As the government is poised to take Bradford and Bingley into public ownership,it argues that The issue of debt will now dominate political debate
It argues on two fronts,firstly that
by getting a poor return on its public spending, the Government has avoidably taken public finances into the red. From its recent low of 29.6 per cent in 2002, debt as a proportion of GDP has risen steadily. In August of this year it stood at 43.3 per cent. This parlous financial position is a direct political legacy. A government of genuine prudence might have put money in the bank at the top of the cycle to pay the bills at the bottom. But it would then have been unable to argue that the Conservative plans to cut taxes would require cuts in public spending. The dividing line of investment versus cuts - on which the Government has fought the last two elections - does not work if there are funds in the bank.and secondly
an expansion based on excessive household credit has gone predictably awry. At the same time as the public finances have been deteriorating, household debt has been rising. The value of Britain's personal debt - £1.35 trillion - is now greater than the value of its gross domestic product. The main reason, of course, is that a house in Britain is not a home: it is an investment. The ratio of household debt to post-tax income is now three times greater than 25 years ago.
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