Jeremy Hunt comments on Liz Truss' mini budget and mistakes made
The UK’s national debt now stands at £2.59trillion, which is 98.8 percent of our gross domestic product. In other words, it’s the size of our entire annual economy. That’s the highest percentage since 1961, when we were still paying off Second World War debts.
We ran up those debts defeating Nazi Germany and Imperial Japan. What has today’s debt splurge gone on? Cleaning up after the financial crisis, Covid lockdowns and the welfare state.
Not quite as heroic, is it?
Next year our national debt will rise to 103.1 percent of national income, the Office for Budget Responsibility (OBR) predicts.
That’s equivalent to around £2.7trillion or a scarcely believable £95,000 per household.
Until recently, there was an alarming school of thought that running up big debts didn’t matter. With interest rates almost at zero, plenty of economists said it made sense for the state to borrow money and pump it into the economy.
That was always a fantasy. Now we’re waking up to the brutal reality that owing a heap of money does matter after all.
We pay interest on the money we owe, like any other debtor, and the bill is rocketing along with interest rates.
The Office for National Statistics estimates the government borrowed £137.1bn in the 2022/23 financial year.
In the same year, debt interest payments totalled £110.6billion.
They swallowed up 81p of every £1 we borrowed.
Remember, that is purely on paying the interest. It isn’t reducing any of the actual debt, which is still growing.
The OBR expects the government will have to borrow another £131.6billion this financial year to plug the deficit.
At same time, the Treasury is forecast to spend £110billion on debt interest.
So 83p of every £1 we borrow will go on servicing the country’s ever-expanding national debt.
We aren’t borrowing to invest. We aren’t borrowing to plug the gaps in our public services. We’re borrowing just to pay the interest on money we have previously borrowed.
What a waste.
Imagine that as credit card debt. We’re borrowing money on a second credit card purely to service the interest on the first.
We aren’t paying a penny of it down.
Some economists argue that government debt is not like personal debt. The say a sovereign nation with its own central bank can always print money to cover its debts. The argument is lunacy, but popular on the academic left.
The biggest difference between government and personal debt is that if you and I owed as much as the government, the bailiffs would be all over us like Parisian bed bugs.
As I’ve written before, the country is now totally at the mercy of the bond markets. That’s what happens when you have to borrow money just to survive.
Which is why wet lettuce Liz Truss was so rash in last year’s mini-Budget, when she heaped on yet more debt to fund tax cuts, without saying how she’d pay for it.
The fact that 60 Tory MP still reckon she’s great shows how plenty on the right are in deep denial about out debt mountain, not just the left.
You may not enjoy Chancellor Jeremy Hunt’s tax raids, but at least he’s trying to tackle the debt monster.
Labour leader Keir Starmer is slowly waking up to the danger, although the rest of his party isn’t. They just want him to spend, spend, spend.
As Liz Truss discovered, that’s no longer an option. We’re caught in a debt spiral and there is no easy way out of it. No wonder it feels like the country is falling apart. There’s no money.
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