I’m once again grateful to Peter Lindsay from UKIP Reigate for the following analysis of Britain’s debt timebomb;
In November 2010, Channel 4 screened film-maker Martin Durkin’s brilliant “Britain’s Trillion Pound Horror Story”. It should have been compulsory viewing for all but has never even been repeated. Since then the dire situation portrayed has got even worse. During the recent election campaign Nigel Farage made constant reference to the Coalition government’s total failure to tackle the problem of debt. However, both Tories and Labour ignored the issue and the mainstream media followed suit. Not on the “agenda”, you see.
In all his talk about our “booming” economy, Chancellor Osborne, like his Labour predecessors, seldom mentions the National Debt. As a good PR man, he knows bad news must be played down, preferably ignored. To recap, in 1997 when “New” Labour got back into power the National Debt was about £350bn.By 2007 it had reached about £600bn, but then soared to £800bn by 2010 as HMG bailed out the banks and tax revenues fell. Since 2010 Osborne has totally failed, or rather, not even attempted to get it under control, for purely party political reasons. So it now stands at £1500bn and is rising by around £100bn a year. It will have reached £2000bn by 2020 on current trends. Add to the above the £trillions owed on mortgages, personal debts and the future obligations to pay £trillions in public sector pensions and the conclusion is that Britain is drowning in debt.
In a free market, which history has conclusively proved is the best way over time to increase living standards, interest rates would have risen when debt rose to such unsustainable levels, so as to constrain borrowing, as in the past. But since 2008, the influential “Bank rate” set by the Bank of England has been kept rigidly at just 0.5%, an all-time record low and has now been at that level for a record 6½ years. Effectively, the free market has been deliberately suspended by the Government. The same has happened in other heavily indebted countries.
So we now have a corrupt centrally managed financial system, just like the Soviet Union. Interest rates have been forced down to ridiculously low levels to favour borrowers and the borrower-in-chief – HMG, and punish savers with pathetic returns on their savings and pensions. In reaction, the housing market continues to be propelled upwards by artificially depressed interest rates, making houses unaffordable for first-time buyers until they are almost middle-aged. With no reliable “price signals” any more malinvestment is rampant , as in all “command” economies and the real economy is now beginning to suffer – worldwide. The crevasse we are in can best be illustrated thus: if Bank rate were suddenly to revert tomorrow from 0.5% to a reasonable rate of just , say 4%, the economy would collapse into a 1930s style depression.
When the 2008 Financial Crisis brought on these emergency measures, a merchant banker was interviewed on BBC’s Newsnight and asked what he thought the underlying cause of the debt problem was. He replied, correctly but to the obvious distaste of the interviewer that it was due to persistent Government over-spending which had been going on for decades past. The trigger for this crisis has been the uncontrolled expansion of Government spending since the 70’s, mainly on lavish social welfare, enabled by a very loose monetary policy. Time has proved the truth of what the Victorians always feared – that a welfare state would get out of control and ultimately could simply not be afforded.
To survive, Britain must fundamentally re-think the Welfare State. We really have no choice – we have seen what happens to countries which ignore debt – Argentina, Greece. Britain is not magically immune from the same fate . Governments have shied away from tackling the problem because it seems that in a democracy, there is no solution to it: if they tackle it by really slashing spending or raising taxes hugely, they will be voted out of power. UKIP thinks country should trump party.
Depressingly, the scale of the debt problem has now reached levels where it is probably beyond solution, without severe social and financial disruption. Reality will eventually hit very nastily, probably with confiscation by the Government of private savings, as done recently in Cyprus.
When this will happen no-one knows. (PJL)