Letters to the editor
Debt mechanics
[Re: Economic perfect storm: The four trends that killed Western growth, Tuesday]
An excellent summary of our economic troubles. But I have an inflation-related observation. Tim Morgan refers to a “shift to immediate consumption” as the cause of debt growth. But it’s wrong to blame consumers. Our economic policy is to blame. Morgan’s evidence is the growth of debt relative to GDP being inconsequential until around 1981, then relentlessly upward. But the growth of debt was essentially the same both before and after 1981. What changed was inflation. Before 1981, inflation kept GDP rising rapidly, eroding the real value of debt. When inflation fell after 1981, inflation could no longer have the same effect.
Thomas Dawson
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Pension reforms
[Re: Incentive to work will be dampened by pension reform, Friday]
Sheila Lawlor is quite wrong to say that our reforms to the state pension will not incentivise work. We are, in fact, returning to Beveridge’s original vision of a single, simple, flat-rate state pension, which recognises contribution in the workplace. But we will also have a state pension fit for the twenty-first century, which recognises the equally vital work of people bringing up children, carers of the disabled, and the self-employed. This builds on the existing crediting arrangements and, along with a legal duty for employers to contribute to a worker’s workplace pension, is surely in everyone’s interests.
Steve Webb MP, minister for pensions
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BEST OF TWITTER
Isn’t it bizarre that people jump on GDP to question the effectiveness of fiscal policy, but not monetary policy or structural factors.
@RyanCPS
GDP-employment paradox may be partly explained by declining output of capital intensive industries like North Sea Oil.
@RichardWellings
The plan for growth was meant to be cutting government consumption spending. But that hasn’t started happening yet.
@AndrewLilico
Boris Johnson’s seven point plan for London includes a new airport, Crossrail 2, and lots new houses. Austerity is expunged.
@KingEconomist