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.