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Guardian: The UK economy must take a long, hard look at itself

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Bit of a long winded analysis of how the UK economy is in the mess it is (no mention of immigration, this being the Graun). Liked this bit though:

Halfway through the 2010 parliament, David Cameron and George Osborne had a problem. They had arrived in office promising a different economic model that would be less dependent on private and public debt, and the result was that taxes were raised and public spending was cut to rid Britain of its budgetary incontinence. Businesses would be encouraged to invest by the commitment to reduce the budget deficit, while the Bank of England’s easy money regime would ensure that the economy kept growing at a reasonable pace.

Things didn’t work out as planned and the reason they didn’t was that Cameron and Osborne failed to understand just how structurally weak the economy was. They assumed that it wouldn’t really matter if consumer spending was flat and the housing market a bit depressed because growth would pick up elsewhere – in manufacturing, exports and investment – to compensate.

But there was no rebalancing. Without the consumer and the housing market, it was not a case of different growth, it was a case of no growth. Fearful of losing the 2015 election, steps were taken to get the housing market moving.

Five years on, Theresa May and Philip Hammond have the same problem. Consumers are being squeezed by higher inflation and have already run down their savings. Activity in the housing market has stalled because the mini-boom set off by Cameron and Osborne has run its course. Across large parts of the country, property has become unaffordable.

But, as in 2012, there is scant evidence of the other bits of the economy picking up the baton.

https://www.theguardian.com/business/2017/jul/09/uk-economy-take-long-painful-look-research-development

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25 minutes ago, rantnrave said:

Bit of a long winded analysis of how the UK economy is in the mess it is (no mention of immigration, this being the Graun). Liked this bit though:

Halfway through the 2010 parliament, David Cameron and George Osborne had a problem. They had arrived in office promising a different economic model that would be less dependent on private and public debt, and the result was that taxes were raised and public spending was cut to rid Britain of its budgetary incontinence. Businesses would be encouraged to invest by the commitment to reduce the budget deficit, while the Bank of England’s easy money regime would ensure that the economy kept growing at a reasonable pace.

Things didn’t work out as planned and the reason they didn’t was that Cameron and Osborne failed to understand just how structurally weak the economy was. They assumed that it wouldn’t really matter if consumer spending was flat and the housing market a bit depressed because growth would pick up elsewhere – in manufacturing, exports and investment – to compensate.

But there was no rebalancing. Without the consumer and the housing market, it was not a case of different growth, it was a case of no growth. Fearful of losing the 2015 election, steps were taken to get the housing market moving.

Five years on, Theresa May and Philip Hammond have the same problem. Consumers are being squeezed by higher inflation and have already run down their savings. Activity in the housing market has stalled because the mini-boom set off by Cameron and Osborne has run its course. Across large parts of the country, property has become unaffordable.

But, as in 2012, there is scant evidence of the other bits of the economy picking up the baton.

https://www.theguardian.com/business/2017/jul/09/uk-economy-take-long-painful-look-research-development

By default the general equilibrium models at the Treasury and the Bank assume the economy will grow at around 2% p.a. in the absence of external shocks (with a bit of a lag as the impact of recession is worked off). Clearly, when UK economic output exceeded its pre-GFC peak in the second half of 2012, this outcome is broadly what they were expecting!

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Well ....

A quick summary of why he UK economy is in trouble:

~30% of working age people not working, paying tax. A large number are drawing benefits much higher than the minimum.

- Another 30% of the working age population working for the state, some in totally made up jobs.

- About 6M migrants living i nthe UK. At best they mgith pay some tax to ocover the public services they use. At worse, they are being aid ~20K/year to drive up housing cost and consume UK public services.

 

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4 minutes ago, spyguy said:

Well ....

A quick summary of why he UK economy is in trouble:

~30% of working age people not working, paying tax. A large number are drawing benefits much higher than the minimum.

- Another 30% of the working age population working for the state, some in totally made up jobs.

- About 6M migrants living i nthe UK. At best they mgith pay some tax to ocover the public services they use. At worse, they are being aid ~20K/year to drive up housing cost and consume UK public services.

 

Worse, the immigrants send a significant fraction of their salaries and welfare handouts back home to be spent outside of the UK.

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All sounds like messing around at the edges rather than taking a long, deep look at the basics, which is what we've lost sight of. There's still this "bigger is better, always need more" assumption underlying it and driving everything to try to push in that direction, no matter what the consequences. The debt and immigrant binge are just examples of doing that with a very short-termist attitude.

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The two biggest changes over the last twenty years are education and migration. The latter, to a certain extent, required to plug the gap of expectations ( menial jobs no longer suited to the indigenous population) and  the years out studying for lifestyle degrees when we by and large used to start work at 16.

Both have also put a huge strain on house prices going from the cheapest house prices in our history in 1996 to the most expensive.

 

 

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1 hour ago, spyguy said:

Well ....

A quick summary of why he UK economy is in trouble:

~30% of working age people not working, paying tax. A large number are drawing benefits much higher than the minimum.

- Another 30% of the working age population working for the state, some in totally made up jobs.

- About 6M migrants living i nthe UK. At best they mgith pay some tax to ocover the public services they use. At worse, they are being aid ~20K/year to drive up housing cost and consume UK public services.

SG, these are consequences and patch-ups becuase we don't have nearly enough real industry here.

IMO, there is only one true way for a country's wealth to increase - that's to make things that the rest of the world wants and will pay for.
 

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26 minutes ago, crashmonitor said:

cheapest house prices in our history in 1996 to the most expensive.

 

 

Pretty sure they were cheaper when you just took a bit of land and built a shack on it.  

 

 

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1 hour ago, zugzwang said:

Worse, the immigrants send a significant fraction of their salaries and welfare handouts back home to be spent outside of the UK.

Of course they are.  Who wouldn't leverage the living cost differential between their homeland (cheap to live) and the UK (expensive to live "normally", but cheap if you live in an HMO and/or have your rent paid by housing benefits).  They're not in the UK to live like the locals (struggling) - they're on a leverage play, saving up for a decent house in their home country - pay in cash when they've had enough of the UK.

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26 minutes ago, Tempus said:

But can't we all become buy-to-let landlords and open coffee shops?

I thought that was the plan to economic nirvana? 

You forgot another business model....who's going to make the cupcakes for the coffee shops?!

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5 minutes ago, canbuywontbuy said:

Of course they are.  Who wouldn't leverage the living cost differential between their homeland (cheap to live) and the UK (expensive to live "normally", but cheap if you live in an HMO and/or have your rent paid by housing benefits).  They're not in the UK to live like the locals (struggling) - they're on a leverage play, saving up for a decent house in their home country - pay in cash when they've had enough of the UK.

The woman claims housing benefit and then 8 of her family move in and send their wages home.No rent,no council tax and she gets tax credits for her children back home.The couple next door,married with a child cant earn enough because wages are crushed by the people who dont pay rent or council tax.Their tax also goes to fund the freeloaders.

Our politicians have destroyed the country and have been a disaster for the working low/average waged worker.I see no way out apart from a crash and then a full on reflation after our borders are secure.

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The Guardian's view is meaningless when they ignore the demand side of the equation on housing and services caused by millions of migrants. 

Also, this is the paper that's constantly wanting to cancel 'austerity' and let let slip the dogs of debt and public spending - even while the economy is still running a public spending deficit of tens of billions of £ per year. 

They're basically doing what their readership expects, and attacking the tories.  

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1 hour ago, jonb2 said:

SG, these are consequences and patch-ups becuase we don't have nearly enough real industry here.

IMO, there is only one true way for a country's wealth to increase - that's to make things that the rest of the world wants and will pay for.
 

...that would be London flats then :/

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2 hours ago, spyguy said:

Well ....

A quick summary of why he UK economy is in trouble:

~30% of working age people not working, paying tax. A large number are drawing benefits much higher than the minimum.

- Another 30% of the working age population working for the state, some in totally made up jobs.

- About 6M migrants living i nthe UK. At best they mgith pay some tax to ocover the public services they use. At worse, they are being aid ~20K/year to drive up housing cost and consume UK public services.

 

Agree totally with your main argument.  What I can't quite get to grips with is the percentage of economically inactive has not dramatically increased over the years.  At least if you believe the official figures.

Also, it may be little comfort but is the UK any worse than other western economies?  We are all suffering from the same problem, i.e the outsourcing of productive work.  It seems to me the USA is even worse than us in this regard, hence the election of the Donald.

If the outsourcing to China, India et al could be de-incentivised we might stand a chance.

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2 hours ago, spyguy said:

Well ....

A quick summary of why he UK economy is in trouble:

~30% of working age people not working, paying tax. A large number are drawing benefits much higher than the minimum.

- Another 30% of the working age population working for the state, some in totally made up jobs.

- About 6M migrants living i nthe UK. At best they mgith pay some tax to ocover the public services they use. At worse, they are being aid ~20K/year to drive up housing cost and consume UK public services.

 

(Frankie Boyle so maybe not safe for work)

 

Edited by DrBuyToLeech

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5 minutes ago, kzb said:

Agree totally with your main argument.  What I can't quite get to grips with is the percentage of economically inactive has not dramatically increased over the years.  At least if you believe the official figures.

Also, it may be little comfort but is the UK any worse than other western economies?  We are all suffering from the same problem, i.e the outsourcing of productive work.  It seems to me the USA is even worse than us in this regard, hence the election of the Donald.

If the outsourcing to China, India et al could be de-incentivised we might stand a chance.

Yes. The UK is a *lot* worse off than other developing countries. They are have time limited, contribution based benefits systems. The money stops after a few years, or does not start if youve not paid in.

The poor, productive UK workers has to compete and pay for loads of idle dossers.

The unemployment figures have been bent so much tat they are meaningless.

The figure the UK needs to publish is the percentage of working age household in receipt of any benefit bar child benefit.

Then, for further detail, where about 30% of he household income is from the state.

 

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13 minutes ago, btd1981 said:

...that would be London flats then :/

Absolutely :)

Pity it's a finite resource - perhaps we could build them for export. Rose cottage versions with own garden, smelly bulldog and cream tea welcome baskets.

Actually, don't tell anyone - I think I have a new business idea ...

Edited by jonb2

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1 minute ago, DrBuyToLeech said:

(Frankie Boyle so maybe not safe for work)

 

No.

Its was Brown lettign the banks grwo amssive (in debt) to tax to pay for a vast welfare state.

The banks collsped and will not be paying tax for the forseeable future.

The UK is still stuck with Browns horrendous 'Vote for Me' spending.

 

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2 minutes ago, spyguy said:

No.

Its was Brown lettign the banks grwo amssive (in debt) to tax to pay for a vast welfare state.

The banks collsped and will not be paying tax for the forseeable future.

The UK is still stuck with Browns horrendous 'Vote for Me' spending.

 

Brown let the banks do it, but it was still the banks. 

Gordon Brown, incidentally, wasn't the president of the US, didn't run Ireland or Iceland or any of the other countries that seem to have blown up for exactly the same reasons at exactly the same time. 

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Almost on cue

Pay growth of working mothers surpasses fathers

https://www.ft.com/content/82563b38-6330-11e7-8814-0ac7eb84e5f1

 

IFS stats.

' One in three children in relative income poverty belong to families where only one parent works — 85 per cent of the time, the father. '

' Immigrants to Britain, who are generally paid less than similarly qualified UK-born people, now comprise a greater proportion of single earner families — up from 15 per cent in 1996 to 35 per cent in 2016.'

Can anyone of here give me one benefit that the UK + UK taxpayers get from importing foreign single parents? Each of each witll be drawing down 30k+ in cash + use of public services?

Can you name another country inthe world that allows single parents to come in and not work, drawing benefit?

Just one will do.

Dont say canada who, despite, cuddly wuddly image, does not let unskilled people who cannot support themselves into the country.

My quite simple solution is:

- No recourse to benefit for any migrant arriving in the UK.

- 30K hurdle for single people workign in the UK. 70K for a family + private health + private schools.

 

 

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4 minutes ago, DrBuyToLeech said:

Brown let the banks do it, but it was still the banks. 

Gordon Brown, incidentally, wasn't the president of the US, didn't run Ireland or Iceland or any of the other countries that seem to have blown up for exactly the same reasons at exactly the same time. 

No. And both countries slammed down on benefit payouts.

neither did either manage to allow their p1sspot banks become the largest (by assets') i nthe world.

 

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10 minutes ago, DrBuyToLeech said:

Brown let the banks do it, but it was still the banks. 

Gordon Brown, incidentally, wasn't the president of the US, didn't run Ireland or Iceland or any of the other countries that seem to have blown up for exactly the same reasons at exactly the same time. 

I am glad you mentioned that.  I am no fan of Brown but he was not solely responsible for our financial misfortunes.  Like many finance misters around the world at the time he did take his foot off the financial brake a bit too much but it was 'the banks that did it', not Brown.

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11 minutes ago, spyguy said:

Yes. The UK is a *lot* worse off than other developing countries. They are have time limited, contribution based benefits systems. The money stops after a few years, or does not start if youve not paid in.

The poor, productive UK workers has to compete and pay for loads of idle dossers.

The unemployment figures have been bent so much tat they are meaningless.

The figure the UK needs to publish is the percentage of working age household in receipt of any benefit bar child benefit.

Then, for further detail, where about 30% of he household income is from the state.

 

But are we any worse in these factors than other developed (developed not developing) countries?

State spending as per cent GDP -we are mid table at 42% and way behind France at 56%.  UK is below Eurozone average of 47%.

UK is apparently not taking our fair share of "refugees".  Other EU countries are hit far harder than us.

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