Saturday, Dec 13, 2008
Why ?
Daily Mail: £4bn aircraft carriers delayed by two years as MoD cuts costs amid funding shortfall
Why is this labour intensive public project being cancelled if the UK needs a fiscal stimulus which will be provided by government borrowing? Also, just to mention a quick point, all of the losses written down by banks come out of future taxation. Essentially every write-down ends up as a reduced tax bill. A suspicious thought occurs, that the "fiscal stimulus" will in fact only maintain current government spending in the face of declining tax revenue. And just to repeat myself, the banks will not be providing any revenue to the government for decades in the future, their losses are offset against tax not just this year, but onwards. Cancelling these ships is in contradiction to stated government policy and is very suspicious.
Posted by stillthinking @ 11:56 AM (853 views) Add Comment
13 Comments
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1. stillthinking said...
Going on, what is important is to know when the UK government gets to the point where they cannot repay their debts and default. So, when I read about tax revenue this is always "declining" but declining means 100,99,98.. and so on. But tax revenue must have dramatically collapsed. But I never read this.
Also, when the government borrows and pays public sector workers, those public sector workers pay tax. From that, government borrowing is a component of tax revenue, and when government borrowing stops, tax revenue must accordingly reduce. So basing the idea of a safe level of UK borrowing on tax income is completely fake, because that tax income is not real.
Further, when Argentina appropriates pension funds it is rightly seen as a corrupt socialist government confiscating wealth. The key point though, which makes it confiscation, is that everybody knows that the government will not pay it back. So in the situation of the UK, forcing pension funds to purchase government gilts, for "safety" etc, is not seen as confiscation because of the belief that the UK government can successfully pay it back.
However, we know that at some point the government will be unable to successfully repay and the likelihood of default is going up according to the market. What is occurring to me from the cancellation of the aircraft carriers is that there will not be a fiscal stimulus, too expensive, and that these announcements are to influence the market and induce inflation because inflation is belief based, and that additional borrowing is required just to maintain existing spending. Establishing inflationary expectations is the goal of all public announcements, whether they are describing real or possible actions.
Basically I think -real- tax revenue must have been hammered to death, but I don't read this anywhere.
2. paul said...
Brown regularly confiscates £5bn in pension funds per annum. By UK government logic, if Argentina had called it a "windfall pension tax", they'd have gotten away with it. Argentina can't run up massive debts because they have a higher default risk associated. The UK is perceived as less of a risk, so the government borrows too much and seeks through inflation to reduce the size of their debt - effectively reducing their own debt by reducing everyone else's wealth.
Inflation is a stealth tax of the worst kind because it is not even called a tax.
But corruption and state confiscation of private wealth only happens in hot countries, don't ya know ...
3. mark said...
because they are giving vauxhalls the money
4. enuii said...
As we are turning into a 2nd class potato republic (we have no bananas) Vauxhall's redundant assembly lines could make toyota style pickup trucks into which our armed forces can mount old Anti Aircraft guns.
5. str 2007 said...
Yes defence spending could be the best policy for when the International Bailiffs come knocking.!
6. Bertywooster said...
enuil said "As we are turning into a 2nd class potato republic.." I disagree, I do not believe things are getting better.
The stories about the British economy, politics, doubtful government statistics, an illegal war, the under funded and equipped armed forces in Iraq and the police force, all read like something out of Zimbabwe. And now this government is exploiting the weakest group in our society, the retired on fixed income, to pay for their utter incompetence. I feel nothing but shame.
7. montesquieu said...
Britain's defence budget has been way overblown for years, as governments refuse to accept our diminished status in the world. WFT are we doing in Iraq other than to curry favour with the White House? Doesn't make us any safer, not one little bit.
Aircraft carriers and nuclear bombs are not for the British people's protection, but so that Britain can throw its weight around in the world and retain its place at the top table. How much good that does us taxpayers remains to be seen but I suspect precious little..
Also it's only partly true that these are 'labour-intensive', the vast majority of the money will go on buying imported sub-systems to French, German and particularly US companies.
8. stillthinking said...
I don't mean spending on aircraft carriers is a useful way to spend. I mean that if you are going to spend money Keynsian style to dig and fill in holes, then you may as well make an aircraft carrier. But we aren't, so therefore we aren't doing a stimulus. The gov. is just borrowing for existing spending.
9. fjcruiser said...
With the Iraqi and Afghanistan war, our defense buget has doubled. So cuts are inevitable. No money in the coffers, the City wont be paying £15Bn in tax this year, nor next year nor ever after.
10. inbreda said...
ST has a valid point. Effectively I guess that means that, like the banks, the UK is already bankrupt. It's just a matter of time before everyone realises it.
11. mark said...
cheap money was always good for a war, now money is not so cheap war no longer makes sense..........
12. stillthinking said...
I think they have realised. I also think that there are two approaches, buy insurance against default, or run off. The pound is dropping because people don't want to buy insurance, they just want to run off.
When will the pound bottom out? It hasn't stopped going down... and more worringly, nobody is making any predictions about the floor. But my point was just that there is no stimulus, just more PR feelgood factor, and that the chronic breath stoppong loss of taxes hasn't become public, or the decades of lost taxes we are already booked in for.
13. Quad said...
what steps are avaliable to stop the pound falling, or to stabilise it?