Who says there is a recession on?

[Morat]

Don't think it's controversial. Was in the press a bit when the public sector job cuts were announced along with the likely loss of the same number of jobs in the private sector for precisely this reason.

 

Have a dangerously revolutionary source: http://m.guardian.co.uk/commentisfree/2010/sep/08/cuts-derailed-alternative-unions?cat=commentisfree&type=article

 

But what is the government spending? Tax revenue. No matter how you slice it, the public sector is funded by the private one. Don't get me wrong, I know that the public sector is vital - but when the private sector shrinks, and the government can no longer borrow to cover the shortfall, then the public sector will have to shrink as well.

 

just wait until the inevitable rise in interest rates.

 

Yes, that is when we'll see some screaming. The current situation very much favours the people who have over-borrowed (including the treasury).

 

I guess it is all relative. my ex partner who qualified as a doctor in 1985 spent many years on very low earnings as a GP working many hours and on call 24 hours a day. Yes in the last few years she has started earning some decent money. The peoples whose lives she has saved did not seem to concerned what she was earning.

My nephew will start the slog to becoming a doctor this September this will involve at least 5 years as a student meaning before he qualifies he will have debts of about £70,000, he will need a fairly decent salary to service that debt.

 

My experience of the public sector was similar, except I earnt very much less, was "on call" for six months at a time and the lives at risk included my own. I can assure you that the Student Loan Company letters still got through.

Edited June 1, 2011 by Morat

[ymu]

But what is the government spending? Tax revenue. No matter how you slice it, the public sector is funded by the private one. Don't get me wrong, I know that the public sector is vital - but when the private sector shrinks, and the government can no longer borrow to cover the shortfall, then the public sector will have to shrink as well.

If that happens, where is the money coming from? Who is spending?

 

Cuts can't reduce the deficit if tax take falls and benefits increase. It's what we tried in the '30s and it caused the great depression. It's been tried 30 odd times since in response to recession and it does not work. It cannot work.

Edited June 1, 2011 by ymu

[Morat]

OK, borrow more money and default on the loans when the interest payments get too high.

 

Benefits may well go up, but they're not going to be generous under the current regime - they're already cutting them as hard as possible. There is a simple see-saw here. If the public sectors costs too much, then the private sector can no longer support it. The government's income comes from the private sector and loans. Yes, money is recirculated through the public sector but ultimately the public sector does not generate wealth.

 

To say that cuts cannot work is irrelevant - we have no option. There is no more tax revenue to take and we can't afford any more loans. The only option is to reign in public spending and ride out the recession. Who will get hurt? The little guy - as always. Not the boards of RBS, HBOS and Northern Rock who are the real villains in this.

Edited June 1, 2011 by Morat

[sociable_hermit]

The dominant characteristic of all big Government-led organisations, sooner or later, is inept management.

 

The electorate can see that most of our public services are badly managed and they are demanding change.

 

Unfortunately the people generally entrusted with bringing about this change are the very officials who made things so bad in the first place. A manager looking for efficiency cuts won't ever sack themselves, they'll always pick on someone lower down. Even if the person lower down is actually very efficient indeed. As a consequence most of the public sector is top-heavy and yet again we are seeing cuts on the front line, which will only make things worse.

 

Rest assured the big boys - banks, oil companies, weapons manufacturers, drugs companies - are all doing fine thanks very much. The biggest joke of all is to cut back spending on public services, because our spending has been based on "unsustainable debt", whilst simultaneously keeping interest rates down to reward those who managed their finances foolishly, punish those who planned ahead, and basically start the whole cycle off again.

[ymu]

OK, borrow more money and default on the loans when the interest payments get too high.

Well, we still have very cheap debt because we're in good economic shape.

 

the only way to reduce the deficit is to grow the economy, so that when the private sector is spending again there's an economy left for them to operate in. Otherwise we stagnate. Every credible economis in the world agrees here ... you can easily find their articles for yourself if you want to know.

 

We need to build housing and invest in energy self-sufficiency. It'll pay dividends, as I think they say in the private sector, where leverage/borrowing is a good thing, not a crime.

 

I feel slightly dirty making such pro-capitalist arguments, but needs must.

 

OK, borrow more money and default on the loans when the interest payments get too high.

 

Benefits may well go up, but they're not going to be generous under the current regime - they're already cutting them as hard as possible. There is a simple see-saw here. If the public sectors costs too much, then the private sector can no longer support it. The government's income comes from the private sector and loans. Yes, money is recirculated through the public sector but ultimately the public sector does not generate wealth.

 

To say that cuts cannot work is irrelevant - we have no option. There is no more tax revenue to take and we can't afford any more loans. The only option is to reign in public spending and ride out the recession. Who will get hurt? The little guy - as always. Not the boards of RBS, HBOS and Northern Rock who are the real villains in this.

Level of benefits is irrelevant - benefits or crime, it all costs. Having millions not spending hurts the economy more than paying benefits to allow them to spend. Cuts are not savings, put simply. Osborne's plan increases private borrowing by 300bn, he saves 43bn. Bonkers.

[Morat]

/me passes ymu a sponge

 

To be frank, at the moment I think the economy is exactly where the treasury want it - in very small positive growth with some (historically low) inflation to take the edge off the debts that have been incurred recently. Whether the next round of cuts throws us into recession has yet to be seen but I suspect (based purely on a hunch) that the government would be quite happy to find a way of controlling inflation that didn't include raising interest rates and alienating their (house owning, debt ridden) core voters.

 

I would love to grow the economy but I don't think that we can take the lead here since too much of our economy is/was based on financial "products" and service industries which pretty much ensures that we will lag behind the nations with more of an industrial base. IIRC I read recently that manufacturing is about 12% of our GDP but a much higher proportion of our visible exports.

 

I also feel dirty for proposing that we need to "control the means of production" but it would be bloody handy to have a stronger industrial base that could produe more exports right about now.

[cotswoldsman]

ultimately the public sector does not generate wealth.

 

 

 

Try telling that to BAE or any of the thousands of private companies and there employees that rely on public sector spending. We live in a country that has no manufacturing so the private sector is mainly reliant on service industries, just look at the FTSE 100 companies.

[ymu]

How does the publc sector not create wealth. Anyone care to look for a plot of countries by the size of their public sector and their purchasing power per capita? Or is it too obvious to bother checking?

 

Which countries with little or no public sector are rich, please?

Edited June 1, 2011 by ymu

[MtB]

How does the publc sector not create wealth.

 

 

I think you're confusing cause with effect. Skoolboy economics says private sector creates wealth and the public sector spends it, basically.

 

I'd ask the question the other way around. How does the public sector create wealth?

[carlt]

How does the public sector create wealth?

It spends it on the private sector, enabling the private sector to create it.

 

When I worked in the public sector my budget kept a handful of public sector employees in a job whilst hundreds of private sector employees and many private businesses, relied on it, for their work.

[Morat]

Raising taxes and spreading them around is not making money.

When the Government "Buys British" it merely ensures that the money stays in the country. A company like BAE only helps the GDP when it exports, which is why flogging everything from torture equipment to fighter jets to unsuitable governments very popular indeed with the Treasury.

[carlt]

Raising taxes and spreading them around is not making money.

When the Government "Buys British" it merely ensures that the money stays in the country. A company like BAE only helps the GDP when it exports, which is why flogging everything from torture equipment to fighter jets to unsuitable governments very popular indeed with the Treasury.

That depends on your definition of "wealth".

 

Personally I'm sick and tired of calculating our country's condition by counting how many pounds the richest have, whilst ignoring how much the poorest do without.

 

This country is still in the depths of recession whilst other countries are now in growth, without the 'austerity' measures, that the UK's wealthiest have imposed on the poor.

[Guest]

I'd ask the question the other way around. How does the public sector create wealth?

 

During the 'boom' years our local authority replaced virtually everyone of it's secondary schools and the health Trust I worked for commissioned a fantastic state of the art Primary Care hospital.

 

Now Private finance schemes have their faults BUT all those buildings created loads of jobs on site and in the supply chain.

 

I wonder were all those engineers, sparkies, brickies and joiners are now?? and how much disposable income will they have now that they will be collecting job seekers allowance or have gone abroad to seek work. Ditto for those that supplied all the mateials.

[Chertsey]

During the 'boom' years our local authority replaced virtually everyone of it's secondary schools and the health Trust I worked for commissioned a fantastic state of the art Primary Care hospital.

 

Now Private finance schemes have their faults BUT all those buildings created loads of jobs on site and in the supply chain.

 

I wonder were all those engineers, sparkies, brickies and joiners are now?? and how much disposable income will they have now that they will be collecting job seekers allowance or have gone abroad to seek work. Ditto for those that supplied all the mateials.

But don't forget also that for the next thirty years the local authority and the health trust are going to be paying massively for this, way over what they would have paid had they been allowed to commission the buildings directly (which would have created just as many if not more jobs) and that is public/taxpayers money over the next thirty years going into the coffers of the private sector rather than on public services. PFI hospitals (no I can't remember which ones) are already closing wards in order to cut costs so that they can meet their payment obligations to the private sector firms they entered into PFI with. PFI was and still is an appalling system from the taxpayer's and the public's perspective, which you would have expected from a Tory govt but which was obscene being perpetuated and expanded by a Labour one.

[Guest]

But don't forget also that for the next thirty years the local authority and the health trust are going to be paying massively for this, way over what they would have paid had they been allowed to commission the buildings directly (which would have created just as many if not more jobs) and that is public/taxpayers money over the next thirty years going into the coffers of the private sector rather than on public services. PFI hospitals (no I can't remember which ones) are already closing wards in order to cut costs so that they can meet their payment obligations to the private sector firms they entered into PFI with. PFI was and still is an appalling system from the taxpayer's and the public's perspective, which you would have expected from a Tory govt but which was obscene being perpetuated and expanded by a Labour one.

 

Absolutely - that is the big down side of those schemes - and you are correct the jobs would have been there if they were constructed the old way (Our local Primary Care hospital is actually one of the very last in the country to be built the 'old' way) but either way when the public sector spends money this does contribute to creating 'wealth' - there is a direct correlation.

Edited June 1, 2011 by MJG

[cotswoldsman]

Going back to the original post I would imagine that the people who bought these boats were maybe slightly older generation and yes maybe these group are not so effected by the recession. This recession hits mainly poorer people and certainly school and university leavers and of course public sector workers.

[Morat]

The money spent by the public sector comes either from loans or taxation - when the public sector pays brickies to build a hospital it is returning tax revenue to the private sector.

Edited June 1, 2011 by Morat

[Chertsey]

The money spent by the public sector comes either from loans or taxation - when the public sector pays brickies to build a hospital it is returning tax revenue to the private sector.

True but, paying brickies is more likely to keep the money in the local economy. It also works out cheaper than paying massive management fees for the next thirty years to Balfour Beatty and their ilk. The public sector can borrow more cheaply than the private sector. But under PFI the public sector still has to guarantee the (more expensive) borrowing while the big PFI companies walk off with the profits. PFI has two advantages as far as the government is concerned. 1. It gets the borrowing off the official public sector balance sheet, even though we're still paying for it and it's now a lot more expensive; 2. It provides extremely lucrative contracts at taxpayers' expense for some of the big firms that have bankrolled the main political parties in recent years. For local government, health bodies, education authorities et al, it is a terrible deal. The only reason they even consider it is because central government have ensured that they cannot get new facilities any other way.

[Morat]

Don't get me wrong, I'm not arguing in favour of PFI! IMO the public sector should do good works and the private sector should go make money. Mixing the two rarely works out well.

 

Judging by their performance to date, the negotiations between Partnerships UK and the private sector must look rather like Daniel entering the Lions den, except this time Daniel is dressed entirely in steak.

Edited June 1, 2011 by Morat

[carlt]

The money spent by the public sector comes either from loans or taxation - when the public sector pays brickies to build a hospital it is returning tax revenue to the private sector.

...creating wealth for brickies.

 

Presumably, if a foreign country bought services provided by the DTI, or FCO, then, by your measure, wealth has been created by the public sector.

 

So let's not hold the whole of the private sector up, as heroic wealth creators.

 

Only those bits of the private sector that export actually create wealth. The rest just slosh the same money about that the public sector does.

[Guest]

Don't get me wrong, I'm not arguing in favour of PFI! IMO the public sector should do good works and the private sector should go make money. Mixing the two rarely works out well.

 

But you can't separate the two - even pre- PFI hospitals and the like were built by private companies, contracts were tendered for and won by the likes of Balfour Beaty, McAlpine and the brickies got paid. It just happened to be a more efficient process both in the short and long term.

 

What you seem to be advocating would require the NHS to employ it's own bricklayers and that ain't going to happen.

[Morat]

I'm not advocating any particular way to build hospitals. I'm just saying that the public sector doesn't generate growth, wealth or GDP overall. It spends revenue raised through taxation or loans.

 

Anyway, I think I've ranted on long enough!

[Chertsey]

I'm not advocating any particular way to build hospitals. I'm just saying that the public sector doesn't generate growth, wealth or GDP overall. It spends revenue raised through taxation or loans.

 

Anyway, I think I've ranted on long enough!

Cos all the parts of it that did, were the first to be privatised.

[Morat]

...creating wealth for brickies.

 

Presumably, if a foreign country bought services provided by the DTI, or FCO, then, by your measure, wealth has been created by the public sector.

 

So let's not hold the whole of the private sector up, as heroic wealth creators.

 

Only those bits of the private sector that export actually create wealth. The rest just slosh the same money about that the public sector does.

1. yes - but it would have to be a pretty stellar margin on the original investment

2. I'm not saying it's heroic, it's just a job!

3. Pretty much. If we continue running an export deficit we'll always be in trouble.

Edited June 1, 2011 by Morat

[carlt]

1. yes - but it would have to be a pretty stellar margin on the original investment

2. I'm not saying it's heroic, it's just a job!

3. Pretty much. If we continue running an export deficit we'll always be in trouble.

I'm just a simple engineer. I don't know what a "pretty stellar margin" is but if a service is sold abroad then it is surely "creating wealth" by the measure that you are using, unlike the majority of the private sector.

 

The fact that "The public sector does not create wealth" myth is used repeatedly to criticise said sector can only lead one to assume that the private sector is held in somewhat higher esteem.

Edited June 1, 2011 by carlt