Monday, 2 September 2013

Why UK Public Debt is out of control

Essentially though, the reason why modern debt levels have gotten as high as they have is because they are based on underlying levels of cost reliance. Money got borrowed because of the need to continue to pay for public services that had settled at an established rate. That rate kept getting higher until tax revenue couldn’t pay for it any more.
A crucial political divide faded. Once, one party (Labour) was seen as caring but financially incompetent; the other (Conservative) was seen as competent but uncaring. That meant there was some measure of control on public sector spending. The bill at some point would get too high, and the Tories would be voted in on the expectation that they would fix the mess from the Left. Then they would get booted out, and Labour would be expected to look after anybody who might have slipped through the net.
Increasingly, the political argument shifted. Healthcare, education and many areas of social welfare were seen as things that ‘deserved’ huge amounts of money thrown at them, since the problem set out under the Dump Philosophy was that these areas had (under “eighteen years of Tory misrule”) suffered wilful neglect. Dump bags of cash (several hundred billions would do) and the problems would vanish.
This was, of course, dependent on there being large amounts of money to hand. Since the tax take wasn’t enough, more tax raiding was needed – first as one offs, then as the now-infamous ‘stealth taxes’. After the first Labour term, however, it was clear that by itself this revenue wasn’t enough. The shortfall would have to be covered by borrowing.
Borrowing is a beautiful option for politicians. It is like an EU derogation – it solves the problem by making it go away immediately, and when the chosen time comes that it returns, it smacks your successor between the eyes. That tends to be long after you’ve moved on to another department – or, even better yet, gone into Opposition.
There is an unhappy corollary to this. Some people in the press and in Parliament spotted what was going on, and criticised the Government for bankrolling itself this way. Of course, anybody who challenges billions of pounds being spent on public services by definition is obviously suggesting OAPs should freeze to ice cubes in their homes, and therefore is by definition an evil, heartless, cruel person who deserves to be completely ignored not only on this but on any other subject as well. It would have made a junior Stalin proud, the Number 10 Press Office at times. Given that kind of environment in the media and on public platforms, are we really so surprised that our more sane representatives have been running scared? It’s no excuse of course for weak leadership and for not making the arguments, meaning that the spend-to-you-bust fiscal demagogues were increasingly left with a free run. But it also makes those who did stand up for rational public spending and put their necks on the line all the more deserving of credit in retrospect for attempting it.

from "A Fate Worse the Debt" by Dr Lee Rotherham

Buy your copy at a bookshop or on Amazon

As the UK talks of cuts and austerity, this book explores for beginners the true scale of our financial problems, and some of the controversies behind modern spending. Warning: do not read if you suffer from high blood pressure, or lack a sense of humour in a crisis. Among the questions answered are: What is the difference between Deficit and Debt? How much does the United Kingdom Government really owe? Who is Scotland's forgotten debt genius? How big could you build a new Hadrian's Wall from Pound coins paid out of Britain's debt? Why was Britain's first civil war two thousand years ago triggered by debt repayments? How did WW2 US airmen unexpectedly help bail out Britain's war effort? What was the Geddes Axe, and how far did it swing? What can a wombat's posterior warn us of? How big is our creek today and is there a paddle? Launched to coincide with the Coalition Government's "make or break" 2013 Budget, this book puts the country's financial problems firmly under the microscope. It explains what is going on and why in terms the layman can understand - and will find absolutely terrifying. Possibly the most important book about government you will ever read.

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