Thursday, March 26, 2009

A truly scary statistic

According to Chris Giles, Economics Editor of the Financial Times today:

"Wednesday’s failed British government bond auction is symptomatic of the state of the public finances. In the annals of a nation that has prided itself on keeping tabs on government debt since shortly after the Glorious Revolution in 1688, the state has never needed to borrow as much money. According to the Ernst & Young Item club, in the two years 2009-10 and 2010-11, the government will probably have to raise £350bn.

That is more debt bequeathed to its successor than the total borrowed by successive rulers and governments of Britain between 1691 and 1997, the year Labour was elected. "


The South Sea Bubble, Napoleonic wars (which gave rise to the need for an Income Tax), financing the British Empire across a quarter of the globe, paying for World wars 1 and 11 and setting up the welfare state could all have been done, with change, for less than this Government has spent in the last few months.

As a share of national income, public borrowing is expected to rise from 2.6 per cent in 2007-08 to 12.6 per cent in 2009-10 as tax revenues plummet and already fixed public expenditure plans account for an ever larger share of falling gross domestic product.

Public finances are deteriorating at the fastest pace in the Group of 20 countries, according to the International Monetary Fund.

And what have we got to show for it? Absolutely nothing.

The money is needed because as the productive economy (private enterprise) shrinks the non-productive economy (Public service) grows as a percentage of the oveall economy, even if in cash terms it stays the same. This means you will have to take more money from the productive side (in taxes) to finance the growing public sector, if the chancellor takes that money straight away he creates a downward spiral where the productive economy shrinks even further; so instead he is intending to borrow the money and pay it back out of future taxation. As we discovered in the 1970's what that means in practice is tax rises at the first sign of recovery, killing off the growth and the country lapsing back into another recession. Basically a return to the cycle of borrowing, dash for growth, inflation and bust that we grew so accustomed to for forty years after WW11.


7 comments:

P45 Time said...

Surely some Scottish Chancellor of the Exchequor bloke promised that we wouldn't return to boom and bust? Where is he now?

Oh I forgot, he's the PM!

Anonymous said...

I wish it were P45 time for him, sadly I think unlike many ordinary workers brown will keep his job for another year yet.

I'm NOT Barrie Wood! said...

What a con! All the public sector workes recruited in a blaze of glory are now going to have to be laid off, because we can't afford them.

And why does everyone think theat "Nasal Cable" is a financial guru? He jusrt moans a lot about prudence but hasn't got a clue how to sort anything out.

What a pickle. Up the revolution I say!

Barrie Wood said...

Pickle or maybe even Pickles ? As in Eric Pickles, the Tory party Chairman no less, with his laughable attempt to justify taxpayers paying for a second home near Westminster, despite his Essex constituency being within 30 miles of London.

This, hot on the heels of another front bench Tory, Caroline Spelman, using taxpayers money to pay for her nanny and being forced to repay £10K back. His fellow Tories are making a mockery of his local crusade in promoting integrity in political life.

Whilst we're at it Marcus, how much more have Torbay Tories received from the Belize based Lord (c)Ashcroft ?

If you want integrity and openness no point looking to the Tories. Of course, Nick Clegg and the Lib Dems were very clear that MPs expenses should be in the public domain.

In the interests of further transparency, can you tell me Marcus if you think your one known policy that on Inheritance Tax should be a policy or an 'aspiration' ? And, which parties do you see the Tories aligning with in the EU, now FOUR years after making the pledge, you've parted company with the moderate and influential EPP group ?

I don't expect straight replies to these questions, but I live in hope. Either way looks like you're in a bit of a pickle Marcus !

Anonymous said...

Barrie Wood: Liberal Democrats are the LAST people to go around complaining to anyone about Lord Ashcroft, at least his donations come from his own money. What about the man who gave you £2.5 million that he STOLE and now you won't give it back?

And while you are busy pointing the finger at Pickles, you are strangely silent about your Lib Dem MP who plunders his expenses to employ Lib Dem Cllr Steve Darling, Lib Dem Cllr Ruth Pentney and his dear missus - all on the good ol' taxpayer!!!

Mind you, should have remembered, Lib Dumb by name, and dumb by nature!!

Barrie Wood said...

Firstly Anon why not own your own statement ? Show some backbone and transparency by writing in your own name or do you prefer making slanderous remarks without being held accountable for such?

Like most MP's Adrian Sanders has a constituency office and back-up staff to provide an accessible service to the people of Torbay. So what ? All of this is declared. Will Marcus not do the same if elected at the GE ?

As for party funding, big business has undue influence over the Tories, with Labour largely sponsored by the trade unions. The Lib Dems are overwhelmingly supported by small individual donations. In contrast likes of (c)Ashcroft are trying to use financial muscle to 'buy' seats like Torbay and other marginals for the Tories.

Q4 2008 saw the largest Lib Dem donations as being : Lord Jacobs, who you may recall quit the party back in December; but who contributed £15,000 to Lib Dem coffers six weeks earlier. Other five/six-figure gifts came from: C & C Business Solutions Ltd (£40,000), Peter Thurnham (£10,000 bequest), Brian Roper (£15,000), Betterworld Limited (£25,000), Joseph Rowntree Reform Trust (£250,000), Christopher Nicholson (£20,000), Raymond Cecil Mitchell (£10,000 bequest), Opal-Chant Ltd (£10,000), and Mr W M M Rayner (£10,000). The most generous MP I spot-checked was Alan Reid, MP for Argyll & Bute, who gave £6,948.84.

As you can see this hardly puts us in the back pocket of ANYONE - not in hock to any vested interest, unlike your party.

Further, Nick Clegg has spoken of limiting donations by companies or individuals to a maximum of 25K a year. No-one, not even Torbay Tories, can say that the Brown donation was accepted in anything other than good faith.

What plans do the Tories have for the reform of funding of political parties?

Anon, you avoid commenting on Pickles the Tory party CHAIRMAN, so although his actions are legal are they defensible ? Yes or no ? Of course, similarly you avoid the topic of who your new EU allies might be too. Instead you prefer a silly insult. Looks like the 'nasty party' tag still rests with the Conservatives!!

Barrie Wood said...

I should also add David Howarth (Lib Dem) tabled ammendments on the Political Parties and Elections Bill. These included proposals to take 'big money' out of politics via :

>> a donations cap of £50,000;
>> limits on party expenditure that apply across the electoral cycle, not just at elections;
>> rules to stop parties pouring disproportionately vast resources into marginal seats;
>> and more transparency for trade union donations.

It is time we took the big money out of politics to give all parties an equal footing, so that elections become a contest of ideas rsather han an unequal battle between those with the biggest purse strings. Why is that so controversial an idea ? What's good enough for local elections is good enough for Westminster !