It is Obvious

Chris Rick has got altogether too much to say

Our debt

Posted by chrisrick13 on March 29, 2010

It is obvious: the numbers don’t add up.

We are spending more than we earn as a nation.  We owe about £750bn and will, if Labour have their way, nearly double that to £1.4Tn while getting to the state that we only spend a little more than we earn over the next 5 years.  This is in addition to over £1Tn in PFI debt, which is the next 20 years investment brought forward and spent, the underfunded pension provisions, and local council debts.

 Even those spending numbers are based on GDP increases that most commentators think unrealistically high.  Many of those commentators are ones who predicted this mess so could be believed.  The budget was dealing in savings of the order of £10bn, when the debt will soon enough reach £3,000bn.  There is a long way to go at 0.3% a time.

There is the mantra from the Labour party that if spending is cut the economic recovery will fail, while the Conservatives will not talk of cuts.  I would suggest that the Conservatives would dearly like to miss out on a majority by a few votes and let Labour run things for another year or two.  The mess will be so big and so attributable to Labour that they will be unelectable for a generation.  Labour want to lose by a few votes and can then say that whatever course the Conservatives take that their, different, course would have avoided the pain, thus landing the Conservatives with the blame.  How does an election campaign work when both major contenders are trying to just lose?  I imagine the Liberals are terrified of being in the position of choosing which party to join with and thereby being held responsible for the mess as well.

What is the way out?  Squeeze spending (not cut), get a little more out of taxes and export to give GDP growth of 10% (sic).  All other routes involve lots of pain for UK citizens.  There is a maximum tax take (Laffer curve).  We cannot be far from it at the moment.  The public sector is so big that cuts are easy to achieve but because they are taxpayers also and will move on to benefits, the salary reduction is offset.  Can either have much effect?

Will either (or both) cause the recovery to halt?  I could say: what recovery?  However, increasing the debt means suffering is delayed a little while longer.  Then at some point the interest payments required on the debt are so large that cuts are forced because the income (taxes) is needed to pay the interest on the debt.

It really is cut now or cut bigger later.  Suffer now or suffer more, later.  One strategy wins an election one loses it.

It is obvious: the numbers always add up eventually.

One Response to “Our debt”

  1. Bill said

    I’m not as convinced as you are that taking over the economy now would be suicide for a political party. The old recipe of a few hard years after the election. Then a chorus of “We have done very well, things are OK now” after two years and the Great British public would be nicely primed for the following election. Of course it is always nicer to balme things on 10 years of labour/tory misrule but you can (and they are) blame the rest of the world for getting the UK into the mess.

    It the usual political thing to claim credit for the good things and pass on the blame for the bad – works every time!

    I also think that MPs take a rather short-term view and would prefer jam (expenses and perks from the lobby groups) today rather than the promise of bounty in five years time. After all 5 years is a long long time in politics!

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