Bob Diamond resigns

[BillyStubbsTears]

Was he correct to take the responsibility for setting interest rates out of political control?

Simple yes/no will do.

[mjdgreg]

Was he correct to take the responsibility for setting interest rates out of political control?

Simple yes/no will do.

Unfortunately for you life is not that simple. For starters he gave responsibility for  CPI instead of RPI knowing full well that  politically it would be easier to hit the inflation target of 2%. It should have been RPI but this would have made life harder for him so he took the politically expedient way out.

He couldn't care less if the housing market went totally out of control because of this decision. Look at the mess that Spain are in now from a housing boom. We have yet to still fully suffer the consequences of our housing boom. But let's just assume that the CPI was the correct rate to track. Are you really naive enough to believe that the Bank of England set rates with no political influence? No chance. If you want proof of that look no further than the current Libor scandal involving Barclays. Brown and Balls are going to be fingered on that one very soon.

[Donnywolf]

Was he correct to take the responsibility for setting interest rates out of political control?

Simple yes/no will do.

YES

[BillyStubbsTears]

I never knew there were so many letters in "yes" or "no" Mick

Simple enough question. Why confuse it with secondary ones?

[mjdgreg]

I never knew there were so many letters in "yes" or "no" Mick

Simple enough question. Why confuse it with secondary ones?

Your question is not valid that's why I can't say yes or no. He didn't take interest rates out of political control. Haven't you been watching the news about the Libor rate scandal? Whitehall (Brown and Balls etc) put pressure on the BoE to get Barclays to lower their rates artificially. What more proof do you want that the setting of interest rates was very much politically influenced? Are you really naive enough to think that the current very low base rate has had nothing to do with our political masters?

I don't believe you are that stupid. I think you are just clutching at straws to try and find something Brown got right and if that is your best effort then I rest my case. Game set and match.

[BillyStubbsTears]

Mick

I believe the technical term for what you just wrote is "libel".

There is absolutely no evidence whatsoever that Brown or Balls were involved and frankly, I'd be staggered if they were. Gideon yesterday had to rapidly back track after making exactly the sort of unfounded allegations that you made. He looked a right bloody fool in doing so. As do you.

Regardless of that, Libor is not the same as BoE base rate. So I'll repeat the question. Was Brown correct to put setting of the base rate out of political control. Yes or no. Easy one word answer.

[Donnywolf]

Mick

I believe the technical term for what you just wrote is "libel".

There is absolutely no evidence whatsoever that Brown or Balls were involved and frankly, I'd be staggered if they were. Gideon yesterday had to rapidly back track after making exactly the sort of unfounded allegations that you made. He looked a right bloody fool in doing so. As do you.

Regardless of that, Libor is not the same as BoE base rate. So I'll repeat the question. Was Brown correct to put setting of the base rate out of political control. Yes or no. Easy one word answer.

Sorry but yet again I will venture "YES" and he was right to keep "us" out of the Euro.

Magnificent vision by GB





[attachment deleted by cleanup process]

[mjdgreg]

mjdgreg

I believe the technical term for what you just wrote is "libel".

There is absolutely no evidence whatsoever that Brown or Balls were involved and frankly, I'd be staggered if they were. Gideon yesterday had to rapidly back track after making exactly the sort of unfounded allegations that you made. He looked a right bloody fool in doing so. As do you.

Regardless of that, Libor is not the same as BoE base rate. So I'll repeat the question. Was Brown correct to put setting of the base rate out of political control. Yes or no. Easy one word answer.

I've come to the conclusion that you are both naive and stupid. What I say is not libel it is fact. Somehow I don't think I'm going to be sued any time soon. I believe the technical term for what you write is 'load of b*llocks'. There is plenty of evidence that Brown and Balls were involved and it will all come out over the next few months. You really show your naivety by saying you would be staggered if they were.

You obviously haven't read what Osbourne said in his article. Balls twisted his words. All Osbourne said was that that Labour aides had been ''clearly involved” in the Libor interest rate scandal. The Chancellor was not, in fact, referring directly to Balls. Balls assumed he was referring to him. I wonder why that was. I'll let those of you out there with half a brain work that one out for yourselves.

We all know that Libor is not the same as BoE base rate. What we also know is that Labour aides used political influence with the so-called independent BoE to put pressure on Barclays to lower their rates. It is naive in the extreme to think that Labour aides wouldn't also use political influence with the BoE to affect the base rate. No way a control freak like Brown would let the BoE be fully independent. So I repeat, your question is not valid as it is built on a false premise.

However I'm in a good mood so I am going to humour you. I'm going to pretend for a short while that I inhabit the same parallel universe that you do. I'm going to assume that the BoE was given control of interest rates without political influence and make the case as to why this was yet another bad decision.

Giving the BoE full control of interest rates led to monetary policy being too relaxed in the run up to the financial crash. Also in the past 2 years, the MPC has  forgotten completely about its inflation mandate. Interest rates have been held at extremely low rates even while inflation climbed above 4%. Nobody at the BoE seems to be aware that credibility is the main tool for keeping prices under control and they have lost that, making them very ineffective in dealing with our financial problems.

Far better that the BoE had never been made independent and in May 2010 Osborne had been put in charge of interest rates. He'd have been in charge of a coalition with no plans to hold an election until 2015. He'd have known that he had to cut the deficit on a huge scale and that there was an impending inflation problem. He could have put up interest rates gently early on in the coalition's term of office. That would have stopped inflation rising and with any luck get it back onto its 2% target.

By 2013, the economy would have be through the worst and would have started growing again. The deficit would have been down to manageable levels and taxes could have been cut. With inflation nipped in the bud, interest rates could have been cut as well. Through 2014 people would have been paying less tax and their mortgage would be lower as well. The feel-good factor would be back – just in time for the election. There would be no danger of Labour getting back in.

Inflation is like a disease. The earlier it is treated it the better. The BoE is leaving raising rates far too late and will probably have to raise them sharply in 2013 or 2014 with devastating effects on the economy. The longer and harder you look at the evidence, it becomes obvious that handing over control of monetary policy to the BoE has been an abject failure. It would have been far better leaving interest rates under the control of the chancellor.

[BillyStubbsTears]

Let me get this straight Mick, cos it's late and I'm tired.

1) There's loads of evidence that Brown and Balls manipulated Libor. But none of it has come out yet? So where is it then if you are so certain that it exists? In your back pocket?

2) Brown was a control freak who would never have left the BoE in charge of interest rate policy. But he blundered massively in putting the BoE in charge of interest rate policy and it was that decision that led to the financial crash? (PS: A crash that also happened in Nevada, Ontario, Honshu, Andalucia, Basilicata, Saxony, Gascoigne and Flanders? f**k me but Brown really WAS a control freak wasn't he?)


You've done me a service Mick and I'm very grateful. From tomorrow, I will no longer bray my 5 year old for his regular petulant and logically incoherent outbursts. If you are an exemplar of what adulthood is all about, his consistency would already knock you into a cocked hat.

And that's all before we get onto your childlike misunderstanding of the root of the current macro-economic problems, and your utter ignorance of the classic Keynesian solution to the Depression that we are in.

Raising interest rates? While the economy is already flat-lining? f**king hell, even the Hell fire and damnation right wing Krauts in charge of the ECB haven't pulled that one. And nor has any other central bank. Because it would be the one policy guaranteed to turn our mini-Depression into a full on 1930s catastrophe.

What you are saying is the equivalent of a back seat driver at a level crossing, worrying about a potential crash somewhere down the line if you drive too fast and shouting BRAKE!!!  whilst ignoring the train coming along.

You go on believing your own little theories Mick. Fortunately, you have grown ups on charge to save you from your own bizarre ideas.

[mjdgreg]

1) There's loads of evidence that Brown and Balls manipulated Libor. But none of it has come out yet? So where is it then if you are so certain that it exists? In your back pocket?

Some of it has already come out. Have you missed Paul Tucker's dealings with Barclays? Labour are currently doing their best to hide it, but it will come out over the next few months.

[mjdgreg]

2) Brown was a control freak who would never have left the BoE in charge of interest rate policy. But he blundered massively in putting the BoE in charge of interest rate policy and it was that decision that led to the financial crash? (PS: A crash that also happened in Nevada, Ontario, Honshu, Andalucia, Basilicata, Saxony, Gascoigne and Flanders? f*** me but Brown really WAS a control freak wasn't he?)

You're the one that said he was a control freak (I don't disagree). He would never have left the BoE FULLY in charge of interest rates without sticking his oar in. You missed out the word FULLY. He did blunder massively but I never said it led to the worldwide financial crash. However it did contribute to it and left us in a far worse position to cope with it (along with all the other mistakes Brown made).

Here is some more evidence that the BoE is not free of political influence when deciding interest rates. Although the BoE is supposedly independent, Parliament reviews the bank’s accounts and annual report because its policies affect the public. Additionally, it has a close relationship with the Treasury, whose Treasury Committee conducts regular hearings on inflation with members of the Bank’s Monetary Policy Committee. Also, the government sets the unemployment and growth objectives as well as an inflation target for the economy (currently 2%), which the bank attempts to meet. If the actual inflation rate is 1% (or more) off target, then the Governor of the bank must submit an explanation to the Chancellor of the Exchequer.

The bank’s primary objective is to achieve monetary stability. The MPC has nine members and consists of the Governor, two Deputy Governors, two executive directors of the bank and four appointees by the Chancellor of the Exchequer. The Governor and the Deputy Governors are all appointed by the Crown to a term of five years, although the Chancellor wields a strong influence over the selections.

There you have it. The BoE is independent in name only. There is masses of political influence as described above. I didn't even mention the MBE's and perks like elevation to the House of Lords that are used as carrots to get the BoE to be good boys for the Chancellor.

[mjdgreg]

You've done me a service Mick and I'm very grateful. From tomorrow, I will no longer bray my 5 year old for his regular petulant and logically incoherent outbursts. If you are an exemplar of what adulthood is all about, his consistency would already knock you into a cocked hat.

I feel sorry for your son. No doubt you are turning him into a future leftie with all your brainwashing and braying which will be stifling independent thought in him. My son on the other hand has been shown both sides of the argument and is now an avowed right winger like myself. Job well done as a father.

[mjdgreg]

And that's all before we get onto your childlike misunderstanding of the root of the current macro-economic problems, and your utter ignorance of the classic Keynesian solution to the Depression that we are in.

You need to ask yourself the question 'why are we in this financial mess if spending is the solution? Gordon Brown spent like a drunken sailor and the coalition are still spending like crazy and things are getting worse not better. Your logic is totally flawed.

[mjdgreg]

Raising interest rates? While the economy is already flat-lining? f***ing hell, even the Hell fire and damnation right wing Krauts in charge of the ECB haven't pulled that one. And nor has any other central bank. Because it would be the one policy guaranteed to turn our mini-Depression into a full on 1930s catastrophe.

Far better to raise interest rates early to get inflation under control than to let the problem drag on indefinitely. When interest rates do eventually rise (which they will) a lot more damage will be done than if we'd bitten the bullet earlier. Not raising rates has been a great success so far hasn't it. All it's doing is prolonging the agony and making the patient more ill as time goes on.

[mjdgreg]

What you are saying is the equivalent of a back seat driver at a level crossing, worrying about a potential crash somewhere down the line if you drive too fast and shouting BRAKE!!!  whilst ignoring the train coming along.

You go on believing your own little theories Mick. Fortunately, you have grown ups on charge to save you from your own bizarre ideas.

What you ignore is the already massive debt burden we already have. To want to increase it further is utter madness. I'm glad I don't live in silly Billy land with you and all your leftie friends.

[Donnywolf]

http://www.youtube.com/watch?v=sL5mAbwUYpM&feature=related

[BillyStubbsTears]

Mick.

Going into WWII we had a historically high debt burden. We borrowed like mad to pay for the war because we had no option. We then brought that debt burden down over 30 years after the war.

That is PRECISELY what we have to do now. Hold our nerve. Keep Govt spending up. Get the economy back working. And THEN address the debt burden.

If we don't get the economy going (and there is not a single example in history of a mature economy getting out of Depression by cutting Govt spending - not one) then we will NEVER reduce our debt. Not possible.

We're back to where we were 2 months ago. You spouting the none sense that f**ked up Japan 20 years back. Me asking you to explain why the same medicine here wouldn't also f**k up our chances. You ignoring the question.

[mjdgreg]

Banging on about the years after the war and Japan 20 years ago is not relevant to today's circumstances. The financial world has completely changed since then.

Question for you. Do you still think that Gordon Brown made the BoE independent and free of political influence? A simple yes or no will do.

[BillyStubbsTears]

Mick. Pig ignorance dressed up as wisdom is still pig ignorance. As you remind us four or five times a day.

The changes in the financial sector have nothing to do with the basic mechanics if how macroeconomics works. You might as well say that, because we invented rockets, we can ignore Newton's Laws of Mechanics. The basic mechanisms apply regardless of the detail of how they are applied. You betray your ignorance by suggesting that inflation is the problem in the current recession, when nothing could be further from the truth. You betray your ignorance still further by suggesting that (because if some unspecified) changes in financial institutions) the basic economic rules (relating to how lack of aggregate demand causes deep recessions and how the only way that this has EVER been remedied is increased Govt spending) some how don't apply.

The list of Mickonomics that we are waiting for simple answers to is getting longer by the post. It currently stands at this:

1) Name a single mature western-style economy in history that had got out of a lack-of-demand style recession by cutting back Govt spending.
Answer: None

2) Explain the mechanics of how increasing interest rates would get us out of the current recession:
Answer: None

3) Explain the mechanics of why the well-established Keynesian lessons of what causes demand-slump recessions, and how to get out of them, no longer apply.

Answer: because the financial sector has changed. In what way Mick? And how have those changes changed the basic rules.

Those are three assertions that you have made and not substantiated.

We're waiting.

Meantime, you return a question to me that wasn't the one I posited. Gordon Brown didn't "make the BoE independent". More ignorant guff Mick. A cursory look at the BoE's own website sees it describing itself as "A public body, wholly owned by Govt, with a significant public policy role and accountable to Parliament."

What Brown did was to pass the responsibility for monetary policy (in particular, setting base rate) to the BoE.

Of course there is linkage between the BoE and Treasury. They have to work closely together to synchronise monetary and fiscal policy. The point was that Brown, for the first time in history, passed responsibility for monetary policy to the BoE. More specifically, the responsibility was passed to the nine-person strong Monetary Policy Committee, comprising bankers, central bank staff and leading financial academics. The aim being to have a detailed, apolitical debate on the economic effects of changing interest rates, rather than have political concerns (such as popularity at elections) deciding policy.


 That was a far sighted and correct decision, because at a stroke it did away with generations of Chancellors setting interest rates for political reasons. The two most egregious examples were Tory Chancellors Lawson and Barber in the mid 80s and mid 70s who both, in the run up to Elections, kept interest rates way below what they should have been, fostered colossal booms and led to 15-20% inflation, huge internally driven recessions and tripling of unemployment.

So: There's an answer for you. I await the three that are outstanding from you.

[mjdgreg]

Do me a favour and start answering some of my questions for a change instead of ignoring them and asking me the same old questions over and over again. Ones which I've already answered. I won't comment on your last answer about the BoE as in a previous post I think I proved conclusively that the BoE is far from independent so I'm not going to go over old ground. You think they are fully independent, I don't. We'll have to disagree on that one and let the readers make up their own minds.

Right back to another one of my ignored questions. I'll re-phrase it.

How did unemployment start rising under Labour before the crash despite them spending vast amounts of money that we hadn't got? By your logic if the Government spends vast amounts of money the economy will grow and unemployment will fall not rise. Why did the opposite happen?

[BillyStubbsTears]

Mick.
You have not answered a single question. You duck, dive, evade, dissimulate, dissemble, change the topic. You should be a politician  -and I don't mean that as a compliment.

You don't even read my answers. I stated categorically that the BoE is NOT an independent body. But it has had powers to decide interest rates devolved to it, and can act in an independent manner on that issue. You disagree? demonstrate it with facts. Not you "proving" something by stating and re-stating an opinion. Show us the evidence. That is how grown-up discussion progresses. You have as much time as you wish. we're all waiting. I suspect, as ever, we'll be waiting a while...

In the meantime, I'll continue answering your questions.

Unemployment ALWAYS rises in a recession. The question is, how far do the authorities let it rise?

As the recession of 07-09 kicked in, unemployment rose from ~5.5% in early 08 to ~8% in early 09. It was from early 09 that Brown's Government started the classic Keynesian counter-cyclical fiscal stimulus. Remember those dates for a moment, because we're going to take a historical detour.

The last time we had a recession remotely as severe as this one was in 80-81. In 1979, when Thatcher came to power (with the brilliant dole queue posters "Labour isn't Working"), unemployment was about 5%. In 1980, the recession kicked in. Thatcher's Govt increased interest rates and reduced Govt spending. Unemployment went up and up and up and up. By early 1984, it was 12%. One on 8 on the dole. It stayed above 10% until 1988. It didn't come down to 5% again until 2003.

THAT is what happens when you reduce Govt spending and put up interest rates in the teeth of a vicious recession. Any bloody fool knows that (apart from the bloody fool that I'm answering, clearly...) End of history lesson.

Now. Back to 2009. When Brown's Govt implemented the fiscal stimulus, guess what happened to unemployment Mick. It stabilised. It stayed around 8%. Despite a horrific contraction in the private sector, unemployment stabilised. In simple terms (because I know you are a simple man) the action that Brown took in 2009 means that around 1million people have stayed in work who would have been on the dole if the policies that Thatcher implemented in 1980, and that YOU want to implement now had been used. Had the fiscal stimulus not been whipped away by Gideon in 2010 (with the consequence that GDP flat-lined for 18 months before collapsing this year) then unemployment would have come down by now. Instead, it has gone up. Genius.

Now. Waiting for YOUR answers.

EDIT:
By the way. You want evidence that the BoE acted independently in setting interest rates? Political sway over rate policy would always lead to them coming down in the run-up to an Election.

That was what Chancellors ALWAYS did when they had control over interest rates. In the run up to the Feb 74, Oct 74, 1983, 1987, 1992 and 1997 elections, interest rates fell substantially. Funny that, wasn't it?

Then, in 1997, Brown put the BoE in charge of setting interest rates.

In the 12 months before the 2001 Election, the BoE put rates up from 5% to 6%. In the 12 months before the 2005 Election, the  BoE put rates up from 3.75% to 4.75%.

If Brown was manipulating the BoE over interest rates for political ends, he did a f**king poor job of it.

You have evidence to the contrary? Come and tell us. We're waiting.

[mjdgreg]

At the beginning of 1993 unemployment was just over 3.0M. It fell to around 1.5M by 2001. The Tories were in power until 1997 and managed to get unemployment down by keeping tight control on public spending amongst other strategies. Labour when it came to power stuck to the Tory spending plans until 2000.

It is interesting to note that unemployment stopped falling broadly speaking around about the time Gordon Brown took out the cheque book and credit cards. He went on an unprecedented spending splurge increasing public spending by 80% during his time in office. This was one hell of a fiscal stimulus but guess what, unemployment stopped falling. It stayed at around the 1.5M mark until 2005 when guess what, it started rising.

Now, you seem to be saying that increased government spending reduces unemployment which means more people spend money and the economy flourishes. Looking at unemployment during the period I mentioned your logic seems totally flawed. Unemployment fell when tight control was kept on the purse strings and stayed the same and then rose once Gordon started splashing the cash. And he splashed a lot of cash. For those of you with a short memory there wasn't a recession in 2005. It started in 2007. So for 2 years unemployment was rising despite the country not suffering from a recession and despite Gordon spending like a drunken sailor.

Billy would have us all believe that unemployment only started rising when the coalition came to power. Patently not true. He would have us all believe that increased government spending would get unemployment down. Not true. The opposite is the case. He claims that Labour introduced a big  fiscal stimulus to get us out of recession and bring down unemployment and that the Tories have ditched this plan. Not true. The government since it came to power has only cut public spending by 0.8%. Pretty much the same result as if Labour had won the election and introduced their deficit reduction strategy. Even Labour said the deficit needed reducing but not silly Billy (even though he has said that it does on another thread). Billy wants us to spend even more money totally contradicting himself.

To summarise it can be seen from the evidence I have produced above that unemployment falls when tight control of public finances takes place. It stops falling and begins to rise as soon as the cheque book and credit cards are taken out. Spending even more money is only going to make things worse.

[BillyStubbsTears]

Mick.

You have just excelled yourself. I didn't think it was possible for you to fit in quite so many deviations, mis-understandings and half-truths into one post, but you managed it. well done.

Where to start?

1) Unemployment came down from the mid 1990s. Yes. Because the Tories, finally, had jettisoned the mad Thatcherite experiment and finally had a Chancellor in Ken Clarke, who understood Keynesian macro-economics.  Go and have a look at what happened to CAUSE that fall in unemployment. Clarke let go of the Govt purse-strings. He increased Govt debt to GDP by half between 1992 and 1997. He also kept interest rates down. Classic Keynesian approach. Result - unemployment fell sharply and GDP grew.

2) Economists broadly agree that each economy has a natural rate of unemployment, below which it is impossible to go without driving up inflation. NAIRU - Non-Acceleration Inflation Rate of Unemployment. By 2001, we were pretty much at that position in the UK. It was not possible (or economically sensible) to drive unemployment down any further. The trick then was to keep it stable,  by a dual policy of interest rate management, and small Govt stimuli. That is EXACTLY what happened.

3) Yes, Brown increased Govt spending, but to call it "spending like a drunken sailor" is plain silly. You quote the fact that he increased Govt spending by £1trillion over ten years. What you DON'T quote is that fact that total UK output increased by around £5trillion over that same period. Context Mick. It's vital. If I increase my spending on repair work to the house by £1000 per year, without increasing my income, it is madness. But if my income is increasing by £2000 per year, that is sensible and prudent investment in my infrastructure. Quote the whole picture and not selectively chosen factoids.

4) I'll repeat. When the recession exploded and unemployment rose above NAIRU, Brown did the correct thing of kicking in the big fiscal stimulus. It worked and would have continued to work had Gideon not pulled it.

[mjdgreg]

Billy.

You have just excelled yourself. I didn't think it was possible for you to fit in quite so many deviations, mis-understandings and half-truths into one post, but you managed it. well done.

Where to start?

1) Unemployment came down from the early 1990s. Yes. Because the Tories, finally, gained control of the public finances after taking over a basket-case of an economy from Labour yet again. Go and have a look at what happened to CAUSE that fall in unemployment. Clarke managed the economy sensibly. Result - unemployment fell sharply and GDP grew.

[mjdgreg]

2) Leftie economists broadly agree that each economy has a natural rate of unemployment, below which it is impossible to go without driving up inflation. NAIRU - Non-Acceleration Inflation Rate of Unemployment. By 2001, we were pretty much at that position in the UK. It was possible and economically sensible to drive unemployment down further. The trick then was to keep it falling,  by a dual policy of interest rate management, and small Govt stimuli. Unfortunately the OPPOSITE happened.

[mjdgreg]

3) Yes, Brown increased Govt spending, and to call it "spending like a drunken sailor" is right on the mark. You quote the fact that he increased Govt spending by over £1trillion over ten years. What you also quote is the fact that total UK output increased by around £5trillion over that same period. What you DON'T quote is that much of this was fuelled by borrowed money and consumption. Context Billy. It's vital. If I increase my spending on repair work to the house by £1000 per year, without increasing my income, it is madness. But if my loans are increasing by £2000 per year, that is still madness and not a prudent investment in my infrastructure. Quote the whole picture and not selectively chosen factoids.

[mjdgreg]

4) I'll repeat. When the recession exploded and unemployment rose above NAIRU, Brown made the mistake of spending even more money by kicking in the big fiscal stimulus. It didn't work and has continued not to work. George Osbourne has only reduced public spending by 0.8% so hasn't pulled it.

[mjdgreg]

Here's the true story of the Labour years in government and an explanation why we're all doomed if they ever get back into power.

During the 1980s, we underwent painful but life-saving economic surgery. Britain was the sick man of Europe, stuck in a set of failing economic policies – especially ever-bigger government and higher taxes thanks to Labour. We have a lot to thank Margaret Thatcher for. She turned things around.
 
Unfortunately Labour came to power in 1997 and ruined much of Margaret's good work.  Labour, under cover of much vacuous  pro-market economy rhetoric, changed course and opted  instead for the failed high tax-and-spend model. When Brown became Chancellor of the Exchequer in 1997, he presided over the fastest, most sustained expansion in government spending and intervention since the Second World War.

The British public sector grew to over 50% of GDP. He introduced a creeping re-socialisation of Britain which is the most important (and misunderstood) economic and social story of the Labour years in government. This stands in stark contrast to the fake pro-enterprise narrative spun by Brown. It is the great con of our time, doing untold damage to the British economy.

Perhaps the most stunning socio-economic revolution of the Brown years was the huge growth in the number of people who depended for their jobs, incomes, status and lifestyles on the government. This process risked turning Britain into a permanent state of socialist-style dependency. The growth of Brown’s client-state was truly phenomenal.

Around 30m of Britain’s 60m population are in paid jobs. Under Brown, when using the Labour Force Survey, which measures state employment by asking workers whether they are in the public or private sectors, the result was that over 7m people worked for the government. One-in-four of the workforce. Labour constantly boasted that 2m new jobs had been created since it came to power, but almost half were in the public sector.

Under Labour, government was the biggest growth sector of the British economy. Jobs in public administration, health and education, for example, went up by 30% since 1997. When the state employs at least one-in-four workers there is much evidence from social democratic Europe, to suggest that market-led reforms to create a more dynamic economy become virtually impossible.

Those who work for the state (and their families) become an influential and articulate voice in favour of tax-and-spend and are powerful enough to block reforms based on smaller government and lower taxes. This burgeoning constituency against reform becomes even more formidable when you include those on the welfare state’s payroll.

Towards the end of Labour's term in office over 11.7m people claimed a state pension, 2.7m were on incapacity benefits, 400,000 on other sickness or disability-related schemes, 816,000 on the jobseekers’ allowance and 761,000 were lone parents not in work and dependent on the state (another 191,000 were not in work but claiming various other benefits).

The bottom line is this. A staggering 23m people were either working for the state or were dependent on it for their incomes – 52% of the British electorate of 44m voters. Yet even that total does not include those on tax credits, subsidised farmers and other groups partly or wholly dependent on government largesse. According to a recent household resources survey, 69% of households are now on some kind of welfare benefits. At least 44% of the electorate are either employed by the state or dependent on state benefits for all or most of their income. This sad state of affairs is entirely the consequence of Labour’s cowardly failure to reform welfare and Mr Brown’s public-sector spending spree, which has fuelled higher state salaries and more state jobs.

British public sector workers are now better paid than their counterparts in the private sector, enjoy better pensions and work fewer hours. So they have good reason to be grateful to Labour. They repay it by voting for it. Welcome to the great buy-up of the British electorate. Many of Labour’s safe seats are now as socialised as the old Soviet states of Eastern Europe. Of the 200 constituencies where public sector employment is highest, just 20% are held by the Conservatives and 70% by Labour. By contrast, in the 200 seats where the private sector employs most people, 50% are Conservative.

Parts of Britain are now almost wholly dependent on the state.  In some areas where old-fashioned manufacturing or mining has long since died out, government has taken its place, leaving ghettos of dependency where there is no room for the market economy to breath. Such places will be forever dependent on wealth being generated in those parts of Britain (largely London and the south-east) which are not yet socialised. No wonder they are staunch supporters of Labour's ever-expanding state.

Britain was in the grip of a vicious feedback loop. The more tax-and-spend Labour did, the more the number of those dependent on government went up and the harder it was to reverse course and the faster the British economy and society was declining. Slowly but surely, Britain was becoming trapped in a social-democratic dependency culture. It has almost got to the point that reversing is becoming impossible because those with a vested interest in bigger government and higher taxes have become too powerful to overcome.

Unless Osbourne starts to make significant tax cuts the re-socialisation of the British economy would seem to be a done deal.

[BillyStubbsTears]

2) Leftie economists broadly agree that each economy has a natural rate of unemployment, below which it is impossible to go without driving up inflation. NAIRU - Non-Acceleration Inflation Rate of Unemployment. By 2001, we were pretty much at that position in the UK. It was possible and economically sensible to drive unemployment down further. The trick then was to keep it falling,  by a dual policy of interest rate management, and small Govt stimuli. Unfortunately the OPPOSITE happened.

Mick. Do you go out of your way to make yourself look stupid and ignorant? You cannot manage to do it with such aplomb by accident, surely.

For the record, one of the developers of the concept of NAIRU wax Milton Friedman. You reckon he was a lefty economist?

You remind me of that Goodness Gracious Me character who said "Indian" everytime something successful was put forward. "Neil Armstrong. Indian astronaut."

With you, every time something is suggested that points out your lack of understanding or sheer stupidity, it is the work of lefties. "Milton Friedman. Lefty economist."

And cutting and pasting large works of polemic does not an answer make. Not does it answer any of the questions we've been waiting days and weeks to hear your answers on Mick. But we're patient. I suspect we'll need to be.

[mjdgreg]

Billy. Do you go out of your way to make yourself look stupid and ignorant? You cannot manage to do it with such aplomb by accident, surely.

For the record, one of the developers of the concept of NAIRU wax Milton Friedman.

Interesting that you start going on about unemployment and inflation. It wasn't that long ago that you were berating me for mentioning inflation. If you think it is acceptable for us to have 1.5m out of work then I don't care who the economists are that come up with this view. Lefties or right wingers they are plain wrong.

It's only a few decades ago that having 1m out of work was seen as a national disgrace. You need to come into the real world and stop using the arguments and theories of economists, many of which have had their heads stuck in books all their lives and have no experience of the real world of work. You strike me as this sort of person as well.