A trim or a crew cut?
Government liabilities now total £3.6 trillion. A figure so huge that it is meaningless. To make some sense out of it, it is equivalent to £138,360 for every household in the country.
The placards at the Trade Union organised a fortnight ago seemed clear. “NO CUTS” they read, with a big red line through the two words. Surely this double negative must indicate an understanding that the cuts were indeed necessary. Well done the TUC, I thought. They have at last got it: they accept the case for the cuts. How mature. What leadership. What good sense.
So far, so good. Now I thought we can move on to the argument that really matters: are the cuts just necessary or a good thing in themselves? But just before dreaming about how best to persuade Mark Serwotka of the latter case, I suddenly realised that the placards indicated not economic literacy but the sign writer’s confusion. They really did want NO CUTS.
Yes, of course if your job is under threat then it is right to be worried. To protest. But just to demand something because you want it, with no thought about whether it is reasonable or indeed desirable, is the behaviour of an infant.
Surely we should try to work out how bad things are. Today, the Centre for Policy Studies publishes some new figures from Brooks Newmark MP on what the true size of the government debt actually is. And this is a grim story.
Government liabilities now total £3.6 trillion. A figure so huge that it is meaningless. To make some sense out of it, it is equivalent to £138,360 for every household in the country. Which is, by coincidence pretty close to the average mortgage.
Most homeowners keep a careful eye on their mortgage, its size and its interest rate. So don’t imagine them to thank you for telling that the government has borrowed the same amount on their behalf. Yet that is what has happened.
How? Well, the ONS now reckons that the Public Sector Net Debt is now around £875 billion. The ONS says that you have to include the total liabilities of the nationalised banks, which takes the figure up to £2,250 billion. Then you need to add in all those unfunded public sector pension liabilities (another £1,180 billion), the unfunded cost of all those PFI projects (another £170 billion) and other such treat as the investment in Network Rail (another £24 billion).
“A billion here, a billion there, pretty soon it adds up to real money”, quipped US Senator Everett Dirksen to the oil tycoon, H L Hunt.And with over 3,000 billion pounds worth of government debt, it should be clear, even to those waving their placards, that the cuts are necessary (at the very least).
And, things are going to get worse before they get better. The Budget announced that government debt is set to grow over the rest of the Parliament. The “CUTS” are not in fact cuts in the amount that government spends but are merely cuts in the growth of spending. The official government debt is set to increase from 58% of GDP today to 71% in 2013/14. It is not even a trim, let alone a crew cut.
How to get out of this hole? Three things must be done. Firstly, the government must not waver in the face of popular discontent. Second, it must secure the best possible price for the banks we now own (and the CPS has some brilliant ideas on how to achieve just that). And government must focus relentlessly on pro-growth policies (again, the CPS has plans...).
Tim Knox is Acting Director of the Centre for Policy Studies
The hidden debt bombshell – April 2011 update by Brooks Newmark and Ryan Bourne is published today Friday 8 April by the Centre for Policy Studies
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