Wednesday, April 28, 2010

Britain is broke again and desperately needs another Thatcher to fix up the mess

Saw an interesting graph in one of this morning's papers which rather put this into perspective, though with obvious caveats about comparing the United Kingdom with Spain.

Spain is of course one of the Eurozone PIIGS - Portugal, Ireland, Italy and Greece being the others - that have governments which have overspent recklessly and for which there are increasing doubts concerning their ability to service the massive debts that have been run up.

Government debt in Spain is currently equal to fully 53% of the value of its entire economy.

(Greece's is 115%! Yes, the government owes more money than what the entire economy is worth and, I'm sorry, but I really don't think you can argue that somehow those "evil" bankers forced or tricked the government into borrowing so much money. It was borrowed to pay ordinary people the kinds of entitlements like fat public service salaries and pensions they have come to see as their due and their right, no matter how much they cost.)

So while Greece is a basket case, Spain is simply in a lot of difficulty.

Now again, Britain is not Spain I know. Thankfully it never adopted the common currency and so has more control over its own economy in terms of monetary policy and the like.

But its government debt is almost 70% of the value of its whole economy.

Interest on this debt is now more than the entire defence budget.

Total government debt will soon pass one trillion pounds, or something like $1,641,000,000,000 Australian.

And yet, as you can see from the article below, the leaders of all three major parties are busily going up and down the country telling people that they can get this enormous debt under control while not cutting government services.

Eerily familiar to those of us who have been around long enough.

It wasn't that long ago, back in the 1970s, that Britain was also broke and on the ropes. It was the first developed country in history that needed to be bailed out by the IMF.

The Europeans sneered at the country as the "Sick Man of Europe." It was an international laughing stock. A bad joke that seemed to be going nowhere other than down and out.

And then a miracle. Margaret Thatcher became prime minister.

By the time she left office, (pushed by her own ungrateful and stupid party), Britain had been transformed into one of the strongest economies in the world.

Yes, that miracle required a lot of pain and involved some major mistakes on her part, but it was necessary.

Now, after 13 years of Labour government, the country is facing ruin again. But even the Tories are now scared of being seen as the inheritors of Thatcher and are playing the game of telling the punters that everything can be fixed and the budget brought under control without any cuts to any spending program that any of them may care to name.

They'll 'find savings' by 'cutting waste.' Quite what this means is anybody's guess. I'm reminded of the current Australian government's airy assurance that it can find $20 billion worth of savings over the next few years out of the defence budget, and thus actually be able to afford all the new planes and ships and stuff it wants.

Apparently the previous defence minister had drinks in his office on his last day in the job with the various service and departmental chiefs and posed the question to the room as to what they thought about the likelihood of this being achieved. Everybody in the room fell about laughing.

There may be fat to cut, but there ain't that much. And PIIGS wont fly.

Likewise in Britain. They'd have to find 160 billion pounds of savings just to pay for this year's borrowings alone.

Unfortunately, the cultural Left has done such a good job of demonising Margaret Thatcher, nobody wants to be seen to be associated with her or her bad tasting medicine. Not even the Conservatives.

When we think of Thatcher's Britain we think of plucky coal miners wanting to play in brass bands in their picturesque northern mining villages, but who have to fight against rapacious capitalists who want to close the mines and destroy their quaint villages for no other reason than this is what rapacious capitalists do. And eat babies. And harvest the bodily organs of small children for profit.

The Full Monty was simply one of a number of films and TV series that pushed this deeply deceptive and dishonest line.

Oh there was a horrible dystopia in Britain characterised by ever lengthening dole queues, riots, civil disruption and the general malaise of a country that was falling to bits in front of people's eyes. It was Britain before Thatcher.

The Sick Man of Europe which Thatcher restored to health with tough, but much needed, love.

Here's a bit from the article I mentioned:

In Australia, the Howard government all but cleared the national debt and set up a Future Fund (which I confess I criticised at the time) to reduce public sector superannuation liabilities.

But in Britain, the government just kept spending. And the more it spent, the more it stoked public expectations about what government could and should provide.

The result is that no party now dares to break the bad news to the voters, that things will have to be drastically cut back.

All three main parties promise to halve the deficit in four years (this doesn't mean halving the debt, only that they will cut by 50 per cent the amount government borrows each year).

This would require a 5 per cent cut in public-sector pay, freezing welfare benefits, culling hand-outs like the pound stg. 250 winter fuel allowance for the over-60s, as well as tax rises. But this is not acknowledged on the hustings.

At last week's televised leaders debate, Brown suggested the Tories might scrap the winter fuel allowance and free eye tests for pensioners.

Conservative leader David Cameron angrily insisted these hand-outs would be secure under a Conservative government.

All parties promise front-line services will be safeguarded, and none is proposing tax increases. How will the deficit be reduced? All they tell us is they will cut waste.

Posted via email from Garth's posterous

No comments: