4 ms·

This is the ONS graph of debt to GDP (which is not absolute debt level, but it's the measure that usually matters for markets): https://www.ons.gov.uk/chartima

by rwmj 3y ago

This is the ONS graph of debt to GDP (which is not absolute debt level, but it's the measure that usually matters for markets): https://www.ons.gov.uk/chartimage?uri=/economy/governmentpublicsectorandtaxes/publicspending/bulletins/ukgovernmentdebtanddeficitforeurostatmaast/september2021/ae52a16b https://www.ons.gov.uk/chartimage?uri=/economy/governmentpub... (source: Figure 1 here: https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicspending/bulletins/ukgovernmentdebtanddeficitforeurostatmaast/september2021 https://www.ons.gov.uk/economy/governmentpublicsectorandtaxe...) You can see that it was indeed increasing through 2008/2009, although that was largely a one-off thing because of the financial crisis. The problem is austerity didn't work, and the reason is that it also reduces economic growth (slowing growth of the demoninator - GDP). Without austerity, if we'd spent money on infrastructure, we'd likely have had higher growth, reducing debt to GDP that way. Plus the fact is the markets were lending the UK money at 1% for very long terms all through the 2010s, so funding a large debt to spend on infrastructure would not have been difficult.

mjburgess 3y ago
The markets were lending money at that rate because of austerity. Austerity isnt about reducing debt, it's about reducing borrowing costs. UK debt went from 50% GDP to 75% in two years by your own graph -- you'll notice that rate basically flatlined when austerity was introduced. Increasing your debt load by 12.5% *GDP* YoY is an insane situation to be in; austerity was part of the policy response which enabled the UK to continue to borrow. Ideologues on the left havent address this, as far as i'm aware. Preferring to blame austerity for one of the worst economic crises in modern history.
- teamonkey 3y ago
  I think even people against Austerity agree that governments may have to temporarily rein in some spending following a crash or time of economic hardship. In the UK, however, austerity has been a persistent policy for over 13 years. Low taxation, low spending, persistent erosion of workers rights. No spending even when times were better, leaving it all the more fragile the next time. Compare to the US, Canada and elsewhere, which performed strong austerity measures immediately following the 2009 crash, then dialled them back - as per economists recommendations - and recovered much faster than the UK.
  - JetSetWilly 3y ago
    Taxation in the UK is currently at the highest levels in recorded history. It is not true to say that "taxation is low". It is also not really true to say that government spending is low recently either, so it is a bit of a myth that there's some ongoign "austerity" in all the 15 years since 2009. In addition, we just came through a pandemic where a large portion of the population were paid to do nothing. The "austerity" narrative just isn't reflected by facts. What's going on is that the UK population is greying and far older than it once was, and huge portions of the UK budget are going towards paying pensioners, the NHS etc. Worse, the triple lock ensures that this part of the UK budget is essentially inflexible. The perceived "austerity" is jsut a reflection of demographic trends.
    - smeagull 3y ago
      Nope. It was at it's highest in 2010.
      - lotsofpulp 3y ago
        Decreasing the purchasing power of the currency is also taxation. For example, a country might want to increase its money supply to nominally satisfy obligations to old people, while the supply of labor and goods does not keep up with the demand. Manifests as higher prices and longer wait times. Or the country can experience a reduction in the quality of goods and services being delivered, for example instead of being able to see a doctor, some portion of the population is now expected to consult with someone less qualified.
    - bigfudge 3y ago
      Tax in the UK is still low relative to European neighbours https://www.dannydorling.org/?p=9541 https://www.dannydorling.org/?p=9541 It's high in historical perspective because the austerity years of the 2010s and Brexit choked growth. But we could still choose to spend more on services without being unusual in European terms
    - CraigJPerry 3y ago
      The top income tax rate was 90% for decades until it dropped to 75% in the 70s (although you could still end up paying 90% in some cases even then). Today it’s 45% Since 1965 companies pay a much lower corporation tax. Tax to GDP has been a little bit up and down but only recently did it breach the 1970s peaks. I don’t think this matches with “ Taxation in the UK is currently at the highest levels in recorded history.”
JetSetWilly 3y ago
It is only a "one off thing" in hindsight. I recall well the UK deficit was 14% of GDP each year. That is not sustainable. The point you are missing is that if the government had said "YOLO, lets just increase the deficit to 20% and invest in infrastructure!" then the markets would certainly not have continued to lend money at 1%. That's the path towards an Argentina style situation.
- rwmj 3y ago
  Once you've bailed out the banks, then what? You're going to bail them out again? (No, because they're now publicly owned). There was no reasonable scenario where that was not a one-off increase in the debt. We were borrowing at 1% (basically free money because inflation was higher) and we might have spent that on growth policies, but George Osbourne thought this was a good way to reduce the size of the state, a political decision.

by rwmj 3y ago

mjburgess 3y ago

The markets were lending money at that rate because of austerity. Austerity isnt about reducing debt, it's about reducing borrowing costs. UK debt went from 50% GDP to 75% in two years by your own graph -- you'll notice that rate basically flatlined when austerity was introduced. Increasing your debt load by 12.5% *GDP* YoY is an insane situation to be in; austerity was part of the policy response which enabled the UK to continue to borrow. Ideologues on the left havent address this, as far as i'm aware. Preferring to blame austerity for one of the worst economic crises in modern history.

teamonkey 3y ago
I think even people against Austerity agree that governments may have to temporarily rein in some spending following a crash or time of economic hardship. In the UK, however, austerity has been a persistent policy for over 13 years. Low taxation, low spending, persistent erosion of workers rights. No spending even when times were better, leaving it all the more fragile the next time. Compare to the US, Canada and elsewhere, which performed strong austerity measures immediately following the 2009 crash, then dialled them back - as per economists recommendations - and recovered much faster than the UK.
- JetSetWilly 3y ago
  Taxation in the UK is currently at the highest levels in recorded history. It is not true to say that "taxation is low". It is also not really true to say that government spending is low recently either, so it is a bit of a myth that there's some ongoign "austerity" in all the 15 years since 2009. In addition, we just came through a pandemic where a large portion of the population were paid to do nothing. The "austerity" narrative just isn't reflected by facts. What's going on is that the UK population is greying and far older than it once was, and huge portions of the UK budget are going towards paying pensioners, the NHS etc. Worse, the triple lock ensures that this part of the UK budget is essentially inflexible. The perceived "austerity" is jsut a reflection of demographic trends.
  - smeagull 3y ago
    Nope. It was at it's highest in 2010.
    - lotsofpulp 3y ago
      Decreasing the purchasing power of the currency is also taxation. For example, a country might want to increase its money supply to nominally satisfy obligations to old people, while the supply of labor and goods does not keep up with the demand. Manifests as higher prices and longer wait times. Or the country can experience a reduction in the quality of goods and services being delivered, for example instead of being able to see a doctor, some portion of the population is now expected to consult with someone less qualified.
  - bigfudge 3y ago
    Tax in the UK is still low relative to European neighbours https://www.dannydorling.org/?p=9541 https://www.dannydorling.org/?p=9541 It's high in historical perspective because the austerity years of the 2010s and Brexit choked growth. But we could still choose to spend more on services without being unusual in European terms
  - CraigJPerry 3y ago
    The top income tax rate was 90% for decades until it dropped to 75% in the 70s (although you could still end up paying 90% in some cases even then). Today it’s 45% Since 1965 companies pay a much lower corporation tax. Tax to GDP has been a little bit up and down but only recently did it breach the 1970s peaks. I don’t think this matches with “ Taxation in the UK is currently at the highest levels in recorded history.”

JetSetWilly 3y ago

It is only a "one off thing" in hindsight. I recall well the UK deficit was 14% of GDP each year. That is not sustainable. The point you are missing is that if the government had said "YOLO, lets just increase the deficit to 20% and invest in infrastructure!" then the markets would certainly not have continued to lend money at 1%. That's the path towards an Argentina style situation.

rwmj 3y ago
Once you've bailed out the banks, then what? You're going to bail them out again? (No, because they're now publicly owned). There was no reasonable scenario where that was not a one-off increase in the debt. We were borrowing at 1% (basically free money because inflation was higher) and we might have spent that on growth policies, but George Osbourne thought this was a good way to reduce the size of the state, a political decision.