Comments on: The £12bn blackhole: What Next?

By: gastro george

gastro george — Mon, 19 Sep 2011 15:52:44 +0000

“… it is a damning indictment of the state of the economy after many years of Labour investment”

More a damning indictment of thirty years of economic nostrums from both main parties.

By: dan

dan — Mon, 19 Sep 2011 14:21:46 +0000

did the UK “lie” like Greece?

By: duncanseconomicblog

duncanseconomicblog — Mon, 19 Sep 2011 11:49:08 +0000

In the long run: Yes they can damage potential growth. Don’t think they’ll have managed that in 16 months though.

More to do with long term over estimation of productivity rate of financial services. The ‘Mirage or Miracle’ question:

http://www.bankofengland.co.uk/publications/speeches/2010/speech442.pdf

By: Stephen

Stephen — Mon, 19 Sep 2011 11:35:12 +0000

You say that we cannot blame the present Govt. for this weakening of growth capability — but Krugman makes precisely the opposite point that short-run austerity in the US is damaging long run growth potential right now.

Is it really so different in the UK?

Commentary:
Economic Bleeding Cure http://nyti.ms/qY7zjN

And with detail on manufacturing capacity:
Hysteresis Begins http://nyti.ms/pVvWdA

By: Gareth

Gareth — Mon, 19 Sep 2011 11:14:09 +0000

Indeed, and I’d certainly agree with the OBR, because significant supply-side reform has been AWOL thus far. We really *should not* have relatively high inflation and high unemployment. It is a bad place to be.

Regardless, I’d say this stuff is noise. No spare output capacity with 2.5m unemployed, and 9 million “economically inactive”? Give me a break. It was dumb of Osborne to pick the structural deficit as his fiscal target, I totally agree with you on with that.

I don’t see how Labour can make hay out of this either. If supply capacity really was so weak:

a) it is a damning indictment of the state of the economy after many years of Labour “investment”

b) it is very difficult to argue that you would want to tip the spending scales back towards the government, given the ONS estimates of public sector productivity improvements over the last decade.

By: Dave Holden

Dave Holden — Mon, 19 Sep 2011 10:41:57 +0000

Anything based on what the OBR predicts needs to be taken with a large pinch of salt – they’re track record hasn’t been great.

Of course Osborne has to take notice of them since he’s nailed his colours to that particular mast. So I guess there’s a chance we may get a repeat of Gordon Brown’s trick where you arbitrarily move the goal posts while insisting nothing has changed.

The point of course is it’s easy for government to increase demand via an increase in debt it’s a lot less easy to make that sustainable.

The real solution to this mess of course is for banks and bond holders to be made to write down their bad loans, until that happens we’re going to be – at best – treading water.

By: duncanseconomicblog

duncanseconomicblog — Mon, 19 Sep 2011 10:16:36 +0000

The problem for him though Gareth is that so far the OBR seems distinctly unimpressed with his supply side reforms and their likely impact.

By: Gareth

Gareth — Mon, 19 Sep 2011 10:03:57 +0000

The choice for a Conservative Chancellor, on being told that he has inherited an economy of which the supply capacity has been devastated, after 13 years of Labour rule?

Only one thing: rub his hands with glee, and enact truly radical supply-side reform.