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When the Tories come to power, they will be taking power not over a country, but
of a large bank with a medium-sized government attached to it. Britain paid for
the banking crisis with debt. Now we need to start paying for it.
We've run up quite a bill. The IMF warns Britain has the second highest structural
deficit in our fiscal primary balance of 22 developing countries, at a colossal
7.8% of our national income. The government overspend was £11 billion last month
alone – for every pound the state spends, it has to borrow 25p. In the first full
year of the next government, 2011, Britain is forecast to have the largest deficit
in the developed world. Our net debt will top £1 trillion within four years.
As far as lending's concerned, that accumulation of debt hasn't helped the public
very much. Britain has not benefitted from the worldwide application of cheap loans.
Our base rate may be 0.5 per cent but the typical British mortgage is charged at
4.3 per cent (by way of comparison, the average mortgage on the Continent is charged
as less than 2 per cent). Had mortgages come down as much as base rates, British
consumers would be £50 billion a year better off – and the economy would likely
have come out of recession, just as those in Europe have.
We can't keep borrowing. But, as the Chancellor knows only too well, we can't raise
taxes too far and we can't cut spending too much either. Either threatens an economic
recovery. What to do? We could start by canning final salary pensions for civil
servants or at the very least, make them contribute to their pension plans as the
private sector has to. There's a 5 to 10% saving straight off! |
