As borrowing soars, high taxes and net-zero policies are creating a "doom loop", preventing the growth needed to put our public finances back on an even keel
I've been talking to the UK's leading politicians for the best part of 30 years. While I've met and known some really bright ones - Lawson, Field, Darling and Ken Clarke spring to mind – the vast majority have struck me pretty dim. Harsh - but that's how I see it.
This is not the fault of the Bond Holders per se but us as a country spending beyond our means. Nobody wants to elect Politicians who force us to face the fiscal truth and take the medicine.
A fiscal crisis is where this pans out given the above…. The only upside of the Labour Government is that we will face the reckoning earlier…
Not solely, no. However Reeves got into the seat of a runaway lorry and rammed her foot on the accelerator, gleefully driving straight for the nearest cliff.
She could - and should - have gone against her socialist ideals and cut taxes and put the state through a blender but she chose to tax and waste because, for some bonkers reason, the Treasury seems to think the more money the state spends, the better that is for the economy. Like a transfusion from one arm to another, spilling most of the blood on the floor, this is a fallacy only Keynesians hold to.
Sadly, the BoE, OBR and Treasury all refuse to consider dynamic response and the positive effect of tax cuts in their models, thus they are all consistently wrong. Reeves doesn't have the intelligence - or interest - to arrest the decline these institutions pursue. It's just take more tax, more waste regardless of the damage they do.
Shame there can’t be a politically neutral Economic Department with advisers like yourself. But there again I think the NHS should be bipartisan rather than a political football It’s the National Health Service not the Political Health Service (PHS) - it’s time to legislate that all government departments & organisations have to be bipartisan & a 50/50 quotas to retain pluralism. The sectarianism that’s starting to become embedded in our political system & on the streets needs to be reined in I don’t think the police force or even the army are ready to protect British citizens
Thank you for your clear and worrying analysis. Please can you interview Rachel Reeves and ask her to explain her actions… and hopefully change course.
QE is partially responsible for the mess we're currently in. It went on too long and drove asset inflation, causing interest rates to rise and the now very high government debt service.
Surely better to do things like (just off the top of my head):
1) Reform welfare to get people who can work back to work (reduce incentives to move on to long term PIPs etc)
2) incentivise businesses in order to grow - make it worthwhile (ie reduce tax)
3) Remove distortions in the tax system that create 60% plus marginal tax rates and discinsentivise people from working.
4) decouple the electricity price from the gas price
5) stop buying gas from abroad when we have our own North Sea reserves.
6) reduce the number of government employees back to pre-pandemic levels
7) Charge tourists a modest tourist tax for staying in our hotels and for entry to our museums and galleries (like other countries do)
8) Charge taxes on foreign owned property in the UK that are treated as a store of value and remain empty for years, making the housing crisis worse not better.
You forgot unaffordable Defined Benefit Public Sector Pensions for 20% of employees paid for through Taxation/ Council Tax etc. Time to reform those as well
Nice job Liam. A sanely de livered summary of an insane situation.
Thanks Dom X
Milliband is building acres of solar panels on prime farmland
Starmer is working with Gates to block out the sun
Make it make sense!
Liam is bang on, I don’t think our chancellor even realises the severity of our situation, or any one else in the Labour party for that matter.
Here is Milliband talking complete nonsense, just wish Liam had been there to correct him.
https://x.com/TobyMacallister/status/1915306232358781261
I've been talking to the UK's leading politicians for the best part of 30 years. While I've met and known some really bright ones - Lawson, Field, Darling and Ken Clarke spring to mind – the vast majority have struck me pretty dim. Harsh - but that's how I see it.
Great summary Liam, as ever.
Flirting? UK is financially debauched.
This is not the fault of the Bond Holders per se but us as a country spending beyond our means. Nobody wants to elect Politicians who force us to face the fiscal truth and take the medicine.
A fiscal crisis is where this pans out given the above…. The only upside of the Labour Government is that we will face the reckoning earlier…
Absolutely NOT the fault of bondholders ... It's about political myopia and profligacy, as you say !
Do some people still not know that the globalists want the western cities bankrupt to make their great reset work ?
A country that gets into great debt gives political power over it to those who hold the debt.
This is how Liz Truss was deposed.
So perhaps our economic destruction is not down to the basic incompetence of Starmer and Reeves.
Not solely, no. However Reeves got into the seat of a runaway lorry and rammed her foot on the accelerator, gleefully driving straight for the nearest cliff.
She could - and should - have gone against her socialist ideals and cut taxes and put the state through a blender but she chose to tax and waste because, for some bonkers reason, the Treasury seems to think the more money the state spends, the better that is for the economy. Like a transfusion from one arm to another, spilling most of the blood on the floor, this is a fallacy only Keynesians hold to.
Sadly, the BoE, OBR and Treasury all refuse to consider dynamic response and the positive effect of tax cuts in their models, thus they are all consistently wrong. Reeves doesn't have the intelligence - or interest - to arrest the decline these institutions pursue. It's just take more tax, more waste regardless of the damage they do.
Never with Two.three trillion debt
Shame there can’t be a politically neutral Economic Department with advisers like yourself. But there again I think the NHS should be bipartisan rather than a political football It’s the National Health Service not the Political Health Service (PHS) - it’s time to legislate that all government departments & organisations have to be bipartisan & a 50/50 quotas to retain pluralism. The sectarianism that’s starting to become embedded in our political system & on the streets needs to be reined in I don’t think the police force or even the army are ready to protect British citizens
Flirting? This is the longest flirt I've ever seen! 🤣😳
excellent article as ever Liam. Thank you for this bit of realism.
Thank you for your clear and worrying analysis. Please can you interview Rachel Reeves and ask her to explain her actions… and hopefully change course.
What’s your suggested solution ?
Turn Japanese and QE ourselves to growth ?
QE is partially responsible for the mess we're currently in. It went on too long and drove asset inflation, causing interest rates to rise and the now very high government debt service.
Surely better to do things like (just off the top of my head):
1) Reform welfare to get people who can work back to work (reduce incentives to move on to long term PIPs etc)
2) incentivise businesses in order to grow - make it worthwhile (ie reduce tax)
3) Remove distortions in the tax system that create 60% plus marginal tax rates and discinsentivise people from working.
4) decouple the electricity price from the gas price
5) stop buying gas from abroad when we have our own North Sea reserves.
6) reduce the number of government employees back to pre-pandemic levels
7) Charge tourists a modest tourist tax for staying in our hotels and for entry to our museums and galleries (like other countries do)
8) Charge taxes on foreign owned property in the UK that are treated as a store of value and remain empty for years, making the housing crisis worse not better.
You forgot unaffordable Defined Benefit Public Sector Pensions for 20% of employees paid for through Taxation/ Council Tax etc. Time to reform those as well
windfall tax them
that doesnt work