Dec 09 2009
Public Borrowing Reverie (PBR)
As I sat listening to the Chancellor, I tried to share his dream. Even with my eyes closed, I could still not get the ultimate losses on our £850 billion of bank assistance down to just £10 billion as he can. I was unable to see how a £178 billion deficit could be halved in four years without announcing any new real spending cuts. The Chancellor’s magic did not work for me when he intoned that we could double the UK public debt again over the next four years without shifting interest rates dangerously high.
The PBR document is full of unpleasant surprises. The Treasury thinks unemployment will fall to 1.25 million as soon as 2013, but the National Audit Office thinks it will still be at 1.94 million in 2014. The NAO has sliced 5% off growth to cover the downturn, whilst the Chancellor himself has had to up his annual forecast of the decline from a drop of 3.5% to a fall of 4.75%.
The PBR forecasts that the government will borrow £242,900 million this year to cover its cash requirement of £223,000 million and its gilt repayments of £16,600 million. The two year net requirement is a massive £400,000 million.
Today brought more grief in the form of poor balance of payments figures. A year after the big devaluation, and there is sitll no sign of the gap between imports and exports closing on the scale we need. The Chancellor said nothing about it. This week’s industrial output figures are still poor. The printed money is pouring into the public sector, and is pushing up asset prices. It is not yet helping restore some fortune to manufacturing and exporting as we need.
20 Responses to “Public Borrowing Reverie (PBR)”
John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College...
John did you not see the stardust that was being spread all around.
You would be forgiven for thinking that everything in the garden is rosey.
Debt, that is for another day.
Cuts in Public expenditure, that is also for another day.
National Insurance increases, that is for 2011 (almost forgot already going up in April 2010)
Just keep on printing the money, UK PLC will not go broke whilst we are in office, that may happen to someone else.
No more than I expected from this Government as the debt rises by £25,000 per minute (at least that is what I am lead to believe)
The £200bn QE money has flowed through the system and is currently in the banks reserves in the Bank of England. Next year, the banks will be asked to use this money to buy more gilts (approx 200bn) and then we will have £400bn more in money than we started with, interest rates remain low, house prices shoot up and the Govt is happy.
the only thing they cant control is the pound.
It seems absolutely in keeping with everything this government does that it proclaims its confidence in future economic growth whilst simultaneously cheer-leading efforts to de-industrialise the Western economies at the Copenhagen Conference.
Joined up thinking? Surely not?
Despite the hollowness of the Review unless the Tories start to tear into these Labour myths and show the public the crassness of Brown and Co. DC aint going to finish up in No10. So far there appears to be a Tory front bench of two. Surely now is the time to unleash the experienced and trusted Tory politicians.
one final point. Asset prices are not included in the measure of inflation so the Bank and Govt can pretend that the QE printed money is not inflating away savings. Its how we got into the current mess and its how we will get into the next one. The pound is destroyed.
And yet the Tories are falling in the polls, with further falls likely if Cameron continues to present himself as more pessimistic on the future, and more hawkish on the required remedy.
Something has gone wrong. Is it the return of Campbell and Mandelson, or is there a problem with Cameron’s credibility and performance?
DennisA Reply:
December 9th, 2009 at 10:45 pm
He should abandon the foolish pursuit of higher energy costs for no reason, plus he is reaping the reward of his Lisbon strategy.
Good Eveing John
I don’t know how to say this, so i just say it. Gordon has some time ago done a deal with “Someone” ref the value of the £…..It should have crashed some time ago.
“DC” MUST go to whom ever they are & explain that IF “They” wish to work with him….Like HELL he is going to have the £ crash on his watch……..”They” better ensure the £ crashes on Gordon’s watch.
Mike
All they want to do is say things and get “facts” written down in Hansard so that when the next government takes action they will be able to refer to, and quote, their figures as if they were facts – and will then say how inept, incompetent and incapable the new government is.
They don’t/won’t mention current problems and poor balance sheets in Parliament – because everything that is said is on public record.
In the long term lies don’t matter, nor does spin – it’s all in perception. We know the numbers don’t add up – now – but people have small memories and will only see what’s happening at the time.
Whoever wins the coming election, assuming it isn’t Labour, will have to take great care to quickly, and publicly, release full figures – and risk the wrath of the international community.
Having just posted, there is a lot I agree with here, notably the critical one of interest rates. It is all a terrible mess, and a great deal is being left unsaid.
From the Coffee House http://www.spectator.co.uk/coffeehouse/5620128/the-publics-right-to-know.thtml
“The Treasury have just banned transcripts of the all-important briefing they give to journalists after the budget.”
The Tories should be pro-growth and scrap all the Brown-Darling tax hikes ! Instead they should accept the CBI statement that £120 billion in spending cuts are needed in the next parliament.The Opposition should work with the Tax Payers Alliance,Adam Smith Institute and Center For Policy Studies to produce the reforms needed to generate the said savings over a 5-6 year period.
We could sell spending cuts as a less unpalatable option to higher taxes and thus make our plans for a smaller state sound like an attractive pro-growth package.After all we want investors investing in business expansion to drive economic recovery.That sounds better than investors buying bonds to fund vast budget deficits that will be a shocking burden on future generations.
After over a decade of rising taxes there is no scope for any extra revenue raising.The vast Brown created client state was created for political reasons(to ensure that enough state reliant people where around to vote Labor in elections) and for economic reasons it must end.The parts of the UK that have the lowest levels of reliance on the state are the wealthiest – look at the South-East,London and the Eastern Region.
I think that speaks volumes myself as socialists are only good at wasting other peoples money-creating wealth is not something your average lefty really favors despite the fact that you need a prosperous economy to fund the welfare state.
A couple of years ago the EU opened the flood gates to immigrants. Since then Lithuania and Latvia have gone under as we soon will. I am teaching these immigrants English so that they can settle here. So how am I paid? Well, to get my pittance (ten pounds an hour less than I get coaching in the Fens), I have to beg. And who do I beg but the government and the EU.
If that stream is cut off, our Centre goes down and it is doing excellent work.
I see a lot of people on the dole. If that goes, there will be even more mugging. I see a lot of minor bureaucrats. They all stand to lose their livelihood if the State withdraws it. Police, Teachers, Social Workers (we had a girl of 13 who has just gone onto the streets), Firefighters…. All will go under if the State withdraws its bounty.
I think this goes a long way, myself, to explaining why people are being so very crass about these appalling figures and why the political parties – all – are being so careful with their promises.
No wonder rigs are being sent down to the Falkland Islands. We’re going to need a huge oil bonanza if we’re ever going to dent this unprecedented peace-time national debt!
Am I the only one who thinks that sustainable government spending ought to be in the region of £300 billion per annum, rather than the current £600+ billion?
The ONLY reason that the Sterling Pound has not appeared to tank to date, is that the US Dollar is falling against a basket of currencies.
However, the Dollar is being reconsidered as a “Safe Haven” currency due to the debacle in Dubai and the fact that US unemployment seems to be hitting the bottom now.
If US Treasury rates rise, THEN the pound will get hammered, which is expected in the next six weeks. It is clear that Public Expenditure is outside the will of Government to either control or diminish and the markets will punish our currency for this.
Darling’s performance today in Parliament was rated poor to pathetic and the markets are already taking notice. By hitting the Banks too with penal taxes on any bonuses means that Hedge Funds will be heading for new pastures outside of UK
It’s called b*llsh*t John and you need to call them on it.
Call them b*llsh*tters and you will get the applause you deserve. If you treat it as a debate the spectators will give you no respect.
Stop being so polite with them when they are being so rude with the truth and British public. It’s a fight not a debate.
As they say in self defense training – Know when you are in a fight.
How this PBR can have done anything to preserve this country’s credit rating is beyond my comprehension. I have just listened to Darling’s abysmal performance when interviewed on ‘Today’. He sounded like the person who has been put up to answer questions on a report for which he had no involvement in the preparation. The behaviour of this government seems nothing short of criminal.
I watched your spot on Sky News yesterday afternoon ,you aquitted yourself with sensible arguments and dignity but did you know that you would be debating with that rotund union caricature? I hope not , you deserve more worthy opponents. I think I speak for most of your readers in saying that we want you to have a strong influence on the next government’s policies , going up against (such people-ed) with studio advantage is not getting you where you are needed. I know you have problems getting the right kind of media exposure and I suspect that confrontation was sprung on you. Have you any thoughts on this?
reply: I was offered a longer slot against a senior Labour politician with Treasury experience.
The balance of payments figures used to be routinely reported on the BBC national news. Under labour they have never been mentioned.
Ireland is taking its medicine early and sensibly, under the discipline of EU membership. We do not need to join the Euro, but should seriously consider following their lead – 5%-8% cuts in Civil Service salaries, for example. If we keep on dithering the capital markets will become much more unforgiving than the cold hand of Teutonic monetary discipline could ever be. Debauching the pound has been stupidity from the start, and has obviously failed, apart from importing inflation. We need to get serious about sorting things out very, very quickly, or the currency will collapse completely and we will be a very large Iceland. Don’t believe that it can’t happen, it can and will unless we follow Ireland’s leads, plus some other cuts of our own. The cretins who think that a massively devalued pound will solve things should look at Iceland’s latest GDP figures. All that the weak kroner has done is to benefit a large foreign aluminium company and lead to major shortages of essential goods, medicines and fuel. That’s bad enough for a tiny nation of 300,00, how will it be when this country of 60 million can’t even, for example, buy the medicines that the NHS needs because the pound is either so weak that imported drugs are too expensive, or else Sterling has ceased to be a convertible currency? Believe me, the idiots in charge in Downing Street, the Treasury, and Threadneedle Street are playing with fire, and it’s we who shall be burnt (if you don’t believe me, look at the BoE pension fund’s current investment strategy).