Debt Bomb Britain
Be under no illusion, even the Conservative and Labour parties do not believe they are offering a choice to the electorate in the 2015 General Election. What they are offering is a political ‘price fix’ orchestrated by the Westminster Cartel. In the Scottish Referendum the British State inadvertently showed its real face: and in the 2015 election it will be ’Better Together’ yet again; a multi-party system offering the same Government under different names; fronted by a theatrical pantomime diversion of a Parliament, which has the sole purpose of disguising from the electorate the real nature of the political Cartel that has sold them short.
At the core of all this theatrical, over-dramatised, storm-in-a-teacup, puffed-up pointlessness, intended only to produce the public illusion of a political “contest“ between Labour and Conservative in 2015, is the critical matter of the UK “Deficit”. The Deficit is the centre of the election campaign; to all intents and purposes, it is the campaign.
Conservative and Labour are desperate (despairing?) in their anxiety to persuade the electorate that there are real, wide differences between their approaches to tackling the “Deficit”. In fact the actual differences between Labour and Conservative in their approach to the “Deficit”, relative to the real scale of the problem, are insignificant. We are usefully reminded about the real nature of the political sleight-of-hand to which Cameron, Clegg, Osborne and Alexander have resorted in presenting their efforts at Deficit reduction; not by appeal to allegedly independent economists, think-tanks, media commentators, or any of the rest of the conventional paraphernalia that calculatingly adds so little to public understanding; but simply by reading John Redwood’s Blog (1st October, 2014):
“Under the Coalition the level of state bank indebtedness has been curbed substantially. This has been almost entirely offset by continuing increases in state borrowings to pay for public spending. On the narrower definition of state borrowing excluding banks the total has risen from £956bn in March 2010 to £1432 bn in August 2014, an increase of £476 bn. This puts the idea of public sector austerity into perspective. The Coalition has continued borrowing at a similar rate to Labour’s increases, though the Coalition is gradually bringing down the rate of increase in the borrowing”.
In the present and recent past there is no difference between Labour and Conservative over the non-management of the “Deficit” (as to the future, party political ‘promises’ cannot be cashed for value). What Labour and Conservative are actually arguing over is the rate of increase in borrowing under their trivially different regimes; which under scrutiny quickly collapses into a form of metaphysical esotericism: microscopic nit-picking over small oscillations around a deficit trend line neither side can control, and a problem that neither party has shown any capacity to solve.
Both parties will continue to operate a system of brutal social welfare spending austerity, flavoured by vacuous rhetorical gestures towards whatever last vestiges of the electorate remain sufficiently credulous or gullible to fall for the seduction of snake-oil salesmen; you can be sure these will be mere gestures, moving the “Deficit” trend line a few microns one way or the other to please the constiuency of mindless right-or-left ideologues, but austerity will be combined with a fiscal policy that, we should carefully note; is intended to fail to achieve anything at all (they will argue ideologically over nominal tax rates that are effective as tax rates almost exclusively in the case of the almost defenceless ‘paye’ contributor, but in corporate terms are largely decorative, and in wider international economic terms, effectively meaningless).
When Redwood offers the observation that, “the level of state bank indebtedness has been curbed substantially”, what he fails to mention is that large private sector banking losses have been transferred, permanently, to the public sector by the neo-conservative apologists for unregulated free-enterprise, and added to what he terms “public borrowings”; the National Debt (the public sector). It seems that in Britain the word “free” in “free enterprise” is there to ensure that in banking at least the profits and assets remain “private”, while the inconvenient losses and liabilities are despatched smoothly and seamlessly to the “public”; typically represented by the defenceless ‘paye’ taxpayer.
Turning now to the reality behind the mere knockabout politics of the Conservative or Labour ‘spin’ on the “Deficit”, it is worth remembering that the “Deficit” is only one part of the deep, unsustainable problem now facing the British economy; an unsustainable problem that will unravel alarmingly as interest rates rise (as they will, like nemesis), and perhaps with disconcerting speed as matters unfold; but the trite politics of the “Deficit” is all you are going to be offered in 2015. Originally, if you wearily care to recall, the “Deficit” was to be eradicated within one Parliament (by 2015), but while Parliaments and Governments come and go, the “Deficit” alone remains intact, and the date of its elimination drifts ever forward, into a perpetually receding medium-term future (think of it like a receding hair-line; and the economic fashionista George Osborne as offering a comb-over as the solution).
Behind the “Deficit”, and lying in wait for us all, is the yet bigger problem of the UK National Debt; which has not yet peaked, nor the date that peak will be reached, reliably forecast; indeed the date when we finally discover just how big the biggest problem Britain will face – the “Debt” itself – in turn, continually recedes from view. The “Debt” thus carries another, problematic moving problem that Conservative and Labour are disinclined to discuss; but for Britain today and for the British people, a problem that can only turn for the worse. The underlying problem is the rate of interest to be paid on Britain’s “Debt” Mountain; interest rates can scarcely move lower — even theoretically; if they did, we would almost certainly have simply moved into another kind of crisis, serious deflation; the proverbial fire replacing the current, warming frying pan.
So what is the cost of servicing the UK “Debt“ Mountain? Labour and Conservative politicians do not like to discuss longer term interest rate prospects, it is too difficult; however bad the problem of controlling the “Deficit” becomes, it is much easier to produce phoney arguments over political management of the “Deficit”, than discussing how on earth we are going to fund Britain’s “Debt”, long term and in a much more realistic higher-interest rate environment than the current ‘management’ of the inherently unmanageable allows. Remember, this is the all-seeing, all-wise “markets”; this is how (allegedly, they work – well, at least when they are not actually being rigged), and eventually they follow their own logic. There are no good outcomes.
Even in 2014 interest paid on the UK Debt Mountain (that in turn has not yet peaked), had reached around £1Billion per week; that is £52 Billion per year. Unfortunately even this level of funding relies on interest rates remaining at historically exceptionally, unsustainably, low levels; interest rates, it must be stressed, over which Britain has very little control long term, whatever British governments or the Bank of England opine; low interest rates that, even at £1Billion per week, have quite fortuitously served the UK rather too well, because of the peculiar circumstances following on the international financial turbulence in the wake of the Crash. This position is not ‘normal’, and it will not last. Indeed, “Low” scarcely does justice to current base-interest rates that are near zero and historically atypical.
Assuming we return to more conventional levels of interest rates in the world, then UK interest payments on the “Debt” will inevitably rise, quite probably exponentially. We may then be looking at UK interest payments on the final mountain of “Debt”, whatever that total; that is far higher than £52Billion per annum. Even at relatively modest, stable interest rates, and allowing for timing adjustments for holding the total Debt for a full year; we may reasonably extrapolate interest payments of double, treble or even quadruple current levels of payment, as represented by the mid-2014 £52Billion per annum. What we are looking at may be interest costs for Britain, long-term of, say (?) £100Billion or higher; perhaps even £200Billion per annum in adverse circumstances?
What British Government Budgets will be cut then? Rather, the question will be, what Budgets will survive? In these circumstances how are we ever going to pay, not just the interest; but repay the “Debt” itself? Labour and Conservative have not even contemplated how the problem of the “Debt” capital repayment schedule is to be addressed, or worse still (but more likely), refinanced.
What kind of future does this outcome promise for Britain, or for that matter, its Parliament? Perhaps this is why such disparate sources as the ‘Guardian’ or ‘Spectator’ have suddenly taken to circulating the latest Westminster Cartel General Election 2015 wheeze; a National Government. The Labour and Conservative answer to the problem is simply to make the long-standing, implicit, lack of political choice of government in Britain, finally, explicit. There is only one government in Britain, whoever wins the election.
Who would notice the difference? What difference?