Shortly after the expensive and clumsy nationalisation of Northern Rock I made a speech to a large dinner in London that we needed to move on from talking in billions about public finance. I suggested we needed a new larger unit. I proposed the “Rock” or £100 billion as the sensible unit for account, management and discussion.We were clearly moving into an era of big government, where the odd billion was not worth discussing. It was just small change. A “rock” would buy you the NHS for almost a year , or a mortgage bank. Strangely the government thought they could afford both.
In a few short months my proposal was blown out of the water by the terminal fascination this government has with RBS. Now we all talk in trillions, if we wish to discuss the true and dreadful sate of the public finances.
I had come to the conclusion that the true liabilities of the state – including pension deficits, Northern Rock, PFI, PPP and Network Rail as well as the public debt the government recognises, reached about £2 trillion before the RBS adventure. On top of this today we should add the £2 trillion of the RBS balance sheet, now that we own or about to own practically all the shares and clearly stand behind every last bad debt and foolish investment this wretched bank has ever made. Or if you prefer not to consolidate this errant and overghty subsidiary, you need to account for the £0.5 trillion banking package last autumn which failed to work as intended, and the guaratees now being crafted for banks that will exceed another £0.5 trillion.
If you were being kind you would conclude the taxpayer in on the line for at least £3 trillion, or twice the National Income. On private sector accounting rules it would be at least £4 trillion.
The public accounts are being shot to pieces. Usual debate about whether to increase spending by a few billion or to cut taxes by a few billion have become futile against this huge move to mega buck spending on banks. The government has developed a dangerous and expensive habit of propping banks in the dearest way imaginable. I have not been blogging on the issue of Goodwin’s pension pot, because it is a small diversion from the collosal waste of public money going on in subsidising and backing toxic debt