George Osborne Criticised Over Welfare Cuts.

[Big Orange]

While Labour overspent and didn't save up (with Brown selling gold at knock down prices) brought us into the current mess, I'm wary of the ConDem price cuts to treat the national debt shuffling into blatant "fuck the poor, the dependent, and harmlessly inept" territory:

Osborne cricitised over benefits cuts announcement

George Osborne's announcement that the annual welfare bill faces further cuts of £4bn has been criticised by Labour MPs and two Lib Dems.

The chancellor wants more savings on top of the planned £11bn, targeting those he says make a "lifestyle choice" not to work.

Labour's Liam Byrne said he was "taking an axe" to unemployment benefits.

And Lib Dem Bob Russell said he wished the government "had equal enthusiasm" towards people "fiddling" on tax.

Mr Osborne told the BBC on Thursday that welfare spending was "completely out of control" and he wanted to stop people just "sitting on out-of-work benefits" and not attempting to find work.

'Cheesed off'

The Treasury says the targets for the reductions - expected to be outlined in the coalition government's spending review in October - are still being discussed.

Further cuts of £4bn, in addition to the £11bn announced in June's budget, would represent a drop of about 6% of total spending on welfare.

But the manner in which Mr Osborne announced the cuts in a BBC interview appears to have annoyed some of his Lib Dem coalition partners, already unhappy about the pace of spending cuts and plans to raise VAT in January.

Mike Hancock and Bob Russell - who both voted with Labour against the coalition's plans to raise VAT to 20% - were critical.

Mr Hancock said he was "cheesed off" that he had not been consulted over the announcement and Mr Russell has complained to Commons Speaker John Bercow that MPs were not told first.

"I didn't get elected to punish the poor and the less well off," Mr Hancock told BBC Radio 4's PM programme.

"This will go right to the heart of the benefits system. This is really going hard at it with a sledgehammer. He has got a lot of questions to answer. We need to know where the rest is coming from."

'Scapegoat'

And Mr Russell told the BBC: "I think we need to approach all forms of waste and abuse, I've no problem, with that, but I wish the government had equal enthusiasm towards people who are fiddling on VAT, income tax and all all those tax avoidance schemes as well.

"Blaming welfare cheats, and I don't support welfare cheats, is similar to the French government blaming everything on the Roma, who they are deporting. So finding a scapegoat I don't think is very ethical."

Labour say the plans lacked details of how the savings will be achieved and over what period, and should have been announced to Parliament first.

"The reality is that right now what we need is a plan to get people back into work," Shadow Chief Secretary to the Treasury Liam Byrne told BBC Breakfast.

"All we have got from the government so far is a plan to cut public spending so quickly, so deeply that hundreds of thousands of people will be put on the dole."

Aware that spending cuts would push up jobless levels, he said Mr Osborne was trying to keep the unemployment bill "as low as possible by taking an axe to dole payments".

And Labour MP John McDonnell dismissed Mr Osborne's comments "as a publicity stunt" and said they did not "reflect the reality" of most people who wanted to work but faced a lack of jobs and support.

However, Tory MP Michael Fallon - a member of the Treasury Select Committee - said when all departments were having to make substantial savings, the welfare bill should not be "sacrosanct".

"It would be quite wrong to start cutting every other departmental budget but leave the entire welfare bill intact," he told Today.

There were half a million vacancies in the economy, he added.

"We have this generational unemployment of families where there has been nobody working for a long period of time and we have to change that."

The BBC understands discussions are continuing in Whitehall about whether it is possible to limit pensioner benefits - such as the winter fuel allowance, bus pass and free TV licence - without breaking Prime Minister David Cameron's election promise that he would preserve them.

The Conservatives have described as "lies" Labour's warnings that those benefits would be scrapped.

October's spending review is likely to be the toughest in a generation, with most government departments have been told to prepare packages of cuts worth between 25% and 40%

BBC

And on that note that it's fact that tax evaders accounts for 3% of tax liabilities, as opposed to 0.8% of welfare expenditure getting extracted by fraud.

[TC27]

would represent a drop of about 6% of total spending on welfare.

Ok I dont know how this fits in with the total DWP budget but 6% is pretty tame in comparision to the cuts most departments are going to have to make over the next two years.

You have a point regarding tax evasion but that itself doesnt mean that the DWP shouldnt feel the pain like every other department...only the NHS is untouchable (apparantly).

I disagree with you regarding the coalition - anyone in power would be making these decisions now or would be forced to by our lenders down the road at some point...its Labour who fucked the poor over by running up a defecit in the good times.

[HMS Conqueror]

The deficit is so enormous that there isn't any painless way out. Low single digit % and you may not have to cut welfare, but at 10-15% of the budget either everything has to be cut somewhat or some things have to be cut entirely, and the latter is not really viable for any major department.

On the plus side, at least we're not in the US position, of vastly increasing deficit that is going to result in horrific consequences when either the Republicans retake control of the government, or Obama is forced to cut by the bond markets, whichever happens first.

[J]

On the plus side, at least we're not in the US position, of vastly increasing deficit that is going to result in horrific consequences when either the Republicans retake control of the government, or Obama is forced to cut by the bond markets, whichever happens first.

Oh really? The total debt load of the UK 30%-50% worse than that of the US and it does not enjoy reserve currency status. So would you like to explain why the UK is in a better situation than the US? Did I mention the debt growth rate is higher as well?

[Broomstick]

All I want to know is how Mr Obsborne, who is clearly an American Republican of the far right, came to achieve a position of power in the UK government. In other words, don't make your welfare system like ours.

[Murazor]

All I want to know is how Mr Obsborne, who is clearly an American Republican of the far right, came to achieve a position of power in the UK government. In other words, don't make your welfare system like ours.

Because Europeans (particularly western Europeans) have grown disenchanted with the political proccess, because there are groups of interest that would just LOVE to bring the American social mode over the ocean and have power brokers working like crazy to accomplish just that, because those very groups of interest have found a large number of very high profile accomplices who can throw their weight in the highest level of political decision making...

*sigh*

Never mind. Essentially, western Europe is struggling between the supreme unwillingness of the people to rock the boat to do what must be needed in order to get things done and the very real need to rock the boat in order to boot out 'special interest groups' and such. That most would rather swallow the scapegoats offered by the politicians (see Berlusconi's almost-fascist thuggery in Italy and France's recent mass deportation of Romanian gypsies in blatant violation of EU law for some examples of this) doesn't exactly help matters, either.

[TC27]

On the plus side, at least we're not in the US position, of vastly increasing deficit that is going to result in horrific consequences when either the Republicans retake control of the government, or Obama is forced to cut by the bond markets, whichever happens first.

Oh really? The total debt load of the UK 30%-50% worse than that of the US and it does not enjoy reserve currency status. So would you like to explain why the UK is in a better situation than the US? Did I mention the debt growth rate is higher as well?

Unfortunately there a plenty of politicians in the UK who argue that we should increase borrowing in order to keep the budget 'progressive'.
Most people in the UK dont appreciate how bad the situation is and how much worse it could get without severe austerity measures ASAP.

[bobalot]

On the plus side, at least we're not in the US position, of vastly increasing deficit that is going to result in horrific consequences when either the Republicans retake control of the government, or Obama is forced to cut by the bond markets, whichever happens first.

Oh really? The total debt load of the UK 30%-50% worse than that of the US and it does not enjoy reserve currency status. So would you like to explain why the UK is in a better situation than the US? Did I mention the debt growth rate is higher as well?

Unfortunately there a plenty of politicians in the UK who argue that we should increase borrowing in order to keep the budget 'progressive'.
Most people in the UK dont appreciate how bad the situation is and how much worse it could get without severe austerity measures ASAP.

Why? I can understand the need to cut spending while the economy is an reasonable state*, but cutting spending severely during an recession is deflationary and may create a downward spiral that might blow out the budget regardless.

*I cannot understand how the UK irresponsibly ran gigantic budget deficits during its boom.

[Fingolfin_Noldor]

Unfortunately there a plenty of politicians in the UK who argue that we should increase borrowing in order to keep the budget 'progressive'.
Most people in the UK dont appreciate how bad the situation is and how much worse it could get without severe austerity measures ASAP.

This is intrinsically paradoxical.

You cut off a few % points of the civil service and cut spending, you have plenty out of the jobs, who won't be paying taxes, and will be living on welfare payouts. COmpanies relying on government spending start laying off.

This will then spread out and reverberate throughout the system because as these people will spend less, and people who happen to work near the offices will get less money.

So how does it solve anything? If by anything, there seems to be a deeper problem, and I suspect it lies in how taxes are collected.

[Broomstick]

Just as starting a new business creates a "multipler" effect, stimulating the local (and not so local) economy by giving workers wages to spend and creating demand for whatever is required to produce the business product, not to mention things like business for local eateries during lunch hour and so forth, by removing businesses/reducing jobs you have the opposite effect (which I've never heard nicely named, but let's call it the "divider" effect) where there is less money going into the economy, supportive businesses see less demand for their products/services, and so on.

I find the degree of scapegoating going on (not just in Europe, those obviously the examples given in this thread are from there) quite disturbing for several reasons.

[HMS Conqueror]

On the plus side, at least we're not in the US position, of vastly increasing deficit that is going to result in horrific consequences when either the Republicans retake control of the government, or Obama is forced to cut by the bond markets, whichever happens first.

Oh really? The total debt load of the UK 30%-50% worse than that of the US and it does not enjoy reserve currency status. So would you like to explain why the UK is in a better situation than the US? Did I mention the debt growth rate is higher as well?

This graph shows total debt, not just government debt, which isn't the same (private sector generally takes up credit in expectation of future returns on investment, or at least to purchase fixed capital like houses, not to fund present consumption). US government debt is listed by this as 60% of GDP, while Britain's is listed as 52% of GDP. The second important distinction is that the UK is now trying to cut the government deficit, while US is trying to expand it.

btw, aside from the fact that the GBP is a reserve currency, what benefit do you think that gives you? Unless you plan on hyperinflation to default on the debt (which UK could do too, it just isn't a good idea).

All I want to know is how Mr Obsborne, who is clearly an American Republican of the far right, came to achieve a position of power in the UK government. In other words, don't make your welfare system like ours.

Seriously? What other choice is there? Even the Obama choice is just "push this back a few years, while making the problem worse", presumably until he has already won/lost 2012 election and no longer cares what happens. And for the record, Labour also pledged to cut, just a little less than the Tories.

Anyway, UK has since Thatcher been half way across the Atlantic. Very few people here have wanted to go the way of France or Germany since then.

Just as starting a new business creates a "multipler" effect, stimulating the local (and not so local) economy by giving workers wages to spend and creating demand for whatever is required to produce the business product, not to mention things like business for local eateries during lunch hour and so forth, by removing businesses/reducing jobs you have the opposite effect (which I've never heard nicely named, but let's call it the "divider" effect) where there is less money going into the economy, supportive businesses see less demand for their products/services, and so on.

I find the degree of scapegoating going on (not just in Europe, those obviously the examples given in this thread are from there) quite disturbing for several reasons.

Admittedly I have never read Keynes' General Theory, but I've never understood this. If money is not spent in one place, it will be spent in another, which also will have a multiplier effect. So if the government doesn't borrow money, that money doesn't just disappear. If it did, there would not be any trade-off to having government spending, because it would not require borrowing or taxation to fund.

[Broomstick]

Admittedly I have never read Keynes' General Theory, but I've never understood this. If money is not spent in one place, it will be spent in another, which also will have a multiplier effect. So if the government doesn't borrow money, that money doesn't just disappear. If it did, there would not be any trade-off to having government spending, because it would not require borrowing or taxation to fund.

Incorrect.

Money does not have to move at all. If I stuff all my money into a mattress and never spend it, it is essentially removed from the economy. The money has "disappeared". If banks will not loan money (and right now in the US it is VERY difficult for even those with excellent credit to get a loan) then that money is, again, taken out of circulation. It "disappears".

There is no obligation for anyone to spend money. There can be consequences for not doing so, of course, in regards to debts, but beyond that, no, no one has to spend anything beyond that. Austerity measures means everyone cuts back - less money is spent. The economy contracts.

[J]

This graph shows total debt, not just government debt, which isn't the same (private sector generally takes up credit in expectation of future returns on investment, or at least to purchase fixed capital like houses, not to fund present consumption).

Private sector debt wasn't used to fuel consumption? Houses are fixed capital? Are you really that stupid?

US government debt is listed by this as 60% of GDP, while Britain's is listed as 52% of GDP. The second important distinction is that the UK is now trying to cut the government deficit, while US is trying to expand it.

There's a big difference between trying and succeeding.

btw, aside from the fact that the GBP is a reserve currency, what benefit do you think that gives you? Unless you plan on hyperinflation to default on the debt (which UK could do too, it just isn't a good idea).

The GBP is a fairly important currency but it's not a reserve currency. There is only one reserve currency and that's the US dollar. If you do not know the advantages of reserve currency status I'd suggest staying out of this discussion until you do.

Admittedly I have never read Keynes' General Theory, but I've never understood this. If money is not spent in one place, it will be spent in another, which also will have a multiplier effect. So if the government doesn't borrow money, that money doesn't just disappear. If it did, there would not be any trade-off to having government spending, because it would not require borrowing or taxation to fund.

You have no business taking part in economics discussions. You do not have the background to understand the theories, and furthermore, you're completely mistaken on the parts you think you understand. Go back to the kiddie table, the adults are trying to talk here.

[Broomstick]

There is only one reserve currency and that's the US dollar.

I thought the euro was considered a reserve currency as well - or am I mistaken on that? Or is it that the U$D is the official reserve currency and the euro unofficially has a similar role?

[J]

The Euro has been making gains as currency of trade and a store of wealth for some countries but it still doesn't have the worldwide acceptance of the USD. If things had continued as they were earlier this decade for the next 30-50 years it's likely the Euro would become the worldwide currency of commerce and gain reserve currency status based on its use and the wealth & power of the countries behind the Euro. To have reserve currency status the money needs to be widely used and accepted and it also needs to be seen as the most well-backed, stable, and reliable currency in the world.

The Euro doesn't have that since it has a few problems, namely Greece, Spain, Portugal, Ireland and some of the Eastern European countries; the financial troubles in those countries require lots of bailouts and may eventually result in those countries leaving or being kicked out of the Eurozone. Doubts about the future of the Eurozone lead to doubts about the backing & stability of the currency, that's not good if it's to be a reserve currency. Imagine what would happen to the status of the USD if say...a third of the States managed to succeed.

[Teebs]

The Euro doesn't have that since it has a few problems, namely Greece, Spain, Portugal, Ireland and some of the Eastern European countries; the financial troubles in those countries require lots of bailouts and may eventually result in those countries leaving or being kicked out of the Eurozone. Doubts about the future of the Eurozone lead to doubts about the backing & stability of the currency, that's not good if it's to be a reserve currency. Imagine what would happen to the status of the USD if say...a third of the States managed to succeed.

A nitpick, but I don't think the two Eastern European countries in the eurozone (Slovenia and Slovakia) have been causing any problems.

[Terralthra]

Secede.

[TC27]

Unfortunately there a plenty of politicians in the UK who argue that we should increase borrowing in order to keep the budget 'progressive'.
Most people in the UK dont appreciate how bad the situation is and how much worse it could get without severe austerity measures ASAP.

This is intrinsically paradoxical.

You cut off a few % points of the civil service and cut spending, you have plenty out of the jobs, who won't be paying taxes, and will be living on welfare payouts. COmpanies relying on government spending start laying off.

This will then spread out and reverberate throughout the system because as these people will spend less, and people who happen to work near the offices will get less money.

So how does it solve anything? If by anything, there seems to be a deeper problem, and I suspect it lies in how taxes are collected.

Of course you are correct to an extent and it gets very complex down this road im sure......

However its all a bit moot as the far bigger threat is loosing our AAA bond status which would screw us totally....the only issue is how quickly goverment spending is slowed (even Ed Balls admits this).

[J]

Timing. Timing is everything. If the debt accumulation is allowed to get too out of hand then there's no way to recover from it without starting a positive feedback cycle which leads to severe cutbacks and depression. The problem has to be tackled and paydowns on the debt have to begin well before the country is on the verge of sinking, in Canada for instance we started paying down our our debt in the 1990's while our stats were still a fair bit better than the UK's at present and we able to right the ship before the current downturn hit.

For the UK it's simply too late, there's no way out of the debt trap which does not involve large job losses and suffering. I suppose there's a chance of a miraculous alien intervention to save the day which I estimate to be around as likely as a cold fusion power source. Perhaps the aliens will have one of those too...

[TC27]

I dont envy George Osborne or anyone at the treasury - walking the tightrope between a double dip recession on one hand and the threat of a credit rating downgrade on the other...meanwhile everyone in the cabinet hates you as you haul then over the coals and force them to cut.

[Kanastrous]

(and right now in the US it is VERY difficult for even those with excellent credit to get a loan)

It's strictly anecdotal off my own experience of the last several months, but even with unremarkable credit (low-mid 700s big-three reporting scores) I'm up to my ears in lenders wanting to write me real-estate loans.

Maybe if I were pursuing loans for other purposes it would be different.

[Broomstick]

Purchasing real estate will not induce a multiplier effect on the economy. What you need is the ability to get loans for other purposes. For instance, small businesses require "float" so they can cover expensive between the time the provide goods and services and the time they actually get paid (which can be months). Right now, banks are reducing or even entirely cutting off "float", which in my area has driven many businesses out of business.

Really, economics can be quite complicated. I don't pretend to understand all of it, which is why it annoys me when people promote simplistic, one size fits all solutions.

[Uraniun235]

To have reserve currency status the money needs to be widely used and accepted and it also needs to be seen as the most well-backed, stable, and reliable currency in the world.

Have there been periods in history where there has effectively been no one reserve currency?

[Broomstick]

Well, yes, of course - prior to the 20th Century there wasn't much in the way of a global financial world. Prior to the time when round-the-world travel was feasible on a frequent basis I'm sure there were several currencies that served that function, even if they weren't formally termed that.

For example - in colonial times in the Americas (both continents) Spanish "pieces of eight" were accepted in many places outside of Spanish holdings. I'm going to take a wild ass guess and assume that at times China had an empire their currency was accepted through most of Asia. Ancient Roman coinage was good throughout their Empire, accepted beside local currencies. These may not fit the precise definition of a "reserve currency", and those more conversant with the topic and with historical monetary systems might give better and/or more detailed examples, but I could certainly see where there would be simultaneous existence of widely accepted currencies on different continents.

[Simon_Jester]

In that era everyone was on the precious metal standard, so I'd argue that the real "reserve currency" was gold and silver. It was just that the more trusted and powerful empires also owned the most specie, and so minted the most (and most trustworthy) coins, the ones you could be confident actually contained as much silver as they were supposed to.