Advice to the Tories

Its now pretty certain (bar some national disaster) that the Conservatives will win the next election. Its also certain they will inherit a gargantuan financial mess in the wake of Gordon "Wrecker" Brown. So what can they do when they get in?

First thing is they need to be transparent with the county's financial figures. Without being truthful to the country, they will never take the country with them when it comes to the painful medicine needed to get us all back on track. Despite the fact that we may suffer more financially as our backers see us as a bad risk, it needs to be done.

Once everything is out in the open, then a plan can be devised for recovery. Make no mistake, recovery will be long and hard. It will take two decades or more to accomplish, but if the Conservatives are honest and open, retain humility and above all work for the ordinary people of the country rather than the banks, there is no reason why they can't still be in power at the end of those two decades.

Cover things up, or revert to cronyism, or forget about working for the ordinary people of the country, then it will all end in tears.

The next government is the last chance saloon for party politics. The population have experienced two governments in power now that eventually worked against them rather than for them. They won't tollerate a third.

Why Brown Can't afford Not to Spend.

There are voices from several quarters now questioning Labour policy on public spending. Quite right too: we're heading for the largest national debt since the Second World War. Hold on, lets put that in perspective: it's taken 12 months to put us in a much debt as it did for the country to wage total global war over 6 years.

Hold on, you'd think that if continuing as we are will push up national debt to new historical highs, then the government would start cutting back a bit and start saving money instead of spending it.

The problem is, they can't. The secret that no one will tell you is that the whole economy relies on large amounts of government borrowing, taxation and spending. Government is our industry, because we no longer have any wealth-creating industry to speak of. Government has taken over the role.

Let me explain:

Last time we were in this position, at the end of the second world war, the government quite rightly put UK industry to the task of winning exports. Literally, thats all that UK industry did: supply goods to foreign countries in order to earn money for the country. As an example, the first Land Rovers were all shipped abroad. You had a hard time getting one if you lived here because you weren't a priority. Earning that foreign cash was.

Roll the clock forward to now and the mess we're currently in. We have no large industry any more. We have nothing to export as the goods we make here can be made cheaper in China and shipped all over the globe as easily as if they were made here.

So what has happened over time is government has become the biggest company in the UK. If you're not working directly for local or national government, you may be working in a call centre for one of their agencies, or working on a government sponsored training scheme, or even a Government-funded charity. Even if you don't work for the government, you tip up a high percentage of your wages over to them so they can employ somebody to pay some of that back to you in tax credits.

Basically the money is being churned around in an endless cycle, with relatively small profit and growth.

If the government had let the banks fail and if they had cut public spending to reduce borrowing and debt, whole swathes of the population of this country would have been out of work, due to the reliance on the state to provide jobs. There would definately have been riots on the streets.

So Gordon Brown is committed to continue funding at these rediculously high levels for a good while yet, and the next government too, will find it hard to wean the population off the state teat. It will take a decade at least to undo what Labour have done to this country without causing catastrophic problems, and another decade on top of that to get back to middling levels of prosperity. Hopefully then we can start reducing the national debt.

By that time I hope to be retired, or dead. It's my children I worry about most. They will have to carry this burden in higher taxes for a significant part of their working lives.

All because of 12 months of recklessness on the part of Gordon Brown.

"Titan" Prison Plans Dropped

The BBC has the story here. I just wonder how many millions were spent looking into the idea: proposals, committees, planning applications, etc. aren't cheap.

While the abandonment of the Titan prison programme is a story in itself, it just shows the criminal amount of waste that goes on in government.

I well remember the asylum detention camps that were proposed a number of years ago. One was next to Bicester, where I lived at the time. In the end, the camps didn't go ahead, but for the Bicester camp alone, the bill was still if I recall correctly around £6 million.

Now that may be chickenfeed alongside the billions squandered on the banks, but it does show the wateful mentality in government. Ministers propose schemes in soundbites that never come to fruition, but still have consequences in costs that run to millions.

Just remember that whenever a minister spouts on about a new proposal. That's several million quid being pissed away right there, even if the proposal is never completed.

Just think if ministers stopped with the soundbite politics: we could save millions, just by them keeping their mouths shut.

The Tory Tightrope

It seems there's a growing clamour amongst bloggers for David Cameron to start beating Labour up about the budget.

Especially attacking Gordon Brown on the amount of debt and borrowing without the requisite reductions in publice finance that the government proposes over the next 10 years.

The problem for the Tories is that the man in the street hasn't the first idea about the level of national debt nor does he understand GDP. Most bloggers that take an interest in politics do, so its easy for them to criticise the Tories as no being pro-active enough.

The problem is its too easy for Labour to then start the mantra of "Tory cuts" and destroy the Conservative lead in the polls.

Cameron is playing Labour at their own game: in 1997 Labour said they would continue with Tory spending plans and thereby gained acceptance with the public and were voted in. Cameron is playing the same game. By refusing to engage in any discussions about financial policy, he is first refusing to allow Labour to pin the Tory cut badge on him.

Its a tightrope for the Conservatives. Navigating a clear path to election victory isn't straightforward as some bloggers insist it is.

The Budget: First Impressions.

Well, first off, I'm not impressed.

According to the Figures given out by Alastair Darling today, we are in for a tough decade ahead. By his projections, Public Sector Debt is set to increase to 79 percent of GDP by 2013-14.

That by itself, is a harrowing statistic. But it gets better, I assure you. These figures are based on there being economic GROWTH next year! So borrowing continues to escalate thorugh 2010-11 as supposedly the economy grows and then starts a gentle decline towards 2013-14. But whats the figure after 2013-14? Does PSB decline, or as I suspect continue? Well yes, because later on in the budget report its says that it expects PSB to reach balance and start to decline "Once the global shocks have worked their way through the economy in full". The words and the government's own graph seem at odds: either borrowing declines after 2010 because of growth, or it declines after 2013 when the effects of the credit crunch are over. Which is it? I suspect the latter, because given the increased demand from unemployment benefit and the reduction in tax revenues we're looking at in 2009-10, I really doubt these figures.

Anyway, to sum up this section, we have figures based on wholly bogus growth data showing Net Debt to be 79% of GDP by 2013 and PSB to continue at high levels until 2018. In fact one of their own graphs (Chart 2.3) shows Net Debt to still be over 70% until 2019-20 and thats if their optimistic fianancial forecasts hold true! How long things draw out if the economy recovers as slowly as the pessimists predict or theres a significant reduction in GDP is well, anyone's guess. 15 years? 20 years?

The chances are good that it will be a whole lot worse, because there are several things which can throw a spanner in the works. Which I'll now come to:

The Chancellor's figures on inflation don't have any basis in reality. He has inflation at ludicruosly low levels, given that the pound has already slumped by 30% (and on todays news slumped almost another 2%). So as the Pound devalues against other currencies, our goods become more expensive. Petrol is already on the rise as are food prices, as I've already said elsewhere. Factor in the increased money supply, which deliberately devalues the Pound as well, the government will be lucky if inflation stays as low as their predictions over the next few years.

All the way through the budget document, the figures of net debt and borrowing are qualified that they include certain assumptions about unrealised losses. Whats the betting that these assuptions are wildly optimistic.

I really think that the chances are high we'll eventually be heading to the IMF, because if even the optimistic government figures show us heading for 80% of GDP in debt, whats the reality going to be; 90%, 100%? Given that we don't have any manufacturing base and therefore no way to pay the money back, I assume the IMF won't touch us with a bargepole. People have joked on various blogs that this is Zimbabwean politics in action. Its a joke no longer, its actually reality.

It may well be part of the plan to call in the IMF, because loans from them always come with requirements to reduce public spending. The warped minds in government probably think its better to do it this way so they can blame the IMF for the huge neccessary cuts in public sector spending, rather than accept blame themselves.

Now the other stuff.

The 50% tax rate for people earning over £100,000 is plain stupid. Its the politics of envy and just puts up a sign that the UK doesn't want high earners here.

Alcohol and fags get clobbered again, but thats to be expected, given that we're already in a 70's timewarp economically.

What wasn't expected was the fuel duty increase in September. Given that people are on their knees financially, the last thing they need is increased fuel costs.

The car scrappage scheme is very clever. Basically anyone taking up the offer (if they can get credit to pay for their new car) trades in their 10-year-old motor, for a brand spanking new one. Its very clever in that it gets people to trade older cars that are on the old capacity-related Vehicle Excise Duty, for a new vehicle on the CO2-Emissions-Related, more expensive VED. A nice touch from the government: they look as though they're helping out and they'll get their money back in increased VED over the life of the vehicle anyway. The downside is it's bad news for anyone with a secondhand car under 10 years, its just devalued by a significant amount.
To be honest I don't see that much of a take-up on this, because people tend to drive older cars here. Its worked in Germany as people tend to drive younger cars there because their tougher MOT rules weed out the older cars sooner.

Finally (because there is too much to criticise in the budget), one last point: The government has signalled that there will be at least 5 years of continuing borrowing. What's that going to do to the guilt bond markets? I can see their values depressed quite a bit, seeing as how they've pre-warned everyone there will be a steady stream of issues over the next few years. I wonder if the government, now its issued these plans will get its debt financed? I'd put money on saying no it won't. Then it'll be off to the IMF for a loan.

So many stumbling blocks, so many unquantifiables.

Basically, scary times ahead.

The Budget: Grasping at Straws.

I've been listening to the Chancellor for the past 20 minutes. I've had enough. I'm going for a walk to calm down, because from what I've seen so far, this country has had it.

I wouldn't be suprised if there was a huge drop in the FTSE today.

Basically we're in for a decade of misery as a minimum, thanks to the actions of the clowns in the Labour government. I certainly don't envy the next government, because winning the next election and the election after that will be poisoned chalices. This government has assured that there will be little financial leeway for government over the next decade and possibly beyond, unless there is some really creative government thinking.

I commend those of you that can, to leave this country now, its finished. Find somewhere nice and go live there.

Until future governments learn a lot of humility and start living within their means, recovery will be difficult.

I'll report more in detail once I've seen the small print, where I suspect the bombshells will actually lie.

Selling the Family Silver

It looks like plans are well in place to privatise the Royal Mint.

The fact we're selling off the Royal Mint and the Post Office just shows how desperate the government are to raise revenue.

Both will end in tears, mark my words.

IMF Report Shows True Cost of Banking Crisis

http://news.bbc.co.uk/1/hi/business/8009734.stm

All I'll say is that isn't the end of it. They've had to re-estimate the figures up from $1 trillion a year ago, to $4 trillion now.

If the banking crisis doesn't eventually reach $10 trillion, I'll be very suprised.

There are a number of things that come out of this: (a) The amount of money involved in the credit crunch is huge. (b) The people that are supposed to know whats going on, don't really know. (c) The depression will last longer than anyone predicted. 10 years is looking optimistic. (d) Its about time people stopped acting like they can control this. They can't. Its damage limitation time. (e) Just where did all the money go?

I blogged a year ago that people that should have known, didn't know how deep the banking crisis was. It's aparrent that a year on they still don't know the extent of it. How massive does something have to be if it needs over a year to quantify it?

Should I be Flattered or Depressed?

ASDA have turned me down for a job.

I don't know whether to laugh or cry.

All I do know is that if ASDA are turning people down for jobs, then they must be way oversubscribed on applications.

My empirical data says unemployment is already above 3 million.

Negative Inflation?

Have a look at this headline in this article:

http://news.bbc.co.uk/1/hi/business/8009718.stm

Quite straightforward you might think: the inflation figures have gone negative for the first time in decades. We've been taught since the late seventies that inflation is bad, so negative inflation is good isn't it?

Well, no. You see, these figures take a while to come out, so what you're seeing is a snapshot of prices a few months ago and yes, store chains were closing and prices were being slashed and petrol was at its lowest price.

But what's happened in the last month? Petrol prices have started to rise. It was at its Lowest in January, it crept up February then there was a 5 week hold During February and March. It then started to climb again. This time with a weak pound driving the price, and no recessionary pressure to hold it back.

Food prices have started to firm up again too in the past few weeks as well.

So who do you believe? Statistics and headlines stating the results of 3-month old data, biased to make you feel good ahead of the budget, or your own experience, right now?

Do you believe the BBC, who will highlight any glimmer of news indicating a return to the good old days (like the news of rising house prices the other week), or your own experience of a tough housing market, people being repossessed and food prices increasing?

Do I believe the government's jobless figures, or do I go on my own personal experience where in December there were 6 people waiting to be seen at the same time as me at the jobcentre, but now there are 3 times that?

I'm going with the empirical data.

A Tip for the Budget.

Read the small print. Not every important detail will be mentioned in the Chancellors speech.

It really will be an interesting exercise, I promise.

I have an Idea for how MPs can Get Back in Touch with Reality.

It seems pretty obvious to me, that the politicians we have are extremely out of touch with reality. Anyone comparing the rhetoric they spout with reality will find a huge gulf in expectation and experience.

I was a big fan of the Troubleshooter" and "Back to the Floor" programmes made by the BBC, where various senior executives or large companies spent some time working on the shop floor to get first hand experience of how the plans and procedures they had proposed were actually being implemented. For the majority, it came as quite a shock how their well-meaning plans had been twisted and distorted on it's travels down through the layers of management.

I think our MPs should do something similar. How about a junior minister in the DWP spending the summer recess trying to apply for Jobseekers? How about a health minister getting a job as a clerical worker in the NHS? A junior Home Office minister becoming a PCSO? So they can see first hand the waste and mismanagement prevalent in the shambles that is the public sector.

MPs would love the publicity of being on Big Brother, but would never lower themselves. Well, here's an option for worthy reality TV, something that (hopefully) would benefit the nation that we could all take an interest in.

Remember, you heard it here first, so I want royalties if ever it goes ahead.