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From Financial Crisis to Public Sector Meltdown

From Financial Crisis to Public Sector Meltdown. WEA lecture Steve Davies 20 January 2011. ‘We’re all in this together’. Outline. Coalition claims on the economy What’s really happening Some possible alternative policies. We’re all doomed. State, not market to blame, for crisis.

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From Financial Crisis to Public Sector Meltdown

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  1. From Financial Crisis to Public Sector Meltdown WEA lectureSteve Davies20 January 2011

  2. ‘We’re all in this together’

  3. Outline • Coalition claims on the economy • What’s really happening • Some possible alternative policies

  4. We’re all doomed

  5. State, not market to blame, for crisis ‘Why is our economy broken? Not just because Labour wrongly thought they’d abolished boom and bust. But because government got too big, spent too much and doubled the national debt.’ David Cameron, Conservative Party Conference, 2009

  6. UK tax receipts, 2000–09

  7. UK Deficit

  8. Public Expenditure, % GDP

  9. Government expenditure as % of GDP

  10. There is no alternative • They left us with massive debts, the highest deficit • Back in May, we inherited public finances that can only be described as catastrophic. This year, we will borrow more money than we spend on the NHS. Just think about that. • Everything in our hospitals and surgeries – paid for with borrowed money, much of it from abroad. And then think about the interest.

  11. UK Public Debt as % of GDP

  12. Debt as % of GDP - comparative

  13. UK Public Debt as % of GDP

  14. Slashing spending now could push the economy back into recession and inflict further structural damage on the UK that will make it harder to sustain our credit rating. He [George Osborne] …fails to appreciate that what the markets are looking for is a credible plan to reduce the deficit, not a willingness to slash regardless of economic conditions. In the current climate it is essential that decisions about the speed and timing of tackling the deficit are based on the state of the economy, not political dogma.

  15. Slashing spending now could push the economy back into recession and inflict further structural damage on the UK that will make it harder to sustain our credit rating. He [George Osborne] …fails to appreciate that what the markets are looking for is a credible plan to reduce the deficit, not a willingness to slash regardless of economic conditions. In the current climate it is essential that decisions about the speed and timing of tackling the deficit are based on the state of the economy, not political dogma. Vince Cable, 24 February 2010

  16. 2 Questions Was it the market or the state that caused the problem? Will it predominantly be the market or the state that gets us out of the mess?

  17. An alternative agenda • Tax reform • Public investment

  18. Selected alternative policies

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