The OBR’s latest Fiscal Risks and Sustainability report has led
Daniel Herring (of whom I have spoken before) to reiterate what I reported on not that long ago - how Britain is going bankrupt in slow motion. Debt could hit 300% of GDP within 50 years unless politicians finally choose to act to stop spending money they don’t have.
How badly things have been mismanaged can be judged quite simply by how far behind our neighbours we have fallen in housebuilding. I’ve said before we are 6.5 MILLION houses short on a per capita basis. Andy Burnham says he is going to create the biggest social housing building program ever. He has, of course, not mentioned that the actual cost is more than the total of the world’s richest billionaires wealth put together, so I think we can forget very much happening any time soon. As ever, it’s not a splurge of activity that is worthwhile, it is a long-term accretion of activity and effort and taking the general population along with you.
If Burnham started now, targeting keeping UK debt at roughly where it is today, he could do that by cutting the primary deficit by 3.8% pa. That sounds like a huge amount and it is – but it is one that relies on no real growth. Get some growth going and that figure can very quickly fall. But do nothing and within 20 odd years they will have to cut by 8%. That’s real money.
Speaking as a Senior Citizen, it is entirely to my benefit that we have the triple lock on pensions. My eldest daughter is permanently incensed with rage that SHE is paying for my pension, my railcard, my bus pass etc etc. Point out to her that I paid taxes to get here and she simply replies that none of what I paid in has been ringfenced and all the largesse I am now receiving is permanently topped up by she and such as she who earn good money. Or try to.
She is particularly furious about the triple lock. By its very nature it was intended to make sure that we poor pensioners did not lose out against other members of society. Over the last few years we have done very well and we now get (almost) a decent enough amount of cash to live on – especially if topped up with Pension Credits.
But it can’t continue. You cannot have one section of society (by its very nature deserving) getting more and more by TAKING more and more from everyone else. It won’t last and will eventually lead to bankruptcy and potentially social unrest. So the triple lock HAS to go. Even an average of the three as opposed to the highest would save billions and is manifestly fairer. I’m perfectly happy to ask my daughter for a bung when I need it.
It's worth remembering we are living in a pre-deflationary world. That may be hard to believe as we are warned inflation is due to rise again and interest rates my need to rise again to combat it, but think what the situation would be if we didn't have tech.
Jeff Booth in his "The price of TOMORROW" has cogently made the point that tech by its very nature is deflationary. Everywhere you turn tech is reducing production costs. The natural result of that is falling prices but as of now the only reason we don't have deflation is because governments around the world have mismanaged their economies to such an extent that the tech minus is more than covered by the fiscal plus. Salaries continue to bring in more cash every year. So money continues to fall in value. Governments LOVE inflation because their debts fall relative to what they originally bought. But if this trend reversed, governments - and quite likely lots of the populace - would end up owing more in value than what they originally obtained. Result? Fiscal disaster. You only have to look at America in the 1930s to realise this is not a good thing.
We currently need to have a complete rethink about our entire economy. As I mentioned in last week's article, the Americans have already worked out that tech will set them free and are spending to make it happen. We aren't. I read a lovely article about David Hockney saying that his paintings represent a different way of looking at the world and they take us away from held perceptions. That is precisely what is needed economically and fiscally. The traditional economic policies have slowly but surely led us into temptation but we are now at the point where we must resist. To be fair, those policies have not been properly applied and things would be very different if they had been.
The UK is an aging country. Our median age in 44 years’ time will have risen from 40 to 49. That means there will be FEWER people earning and paying tax to support those who are retired, and as these people age, they will need more care and higher attention from the NHS. Arguably, the NHS itself is part of the problem and a wholesale rethink is long overdue.
I don’t think anyone other than the odd zealot thinks that net zero is a growth policy. Indeed, how could it be as it removes money from the general economy. Thus it legislates for lower living standards. The economic fact of net zero is having more inputs and producing fewer outputs. By its very definition, that spells negative productivity growth and, indeed, lack of economic growth.
To diverge slightly, I read an interesting thought piece about bank runs the other day. Silicon Valley Bank lost $42billion in less than a couple of days, which sealed its fate. The article was saying that if we transfer over to digital deposits (I wrote about this recently) $42 billion could disappear in nanoseconds. I’m sure you all recall that banks don’t go bust because their customers do, but because they lose their liquidity – think Royal Bank of Scotland from some years back. Far be it for me to sound alarms, but I genuinely wonder whether anyone has thought about this. The biggest banks could go bust in less than a day. Or even an hour.
