Today's budget revealed the appalling state of UK public finances. After running up a deficit of over seven percent of GDP last fiscal year, Darling and the rest of the New Labour crew intend to run up an even larger one this year. This year, New Labour want to spend 12 percent of GDP more than we raise in taxes. Moreover, if elected next year, they intend to do the same thing in 2011. In fact, New Labour's fiscal plans envisage six straight years of appallingly large deficits.
Somehow, I don't think this is going to happen. Deficits need to be financed. This will require the UK government to flood the bond market with hundreds of billions of new debt. Ultimately, financial markets will have the last word on today's budget.