A blog by Luke Akehurst about politics, elections, and the Labour Party - With subtitles for the Hard of Left. Just for the record: all the views expressed here are entirely personal and do not necessarily represent the positions of any organisations I am a member of.

Wednesday, December 03, 2008

Redwood's solution

John Redwood's solution to the financial crisis: "The truth is that both the UK and the US have to cut living standards."

Is that official Tory economic policy: "you all need to live less well"?

24 Comments:

Anonymous Paul said...

Well it's entirely consistent with Andrew Lansley's views. John redwood is harder to muzzle though.

10:59 am, December 03, 2008

 
Anonymous Anonymous said...

A recession means lower living standards - don't you know that?

11:06 am, December 03, 2008

 
Blogger Merseymike said...

Does this mean the poor, or people like Redwood?

There may need to be a reduction in living standards but I think it entirely unreasonable that those who have more will miss a small reduction far less.

Of course, this is not the Tory view. I hope it will be the Labour one, but I think that will require a recognition that this may not benefit the 'aspirational'

11:38 am, December 03, 2008

 
Blogger jdc said...

We have, for an extended period of time, spent substantially more as a country than we have earned, and lived on recycled credit from China and oil producers. Martin Wolf is excellent on this in today's FT - if you need more detail I can dig it out for you.

http://www.ft.com/cms/s/0/027b1efc-c0a4-11dd-b0a8-000077b07658.html

That era is, for now, over. The new economic realities mean we are going to have to adjust to that - we either have to earn more, consume less, or a combination of both.

In that sense, he's right. The gap will no longer be filled by profligate lending to UK consumers, in the long-term the Government can't borrow enough to prop it up, and we can't print enough money as the pound would collapse.

What Labour should be doing is not keep up our shopping habits with cuts in VAT, but (some priorities here)

1) Supporting viable industries through cashflow difficulties
2) Keeping people employed (directly through public works if necessary) to minimise endogenous unemployment
3) Shifting the tax burden so that the required fall in living standards falls more heavily on those who can most afford it (VAT does not actually help here)
4) Supporting moves to persuade the Chinese to consume more of the wealth they generate, to minimise the global imbalance in future.
5) Pointing out that if the Tories hadn't trashed half the country and deregulated credit, we might be in less of a mess, and they should shut up and go away.

12:14 pm, December 03, 2008

 
Anonymous Arnold said...

When The Queen cuts her living standards, I will follow suit. Not before then though.

12:32 pm, December 03, 2008

 
Anonymous mustapha kunt said...

Yeah, Luke, let's allow the economically illiterate to carry on spending, chavvy pikies maxing out their credit cards and spending all their benefit money - which I pay for - so their scummy kids can have the latest trainers and mobile phones...

Welcome to Hackney! The home of both the vilest MP (Dianne Abbott) and the sickest councillor (Luke Akehurst) in the country.

1:46 pm, December 03, 2008

 
Blogger kris said...

Luke

the chickens have come home to roost. You cannot put off the dreaded day indefinitely: sooner or later, we all have to pay. John Redwood recognises that.

What is worrying is that even with financial institutions and industry crashing under unsustainable debt, there is always some Labour dope who thinks no one will have to take their medicine.

5:03 pm, December 03, 2008

 
Anonymous Anonymous said...

I salute you, Luke, in your barefaced politicking.

You almost certainly know the economic realities, as set out by jdc and kris, and yet you somehow bid to spin Labour's line about endless boom.

Boom. Boom. We're bust. It's that simple.

5:58 pm, December 03, 2008

 
Anonymous Rich said...

Well I think the conservatives are spot on, we have to expect lower living standards. The UK has been kicked off the economic stage and our economy has been downgraded. Investors are leaving faster than the passengers of the titanic and trying to borrow money at the moment is like trying to turn water into gold.

Do you know Luke that the average family can only survive for just 30 days if one of them was to lose their job. This is how serious the situation is and with public finances in such a poor state we can't even offer these people a lifeline.

Sure putting off repayments for two years sounds attractive but the interest on these loans gets added to the debt. In the end the debtor ends up with a bigger mortgage.....Not good at all.

Those on housing benefit though are able to claim rent...why can't we do the same thing for homeowners on the dole?

I can't see living standards improving can you?

10:17 pm, December 03, 2008

 
Blogger Mark Still News said...

Its frightening enough what New Labour are going to do to the remaining Council Homes, such as ending long term tenancy agreements, using social housing as transit camps. But now the Tories are showing us there own version of destroying Council housing. The Tories were the first to attack Council home and the principle of affordable housing by selling them off and not building 1 single Council home.

If the Housing market was lowered in price to affordable levels, so workers could buy a private home, using 3x times income formula on loans and various available controls put in place to hold prices down so no more astronomical inflation then the ques for Council housing would go down. Lets face if we could afford our own homes this would be our preference. Living in social housing your never free and have regimental rules & regulations and never sure which term of government is going to eventually boot you out.But Council housing is essential as housing costs are astronomical and should have been tackled and sustained years ago-instead the dumb Chancellor rode on the back of the housing inflation, claiming it was part of the sustainable growth in our economy.

Housing costs must come down by at least 75% to obtain a sustainable economy.

2 Million Council properties must be built and conditions set in stone stating they can't be sold off.

The 800,000 empty properties in England, should be seized by the government and renovated to living standards then rented out as Council homes, with a clause set in stone that they can't be sold off.

I am very angry the way housing booms are always looked as a good sign of a healthy economy, this annoys me and I have been warning Brown when he was Chancellor for years and years, yet all I got back was ambiguous reports & Spin doctoring explanations, in the end he passed my letters to my local MP, who then in turn replied he thoroughly agreed with me and had criticised the government himself over this issue and put motions through Parliament about it.

Mortgages and rents are not shown in the RPI, but this is what caused the boom and then bust.

If housing costs were reduced 75% there would be less demand to borrow money and inflation could be held down in many other areas of the economy as housing costs have indirect affects as well.

1:05 am, December 04, 2008

 
Anonymous Anonymous said...

It is true that the Conservative govenment took 75% of the sale price of a right-to-buy sale leaving just 25% with the local authority.

Unfortunately, the Labour government did exactly the same.

The Labour government accepted the Conservative government's view that creating slabs of social deprivation in the shape of new council housing estates was not a good idea.

The Labour government still believes this - because it has been tested to bleedin' destruction - but they're never going to admit it, although they want to suggest something different.

1:47 am, December 04, 2008

 
Blogger Letters From A Tory said...

John Redwood doesn't want this to happen, but he (like anyone else with a shred of common sense and a basic grasp of economics) can see what's coming.

10:20 am, December 04, 2008

 
Anonymous Anonymous said...

We haven't exported as much as we have imported for the last ten years. That gap has been made up by debt. It has occurred because we have too many people working in the public sector (paid for by growing government debt) and too few working in the private sector.

You can tax the rich as much as you like - it will not have any effect on the fundamental truth that the economy is seriously unbalanced and has been for ten years. Taxing the rich will merely take UK money and slosh it around in the system a bit. It will be as effective at solving the UKs problems as taking Richard Branson's swimming pool, dividing it into 20million pieces and giving everyone a share.

When the Tories get into power we will have double the pain. The pain of re-balancing the economy to grow the exporting private sector at the expense of the public sector, and the pain of doing that on such a scale that it repays the previous ten years of government excess. It may in any case be forced upon us by the IMF, since the latest problems we have had in selling on our debt to foreign investors suggest the spiggots of cheap foreign money that have kept NuLabour afloat these last ten years are rapidly being turned off leaving us with a cashflow problem.

I could solve my financial problems by getting out my credit card too. But eventually I need to get a job and repay my debts. The sooner I get around to it the better off I will be.

10:47 am, December 04, 2008

 
Anonymous Anonymous said...

Luke, is he wrong? Or do you still have your hands over your ears and your eyes closed pretending that we are not in a whole heap of trouble.

12:28 pm, December 04, 2008

 
Blogger jdc said...

Anon

"It has occurred because we have too many people working in the public sector (paid for by growing government debt) and too few working in the private sector."

But the problem's too much private debt. It's occurred because we let too much lending happen, and didn't increase taxes as we should have done during a boom to restrain the 'irrational exuberance'.

1:22 pm, December 04, 2008

 
Blogger Merseymike said...

And what exactly are all these private sector workers going to do - given that the Tories essentially decided that Britain was no longer to be a large scale manufacturer last time they were in power? Financial services - oh, hold on, wasn't it those twats who got us into this mess?

The point is that the monetarist myth never worked, it was a flawed philosophy which should be permanently abandoned.

4:11 pm, December 04, 2008

 
Anonymous Anonymous said...

The contribution of financial services as a percentage of national GDP accelerated under New Labour.

Luke and the boys led us into the doodoo

4:35 pm, December 04, 2008

 
Anonymous Rich said...

Freedom and choice are very important and giving everyone the choice to buy is surely the correct response. Many people may choose not to buy and for these the option is the rental market.

Property is still too expensive for many people in this country. However, it is unlikely that prices are going to fall by more than 40%. The reason I say this is that there are a number of buy to let investors ready to start buying once the market looks as if it has hit rock bottom. Once these investors start buying again then property prices will inflate as before. The big challenge is how we stop the growth of the buy to let market.

We maintain a large number of social housing schemes and much of our social housing stock does not meet the decent home targets this government has set.

We need to empower people and give them the option to invest in a home and not keep them down in poor quality social housing.

6:49 pm, December 04, 2008

 
Anonymous Anonymous said...

People borrowed too much and can't pay it back. Now the government has to bail them out for their errant stupidity? I'm no good at maths, but the chickens will have to come home to roost soon. Official Labour policy, as evidenced in the PBR, assumes a reduction in GDP of 4% permanently to pay for the loan the govt is taking in a bid to win another election. That's 4% less wealth to pay for Drs, nurses, teachers, etc etc, irrespective of who wins the election. Labour and Tory policy is the same, Luke, so pull your head out of your arse.

8:34 pm, December 04, 2008

 
Blogger Mark Still News said...

Will John Redwood cut his living standards?

Buy to lets should be abolished!

Astronomical housing inflation should be abolished!

10:42 pm, December 04, 2008

 
Anonymous Rich said...

I have no issues with bailing home owners out of financial trouble. It is a lot cheaper to pay their mortgage for a couple of years than let them go homeless.

The cost of repossession alone is about £40,000, which means it is not in the banks interest to foreclose.

Once a family loses their home it is also very likely that the state will in the end pick up the bill. They will almost certainly need emergency accommodation and then probably be housed in social housing. They may also lose their job and end up on benefits...and then the cycle begins.

I'm not even going to consider the trauma and stress such an event must have on a household.

It is far better to help families meet their repayments and force the banks to freeze the interest until the families financial situation improves. This policy saves the tax payer a lot of money and probably means the bank will in the end get their money back.

As for buy to let landlords, unfortunately that is tough luck. You can't keep the profits when times are good and then expect the tax payer to pay for your losses when it all goes tits.

8:36 pm, December 05, 2008

 
Blogger Mark Still News said...

Rich Sure

Home owners should be bailed out.

Also those paying rents should be bailed out too.

The banks should be more lenient as they loaned 10x times income and this self certification, some of these debts should written off!

Buy to lets should not be bailed out or helped.Most of these buy to lets avoid tax and fail to comply with the H & S regulations.

These idiots in Cabinet need to bring in urgent legislation at the 1st session of Parliament to ensure we do not have a return to astronomical housing inflation by using controls to sustain prices.

There are many controls available and also controlling by a census of each property and fixing saleable price ceilings!

11:21 pm, December 05, 2008

 
Anonymous Rich said...

Mark the easy solution is to add the price of housing onto the inflation figures....simple.

That way interest rates would have gone up with house prices and people would not have been able to borrow.

The house price boom was engineered by this government to create economic growth....now look at us.

9:34 am, December 06, 2008

 
Blogger Mark Still News said...

Rich

The price of housing should be put into the RPI
Renting:
and
Buying:

12:44 am, December 08, 2008

 

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