The Office for Budget Responsibility issued a report yesterday that showed their ignorance of a great many issues and, in the process, highlighted the danger of relying on people who do not understand the substance of what might happen in the real world but who would rather, instead, extrapolate financial data in ways that are utterly impossible.
OK, well, etc. He should have read the rest of the report but it obviates most of what he’s said. But that claim of ignorance. Spud tells us that:
But what they ignore altogether is that if public spending grows to 60 per cent of GDP – as they say is likely – then it is utterly implausible that taxes will stay at 40 per cent of GDP. That simply cannot happen if inflation is to be controlled. Because they do not understand that state spending is funded by government money creation, the result is that they do not apparently appreciate that taxes will have to rise if the state commands so much of the output of the state to meet essential needs – which all of these issues will represent. Unless they do, inflation would follow, like night does day.
Instead, they assume, wholly without reason, that there is a limit to which taxes can go, whatever the circumstances. Only dogmatic belief, and not evidence, can explain this bizarre assumption. They have only to look at other times of crisis (like wartime, in the UK’s most recent experience of existential threat) to realise that no such limit on tax raising exists. But they apparently have not been able to undertake that simple exercise and think that there is a ceiling on tax revenues beyond which it cannot rise. Their neoliberal beliefs blind them to reality.
Hmm.
The state will tax more as it spends more – it will have no choice but do so to prevent inflation, the causes of which the OBR clearly does not understand. If state spending reaches 60% of GDP, expect taxes to be at least 55% of GDP, and as a result, debt will not accumulate as the OBR suggests. In that one observation, I have solved the whole crisis the OBR says exists.
Well, one thought is that perhaps you cannot, in fact, collect 55% of GDP in taxes. Maybe?
As they didn’t in WWII despite Spud’s confident “They have only to look at other times of crisis (like wartime, in the UK’s most recent experience of existential threat) to realise that no such limit on tax raising exists.”
Ahem:
When World War II began in 1939, Britain’s stock of debt stood at 135 per cent of GDP. Spending as a share of GDP rose to its WWI peak of 62 per cent in 1944-45, of which 80 per cent was defence spending. Tax revenues as a share of GDP rose to 39 per cent.
Just need a bigger war then.
Comedy Gold – Murphy in typical restrained mode.
“The Office for Budget Responsibility’s forecast for the national debt is a worthless exercise by economically illiterate fantasists”
What they noted was:
The past two decades have seen the UK economy hit by a succession of extraordinary shocks, in the form of a global financial crisis, a pandemic, and an energy crisis. The public finances have emerged from these shocks under strain. Deficits have averaged just under 5 per cent of GDP since the start of the century. This has caused debt to more than triple as a share of GDP to 98.1 per cent of GDP by March 2024, its highest level since the early 1960s.
As they also noted:
Public spending is at nearly 45 per cent of GDP in 2023-24 – its highest sustained level since the mid-1970s – as a result of increased spending on public services, welfare, and interest costs.
And as they added:
To reduce the deficit and arrest the rise in debt over the next five years, the previous Government’s fiscal plans were based on holding real growth in public spending below that of the economy, and the tax take increasing to 37.1 per cent of GDP, which would be its highest level since the late 1940s.
I’m no massive fan of the OBR but their observations seem completely on the money. The levels of tax that Labour tried (and failed) to get away with in 1978 would be a much harder sell nearly 5 decades on.
All, then, is gloom and doom. So much so, in fact, that right at the outset of their report, they note that:
The analysis in this report shows that, based on policy settings in March 2024, these and other pressures would eventually put the public finances on an unsustainable path.
Over the next 50 years, public spending is projected to rise from 45 to over 60 per cent of GDP, while revenues remain at around 40 per cent of GDP (Chart 1.1).
As a result, debt would rise rapidly from the late 2030s to 274 per cent of GDP in our baseline projection.
They add, just for fun:
Indeed, debt is projected to rise further to over 300 per cent of GDP, when further shocks and pressures are taken into account.
In practice, if these pressures and shocks were to materialise as we project, then governments would need to take mitigating policy action to prevent this debt spiral from occurring.
On our baseline projection, to return debt to its pre-pandemic levels would require an average fiscal tightening of 1.5 per cent of GDP per decade over the next 50 years.
Everything here seems on the money – looks like a sober analysis based in the real world – indeed if anything it’s underplaying it.
What are the shocks that they expect? They say that they are:
• an ageing population, with a falling birth rate
This is indeed a big problem,especially for the welfare state which is in effect a giant Ponzi scheme at this point. Of course it can be solved if you set up a fake LLP for your son’s benefit.
• climate change, including the fiscal costs of completing the transition to net zero while also coping with damage from rising temperatures and more severe weather; and
This could have been lifted from the pitch for SCA (Sustainable Cost Accounting) – one of his boondoogles
• rising geopolitical tensions, with both the previous and current UK Governments aspiring to raise defence spending to 2.5 per cent of GDP.
He seems to think geopolitical tensions and warfare can be wished away
In other words, the costs of what is already observably happening are what is going to send us into the economic tail-spin that they predict.
I will admit that I have not read all the rest of the report that they have produced: time has not permitted that. But I have read enough to think that this is laughably wrong, although it will be widely believed.
He’s got a greater level of insight than the OBR.
In essence, what they are saying (and I think what follows is fair, although a drastic simplification, in a tone that they do not use) is:
We will not be able to afford to tackle climate change because of the increases in government debt that it will create, as noted above.
it will certainly make it that much harder for sure.
We will not be able to provide health care for those who need it – the cost of which is going to rise considerably.
We certainly will have to restrict health care if immigration continues at its current rate – that is unarguable.
We really can’t afford to fall out internationally, although the likelihood that we will is growing.
Well I’d say many more embroilments like the Ukraine war we genuinely can’t afford.
As a result, the OBR concludes all other state services must be cut from now on, meaning austerity is required. Even then, we might just not be able to afford to both care for the elderly and tackle climate change.
All of this is pure nonsense. There are good reasons for saying so:
The UK population will grow: inward migration will guarantee that.
Bringing in a load of people with no discernible resources who are a net drain on the taxpayer will guarantee growth? Also I thought because of Brexit and the Far Right the UK was becoming a less desirable location? Or was that on Monday?
As a result, tax revenues will grow, come what may.
Great maths – a ‘tax expert’ calculates 100% of 0 as 100
The state will tax more as it spends more – it will have no choice but do so to prevent inflation, the causes of which the OBR clearly does not understand. If state spending reaches 60% of GDP, expect taxes to be at least 55% of GDP, and as a result, debt will not accumulate as the OBR suggests. In that one observation, I have solved the whole crisis the OBR says exists.
What I will say is this is consistent – his optimal tax rate is 199% and he truly believes that will have no impact on behaviour
Wealth inequality will be tackled. It will have to be, and that is what happens in crises.
A la Venezuela and Zimbabwe , no more, no less
Society will change radically in the face of the demands imposed on it: the OBR assumption, not stated but implicit in all they say, that all things will, bar those they mention, stay as they are now is absurd.
There is no such thing as society? or is he saying ‘La societe, c’est Moi’
In summary, this work is a worthless summary by economically illiterate fantasists who wish to justify economic and social inaction in the face of climate change, ageing populations and other issues. And these are the people Rachel Reeves thinks should be in charge of saying whether the country is on the right track or not.
The unkind might say it takes one to noone
I despair.
So do I, you evil fat bastard.
The likes of you who have said:
– Unlimited migration has no economic or social costs
– We can raise public expenditure without limit and there will be no inflationary consequences
– We can fund wars in which we have no national interest on the never never
– That Climate Change measures which involve the complete destruction of our economy are either realistic or feasible
– That the country is ‘institutionally racist’
Have so much to answer for. Evil doesn’t really come close.
He is quite amazing.
I’m no fan of the O.B.R. but for him to suggest, in terms, that he, a monomaniac fisting nonsense into his keyboard in the back bedroom of his little house in Ely, has access to some truth or understanding that they don’t have is bizarre, particularly when you look at his lack of understanding of almost everything about which he writes.
He is quite clearly certifiable.
I wonder how many times he had his head kicked in at school? Perhaps some form of brain damage, caused by the reaction to his explaining to all of his classmates, and the boys in the years above him, and doubtless the masters, the ground staff, the caretaker, the school secretary, and any passing parents, that they were all completely stupid, is the explanation.
Sigh
I read it as a student in 1987.
Hancock and Gowing ‘British War Economy’ HMSO 1952
explains everything.
He is quite clearly certifiable.
Indeed. And thick as shit to boot. Which is why I wish we had less of him here. Same goes for that other loony in a frock. There’s no point in arguing with these people. (or against them I suppose, neither put themselves forward for debate) You can’t reason with the irrational. And you can’t make a moron see the error of his ways, because he is too stupid to understand what you are telling him.
Evil he might be, but Spud presents no threat to anyone, apart from idiots wasting endowment money.
Otto
There’s a copy on the Internet Archive. If anyone’s interested.(archive.org/details/in.ernet.dli.2015.274894/page/n1/mode/2up)
Despite US tax rates varying widely over the decades the US IRS has never generated more than a narrow band around 19% of GDP over the last century.
This is despite such Potatoist barriers such as taxation by citizenship and extortionate exit taxes for those abandoning their US citizenship, policies which the Sage of Ely salivates over.
Quite where he thinks he’s going to squeeze 55% of UK GDP in taxation from, I have no idea. At those sorts of rates everybody would simply up tools and go in the dole, since there would be no point in working for no net benefit when bills have been paid (if you could afford to pay bills at that level of taxation).
The guys a loon.
Assuming that the gov’t can collect 60% of GDP, evidence is overwhelming that this will turn out to be 60% of a number that is so much smaller that you end up with less money. The Laffer curve, diminishing returns, etc.
@Marius
The reason he’s discussed here is you’re actually looking at UK government economic policy over the past few decades. You live in Murphyworld. Helps if you understand it.
Same with the befrocked buffoon. He’s your legal reality.
Public spending is at nearly 45 per cent of GDP in 2023-24 – its highest sustained level since the mid-1970s – as a result of increased spending on public services, welfare, and interest costs.
It really is necessary to get money out of the way when looking at this. Money is a token of value exchangeable for goods & services. So the above means 45% of all the goods & services produced in the UK in that period were consumed by the government. None of this is deferred to the future as government debt. That’s a trick you can only do with money. Goods & services only exist in the now. Of course, in reality, government itself consumes relatively little. All of those goods & services must have ended up being consumed by government’s favourite clients. So who were they? They can’t have been productive because their production would end up in the GDP & cancel out.
I say this because you’ve interest costs in there. That’s just money. The underlying value of the goods & services it purchased must have gone somewhere.
>That simply cannot happen if inflation is to be controlled.
1. He has an assumption that inflation is to be controlled – but inflation is a problem for tomorrow, a politician needs to get through the election today.
2. I thought he thought that inflation doesn’t exist and thus nothing need to be done about it?
Marius – certifiable for sure, but also a threat to the gullible. I have some acquaintances fooled by the fool into believing some of his cretinous opinions, to their financial detriment. Perhaps they too are morons unable to understand their error, but losing because of his evil influence.