Gordon Brown is whistling in the dark

At last a government minister has admitted that spending cuts are inevitable after the next election, even as Gordon Brown still tries to pretend otherwise.

Despite the talk in the media of green shoots, last week’s OECD report gave the grimmest assessment yet of Britain’s economy and its public finances. There was a lot of fuss in the press about the prediction of a 14% deficit next year but the really worrying figure is the long-term projection. By 2017, the OECD predicts that the UK’s debt will stand at 125% of GDP, higher than that of the USA , Italy and even Iceland. Of the OECD countries, only Ireland and Japan are predicted to have debt levels higher than that of the UK. (See page 250 of the OECD report for the full details.)

But wait, there’s more. The 125% debt level is based on the assumption that from April 2010, nine months from now, the government cuts spending by one percent of GDP for the next seven years. A quick back-of-the-fag-packet calculation, based on Christopher Chantrill’s figures, makes that somewhere between 2% and 2.25% of public spending.

So let’s just summarise. The OECD reckons the UK needs to start cutting public spending by at least 2% in nine months time, just to get debt down to 125% of GDP by 2017. Bloody Hell!

Despite all this, Gordon Brown still claims that he can reduce debt without cutting public services.

A recent YouGov poll suggests that most people understand the position. 77% agreed that there is a need for cutting public spending by as much as 10%. Of course, there is a world of difference between approving in principle of unspecified spending cuts and approving of cuts in specific services, but this poll shows that there is no longer an electoral advantage in pretending it’s not going to happen.

It is probable that the government is going to lose the next election but it will certainly do so if it doesn’t come clean about the public finances. By pretending everything is OK, Gordon Brown is allowing the Tories to attack him on public spending without needing to say specifically what they would cut. By being honest, Labour might be able to put some pressure on David Cameron who, up until now, has come up with no clear strategy either.

As it is, both main parties are letting us down. The public services we have been used to won’t be the same in five year’s time. We need to start talking about that now.

This entry was posted in Uncategorized. Bookmark the permalink.

8 Responses to Gordon Brown is whistling in the dark

  1. jameshigham says:

    It leaves one with that dry-mouthed, sinking feeling, doesn’t it?

  2. Bob B says:

    According to David Halpern – a senior Blairite adviser who used to work in Downing St – there’s a simple way of cutting back public spending:

    “Billions can be saved, for instance, if services for those with chronic conditions like diabetes are redesigned around self-care.”
    http://www.prospect-magazine.co.uk/article_details.php?id=10870

    That’s bound to be good news. By media reports there are about 100 amputations every week due to diabetes – and when most diabetics are already on self-care regimes. Presumably, they will now be expected to carry out the amputations as well. But what’s the problem – just get out a carving knife from the kitchen draw and a saw from the household toolbag and they can do it?

    What about folks with chronic cardiac conditions? There must be endless scope for DIY angioplasty procedures and open heart bypasses.

    But just a minute, isn’t there a recurring problem with self-care regimes for potentially homicidal schizophrenics because they can’t be relied on to take their medication?

  3. Giles says:

    Is there not a problem with alternative definitions of what the debt actually is? I mean, 125pc of GDP is nowhere near other estimates

    http://www.imf.org/external/np/pp/eng/2009/030609.pdf

    table 6.

    I somehow suspect that the net interest cost of our 2016 debt will be something like 4.5% of GDP – the level Mrs T managed.

  4. Rick says:

    True enough Giles, but the OECD prediction wasn’t up at 125% in March either. They’ve seriously downgraded their view of the UK finances.

    Whatever the figures, all the projections (OECD, IMF, EU) seem to say the same thing. We start the recession with less debt than other large economies and finish it with more than France and Germany and about the same as the USA.

    That should be worrrying us.

  5. Bob B says:

    By this IMF estimate reported in The Economist of 13 June, Britain’s predicted gross government debt as a percentage of national GDP in 2014 doesn’t look too bad compared with France, Germany, Japan or the US.
    http://www.economist.com/printedition/displaystory.cfm?story_id=13825211

    Surely the worries are projected GDP growth and the mooted possibility of a double dip recession, the decline in tax revenues and about whether the finance markets will absorb the stream of new debt without bond yields soaring. So far, yields on 10-year government bonds of Germany, Britain and the US are all about the same – see the chart 2 – which is reassuring.

  6. Pingback: Why is Brown lying? |

  7. Bob B says:

    An extraordinary commentary by Philip Stephens on the Governor of the Bank of England in Tuesday’s FT opposite the leader page: King does not have a monopoly of wisdom:
    http://www.ft.com/cms/s/0/de7bb11a-64d6-11de-a13f-00144feabdc0.html?nclick_check=1

    I can’t recall the like of it in the FT before. If I were Mr King, I’d be a bit worried, given the international readership of the FT and the fact that Alan Greenspan had a recent opinion piece on the same page and Larry Summers used to have a regular fortnightly column there until he became Director of the (US) National Economic Council for the President in the White House.

  8. Impressive Article , I considered it great

    I look ahead to more interesting postings like this one. Do you have a newsletter I can subscribe to for fresh posts?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s