The people get it, the government is in denial.
People in Britain and their government are diverging on how to deal with overborrowing. The people know you need to save to sort out a credit crunch. The government thinks you need to borrow more!
Many families are cutting out the luxuries and the inessentials from their budgets, to cut their borrowing. They are dining out less, cancelling the exotic holiday, taking fewer trips to the pub and reducing the purchases of designer clothes.
The government meanwhile is increasing its spending on administrative staff, on adverts and spin doctors, on Identity Cards and much else that we don’t need.
Many families are repaying credit card borrowings and stopping use of their old flexible friend. They know it all has to be repaid and the interest rates on them are still high.
The government meanwhile presses on with more PFI and PPP contracts, its equivalent of very expensive credit card borrowing, and flexes its plastic whenever it can. It has a weakness for ruinously expensive bad banks and can’t walk down the High Street without buying another.
Many families are repaying some of the mortgage, aware that their property is falling in value and all too conscious that the debt on their home is too high. Government in contrast is taking out record levels of borrowing, increasing the nation’s mortgage like there’s no tomorrow.
They can’t both be right.
The truth is the public understand that together we borrowed too much, imported too much, saved too little and produced too little. They are desperately trying to correct all this, by reining in and repaying debt. As predicted here, the savings rate is shooting up, mainly through debt repayment.
People are therefore angry and frustrated that just as they are getting their own finances into shape, the government is debauching the national finances. We all know we are responsible for the debts the government builds up. Long after these reckless Ministers have gone we will be working harder to repay the bills they incurred. No wonder the public mood is so bad.
The scale of it all is so worrying. If you take the more accurate government balance sheet I have set out each man woman and child is now in debt to the tune of £50,000 including the banks and £75,000 if you include the public sector pensions deficits. That’s the magnitude of the risks and borrowing this government has taken out. It was around £5000 each plus say £5000 for pensions in 1997.
It means the government is increasing the borrowing of every one of us quicker than we can repay our personal debt. That’s why so many of us are hopping mad.
I agree with those who say Labour think they can get through the next year without a formal trip to the IMF for a big loan. My point is they are getting into a position where they could borrow from the IMF if Plan A, domestic borrowing and printing, starts to go wrong. They are afraid the past will come back to haunt them and are lining up as many credit cards as possible, just in case. It will be a disaster indeed if the domestic borrowing and printing runs out in under a year of maximum overspend.