£2,336,177,000,000

Above you will see a very large number, over two thousand, thousand million and it is the amount of money that the UK government (in other words you and me) owes the world. If you want to know what your personal share is then it works out at about £90,000 per household, so it is going to take a huge amount of paying back. Thank you very much Gordon Brown.

Now you might think that with the VAT increase and all the government spending cuts that we now have this debt situation under control. But we don’t, the profligate spending instigated by the Labour government cannot just be switched off. In fact we are scheduled to borrow a further £149 billion in the 2010/2011 financial year, that is equivalent to over 12% of our GDP. So for every £10 of UK plc income £1.20 of it is just government borrowing.

Now the socialists are saying let’s borrow and spend some more, we don’t really need those cuts. But let’s look at what we are having to pay out in interest to the people we borrowed all this money from. A year ago these interest payments were running at the rate of £43 billion a year (£120 million a day!) but they are forecast to peak at over £70 billion a year. To put that in context our total defence budget is around £40 billion a year and our total education budget around £80 billion.

When Labour came to power in 1997 they inherited a very well run economy with sound government finances. Tax income and spending were in balance thanks to the excellent job done by Ken Clark. So how did we get to where we are today? Profligate, uncontrolled spending is the simple answer. Spending on a massive increase in the numbers of civil servants and on their salaries. Spending on a woefully inept and out of control NHS. Spending on an illegal war in Iraq and another war in Afghanistan as we became America’s poodle. Spending on wasteful PFI projects. Spending by an inept Ministry of Defence who lost control of multi billion pound budgets. I could go on.

The very worst thing though is that they broke one of the cardinal rules of financial management. The economy works in cycles of growth followed by a correction, sometimes the correction is a downturn, sometimes it is a recession. So governments need to save money during the good years and spend it in the bad years, that way the government can do the most good. But Gordon Brown borrowed in the good years, the exact opposite of what any prudent person would do. This meant that when our economy hit bad times there was no manoeuvre room left. Hence our recession has been so much worse than that experienced by our main trading partners.

And it is not as if the British public benefited from all this profligate spending by Gordon Brown. In fact the average family take home pay has gone down in real terms for every one of the last 10 years. So we were becoming poorer whilst around us the world economy boomed. It just amazes me that anyone voted Labour in the 2010 election.

Then lets talk about the banks, because Labour blame the banks for everything. In Britain the financial sector has disproportionate importance because nationalisation and the unions destroyed much of our historic manufacturing base.The sector is so important that in 2009-2010 (which wasn’t so good a year for the City) the companies that are there created over 20% of our national Gross Value Added (GVA). We would all be a lot poorer if it wasn’t for the wealth the city generates for UK plc.

However the city needs regulating and Gordon Brown wasn’t very good at this. He took key responsibilities away from the Bank of England and gave them to the FSA. He constantly boasted that he was regulating with a light touch. Which allowed people like Fred Goodwin to run amok and take excessive risk that was caught out when the American sub prime market collapsed. The British government was forced to intervene to bring credibility and in some cases capital back to the market. But the money that was used in this “rescue” wasn’t just given away, it was either loaned and has to be paid back, or it went into bank shares which, because they were bought cheaply at the bottom of the market, we (the British taxpayers) stand to make a huge profit on.

I am both staggered and depressed by the level of ineptitude shown in the management of the British economy by the last government. It is a truly unenviable task that David Cameron and George Osborne have in trying to dig us out of this hole. And what a thankless task it is as they get blamed by the ignorant for the cuts that are caused by Gordon Brown and what he did to British government finances.

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4 Comments


  1. “Labour blame the banks for everything” –

    oddly enough, your mate at the Bank Of England has views on that too:

    In some of his strongest language yet, Mervyn King today claimed the fall in households’ living standards was the fault of the financial services sector and he expressed sympathy that innocent families paying the price.

    “The people whose jobs were destroyed were in no way responsible for the excesses of the financial sector and the crisis that followed,” he told MPs on the Treasury Select Committee.

    In most aspects, he said, the economy had been on a sound footing before the crisis. Previous downturns were often caused by inefficiencies or weak management and were useful opportunities to improve systems. “None of that applied in this crisis,” he said. “We had quite a successfully operating economy.”

    The people who are now suffering “did not get bonuses of the scale people in the financial sector got”. The financial crisis may have occurred two years ago but, as austerity measures kick in, “the cost is now being felt”, he said.

    It remains “a big political problem”, he added: “I’m surprised the real anger hasn’t been greater than it has.”

    http://www.telegraph.co.uk/finance/economics/8355475/Anger-at-the-banks-is-justified-Mervyn-King-says.html

    please note, I have included a reference link so you can see for yourself that I’ve just not made it up. I’d welcome similar links to backup much of what you say too, because an awful lot of it seems little more than propaganda (can’t wait for your “Why socialism is evil: they eat babies” post sometime in the near future).

    for example, I’d love to see your source for “socialists are saying let’s borrow and spend some more, we don’t really need those cuts”, since what I hear them saying in many many interviews is that they don’t disagree with cuts, just the haste in which they’re being introduced. there are massive implications in restructuring that deserve serious consideration; programmes that hard working and conscientious people have spent a lot of effort on – and which are proving successful in, say, getting people back into the job market, etc. – but snip, snip, snip, a lot of it will be thrown away, only for no doubt similar schemes being relaunched at great expense and fuss once government realises the impact of such programmes going.

    PS, if anyone is ever daft enough to contribute a Paypal donation to your site, will you do us all a favour and treat yourself to a thesaurus..? or is it some kind of competition to fit “profligate” into almost all your posts?

    Reply

    1. Except that living standards dropped for ten consecutive years, long before the “excesses of the financial sector”.

      Reply

  2. Being dispassionate – I left the UK for Canada 10 years ago, and have been enjoying the higher standard of living ever since – I’d suggest that you can tell the story of the British economy by looking at its oil. Booming North Sea production bankrolled the Thatcher years, but since peaked, and revenues are down.

    It was a windfall. It was spent. Then, like gamblers, governments since have been trying to win their money back by borrowing. . . You cannot dig your way out of a hole!

    Being political, I’ve no doubt Blair will be remembered as the worst PM in living memory – lying to Parliament to justify an expensive overseas war, and spending like a drunken sailor. Having said that, I’d have to ask if the Conservatives were riding to the rescue or just targeting traditional enemies with cuts?

    Reply

  3. given that Bruce has already talked about how Scotland should be properly independent, maybe he’d have preferred that the rest of the country didn’t benefit from that North Sea windfall – after all, fair’s fair.

    Reply

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