Posts Tagged ‘National debt’
Politicians don’t want to talk about the pain!
The news agenda has been virtually dominated by the economy, as it should do, over the past few days with the Conservatives wheeling out George Osborne at the British Museum to espouse how they would try and tackle Britain’s enormous budget deficit and our debt mountain which is the highest in the industrial world. Rebuffing it all in a jolly sort of way Lord Mandelson for Labour tries to suggest that “boy George” has his sums all wrong again, but the Prince of Darkness is no expert when it comes to figures himself he just knows how to talk a good game. It’s this glossing over of the realities which really causes me some pain at the moment, noting that leading politicians from both Labour and the Conservatives are painfully unwilling to front up to the facts that our imbalance between tax receipts and planned spending is actually a huge gargantuan gulf, a gulf so large that it has to be supported by the biggest amount of debt in our history and the printing of money.
Neither party wants to be seen as the bringer of pain, yet pain there will have to be in some measure in order to pay off the debt and reduce the size of the deficit, our economy will not enjoy a healthy return to growth and financial liquidity until our international credit rating recovers, and that will not happen whilst we carry these double millstones around our neck. I don’t know how other people in South Shields view the national economic situation but I’m sure that the majority of us are feeling its effects on our own household budgets, and having enjoyed the fruits of a debt induced growth over the past decade there will be some shocks for some as we learn that the national debt needs to be paid down quickly. If we want jobs and prosperity then we need a stronger pound to attract inward investment, steady interest rates to encourage the flow of money, and a reduced size of the state and public sector to encourage a flourishing private sector that supports small and medium enterprises.
Picture via Guido Fawkes
Our national debt as a percentage of GDP is higher than all of our industrial competitors and politicians of both parties are now too afraid to approach the issue in fear of losing popular support, as Guido points out in his post Mandelson, Brown, Osborne and Cameron now appear to be competing on how little pain they can cause to reduce the deficit, this argument is simply not sustainable.
As the general election approaches both major parties need to take some strong medicine and admit to the size of the problem, and the self inflicted wounds to the economy from Brown’s thirteen year stewardship will not be healed by a few headache removing aspirins! It will do us no good at all in putting off the inevitable, there is a job to be done which may well involve some major surgery to stem the haemorrhage and aid the recovery. We need a clear cut choice, perhaps a polarisation of the parties so we know that one will offer hard choices and hard decisions now that may lead to a low tax economy later, and I’ve said for years that standing in the middle of the road is the best place to have an accident, the fact that both the Socialist and Tory economic policies are so similar is not a good option for politics, popularity, or Britain’s weak economy.
Our politicians need to face their own fears and swallow a massive dose of honesty.
The generation in debt
Not to put too fine a point on it, but after saddling the folks of South Shields with a larger national debt than what it cost us for the first world war, who knows how much extra debt is hidden away off balance sheet by Gordon Brown, starting with Northern Rock? Then there are the guarantees to other banks and institutions, there are also the huge pension liabilities of the public sector to take into account too.
I have a feeling this little baby may end up passing some of it’s debt onto it’s own children!
Oh, and I’m glad it didn’t have Gordon’s nose
Apparently £1 trillion doesn’t cover half of it.
Nick Silver at the Institute of Economic Affairs argues that national debt is actually over £4 trillion and stands at 276% of GDP (Gross Domestic Product)
The debt the government carries represents the level of transfer to future generations – the debt will have to be paid off out of the government’s future tax revenue. The population has effectively promised itself a pension without setting aside a capital fund in the hope that, in the future, there will be enough taxpayers. But we are at serious risk as the demographics deteriorate further as there will be fewer tax payers to pay for an increasingly large burden.
If the government acknowledges its true debt level, it will have to behave like a highly indebted person – with extreme prudence and the introduction of austerity measures. It will be forced to cut spending, increase taxes, possibly print money to pay off its debts, and almost certainly look to break its pension promises.
So don’t hope that your pension will be looked after, particularly if you are one of the 10% of school leavers likely to get a job next year.