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.