have been totally ignored.

...and thats when, politically, people who have lost everything will start turning to demagogues for the solutions.

[dbgtz]

That's not a 'cut' - its only future spending thats being cut, and you can't cut something thats not yet been spent.

If my household budget today is £500 a week and I can only afford to spend £300 a week - well i'm £200 a week in debt. So whats the sensible thing to do? cut it back to £300 a week or lower to pay back what I owe. This government however looks at the books and says "hm, obviously this spending can't go on - and I was going to start spending £900 a week next week, so i've decided we'll cut back to £700 when the time comes". Meaning obviousy that the debt is going to get even worse, as it has under this Ministry.

Yes I know what deficit is. It was the cut in deficit comparing 09-10 and 11-12 so I don't know what this "future spending" malarky is about...

[Chippiewill]

So we shouldn't attempt to pay it back then? is that what your saying?.
That's not what I said. Straw Man.


Do you not understand that we're reaching the point now where the debt is becoming so large (and thats not including all of the stuff off the books) that we're not going to be able to pay it back? and what happens then? lenders stop borrowing altogether and the economy crashes.
There is not a magical point where it becomes impossible to pay back debt you seem to have failed here with basic mathematics, debt = debt + government-spending - tax-revenue. A little thought reveals that if at any time tax revenue is greater than government spending then the debt will shrink, there is no effect by

a) When you pay debt back
b) How large debt is

On your ability to pay back said debt. Lenders might lose faith and stop letting us borrow at AAA, however it doesn't suddenly mean we can't pay it back.


The cuts are a myth, as shown by government spending. So the idea that cuts have stunted growth is absolutely ridiculous, infact its the opposite - the government is following the route you propose (more spending) and the economy is getting worse.
I was trying to keep it in simplistic terms, by cuts I meant any effort to reduce the spending deficit, which clearly HAS happened (Deficit has decreased) which has clearly had a hit on the economy since we are no longer tagging along with the Americans, it's not a proposal, it's not a theory, it's a statistical fact.


It's the same in America and across Europe - there's a lot of talk of cuts, but they're only talking about cutting plans for future spending increases. That's not a cut, thats simply reducing the amount you were planning to spend and keeping it roughly the same as now.
That is a cut; they have a plan, they cut spending from the plan, that is a cut. And actually if you adjust for inflation it's probably a cut outright (Aka in the limited form you envisage a cut).


Yes, which is why we and the United States are stuffed.
There's more than one way to cook a pie.


The idea that government spending boosts an economy is utterly ridiculous, government spending only removes money from the real economy by either a) taking it directly out of the economy today via taxation or b) taking it out in the future to pay off the debts then. What you've written in this thread about state spending being essentially good for the economy is unbelievable.

So you're saying that bailing out banks doesn't help the economy?

You're saying that Obama, didn't save the auto industry? Or maybe you're saying that an entire industry, doesn't affect the economy?


But hey, within a few years we'll hit reality (like Greece, like Argentina, like Spain). The sad fact is though, that those of us who warned that we needed to make massive cuts whilst we still could (before debt interest payments spiral out of control) will have been totally ignored.

...and thats when, politically, people who have lost everything will start turning to demagogues for the solutions.
Or maybe we'll just do an iceland.


If my household budget today is £500 a week and I can only afford to spend £300 a week - well i'm £200 a week in debt. So whats the sensible thing to do? cut it back to £300 a week or lower to pay back what I owe. This government however looks at the books and says "hm, obviously this spending can't go on - and I was going to start spending £900 a week next week, so i've decided we'll cut back to £700 when the time comes". Meaning obviousy that the debt is going to get even worse, as it has under this Ministry.
That's a false analogy and any economist will call you an idiot for suggesting this is relevant.