John Major has - like the German finance minister, got it right in
essence. But the real horror has still to come in the new year.
This will be worse than in other countries because of Gordon Brown's
spendthrift policies in the 'good years'. Because of this he can
only deal with the crisis by giving a stimulus on borrowed money.
This profligacy will take a generation or more to pay off.
So for now the old and the savers are paying the price but in a
year's time they will be joined by an army of unemployed and the rest
of the population facing a lifetime of swingeing taxes.
So while Major is right on the details he is wrong in belittling the
depth of the crisis - the crisis created right here in Britain not by
the banks who merely lived by Brown's rules, but by Brown himself.
xxxxxxxxx cs
========================
BBC ONLINE 14.12.08
Ministers 'over-cooking' downturn ['Downturn' - The BBC and
Government word for the slump/depression/recession -cs]
Former prime minister Sir John Major has accused the government of
"over-cooking" the economic crisis to justify the rising size of its
debt.
He said ministers had been right to recapitalise banks but added that
they had since "got their politics wrong", which would deepen the
recession.
Sir John also told BBC One's Andrew Marr Show there could be an
"avalanche" of job losses in the new year.
But the government said it was working to get out of the recession
"faster".
'Help for savers'
Sir John, who himself had to deal with a recession while prime
minister from 1990 to 1997, said it had felt "pretty awful".
Asked whether ministers were scaring people too much over the current
economic downturn, he said: "I think they are.
"I think they're over-cooking it because I think they're concerned
and they wish to justify the amount of debt they're getting us into.
"I think that is a mistake for a raft of reasons. I don't downplay
the seriousness of this: I think this is the worst situation we have
had since the Second World War.
"And after 12 years of Labour government, we now have a level of
national debt that is the same after six years of world war."
Sir John said: "If we continue borrowing like this, the world will be
coming out of recession and we will have a huge amount of borrowing
that will force up interest rates.
"In three years' time, as the world comes out of recession, in the
United Kingdom we will have higher interest rates, we will have
higher national insurance contributions because the government have
already implemented that, and we will have higher taxes."
VAT change
The government's actions were "ensuring that our recession is longer
and deeper than anybody else's".
In his pre-Budget report last month, Chancellor Alistair Darling
announced a package of measures including cutting the VAT rate from
17.5% to 15% until the end of 2009.
He also said the level of pension credits would rise, with pension
and child benefit payments going up in January, rather than April.
Mr Darling predicted that public sector borrowing would be £78bn this
year, going up to £118bn next year.
He added that, from April 2011, all rates of National Insurance
contributions would be increased by 0.5% for all employees and
employers and proposed a 45% rate of income tax for those earning
more than £150,000 a year, from the same date.
Sir John said: "I don't think most of the government's actions are
wise. Recapitalising the banks was fine... Since then they have got
their policies wrong."
Of the VAT reduction, he added that ministers "might as well have
burnt the money and thrown it away".
Sir John called for more protection for savers, including no tax on
interest on the first £5,000 in bank and building society accounts.
He said: "At the moment policy helps the imprudent and penalises the
prudent."
========================
OTHER COMMENTS
BBC ONLINE - shortened
UK economic slowdown 'worsening'
The UK economy contracted 1% between September and November, the
National Institute of Economic and Social Research (NIESR) has
estimated.
This fall followed after a 0.8% drop in the three months to the end
of October, said the think tank.
Indicating that the rate of output decline is "accelerating", the
NIESR now expects a fall of more than 1% in the last three months of
the year.
Official data showed that the economy shrank 0.5% from July to
September.
But it will not be until January that the Office for National
Statistics reports on the final quarter's GDP.
- - - - - -
'Real risk'
The latest data from NIESR is just the latest indication that the UK
economy is most probably falling into a recession.
Martin Weale, the director of NIESR, said that the government would
need to put more equity into the banking system so that it was better
capitalised.
And he warned that things would not get better soon.
"I would not be terribly surprised if output continued to fall until
2010," he told BBC News.
The government has predicted a short, sharp recession, with recovery
in mid-2009.
NIESR said the recession was likely to be deeper than first thought.
- - - - - - -.
"The main problem that it needs to address very urgently is the
availability of bank credit, and further interest reductions are
unlikely to have much effect."
- - - - - - - - -
The Organisation for Economic Co-operation and Development (OECD)
also warned last week that the UK faces a "severe" economic downturn
in 2009.
The Paris-based body predicted that economic output in the UK will
fall by 1.1% next year, more than any other major G7 country.
It added that unemployment in the UK will likely rise significantly
to over 8% by end of 2009 from 5.5% in 2008.
THE UK ECONOMY
ECONOMIC INDICATORS:
=Pound in fifth day of euro lows
=Manufacturers remain gloomy
=Economic slowdown 'worsening'
=Retail sales 'fall still further'
=UK job market weakening rapidly
=Record decline in manufacturing
=Clothes and holiday spending down
========================
POLITICS HOME 14.12 08
COMMENTS
=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-
Andrew Marr Programme, BBC One at 09:40
Cooper: Government plotting the right course to reduce inflation
Yvette Cooper, Treasury Chief Secretary
Ms Cooper said the co-coordinated action between Europe was "very
welcome" and how the government has taken the right action in
supporting the economy now with actions such as the VAT cut as
opposed to governments of the past.
"I think we are plotting the right course in making sure inflation is
coming down. We've never had a policy of targetting the pound, our
policy has been to target inflation. We saw that previous attempts
such as the exchange rate mechanism were not successful.
"We don't as Ministers do a running commentary on the pound. The
purpose of what we do is to support the economy overall and to help
people through this, this is exactly when you need the governments to
step in and I don't think that's what governments of the past did do.
"If we don't act to support the economy it will cost us more in
future as we will see recession in the future, unemployment will last
longer. If you have a deeper recession that's more damaging in the
long term."
When asked if deflation was now a serious worry, she said: "It is
something that some commentators have been talking about - what you
can't do when facing this kind of global problem you cant just rely
on interest rates that's why co-ordinated action from governments is
important."
In response to John Major's criticisms of the governments handling of
the crisis she said: "I completely disagree with him on this, this
is not a nationally caused problem, this is a global private sector
credit crunch. The John Major government doubled the level of
national debt, that was the result of a home grown inflation problem,
not as the result of the greatest financial crisis in the world for
decades
=-=-=-=-=-=-=-=-=-=-=-=--=-=-=-=-=-
Andrew Marr Programme, BBC One at 09:54
Major: Ministers "over cooking" financial crisis
Sir John Major, former Tory Prime Minister
Sir John attacked Labour's handling of the economic crisis, predicted
an avalanche of job losses next year and claimed ministers were "over
cooking" the crisis to justify their actions.
"They are over cooking it because they are concerned and they want to
justify the amount of debt they are getting into," he said.
Describing the crisis as the "worst since the second world war", Sir
John added: "I fear we are going to have an avalanche of job losses
in the first months of next year."
He said the cut in VAT had been pointless, declaring: "You might as
well have burned the money and thrown it away."
And he suggested David Cameron should extend his proposed bank loan
guarantee to homes as well as businesses and consider exempting from
tax the first £5,000 of savings income which would not only help
savers but be "socially just".
He said the previous Tory government, of which he was leader, looked
heartless during the last recession because it simply did not have
the money to spend that Gordon Brown now has.
"We looked particularly heartless just sitting there. We looked very
heartless and we paid a heavy political price for it. But we did kill
inflation for a very long time," he said.
=-=-=-=-=-=-=-=-=-=-=-=--=-=-=-=-=-
Sunday Live, Sky News at 10:55
Fallon: Govt must not bail out indidvidual car plants
Michael Fallon, Tory member of Treasury Select committee
Mr Fallon supported help for the struggling car industry but warned
it had to be in the form of loans and not targeted on a single plant.
"The government has to be very, very careful about the money it makes
available. If it's money for innovation and adaptation, it is
possible it will be money well spent. But if it's bailing out an
individual plant we are not going to see that money back."
He said the government should extend its loan guarantee scheme, as
suggested by David Cameron, and ensure the banks started lending again.
"The government has got to work very hard to make sure that money
gets through. The whole system is frozen. There is plenty the
government can do to get water flowing through the system again to
help car plants."
=-=-=-=-=-=-=-=-=-=-=-=--=-=-=-=-=-
Sunday Live, Sky News at 11:05
Woodley: Govt should create fund to help car plants
Tony Woodley, Unite General Secretary
Mr Woodley said the government should "bail out" the car industry
with a separate fund specifically for the purpose.
"The banks created this problem. It was right to bail out the banks
and it's right to do the same for manufacturing.
"The question is do we intervene at this time or just let market
forces rule. I think the government must intervene," he said.
Ministers should follow Germany's example and create a separate fund
for the ailing industry to make money available which would be paid
back, he said.
=-=-=-=-=-=-=-=-=-=-=-=--=-=-=-=-=-
Sunday Live, Sky News at 11:15
Clarke: Government are not demonstrating economic competence
Ken Clarke, Former Chancellor
Mr Clarke said he does not expect to be invited back to the
Conservative front bench for it would be "a mistake" to remove George
Osborne as Shadow Chancellor. He said the £20bn economic stimulus was
an "absurd thing to do" criticising Brown's handling of the economic
crisis.
When asked about Labour's position in the polls he said, "Well
firstly if Gordon Brown and Alistair Darling are still ahead in those
questions at Easter I will be amazed.
"I don't think they are demonstrating economic competence. I think
Osborne has played it well, he's not said anything wrong, he's not
competing with Brown for saving the world. I think Osborne is doing
the right think going to the credit and banking problems at the
centre of this crisis."
He criticised Brown decision to take £20bn economy stimulus, "I said
you should try a fiscal stimulus if you can afford is, that's what
the G20 also said. There is nobody that thinks the UK can afford the
£20bn of stimulus that Gordon Brown insisted upon."
When asked when he thinks an election will be called he said: "Gordon
Brown is fighting an election campaign, every sentence faces a
peculiar attack at the Conservatives.
"Gordon wants to get out in 2009 when he can, as he realises going
into a deep recession into 2010 he wont survive it - that's what he
and Mandelson are campaining."
Sunday, 14 December 2008
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