2015 Election Year


In The debt we’re in (Jan 2011) I referred to a 2009 report by Brooks Newmark MP with the title The Hidden Debt Bombshell. In it Newmark claimed that the true level of government debt was £2,200 billion and not £805 billion as was reported by the Office for National Statistics. It’s interesting that Newmark has not written a similar report in the run-up to this years general election. However I can understand why.

Bill Mitchell has given his latest post the title: Who are the British that are living within their means? We may well ask that question of ourselves, although those of us who are British – and not just taxpayers – voting in the 2015 General Election may prefer to rephrase it as: ‘Who are those that are living beyond our means’?

Bill Mitchell published a graph from the Office for National Statistics which shows the Household gross debt to income ratio from 2003 to 2020, adding that the ratio “has been revised up significantly since our March forecast” – by some £174 billion by 2019, acknowledging that there will be “a weaker forecast for wage growth” over the same period.

US_OBR_HH_debt_income_2020
British households are not forecast to be ‘living within their means’ any time soon.

 

Mitchell’s post deals with the disingenuous approach taken by The Conservatives to future fiscal policy and its (deliberate) obfuscations over a monetary system that can only function when considered in terms of real resources. In that context, the level of public debt that is carried through time has no bearing on what each generation is able to consume (or produce). The next generation will be able to consume the outputs of their labour in the same way that the current generation is potentially able. Clearly, governments bent on fiscal austerity deliberately deny successive generations the ability to consume and produce but that is not an intrinsic function of the level of public debt outstanding. [sic]

Debt and Taxation (Nov 2013) opened with: The role that economic theory plays in the ‘creation of money’ and the role played by all politicians in the manipulation of ‘economic theory’ for the purpose of a fiscal policy, bear little relationship to the social responsibility that Peter F. Drucker applied to a private enterprise when he wrote in The Practice of Management (1954): “The first responsibility of business is to make enough profit to cover the costs for the future. If this social responsibility is not met, no other social responsibility can be met.” 

We may also wish to rephrase Drucker and say: “The first responsibility of government is to ensure an economy in which the fiscal policy will cover the costs for the future. If this social responsibility is not met, no other social responsibility can be met.”

I’m reminded of Cassandra’s Curse (Oct 2013) and my reference to the 1976 Labour Party Conference, where the Prime Minister, James Callaghan said: “We used to think that you could spend your way out of a recession, and increase employ­ment by cutting taxes and boosting Government spending. I tell you in all candour that that option no longer exists, and that in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of infla­tion into the economy, followed by a higher level of unemployment as the next step. Higher inflation followed by higher unemployment. We have just escaped from the highest rate of inflation this country has known; we have not yet escaped from the consequences: high unemployment.” [sic]

This was not a message that anyone wanted to hear. Quite the opposite, aided and abetted by successive administrations’ fiscal policies, things have become far worse in the – nearly forty – intervening years.

In 2015 be careful what you wish for!

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Hello, I’m Ed Conway, Economics Editor of Sky News, and this is my website. Blogposts, stuff about my books and a little bit of music

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Am I my Brothers keeper?

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Selected by other writers

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The Short Stories of David Goodwin (Capucin)

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