Until this is done with complete honesty, the problem cannot be dealt with.
How many times have you heard politicians talk about our National Debt?
Have you ever heard them talk about it?
Our Governments response to the problem of National Debt over the past decade has resembled nothing better than a gambler in denial. “I only lost seven percent of our annual income this year, Honey. Don’t worry, the loan shark gave me a reeeally good deal…”
Politicians frequently talk about the deficit but rarely about the actual debt our country owes.
When large corporations issue their quarterly reports stating they made a loss there is a general understanding that three of these in a row signals something seriously wrong with the company. If you haven’t already bailed as a shareholder then it may be time to sell. No matter how much you stand to lose, if you continue to hold those shares there is a good chance that trend down is just going to get worse.
The UK Government hasn’t just made several quarterly losses, it has made a loss every year since 2001! (CI001A)
The Conservative and Liberal Democrat Coalition Government, hereafter referred to simply as Government or Coalition, inherited an estimated National Debt of £776.6 Billion in 2010.
According to the Coalition’s 2014 budget, Net Debt is forecast to be at £1,355 Billion in the current 2014/15 financial year. (CI001C)
Contrast that estimate by our esteemed Coalition with this statement from the ONS on 23 September 2014: “Public sector net debt excluding public sector banks (PSND ex) was £1,432.3 billion in August 2014, an increase of £96.7 billion compared with August 2013.” (CI001D)
We’re already well over the Coalition’s estimate of where our debt should be and still almost half a year to go…
In the first four years of Coalition they managed to add £655.7 Billion to our national debt. By the time the next general election is held, it is likely the Coalition will have doubled our national debt.
Note the statement above that this does not include the liability taken on by the Government for bad loans made by the now publicly owned banks. Or as it was subtly put in Labours 2010 budget: the “temporary effects of financial interventions.” When you actually include this figure, national debt balloons to £2.285 Trillion! (CI001A)
Neither does it include the unfunded pensions black hole… “Obligations relating to unfunded pensions for public sector employees in the UK at end-2010 were estimated at £0.9 trillion.” (CI001E)
National Debt is up to £3 Trillion already!
I voted Conservative in the 2010 election, in large part as I was then convinced that the then huge increase in National Debt was unsustainable and I hoped a Conservative led government would attempt to bring debt under control. I struggle to understand how a Coalition that preaches the need for austerity can be so profligate with public spending.
When in 2013 I first tried reading the June 2010 Budget I noted this statement: “The OBR’s judgement is that the policies set out in this Budget are consistent with a greater than 50 per cent chance of achieving the Government’s fiscal mandate and target for debt.” Slightly better than flipping a coin but not much!
A small clue is given in the 2014 budget: “net borrowing will reach a small surplus by 2018-19. However, the record deficit inherited by the government means that public sector net debt will have risen by around 40% of GDP to a forecast peak of 78.7% of GDP in 2015-16, and will be 74.2% of GDP in 2018-19 – or over £50,000 per household. This is the highest level of debt since the end of the 1960s.” (CI001F)
No, No, No! The Coalition inherited the debt, not the deficit. The moment the Coalition released their emergency budget in June 2010, they became fully responsible for the deficit. They could at that point have been fully honest with the British public about the level of debt. Could have been fully honest about the need for GOV.UK to massively cut back. But instead they failed to face the problem.
When the Coalition came to power in 2010, they inherited a Budget that planned to borrow £163 Billion (CI001C). They cut this down to £149 Billion in the June 2010 Budget (CI001C) yet presented no plan of how this money would ever be repaid. The June 2010 Budget forecast we would pay interest of £44 Billion that financial year. This means they knowingly planned to use 8 Pence in every Pound collected in tax to pay interest! (£44 Billion interest payment divided by £541 Billion Government Receipts)
Almost ten percent of the money we paid in taxes in 2011 went on paying interest and this could continue for decades even if they immediately balance the Budget!
There are many views on Budget management. I and many people in Britain hold to the view that we should only spend what we can afford and should only take on debt when we have a clear plan of how to repay that debt. Taking on greater amounts of debt when we cannot even pay off the debt we have previously accrued is a sign of financial mismanagement.
No competent financial institution will lend to a person who has no plan to pay off their loan. It is a sad indictment of our society that financial institutions still exist that fail to ensure everyone who takes out a loan can and will pay it back.
Our Government is a borrower with no plan to repay its debts. The budgets of the last few years include an intention to pay interest but also to keep borrowing. Money that in a normal future would be expected to be repaid.
But everyone with financial sense knows that if anyone keeps borrowing without ever repaying that debt they are digging a deeper hole in which to bury themselves.
The National Debt is publicly known. Some people are extremely worried about it, everyone it appears except the only people whose jobs it is to do something about it. They may well be worried in private but in public they rarely mention the elephant in the room instead preferring to talk about “the deficit.”
You know what the deficit is, right? The difference between tax receipts and Government spending, or to put it another way, the deficit is spending more than you have coming in. It is absolutely essential the deficit is reversed if we are ever to repay any of our debt. However the absolute focus on deficit fails to address the real problem. Government has set targets to reduce the deficit by one or two percentage points. What this really means though is that they want to continue to add billions of pounds to the National Debt, not just every year, but every month!
Remember, National Debt currently stands at £1.4 trillion in August 2014 according to the ONS! (Leaving aside all that nasty unfunded stuff the government doesn't like telling us about...) According to Labour Market Statistics, September 2013 from the ONS, there were 29.84 million people in employment aged 16 and over. (CI001G)
If we round that number up to 30 million and state that we as tax payers owe this debt, this means that each and every tax payer owes £47,743. (Not including unfunded pension obligations or debt from bad banks…) And the National Debt continues to grow!
Can you afford to pay your share of £47,743? Fancy taking out a mortgage? A second mortgage? Not so you can own a house but simply so that this debt can be repaid. Debt that you didn’t ask for, didn’t authorise, didn’t sign up to be responsible for?
If we don’t deal with this debt then it will remain. Do you want your children to inherit fifty, sixty, eighty thousand pounds worth of debt, before they are even born?
The deficit appear to be the politically correct way of minimizing the problem. I’m not sure what exactly our Government thinks would happen if they stopped talking about the deficit and started actually talking about debt. Riots on the streets? Food shortages? Civil War?
I’m quite confident the vast majority of my fellow citizens have no desire for riots or war and that there actually is enough food to go around. Though my recent experiences volunteering at a food bank suggest while some may have plenty, there are many who have far too little.
Currently the Government appears to be in denial about the debt we face. Unfortunately it is only once denial is overcome and the reality of the situation is fully faced that the problem can truly be dealt with.
So, my first crazy idea is that Government and all of us stop talking about the deficit and start being honest about the amount of debt we have as a country and what it means for us and our children.
Do post your own crazy ideas or feedback on mine in the comments below and sign up to my mailing list below to be notified of future posts.
Why should my crazy ideas have any relevance to the economy? I'm the author of The Great Scottish Land Grab, a novel that imagines a fairer future for Scotland where the poor are empowered to change their destiny. I'm director of my own limited company: Goal 31 Ltd and I've over seven years experience working for government and financial organisations.
As I wrote at the start, I am making my 100 crazy ideas freely available. It seems unjust to propose ideas to fix the economy and then prevent people from freely reading those ideas. 100 Crazy Ideas to Fix the Economy will be published once the craziness is complete.
I can be found on Twitter: @my100goals or on Facebook: http://www.facebook.com/my100goals. There's a short bio here.
Powered byEMF Online Form Builder
(CI001A; ONS; 01/11/2014; http://www.ons.gov.uk/ons/rel/psa/public-sector-finances/september-2014/rft---public-sector-finances-tables-1---10.xls)
(CI001B; National Archives; Budget 2010; Page 215: http://webarchive.nationalarchives.gov.uk/+/http://www.hm-treasury.gov.uk/budget2010_documents.htm)
(CI001C; UK GOV; Budget 2014; https://www.gov.uk/government/publications/budget-2014-documents)
(CI001D; ONS; http://www.ons.gov.uk/ons/rel/psa/public-sector-finances/august-2014/stb---august-2014.html)
(CI001E; ONS; http://www.ons.gov.uk/ons/rel/pensions/pensions-in-the-national-accounts/uk-national-accounts-supplementary-table-on-pensions--2010-/art-mainarticle.html)
(CI001F; UK GOV; Page 27; https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293754/37630_HC_1104_Budget_2014_Complete_PRINT.pdf)
(CI001G; ONS; http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/september-2013/statistical-bulletin.html)