Channel 4 highlights Osborne’s ‘grossly misleading claims on investment’

Faisal Islam at Channel 4 Factcheck claims to have witnessed "the most egregious statistical chicanery...in a Treasury fiscal event in 13 years of covering economics for newspapers and TV".

Faisel

Faisal Islam at Channel 4 Factcheck claims to have witnessed “the most egregious statistical chicanery…in a Treasury fiscal event in 13 years of covering economics for newspapers and TV”.

What is he so excised about? Have a look at this:

‘I was quite shocked to hear the chancellor claim that investment spending would be £50bn. This would be fiscal stimulus territory. I got some return tweets about PSGI: “Public Sector Gross Investment”. Then the chancellor talked of £300bn of investment. That too sounded quite high. Again it was gross investment.

‘The traditional standard measure of government investment spending is “net investment” which accounts for depreciation on the government’s giant stock of capital. It is the way government investment has been measured for decades.

‘So it was a bit cheeky, a little cute, for the chancellor to switch measures for his speech. This is clearly part of an effort to communicate a narrative of “investing in growth” as we go “from rescue to recovery”. The real numbers would have to wait until the fiscal documentation was published.

‘Alas it was nowhere to be seen. The only reference to net investment was as a footnote to a table about the impact of the Royal Mail pension. Nothing. Nada. Gone. Erased. PSGI is now the only measure, and it has the happy side effect of sounding bigger.

‘However you can compare PSGI announced today to PSGI in March in the OBR’s table. Miraculously those numbers are idenitical to the number’s published today. Actually that’s not quite right: this year PSGI is £100m less than forecast by OBR in March. So, officially, capital investment by government has been CUT. That’s not the impression you would get from the chancellor’s speech.’

16 Responses to “Channel 4 highlights Osborne’s ‘grossly misleading claims on investment’”

  1. LB

    So how are all those investments Labour made doing?

    Must be raking in the profits – er no

    Must be saving loads of cash because of efficiencies (cuts) – er no

  2. DJT1million

    Irrelevant nonsense.

    The chancellors mistakes and lies are all his own as is his colossal failure to do anything positive for the majority of British people and our economy.

    To repeat, austerity is a busted flush, a failure, it hasn’t worked in the past, it won’t work now and making us go through even more of such a failed policy is compounding the problems we face, not solving them.

  3. LB

    Spending is up. Notice the figures.

    Has it worked? Nope.

    The state is sucking resources away from the productive to feed its need to spend on the unproductive.

    End result, its busted.

    There has been no austerity. There’s just been more and more spending.

  4. DJT1million

    Nonsense, sick of hearing this rubbish.

    Spending is up certainly, but it’s going up because the austerity policies are failing us. Put simply, the government is wasting money on failure and on putting an ever larger sticking plaster over the consequences of their policies, making the lives of millions a misery in the process and it is still costing more than if they changed their stupid policy. We are getting further into debt as a nation yet receiving fewer services and more poverty even as spending goes through the roof, it’s stupid, it’s not working and I do wish people like your good self would stop trying to convince us that even more austerity would be the way to go.

    How many times……austerity has never worked in the past and isn’t working now, we didn’t have to go through all this pain to re-learn that lesson.

  5. LB

    It’s not.

    However, you are right on some of the causes.

    Lets look at welfare. 60 quid a week isn’t much to live off, and yet you’re asking me to believe that has driving up government spending?

    No the core reasons are low skilled migration. You have the debt costs. On top there is the hidden debt, the pensions that are hidden off the books. Wage costs in the PS are going up, but stuck in the private sector. Its the private sector that pays all tax. The tax that PS workers pays, comes from the tax the PS pays.

    What’s happened is that the debts are rising faster than the ability of the productive to pay, and the taxes imposed make things more unproductive. Hence companies move overseas, and work gets offshorred.

    We need low taxes, particularly low employment taxes. Hence I would suggest abolishing Vince Cables department that doesn’t even know how many jobs it creates. We use that cash to cut low paid employer’s NI. At the same time, we curtail low skilled migrants.

    The migrant issue has several major effects. Government spending is about to hit the 12K per person per year. Low skilled migrants aren’t paying that amount of tax, plus they drive down wages for low skilled Brits. Lets stop that. It’s legal, after all Cyprus broke EU law on movement of capital. We can do the same for freedom of movement of people.

    That cuts costs, by 48 billion a year. We keep the productive 1 million migrants, and remove the rest. That’s half way to getting towards a bit of balance on the borrowing.

    The NI cut makes a major difference too.

    We also need cuts in corporation tax. If you have a high rate of tax you get a high rate of nothing If you have a low rate, you get a low rate of lots.

    You also need capital allowances for machinery and R&D to be zero.

    Next, we need a free trade area with the USA and Canada.

    Lastly, and this is disasterous, the pensions debt has to be addressed. It’s well over 5,000 billion, and rising at 734 bn a year. That’s your debt increase and its unstainable.

    I would say no more state pension, civil service pension. You get what you have already accrued and no more. Then you have to save your NI. That creates a lot of money for investment. Then if and only if that fund plus the accrued pension runs out, do you get help. The remainder of your fund goes to your heirs. A median wage earner would have had 627K if they had done this, rather than a promise of state pension costing 152K, that will be defaulted on

  6. DJT1million

    Thanks for all that well rehearsed verbiage. You’re wrong of course, it’s a version of the same stuff that has been implemented over the past 30+ years or so and it is part of the wider economic consensus that is currently failing.

    Examples include low corporation tax, currently lower than they have been for a long time and yet investment remains stubbornly low.

    Low taxes? Most of the big businesses and wealthy individuals are avoiding paying any taxes on an industrial scale whatever the level, a problem that is seriously destabilising our nations finances.

    Pensions? Really?! The lie that they are unaffordable is often repeated but remains a lie.

    Welfare? I think you mean social security spending, more than half of which is the aforementioned state pension, a pension that’s lower than our competitor nations by some measure.

    The main reason our governments spending is climbing is because there is no economic growth and falling tax receipts, both situations they have a degree of control over and yet refuse to do basic stuff like close tax loopholes, manage tax havens that are under our control better or invest in education/apprenticeships (fill that skills gap), infrastructure, roads, rail, housing…..I could go on but you know it, you just don’t believe it.

    Funny thing is, your approach has been increasingly followed since the mid 1970s and has caused the biggest financial crash since the C19, my approach was followed in post war Britain and resulted in a pretty stable economy with improving living standards across our nation for decades. I know which one I would rather have and it’s not the current car crash of a system that is failing all but the very rich.

  7. LB

    Pensions? Really?! The lie that they are unaffordable is often repeated but remains a lie.

    =============

    Really? I think its you who are deluded on the cost.

    How much does the state owe? Its been spending all the money for pensions, so it does owe people a pension for their contributions.

    Or are you one of those people who claim the state owes people nothing for their money? [So long as you get your cut]

    I know how much they owe, because I know where the figures are and how they have been hidden.

    I’d be interested in your number for how much they owe, and hence how you conclude that its affordable,.

  8. DJT1million

    Now you are just tying yourself up in knots.

    I love it when commentators say such things as (and I paraphrase) ‘I know The Truth and you plebs (implied) don’t!”

    The State does not take in taxes and then stop at a given point, it is a process. People work, businesses prosper, they pay their taxes and those taxes pay for current needs along with appropriate investment for the future.

    In the the future, those people and businesses will pay their taxes and so on……as a child I was educated and went to University. Now, as an adult I pay my tax & NI which pays for those being educated now…that’s the way it works. Or should work, now we have a significant portion of wealthy individuals and large businesses that feel they don’t have to pay their taxes and it is one of the factors that is gradually damaging our nations finances. Not the only factor but a big one, it needs to change.

  9. LB

    Simple question. You’ve said the state’s pensions, state pension and civil service, local government etc are perfectly safe and will be paid.

    To come to that conclusion, you must have done a bit of maths to work out how they can be afforded.

    So can you post up your numbers so I can compare them against mine, and the official numbers,

    I’l start you off. Bar the local government scheme, the others are unfunded. So they hold no assets that have value. I presume you do agree that you can’t owe yourself money? So no assets. Next you would need to have an idea of how much they owe for the money that you and other people have paid. At least you’ve been paying.

    So how much do they owe?

    Then we can move on to what income they need to be able to pay the pensions.

  10. DJT1million

    That’s not a simple question and you know it, there’s no-one that could provide such a comprehensive and completely accurate set of figures covering all those different elements. You want to ask the question simply to show that I couldn’t answer it in the detail you demand and therefore undermine anything I say, a familiar debating tactic. It won’t wash.

    I love that you will be comparing ‘my’ figures against ‘yours’ and the ‘official’ stats though, nice touch….and also some distance from the actual subject of this article noting that Osborne has lied about the levels of investment he is proposing. Oddly that is the one thing you haven’t talked about though there was a bit of irrelevant ‘whataboutery’ concerning Labours record on investment. Funny that….

  11. LB

    I kniow its not a simple question. However it goes to the heart of your assertion that pensions are affordable.

    If pensions aren’t affordable its a disaster for the vast majority of people in the UK, because they, quite simply will be destitute.

    Your approach of I don’t want to know is going to result in that scenario.

    If we look at the current value of those debts, the ONS have some figures.http://www.ons.gov.uk/ons/dcp171766_263808.pdf

    It’s only 5-6 pages. The bottom of page 4 is the interesting bit. Its 2 years out of date.

    ========
    In summary, the estimates in the new supplementary table indicate a total Government pension obligation, at the end of December 2010, of £5.01 trillion

    ========

    If you also look at the 2005 figure and compare it to the 2010 figure, that debt is rising at 734 bn a year.

    Current total tax raises 600 bn a year, and the overspend is 122 bn.

    It’s a debt, so its rising exponentially.

    I think the prospects for anyone reliant on the state in their old age are dire. It’s not a case of won’t pay, its a case of can’t pay.

    So who is going to be hit? Clearly the poor. The 20% who haven’t got enough cash to last out 1 month, are completely screwed. They can’t go on welfare, because if the cash was there for welfare it is there for pensions.

    Next on the list are public sector workers. Can you justify paying an ex GP 120K a year in pensions when people are destitute? Nope. That sets the precedent, and it will work its way down the chain to the lower paid.

    So what’s going on, and Balls is doing it too, is go for a cap on welfare. Then keep quite that pensions are welfare.

    Now you set one group of pensioners against another, and pensioners against welfare claimants. All to distract from the mess MPs have created.

    On Labour’s investments. How much money are they generating, or if it was investment to save money, where are the savings (cuts)? Spending is up.

  12. DJT1million

    Thanks for that. Again you imply that I have my head in the sand avoiding the truth as you see it.

    Two things, the pensions projected liability is huge, that’s true, however it is a projected total of public sector, state and private pensions and not money due to be definitely paid in one lump sum though you are correct, the government can (and does) change the rules to disadvantage pensioners and millions are looking at a poverty stricken old age. Fewer would if the government focused on creating jobs with decent salaries, generating income and started collecting tax from those individuals and companies that currently avoid paying their fair share of course but that is another story.

    As one commentator (Neil Wilson) said in an old story done on just this issue by Robert Peston ages ago:

    “There is no issue with public sector pensions or private sector pensions if the production system of the UK is efficient enough to generate enough output for these people to buy. – Rather than constantly worrying about how big the slice of the pie is, what we need to be doing is ensuring that the pie is as big as possible. And you don’t do that by cutting education or investment today.”

    Secondly, you are still to comment on the actual subject of this article which is George Osbornes ‘grossly misleading claims on investment’. Of course the two issues are linked as investment today means profit tomorrow, that’s how capitalism works….and thats how pensions are funded.

  13. LB

    Two things, the pensions projected liability is huge, that’s true, however it is a projected total of public sector, state and private pensions and not money due to be definitely paid in one lump sum though you are correct

    ===========

    Not quite. It’s not the total of the projected payouts. It’s the discounted or present value of the projected payouts.

    If you really want to scare yourself, the projected payouts are many times the 5 trillion number.

    For example, if you take a 100K mortgage, the present value is 100K of the debt. However you have a house worth 110k (because banks don’t loan 100% any more). Net assets positive. However, your payments are pretty close to 200K over the time span of the mortgage. (assuming fixed rate).

    Future payments are completely different from a present value. The ONS have published the present value.

    You are correct, it doens’t have to be paid in one hit. Just like the debt. If we follow your logic, we can borrow 3-4-5 times what we have done now. Not a problem, because it doesn’t have to be paid in one hit. Just to show that the one hit argument isn’t valid

    ========
    There is no issue with public sector pensions or private sector pensions IF the production system of the UK is efficient enough to generate enough output for these people to buy

    ========

    Now, I’ve capitalised the one important word. IF.

    I’m asking the question, is it, or is it not?

    It’s not.

    There are two easy measures you can look at. First is in the ONS paper, but you have to do a bit of maths. Take the debt figure in 2005 and the debt figure in 2010. The difference, divided by 5 years is the annual increase in the pension debt. It’s 734 bn a year.

    So just to keep the debt constant, you would need to extract another 734 bn in taxes from the UK. This is on top of the current 600 bn tax take. Since you don’t want the other debts growing too, you either cut spending, or raise taxes to get the increase in the borrowing under control. That’s another 122 bn a year.

    The government needs a tax take of 1,456 billion a year.

    That is GDP near as damn it. 100% taxation, no money for food, living, travel, …

    You’re correct in quoting Peston’s statement. Where both you and him fall over is not check to see if the IF condition is met.

    There’s another test you can do.

    Look at current income and current spending on pensions. 145 bn a year spent on pensions. NI receipts 101 million.

    Again, doesn’t add up.

    On Labour’s investment plans versus Balls investment plans.

    Both are as loopey as each other.

    Lets start with Labour, because there has been a passage of time, so no doubt you can educate me about how well those investments have done.

    1. What did they invest in?

    2. How much did they invest?

    3. What profits have those investments generated?

    4. Or if the investments we made to save money, what money has been saved (cuts)

    A very difficult question no doubt to answer. Where have the billions gone?

    If we take the numpty Osbourne. HS2. Notice yesterday, they didn’t budget for the trains. Imagine that. Deciding to build a railway, and ignoring trains. Another 10 bn on top. From memory its now 40 bn to shave a few minutes off the commute time for MPs going north. Now, hows that investment going to work. We build it, and from the ticket sales we get money to pay off the debt. You need about 1.6 billion a year in ticket sales, assuming zero running costs. If you have running costs, repairs electricity, staff etc, you have to add that on top. Never going to happen. It just means some poor bugger in Cornwall gets taxed to pay for the rich to travel a bit faster on the train.

    A case of invest now, lose money going forward. And unlike capitalism, the tax payer can’t get out of it.

  14. DJT1million

    …and again, a whole lot of stuff that has been copied & pasted from your hard drive and yet again not a single attempt to discuss the subject of the article which is, to repeat, George Osborne’s ‘grossly misleading claims on investment’.

  15. LB

    It was type especially for you. It’s not a cut and paste.

    So let me see if I can get you to think it through.

    First, you said there was nothing about Osbourne’s investment plans. Let me cut and paste from my last posting

    =============

    If we take the numpty Osbourne. HS2. Notice yesterday, they didn’t budget for the trains. Imagine that. Deciding to build a railway, and ignoring trains. Another 10 bn on top. From memory its now 40 bn to shave a few minutes off the commute time for MPs going north. Now, hows that investment going to work. We build it, and from the ticket sales we get money to pay off the debt. You need about 1.6 billion a year in ticket sales, assuming zero running costs. If you have running costs, repairs electricity, staff etc, you have to add that on top. Never going to happen. It just means some poor bugger in Cornwall gets taxed to pay for the rich to travel a bit faster on the train.

    ==============

    All about Osbourne’s idiotic investment plans.

    Now how did Labour do on their investments?

    Next, 122 bn overspend is a 20% overspend.

    Given your idea of borrowing to invest, how much growth are you going to get in taxes to close that overspend? Do you think you can get 20% in a year?

    Back again to the Labour investments. The reason I’m pushing you on it, is that track records matter. You want more investments so you can tax more, and hence avoid cuts in spending. Or the invesments produce income or cuts in spending. I would like to know how the last lot of investments worked out.

    At a first bit of analysis, they didn’t. Otherwise spending would be up or debts down. They produced the opposite effect.

  16. DJT1million

    No, you are now complaining that both Labour & the Tories have idiotic investment plans. Whether I agree or not with your assessment (I think it is pretty clear that I don’t and also believe that public & private sector investment is essential and one cannot exist without the other) however that is not the same as commenting on Osborne making grossly misleading claims on investment.

    With respect, I’m done now and will leave you to talk amongst yourself.

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