Letter - UK’s debt is increasing
Mike Cockett says that the supposed trillion pounds debt inherited from Gordon Brown, is in fact a trillion-and-a-half. Here are a few facts he can check up on.
Recently, two eminent think-tank committees have provided figures which show that in two-and-a-half years that the Government has not reduced the national debt. In fact, it has increased.
They still can’t understand that if you cut jobs, more revenue in tax is lost and benefits soar.
They still can’t understand that it is morally and economically wrong to pour £13 billion a year in foreign aid while many of our people go without.
They need to wake up and stop ‘whistling in the dark’. It’s time they were exposed for what they are, hopeless!
G Duckett, Dawley
Comments for: "Letter - UK’s debt is increasing"
Roger
Few people actually understand the national debt enigma. Because the standard measure is debt expressed as a % of GDP in can in fact rise whilst borrowing falls.
In absolute terms the amount of cash borrowed per year has fallen so the year on year deficit is being lowered. Whether you believe that the cut's represent value for money is political.
If, as has happened the economy goes into recession the GDP falls so existing debt as a % of GDP rises. If there is still a deficit it rises even more. So yes the National debt is rising by both factors.
This is because the issue of growth has not been addressed. The capital projects of the last government were cancelled and have now been replaced by different capital projects by this government. EG. The schools rebuilding programme was cancelled but more Railway electrification has been authorised. Unfortunately the schemes that were cancelled were "Shovel ready" but the new schemes require planning, so are not "Shovel ready". In between there is no capital spend, and growth is depressed.
No growth means more unemployment and higher benefits charges. It also reduces the tax take through income tax. This also means there is less money to spend so retail turn over falls. It does not effect essential goods like grocery but has a disproportionately high effect on goods bought with discretionary income. This leads to discounting with reduced profits thus reduced corporation tax take. Some Companies will fail reducing tax take and increasing unemployment causing the downward spiral of increased benefits and reduced disposable income and most of all reduced GDP.
Reduced GDP means higher debts as measured % of GDP and reduced deficit cuts so both top and bottom of the equation change to push up the measure faster.
Put simply Austerity without growth fails, austerity with growth works. So what we need is growth in the economy.
What this government has done is to reduce future pensions, which reduces the structural deficit. It did this by robbing every civil, public and ex public sector employee of the full value of their pensions. This means that future governments will not need to finance the payment of pensions. The whole cost will be met by contributions from the scheme members. That will reduce future borrowing but it’s full effects will only come in slowly for pensioners. The RPI/CPI rip off had an immediate effect of about 15% reduction to be followed by smaller annual reductions making pensioners poorer as time goes by. This of course also reduces disposable income so the effects on growth are immediate.
Nick, Telford
I agree the coalition government has shown itself to be "useless" in its efforts to sort out the economy, but that naturally suggests the previous administration did a better job, until I remember who really did leave a legacy of £1 trillion by allowing the "croupiers" on bank trading floors to gamble with impunity and without fear of retribution. With my pension now taxed to its bones, almost nil returns on investments and spending power half what it was when I retired five years ago I sometimes feel the Bank of Grandmas & Grandads is being asked to sort out the economic mess single-handed. As the country now owns or has considerable stakes in most of the banks perhaps we should look at using their assets to ease the pain instead of constantly clobbering Joe Public.
Peter
Nick,
Perhaps you could remind us of any occasion when the Tories in opposition were campaigning for tighter regulation of their friends and benefactors in the financial services sector - because try as I might I can only find examples of them talking about a 'lighter touch'.
The fact of the matter is that the excess debt was caused by gross failure and unpunished fraud in the global financial sector - that's why so many countries suffered - most of them to a greater extent than us when taken in the context of their respective GDP output.
It's also a fact that we had returned to growth at the end of the Labour administration - something that the current shower have completely failed to achieve. In the end if it's a choice between borrowing to fund public infrastructure and thus provide jobs vs. borrowing to pay for increased unemployment surely it's a straightforward choice?
There never was a major recession that was fixed without significant investment in public infrastructure. Giving the money to the wealthy, in the hope that it will trickle down to the poor and stimulate them to spend is to rely upon a myth - it simply hasn't worked in the past.
Colin Dodd.
G. Duckett.
If they were hopeless, that would be a vast improvement. The UK is still sending over £1 billion in aid to India, who's economy has grown by £1 billion in the last 3 months, while the UK economy is shrinking. I wonder why?
I see that Camoron is having a re-shuffle soon, which will prove as effective as issuing mops to the passengers on the Titanic would have done.
They call themselves the government, but it says Oxo on the side of some buses, but you can't buy it there.
Peter
The whole issue of foreign aid in the context of the recession is something of a red herring.
Expenditure on foreign aid is of course, principally to help those individuals in far worse circumstances than even the poorest of people in this country, but it also ties in with our influences in respect of foreign policy, trade opportunities and general diplomacy - it's a complex area - sometimes upalatable, but generally accepted by all parties except the comically naive as necessary.
In any event, the amount spent on foreign aid is absolutely dwarfed by the amount spent on tax breaks for the wealthy (£120 bn or so per annum). Shouldn't we be concentrating on fixing that anomaly first?
pete
Mr Duckett has a an appropriate name for such a nonsensical politic!
The possibility of a systemic banking collapse has been a long concern of many economists , the former Chancellor Lord Lawson in his Mais lectures (1990) was unequivocal in his statement that "of corporate indebtedness lies the possibility of systemic banking collapse in which the Bank of England would be the lender of last resort". Being fully aware of the problem we had a new Labour Government whose economic management failed to protect the majority of house owners from deregulated banking practices inflating house prices which effectively spread debt burden from corporate to domestic , despite this Mr Duckett bemoans a mere £13 Billion over the national debt left by Gordon "no more boom or bust" Brown . Out of context and totally irrelevant letter publish by SS in my view. The real irony apart from the obvious not understanding of economics (or politics) is how this current government is actually creating jobs spending more within targets of the former governments and actually gently governing at present , Their not cutting too hard or too fast which is some of the problem! The politics of foreign aid is a joker in the pack of populous nausea often which was used by the national socialists in the Germany of the 1930's.