Saturday, March 21, 2009
In his pre-budget report in November, Darling announced a 20 billion pound stimulus and forecast that borrowing would rise to 118 billion pounds, or 8 percent of GDP, next year.
The report said public finances were deteriorating at an "alarming rate" with the recession easting into tax revenues and a surge in unemployment leading to a sharp increase in benefits payments...
That meant Darling had few options for injecting extra resources to jumpstart the economy, it added.
Official figures on Thursday showed Britain posted its record biggest February budget deficit on record with public sector net borrowing almost 9 billion pounds, more than eight times higher than a year ago.
Ernst & Young said it now predicted that total borrowing over the next five years will be 270 billion pounds higher than Darling's current forecasts, the report said.
"The Chancellor must provide some credible forecasts for the public finances and present an unambiguous medium-term plan for restoring them to health," Spencer said.
"This is essential to maintaining confidence in the government bond market."
Borrowing 12.5% of GNP every year is quite obviously unsustainable, particularly when the productive, non-governmental, part of the economy which has to pay it back is under 50%. By comparison Brown's "prudence" used to be that we should not allow government borrowing to exceed 40% of GNP - but that 40% was all the money ever borrowed & not repaid over 2 centuries.
At £180 billion borrowing is getting dangerously close to the £200 billion increase in the, after inflation, increase in the size of government spending under Labour. To get the economy back on an even keel the Conservatives are going to have to cut almost all of that spending & even so that only gets us back to solvent.
That leaves the only option, if we want to make the economy actually work, being to ALSO cut back the Luddite regulations that make our economy uncompetitive. I previously said that we can easily get out of recession* & that this is a wholly unnecessary recession caused by overgovernment. It still is but getting out of this hole is becoming more difficult with each new day & each new dollar borrowed.
Alastair Darling's whole approach of borrowing recklessly to smooth out the recession has clearly & unambiguously led us to the brink of disaster. In the November budgetette he said
"I, too, am forecasting that output will continue to fall in the UK, for the first two quarters of next year.
But then, because of decisions taken in this Pre-Budget Report, I expect it to start to recover.
GDP growth for 2009 is forecast to be between minus ¾ per cent and minus 1 ¼ per cent."
We have already declined 2% since then.
Which would have allowed us to stop borrowing before we were to maxed out. Nobody now believes we are going to end the recession by the end of the 2nd quarter (ie June 30th 2009) which means borrowing & our entire finances are out of control.
The Conservatives need to say now that every day this government stays is another day nearer disaster. That if Labour got back in they would undoubtedly bankrupt the country & that they actually intend to do something seriously different. That an awful lot of Labour's sacred cows (massive bureaucracy, feather bedding of civil servants, putting PCness first & economic success last, windmillery) are going to have to go. We simply cannot afford to keep them no matter how much kicking & squealing there is. We cannot avoid reality for the sake of peace anymore.
There is no technical reason why our economy should not be growing as fast as China's. Technological progress continues at a fantastic rate. However under the present government, or one very similar, there is no possibility of it.
* Though I sent copies of that article to party leaders & letters based on it to all newspapers only Nick Clegg's office replied - saying how nice it was to get novel ideas from outside the party & how he was passing it on to Vince - nonetheless nobody has found any fault with it so they cannot subsequently plead ignorance of how to get out of this purely political mess.
My employer held a meeting to discuss some job cuts that had occurred among the salaried staff at the head office and among salaried store managers. At the meeting my store manager stated that Fry's is expecting this recession to last until 2011. I will be approaching 30 by the time this is supposed to be over.
Of course if Obama screws the economy further then the recession may become a permanent resetting of our economic level.
On the other hand I stand by my statement that if Palin's promise to "start building cuvlear plants in January" had happened we would already be starting to come out of the recession.
Meanwhile the BRICK countries (Brazil. Russia, India, China, Korea) continue to grow, albeit more slowly but still faster than us in good times, & the overall world recession is predicted to be only 0.6%.
In reality there is no such thing as cheap labor. Even if the employer pays $10 when the going rate is $25 someone is making up that extra $15, or else we all end up paying in the future. Despite all of the bleating by free marketeers stating that the rich are wealthy because they plan for the future, it is the working class that sees the future up close and personal. That is why the working class is the most likely to hate immigrants.