As if we needed a reminder that Treasury forecasts aren't worth the paper they're written on, we learn today that government borrowing is higher last month than it has ever been. In October it reached a massive £11 billion. October is normally a good month for tax receipts, particualrly corporation tax. Borrowing in this financial year is scheduled to be £175 billion. I repeat, in case your gob is too smacked to take that in - £175 billion.
The worrying thing is not just the headline figure of £11 billion - it is the trend. So far this financial year borrowing has amounted to £87 billion. Last year at this point it was £34 billion. Experts are now predicting that if the trend continues, borrowing this financial year could reach £200 billion or more. One financial pundit on 5 Live just now was saying it could reach £220 billion. Truly horrifying.
If the financial markets take fright at these figures, as well they might, the consequences could be truly horrendous. Our triple AAA credit rating will come under further strain, and if that goes, well, we're in unknown territory.
It looks to me as though we will not be heading for a period of massive spending cuts, but also tax rises. Which to a low tax Tory like me are about the bitterest pill to swallow.
UPDATE: LibDem blogger Mark Reckons thinks the Fiscal Responsibility Bill is a Brown built landmine, set to go off as a Tory government prepares for its re-election campaign.
21 comments:
It will be interesting to see how happy low tax Tories are under a Cameron government. I suspect not very.
News reaches me that Darling's gone into hiding.
The loansharks want their money back.
D
IIRC £175bln is approximately the ENTIRE take from income tax.
They are making fresh borrowings more than they currently grab and spend from the fruits of our labours.
Where are the other 60bln people from which they can draw blood? Or do they aim to double our income tax burden?
I suspect the children yet unborn are in their sights alongside the living and the dead.
Oh yes, the living, the dead and the as yet unborn. Every soul past present and future must be lowered into the great maw of Statism.
Don't think Dave will be much better. We need drastic (40-50%) cuts in State outgoings. The Government and Opposition are like that lady living in her Regents Park Mansion not accepting the fact that her source of income has long gone.
I almost wish we lose our triple AAA rating - how would Brown/Darling cope with that I wonder.
Truly catastrophic!
Not helped by Brown's £200 billion of borrowing before the recession either!
History tells us that after Labour have had a spell in power the Conservatives have to clean up the economic mess. This has been Labour's longest spell in power ever - hence the mess is bigger than normal.
If Brown is so intent on reducing the deficit by half in four years why isn't he starting now?
But a Tory government in the same circumstances how would it be different ?
Would you have regulated the market more than Labour ? not on your nelly.
Could you see Howard if he had won the last election saying his first queens bill was tougher regulation on the city. I just don't believe you would have done that iain.
What would a conservative government have done about Northern Rock HBOS etc ?
If your saying you'd have put money aside for harsher times what services would you have cut ?
How would it be different if the conservatives had been in power ?
Its fine to be critical of the current policies but please offer some solutions yourself otherwise its just hot air.
"... Our triple AAA credit rating will come under further strain, and if that goes, well, we're in unknown territory."
We won't!
We'll be in Iceland, or Mexico... or Zimbabwe. Basically, we'll become a sub-prime borrower. Well done Gordon.
G_balls,
you really ought to work on consistency of message. It's not very convincing to argue on the one hand that Tories are heartless spending slashers, and on the other that the current fiscal position would be no different had they been in government over the last decade.
Oliver,
"Just exactly where is the motivation for the financial markets to buy this much government debt?"
There is none.
Which is why the amount of quantitative easing is suspiciously similar to that of government borrowing over the last twelve months.
Nice trick while it lasts.
Eventual consequences not so nice.
The biggest task of the next administration will be explaining to the electorate just how much poorer they are.
Hasn't it been widely speculated in political circles that Brown will conduct an 'economic scorched earth' policy just to give the Tories the worst inheritance possible?
His many actions as PM proves without doubt he will do all it takes to get one over the Tories even if it's not in the best interests of the country.
The man is truly an unpatriotic c***, it really makes one wonder at what point is it justifiable to assassinate him, for the good of our country?
By the way, the Fiscal Responsibility Act (and the government's promise to halve the deficit) is a con anyway. Half the deficit is cyclical according to the Institute for Fiscal Studies, so half will go away without any cuts. That's right, if they're only promising to cut the deficit by half, it means they have no plans for any cuts at all!
Iain, no disrespect, but this has been a problem for years. Even without the recession our structural deficit is in the high single digits.
Your analysis is correct, and I'm delighted that conservatives are finally realising that 1) we were not facing deflation and 2) that deficits kill an economy.
Where was everyone when Cameron was still dedicated to socialist spending levels? I mean, I don't necessarily dislike the guy, but the Tories have been whistling by the graveyard on the size of the deficit for a while now. That's why it's so frustrating to see people only now (after QE, inflation, the pound tanking, and increased borrowing costs to consumers) saying it has to be tackled.
As I said you're spot on, but this issue had to be raised at least over a year ago.
"golden_balls said...
But a Tory government in the same circumstances how would it be different ?"
Dare I suggest that this situation would not have arisen under the Tories. The good years would have seen money being invested, rather than being borrowed.
I don't think that the Tories would have sold British gold, either.
So the position that Britain would have found itself in at the beginning of this whole mess would have been far stronger than the shamble, created by Labour.
We're now in a position that makes the 1970s look like a golden age.
Britain now stands in danger of having its governmental credit worthiness rating slashed by the international finance markets and were that to happen, the government's capacity to raise additional debt finance would practically evaporate. And yet the toxic duo of Brown and Darling continue to insist that all's well in the garden and everything is going exactly as they planned.
If they had actually planned this mess then they're even bigger idiots than we already believe them to be. Mind you, if they were any good at planning at all we wouldn't be here in the first place.
We can't go on like this. The country can't take it.
http://cogitodexter.wordpress.com/2009/11/19/labour-spells-doom-for-britain/
Iain,
I had a brief look at what else the government could have bought with this month's debt.
bit.ly/3JCwY5
@ nigel
the question is what would the conservatives have done differently plain and simple
@ titus-aduxas
So out of all the world economies
the uk wouldn't have entered a recession under a conservative government ?
hmmmm that is something i disagree with i just don't believe a Tory government would have regulated the finacial sector more than a Labour government.
Is Michael Howard a secret regulator junkie?
So the conservatives would have put money aside for harsher times.
fair enough i can accept that and probably would agree.
But where exactly would this money come from ?
As i said earlier its all hot air unless you can say where the cuts are from what taxes would have been raised etc
@_balls
"the question is what would the conservatives have done differently plain and simple "
Plain and simple: spent less over the last decade.
If you can't work out how that might have been possible, then you are clueless as the present administration.
And of course, if we had not had a Scottish dominated establishment for most of that period, it's possible, just possible, that the two banks which cost the UK the most to bail out (by a long, long way) might not have taken the enormous, hubristic gambles that they did.
(eg:
http://www.guardian.co.uk/business/2009/feb/10/abn-amro-columnists-predictions )
Like it or not, I think we are all going to have to accept a period of higher taxes and lower public spending. The remaining political question is where those will fall?
What the Tories will probably do...
* Increase taxes on the lower middle classes
* Cut taxes on the very rich, hedge funders, etc
* Cut spending across the board apart from defence
* Cut spending on benefits and core welfare
What we should be doing...
* Axing massive spending on contractors across government whilst protecting education and health
* Raising taxes on hedge funds, bankers bonuses, windfall taxes on energy companies
* Raising taxes on luxury spending and sin taxes
* Raising taxes on carbon
@nigel
I agree with you nigel the conservatives would have probably spent less and saved for a rainy day.
But this money can't just appear as if by magic. That money would have had to be taken from the NHS Defence education budgets to name just afew.
You can't have one without the other.
So you actually think as PM Michael Howard would have brought forward new regulations for the finacial services ? pull the other one it has bells on
what would
No Government binds its successors, why such tosh?
Bored?
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