Jantra

Jul 18, 08 - 1:59 PM

more taxes in the future people

http://news.bbc.co.uk/1/hi/uk_politics/7512972.stm

seems like all those years of feast and the government didn't prepare us for famine.

Seriosuly, is this a good thing. I'm divided, on one hand an injection of public spending into the economy can give it the kick start it needs but the money has to be spent quickly and filter through rather than being wasted on measurement and bureaucracy - we already have that. However, if it is wasted then it will simply stifle us in the future due to higher taxes but no imprvoement in the economy...anyone have any thoughts....

Hypercelt

Jul 18th, 2008 - 2:22 PM

Re: more taxes in the future people

Government needs to become much leaner - there are far too many micro projects and programmes which are only achieving marginal changes (at best) but costing much in administrative costs.

I noticed on the news story this morning that the option was "higher borrowing or higher taxes" - lower public spending is another option.

Cambo_Dai

Jul 18th, 2008 - 3:21 PM

Re: more taxes in the future people

The Fiscal Rules as currently in place are rather silly.

The Debt Ceiling rule is perhaps the one that is least silly but is it really worthwhile? The idea was that it would make public debt cheaper to service as investors would know the government wasn't going to let it balloon. Whilst this might have been necessary when markets were jittery about Labour's tax and spend credentials, despite the public finance weakness, the party has shown itself to be at least as good a custodian of the finances as the Tories (who had significantly larger budget deficits during the early - mid 1990s and didn't tighten finances enough during the late 80s boom). So maybe its not really needed. However the politics of this will be tricky and will give the Tories ammo.

The stupid rule is the "balanced spending rule" which is based on ensuring the current budget is (at least) in balance over the economic cycle. However, cycles aren't something you can nicely define and are subject to revision and disagreement. A more forward-looking rule would be appropriate. I don't deal with fiscal policies but some of my colleagues have suggested alternate approaches I think.

If we're talking about using government spending to boost the economy it doesn't really matter whether or not the spending is particularly efficient: just that it pumps money into the economy. Pen-pushers wages feed into the economy just as much as nurses, and demand for paper for form filling helps paper-manufacturers just as much as for more school textbooks. Its in the long-run that the efficiency of public spending matters: in the short run you might want to ramp up spending quickly before you can identfy ways to make it most effective in terms of policy as well the "fiscal boost". Fiscal expansion and the provision of services are quite differnet motives for increasing spending.

I'd also draw a distinction between inefficiency and measurement. Much measurement which you so disparage is vital to government efforts to focus on key problems. If they dont know where crime is highest, or where its falling fastest they dont know which methods work or where needs more help. If they don't know which hospital trusts are treating most effectively, they dont know which hospitals to reward. Incentivising public servants requires accurate measurement of their performance just as it does in the private sector. Inefficiency means duplication, poorly targeted systems, poor procurement, over-staffing and the like. Some forms of measurement may not be worth it but I reiterate you can't throw it all out the window. Evaluation of policy is really important so you can learn what works best and in modern government purely informal methods just don't cut it.

Zach

Jul 18th, 2008 - 3:47 PM

Re: more taxes in the future people

Oh dear, another Economic Intellectual Discussion (slagging match) tread I fear

URBANO

Jul 18th, 2008 - 4:52 PM

Re: more taxes in the future people

I'm feeling left out.

The lack of a balanced budget means borrowing which is inflationary

Cambo_Dai

Jul 18th, 2008 - 5:03 PM

Re: more taxes in the future people

Borrowing itself isn't inflationary provided that the economy is not operating above potential. Borrowing shouldnt be confused with seignorage (governments printing money) which does cause inflation.

Kyle

Jul 18th, 2008 - 5:22 PM

Re: more taxes in the future people

I'm not having a go at the economic discussions on these threads as they are very interesting, but don't you just think that the fact that the forum is virtually dominated by these discussions just goes to show how bad the property market is these days.

We have quite a few unstarted proposed schemes in the city and one or two started that just seem to have died a death. All very depressing...thank god for SD2 and the Radisson !

jantra

Jul 18th, 2008 - 5:34 PM

Re: more taxes in the future people

sorry Kyle I just couldn't resist it

Kyle

Jul 18th, 2008 - 6:11 PM

Re: more taxes in the future people

No worries Jantra

I might even learn something other than IT and Psychology for a change

Cambo_Dai

Jul 18th, 2008 - 6:55 PM

Re: more taxes in the future people

We're a pretty small city - its not surprising we are running out of new developments to discuss. And we shouldn't be surprised when proposed schemes fail to materialise. A lot of things are proposed and then never happen or get changed out of recognition over a period of years before they finally do. People interested in SD2 way back in 2002 would have been saying the same back in 2006 with over 4 years gone and no real work started.

You're right we're going to see less interesting things proposed in the next few years because of the downturn. What is going to be happening behind the scenes (not yet but when it looks closer to bottoming out) is a shake-up of land ownership which will let next cycles big schemes come forward.

I think we'll see some exciting new proposals for Tyndall Street and Havannah Quay being fleshed out a bit, although construction is going to be delayed. I wouldn't be surprised if the top end of Penarth Road (the Big Yellow Self Storage) gets some attention as it'll look rather odd between the city centre and the Havannah Quay area having low density warehousing and light industry. We may get some news on the Sports Village too.

URBANO

Jul 20th, 2008 - 4:00 PM

Re: more taxes in the future people

Of course borrowing in itself is not inflatonary, but when the amou of money in circulaon beginsto exceed the goods and services being produced it certainly is The cause of infation in thoe situations is excessive goverment expenditure.

London-David

Jul 20th, 2008 - 11:20 PM

Re: more taxes in the future people

Yes - but its pretty odd to be arguing in a recession that we have excess demand as opposed to insufficient demand. I mean we'd be seeing shortages of workers not job losses.

This is very much supply led as opposed to nominal demand led inflation.

URBANO

Jul 21st, 2008 - 10:34 PM

Re: more taxes in the future people

My previous post looked as if I had had a long lunch. I hadn't. There aren't any anymore

But here it is as it should have been

"Of course borrowing in itself is not inflationary, but when the amount of money in circulation begins to exceed the goods and services being produced it certainly is. The cause of inflation in those situations is excessive government expenditure".

Either I'm drunk with the idea that you may be agreeing with me, Cambo, or you've got hold of the wrong end of the stick.

London-David

Jul 21st, 2008 - 11:32 PM

Re: more taxes in the future people

I'm saying demand that exceeds supply is inflationary - yes. Whether that be government spending, or a consumption or investment boom.

I would hasten to add that at the moment we are in a slowdown as opposed to a recession. But even with this you'd think its the end of the world. I saw the Item Club predicting a "doomsday" scenario with inflation above 4%, unemployment of 2 million and growth of just 1%.

Compare that to the early 1980s and 1990s when we had inflation of 20% and 10% respectively, nearly 3.5 million unemployed and contractions of close to 2%. Helps put our current troubles in a little bit of perspective.

Jantra

Jul 22nd, 2008 - 9:09 AM

Re: more taxes in the future people

Dai

if the RPI was 20% and 10% and interest rates were 12-15%, then what were the real rates of inflation

Cambo_Dai

Jul 22nd, 2008 - 9:45 AM

Re: more taxes in the future people

Hrm... the rates calculated on the same basis were 'real' before but suddenly not now? hrm. I won't rise to it! :-P

Jantra

Jul 22nd, 2008 - 11:09 AM

Re: more taxes in the future people

Author	Comment
Jantra Jul 18, 08 - 1:59 PM	more taxes in the future people http://news.bbc.co.uk/1/hi/uk_politics/7512972.stm seems like all those years of feast and the government didn't prepare us for famine. Seriosuly, is this a good thing. I'm divided, on one hand an injection of public spending into the economy can give it the kick start it needs but the money has to be spent quickly and filter through rather than being wasted on measurement and bureaucracy - we already have that. However, if it is wasted then it will simply stifle us in the future due to higher taxes but no imprvoement in the economy...anyone have any thoughts....
Hypercelt Jul 18th, 2008 - 2:22 PM	Re: more taxes in the future people Government needs to become much leaner - there are far too many micro projects and programmes which are only achieving marginal changes (at best) but costing much in administrative costs. I noticed on the news story this morning that the option was "higher borrowing or higher taxes" - lower public spending is another option.
Cambo_Dai Jul 18th, 2008 - 3:21 PM	Re: more taxes in the future people The Fiscal Rules as currently in place are rather silly. The Debt Ceiling rule is perhaps the one that is least silly but is it really worthwhile? The idea was that it would make public debt cheaper to service as investors would know the government wasn't going to let it balloon. Whilst this might have been necessary when markets were jittery about Labour's tax and spend credentials, despite the public finance weakness, the party has shown itself to be at least as good a custodian of the finances as the Tories (who had significantly larger budget deficits during the early - mid 1990s and didn't tighten finances enough during the late 80s boom). So maybe its not really needed. However the politics of this will be tricky and will give the Tories ammo. The stupid rule is the "balanced spending rule" which is based on ensuring the current budget is (at least) in balance over the economic cycle. However, cycles aren't something you can nicely define and are subject to revision and disagreement. A more forward-looking rule would be appropriate. I don't deal with fiscal policies but some of my colleagues have suggested alternate approaches I think. If we're talking about using government spending to boost the economy it doesn't really matter whether or not the spending is particularly efficient: just that it pumps money into the economy. Pen-pushers wages feed into the economy just as much as nurses, and demand for paper for form filling helps paper-manufacturers just as much as for more school textbooks. Its in the long-run that the efficiency of public spending matters: in the short run you might want to ramp up spending quickly before you can identfy ways to make it most effective in terms of policy as well the "fiscal boost". Fiscal expansion and the provision of services are quite differnet motives for increasing spending. I'd also draw a distinction between inefficiency and measurement. Much measurement which you so disparage is vital to government efforts to focus on key problems. If they dont know where crime is highest, or where its falling fastest they dont know which methods work or where needs more help. If they don't know which hospital trusts are treating most effectively, they dont know which hospitals to reward. Incentivising public servants requires accurate measurement of their performance just as it does in the private sector. Inefficiency means duplication, poorly targeted systems, poor procurement, over-staffing and the like. Some forms of measurement may not be worth it but I reiterate you can't throw it all out the window. Evaluation of policy is really important so you can learn what works best and in modern government purely informal methods just don't cut it.
Zach Jul 18th, 2008 - 3:47 PM	Re: more taxes in the future people Oh dear, another Economic Intellectual Discussion (slagging match) tread I fear
URBANO Jul 18th, 2008 - 4:52 PM	Re: more taxes in the future people I'm feeling left out. The lack of a balanced budget means borrowing which is inflationary
Cambo_Dai Jul 18th, 2008 - 5:03 PM	Re: more taxes in the future people Borrowing itself isn't inflationary provided that the economy is not operating above potential. Borrowing shouldnt be confused with seignorage (governments printing money) which does cause inflation.
Kyle Jul 18th, 2008 - 5:22 PM	Re: more taxes in the future people I'm not having a go at the economic discussions on these threads as they are very interesting, but don't you just think that the fact that the forum is virtually dominated by these discussions just goes to show how bad the property market is these days. We have quite a few unstarted proposed schemes in the city and one or two started that just seem to have died a death. All very depressing...thank god for SD2 and the Radisson !
jantra Jul 18th, 2008 - 5:34 PM	Re: more taxes in the future people sorry Kyle I just couldn't resist it
Kyle Jul 18th, 2008 - 6:11 PM	Re: more taxes in the future people No worries Jantra I might even learn something other than IT and Psychology for a change
Cambo_Dai Jul 18th, 2008 - 6:55 PM	Re: more taxes in the future people We're a pretty small city - its not surprising we are running out of new developments to discuss. And we shouldn't be surprised when proposed schemes fail to materialise. A lot of things are proposed and then never happen or get changed out of recognition over a period of years before they finally do. People interested in SD2 way back in 2002 would have been saying the same back in 2006 with over 4 years gone and no real work started. You're right we're going to see less interesting things proposed in the next few years because of the downturn. What is going to be happening behind the scenes (not yet but when it looks closer to bottoming out) is a shake-up of land ownership which will let next cycles big schemes come forward. I think we'll see some exciting new proposals for Tyndall Street and Havannah Quay being fleshed out a bit, although construction is going to be delayed. I wouldn't be surprised if the top end of Penarth Road (the Big Yellow Self Storage) gets some attention as it'll look rather odd between the city centre and the Havannah Quay area having low density warehousing and light industry. We may get some news on the Sports Village too.
URBANO Jul 20th, 2008 - 4:00 PM	Re: more taxes in the future people Of course borrowing in itself is not inflatonary, but when the amou of money in circulaon beginsto exceed the goods and services being produced it certainly is The cause of infation in thoe situations is excessive goverment expenditure.
London-David Jul 20th, 2008 - 11:20 PM	Re: more taxes in the future people Yes - but its pretty odd to be arguing in a recession that we have excess demand as opposed to insufficient demand. I mean we'd be seeing shortages of workers not job losses. This is very much supply led as opposed to nominal demand led inflation. Email: fluffysheepwa@hotmail.com
URBANO Jul 21st, 2008 - 10:34 PM	Re: more taxes in the future people My previous post looked as if I had had a long lunch. I hadn't. There aren't any anymore But here it is as it should have been "Of course borrowing in itself is not inflationary, but when the amount of money in circulation begins to exceed the goods and services being produced it certainly is. The cause of inflation in those situations is excessive government expenditure". Either I'm drunk with the idea that you may be agreeing with me, Cambo, or you've got hold of the wrong end of the stick.
London-David Jul 21st, 2008 - 11:32 PM	Re: more taxes in the future people I'm saying demand that exceeds supply is inflationary - yes. Whether that be government spending, or a consumption or investment boom. I would hasten to add that at the moment we are in a slowdown as opposed to a recession. But even with this you'd think its the end of the world. I saw the Item Club predicting a "doomsday" scenario with inflation above 4%, unemployment of 2 million and growth of just 1%. Compare that to the early 1980s and 1990s when we had inflation of 20% and 10% respectively, nearly 3.5 million unemployed and contractions of close to 2%. Helps put our current troubles in a little bit of perspective. Email: fluffysheepwa@hotmail.com
Jantra Jul 22nd, 2008 - 9:09 AM	Re: more taxes in the future people Dai if the RPI was 20% and 10% and interest rates were 12-15%, then what were the real rates of inflation
Cambo_Dai Jul 22nd, 2008 - 9:45 AM	Re: more taxes in the future people Hrm... the rates calculated on the same basis were 'real' before but suddenly not now? hrm. I won't rise to it! :-P
Jantra Jul 22nd, 2008 - 11:09 AM	Re: more taxes in the future people