Does anyone think that the UK government is going to get away with fiscal deficits of around 10 percent of GDP for three consecutive years? Of course not; no one believes that. According to the IFS, the current mix of taxes and expenditure policies implies just that; three years of huge gaping holes in our public finances.
Someone down at the Treasury needs to wake up. We need an brave civil servant to come forward and write an honest memo to Mr. Darling about the disgraceful state of our public finances. Not the one that he wants to read; but the one that he needs to read. A memo filled with the hard truth, and even harsher fiscal projections. Above all, a memo that forcefully explains why taxes must increase and expenditure must be reduced.
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http://business.timesonline.co.uk/tol/business/economics/article6043637.ece
But taxes MUST fall.
It is of course much larger than 10%; public sector pensions, private finance initiative debt, servicing rail track debt and unfunded banking guarantees being taken into account...
Do I hear it? Yes I hear it! the markets will all scream together:
Default default default!
I assume the plan is inflation.
Didn't everyone know that?
I said this on Guido a while back and got called an arse by lots of people.
Inflation could actually be a huge problem for the government as bond yields would rise rapidly. This would mean the taxpayer would have to pay more tax to pay more interest on the national debt.
Not really a solution, but probably one that Brown favours!
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