Borrow, borrow, and borrow again. The government is living in a fantasy world, where foreign investors and rich British people have to lend to the government to spend like there was no tomorrow. Their political strategy seems geared to a Spring 2009 election which they will back away from when they see the opinion polls, after a winter of job losses and factory closures.
This government will drown in a sea of red ink. Never have I seen the public accounts in such dire straights. The government assumes a mild and short recession, with recovery beginning in the middle of next year. Even so, they anticipate tax revenues plunging by a massive £73 billion in 2009-10 because the economy will be weak, and anticipate borrowing £157 billion this year and £126 billion next year. This year’s borrowing including buying bank shares amounts to more than 10% of national income.
The Opposition talks of the government flashing the national credit card. They are also taking out a huge national mortgage, and will soon have us deep into negative equity, unable to pay the interest bill easily.
If this were a company it would be time for the Non executive Directors to have strong private words with the Chief Executive. They would tell him or her that the strategy was taking the company quickly to a position where it could not afford the interest and all the other bills. They would demand cost cuts and raising more revenue. They would warn that if the company did not do it for itself, the bank manager would take over or eventually the Administrator would be called in by the creditors to do it. It is time for the rest of the Cabinet to warn the PM and Chancellor in private, and time for Parliament to raise the roof beams, warning this government there are limits to how much a country can borrow.
Labour’s crude political strategy is to say they will take care of the victims of recession through spending more public money, whilst the Opposition just wants spending cuts. Please do us a favour. The Opposition welcomes – and urges – action to ease the plight of the victims of recession. We have asked for schemes to help small business struggling to pay the bills, to help Council taxpayers faced with another large public sector demand, and pensioners. More can and should be done. What we cannot afford is the VAT cut, the bank nationalisation, the ID cards, the unelected regional government, the public sector’s rich list, the surveillance society and all the panoply of Labour’s illiberal state.
As I have commented before, what we really can’t afford is a long and deep recession. That is why yesterday was such a wasted opportunity. Sensible action to improve the terms of the bank support in a way which cut taxpayer risk and made it more effective would have helped. Tax cuts of the right kind to target money to the lower paid would have helped. Tax cuts for business struggling with insufficient cashflow and restricted borrowing would help. Instead the PM went for broke with a VAT cut which will do little good, and could be the final weight which pushes this government under in the sea of red ink it has created.