Tuesday, 27 March 2012
Government debt - a story too big for the the nation's front pages
I had a quick look at the front page of the Times today. The top story was "Bankers and tycoons at Cameron’s top table". Could it be true? Was the chairman of the Conservative party selling access to the Prime Minister? Whatever. Maybe I have become too jaded, but I thought everyone knew that you had to pay to dine with the PM.
Other front page stories were:
"What do New York taxi drivers talk about all day?"
"Is it ever possible to look good in fishnet tights?"
"Albert Hall trustees sell charity tickets for profit"
"The bottom of the Earth is like an alien world"
The explosive growth of UK government debt didn't get a mention. Perhaps it is a story that is simply too big for the front page of the Times.Perhaps it is easier to think of alien worlds, ladies' intimates, and New York taxi drivers rather than confront our collective slide into bankruptcy.
The debt numbers are big. Back in 1976, the government owed £76 billion. Earlier this year, we crossed the trillion pound threshold. The Treasury thinks that this number will hit almost £1.8 trillion in just four more years.
Some of you might be thinking, isn't a large part of that extraordinary increase due to inflation. It is hard to explain away a 2000 percent increase in public indebtedness just by rising prices.
Conceptually, this problem isn't hard to understand. Government debt increases in much the same way as it does for households.If the government spends more than it receives in taxes, it makes up the difference by borrowing. This is more or less what we've been doing for over four decades. Government indebtedness has fallen in only six of the last 36 years.
It is a problem that few of us want to think about. We would rather be distracted by nonsense than soberly examine where our country is heading. That chart is plotting the future trajectory of the UK economy. There is only one destination, if we keep on borrowing like we have over the last five years. We're heading for Crashville.