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Monday, May 17, 2010

Labour admit they have bust the nation

In his first press conference as Chief Secretary to the Treasury today, Liberal Democrat MP, David Laws revealed the advice that had been passed down to him by his predecessor, Liam Byrne:

Laws revealed the contents of the letter at a press conference today, telling reporters: "When I arrived at my desk on the very first day as chief secretary, I found a letter from the previous chief secretary to give me some advice, I assumed, on how I conduct myself over the months ahead.

"Unfortunately, when I opened it, it was a one-sentence letter which simply said: 'Dear chief secretary, I'm afraid to tell you there's no money left,' which was honest but slightly less helpful advice than I had been expecting."

Mr. Byrne claims that the note was a joke and no doubt that was the intention. However sometimes, as in this case, wry remarks can reveal deeper truths. Labour really has left the country near to bankruptcy.
£1 buys $1.44
£1 buys 1.17 Euros

With the Euro in such decline, with the various crisis going on Greece, Spain etc. The pound is incredably weak against it.

No gold in the bank to prop things up with, personal debt spiraling out of control.

This mess we have been left with by Labour is going to take a huge amount of time to sort out
Why is Laws' first action going to be to implement cuts that ten days ago he said would be dangerous and cause a double dip recession?

I'm baffled as a man who would do something like that strikes me as an idiot at best?
To argue that Labour left the UK close to bankruptcy is nonsense. No sensible economic commentator believes that. Gordon Brown like most Western Finance Ministers made mistakes. His biggest mistake as Martin Wolf pointed out in the FT was to believe the views of the majority of economic commentators regarding the direction of the world economy after 2001. But would the Liberal Democrats have adopted a different policy in the boom years? Hindsight is a wonderful thing but I doubt it. In fact you would probably have made things even worse by joining the Euro and like Greece and Ireland we would now have lost control of our economic destiny.If the new government is going to follow your lead and argue that we are on the verge of bankruptcy then it could become a self fullfilling prophecy as the bond dealers react by not buying UK gilts. You should also realise as well that if the Treasury forecasts are wrong and these were made by civil servants not politicians then we are in real trouble. A 1% cut in the growth forecast is equal to another £7 billion cut in public expenditure or to put it another way a 6% cut in public sector pay. Much of the UK's problems have been caused not by Gordon Brown and the Labour party but by the aftermath of a global recession. A recession which most people agree did not turn a depression because Gordon Brown unlike the Tories made the right call. I hope for the sake of the country that the doom mongers are not proved right and the economy does improve. If Osborne and Cable get it wrong the losers will not be the politicians but the thousands of young people who will lose their jobs and their homes. Byrne cracked a joke and everyone knows that. This is not the time for cheap political point scoring.It is a time for a real debate about the future direction of the country.
Vince Cable and a garage mechanic from Taibach were both warning that there was too much lending with BS offering 125% mortgages. I could see the bust coming, so could the garage mechanic from Taibach.
Face facts Gordon Brown made some crass financial decisions, he should have gone to the country earlier, rather than dragging out this very sorry saga.
I feel some sympathies towards the remaining socialist in the Labour party, according to David Milliband, "New Labour era is over". So, what is the Labour party going to do, re-brand itself? Got to choose a leader first, only two contenders to date, Mssrs Miliband & Miliband, no-one else chucking their hats into the ring.
The fact that Byrne could joke about a 165 Billion pound deficit whilst people are losing their jobs and houses, speaks volumes for the contempt that people have for the people. If my mother a pensioner could tell me in 2005 about people borrowing money that they could never afford to repay putting us in debt, then maybe both Gordon Brown and Jeff Jones are in the wrong jobs! Oh I guess ex jobs!

Jeff also you need to revise your facts concerning the 1920s. The offical Liberals dropped out of the coalition with the Tories in 1916 after Lloyd George's coup against Asquith. It was LG and his National Liberals that continued a coalition with the Tories. Harold Macmillan (a Tory socialist) believed the the liberals collasped after they supported Ramsay MacDonald's first Labour government.
Liberal support collapsed in the 1920s not because they supported the 1924 Labour government but because the issues that held the party together pre 1914 were no longer relevant and the party failed to adapt to the new world created by the First World War. Basically they lost direction and the issue was made worse by the quarrel between Lloyd George and Asquith and some pretty poor decision making.

On the issue of is the UK bust could I recommend that people read the article by Samuel Brittan in the FT. Pay particular attention to the comments about government's gross financing needs and gross debt to GDP. UK's gross financing needs are 20%, France is 25.1%, USA 32.3% and Japan is at 64%. UK's debt to GDP ratio is below Germany, USA and Canada. The UK's average maturity of debt which determinees future financing needs is also much better thasn the USA. All the western powers made mistakes but to quote the IMF ' the bulk of fiscal deterioration in most advanced countries comes neither from irresponsbe spending nor fiscal stimulus but from the automatic effects of the recession.'
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