Back in the spring of 1997, the sterling trade-weighted index stood at 93, exactly the average since 1990, and the deficit (PSBR at the time) was 8% of GDP (See note). This, according to the Conservative Party, was a golden legacy Labour were squandering. Now, the sterling trade-weighted index is at 93, exactly the average since 1990, and the Treasury is forecasting a deficit (PSNCR this time) of 8% of GDP. This, according to the Conservative Party, is national bankruptcy, brought about by the Labour Party for its own inscrutable ends (dog whistle: they’re all communists).
Further, according to the Conservative Party, the State should establish “an institution to lend to small businesses”. (Hey, we could call it the Industrial Reorganisation Corporation, or maybe the National Enterprise Board – that one has just the right sound to it, no?) Let’s recap: first of all, the Bank of England was right to lend taxpayers’ money to Northern Rock. Then the Government was wrong to do so. Then the Government was wrong to nationalise Northern Rock because it put taxpayers’ money at risk, and (dog whistle) they’re secretly plotting to take over all the banks. Instead, the Government should have the Bank of England pay for it because its funds suddenly weren’t taxpayers’ money any more. The same procedure was followed for Bradford & Bingley, but the Conservative Party also held that there was no need for this because everything was really OK.
Then it turned out to be not OK at all, and for a while the Conservative Party kept schtum. The Government came up with a plan, which was rapidly taken up by every other OECD nation, to (essentially) underwrite an absolutely huge rescue rights issue for several banks, to guarantee wholesale interbank lending, and to top the whole lot off with a fiscal reflation. The Tories were silent. Now, with this actually in place, they are incoherent with rage; things are so bad, apparently, that the assets of NR, B&B, RBS, and HBOS are worth absolutely nothing and the interbank guarantees will all be called in (even though most of them will net-out). However, things are still not actually so bad that we need the reflation.
Now, apparently, although the Government should not be spending any taxpayer funds, it should also be lending them directly to industry to substitute the banks, which you will recall there is nothing wrong with, but which are also worthless.
On top of this, Private Finance Initiative costs are now, according to the Conservative Party which invented the things so as not to include them in the national debt, part of the national debt. If they really believed that, this would imply that Ken Clarke, John Redwood, Malcolm Rifkind, and William Hague should be drummed out of the party as a gang of fraudsters. Hey, they were plotting to conceal the government’s true indebtedness in sinister Enronlike off-balance sheet vehicles!
All these funny figures are necessary to keep Gideon and Dave from PR from being caught deceiving the House of Commons. Why? Because he decided to say that the UK “has the debt levels of Italy”. Italy has a national debt equal to 103% of GDP; the peak forecast figure for the UK is 57%. But if you torture the data enough, by reclassifying the PFIs, by deciding that all those square miles of Victorian terraces with HBOS mortgages don’t keep the rain out any more, by capitalising all the future public pension liabilities (but strangely not the “unfunded nuclear missile liability” or the “unfunded tax break for Conservative client groups liability”) you can kindasorta get there – if you have absolutely no intellectual integrity at all, that is. After all, if you did that, you’d have to do the same for the Italian public sector as well – and can you imagine what that balance sheet would look like if it had to roll up all those retired posties’ pensions to an infinite horizon? If you want any more of this stuff, try Daniel Davies.
The ideal response to this is already available, thanks to Mark Easton of the BBC.
We might as well report that the date, 2008, is a record number of recorded years. More than in any other year since records began 2008 years ago. Beating by one the record held only last year, of 2007. And that if the trend continues we will see another record number of years recorded in the year as early as next year.
Bravo! Remind me why we have to put up with these fucking people. Meanwhile, for everything else, I think it would be better to spend more of this money on capital investments rather than a VAT cut. Which apparently puts me in harmony with the political party I’m a member of. Perhaps I should take maverick lessons.
Update: Mea maxima culpa. As part of our commitment to quality, I feel compelled to note that the figure of 8% of GDP, £46bn, was the government deficit at the peak in 1993-1994; it was down to £28bn in 1996-1997. It remains true that 8% now is no worse or better than 8% then.
Oh, so what political party are you a member of?
One of the Sunday papers I read at the weekend had some interesting graphs showing how since 2000 or so, public borrowing has crept up and up, and the debt has been increasing. Given that Blair/ Brown were in the past 7 years trying to convince us that everything was coming up roses and the economy was in wonderful shape, the increasing gvt debt gives that the lie.
Of course I consider that the modern monetary system is crooked, and it is impossible to run a modern mixed economy country with a good dose of welfare state without a permanent gvt deficit.
The government ran a significant surplus from 2000-2003. Perhaps you need to get another Sunday paper.
More bollocks.
Just because other countries aren’t reporting the liabilities, why should we. A bit like a murder saying you can’t prosecute me because others are getting away with it.
Why aren’t the state employee’s pensions on the books? The advantage I can see here is that if they aren’t on the books, we don’t have to pay them.
What about the state pension, state second pension? They aren’t on the books either which means the government doens’t have to pay that too.
What about all these new loans and guarantees? Not on books.
…
It’s worse than Enron by miles. No company could publish accounts like the government and not be prosecuted for fraud.
“Just because other countries aren’t reporting the liabilities, why should we.“
Fuckwit. The point is, we (and more to the point, the foreign investors we’re borrowing the money from) can only assess whether our levels of debt are reasonable by comparison with other countries. And comparing UK national debt + future pensions to Italian national debt not including future pensions doesn’t tell anyone anything meaningful.
And no, no company could publish accounts like the government and not be prosecuted for fraud. Similarly, no company could arrest people under the threat of lethal force, or compel people by law to pay it a proportion of their income. This is because companies and governments are Not The Same Thing.
Put me in the credits column: great TYR post. No-one’s saying that Brown and Co aren’t duplicitous and often wrong-headed – they are politicians, after all.
But Dave and little Georgie really are beyond appalling. The Tories now are so obsessed with electoral strategy that they’re losing their grip on reality (read Danny Finkelstein at the Times for further evidence…). Like New Labour living in fear of 1983, these guys are constantly harking back to 1997 – “we’ll never be be out-marketed again!”
I don’t like the Lib Dems (I’d still be in the Owenite SDP if I could, so I guess my own credentials are suspect, too). But if they’d elected Vince Cable leader, I think I’d be voting for them, based purely on his sound reading of the capitalist clusterf***.
“if they’d elected Vince Cable leader, I think I’d be voting for them, based purely on his sound reading of the capitalist clusterf***.“
Thanks Richard, you’ve given me the grain of a post on LC, which I’ll do Real Soon Now, on how unfortunate it is that both opposition parties finally got to grips with the Nothing Very Serious era of Blair-y flim-flam, just as things actually became serious and flim-flammy Blairite stock plunged by 95%…
(blah blah Iraq, War on Terror blah blah. Not serious for British people. 0.2% of GDP, fewer annual deaths than cooking accidents. Serious for Iraqis, but when has that ever factored into domestic political calculus?).