Macroeconomics, the economy, inflation etc. *likely to be very dull*
Comments
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I still don't get it. One option the government is obliged to pay interest for 25 years. The other option the government is obliged to pay PFI charges for 25 years albeit starting a couple of years later. Is it that delay in commencement that is bothering you and makes you think all budgeting goes out the window?wallace_and_gromit said:
Sorry - I wasn't being particularly clear.TheBigBean said:
We've disagreed before on this subject, but this makes no sense. If you borrow some money to build a school, you need to pay the debt whether that is by PFI or whatever other magic borrowing device you are using.wallace_and_gromit said:
I agree it's not easy. That's why I'm an accountant rather than a politician!rjsterry said:
I think people forget just how many schools were repaired and new schools built in that period. Of course the money could have been spent elsewhere but it feels like that is mostly robbing Peter to pay Paul. A few more libraries are open; a few more schools are falling apart and overcrowded.wallace_and_gromit said:
2002-2007 spring to mind. Whilst there was lots of leaking roofs fixed in this period, this was via PFI, which defers the impact on public finances many years into the future.rjsterry said:
To what sunny period are you referring and which roof do you think should have been fixed? The last one I can think of we almost literally fixed the leaking roofs of schools.surrey_commuter said:
and yet we spent £120bn on debt servicing costs last yearrick_chasey said:
Sure, but in the context of "Britain has run out of money in 2010 so austerity was the only policy choice", I'm arguing that by many standards that plainly wasn't the case.Pross said:All that graph tells me is that debt to GDP had started rising sharply around the time of the GFC and that it got back under control as austerity was introduced.
Later on the debt/gdp ratio was even higher and the cost of servicing was lower, and historically the burden had been even higher still.
imagine how much rosier everything would look if successive Govts had not reset the fiscal rules so they could justify borrowing ever higher amounts instead of fixing the roof when the sun was shining
Had fewer PFI contracts been entered into, then post-GFC, we'd have had leakier roofs in schools etc. but with more flexibility to address the social issues resulting from the GFC, without sustained historically high levels of borrowing.
Similarly, whilst all the other stuff Labour invested in was likely "good" the more marginal stuff might have been better left uninvested in as this would have freed up fiscal headroom for direct action post-GFC.
FWIW, I think the problem with "austerity" in the UK was that it was too focused on cutting spending in unsexy but vital areas (e.g. libraries and early years education) rather than biting the bullet and raising taxes. The latter approach spreads the pain, whereas a lot of Coalition spending cuts were disproportionately focused on a relatively small number of people. And some of the cuts e.g. the Overseas Aid budget were probably counter-productive in that they saved little money, but at a lot of cost in terms of reputational damage and/or stirring social unrest.
Though I think it's fair to criticise the New Labour regime for thinking too much about the benefits of PFI schemes and not enough about the downsides namely the impossible to get out contracts with long term, large payments involved.
If you simply borrow in full to fund each new school etc. then when times are hard, you can stop building new ones and hence stop borrowing. Under PFI, the die was long-since cast re the future levels of expenditure (and hence borrowing requirements).
In a given year, assume the government's fiscal headroom (incorporating the impact of current borrowing on future debt service requirements) for discretionary investment is £Xm. If a schools costs £Xm then the government can borrow to fund one school.
This occurs for the next 2-3 years but then there is a major economic downturn and fiscal headroom is eliminated as tax revenues fall etc. Government can respond by stopping its school building campaign for a few years and then resuming once economic conditions are again favourable.
[Assume PFI costs are spread over 25 years.]
If you build a school via PFI, then the cost of the government in Year 1 is £Xm / 25.
So the politicians think "With this year's fiscal headroom of £Xm we can commit to building 25 new schools as it will only cost £Xm this year" so that's what they do, as it popular and makes them feel good and next year is another problem.
For the next 2-3 years, the government uses £Xm of its borrowing capacity to pay 25 lots of £Xm / 25 annual charge for the PFI schools.
Major economic downturn hits, government now has zero fiscal headroom, but is still committed to paying £Xm per year for the schools and has to find some way of paying this, be it higher taxes or reduced spending elsewhere.
So the risk of PFI is that it encourages politicians to commit to higher spending than the economy can really afford over the long term, as they are seduced by cyclically favourable fiscal conditions and think they've abolished economic downturns due to their brilliance. The dull old "Pay As You Go" scheme keeps expenditure in line with what can sensibly afforded, given longer term economic realities.
If the government built also 25 schools in one year via the PAYG approach then the argument would boil down to the relative efficiency of PFI schemes vs government managed schemes.
PFIs largely ended in 2010 with austerity.0 -
Totally agree about the big 4, a bunch of crooks themselves. So often they have failed to see, or blatantly ignored major issues in businesses that they should have picked up and highlighted.rick_chasey said:
Carillion was run by a bunch of half crooks. You can put some of the blame at the gov't vetting process, but let's not pretend it was the gov't fault they were dodgy.Dorset_Boy said:
If those figures are correct, and my maths is right, that works out at over 7.5% pa interest over 25 years.pblakeney said:
I'd say it's bad if it costs £80bn to fund a £13bn investment.rick_chasey said:Honest question, was PFI really that bad, and was it worse than the alternative?
Alternatives are less funding elsewhere or increased taxes. Who'd be a politician?
That said, given what the Bean says, some of the £80 bn might be providing ongoing services, but then again, who on earth would sign a company up to provide a service over 25 years.
Look at what happened with Carilion with all their lucrative Government contracts.
It also points to one of my big bugbears, which is the absolute racket of the big 4 accounting firms. They are useless at the actual job of auditing and no-one else has the capacity to do it.
Contemptible. Whenever a business goes bust or is found to be fraudulent, you can *guarantee* one of the 4 have signed it off no problems.
On insolvency they have no obligation to wind up and sell off the assets of the failed business and distribute to the creditors in any timescale. so they just keep using up the assets paying themselves extortionate levels of fees for doing diddly squat.0 -
Ja. Senior management is also of questionable quality, and those who believe their own hype are often found out when they actually need to compete for work when they move outside of the big 4 (usual caveats apply, not everyone blah blah).0
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That's my experience of all administrators. We waited something like four years to recover 40% of a fee whilst the administrator provided no updates and paid himself handsomely with some of the fee we lost.Dorset_Boy said:
Totally agree about the big 4, a bunch of crooks themselves. So often they have failed to see, or blatantly ignored major issues in businesses that they should have picked up and highlighted.rick_chasey said:
Carillion was run by a bunch of half crooks. You can put some of the blame at the gov't vetting process, but let's not pretend it was the gov't fault they were dodgy.Dorset_Boy said:
If those figures are correct, and my maths is right, that works out at over 7.5% pa interest over 25 years.pblakeney said:
I'd say it's bad if it costs £80bn to fund a £13bn investment.rick_chasey said:Honest question, was PFI really that bad, and was it worse than the alternative?
Alternatives are less funding elsewhere or increased taxes. Who'd be a politician?
That said, given what the Bean says, some of the £80 bn might be providing ongoing services, but then again, who on earth would sign a company up to provide a service over 25 years.
Look at what happened with Carilion with all their lucrative Government contracts.
It also points to one of my big bugbears, which is the absolute racket of the big 4 accounting firms. They are useless at the actual job of auditing and no-one else has the capacity to do it.
Contemptible. Whenever a business goes bust or is found to be fraudulent, you can *guarantee* one of the 4 have signed it off no problems.
On insolvency they have no obligation to wind up and sell off the assets of the failed business and distribute to the creditors in any timescale. so they just keep using up the assets paying themselves extortionate levels of fees for doing diddly squat.0 -
How about in the good years you fix the public finances and then when you have a downturn and need to put money into the economy you fix the school roof.wallace_and_gromit said:
Sorry - I wasn't being particularly clear.TheBigBean said:
We've disagreed before on this subject, but this makes no sense. If you borrow some money to build a school, you need to pay the debt whether that is by PFI or whatever other magic borrowing device you are using.wallace_and_gromit said:
I agree it's not easy. That's why I'm an accountant rather than a politician!rjsterry said:
I think people forget just how many schools were repaired and new schools built in that period. Of course the money could have been spent elsewhere but it feels like that is mostly robbing Peter to pay Paul. A few more libraries are open; a few more schools are falling apart and overcrowded.wallace_and_gromit said:
2002-2007 spring to mind. Whilst there was lots of leaking roofs fixed in this period, this was via PFI, which defers the impact on public finances many years into the future.rjsterry said:
To what sunny period are you referring and which roof do you think should have been fixed? The last one I can think of we almost literally fixed the leaking roofs of schools.surrey_commuter said:
and yet we spent £120bn on debt servicing costs last yearrick_chasey said:
Sure, but in the context of "Britain has run out of money in 2010 so austerity was the only policy choice", I'm arguing that by many standards that plainly wasn't the case.Pross said:All that graph tells me is that debt to GDP had started rising sharply around the time of the GFC and that it got back under control as austerity was introduced.
Later on the debt/gdp ratio was even higher and the cost of servicing was lower, and historically the burden had been even higher still.
imagine how much rosier everything would look if successive Govts had not reset the fiscal rules so they could justify borrowing ever higher amounts instead of fixing the roof when the sun was shining
Had fewer PFI contracts been entered into, then post-GFC, we'd have had leakier roofs in schools etc. but with more flexibility to address the social issues resulting from the GFC, without sustained historically high levels of borrowing.
Similarly, whilst all the other stuff Labour invested in was likely "good" the more marginal stuff might have been better left uninvested in as this would have freed up fiscal headroom for direct action post-GFC.
FWIW, I think the problem with "austerity" in the UK was that it was too focused on cutting spending in unsexy but vital areas (e.g. libraries and early years education) rather than biting the bullet and raising taxes. The latter approach spreads the pain, whereas a lot of Coalition spending cuts were disproportionately focused on a relatively small number of people. And some of the cuts e.g. the Overseas Aid budget were probably counter-productive in that they saved little money, but at a lot of cost in terms of reputational damage and/or stirring social unrest.
Though I think it's fair to criticise the New Labour regime for thinking too much about the benefits of PFI schemes and not enough about the downsides namely the impossible to get out contracts with long term, large payments involved.
If you simply borrow in full to fund each new school etc. then when times are hard, you can stop building new ones and hence stop borrowing. Under PFI, the die was long-since cast re the future levels of expenditure (and hence borrowing requirements).
In a given year, assume the government's fiscal headroom (incorporating the impact of current borrowing on future debt service requirements) for discretionary investment is £Xm. If a schools costs £Xm then the government can borrow to fund one school.
This occurs for the next 2-3 years but then there is a major economic downturn and fiscal headroom is eliminated as tax revenues fall etc. Government can respond by stopping its school building campaign for a few years and then resuming once economic conditions are again favourable.
[Assume PFI costs are spread over 25 years.]
If you build a school via PFI, then the cost of the government in Year 1 is £Xm / 25.
So the politicians think "With this year's fiscal headroom of £Xm we can commit to building 25 new schools as it will only cost £Xm this year" so that's what they do, as it popular and makes them feel good and next year is another problem.
For the next 2-3 years, the government uses £Xm of its borrowing capacity to pay 25 lots of £Xm / 25 annual charge for the PFI schools.
Major economic downturn hits, government now has zero fiscal headroom, but is still committed to paying £Xm per year for the schools and has to find some way of paying this, be it higher taxes or reduced spending elsewhere.
So the risk of PFI is that it encourages politicians to commit to higher spending than the economy can really afford over the long term, as they are seduced by cyclically favourable fiscal conditions and think they've abolished economic downturns due to their brilliance. The dull old "Pay As You Go" scheme keeps expenditure in line with what can sensibly afforded, given longer term economic realities.
If the government built also 25 schools in one year via the PAYG approach then the argument would boil down to the relative efficiency of PFI schemes vs government managed schemes.
For the nitpickers please don't tell me about the problems of water ingress as the school roof is a metaphor for increased public spending.
1 -
Isn't that what Rick has always advocated?surrey_commuter said:
How about in the good years you fix the public finances and then when you have a downturn and need to put money into the economy you fix the school roof.wallace_and_gromit said:
Sorry - I wasn't being particularly clear.TheBigBean said:
We've disagreed before on this subject, but this makes no sense. If you borrow some money to build a school, you need to pay the debt whether that is by PFI or whatever other magic borrowing device you are using.wallace_and_gromit said:
I agree it's not easy. That's why I'm an accountant rather than a politician!rjsterry said:
I think people forget just how many schools were repaired and new schools built in that period. Of course the money could have been spent elsewhere but it feels like that is mostly robbing Peter to pay Paul. A few more libraries are open; a few more schools are falling apart and overcrowded.wallace_and_gromit said:
2002-2007 spring to mind. Whilst there was lots of leaking roofs fixed in this period, this was via PFI, which defers the impact on public finances many years into the future.rjsterry said:
To what sunny period are you referring and which roof do you think should have been fixed? The last one I can think of we almost literally fixed the leaking roofs of schools.surrey_commuter said:
and yet we spent £120bn on debt servicing costs last yearrick_chasey said:
Sure, but in the context of "Britain has run out of money in 2010 so austerity was the only policy choice", I'm arguing that by many standards that plainly wasn't the case.Pross said:All that graph tells me is that debt to GDP had started rising sharply around the time of the GFC and that it got back under control as austerity was introduced.
Later on the debt/gdp ratio was even higher and the cost of servicing was lower, and historically the burden had been even higher still.
imagine how much rosier everything would look if successive Govts had not reset the fiscal rules so they could justify borrowing ever higher amounts instead of fixing the roof when the sun was shining
Had fewer PFI contracts been entered into, then post-GFC, we'd have had leakier roofs in schools etc. but with more flexibility to address the social issues resulting from the GFC, without sustained historically high levels of borrowing.
Similarly, whilst all the other stuff Labour invested in was likely "good" the more marginal stuff might have been better left uninvested in as this would have freed up fiscal headroom for direct action post-GFC.
FWIW, I think the problem with "austerity" in the UK was that it was too focused on cutting spending in unsexy but vital areas (e.g. libraries and early years education) rather than biting the bullet and raising taxes. The latter approach spreads the pain, whereas a lot of Coalition spending cuts were disproportionately focused on a relatively small number of people. And some of the cuts e.g. the Overseas Aid budget were probably counter-productive in that they saved little money, but at a lot of cost in terms of reputational damage and/or stirring social unrest.
Though I think it's fair to criticise the New Labour regime for thinking too much about the benefits of PFI schemes and not enough about the downsides namely the impossible to get out contracts with long term, large payments involved.
If you simply borrow in full to fund each new school etc. then when times are hard, you can stop building new ones and hence stop borrowing. Under PFI, the die was long-since cast re the future levels of expenditure (and hence borrowing requirements).
In a given year, assume the government's fiscal headroom (incorporating the impact of current borrowing on future debt service requirements) for discretionary investment is £Xm. If a schools costs £Xm then the government can borrow to fund one school.
This occurs for the next 2-3 years but then there is a major economic downturn and fiscal headroom is eliminated as tax revenues fall etc. Government can respond by stopping its school building campaign for a few years and then resuming once economic conditions are again favourable.
[Assume PFI costs are spread over 25 years.]
If you build a school via PFI, then the cost of the government in Year 1 is £Xm / 25.
So the politicians think "With this year's fiscal headroom of £Xm we can commit to building 25 new schools as it will only cost £Xm this year" so that's what they do, as it popular and makes them feel good and next year is another problem.
For the next 2-3 years, the government uses £Xm of its borrowing capacity to pay 25 lots of £Xm / 25 annual charge for the PFI schools.
Major economic downturn hits, government now has zero fiscal headroom, but is still committed to paying £Xm per year for the schools and has to find some way of paying this, be it higher taxes or reduced spending elsewhere.
So the risk of PFI is that it encourages politicians to commit to higher spending than the economy can really afford over the long term, as they are seduced by cyclically favourable fiscal conditions and think they've abolished economic downturns due to their brilliance. The dull old "Pay As You Go" scheme keeps expenditure in line with what can sensibly afforded, given longer term economic realities.
If the government built also 25 schools in one year via the PAYG approach then the argument would boil down to the relative efficiency of PFI schemes vs government managed schemes.
For the nitpickers please don't tell me about the problems of water ingress as the school roof is a metaphor for increased public spending.0 -
Clearly not as he supported Nick Clegg and the Libs during Austerity.Pross said:
Isn't that what Rick has always advocated?surrey_commuter said:
How about in the good years you fix the public finances and then when you have a downturn and need to put money into the economy you fix the school roof.wallace_and_gromit said:
Sorry - I wasn't being particularly clear.TheBigBean said:
We've disagreed before on this subject, but this makes no sense. If you borrow some money to build a school, you need to pay the debt whether that is by PFI or whatever other magic borrowing device you are using.wallace_and_gromit said:
I agree it's not easy. That's why I'm an accountant rather than a politician!rjsterry said:
I think people forget just how many schools were repaired and new schools built in that period. Of course the money could have been spent elsewhere but it feels like that is mostly robbing Peter to pay Paul. A few more libraries are open; a few more schools are falling apart and overcrowded.wallace_and_gromit said:
2002-2007 spring to mind. Whilst there was lots of leaking roofs fixed in this period, this was via PFI, which defers the impact on public finances many years into the future.rjsterry said:
To what sunny period are you referring and which roof do you think should have been fixed? The last one I can think of we almost literally fixed the leaking roofs of schools.surrey_commuter said:
and yet we spent £120bn on debt servicing costs last yearrick_chasey said:
Sure, but in the context of "Britain has run out of money in 2010 so austerity was the only policy choice", I'm arguing that by many standards that plainly wasn't the case.Pross said:All that graph tells me is that debt to GDP had started rising sharply around the time of the GFC and that it got back under control as austerity was introduced.
Later on the debt/gdp ratio was even higher and the cost of servicing was lower, and historically the burden had been even higher still.
imagine how much rosier everything would look if successive Govts had not reset the fiscal rules so they could justify borrowing ever higher amounts instead of fixing the roof when the sun was shining
Had fewer PFI contracts been entered into, then post-GFC, we'd have had leakier roofs in schools etc. but with more flexibility to address the social issues resulting from the GFC, without sustained historically high levels of borrowing.
Similarly, whilst all the other stuff Labour invested in was likely "good" the more marginal stuff might have been better left uninvested in as this would have freed up fiscal headroom for direct action post-GFC.
FWIW, I think the problem with "austerity" in the UK was that it was too focused on cutting spending in unsexy but vital areas (e.g. libraries and early years education) rather than biting the bullet and raising taxes. The latter approach spreads the pain, whereas a lot of Coalition spending cuts were disproportionately focused on a relatively small number of people. And some of the cuts e.g. the Overseas Aid budget were probably counter-productive in that they saved little money, but at a lot of cost in terms of reputational damage and/or stirring social unrest.
Though I think it's fair to criticise the New Labour regime for thinking too much about the benefits of PFI schemes and not enough about the downsides namely the impossible to get out contracts with long term, large payments involved.
If you simply borrow in full to fund each new school etc. then when times are hard, you can stop building new ones and hence stop borrowing. Under PFI, the die was long-since cast re the future levels of expenditure (and hence borrowing requirements).
In a given year, assume the government's fiscal headroom (incorporating the impact of current borrowing on future debt service requirements) for discretionary investment is £Xm. If a schools costs £Xm then the government can borrow to fund one school.
This occurs for the next 2-3 years but then there is a major economic downturn and fiscal headroom is eliminated as tax revenues fall etc. Government can respond by stopping its school building campaign for a few years and then resuming once economic conditions are again favourable.
[Assume PFI costs are spread over 25 years.]
If you build a school via PFI, then the cost of the government in Year 1 is £Xm / 25.
So the politicians think "With this year's fiscal headroom of £Xm we can commit to building 25 new schools as it will only cost £Xm this year" so that's what they do, as it popular and makes them feel good and next year is another problem.
For the next 2-3 years, the government uses £Xm of its borrowing capacity to pay 25 lots of £Xm / 25 annual charge for the PFI schools.
Major economic downturn hits, government now has zero fiscal headroom, but is still committed to paying £Xm per year for the schools and has to find some way of paying this, be it higher taxes or reduced spending elsewhere.
So the risk of PFI is that it encourages politicians to commit to higher spending than the economy can really afford over the long term, as they are seduced by cyclically favourable fiscal conditions and think they've abolished economic downturns due to their brilliance. The dull old "Pay As You Go" scheme keeps expenditure in line with what can sensibly afforded, given longer term economic realities.
If the government built also 25 schools in one year via the PAYG approach then the argument would boil down to the relative efficiency of PFI schemes vs government managed schemes.
For the nitpickers please don't tell me about the problems of water ingress as the school roof is a metaphor for increased public spending.0 -
Yes.Pross said:
Isn't that what Rick has always advocated?surrey_commuter said:
How about in the good years you fix the public finances and then when you have a downturn and need to put money into the economy you fix the school roof.wallace_and_gromit said:
Sorry - I wasn't being particularly clear.TheBigBean said:
We've disagreed before on this subject, but this makes no sense. If you borrow some money to build a school, you need to pay the debt whether that is by PFI or whatever other magic borrowing device you are using.wallace_and_gromit said:
I agree it's not easy. That's why I'm an accountant rather than a politician!rjsterry said:
I think people forget just how many schools were repaired and new schools built in that period. Of course the money could have been spent elsewhere but it feels like that is mostly robbing Peter to pay Paul. A few more libraries are open; a few more schools are falling apart and overcrowded.wallace_and_gromit said:
2002-2007 spring to mind. Whilst there was lots of leaking roofs fixed in this period, this was via PFI, which defers the impact on public finances many years into the future.rjsterry said:
To what sunny period are you referring and which roof do you think should have been fixed? The last one I can think of we almost literally fixed the leaking roofs of schools.surrey_commuter said:
and yet we spent £120bn on debt servicing costs last yearrick_chasey said:
Sure, but in the context of "Britain has run out of money in 2010 so austerity was the only policy choice", I'm arguing that by many standards that plainly wasn't the case.Pross said:All that graph tells me is that debt to GDP had started rising sharply around the time of the GFC and that it got back under control as austerity was introduced.
Later on the debt/gdp ratio was even higher and the cost of servicing was lower, and historically the burden had been even higher still.
imagine how much rosier everything would look if successive Govts had not reset the fiscal rules so they could justify borrowing ever higher amounts instead of fixing the roof when the sun was shining
Had fewer PFI contracts been entered into, then post-GFC, we'd have had leakier roofs in schools etc. but with more flexibility to address the social issues resulting from the GFC, without sustained historically high levels of borrowing.
Similarly, whilst all the other stuff Labour invested in was likely "good" the more marginal stuff might have been better left uninvested in as this would have freed up fiscal headroom for direct action post-GFC.
FWIW, I think the problem with "austerity" in the UK was that it was too focused on cutting spending in unsexy but vital areas (e.g. libraries and early years education) rather than biting the bullet and raising taxes. The latter approach spreads the pain, whereas a lot of Coalition spending cuts were disproportionately focused on a relatively small number of people. And some of the cuts e.g. the Overseas Aid budget were probably counter-productive in that they saved little money, but at a lot of cost in terms of reputational damage and/or stirring social unrest.
Though I think it's fair to criticise the New Labour regime for thinking too much about the benefits of PFI schemes and not enough about the downsides namely the impossible to get out contracts with long term, large payments involved.
If you simply borrow in full to fund each new school etc. then when times are hard, you can stop building new ones and hence stop borrowing. Under PFI, the die was long-since cast re the future levels of expenditure (and hence borrowing requirements).
In a given year, assume the government's fiscal headroom (incorporating the impact of current borrowing on future debt service requirements) for discretionary investment is £Xm. If a schools costs £Xm then the government can borrow to fund one school.
This occurs for the next 2-3 years but then there is a major economic downturn and fiscal headroom is eliminated as tax revenues fall etc. Government can respond by stopping its school building campaign for a few years and then resuming once economic conditions are again favourable.
[Assume PFI costs are spread over 25 years.]
If you build a school via PFI, then the cost of the government in Year 1 is £Xm / 25.
So the politicians think "With this year's fiscal headroom of £Xm we can commit to building 25 new schools as it will only cost £Xm this year" so that's what they do, as it popular and makes them feel good and next year is another problem.
For the next 2-3 years, the government uses £Xm of its borrowing capacity to pay 25 lots of £Xm / 25 annual charge for the PFI schools.
Major economic downturn hits, government now has zero fiscal headroom, but is still committed to paying £Xm per year for the schools and has to find some way of paying this, be it higher taxes or reduced spending elsewhere.
So the risk of PFI is that it encourages politicians to commit to higher spending than the economy can really afford over the long term, as they are seduced by cyclically favourable fiscal conditions and think they've abolished economic downturns due to their brilliance. The dull old "Pay As You Go" scheme keeps expenditure in line with what can sensibly afforded, given longer term economic realities.
If the government built also 25 schools in one year via the PAYG approach then the argument would boil down to the relative efficiency of PFI schemes vs government managed schemes.
For the nitpickers please don't tell me about the problems of water ingress as the school roof is a metaphor for increased public spending.
Where he and I disagree is the level of borrowing in the good times. He would disagree with this as he does not take the time to understand my position0 -
I'm not opposed to this as a plan, as it accounts for the economic cycle and that different actions are most appropriate at different times therein.surrey_commuter said:
How about in the good years you fix the public finances and then when you have a downturn and need to put money into the economy you fix the school roof.wallace_and_gromit said:
Sorry - I wasn't being particularly clear.TheBigBean said:
We've disagreed before on this subject, but this makes no sense. If you borrow some money to build a school, you need to pay the debt whether that is by PFI or whatever other magic borrowing device you are using.wallace_and_gromit said:
I agree it's not easy. That's why I'm an accountant rather than a politician!rjsterry said:
I think people forget just how many schools were repaired and new schools built in that period. Of course the money could have been spent elsewhere but it feels like that is mostly robbing Peter to pay Paul. A few more libraries are open; a few more schools are falling apart and overcrowded.wallace_and_gromit said:
2002-2007 spring to mind. Whilst there was lots of leaking roofs fixed in this period, this was via PFI, which defers the impact on public finances many years into the future.rjsterry said:
To what sunny period are you referring and which roof do you think should have been fixed? The last one I can think of we almost literally fixed the leaking roofs of schools.surrey_commuter said:
and yet we spent £120bn on debt servicing costs last yearrick_chasey said:
Sure, but in the context of "Britain has run out of money in 2010 so austerity was the only policy choice", I'm arguing that by many standards that plainly wasn't the case.Pross said:All that graph tells me is that debt to GDP had started rising sharply around the time of the GFC and that it got back under control as austerity was introduced.
Later on the debt/gdp ratio was even higher and the cost of servicing was lower, and historically the burden had been even higher still.
imagine how much rosier everything would look if successive Govts had not reset the fiscal rules so they could justify borrowing ever higher amounts instead of fixing the roof when the sun was shining
Had fewer PFI contracts been entered into, then post-GFC, we'd have had leakier roofs in schools etc. but with more flexibility to address the social issues resulting from the GFC, without sustained historically high levels of borrowing.
Similarly, whilst all the other stuff Labour invested in was likely "good" the more marginal stuff might have been better left uninvested in as this would have freed up fiscal headroom for direct action post-GFC.
FWIW, I think the problem with "austerity" in the UK was that it was too focused on cutting spending in unsexy but vital areas (e.g. libraries and early years education) rather than biting the bullet and raising taxes. The latter approach spreads the pain, whereas a lot of Coalition spending cuts were disproportionately focused on a relatively small number of people. And some of the cuts e.g. the Overseas Aid budget were probably counter-productive in that they saved little money, but at a lot of cost in terms of reputational damage and/or stirring social unrest.
Though I think it's fair to criticise the New Labour regime for thinking too much about the benefits of PFI schemes and not enough about the downsides namely the impossible to get out contracts with long term, large payments involved.
If you simply borrow in full to fund each new school etc. then when times are hard, you can stop building new ones and hence stop borrowing. Under PFI, the die was long-since cast re the future levels of expenditure (and hence borrowing requirements).
In a given year, assume the government's fiscal headroom (incorporating the impact of current borrowing on future debt service requirements) for discretionary investment is £Xm. If a schools costs £Xm then the government can borrow to fund one school.
This occurs for the next 2-3 years but then there is a major economic downturn and fiscal headroom is eliminated as tax revenues fall etc. Government can respond by stopping its school building campaign for a few years and then resuming once economic conditions are again favourable.
[Assume PFI costs are spread over 25 years.]
If you build a school via PFI, then the cost of the government in Year 1 is £Xm / 25.
So the politicians think "With this year's fiscal headroom of £Xm we can commit to building 25 new schools as it will only cost £Xm this year" so that's what they do, as it popular and makes them feel good and next year is another problem.
For the next 2-3 years, the government uses £Xm of its borrowing capacity to pay 25 lots of £Xm / 25 annual charge for the PFI schools.
Major economic downturn hits, government now has zero fiscal headroom, but is still committed to paying £Xm per year for the schools and has to find some way of paying this, be it higher taxes or reduced spending elsewhere.
So the risk of PFI is that it encourages politicians to commit to higher spending than the economy can really afford over the long term, as they are seduced by cyclically favourable fiscal conditions and think they've abolished economic downturns due to their brilliance. The dull old "Pay As You Go" scheme keeps expenditure in line with what can sensibly afforded, given longer term economic realities.
If the government built also 25 schools in one year via the PAYG approach then the argument would boil down to the relative efficiency of PFI schemes vs government managed schemes.
For the nitpickers please don't tell me about the problems of water ingress as the school roof is a metaphor for increased public spending.
Re education particularly, it is so important that spending thereon should be a high priority throughout the economic cycle. (My view - alternative views doubtless exist!) Less important infrastructure projects could be held in reserve for downturns to boost demand.
I think in general though if one has politicians in charge that are aware of the inevitability of economic cycles (and the associated need for prudence) and that aren't ideologically attached to high or low levels of public spending then spending less during "good times" than you can will happen automatically (due to prudence being a real thing rather than a soundbite) which then leaves headroom for spending during "bad times".
I know managing a nation's finances isn't like running a household budget, but there are still some useful lessons from household budgeting. For example, I get paid typically 20% of my annual wedge in June, as that's when I get my bonus. So when it lands, there are a few key decisions to be made:
- Should I spend it all at once?
- Should I assume I'll get the same next June?
- If I can't think of something useful on which to eventually spend it, should I blow it all anyway, however frivolously?
Politicians tend towards Yes, Yes and Yes, whereas they'd be better off going for the household budget approach of No * 3 as the starting point.0 -
I used to work with somebody who when told the size of her bomus would go out and spend it, then when it hit her acct spent it again. Of course the first expenditure was on the gross so by the end she was considerably worse off.wallace_and_gromit said:
I'm not opposed to this as a plan, as it accounts for the economic cycle and that different actions are most appropriate at different times therein.surrey_commuter said:
How about in the good years you fix the public finances and then when you have a downturn and need to put money into the economy you fix the school roof.wallace_and_gromit said:
Sorry - I wasn't being particularly clear.TheBigBean said:
We've disagreed before on this subject, but this makes no sense. If you borrow some money to build a school, you need to pay the debt whether that is by PFI or whatever other magic borrowing device you are using.wallace_and_gromit said:
I agree it's not easy. That's why I'm an accountant rather than a politician!rjsterry said:
I think people forget just how many schools were repaired and new schools built in that period. Of course the money could have been spent elsewhere but it feels like that is mostly robbing Peter to pay Paul. A few more libraries are open; a few more schools are falling apart and overcrowded.wallace_and_gromit said:
2002-2007 spring to mind. Whilst there was lots of leaking roofs fixed in this period, this was via PFI, which defers the impact on public finances many years into the future.rjsterry said:
To what sunny period are you referring and which roof do you think should have been fixed? The last one I can think of we almost literally fixed the leaking roofs of schools.surrey_commuter said:
and yet we spent £120bn on debt servicing costs last yearrick_chasey said:
Sure, but in the context of "Britain has run out of money in 2010 so austerity was the only policy choice", I'm arguing that by many standards that plainly wasn't the case.Pross said:All that graph tells me is that debt to GDP had started rising sharply around the time of the GFC and that it got back under control as austerity was introduced.
Later on the debt/gdp ratio was even higher and the cost of servicing was lower, and historically the burden had been even higher still.
imagine how much rosier everything would look if successive Govts had not reset the fiscal rules so they could justify borrowing ever higher amounts instead of fixing the roof when the sun was shining
Had fewer PFI contracts been entered into, then post-GFC, we'd have had leakier roofs in schools etc. but with more flexibility to address the social issues resulting from the GFC, without sustained historically high levels of borrowing.
Similarly, whilst all the other stuff Labour invested in was likely "good" the more marginal stuff might have been better left uninvested in as this would have freed up fiscal headroom for direct action post-GFC.
FWIW, I think the problem with "austerity" in the UK was that it was too focused on cutting spending in unsexy but vital areas (e.g. libraries and early years education) rather than biting the bullet and raising taxes. The latter approach spreads the pain, whereas a lot of Coalition spending cuts were disproportionately focused on a relatively small number of people. And some of the cuts e.g. the Overseas Aid budget were probably counter-productive in that they saved little money, but at a lot of cost in terms of reputational damage and/or stirring social unrest.
Though I think it's fair to criticise the New Labour regime for thinking too much about the benefits of PFI schemes and not enough about the downsides namely the impossible to get out contracts with long term, large payments involved.
If you simply borrow in full to fund each new school etc. then when times are hard, you can stop building new ones and hence stop borrowing. Under PFI, the die was long-since cast re the future levels of expenditure (and hence borrowing requirements).
In a given year, assume the government's fiscal headroom (incorporating the impact of current borrowing on future debt service requirements) for discretionary investment is £Xm. If a schools costs £Xm then the government can borrow to fund one school.
This occurs for the next 2-3 years but then there is a major economic downturn and fiscal headroom is eliminated as tax revenues fall etc. Government can respond by stopping its school building campaign for a few years and then resuming once economic conditions are again favourable.
[Assume PFI costs are spread over 25 years.]
If you build a school via PFI, then the cost of the government in Year 1 is £Xm / 25.
So the politicians think "With this year's fiscal headroom of £Xm we can commit to building 25 new schools as it will only cost £Xm this year" so that's what they do, as it popular and makes them feel good and next year is another problem.
For the next 2-3 years, the government uses £Xm of its borrowing capacity to pay 25 lots of £Xm / 25 annual charge for the PFI schools.
Major economic downturn hits, government now has zero fiscal headroom, but is still committed to paying £Xm per year for the schools and has to find some way of paying this, be it higher taxes or reduced spending elsewhere.
So the risk of PFI is that it encourages politicians to commit to higher spending than the economy can really afford over the long term, as they are seduced by cyclically favourable fiscal conditions and think they've abolished economic downturns due to their brilliance. The dull old "Pay As You Go" scheme keeps expenditure in line with what can sensibly afforded, given longer term economic realities.
If the government built also 25 schools in one year via the PAYG approach then the argument would boil down to the relative efficiency of PFI schemes vs government managed schemes.
For the nitpickers please don't tell me about the problems of water ingress as the school roof is a metaphor for increased public spending.
Re education particularly, it is so important that spending thereon should be a high priority throughout the economic cycle. (My view - alternative views doubtless exist!) Less important infrastructure projects could be held in reserve for downturns to boost demand.
I think in general though if one has politicians in charge that are aware of the inevitability of economic cycles (and the associated need for prudence) and that aren't ideologically attached to high or low levels of public spending then spending less during "good times" than you can will happen automatically (due to prudence being a real thing rather than a soundbite) which then leaves headroom for spending during "bad times".
I know managing a nation's finances isn't like running a household budget, but there are still some useful lessons from household budgeting. For example, I get paid typically 20% of my annual wedge in June, as that's when I get my bonus. So when it lands, there are a few key decisions to be made:
- Should I spend it all at once?
- Should I assume I'll get the same next June?
- If I can't think of something useful on which to eventually spend it, should I blow it all anyway, however frivolously?
Politicians tend towards Yes, Yes and Yes, whereas they'd be better off going for the household budget approach of No * 3 as the starting point.0 -
Isn't the issue that recognition of good times can only be done with hindsight?surrey_commuter said:
Yes.Pross said:
Isn't that what Rick has always advocated?surrey_commuter said:
How about in the good years you fix the public finances and then when you have a downturn and need to put money into the economy you fix the school roof.wallace_and_gromit said:
Sorry - I wasn't being particularly clear.TheBigBean said:
We've disagreed before on this subject, but this makes no sense. If you borrow some money to build a school, you need to pay the debt whether that is by PFI or whatever other magic borrowing device you are using.wallace_and_gromit said:
I agree it's not easy. That's why I'm an accountant rather than a politician!rjsterry said:
I think people forget just how many schools were repaired and new schools built in that period. Of course the money could have been spent elsewhere but it feels like that is mostly robbing Peter to pay Paul. A few more libraries are open; a few more schools are falling apart and overcrowded.wallace_and_gromit said:
2002-2007 spring to mind. Whilst there was lots of leaking roofs fixed in this period, this was via PFI, which defers the impact on public finances many years into the future.rjsterry said:
To what sunny period are you referring and which roof do you think should have been fixed? The last one I can think of we almost literally fixed the leaking roofs of schools.surrey_commuter said:
and yet we spent £120bn on debt servicing costs last yearrick_chasey said:
Sure, but in the context of "Britain has run out of money in 2010 so austerity was the only policy choice", I'm arguing that by many standards that plainly wasn't the case.Pross said:All that graph tells me is that debt to GDP had started rising sharply around the time of the GFC and that it got back under control as austerity was introduced.
Later on the debt/gdp ratio was even higher and the cost of servicing was lower, and historically the burden had been even higher still.
imagine how much rosier everything would look if successive Govts had not reset the fiscal rules so they could justify borrowing ever higher amounts instead of fixing the roof when the sun was shining
Had fewer PFI contracts been entered into, then post-GFC, we'd have had leakier roofs in schools etc. but with more flexibility to address the social issues resulting from the GFC, without sustained historically high levels of borrowing.
Similarly, whilst all the other stuff Labour invested in was likely "good" the more marginal stuff might have been better left uninvested in as this would have freed up fiscal headroom for direct action post-GFC.
FWIW, I think the problem with "austerity" in the UK was that it was too focused on cutting spending in unsexy but vital areas (e.g. libraries and early years education) rather than biting the bullet and raising taxes. The latter approach spreads the pain, whereas a lot of Coalition spending cuts were disproportionately focused on a relatively small number of people. And some of the cuts e.g. the Overseas Aid budget were probably counter-productive in that they saved little money, but at a lot of cost in terms of reputational damage and/or stirring social unrest.
Though I think it's fair to criticise the New Labour regime for thinking too much about the benefits of PFI schemes and not enough about the downsides namely the impossible to get out contracts with long term, large payments involved.
If you simply borrow in full to fund each new school etc. then when times are hard, you can stop building new ones and hence stop borrowing. Under PFI, the die was long-since cast re the future levels of expenditure (and hence borrowing requirements).
In a given year, assume the government's fiscal headroom (incorporating the impact of current borrowing on future debt service requirements) for discretionary investment is £Xm. If a schools costs £Xm then the government can borrow to fund one school.
This occurs for the next 2-3 years but then there is a major economic downturn and fiscal headroom is eliminated as tax revenues fall etc. Government can respond by stopping its school building campaign for a few years and then resuming once economic conditions are again favourable.
[Assume PFI costs are spread over 25 years.]
If you build a school via PFI, then the cost of the government in Year 1 is £Xm / 25.
So the politicians think "With this year's fiscal headroom of £Xm we can commit to building 25 new schools as it will only cost £Xm this year" so that's what they do, as it popular and makes them feel good and next year is another problem.
For the next 2-3 years, the government uses £Xm of its borrowing capacity to pay 25 lots of £Xm / 25 annual charge for the PFI schools.
Major economic downturn hits, government now has zero fiscal headroom, but is still committed to paying £Xm per year for the schools and has to find some way of paying this, be it higher taxes or reduced spending elsewhere.
So the risk of PFI is that it encourages politicians to commit to higher spending than the economy can really afford over the long term, as they are seduced by cyclically favourable fiscal conditions and think they've abolished economic downturns due to their brilliance. The dull old "Pay As You Go" scheme keeps expenditure in line with what can sensibly afforded, given longer term economic realities.
If the government built also 25 schools in one year via the PAYG approach then the argument would boil down to the relative efficiency of PFI schemes vs government managed schemes.
For the nitpickers please don't tell me about the problems of water ingress as the school roof is a metaphor for increased public spending.
Where he and I disagree is the level of borrowing in the good times. He would disagree with this as he does not take the time to understand my position0 -
I would argue that the long term trend rate is known and so you could set a range where you could borrow money to boost the economy. If growth is above 1% then no borrowing needed to dig holes and fill them in againTheBigBean said:
Isn't the issue that recognition of good times can only be done with hindsight?surrey_commuter said:
Yes.Pross said:
Isn't that what Rick has always advocated?surrey_commuter said:
How about in the good years you fix the public finances and then when you have a downturn and need to put money into the economy you fix the school roof.wallace_and_gromit said:
Sorry - I wasn't being particularly clear.TheBigBean said:
We've disagreed before on this subject, but this makes no sense. If you borrow some money to build a school, you need to pay the debt whether that is by PFI or whatever other magic borrowing device you are using.wallace_and_gromit said:
I agree it's not easy. That's why I'm an accountant rather than a politician!rjsterry said:
I think people forget just how many schools were repaired and new schools built in that period. Of course the money could have been spent elsewhere but it feels like that is mostly robbing Peter to pay Paul. A few more libraries are open; a few more schools are falling apart and overcrowded.wallace_and_gromit said:
2002-2007 spring to mind. Whilst there was lots of leaking roofs fixed in this period, this was via PFI, which defers the impact on public finances many years into the future.rjsterry said:
To what sunny period are you referring and which roof do you think should have been fixed? The last one I can think of we almost literally fixed the leaking roofs of schools.surrey_commuter said:
and yet we spent £120bn on debt servicing costs last yearrick_chasey said:
Sure, but in the context of "Britain has run out of money in 2010 so austerity was the only policy choice", I'm arguing that by many standards that plainly wasn't the case.Pross said:All that graph tells me is that debt to GDP had started rising sharply around the time of the GFC and that it got back under control as austerity was introduced.
Later on the debt/gdp ratio was even higher and the cost of servicing was lower, and historically the burden had been even higher still.
imagine how much rosier everything would look if successive Govts had not reset the fiscal rules so they could justify borrowing ever higher amounts instead of fixing the roof when the sun was shining
Had fewer PFI contracts been entered into, then post-GFC, we'd have had leakier roofs in schools etc. but with more flexibility to address the social issues resulting from the GFC, without sustained historically high levels of borrowing.
Similarly, whilst all the other stuff Labour invested in was likely "good" the more marginal stuff might have been better left uninvested in as this would have freed up fiscal headroom for direct action post-GFC.
FWIW, I think the problem with "austerity" in the UK was that it was too focused on cutting spending in unsexy but vital areas (e.g. libraries and early years education) rather than biting the bullet and raising taxes. The latter approach spreads the pain, whereas a lot of Coalition spending cuts were disproportionately focused on a relatively small number of people. And some of the cuts e.g. the Overseas Aid budget were probably counter-productive in that they saved little money, but at a lot of cost in terms of reputational damage and/or stirring social unrest.
Though I think it's fair to criticise the New Labour regime for thinking too much about the benefits of PFI schemes and not enough about the downsides namely the impossible to get out contracts with long term, large payments involved.
If you simply borrow in full to fund each new school etc. then when times are hard, you can stop building new ones and hence stop borrowing. Under PFI, the die was long-since cast re the future levels of expenditure (and hence borrowing requirements).
In a given year, assume the government's fiscal headroom (incorporating the impact of current borrowing on future debt service requirements) for discretionary investment is £Xm. If a schools costs £Xm then the government can borrow to fund one school.
This occurs for the next 2-3 years but then there is a major economic downturn and fiscal headroom is eliminated as tax revenues fall etc. Government can respond by stopping its school building campaign for a few years and then resuming once economic conditions are again favourable.
[Assume PFI costs are spread over 25 years.]
If you build a school via PFI, then the cost of the government in Year 1 is £Xm / 25.
So the politicians think "With this year's fiscal headroom of £Xm we can commit to building 25 new schools as it will only cost £Xm this year" so that's what they do, as it popular and makes them feel good and next year is another problem.
For the next 2-3 years, the government uses £Xm of its borrowing capacity to pay 25 lots of £Xm / 25 annual charge for the PFI schools.
Major economic downturn hits, government now has zero fiscal headroom, but is still committed to paying £Xm per year for the schools and has to find some way of paying this, be it higher taxes or reduced spending elsewhere.
So the risk of PFI is that it encourages politicians to commit to higher spending than the economy can really afford over the long term, as they are seduced by cyclically favourable fiscal conditions and think they've abolished economic downturns due to their brilliance. The dull old "Pay As You Go" scheme keeps expenditure in line with what can sensibly afforded, given longer term economic realities.
If the government built also 25 schools in one year via the PAYG approach then the argument would boil down to the relative efficiency of PFI schemes vs government managed schemes.
For the nitpickers please don't tell me about the problems of water ingress as the school roof is a metaphor for increased public spending.
Where he and I disagree is the level of borrowing in the good times. He would disagree with this as he does not take the time to understand my position0 -
-
Surely it would be possible to set some fiscal rules based around growth, inflation and interest rates etc.? The problem is that politicians of all colours like to throw money around in the run up to elections (although usually on tax cuts as an electoral bribe rather than investment).TheBigBean said:
Isn't the issue that recognition of good times can only be done with hindsight?surrey_commuter said:
Yes.Pross said:
Isn't that what Rick has always advocated?surrey_commuter said:
How about in the good years you fix the public finances and then when you have a downturn and need to put money into the economy you fix the school roof.wallace_and_gromit said:
Sorry - I wasn't being particularly clear.TheBigBean said:
We've disagreed before on this subject, but this makes no sense. If you borrow some money to build a school, you need to pay the debt whether that is by PFI or whatever other magic borrowing device you are using.wallace_and_gromit said:
I agree it's not easy. That's why I'm an accountant rather than a politician!rjsterry said:
I think people forget just how many schools were repaired and new schools built in that period. Of course the money could have been spent elsewhere but it feels like that is mostly robbing Peter to pay Paul. A few more libraries are open; a few more schools are falling apart and overcrowded.wallace_and_gromit said:
2002-2007 spring to mind. Whilst there was lots of leaking roofs fixed in this period, this was via PFI, which defers the impact on public finances many years into the future.rjsterry said:
To what sunny period are you referring and which roof do you think should have been fixed? The last one I can think of we almost literally fixed the leaking roofs of schools.surrey_commuter said:
and yet we spent £120bn on debt servicing costs last yearrick_chasey said:
Sure, but in the context of "Britain has run out of money in 2010 so austerity was the only policy choice", I'm arguing that by many standards that plainly wasn't the case.Pross said:All that graph tells me is that debt to GDP had started rising sharply around the time of the GFC and that it got back under control as austerity was introduced.
Later on the debt/gdp ratio was even higher and the cost of servicing was lower, and historically the burden had been even higher still.
imagine how much rosier everything would look if successive Govts had not reset the fiscal rules so they could justify borrowing ever higher amounts instead of fixing the roof when the sun was shining
Had fewer PFI contracts been entered into, then post-GFC, we'd have had leakier roofs in schools etc. but with more flexibility to address the social issues resulting from the GFC, without sustained historically high levels of borrowing.
Similarly, whilst all the other stuff Labour invested in was likely "good" the more marginal stuff might have been better left uninvested in as this would have freed up fiscal headroom for direct action post-GFC.
FWIW, I think the problem with "austerity" in the UK was that it was too focused on cutting spending in unsexy but vital areas (e.g. libraries and early years education) rather than biting the bullet and raising taxes. The latter approach spreads the pain, whereas a lot of Coalition spending cuts were disproportionately focused on a relatively small number of people. And some of the cuts e.g. the Overseas Aid budget were probably counter-productive in that they saved little money, but at a lot of cost in terms of reputational damage and/or stirring social unrest.
Though I think it's fair to criticise the New Labour regime for thinking too much about the benefits of PFI schemes and not enough about the downsides namely the impossible to get out contracts with long term, large payments involved.
If you simply borrow in full to fund each new school etc. then when times are hard, you can stop building new ones and hence stop borrowing. Under PFI, the die was long-since cast re the future levels of expenditure (and hence borrowing requirements).
In a given year, assume the government's fiscal headroom (incorporating the impact of current borrowing on future debt service requirements) for discretionary investment is £Xm. If a schools costs £Xm then the government can borrow to fund one school.
This occurs for the next 2-3 years but then there is a major economic downturn and fiscal headroom is eliminated as tax revenues fall etc. Government can respond by stopping its school building campaign for a few years and then resuming once economic conditions are again favourable.
[Assume PFI costs are spread over 25 years.]
If you build a school via PFI, then the cost of the government in Year 1 is £Xm / 25.
So the politicians think "With this year's fiscal headroom of £Xm we can commit to building 25 new schools as it will only cost £Xm this year" so that's what they do, as it popular and makes them feel good and next year is another problem.
For the next 2-3 years, the government uses £Xm of its borrowing capacity to pay 25 lots of £Xm / 25 annual charge for the PFI schools.
Major economic downturn hits, government now has zero fiscal headroom, but is still committed to paying £Xm per year for the schools and has to find some way of paying this, be it higher taxes or reduced spending elsewhere.
So the risk of PFI is that it encourages politicians to commit to higher spending than the economy can really afford over the long term, as they are seduced by cyclically favourable fiscal conditions and think they've abolished economic downturns due to their brilliance. The dull old "Pay As You Go" scheme keeps expenditure in line with what can sensibly afforded, given longer term economic realities.
If the government built also 25 schools in one year via the PAYG approach then the argument would boil down to the relative efficiency of PFI schemes vs government managed schemes.
For the nitpickers please don't tell me about the problems of water ingress as the school roof is a metaphor for increased public spending.
Where he and I disagree is the level of borrowing in the good times. He would disagree with this as he does not take the time to understand my position0 -
https://www.cityam.com/bank-of-englands-huw-pill-brits-need-to-accept-theyre-poorer/
Misses the quiet bit that part of the fight for inflation is making you poorer so you spend less0 -
It's a poor metaphor as a school roof is clearly capital expenditure. Which is the bit which has been cut rather than day to day expenditure.surrey_commuter said:
How about in the good years you fix the public finances and then when you have a downturn and need to put money into the economy you fix the school roof.wallace_and_gromit said:
Sorry - I wasn't being particularly clear.TheBigBean said:
We've disagreed before on this subject, but this makes no sense. If you borrow some money to build a school, you need to pay the debt whether that is by PFI or whatever other magic borrowing device you are using.wallace_and_gromit said:
I agree it's not easy. That's why I'm an accountant rather than a politician!rjsterry said:
I think people forget just how many schools were repaired and new schools built in that period. Of course the money could have been spent elsewhere but it feels like that is mostly robbing Peter to pay Paul. A few more libraries are open; a few more schools are falling apart and overcrowded.wallace_and_gromit said:
2002-2007 spring to mind. Whilst there was lots of leaking roofs fixed in this period, this was via PFI, which defers the impact on public finances many years into the future.rjsterry said:
To what sunny period are you referring and which roof do you think should have been fixed? The last one I can think of we almost literally fixed the leaking roofs of schools.surrey_commuter said:
and yet we spent £120bn on debt servicing costs last yearrick_chasey said:
Sure, but in the context of "Britain has run out of money in 2010 so austerity was the only policy choice", I'm arguing that by many standards that plainly wasn't the case.Pross said:All that graph tells me is that debt to GDP had started rising sharply around the time of the GFC and that it got back under control as austerity was introduced.
Later on the debt/gdp ratio was even higher and the cost of servicing was lower, and historically the burden had been even higher still.
imagine how much rosier everything would look if successive Govts had not reset the fiscal rules so they could justify borrowing ever higher amounts instead of fixing the roof when the sun was shining
Had fewer PFI contracts been entered into, then post-GFC, we'd have had leakier roofs in schools etc. but with more flexibility to address the social issues resulting from the GFC, without sustained historically high levels of borrowing.
Similarly, whilst all the other stuff Labour invested in was likely "good" the more marginal stuff might have been better left uninvested in as this would have freed up fiscal headroom for direct action post-GFC.
FWIW, I think the problem with "austerity" in the UK was that it was too focused on cutting spending in unsexy but vital areas (e.g. libraries and early years education) rather than biting the bullet and raising taxes. The latter approach spreads the pain, whereas a lot of Coalition spending cuts were disproportionately focused on a relatively small number of people. And some of the cuts e.g. the Overseas Aid budget were probably counter-productive in that they saved little money, but at a lot of cost in terms of reputational damage and/or stirring social unrest.
Though I think it's fair to criticise the New Labour regime for thinking too much about the benefits of PFI schemes and not enough about the downsides namely the impossible to get out contracts with long term, large payments involved.
If you simply borrow in full to fund each new school etc. then when times are hard, you can stop building new ones and hence stop borrowing. Under PFI, the die was long-since cast re the future levels of expenditure (and hence borrowing requirements).
In a given year, assume the government's fiscal headroom (incorporating the impact of current borrowing on future debt service requirements) for discretionary investment is £Xm. If a schools costs £Xm then the government can borrow to fund one school.
This occurs for the next 2-3 years but then there is a major economic downturn and fiscal headroom is eliminated as tax revenues fall etc. Government can respond by stopping its school building campaign for a few years and then resuming once economic conditions are again favourable.
[Assume PFI costs are spread over 25 years.]
If you build a school via PFI, then the cost of the government in Year 1 is £Xm / 25.
So the politicians think "With this year's fiscal headroom of £Xm we can commit to building 25 new schools as it will only cost £Xm this year" so that's what they do, as it popular and makes them feel good and next year is another problem.
For the next 2-3 years, the government uses £Xm of its borrowing capacity to pay 25 lots of £Xm / 25 annual charge for the PFI schools.
Major economic downturn hits, government now has zero fiscal headroom, but is still committed to paying £Xm per year for the schools and has to find some way of paying this, be it higher taxes or reduced spending elsewhere.
So the risk of PFI is that it encourages politicians to commit to higher spending than the economy can really afford over the long term, as they are seduced by cyclically favourable fiscal conditions and think they've abolished economic downturns due to their brilliance. The dull old "Pay As You Go" scheme keeps expenditure in line with what can sensibly afforded, given longer term economic realities.
If the government built also 25 schools in one year via the PAYG approach then the argument would boil down to the relative efficiency of PFI schemes vs government managed schemes.
For the nitpickers please don't tell me about the problems of water ingress as the school roof is a metaphor for increased public spending.
Also good luck holding off any tax cuts when the government is running a surplus.
Looking at historic examples, big public debts take decades or even centuries to pay off, so I can't help thinking that you are doomed to haunt no.11 Downing Street for eternity.1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
Pinnacle Monzonite
Part of the anti-growth coalition0 -
Here’s a philosophical question: Are teachers’ salaries “capital expenditure” as they are an investment in the UK’s future “human capital”, or are they day-to-day expenditure?
My view is the former, though that’s probably not how the national accounts do things.0 -
I do, and I think it is short sighted to make teaching a profession that pays less than most “skilled” (ie needing degree or above) jobs.wallace_and_gromit said:Here’s a philosophical question: Are teachers’ salaries “capital expenditure” as they are an investment in the UK’s future “human capital”, or are they day-to-day expenditure?
My view is the former, though that’s probably not how the national accounts do things.
0 -
It's included in the GDP calculations. One of the reasons the UK had a worst recession in the pandemic was that children not going to school in UK affected the GDP whereas other countries continued to include it because teachers were still being paid.wallace_and_gromit said:Here’s a philosophical question: Are teachers’ salaries “capital expenditure” as they are an investment in the UK’s future “human capital”, or are they day-to-day expenditure?
My view is the former, though that’s probably not how the national accounts do things.0 -
lol - the pressure is on for tax cust as we borrowed £13bn less than expected last year, making it only the 4th worst year ever.rjsterry said:
It's a poor metaphor as a school roof is clearly capital expenditure. Which is the bit which has been cut rather than day to day expenditure.surrey_commuter said:
How about in the good years you fix the public finances and then when you have a downturn and need to put money into the economy you fix the school roof.wallace_and_gromit said:
Sorry - I wasn't being particularly clear.TheBigBean said:
We've disagreed before on this subject, but this makes no sense. If you borrow some money to build a school, you need to pay the debt whether that is by PFI or whatever other magic borrowing device you are using.wallace_and_gromit said:
I agree it's not easy. That's why I'm an accountant rather than a politician!rjsterry said:
I think people forget just how many schools were repaired and new schools built in that period. Of course the money could have been spent elsewhere but it feels like that is mostly robbing Peter to pay Paul. A few more libraries are open; a few more schools are falling apart and overcrowded.wallace_and_gromit said:
2002-2007 spring to mind. Whilst there was lots of leaking roofs fixed in this period, this was via PFI, which defers the impact on public finances many years into the future.rjsterry said:
To what sunny period are you referring and which roof do you think should have been fixed? The last one I can think of we almost literally fixed the leaking roofs of schools.surrey_commuter said:
and yet we spent £120bn on debt servicing costs last yearrick_chasey said:
Sure, but in the context of "Britain has run out of money in 2010 so austerity was the only policy choice", I'm arguing that by many standards that plainly wasn't the case.Pross said:All that graph tells me is that debt to GDP had started rising sharply around the time of the GFC and that it got back under control as austerity was introduced.
Later on the debt/gdp ratio was even higher and the cost of servicing was lower, and historically the burden had been even higher still.
imagine how much rosier everything would look if successive Govts had not reset the fiscal rules so they could justify borrowing ever higher amounts instead of fixing the roof when the sun was shining
Had fewer PFI contracts been entered into, then post-GFC, we'd have had leakier roofs in schools etc. but with more flexibility to address the social issues resulting from the GFC, without sustained historically high levels of borrowing.
Similarly, whilst all the other stuff Labour invested in was likely "good" the more marginal stuff might have been better left uninvested in as this would have freed up fiscal headroom for direct action post-GFC.
FWIW, I think the problem with "austerity" in the UK was that it was too focused on cutting spending in unsexy but vital areas (e.g. libraries and early years education) rather than biting the bullet and raising taxes. The latter approach spreads the pain, whereas a lot of Coalition spending cuts were disproportionately focused on a relatively small number of people. And some of the cuts e.g. the Overseas Aid budget were probably counter-productive in that they saved little money, but at a lot of cost in terms of reputational damage and/or stirring social unrest.
Though I think it's fair to criticise the New Labour regime for thinking too much about the benefits of PFI schemes and not enough about the downsides namely the impossible to get out contracts with long term, large payments involved.
If you simply borrow in full to fund each new school etc. then when times are hard, you can stop building new ones and hence stop borrowing. Under PFI, the die was long-since cast re the future levels of expenditure (and hence borrowing requirements).
In a given year, assume the government's fiscal headroom (incorporating the impact of current borrowing on future debt service requirements) for discretionary investment is £Xm. If a schools costs £Xm then the government can borrow to fund one school.
This occurs for the next 2-3 years but then there is a major economic downturn and fiscal headroom is eliminated as tax revenues fall etc. Government can respond by stopping its school building campaign for a few years and then resuming once economic conditions are again favourable.
[Assume PFI costs are spread over 25 years.]
If you build a school via PFI, then the cost of the government in Year 1 is £Xm / 25.
So the politicians think "With this year's fiscal headroom of £Xm we can commit to building 25 new schools as it will only cost £Xm this year" so that's what they do, as it popular and makes them feel good and next year is another problem.
For the next 2-3 years, the government uses £Xm of its borrowing capacity to pay 25 lots of £Xm / 25 annual charge for the PFI schools.
Major economic downturn hits, government now has zero fiscal headroom, but is still committed to paying £Xm per year for the schools and has to find some way of paying this, be it higher taxes or reduced spending elsewhere.
So the risk of PFI is that it encourages politicians to commit to higher spending than the economy can really afford over the long term, as they are seduced by cyclically favourable fiscal conditions and think they've abolished economic downturns due to their brilliance. The dull old "Pay As You Go" scheme keeps expenditure in line with what can sensibly afforded, given longer term economic realities.
If the government built also 25 schools in one year via the PAYG approach then the argument would boil down to the relative efficiency of PFI schemes vs government managed schemes.
For the nitpickers please don't tell me about the problems of water ingress as the school roof is a metaphor for increased public spending.
Also good luck holding off any tax cuts when the government is running a surplus.
Looking at historic examples, big public debts take decades or even centuries to pay off, so I can't help thinking that you are doomed to haunt no.11 Downing Street for eternity.
As I have said before I believe that we are in a new paradigm of the UK Govt borrowing as much as possible each year and that cycle will only be broken by the markets and when that happens we will have Greek level of austerity.0 -
Getting a bit annoyed at the "we tried MMT last year and it failed" argument, as, if you were a fully signed up member to MMT, you'd be whacking up taxes to eye watering levels or doing massive austerity to combat the eye-watering inflation, as that is the single indicator you use to decide if you're spending too much as a state or not.
0 -
Everybody has a plan until they get punched in the mouthrick_chasey said:Getting a bit annoyed at the "we tried MMT last year and it failed" argument, as, if you were a fully signed up member to MMT, you'd be whacking up taxes to eye watering levels or doing massive austerity to combat the eye-watering inflation, as that is the single indicator you use to decide if you're spending too much as a state or not.
1 -
Sure, but can we not pretend it was MMT when it plainly wasn't.surrey_commuter said:
Everybody has a plan until they get punched in the mouthrick_chasey said:Getting a bit annoyed at the "we tried MMT last year and it failed" argument, as, if you were a fully signed up member to MMT, you'd be whacking up taxes to eye watering levels or doing massive austerity to combat the eye-watering inflation, as that is the single indicator you use to decide if you're spending too much as a state or not.
0 -
Well quite.surrey_commuter said:
lol - the pressure is on for tax cust as we borrowed £13bn less than expected last year, making it only the 4th worst year ever.rjsterry said:
It's a poor metaphor as a school roof is clearly capital expenditure. Which is the bit which has been cut rather than day to day expenditure.surrey_commuter said:
How about in the good years you fix the public finances and then when you have a downturn and need to put money into the economy you fix the school roof.wallace_and_gromit said:
Sorry - I wasn't being particularly clear.TheBigBean said:
We've disagreed before on this subject, but this makes no sense. If you borrow some money to build a school, you need to pay the debt whether that is by PFI or whatever other magic borrowing device you are using.wallace_and_gromit said:
I agree it's not easy. That's why I'm an accountant rather than a politician!rjsterry said:
I think people forget just how many schools were repaired and new schools built in that period. Of course the money could have been spent elsewhere but it feels like that is mostly robbing Peter to pay Paul. A few more libraries are open; a few more schools are falling apart and overcrowded.wallace_and_gromit said:
2002-2007 spring to mind. Whilst there was lots of leaking roofs fixed in this period, this was via PFI, which defers the impact on public finances many years into the future.rjsterry said:
To what sunny period are you referring and which roof do you think should have been fixed? The last one I can think of we almost literally fixed the leaking roofs of schools.surrey_commuter said:
and yet we spent £120bn on debt servicing costs last yearrick_chasey said:
Sure, but in the context of "Britain has run out of money in 2010 so austerity was the only policy choice", I'm arguing that by many standards that plainly wasn't the case.Pross said:All that graph tells me is that debt to GDP had started rising sharply around the time of the GFC and that it got back under control as austerity was introduced.
Later on the debt/gdp ratio was even higher and the cost of servicing was lower, and historically the burden had been even higher still.
imagine how much rosier everything would look if successive Govts had not reset the fiscal rules so they could justify borrowing ever higher amounts instead of fixing the roof when the sun was shining
Had fewer PFI contracts been entered into, then post-GFC, we'd have had leakier roofs in schools etc. but with more flexibility to address the social issues resulting from the GFC, without sustained historically high levels of borrowing.
Similarly, whilst all the other stuff Labour invested in was likely "good" the more marginal stuff might have been better left uninvested in as this would have freed up fiscal headroom for direct action post-GFC.
FWIW, I think the problem with "austerity" in the UK was that it was too focused on cutting spending in unsexy but vital areas (e.g. libraries and early years education) rather than biting the bullet and raising taxes. The latter approach spreads the pain, whereas a lot of Coalition spending cuts were disproportionately focused on a relatively small number of people. And some of the cuts e.g. the Overseas Aid budget were probably counter-productive in that they saved little money, but at a lot of cost in terms of reputational damage and/or stirring social unrest.
Though I think it's fair to criticise the New Labour regime for thinking too much about the benefits of PFI schemes and not enough about the downsides namely the impossible to get out contracts with long term, large payments involved.
If you simply borrow in full to fund each new school etc. then when times are hard, you can stop building new ones and hence stop borrowing. Under PFI, the die was long-since cast re the future levels of expenditure (and hence borrowing requirements).
In a given year, assume the government's fiscal headroom (incorporating the impact of current borrowing on future debt service requirements) for discretionary investment is £Xm. If a schools costs £Xm then the government can borrow to fund one school.
This occurs for the next 2-3 years but then there is a major economic downturn and fiscal headroom is eliminated as tax revenues fall etc. Government can respond by stopping its school building campaign for a few years and then resuming once economic conditions are again favourable.
[Assume PFI costs are spread over 25 years.]
If you build a school via PFI, then the cost of the government in Year 1 is £Xm / 25.
So the politicians think "With this year's fiscal headroom of £Xm we can commit to building 25 new schools as it will only cost £Xm this year" so that's what they do, as it popular and makes them feel good and next year is another problem.
For the next 2-3 years, the government uses £Xm of its borrowing capacity to pay 25 lots of £Xm / 25 annual charge for the PFI schools.
Major economic downturn hits, government now has zero fiscal headroom, but is still committed to paying £Xm per year for the schools and has to find some way of paying this, be it higher taxes or reduced spending elsewhere.
So the risk of PFI is that it encourages politicians to commit to higher spending than the economy can really afford over the long term, as they are seduced by cyclically favourable fiscal conditions and think they've abolished economic downturns due to their brilliance. The dull old "Pay As You Go" scheme keeps expenditure in line with what can sensibly afforded, given longer term economic realities.
If the government built also 25 schools in one year via the PAYG approach then the argument would boil down to the relative efficiency of PFI schemes vs government managed schemes.
For the nitpickers please don't tell me about the problems of water ingress as the school roof is a metaphor for increased public spending.
Also good luck holding off any tax cuts when the government is running a surplus.
Looking at historic examples, big public debts take decades or even centuries to pay off, so I can't help thinking that you are doomed to haunt no.11 Downing Street for eternity.
As I have said before I believe that we are in a new paradigm of the UK Govt borrowing as much as possible each year and that cycle will only be broken by the markets and when that happens we will have Greek level of austerity.
I think it would need several years of coordinated comms to get the public on side and I don't think any party has the patience for that. Your only hope is a boom, which brings in so much revenue that they can reduce the debt and give tax cuts.1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
Pinnacle Monzonite
Part of the anti-growth coalition0 -
If I remember rightly their ambition is to get the debt % falling by the end of the decade. In other words it will continue to rise until the next downturn when it will balloon.rjsterry said:
Well quite.surrey_commuter said:
lol - the pressure is on for tax cust as we borrowed £13bn less than expected last year, making it only the 4th worst year ever.rjsterry said:
It's a poor metaphor as a school roof is clearly capital expenditure. Which is the bit which has been cut rather than day to day expenditure.surrey_commuter said:
How about in the good years you fix the public finances and then when you have a downturn and need to put money into the economy you fix the school roof.wallace_and_gromit said:
Sorry - I wasn't being particularly clear.TheBigBean said:
We've disagreed before on this subject, but this makes no sense. If you borrow some money to build a school, you need to pay the debt whether that is by PFI or whatever other magic borrowing device you are using.wallace_and_gromit said:
I agree it's not easy. That's why I'm an accountant rather than a politician!rjsterry said:
I think people forget just how many schools were repaired and new schools built in that period. Of course the money could have been spent elsewhere but it feels like that is mostly robbing Peter to pay Paul. A few more libraries are open; a few more schools are falling apart and overcrowded.wallace_and_gromit said:
2002-2007 spring to mind. Whilst there was lots of leaking roofs fixed in this period, this was via PFI, which defers the impact on public finances many years into the future.rjsterry said:
To what sunny period are you referring and which roof do you think should have been fixed? The last one I can think of we almost literally fixed the leaking roofs of schools.surrey_commuter said:
and yet we spent £120bn on debt servicing costs last yearrick_chasey said:
Sure, but in the context of "Britain has run out of money in 2010 so austerity was the only policy choice", I'm arguing that by many standards that plainly wasn't the case.Pross said:All that graph tells me is that debt to GDP had started rising sharply around the time of the GFC and that it got back under control as austerity was introduced.
Later on the debt/gdp ratio was even higher and the cost of servicing was lower, and historically the burden had been even higher still.
imagine how much rosier everything would look if successive Govts had not reset the fiscal rules so they could justify borrowing ever higher amounts instead of fixing the roof when the sun was shining
Had fewer PFI contracts been entered into, then post-GFC, we'd have had leakier roofs in schools etc. but with more flexibility to address the social issues resulting from the GFC, without sustained historically high levels of borrowing.
Similarly, whilst all the other stuff Labour invested in was likely "good" the more marginal stuff might have been better left uninvested in as this would have freed up fiscal headroom for direct action post-GFC.
FWIW, I think the problem with "austerity" in the UK was that it was too focused on cutting spending in unsexy but vital areas (e.g. libraries and early years education) rather than biting the bullet and raising taxes. The latter approach spreads the pain, whereas a lot of Coalition spending cuts were disproportionately focused on a relatively small number of people. And some of the cuts e.g. the Overseas Aid budget were probably counter-productive in that they saved little money, but at a lot of cost in terms of reputational damage and/or stirring social unrest.
Though I think it's fair to criticise the New Labour regime for thinking too much about the benefits of PFI schemes and not enough about the downsides namely the impossible to get out contracts with long term, large payments involved.
If you simply borrow in full to fund each new school etc. then when times are hard, you can stop building new ones and hence stop borrowing. Under PFI, the die was long-since cast re the future levels of expenditure (and hence borrowing requirements).
In a given year, assume the government's fiscal headroom (incorporating the impact of current borrowing on future debt service requirements) for discretionary investment is £Xm. If a schools costs £Xm then the government can borrow to fund one school.
This occurs for the next 2-3 years but then there is a major economic downturn and fiscal headroom is eliminated as tax revenues fall etc. Government can respond by stopping its school building campaign for a few years and then resuming once economic conditions are again favourable.
[Assume PFI costs are spread over 25 years.]
If you build a school via PFI, then the cost of the government in Year 1 is £Xm / 25.
So the politicians think "With this year's fiscal headroom of £Xm we can commit to building 25 new schools as it will only cost £Xm this year" so that's what they do, as it popular and makes them feel good and next year is another problem.
For the next 2-3 years, the government uses £Xm of its borrowing capacity to pay 25 lots of £Xm / 25 annual charge for the PFI schools.
Major economic downturn hits, government now has zero fiscal headroom, but is still committed to paying £Xm per year for the schools and has to find some way of paying this, be it higher taxes or reduced spending elsewhere.
So the risk of PFI is that it encourages politicians to commit to higher spending than the economy can really afford over the long term, as they are seduced by cyclically favourable fiscal conditions and think they've abolished economic downturns due to their brilliance. The dull old "Pay As You Go" scheme keeps expenditure in line with what can sensibly afforded, given longer term economic realities.
If the government built also 25 schools in one year via the PAYG approach then the argument would boil down to the relative efficiency of PFI schemes vs government managed schemes.
For the nitpickers please don't tell me about the problems of water ingress as the school roof is a metaphor for increased public spending.
Also good luck holding off any tax cuts when the government is running a surplus.
Looking at historic examples, big public debts take decades or even centuries to pay off, so I can't help thinking that you are doomed to haunt no.11 Downing Street for eternity.
As I have said before I believe that we are in a new paradigm of the UK Govt borrowing as much as possible each year and that cycle will only be broken by the markets and when that happens we will have Greek level of austerity.
I think it would need several years of coordinated comms to get the public on side and I don't think any party has the patience for that. Your only hope is a boom, which brings in so much revenue that they can reduce the debt and give tax cuts.0 -
As I think it is total BS I find it hard to read about it but for anybody who is interested this is a very accesible article that I think is reasonably balancedrick_chasey said:
Sure, but can we not pretend it was MMT when it plainly wasn't.surrey_commuter said:
Everybody has a plan until they get punched in the mouthrick_chasey said:Getting a bit annoyed at the "we tried MMT last year and it failed" argument, as, if you were a fully signed up member to MMT, you'd be whacking up taxes to eye watering levels or doing massive austerity to combat the eye-watering inflation, as that is the single indicator you use to decide if you're spending too much as a state or not.
https://www.investopedia.com/modern-monetary-theory-mmt-4588060
Anyway surely the cetral plank of MMT is that if you have a sovereign currency the Govt can't run out of money. In my world this is exactly what happened to Truss0 -
You would have needed to follow it through though. So MMT doesn't really care if the cost of borrowing goes up, as much as it is concerned with inflation.surrey_commuter said:
As I think it is total BS I find it hard to read about it but for anybody who is interested this is a very accesible article that I think is reasonably balancedrick_chasey said:
Sure, but can we not pretend it was MMT when it plainly wasn't.surrey_commuter said:
Everybody has a plan until they get punched in the mouthrick_chasey said:Getting a bit annoyed at the "we tried MMT last year and it failed" argument, as, if you were a fully signed up member to MMT, you'd be whacking up taxes to eye watering levels or doing massive austerity to combat the eye-watering inflation, as that is the single indicator you use to decide if you're spending too much as a state or not.
https://www.investopedia.com/modern-monetary-theory-mmt-4588060
Anyway surely the cetral plank of MMT is that if you have a sovereign currency the Govt can't run out of money. In my world this is exactly what happened to Truss
Part of the market concern with Truss was that it was expansionary in a period of already rising inflation.
That is not MMT, as if there was rising inflation, the spending would not be expansionary.
I'm happy for people to debate the merits and cons of MMT (I'm not convinced myself it's all that good), but I am thoroughly annoyed that people think Truss was MMT - she was literally the opposite.0 -
she was not the opposite of MMT, she picked the bits she liked to give her some intellectual ballast to justify her policies.rick_chasey said:
You would have needed to follow it through though. So MMT doesn't really care if the cost of borrowing goes up, as much as it is concerned with inflation.surrey_commuter said:
As I think it is total BS I find it hard to read about it but for anybody who is interested this is a very accesible article that I think is reasonably balancedrick_chasey said:
Sure, but can we not pretend it was MMT when it plainly wasn't.surrey_commuter said:
Everybody has a plan until they get punched in the mouthrick_chasey said:Getting a bit annoyed at the "we tried MMT last year and it failed" argument, as, if you were a fully signed up member to MMT, you'd be whacking up taxes to eye watering levels or doing massive austerity to combat the eye-watering inflation, as that is the single indicator you use to decide if you're spending too much as a state or not.
https://www.investopedia.com/modern-monetary-theory-mmt-4588060
Anyway surely the cetral plank of MMT is that if you have a sovereign currency the Govt can't run out of money. In my world this is exactly what happened to Truss
Part of the market concern with Truss was that it was expansionary in a period of already rising inflation.
That is not MMT, as if there was rising inflation, the spending would not be expansionary.
I'm happy for people to debate the merits and cons of MMT (I'm not convinced myself it's all that good), but I am thoroughly annoyed that people think Truss was MMT - she was literally the opposite.
So MMT doesn't really care if the cost of borrowing goes up things like that are why I think it should remain in the classroom and not ever be released into the wild0 -
You'd be loving the monster austerity at this point in the inflation cycle however. Don't be like Truss and only want it one way.surrey_commuter said:
she was not the opposite of MMT, she picked the bits she liked to give her some intellectual ballast to justify her policies.rick_chasey said:
You would have needed to follow it through though. So MMT doesn't really care if the cost of borrowing goes up, as much as it is concerned with inflation.surrey_commuter said:
As I think it is total BS I find it hard to read about it but for anybody who is interested this is a very accesible article that I think is reasonably balancedrick_chasey said:
Sure, but can we not pretend it was MMT when it plainly wasn't.surrey_commuter said:
Everybody has a plan until they get punched in the mouthrick_chasey said:Getting a bit annoyed at the "we tried MMT last year and it failed" argument, as, if you were a fully signed up member to MMT, you'd be whacking up taxes to eye watering levels or doing massive austerity to combat the eye-watering inflation, as that is the single indicator you use to decide if you're spending too much as a state or not.
https://www.investopedia.com/modern-monetary-theory-mmt-4588060
Anyway surely the cetral plank of MMT is that if you have a sovereign currency the Govt can't run out of money. In my world this is exactly what happened to Truss
Part of the market concern with Truss was that it was expansionary in a period of already rising inflation.
That is not MMT, as if there was rising inflation, the spending would not be expansionary.
I'm happy for people to debate the merits and cons of MMT (I'm not convinced myself it's all that good), but I am thoroughly annoyed that people think Truss was MMT - she was literally the opposite.
So MMT doesn't really care if the cost of borrowing goes up things like that are why I think it should remain in the classroom and not ever be released into the wild0 -
I don't even see a £120bn deficit as cuddly austerityrick_chasey said:
You'd be loving the monster austerity at this point in the inflation cycle however. Don't be like Truss and only want it one way.surrey_commuter said:
she was not the opposite of MMT, she picked the bits she liked to give her some intellectual ballast to justify her policies.rick_chasey said:
You would have needed to follow it through though. So MMT doesn't really care if the cost of borrowing goes up, as much as it is concerned with inflation.surrey_commuter said:
As I think it is total BS I find it hard to read about it but for anybody who is interested this is a very accesible article that I think is reasonably balancedrick_chasey said:
Sure, but can we not pretend it was MMT when it plainly wasn't.surrey_commuter said:
Everybody has a plan until they get punched in the mouthrick_chasey said:Getting a bit annoyed at the "we tried MMT last year and it failed" argument, as, if you were a fully signed up member to MMT, you'd be whacking up taxes to eye watering levels or doing massive austerity to combat the eye-watering inflation, as that is the single indicator you use to decide if you're spending too much as a state or not.
https://www.investopedia.com/modern-monetary-theory-mmt-4588060
Anyway surely the cetral plank of MMT is that if you have a sovereign currency the Govt can't run out of money. In my world this is exactly what happened to Truss
Part of the market concern with Truss was that it was expansionary in a period of already rising inflation.
That is not MMT, as if there was rising inflation, the spending would not be expansionary.
I'm happy for people to debate the merits and cons of MMT (I'm not convinced myself it's all that good), but I am thoroughly annoyed that people think Truss was MMT - she was literally the opposite.
So MMT doesn't really care if the cost of borrowing goes up things like that are why I think it should remain in the classroom and not ever be released into the wild0
