To put it politely, Gordon Brown and David Cameron are being less than candid about what it will take to fix Britain’s public finances. The prime minister deliberately understates the ferocity of the coming squeeze on public spending; the Tory leader sidesteps questions about the inevitable tax increases
Peston cites McKinsey’s “Debt and Deleveraging” report, which has crunched through all available data on British debt compared to other countries and concludes that when you tot it all up our real debt to GDP ratio is a whopping 466pc; only Japan is worse, on 471pc. Signs of Tory hesitation on spending cuts could make it that much more difficult and expensive for the Government to sell gilts, just when the Bank is supposed to be turning off the QE taps. Why do that, unless…he wanted deliberately to provoke a crisis that could tip the balance against Gordon Brown during the election.
“The message could not be clearer – if you find yourself on the wrong road, you take the first available exit instead of carrying on.
It is very clear that, as in the US, current levels of borrowing cannot continue without putting Britain’s credit standing at risk. We should not forget that at present, government borrowing is being artificially sustained through quantitative easing whereby, in effect, it buys its own debt. That is why I regard bringing stability back to public finances as the first big building block of our plan to re balance the economy and build it up again on firmer foundations than before.
Sterling fell to its lowest level in nearly six months against a basket of currencies.
David Cameron today claimed that Labour's plans for an asset sale worth £16bn would make little difference to the government's deficit problems.
"If the Government were to sell off the whole of what remains in the public sector, they'd have to pay somebody to carry it away,"
In the first two months of this financial year the government borrowed £30.5bn, comfortably over twice what they borrowed in the same two months last year.
At this rate we will certainly blow Darling's budget forecast of £175bn borrowing over the entire year. Even a straight pro rating suggests we'll hit £190bn, but with unemployment surging, that's an underestimate. Get ready for £200bn+.
In other words, Brown/Darling will smash the pre-NuLab record for a single year's government borrowing by a factor of 4 (previous record was £51bn in 1993-94). That is incompetence of an exceptionally high order.
The big discussion in British politics for the foreseeable future will be how to tackle the debt crisis and deliver quality public services when spending is tight,
the Tories are committed to cutting spending – not just in the future, but right now in the middle of a recession. Instead of investing so we can recover more quickly and more strongly, the Tories are ideologically wedded to cutting spending to fund tax cuts for the few.
The numbers show that Fraser Nelson and the Tories are right. Total spending, after debt interest, will fall in real terms after 2011.
However, this is largely due to the halving of net investment. Except for a pause in 2012, real current spending is projected to rise.
Labour's ID card policy was in fresh disarray last night after Chancellor Alistair Darling failed to back the £5billion project.
Mr Darling put the scheme in doubt by signalling the Government may just introduce biometric passports instead.
The Chancellor added that the Government would have to question every 'single item' of public expenditure to save billions for the taxpayer.
it will contain elements that next year the new government will have to incorporate into its own policies. We are going to get a glimpse of the future.he writes
if you look at what has been happening for the past five or six years, revenue tended to come in below the level that the Treasury expected. Now it is collapsing. The reason for the collapse is that the boom had concealed the fact our tax system had become structurally much weaker than it was a decade or so ago. It has been over-dependent on types of revenue that could not be relied on. At a company level these included the corporation tax paid by banks and oil companies, and North Sea oil revenue itself. At a personal level these included tax on capital gains, on stamp duty on housing, and income tax on bonuses.
The consequence of this can only be a claw back in public spending.
It is surely time to batton down the hatches
Faced with a recession and falling tax revenues, more than two thirds believe that the Government should spend less on administration in public services - although core services like health, education and policing should keep their funding.reports the paper
I had taken out plenty of spending money from the bank before we left, but I had not had time to change it into guilders. When we arrived I discovered that the pound was falling so fast that no one knew what the correct exchange rate should be, so the Dutch banks refused to change my money.
Most economists and ministers now believe that a prudent fiscal policy means not allowing public sector debt to exceed 40 per cent of GDP. But the Government is under no obligation to manage the public finances with this target in mind. Indeed, Britain is not even bound by the 60 per cent limit in the Maastricht treaty, as Margaret Thatcher managed to win an opt-out from the relevant article. This is just as well, given what has happened since last year. With the debts of the nationalised and part-nationalised banks now on the public sector balance sheet, the ratio of public sector debt to GDP in the UK exceeds that of Italy and Japan. And it is set to grow much higher. On the basis of the planned levels of borrowing, it could exceed 65 per cent of GDP in 2010-11."
This week's Budget provides the Chancellor with an opportunity to set out a new approach for government spending, based on the notion of a long term sustainable public spending policy. If this opportunity is missed, it will leave the way clear for the Opposition parties.
the programme of public spending increases begun in April 1999 has been unsuccessful. This period of public sector expansion - the largest and longest spending increase of the last 35 years – has failed to achieve its stated aims; has acted as a weight on the private sector, damaging long-term economic growth; and has left the UK ill-placed to face the challenges of the coming years.
during all this long unbroken period of economic growth, Gordon failed to pay down the government debt - a truly prudent Chancellor would have done it at some strong point in the economic cycle. He did however forecast the budget surplus this year to be of some £9 billion, in fact the budget will probably be in deficit £9 billion.
The Chancellor should turn his mind to the big picture. He should try to get on top of his own spiralling debt and spending, without damaging important public services. and
We are in dangerous and uncharted waters. The UK ship of state is carrying too much surplus weight and is not being sailed well. We need more liquidity in markets, and lower interest rates, but the poor performance of the UK public sector constrains UK action
