I’m just wondering, is the UK economy really as bad as it seems? Or is it just media hype trying to whip the public into a frenzy, because on one hand I hear we’re going to go down the same way as Greece, then on the other hand, I hear we’ve got the lowest national debt in the G7.
So what’s the lowdown on this? Is the UK economy going to enter catastrophe or is it going to lurch forward?
I have nothing informed to say, I’m afraid. Even the assertion I’m about to make, which is that it’s difficult to answer your question until we see who wins the election, isn’t very helpful.
In a semi-related way, I was just watching the leadership debate on the economy and wondering how Gordon can think it’s quite such a huge selling point that public sector pay is going to be frozen. He goes on and on about it. Um, yeah, it may be popular with some people, but there are nearly 6.1 million people employed in the public sector. It’s unlikely to be that popular with many of us, even though the public sector tends to be a hefty chunk of the Labour vote.
I was just listening to NPR where they have selected stories from the BBC. They just had one on the British economy and it sounded pretty bad. The story was about people who just wanted politicians to admit that there are only three real choices now:
I was just casually listening but it sounded pretty dire.
Which may be like saying we have the safest suite on the Titanic.
Actually, I’m pretty humble about my grasp of international economics, but some people I trust are pretty worried:
I was thinking that - I’m out of the country at the moment, but am a public sector worker when I’m in the UK… I can understand why they would freeze pay in the public sector, it’s probably better than firing people. But I wouldn’t have gone on about it, if I were him; you’d have thought Labour could use every vote it can get at the moment, and the people who are pissed off with Labour aren’t going to be suddenly converted by a public sector pay freeze.
Brit here. We’re in the shit, but not so deep that we cannot dig our way out. As for public sector pay, public sector workers should remember that they are paid for by tax on the private sector. That money is significantly diminished at the moment. Indeed, they should be glad that no one is pursuing the Irish option of pay cuts.
Hate to break it to you, dear, but I pay tax too. And I pay the exact amount I should, no questions, unlike many in the private sector. Sorry if you can’t quite hear what I’m saying: it’s difficult to lick your boots, thank you for my job and pay all my tax at the same time.
I keep hearing about how WE’RE ALL GONNA DIE!!! but I’m not actually seeing any evidence of it personally, but then I live in London and work in the public sector so possibly am a bit insulated from the places experiencing it most (and funnily enough no, I’m not all that thrilled by a public sector pay freeze either).
The thing that keeps confusing me is how did we go from a position of supposed economic stability to one in which the deficit is suddenly some kind of leviathan threatening to drag Britain into the ocean, and public debt is suddenly considered to be inherently evil. How did this happen in such a short space of time? Did this £60 billion budget deficit creep up on us or something? I don’t remember ever hearing about this as a problem until the very end of last year. As for public debt, we’ve always had public debt, every country does, it’s the foundation of modern government finance. I can’t help but feel it’s all being over-hyped a little.
I can say though that if you were to put me in charge of public finance I’d be able to find you the cost of the deficit easily - a huge amount of government funding goes onto wants rather than needs. We can no longer afford wants, let’s just get rid of them.
As did I when I worked in the public sector. Doesn’t stop the fact that your job is - and mine was - paid for by the private sector. Do you think that funding comes from nowhere? Oh wait, that’s why we’re running a deficit of £500M per day.
Makes no sense. You will always pay less in tax than the tax that has to be collected to pay for you!
Anyhow, in response to the OP - have you read what Merv the Swerve had to say?
Of course one big problem is that the usual method is to inflate our way out of it. Sadly, 80% of our debt is inflation linked*…
*Before some nob comes along and says something like “gilts aren’t 80% linkers” or such shite, bear in mind the worst debt is the public sector pensions. Oh, and gordon ruined private pensions earlier, which was a shame…
The current deficit is not sustainable in the longer term, but luckily it won’t have to be. A few years worth of expanding economy will reduce it to normal UK levels. Oh, and some public sector workers will have a pay freeze, sorry teachers and nurses, that’s going to be amusing for multi-millionaire man of the people Dave and his jolly good chum Gideon.
Of course, there’s always the bank shares to sell. I’ve no idea how a government can offload those without causing market problems, but I’m sure someone will know someone’s father.
Yeah the poisoned chalice, it’s quite annoying. However when media types say ‘biggest deficit since WWII’ they don’t quite realise that we can get the money back once the economy expands and we call our so called ‘tabs’ on the banking sector.
Might be an idea to join the Euro if it ever stabilises.
No I’m being serious, for one it would lower unemployment.
But thinking about it does bring me out in a cold sweat.
Two words: Labour government. They were all prudence in their first term, but from about 2000 onwards they spent money like crazy. Some people were talking about it at the time. The Tories, for example.
I think the idea that a couple of years of growth will clear things up underestemitates the scale of the problem. It will needs more like a decade or so of good growth.
As for joining the Euro, I take it you haven’t been following the news lately? You must be the last person left who wants to join. Even Nick Clegg was trying to laugh it off with “Us? Join the Euro?” in the PM debate the other day. What has happened in the last year, and possibly in the next couple of years, is pretty convincing evidence of the craziness of the whole Euro project, or at least of letting in basket-case countries like Greece.
It does seem like currency unions are fraught with problems. It’s nice not to have to exchange your money each time you travel a few hundred miles onward. OTOH it means no monetary policy can be implemented unless all the countries agree.
I didn’t know there was such great concern about this in the UK, although I had heard of a very difficult economy in the Republic of Ireland.
Ha! It’s only about the second most bitched about thing people don’t like about being in the EU here. 
Ha! I’d think that if the Euro can even hold itself together, it’s not going to be accepting new applicants any time soon 
Is it not obvious that being outside the euro was of great benefit to the U.K. during the last couple of years? As opposed to, say, Greece, which was locked into a structure in which it was unable to adjust interest rates and had no exchange rate of its own to depreciate? That’s not to say that I agree completely with the decisions made by the U.K. financial authorities, but I think it’s clear the country is much better off outside the euro than it would be inside.
Yes, we learned that lesson with the ERM in the early 1990s.