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.
And at that scale of indebtedness, the Armageddon scenario most feared by the Treasury - that there will be insufficient lenders to match the planned level of borrowing - begins to look a distinct possibility.
That is why tax increases and spending cuts are inevitable immediately after the election, assuming that there are signs of economic recovery by then - and why any managers of a public service who are not planning now on the basis that they will have substantially less money to spend in two years time are living in cloud-cuckoo-land.
Gordon Brown and Alistair Darling will be furious at Bundred. But it goes to show just how much government is breaking down when a senior public servant feels free to write in these terms. He would never have dared do so when Brown was at the peak of his political powers.
Read the whole article HERE. It ought to be making headline news on the 24 hour news channels.
17 comments:
I know that what I am now going to advocate is Wrong, but really, someone aught to shoot Brown, now. Another, what, 15 months of this idiot and we'll be doomed to years and years of penury.
'the ratio of public sector debt to GDP in the UK exceeds that of Italy and Japan.'
Italy and Japan combined would that be?
Looked at from Italy, there's an awful lot of incoming impertinence from the New Labour apparatchiks and their media creeps, while the silence from Italy, on the state that England is in, is either that Italians have shut their eyes tight shut against the English crash, or their manners are better.
You that's bad. Sit down and check this out:
http://www.spectator.co.uk/coffeehouse/3078296/the-true-extent-of-britains-debt.thtml
Maybe Gordon Brown should have his Pension clawed back for doing to the country what Goodwin did to RBS?
I have blogged on this subject!
http://delivernothinglabourparty.blogspot.com/
I would have expected a better analysis from the head of the Audit Commission.
Net Debt only include government borrowings. It doesn't include all of the miscellaneous liabilities which would be included in a company's accounts including the actuarial value of any unfunded pension liabilities (for the public sector - the state pension is not a liability because the government has no obligation to pay it).
Add to that the quasi-borrowings such as the debt of National Rail (g'teed by the gov't) and PFI liabilities which together add up to about £15 bn, or 20% of GDP.
From last November but already way out of date:
http://www.youtube.com/watch?v=7ax9ojC7AX4
Audi Commission
Freudian slip?
Steve Bundred has a slightly more interesting career history than may at first sight appear. He was a Labour GLC councillor (Islington North 1981-86) and one of the most loyal of Livingstonites, going on to serve on the directly-elected ILEA until 1990. He then moved into local government officer roles, becoming Chief Executive of Camden in 1995 (at which appointment there was much talk of political favouritism).
At the Audit Commission he was felt by some to have been too keen to end their biggest case, the Shirley Porter corruption in Westminster, while having recovered only a third of the amount owing.
This is probably another reason Gordon continues to stoke the Fred Goodwin pension sideshow.
Gordon said this on Radio Oxford today which is laughable:
"We set up the Financial Services Authority to, you know before we came into power there was a sort of self regulatory system so you know they more or less regulated themselves. We brought in a statutory regulatory system, supervisory system, but of course we couldn't know exactly what was going on in every individual bank and it's only in the last few days to be honest that what has happened over this pension has come to light."
"Maggie Thatcher managed to win an opt out" on the 60%. And Maggie and Major both ran national debt at higher levels in benign times than Brown did in benign times.
But these are not benign times. Now is not the time to reduce spending or increase taxes on anyone but the richest and the windfalling profits of energy companies for example.
If Cameron buys spending cuts and tax increases immediately after the next General election he should give the clearest indications he can on what those will be.
Brown should do likewise for the eventuality of a Labour hold.
This will give the electorate a clearer choice than feelgood quackery from the Tories versus the harsh reality of actually having to take hard decisions.
This man would I think recognise the huge bank assets that are on the balance sheet now as well as the debts related to them.
My reading of his article is not that you are even close in saying: "he couldn't be more damning etc". Are you sure you've read it properly?
Labour are in denial and the Tories seem to be hamstrung by the legacy of "Tory cuts".
Well, the Libertarian Party came right out the gate the beginning of last year with tax and spending cuts. Ending income tax and cutting around £200bln in spending.
Note this does not alter the money in the economy, just the EFFICIENCY of it. Higher efficiency makes us all wealthier. The government is lucky to get 50p in the pound in effective value, so why should it think it is the right agency to "redistribute"?
People with more money will spend it on services they wish or, dare I say it, clear away debt - long overdue. Some will be recouped via VAT, of course, but that would be a bonus.
Rat and sinking ships come to mind.
Bundred is a political apparachik. New Lab to the core and he has destroyed the independence of the AC. It is now a tool of ensuring the local delivery of Govt policy, regardless of local political pressures and democracy.
The term 'Audi Commission' is more than freudian, they all drive them. It is a standing joke among their staff - if they want to find each other in a council car park, just look for the silver A4.
I know you like your Audis Iain, but this is overblowing their importance a little doncha think ?
At the present rate, and with some more honest accounting of pensions, off balance sheet items, etc, national debt will be more like 200% of GDP in 2010/11. Certainly it will be nothing like 65%, not even in Darling's wildest dreams on the official numbers.
And with a budget deficit over 10% of GDP, the figure will be rising very fast until some dramatic action is taken. The next Government will be picking up alot of pieces.
Let's start by getting all (ex) Labour MPs to give up their redundancy money and pensions.
Its amazing how the chief independent public servants are lining up to place the kitchen knife squarely between Brown and Labour's shoulders.
1) Lord Turner
2) Mervyn King
3) and now Steve Bundred.
You might think someone is trying to tell us something ?
Before last October, national debt as a proportion of GDP was still lower than in 1997. The level of debt has increased massively since then because of action taken by the government to prop up the banks. It is inconceivable that a Tory government would have acted any differently. Or would Chancellor Osborne have presided over the coillapse of Britain's banks just to prove a political point?
(BTW, Iain, the options offered me for signing in don't allow me to use my blog web address. Thought you should know. T)
dlogan is the comment to follow here. Bundred (not very eruditely) making sure his job is secure with the likely forthcoming change of tenancy at No 10. Wonder how Woodward and Quentin the smirk feel just now? As to Browns comments on Radio Oxford - as reliable and truthful as his ex-chum Mr Blair; I have just read Yo, Blair a splenetic bash at the not much lamented ex PM published by some outfit called Politico’s! How does Geoffrey Wheatcroft feel about the present incumbent? Was Miliband right – after six months we would want Blair back?
PS Still have to recreate Google account every session to comment. Grrrr….
"And at that scale of indebtedness, the Armageddon scenario most feared by the Treasury - that there will be insufficient lenders to match the planned level of borrowing - begins to look a distinct possibility."
At which point quantative easing will come into its own, the money supply will go thru the roof and the consequnces will be rampant double digit inflation, even higher unemployment, currency collapse and futher govt intervention in the economy thru price controls, import/export controls, exchange controls and, as these police still fail to achieve the govt's objectives, increased central direction of industry.
This is going to be a pretty piss poor country to live in over the next decade or so. If any body has savings in sterling then I suggest you do your best to buy and invest in sthg else - perferably gold or silver. As the Govt destroys our currency and its value collapses so your wealth will go up in smoke. So make the move now while you still can because at some point the govt may even stop you doing that as it tries to grapple with a problem (i.e., the economic collapse) that it just simply doesn't understand but which it has nevertheless been instrumental in causing.
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