Christopher Snowdon: Liz Truss didn't break the economy, it was like that when she found it.

Christopher Snowdon writes how the market response to the Truss/Kwarteng emergency budget showed that the emperor has no clothes, and it is a sign that the era of big borrowing is at an end.

Some choice quotes:

Long before the pandemic began, I was troubled by emergency economic policies - ultra-low interest rates and money printing - being in place for a decade without any emergency to justify them. This led to a great deal of inflation, but since the inflation had mainly affected the housing market and stock exchange and had made the rich richer, it didn’t seem to count. Then, in 2020, we had an actual emergency which seemed likely to push us over the edge.

The so-called "libertarian" budget included massive subsidies to cap the price of energy.  The cut in income tax and reversal of a rise in national insurance were hardly enormous measures, and freezing corporation tax (rather than implementing a rise that was indicated under Boris Johnson) is also hardly libertarian, but the word has stuck. 

Of course there should have been measures to liberalise the economy, and none eventuating except a removal of the ban on fracking - a measure that wouldn't achieve much for some time. 

Some saw the mini-budget as an invitation to the Bank of England to raise interest rates. If so, it was an invitation that was declined. Some thought the mini-budget implied that there would be spending cuts, but Liz Truss insisted that there would be none. Instead, Kwasi Kwarteng took to the airwaves to announce that he intended to make more unfunded tax cuts.

Previous governments had at least paid lip service to balancing the books. The Truss administration didn’t even bother pretending. The bond markets, seeing no plan for growth and no sign of an interest rate rise, naturally demanded a greater return on their investment. 30 year yields nudged toward 5 per cent. The pound fell to a low of $1.07. Pension funds that had been making what the Economist describes as ‘obscure derivatives bets’ found themselves short of liquidity thanks to higher gilt yields - although they insisted that they were not short of capital - and so the Bank of England stepped in to lower yields by buying gilts....

Liz Truss was dealt a bad hand and played it badly, but despite the broadcast media spending a fortnight treating every day as if it were Black Wednesday, she did not ‘crash the economy’, as the Labour Party has claimed. The economy was already in pieces and there is much worse to come. Goldman Sachs has already taken 0.6 per cent off the UK’s GDP forecast for 2023, partly because of the rise in Corporation Tax.

....

Interest rates have existed for thousands of years for good reason. They are, to quote the title of Edward Chancellor’s excellent book, the price of time. Or, if you prefer, the cost of impatience. They should provide an acceptable return to lenders and should certainly be above the rate of inflation. The international experiment with very low interest rates has, unsurprisingly, led to governments, businesses and individuals becoming heavily indebted. As people take on more debt, they become increasingly vulnerable to interest rate rises. This leads to a doom loop in which central bankers are reluctant to tackle inflation because interest rate hikes will make people poorer and so inflation persists, making people poorer.

Even in the absence of inflation, interest rates couldn’t be raised because it would ‘wreck the recovery’. An economic recovery so feeble that it cannot withstand an interest rate of one or two per cent barely deserves the name. The economy had become like an alcoholic. Every drop in interest rates and every bout of money-printing made it feel better in the short-term, but they made the addiction worse and was slowly killing it. It was hair of the dog economics.

The left have already started wailing about ‘Austerity Mark 2’, but they are now going to have start telling us which taxes they want to increase to pay for their spending priorities. They may find that they get a rough reception. It is notable that almost the only thing left from the mini-budget is the scrapping of the Health and Social Care Levy. Even Labour didn’t want to keep it. It’s unpopular. Fine. But if you can’t get the public to support a tax specifically earmarked for the NHS - the one thing that normies say they are happy to pay more tax for! - good luck raising taxes for Net Zero and foreign aid.

The MMT loonies will say that the recession could have been avoided if the Bank hosed us down with one more burst of QE. Everything looks like a ‘political choice’ if you ignore trade-offs and consequences, but the number of practical options available have narrowed considerably. As Janan Ganesh says in the FT today, Labour are not going to enjoy governing without a magic money tree to shake.

Hair of the dog economics has had its day. The era of big borrowing has come to an end. We have run out of road. It would be unfortunate if Liz Truss has given economic growth a bad name because it really is our only way out of the woods....

Why Scotland should vote "No" on independence

Scotland matters to me.  My family came from there, hell I'm named after the place.  I have never lived there, but it is part of my heritage.  I feel warm towards it, I enjoy visiting Scotland and I grew up surrounded by Scottish accents, by elements of Scottish culture and language, and so I have an emotional attachment to the land from whence both my parents were born and raised.

From them and much of my family, I gained a keen belief in the ethic of working for a living, of reaping the rewards of that work, and in not seeking to cheat or live like a host off of the back of others who had achieved.  Call it Protestant work ethic, call it old fashioned self esteem and values, but the impression I got was a cultural background of deep respect for those who put in the effort to better themselves and their family, indeed the stories of my grandparents are of those who strived, against some family members who sneered.

So next Thursday when all Scottish residents 16+ (not people of Scottish descent elsewhere) get to vote on whether Scotland  becomes independent, has become interesting, not least because recent polling showed the strong lead for the "No" side has narrowed to being neck-and-neck.

For a libertarian who believes in a smaller state living in England, there are two compelling arguments for Scotland to say "Yes".  

Scottish voters overwhelming back statist politicians and political parties.  Take away the Scottish MPs from the House of Commons and the Conservatives would have clearly won the 2010 election.  

Scotland's economy is, despite the rhetoric from nationalists, dependent on English taxpayers to sustain a higher level of state spending than the rest of the UK, on average.  For whilst a geographic proportion of tax revenue from Scotland has meant that in some years Scotland contributes a higher proportion of UK tax revenue than it receives in spending from tax revenue, it is still not enough to balance the books.   Scotland overspends by over £12 billion per annum, so remove Scotland and the net impact is positive for UK public spending, but it doesn't mean the public finances in Scotland would be buoyant. 

I wrote in 2007 about the childishness behind calls for independence, and it still stands.

So while there is probably a bigger chance the rest of the UK would have a smaller state without Scotland, I'm asking Scotland to vote No - because that is in Scotland's interests.

I don't want to see my ancestral homeland become a new Venezuela, but moreover I don't want the UK to become smaller, weaker and less important in Europe and the world, and that is exactly what will happen.

An independent Scotland will be a minnow and far from "independent".  

It wont be independent because the intention is not to establish its own fiat currency (which would deservedly be treated with contempt), but to be in a currency union with the rump UK.  Yet all major UK political parties say they would not agree to this, and it is difficult to see how that could be in the interests of the rest of the UK, without imposing strict fiscal rules on Scotland that would limit or eliminate budget deficits for the new country and getting Bank of England approval for any sovereign borrowing by Scotland.  Getting your budget approved in London, and getting London approval for borrowing is not "independence".

If the UK government rejects a formal currency union, the Scottish National Party (SNP) says Scotland will use the Pound Sterling anyway.  That is true, but it would be limited to borrowing only the amounts it could raise at commercial rates.  That would be good for Scotland, but only if it meant shrinking the state, rather than raising taxes.   However, the socialist paradise being sold to Scottish folk can't happen.  For if taxes are raised significantly then the better off will simply leave, it isn't far to move to the UK.  Spending cuts would hit health, education, welfare and pensions, and would be a complete betrayal of what has been offered.

There is no golden egg of independence.

As a small state, Scotland wont be important or influential, or part of an influential state (which it is now).  It wants to join the EU, where its MEPs will be 2% of the European Parliament.  Yet the EU's law will bind much of Scotland's economic policies.  Scotland will have as much influence over those as Slovakia does.

The SNP says it can join the EU but not the Euro, but Euro membership is a condition of EU membership, and has been since the Euro was created.  The UK and Denmark have explicit treaty exclusions to this obligation, and only Sweden remains as the other EU Member State that has not joined the Euro and was an EU Member State at the time the Euro was created.

So Scotland joining the EU and not being required to be on the path to the Euro, would be unprecedented.  Consider also that Scotland will want exclusion from the Schengen agreement that eliminates border control between EU member states, because the rest of the UK excludes itself from it (and if Scotland did join Schengen, the UK would put up border control with Scotland).

The SNP says Scotland will join NATO, but it wants to eject the British nuclear deterrent from the Clyde naval base because it opposes nuclear weapons on Scottish soil.  It wants to be part of a nuclear weapons based military alliance, but its great contribution to that is to weaken it.  How is that credible for NATO members to support?  How can you oppose nuclear weapons, but support them protecting you, as long as you don't have to have any on your territory?

In short, Scottish independence is actually false.  What the "Yes" campaign seeks is independence, whilst using another country's currency and letting that other country veto your public borrowing and budgets.  It is independence, but joining a customs union that will write part of your laws.

However, it is more than that.  Scotland will be financially poorer, but also poorer in terms of influence in the world, and the UK itself will be poorer for that.   The UK has been a successful union, bringing together four nations (notwithstanding conflict and bigotry that plagued one of them), and growing a land of rule of law, relative freedom, prosperity and which had one of its proudest moments holding back the greatest fascist evil the world has ever seen.

I don't want Scotland to leave that, I don't want it to be poorer, I don't want it to drift off to become some northern hemispheric Venezuela, pursuing insane socialist policies on the back of declining oil revenues - because it will bankrupt itself.

Scots may be angry and upset at the recession.  Who isn't?  They may despise politicians for their gutlessness, for their failures, for their lies.  Who doesn't?  However, that is who is exactly keen for them to vote "Yes".

An independent Scotland makes politicians in Holyrood more powerful, makes Alex Salmond a bigger cheese than he is, it feeds their egos and they are willing to lie and deceive to get there.

Most of all, a vote for an independent Scotland is irreversible.

It isn't like a general election which gives a chance to boot out the bastards and reverse what has happened.

Independence is for life.

Virtually every country that has voted for independence in recent years did so largely with a massive mandate in favour, and few regrets or doubts expressed about the wisdom of independence.  These independence movements were almost always due to war or obvious history of ethnic rivalry or previous dictatorship (e.g. Yugoslavia, Czechoslovakia).

Scotland's independence campaign has none of this.

I'm going to write in the next day or so about this, it's an optimistic campaign, but it is trying to sell independence on complete fiction and fear, more than that optimism.  It deserves to be consigned to history.

Forgotten Posts from the Past: Gordon Brown's campaign of lies was failing in 2009

The campaign in Norwich North for Labour set the scene for how the 2010 British election was campaigned by Gordon Brown - quite simply that the Conservatives will cut and burn at the British welfare state, but that Labour will protect the working classes from the evil greedy ones.

Forgetting of course that Gordon Brown has systematically engaged in fiscal child abuse for nearly his entire term of office, running deficits in the good times, as Labour spent up large on welfare, with people of all incomes eligible for child benefits, for example, pouring money into the NHS while getting nothing in return in terms of productivity or better outcomes. The Labour record is a disgraceful waste of money, hiding the true cost of its spending in ongoing deficits. Its stealth taxation has meant that it uses taxes on fuel and car ownership predominantly to pay for welfare and education, with only a quarter of those taxes going on roads and nearly the same again on railways.

The record is damnable. National debt is set to climb to 90% of GDP partly because Labour did not pay off debt during the good times, but also because it wont let any banks fail, even though deposits of up to £50,000 (which would cover most voters) have been guaranteed. Labour now will not cut spending, even though its own "pump priming" of the economy has been a fizzle, because it knows the spending cuts that are needed are fierce, but if it can hold them off until after the election - it wont be a Labour problem.

The Conservatives will face spending cuts on a scale likely to be worse than that faced by Thatcher in 1979. Labour will oppose them through and through, spreading the filthy lie that Labour wouldn't have done the same - when of course it would have faced it as well. That then sets the scene for another class based election, whereby Labour is the one helping out the poor and the needy (always needy of the government), but the Conservatives protect their rich friends from higher taxes (even though the Conservatives haven't even promised to cut taxes).

Matthew D'Acona in the Sunday Telegraph describes Gordon Brown as too cadaverous to be an asset for campaigning, which is quite right. Gordon Brown paints a picture of the UK succumbing to a global recession, but fails to note why the UK is more badly hit than many other countries.

He needed only look at himself.  The supreme arrogance of a man who thought that by milking a credit fueled economy with taxation largesse to buy off the Labour constituency of public sector workers and welfare recipients, that he had got rid of boom and bust.

Now it is the supreme arrogance of one of his right hand men, who now leads Labour, who blames it all on capitalism and on banks in the US.  

Stock market bubble fueled by printed money

So the Dow Jones has hit 15,000, it was 14,000 just over two months ago, with the S & P reaching a record level, the FTSE is at its highest since 2007, and the German DAX index reaching levels not seen since before the global financial crisis.

It is like the crisis didn't happen, but oddly enough there isn't a huge amount of evidence to demonstrate that this is due to performance, rather than cheap credit.

Yes there has been a bit of a recovery, and yes some stock prices were low compared to expected revenues.

However, as Allister Heath of City AM says:

"Ultra-loose and interventionist monetary policy globally is one of the main causes of this resurgence. Pretending that it isn’t, and that economies – even those like America’s which have liquidated many past malinvestments – could immediately and easily readjust to neutral interest rates and zero intervention is a dangerous delusion.

Much of the central-bank induced madness that led to the last two bubbles is reaching ever more dangerous proportions, not least the Fed’s hubristic determination to prop up markets..."

It was the perpetual issuing of fiat money by central banks that fueled the crisis, with CPI inflation hidden by a combination of plummeting prices from Chinese imports (a scenario that has come to an end, as China no longer offers lower costs) and the inflation being largely seen in stock and property prices.

The new bubbles will be stores of future problems. 

Increases in stock prices due to good performance and optimistic earnings based on improved productivity and market growth are one thing,  increases due to banks, flooded with cheap money from central banks, seeking somewhere to put it, are another.

No one has learned anything.

British politics changed this week - principles are being discussed

Having lived only in the UK and New Zealand, I've witnessed only a few passings of political leaders.  In the UK,  I barely missed Ted Heath and James Callaghan's passing.  In NZ, I recall the passing of Rob Muldoon and David Lange, oh and Bill Rowling (truly a footnote I barely recall).

None have been more than a fraction of the influence that Margaret Thatcher has had on the world, and because she was driven first and foremost by principle and a commitment visceral belief in freedom and resistance to communism.

The more there is of her, the more it is abundantly clear that she turned the tide of history for the UK, and that the left, with its faux compassion and peculiar attachment to central planning, only wishes it could do the same in reverse.

The media coverage of her has been wall to wall, and there is no lack of writing for and against her, but what really counts is the level of discussion.  Conservative Home is perhaps the best place to find links to much of that coverage, positive and negative.

Perhaps the most poignant point made of her yesterday was in the House of Lords. Lord Tebbit, who left Parliament in 1987 for family reasons, regretted his retirement from politics saying "I left her, I fear, at the mercy of her friends. That I do regret".   Men, and they all were, who will themselves be footnotes in history, floored a giant.  Yes, because she made one big mistake, but none would get her to change that through principle, but for popularity.  She wasn't going to have that.

Time after time, backbench Conservative MPs have paid testimony to her out of principle. Those who opposed her have shown themselves up for what they are.  Socialists who think they know how to spend other people's money, whose compassion is only shown by their belief in spending other people's money, and whose decade after decade of caricature have been shown up for being false.

Portrayal of Thatcher as a warmongerer, for taking on the invasion of the Falklands by a fascist military dictatorship is simply churlish.  To say she supported apartheid has been thoroughly shouted down, because she considered those fighting it to be no angels either.  The claims that what she did "caused the ills of today" are treated as laughable, 23 years later.  Memories of rubbish piling up in the streets, blackouts and strikes shutting down the economy, and limits on foreign currency purchases, cause some of the young to notice how far we have come.  Few want to go back to a phone monopoly that took weeks to supply a new phone.

Finally, the caricature of her as a predatory heartless hater of the poor is shown to be just that - the creation of leftwing spin that could not confront her willingness to cut the blood supply of dying industries, that was draining the life from the living.  She didn't cut the welfare state, she didn't privatise the NHS and nobody could accuse her of withdrawing state support for the poor.  She was a conservative, not a libertarian.  She believed the welfare state existed to cover people when they had bad fortune, to give them what they needed before they found or created a new opportunity.  The left simply wanted all of these people to be forever dependent on the state, and the unions that destroyed businesses by demanding pay rises of 20-30% every year.

"Divisive" Thatcher won three elections in a row, with landslides, whereas the 1970s were plagued with governments of tiny majorities and a short run coalition.  Indeed the late 1970s were plagued with militant union strikes under the Labour Party, as the unions thought Callaghan to be too moderate, as what they wanted was Soviet style socialism (don't believe me? Google "Arthur Scargill and Lenin").  

There were 605,000 miners in 1960, 289,000 in 1970, 235,200 by 1979 and 62,000 in 1990.  Far more lost their jobs under Harold Wilson than under Thatcher.  Manufacturing production rose 7.5% between 1979 and 1990, smashing the lie that she destroyed industrial production.  What did happen was that the services sector took off, shrinking manufacturing as a proportion of GDP.  

What shines above it all were her principles, and these are like a shining light in today's politics of spin, compromise and polls... they are worth remembering.

UK budget - not one for growth

I wanted this being big tax cuts, funded by a serious capping on the welfare state, cutting of wasteful state spending and bureaucracies, supported by some privatisation.

We got this.

Small tax cuts on companies and on beer, a worthwhile increase in the income tax free threshold to £10k.  Small tax increases on other alcoholic drinks, owning a car, catching a flight and elimination of some tax credits and a mini Fanny Mae type mortgage guarantee scheme, and subsidised loans for home buyers.  There were some new exemptions on climate change obligations for some sectors, which is promising.

Overall, nothing much to see at all.  Public debt growing to close to 100%, budget deficit at levels higher than any OECD country and economic growth forecast to only be 0.6%.

No, the Conservatives wont be winning in 2015 at this rate, and no Labour offers nothing more than a bit more borrowing and a bit more money thrown at public housing and railway projects.  

What's wrong with the Olympics? Part one - the economics

You’re going to see more and more hype in the next few weeks, as the world’s most political sporting event is held in London, and a vast wave of positive support will infiltrate the media, politicians and the event itself.

There is one good thing about the Olympics. It provides a showcase for the best in world athletics to compete and demonstrate the results of their hard work and training and be achievers. That is a good thing. The recurrence of this again and again, is a reason to smile. Opportunities to do this are special and remarkable.

Yet there is a lot wrong with it, so much I’m going to dedicate three articles about it.

• The first is on the economic cost
• The second is in the cost to individual freedom (and surrender to an authoritarian corporatist approach to sponsorship to fund the Games by "any means possible")
• And thirdly is a lesser important point, it is how the transport infrastructure in London has not been upgraded to cope, despite seven years of warning.

No business case

From an economic point of view, there was no “business case” for the British government to support the Olympics being held in London. It comes with a direct financial cost to British taxpayers including future taxpayers, a direct economic cost imposed on much of London, a subsidised platform for sponsorship and the self-aggrandisement and glory claimed by politicians.

The Olympics are political, they are a statement to the world by a country seeking to show off. I need not go through the list of recent hosts to demonstrate that. The previous Labour government bid for this event to try to show off, it didn’t do it for the economy.

£11 billion is the total cost of the infrastructure, hosting and the “regeneration” work undertaken related to the London Olympics. £2 billion is expected to be recovered from sponsorship, ticket sales and broadcasting rights, the rest is a transfer from taxpayers to contractors. Nearly £2 billion of the expenditure is in “regeneration”, code for government subsidised property development. The goal being to make Stratford (the main games site) into a desirable place to live and for businesses to locate (it now has three railway, two underground and two light railway lines serving it).  With the exception of Canary Wharf/Docklands, the evidence of government sponsored regeneration actually providing a catalyst to economic growth and jobs in the UK, is scant.

So financially, it will lose money.

What about the economy? Some economists would claim that this money will be returned in bucketloads because of the increased tourism and investment it will bring, except that this doesn’t bear close scrutiny.

I heard a story of someone in UK Treasury who told then Chancellor of the Exchequer Gordon Brown, that the Olympics would not create a net economic contribution to the UK economy. Gordon allegedly said “don’t worry, we wont win”.

London is already one of the most popular cities in the world for tourism. Indeed it bulges at the seams with tourists. There is evidence that the Olympics deter visitors who may otherwise have come. It brings athletes, who by and large, are not particularly high yielding tourists. It brings coaches, trainers, broadcasters and the like. It brings some spectators. However, it also scares off many others.

Moody’s produced a report saying it was unlikely that the Olympics will boost the UK’s economy. It claims the main sector to benefit will be hoteliers, with 90% occupancy estimated, although at this time of year London typically achieves 80% anyway. Given it was Diamond Jubilee year anyway it seems difficult to imagine that the extra numbers, if they turn up, will actually compensate for the for the taxpayer subsidy. In fact there is some anecdotal evidence that the numbers expected are NOT turning up. A quick look at Wotif.com for London in the next two weeks shows ample availability for hotel rooms with considerable discounts.


This is despite rather weak analysis from Lloyd's regarding the multiplier effect of spending, ignoring what people would have invested or spent the money on had they had it in their own pockets - (it isn't relevant that Lloyd's is a bank that was bailed out by the state and is now majority state owned).   Goldman Sachs says:

Goldman expects the Olympics will boost UK economic output in the third quarter of 2013 by around 0.3 - 0.4 ppt quarter-over-quarter (QoQ) (+1.2-1.6%qoq annualized), but this will be largely reversed in the fourth quarter.

Noting that the economic impacts of the Sydney Olympics were negative compared to the forecasts.

Economic impacts of the Sydney Olympics

The effect is more serious than that when you consider that London hardly has any spare capacity in its transport infrastructure to cope with the deluge of people for major events. The result is that thousands of businesses are telling staff to take leave or to work from home during the Olympics. The reason being that significant parts of the public transport and road networks will be close to gridlock. Business trips are being deferred because of anticipated queues at immigration entering Heathrow. With business likely to be deferred over this period, and those undertaking business facing real increases in cost due to overcrowding on roads and public transport, it’s notable none of this was taken into account in the glowing self-justifying “business case” for the Olympics from the previous government.

The so-called “legacy” is also grossly exaggerated. The Olympic stadium is likely to be offered to a football team (yet to be selected) to be used at a price less than the cost it took to build it, effectively destroying some taxpayers’ wealth. The regeneration of the Stratford area will be seen in property values, but this remains a fraction of the total cost to taxpayers.

Unfortunately, what’s insidious is that it is completely politically incorrect for the media to talk about this now – in the run up to the Olympics. Any major newspaper publishing articles about it would be seen as churlish and spoiling something great. No major politician dare say that which millions of people are saying – how can a country with public debt expected to reach 92% of GDP, which is overspending to the tune of 8.3% of GDP, with a PM who talks about a decade of austerity, justify pouring billions of pounds into a two week celebratory event.

Yes most people will watch some of it, and enjoy that. However, they would’ve done so anyway. Yes, there will be a sense of national pride (except from some Scots and Ulster nationalists) about the event, and some London pride as well, but didn’t the Diamond Jubilee provide that too? Wouldn’t there have been pride if the British Olympic team competed and won elsewhere?

So I’m not celebrating. My money has gone into this event (more than the average, given my income). I am betting the net GDP effect, in the long term, will be negative, as it has taken money out of taxpayers’ hands. People who would otherwise have invested or spent it better, and will have deterred almost as many visitors as it will have attracted. It will have imposed significant costs on London businesses unrelated to the games, by almost gridlocking the transport network.

In short, a colossal waste of taxpayers’ money.  It is a massive vanity project, and who really believes it will result in more than a short term boost to participation in athletics? Wishful thinking.

The Olympics should be left to profligate semi-authoritarian developing countries, willing to squander their national wealth on showing off, or by seriously commercially minded bids from cities that can demonstrate they can make money out of it, financially, without taking from taxpayers.

Let’s stop pretending the Olympics is an investment, it’s a legacy from a profligate, image obsessed former Labour Government, that is a commitment now. All that can be hoped for is that it goes off without a hitch, shows London in a positive light and that the property developed can be sold for the best possible price – and a lesson learnt to never ever do this again.

Myths of UK economic policy

Now I could have said this myself, but I don't need do, because Liberal Democrat blogger, Stephen Tall, has done it for me.  Now that's someone who is no libertarian, and ought to get a wider constituency that those laissez-faire capitalists who are fed up with the Conservative/Liberal Democrat coalition's pathetic attempt at austerity and Labour's dishonest attempt to present itself as the saviour.

What are the myths?

1.  UK public spending is reducing:  In nominal terms it is rising by 8% over the term of this government, in real terms cut by 3%!  Any large business that couldn't extract 3% savings out of five years of operations would be an abysmal performer.  Moreover, in real terms spending in the last year of this term of government will be higher than every year of the Blair/Brown government except the last year.   Big swingeing cuts? Hardly.

2.   Public debt is being reduced:  No.  You see you can't do that unless you run a budget surplus, and that isn't happening or going to happen in this term.  Public debt as a proportion of GDP will be rising by 8% during the term of this Parliament, and wont be dropping in nominal or real terms.  

3.   Labour's approach would have made a big difference:  No.  Ernst & Young modelled the difference, and calculated it would have meant the economy growing on average 0.2% more across three years.  Each additional job would have cost £370,000 in debt (jobs with average income of a tenth of that).

4.   The Obama Administration has taken a different approach which has paid off:  No.  The Obama Administration after the 2010 congressional elections, cut federal spending by 0.9% in real terms.  Somewhat equivalent to the UK government.  Barely austerity at all for both, but US tax levels remain far lower than the UK's.  That's a difference Labour and other leftwing opponents ignore.

5.  There is a magic easy alternative solution:  Both recent UK governments have been Keynesian.  Both dropped interest rates to near zero levels, both printed more money,  both engaged in deficit spending. 

Now I'd argue there are solutions, and that taking a more aggressive stance to cutting the deficit by cutting spending, NOT increasing taxes (which has been about a third of the strategy), would have cut wasteful wealth destroying spending, helped keep the growth of the state interest bill under control, stopped the state competing with the private sector for investment, and meant more money would remain in private hands.  

However, no party in the UK offers that solution as of yet.  You might wonder quite why a government, that is now quite unpopular, didn't just take the hard medicine at the start - rather than pretend to do so, given people think it has already, and it hasn't worked.