Coffee House

The Tories’ economic tightrope

24 January 2014

8:50 AM

24 January 2014

8:50 AM

When things were going pretty badly for the Conservatives, ministers reassured one another that soon they’d be able to start hitting back at Labour with statistics. They’re doing that now – and are hitting as often as possible, even when it’s Labour’s turn to say something. Today the party has released figures to back up David Cameron’s claim at PMQs this week that people are better off, and they show that most people’s earnings are increasing by more than inflation.

Now, Labour is quibbling the stats themselves, pointing out that they don’t involve benefit cuts and tax rises. But while Labour is overall losing in the battle of stats, there is one attack that its ministers have been making this morning that is more dangerous than a stat attack. Cathy Jamieson this morning on Radio 5 Live accused the Conservatives of trying to suggest that people have ‘never had it so good’: her aim is to paint the Tories as complacent and banking the recovery already, which is particularly potent for those voters who remain pessimistic about the recovery (An Ipsos Mori poll on 12 January 2014 found that the percentage of British people who are optimistic about the economy has risen from 9% in 2012 to 29%, while 40% feel pessimistic compared to 74% in 2012, which shows that more people are feeling the recovery – but not everyone).

The Conservatives have said no such thing. Those statistics have been couched in very careful language, with the Prime Minister cautioning that the recovery will ‘take time’ and Matt Hancock taking similar care in broadcast interviews not to suggest any form of complacency. But the Tories also need to tread a tightrope between encouraging voters to think that better days are on the way thanks to the Coalition, and fostering such optimism about the recovery that voters think it is safe to vote in a high-spending Labour government. This is the tension that ministers are acutely aware of – and one Labour hopes to exploit.


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Show comments
  • berosos_bubos

    Is there any evidence that when people think the economy is doing well they are more likely to vote Labour ?

    • the viceroy’s gin

      I doubt this election will be much different than the last one. Lab and the Broun were acknowledged as failures, and the electorate looked elsewhere. This time, the Cameroons are being acknowledged as failures, and the electorate is looking elsewhere.

      The electorate isn’t choosing for any particular party, they’re choosing against proven failure.

    • 2trueblue

      The real trouble is that people do not get out and vote.

  • Jambo25

    I’m retired with sizable savings ,built up by my wife and I, over many years of careful budgeting and frugality. Those savings are now being raped by deliberate government policy. At the same time I’m being told by that idiot Willetts that somehow it’s my fault that young people are having a hard time. I’m a horrible ‘Boomer’.
    At the same time, my son has suffered 2 bouts of unemployment after idiot features Osborne pulled the rug out from under the construction industry in which my son worked. My son is now back in work, doing well, as a self employed consultant and project manager. He and his wife would like to buy a house and start a family but, given the last few years of chronic uncertainty, are not doing so and putting their lives on hold. In the meantime Cameron and Osborne’s wealthy pals and the big corporates are doing very well.
    I’m from a reasonably affluent, middle class section of society. Nobody I know, in either Scotland or England, would even dream of voting Tory.

    • HookesLaw

      So you would let in the Labour govt which caused all the problems you quote?
      You complain against low interest rates and still complain about activity in the constriuction industry which benefits from low interest rates. You are forced to confess that your son is now doing well in the construction indiustry which is well, known for its cyclical nature.

      • Jambo25

        Me getting under 1% on savings has no bearing, whatsoever, on the real rates being charged for mortgages and small building firms. As for whether or not I would prefer Labour (I wouldn’t.). I’m an SNP voter. I’m simply reporting what friends and family, in England and Scotland, are going to do.

        • Alexsandr

          if you don’t like the rates banks charge check out peer to peer lending. Google ‘finding circle’ or ‘funding knight’
          Caveat emptor…

        • HookesLaw

          Do? Shoot themselves in the foot you mean?
          Labour left a massive recession – low interst reates go with a recession. It helps the construction industry for one.

          SNP – ? Good luck with that. Just another example of wishful thinking.

    • 2trueblue

      So all your woes are the result of a government who are trying to clear up the mess Liebore left?

  • Tony_E

    The real story of the recovery is the one not being told – it’s a recovery based around the trashing of a great many western currencies.

    Since QE was first started, the Bank of England has injected £375 Billion of new money into the economy. While some of this has gone into debt repayment, any expansion of the monetary base is likely to reduce the value of a currency. We have seen rises in prices of raw materials over the last 6-7 years which have made it very difficult for many manufacturing processes in the UK, despite the fact that demand for many of these is significantly lower due to economic slowdown than has been previously the case in 2000-2007.

    Looking at the Forex markets doesn’t paint an accurate picture – because the Dollar and Yen have been similarly devalued, and the Euro is beset with its own internal divisions which is forcing value down. The Chinese have long played at manipulating currency also, but have been using Dollar reserves to buy assets and raw materials, further inflating prices at a point of only moderate consumer demand in the West.

    So just as we have made ourselves competitive, we have eroded the store of value in our currency and the man on the street has suffered in terms of inflated prices for essential goods and food.

    • HookesLaw

      You talk but do not explain the mechanism.

      And without the QE? Where would the economy be and our relative wealth? ‘The Economist’ reports that ‘The consensus is that these actions have raised GDP by between 1% and 3% and prevented a catastrophic failure in the global financial system.’
      ‘The Economist’ points out that the low interest rates on govt debt have benefitted govt spending – ‘Austerity would have had to be tougher without QE and ultra-low interest rates.’

      If all the QE countries have seen exchange rates fall then the issue is relatively small. The current £ – $ exchange rate is 1.66, up from about 1.40 before 2010. The pound euro rate is up as well.

      • Tony_E

        How much need I explain Hookes? When there is an excess of something it becomes less valuable.

        When government spends money that it has created, it spends it at its full value, almost as if it were spending ‘old money’. But then that money works its way out into the economy. This is where the action of real inflation (i.e. the increase in the money supply – nothing to do directly with prices), tends to have its effect.

        You need something like Copper for instance. You charged £X for the product you were making with copper last year so you have £Y to be able to plough back into future production. But your currency is devalued so the copper costs more. But your customer is a domestic one who hasn’t seen a rise in cash terms in the amount they can pay for the product. So your costs rise but it’s hard to raise your market price. So you soak up the raw material costs. This year.

        If it continues, next year, that isn’t an option. Your customer still doesn’t have any more money to spend, you fold.

        The QE effect is, as I have pointed out being replicated throughout the first world, in an effort to create a soft landing, added competitiveness and a devaluation of debts. So as I previously explained, looking at currency fluctuations is meaningless in itself. You need to look at the cost of a basket of necessary commodities for both businesses and individuals to see what is really happening.

        The reason that QE is favoured by ‘the economist’ is because it creates instant paper gains. Money is pushed into the commercial lending market which is picked up largely by investment banks and other institutional investors. They invest in the stock market and real estate and the prices rise. This makes everyone feel richer, but is in fact an illusion, because a bubble is a bubble, and as soon as the credit tightens it will be 2008 all over again.

        I prefer the Conservative approach to that of Labour, so I’m on your side Hookes.. I realise the political realities of getting re-elected when the population is largely socialist in nature. But that doesn’t hide the fact that the real problem hasn’t been solved, and will have to be very soon, or reality will come crashing in, regardless of the intentions of government.

  • Eyesee

    The economy is, sad to say, recovering in spite of the Conservatives, not because of them. Alright, even the dopey, Left leaning Cameron isn’t as bad as the Marxist axis of Labour/Lib Dems but the financial scene would improve much quicker if we had a small government, reduced tax burden government. But all of them want more power not less (or consequently, consider country before self, let alone Party). This is echoed by the mandarins of Whitehall pushing agendas such as staying in the EU. Bureaucracy advocating more bureaucracy, what could be biased about that? Is there no chance that someone in a position of power thinks they should serve their country, do the right thing for OTHER people?

    • Tony_E

      The government you describe might be better for the long term, but would never last long enough to see its reforms through both houses.

      • HookesLaw

        The idea for ‘small govt’ is OK until people stop and think what it means. Small govt is OK until it impinges on them.
        This govt has already reduced hundreds of thousands from the public payrol and is continuing to remove more. It has already said it wants more welfare cuts.

        It is implimenting 20 billion of efficiency savings in the NHS.
        it is taking education, with free schools, away from local authorities.

        This is met with howls from the left yet Eyesee has the nerve to say Cameron is ‘left leaning’.

        Right wing nutjobs are living in a dream world on another planet

        • First L

          We had small Government from 1066 until 1939. It worked pretty well.

          70 Years of state expansion and look at where we are.

          Better still, look at the darling of the left: Chavez’s Venezuela. Now the third most dangerous country in the world ahead of Iraq, Afghanistan, Libya, Burma and North Korea.

          Sure. Socialism works.

          • Bob Fossil

            The UK was christian for two thousand years, your point?

            70 years of state expansion brought with it advances in all social indicators, A retreat is destined to undo these gains. We all want a public education system like the USA right? A nation of ignorant paranoiacs like our brethren across the pong.

            Venezuela has always been a cesspool of violence.

            • First L

              No. 20 years of state expansion brought with it advances in all social indicators. The remaining 50 years saw those social indicators going backwards again.

        • berosos_bubos

          It can only occur by following on from a reduction in the scope of laws and the laws have not been changed.

  • telemachus

    Stats are irrelevant
    Folks do not feel better off
    Until they do the Tories are on a hiding to nothing

    • Colonel Mustard

      “Stats are irrelevant”

      Except when you post them to tell us we are better off with the mass immigration foisted on us by the Labour party, eh?

      • telemachus

        I quote those because I know they will benefit the home counties brigade as they retire and grow old

        • HookesLaw

          Thanks for showing us your nasty streak

          • telemachus

            It is economic sense
            THe population of most countries in Europe is falling and they have great fears for the economic wellbeing of their aging population

        • Colonel Mustard

          Er, you quote whatever you think will aid the lying brigade.

      • Makroon

        “Stats are irrelevant” – except the meaningless “tractor production figures” churned out on a daily basis by Brown and Balls during their time on the politburo.

        • the viceroy’s gin

          Hey, you socialist Camerluvvies are publishing your own tractor predictions for 2014, lad.

          So you’re predicting 2014 growth is going to be 2.4%, is it? And you’re trumpeting that prediction, now, as an “accomplishment”? (And a meager prediction it is, if you’re sticking with the 2.4% figure.)

          You’re probably wondering why your Camerloon buds are doing so miserably, lad. Perhaps if you didn’t spend so much time trumpeting mediocrities, predictive mediocrities, you might be able to see the reasons why.

    • Alexsandr

      I would feel ,better off if they:-
      got rid of VAT on domestic fuel. It was introduced for climate change reasons and now that’s discredited it should be scrapped
      gave some movement upwards for the 40% income tax rate. it is catching far too many people. It should kick in at about £50k
      Made life easier for micro businesses. How about a nice hike in the VAT threashold? Merge NI and income tax? cut in employers NI
      totally scrap the fuel duty escalator. The government gets quite enough revenue there.

      • telemachus

        Most of those would help the comfortably off but do nothing for the poor

        • Alexsandr

          but I said on another article that we should stop taxing those on minimum, wage
          And road fuel duty cut would help everyone. cut commuting costs, cut costs of food in the shops because transport costs are a large part.
          and cutting VAT on domestic fuel would help everyone. especially the poor.
          but you wont like tax cuts. you think you should spend other peoples money.

          • telemachus

            As I thought I wrote
            I am much in favour of tax cuts for the bottom of the heap
            Snag is Osborne is wedded to benefit cuts

            • Alexsandr

              simple economics. one mans tax cut is another mans benefit cut. No money tree. sorry.

              Like this
              http://1.bp.blogspot.com/_2sS-70N9bQs/TK9iFFMP_EI/AAAAAAAAANA/70lbavw9ifA/s1600/money-tree-2.jpg

              • telemachus

                I like your tree
                But Osborne keeps the fruits for his kind
                Everyone must eat these fruits

                • Alexsandr

                  not this old chestnut again
                  tax is levied to get cash for the government to do its work
                  it is the job of the chancellor to get the money for this
                  if a tax scheme is found to +be reducing tax take then it should be changed.
                  Tax take has gone up since the 50% rate went.
                  Read up on the laffer curve,

                • telemachus

                  The extra tax-free income for higher earners allows them to take early retirement sooner-back to your pension liability. And we had an experiment with the Lawson tax cuts of 1988. Did these really boost the supply side? No evidence it did-led to the mini recession of the 90’s

                  *

                  It is probable that the cause of the rise in tax receipts is that profits have boomed, boosting top pay and dividends. This profit boom is due more to the consumer boom than to the supply-side effects of tax cuts
                  .
                  I cannot deny that Laffer curves exist in theory. It is the place we happen to be on the curve that matters and gives irrelevance to your argument

                • Alexsandr

                  the age people retire does not affect state pension liabilities because state pension age is same for everyone. some people retire before they get their state pension.

      • HookesLaw

        VAT on domestic fuel was introduced for tax raising reasons by Lamont in 1994 (announced in 1993). It was at 8%. Brown cut it to 5%. So VAT on fuel has actiually gone down.

        Square that.

      • Tony_E

        It cannot be scrapped (VAT on Fuel). It also was not put on because of climate change – it was put on to raise revenue pure and simple, despite what Ken Clarke or other might have said at the time.

        The EU does not allow the removal of VAT from anything that it has been levied on- ever. The best that could be done is what Major forced his chancellor to do at the time – reduce the rate to the lowest allowed – 5%

  • RavenRandom

    You need to give more credit to the public. The public don’t think everything is back to normal. They’ve had years of bad news. Just because we’ve had six months of good figures, and things are getting better, doesn’t mean everybody thinks we can spend like Gordon Brown. Credit the public (especially undecided voters) with more sense.

    • Tony_E

      I’d like to have more faith that people won’t vote for a high spend government again so soon, but history tends to suggest that the majority in the UK are now of a more socialist mindset. They believe in normal times, that government should spread wealth and care for the population from cradle to grave.

      Whether that is realistic of not is not the main consideration.

      • Liberty

        I don’t think that a majority are of a socialist mindset, I think that a majority do not understand economics or even know what socialism is. They only want a government that will give them more money. They don’t know and don’t care where the money is from. This is what Labour exploits.

    • telemachus

      It would be good if Osborne invested in the health service like Gordon rather than frittering the new wealth on tax breaks for the rich and the rich alone

      • First L

        You do realise that we are paying 33 Billion a year purely in debt interest? A debt that was created and continues to increase thanks to Gordon Brown.

        The entire NHS budget comes to 49 Billion a year.

        Public Spending is not going to increase one penny until the Deficit and Debt have been dealt with. Your socialist hero Brown made it economically impossible to do so. He has made sure that instead of paying Teachers, Doctors and Police, we are paying into a black hole.

        Now go away and shut up, there’s a good Telemachus.

        • telemachus

          Look son
          We have to live
          We have to maintain our health
          We have to educate our children
          There is a price
          We are a civilised nation and must pay the price

          • Alexsandr

            no ‘we’ are not paying the price
            our unborn grandchildren will pay the price.
            now that is immoral

            • telemachus

              No

              Health is paramount

              Future prosperity is guaranteed by the energetic immigrants

              *

              “Migrants coming to the UK since the year 2000 have been less likely to receive benefits or use social housing than people already living in the country, according to a study that argues the new arrivals have made a net contribution of £25bn to public finances.”

              http://www.theguardian.com/uk-news/2013/nov/05/migration-target-useless-experts

              • Alexsandr

                but they need to earn quite a lot before they pay enough in taxes to pay for what they take from the state. Including pension liabilities.

                • telemachus

                  The lie of this comes from the chair of the OBR no lass just last week

                  “However, Chote told MPs on Tuesday that foreign workers were usually contributors to the economy, suggesting reducing immigration could be financially counterproductive and mean it takes longer for the Treasury to balance the books.

                  Chote told the Treasury select committee: “Because they’re more likely to be working age, they’re more likely to be paying taxes and less likely to have relatively large sums of money spent on them for education, for long-term care, for healthcare, for pension expenditure.”

                  http://www.theguardian.com/uk-news/2014/jan/14/immigration-beneficial-uk-economy-treasury-independent-advisers

                • Alexsandr

                  you don’t know what ‘pension liabilities’ are do you?

                • telemachus

                  I do son
                  But the same rules apply
                  The immigration program is ongoing

                • Alexsandr

                  and don’t f*cking call me son, you upstart.

                • telemachus

                  I never call my intellectual equals son

                • the viceroy’s gin

                  …your intellectual equals live in a shell and the French eat them for dinner, a fitting fate I must say.

            • Kitty MLB

              Indeed that is immoral.
              Blair started a generation based on
              selfishness, greed, no responibility, short termism and wanting everything now.
              without any thought to future generations
              who will pay the price , the rot started from
              the top ?

              • telemachus

                I think you will find the generation to which you refer was the last PM but one before Blair

                • Kitty MLB

                  Who left the note saying there is no money left?
                  Who left us vunerable , in a leaky boat,
                  Surronded by sharks?
                  Son of Odysseus needs to try better.

          • First L

            Er – how do you think people managed that before the existence of the welfare state? How do you think they manage it in other countries?

            The state does not owe you a living. The state does not owe you good health. The state does not owe your children an education.

            You say there is a price – but what you really mean is you want other people to pay for it.

            Civilised nations do not have an underclass of benefit scroungers, beggars and thugs. Singapore is a civilised nation. Socialism has destroyed our civility.

          • Nicholas chuzzlewit

            And we would probably have a good chance of paying that price of that lunatic Gordon Brown not wasted so much money.

        • HookesLaw

          The NHS budget is 124 billion. It was 117 billion in 2010. I think debt interest is higher as well – 47 billion.

          • First L

            Ah – clearly looking at the wrong figures – still, that’s 47 billion that could be going into the economy.

      • HookesLaw

        Brown promised 20 billion efficiency savings in the NHS and was limiting increases to no more than inflation. So Labour were going to spend no more than the coalition.

        • telemachus

          That was fiscally prudent in 2010
          As thigs improved he would invest and not just give tax breaks to the rich

          • HookesLaw

            it was a 5 year plan to cut NHS spending. The fact is Labours NHS spending would not have been higher – remember ‘there was no money left’
            Your accusations against Osborne are totally bogus.

            • telemachus

              Look son
              You cannot criticise Brown for fiscal prudency on one thread ans fiscal profligracy on anothee
              You are beginning to look like a Tory supporter

              • HookesLaw

                Brown was faced with cutting health spending because his govt faced a 170 billion deficit. And a shrunken economy.

                • telemachus

                  Due to Lehman
                  *
                  But he was engineering us back to growth until Osborne choked it off by axing capital investment

                • Nicholas chuzzlewit

                  Repeating the Lehman bros lie again and again does not make it true. Because that is what it is, a lie.

              • Wessex Man

                are you old mother Hubbard or just insane?

                • Nicholas chuzzlewit

                  Probably the latter.

        • the viceroy’s gin

          Correct, Boy George’s first budget was a duplication of Darling’s, his fellow socialist. Of course, he jacked spending after the IMF socialists directed him to do so.

      • RavenRandom

        Now you’re just funny.

        • telemachus

          So what else is Osborne doing?

          • Nicholas chuzzlewit

            For all his many faults, presiding over the fastest growing Western economy. What is Ed Balls doing? Hoping that the recovery fails and that the same ruinous policies adopted by his idiotic mentor can once again inflicted on the people of Britain.

          • RavenRandom

            It’s clear that though blinkered beyond reason you can actually read. I refer you then to the good services of Google, so that you can do you’re own research rather than beg answers from others. Incidentally, a third rate debating technique, you’re the one doing the attacking, you provide your own bullets.

            • telemachus

              I suppose youre referring to my stats rebutting revanchist views

              • RavenRandom

                Fond of your little word “revanchist” aren’t you? No need to suppose anything, the internet is your friend… even if you are a troll.

      • Nicholas chuzzlewit

        Tagged tripe as usual. Osborne is too busy trying to deal with the consequences of that fiscally incontinent, treacherous lunatic Brown. Namely, a giant structural deficit and a 7.3% contraction of the economy. In his spare time (when not throwing phones at hard working civil servants who could not fight back) he destroyed private pension provisions in the UK, sold Gold at ludicrous prices etc

        • telemachus

          Your spin
          *
          In truth he dragged education and health from Victorian decay to twenty first century excellence
          Sad Osborne is destroying both( and the reprehensible Gove and Hunt)

          • Nicholas chuzzlewit

            No. Labour devalued educational qualifications to the point where employees regard them as worthless. Gove is busy scouring the rancid filth of socialist ideology from British classrooms. We’ll done Michael if the moronic Labour Party oppose you, you must be getting it right.

      • Colonel Mustard
    • BarkingAtTreehuggers

      The figures are not good. We need to stop confusing growth with inflation. How feeble-minded does one need to be to not understand the difference?

      • RavenRandom

        You’ll need to expand beyond insult to be clear. Who has said they’re confused between growth and inflation other than you?

        • Alexsandr

          GDP up 2% inflation 2% (Made up numbers for illustration) = no growth in real terms.
          but we really need GDP per capita to be meaningful.
          GDP in real terms up 1%, population up 1% = no benefit to the population.

          • RavenRandom

            GDP figures as reported are adjusted for inflation. The OBR estimate is for real growth of 2.4%. Include inflation and it will be something like 4.5%.

            • Makroon

              Ha-ha, you explain sensibly Mr Raven and the gloom addicted UKIP creeps mark you down !
              I expect they stuck their tongues out at “teecher”, when his back was turned too.
              According to Ms Hardman, Crosby asked Cameron to stop fighting on Labour’s ground (the cost-of-living-crisis stunt). since people will only believe what they feel personally, and it gives the stunt some traction.
              As usual, Cameron has ignored this good advice.
              And the “public service broadcaster” has had a field day rebroadcasting what passes for “Red’s greatest speeches” – a day long, free, party political broadcast. Doh !

        • BarkingAtTreehuggers

          Oh I have been clear – WE is everyone round ‘ere.
          We need to stop confusing growth with inflation. The figures on the table so far are n o t ‘good’.

          So all those who did not understand that I was agreeing with them (check your vote count perhaps) might want to now acknowledge this dire reality.

  • Not Voting For You

    Is there a recovery in any sense that matters? I’d rather be part of a poorer but sovereign nation that protects its borders and takes care of the indigenous people. I don’t see that happening at all in the UK, and no prospect of it happening at all under either Labour, Lib Dems or Conservatives.

    What sort of recovery is it when most babies born in our capital are not British? When jobs are not being offered to our own children? When hundreds of people with British passports will soon be returning from Syria intent on blowing us up? What has changed that really matters? More people can buy the X-Box One? Is that the recovery you think matters.

    Deny these people any legitimacy. Take the pledge and refuse to vote for them.

    http://www.notvotingforyou.org/take_the_pledge.php

    • Makroon

      If you want to be part of a “poorer but sovereign nation”, I suggest that you get your backside up to Scotland and vote Yes – you might get your heart’s desire then, assuming you would be satisfied with “limited sovereignty”.

      • the viceroy’s gin

        …or, stay in place and be part of a poorer province in an EUSSR nation, eh lad?

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