If only Liam were Chancellor of the Exchequer, we wouldn’t be in this mess, though even better if he’d been chancellor instead of Jeremy Hunt! His solution, like that of Patrick Minford and the hapless, Liz Truss - if she’d been allowed to do as she wanted - perhaps a bit more slowly, is GROWTH, which Rachel Reeves mentions endlessly and clearly knows how to spell without any idea how to achieve it!
Liam a great summary of the position so far, looking forward to the "second half" of the observations tomorrow.
If anyone has Andrew Bailey's contact details or even Rachel Reeves perhaps they could point them at this great top line analysis of the strategic context in which the UK economy sits which is based on the objectivity of facts rather than the subjectivity of hope that Reeves seems to rely on.
Astute analysis of the economic crisis, should be essential reading for the Cabinet and senior civil servants. We need to start speaking about austerity and lancing the cancerous boil of illegal immigration, reduce the cost put them into internment camps and improve safety on our streets
Don't know whether 5-8 will address these issues BUT three more granular factors built into the OBR Forecast are also pretty heroic/lack credibility:
1. Business & Investment Profits (Chart 2.16 in OBR Spring Statement Report):
LOOK at the recovery built into these? It's not credible, particularly as Employers NIC increase from April 25 will both negatively impact Profit/Investment. Look at the trends to date vs those forecast...
2. Productivity (OBR Chart 2.7) :
Forecast to grow at c1% pa. How does that work when Public sector productivity is below the 1997 100 baseline (as well as Covid prepandemic) AND there's nothing material to reverse this trend (cutting c10k Civil Servants doesn't touch the sides). Can't see in the OBR modelling how this factor is taken into account at all. But look at the trends to date vs those forecast...
3. Mix of taxpayers/tax receipts (Table 4.1) :
I can't see any modelling of loss of top 1% of tax payers (c7-8k Millionaires since coming to power and going up) at c£400k per taxpayer - net impact of c£3bn). Tax receipts seem to go up in a pretty linear fashion. This seems to ignore facts - the more likely outcome is that Tax take reduces in line with what the Laffer curve says.....
So, the other point on top of the issues above is that in order to square the circle there are some VERY optimistic assumptions assumed for the Productive, non-Public sector part of the economy. If I was sitting in a Board room as a Chairman or NED I'd be asking the CFO/CEO and their teams to come back with something that resembles reality...
Great article and it really explains the dire straights we are in. I can’t see how we can avoid calling in the IMF. Reeves will not change tack. One of the notable things about all this extra debt she’s taken on is how little of that money is predicted to feed into decent levels of growth.
Rachel from Accounts was never likely to be a credible Chancellor given her history of allegedly being a chess champion and allegedly being an economist for the Bank of England for ten years and allegedly being an economist for the Bank of Scotland for a few years. Those interested can come to a view on how credible these claims are given the ample subsequent data on the internet. Rather more interesting would be to determine more details about her undergraduate period at Oxbridge and her postgraduate period at the LSE.
But we are where we are and it seems that RfromA has the task of managing our National Debt of £2.7tr - about £40k for every man, woman and child in the U.K. - or more realistically our overall debt of about £9.7tr when one adds in funded public sector final salary pension scheme deficits, unfunded public sector final salary pension scheme liabilities, and the huge unfunded accrued basic State pension scheme promises - about £160k for every man, woman and child in the U.K.
Spread that over the rest of the century and that is still £40 per week per person effectively for ever. No doubt RfromA will have the answer in time for her autumn budget. Given her academic history it will be a piece of cake.
Thanks Liam for an excellent and clearly explained summary of the dreadful situation we are in. Unfortunately there is no-one in the Government who understands any of this or how private enterprise only can create real growth. Is there any hope?
Simply put: they don’t have faith in the people. They want to control control control seemingly like good communists. But they also didn’t start it. The Tories were just as bad at the end. All this apparatus for things like hate speech, online control, more power to quangos - all that could be axed along with the parasitic effects it brings.
And they don’t want to let business and entrepreneurs loose. Nor hire or put proper deterrents in the Channel.
They loath us. Much like the Democrats did during Biden’s term.
Excellent clarity as always Liam. Your point about the opposite directions of interest rates and gilt yields is particularly telling. If our economy isn’t already in a spiral dive, it certainly seems to be heading that way. The Cabinet, driven as it is by ideology and inexperience, is out of its depth.
Great analysis, Liam. I look forward to tomorrow’s episode.
One question I have, though, is what exactly is involved in an “IMF bailout”? I’m old enough to have been around for Sunny Jim’s tenure at No. 11 but wasn’t not interested in politics nor economics at that time.
It’s a worry if I was the chancellor I would be surrounding myself with experts like Liam. She may have dabbled as an economist in the past but it is clear she is no expert. It’s time she stopped pretending and replace her ideology with expert economic strategies.
This focus on growth was Labour’s manifesto core in order to push the country forwards. This was a promise that had simply not manifested and there is a need for an about turn on this approach. As Liam quite rightly states there are challenges on both the growth and debt front. The chancellor needs to do a refresh here as it’s the fundamental pillars of economics. Someone should be able to explain how no income and lots of loans or credit card debt can as a combination can be debilitating and needs an overhaul.
If only Liam were Chancellor of the Exchequer, we wouldn’t be in this mess, though even better if he’d been chancellor instead of Jeremy Hunt! His solution, like that of Patrick Minford and the hapless, Liz Truss - if she’d been allowed to do as she wanted - perhaps a bit more slowly, is GROWTH, which Rachel Reeves mentions endlessly and clearly knows how to spell without any idea how to achieve it!
Great summary, Liam. Reeves, and much of the elite political/media class, is fiddling while Rome burns.
Liam a great summary of the position so far, looking forward to the "second half" of the observations tomorrow.
If anyone has Andrew Bailey's contact details or even Rachel Reeves perhaps they could point them at this great top line analysis of the strategic context in which the UK economy sits which is based on the objectivity of facts rather than the subjectivity of hope that Reeves seems to rely on.
Astute analysis of the economic crisis, should be essential reading for the Cabinet and senior civil servants. We need to start speaking about austerity and lancing the cancerous boil of illegal immigration, reduce the cost put them into internment camps and improve safety on our streets
Exceptional, erudite and forensic thank you Liam.
Don't know whether 5-8 will address these issues BUT three more granular factors built into the OBR Forecast are also pretty heroic/lack credibility:
1. Business & Investment Profits (Chart 2.16 in OBR Spring Statement Report):
LOOK at the recovery built into these? It's not credible, particularly as Employers NIC increase from April 25 will both negatively impact Profit/Investment. Look at the trends to date vs those forecast...
2. Productivity (OBR Chart 2.7) :
Forecast to grow at c1% pa. How does that work when Public sector productivity is below the 1997 100 baseline (as well as Covid prepandemic) AND there's nothing material to reverse this trend (cutting c10k Civil Servants doesn't touch the sides). Can't see in the OBR modelling how this factor is taken into account at all. But look at the trends to date vs those forecast...
3. Mix of taxpayers/tax receipts (Table 4.1) :
I can't see any modelling of loss of top 1% of tax payers (c7-8k Millionaires since coming to power and going up) at c£400k per taxpayer - net impact of c£3bn). Tax receipts seem to go up in a pretty linear fashion. This seems to ignore facts - the more likely outcome is that Tax take reduces in line with what the Laffer curve says.....
So, the other point on top of the issues above is that in order to square the circle there are some VERY optimistic assumptions assumed for the Productive, non-Public sector part of the economy. If I was sitting in a Board room as a Chairman or NED I'd be asking the CFO/CEO and their teams to come back with something that resembles reality...
Great article and it really explains the dire straights we are in. I can’t see how we can avoid calling in the IMF. Reeves will not change tack. One of the notable things about all this extra debt she’s taken on is how little of that money is predicted to feed into decent levels of growth.
Rachel from Accounts was never likely to be a credible Chancellor given her history of allegedly being a chess champion and allegedly being an economist for the Bank of England for ten years and allegedly being an economist for the Bank of Scotland for a few years. Those interested can come to a view on how credible these claims are given the ample subsequent data on the internet. Rather more interesting would be to determine more details about her undergraduate period at Oxbridge and her postgraduate period at the LSE.
But we are where we are and it seems that RfromA has the task of managing our National Debt of £2.7tr - about £40k for every man, woman and child in the U.K. - or more realistically our overall debt of about £9.7tr when one adds in funded public sector final salary pension scheme deficits, unfunded public sector final salary pension scheme liabilities, and the huge unfunded accrued basic State pension scheme promises - about £160k for every man, woman and child in the U.K.
Spread that over the rest of the century and that is still £40 per week per person effectively for ever. No doubt RfromA will have the answer in time for her autumn budget. Given her academic history it will be a piece of cake.
Don't worry too much. Once the inevitable mass civil unrest commences nobody will be too bothered about a collapsed economy.
Thanks Liam for an excellent and clearly explained summary of the dreadful situation we are in. Unfortunately there is no-one in the Government who understands any of this or how private enterprise only can create real growth. Is there any hope?
Simply put: they don’t have faith in the people. They want to control control control seemingly like good communists. But they also didn’t start it. The Tories were just as bad at the end. All this apparatus for things like hate speech, online control, more power to quangos - all that could be axed along with the parasitic effects it brings.
And they don’t want to let business and entrepreneurs loose. Nor hire or put proper deterrents in the Channel.
They loath us. Much like the Democrats did during Biden’s term.
Excellent clarity as always Liam. Your point about the opposite directions of interest rates and gilt yields is particularly telling. If our economy isn’t already in a spiral dive, it certainly seems to be heading that way. The Cabinet, driven as it is by ideology and inexperience, is out of its depth.
Great analysis, Liam. I look forward to tomorrow’s episode.
One question I have, though, is what exactly is involved in an “IMF bailout”? I’m old enough to have been around for Sunny Jim’s tenure at No. 11 but wasn’t not interested in politics nor economics at that time.
Andy - check out the relevant episodes of the rest is history podcast for a nice thumbnail
Preach, brother
It’s a worry if I was the chancellor I would be surrounding myself with experts like Liam. She may have dabbled as an economist in the past but it is clear she is no expert. It’s time she stopped pretending and replace her ideology with expert economic strategies.
This focus on growth was Labour’s manifesto core in order to push the country forwards. This was a promise that had simply not manifested and there is a need for an about turn on this approach. As Liam quite rightly states there are challenges on both the growth and debt front. The chancellor needs to do a refresh here as it’s the fundamental pillars of economics. Someone should be able to explain how no income and lots of loans or credit card debt can as a combination can be debilitating and needs an overhaul.