..but of a different kind. It is the most extreme sort of wishful thinking to think the UK is going to balance its budget in the next Parliament, a promise which cannot be delivered upon. Worse is the pure deception that this implies, that somehow when we do this things will improve. Here are 2 charts from the ONS:
What do these tell us? Well thei first one shows how the Public Sector Net Borrowing has changed since 1995. As we can see since the financial crisis in 2008 it has shot up massively. Worse, it is proving to be very stubborn to get down, due in the main due to a lack of will to introduce any drastic cuts or to keep taxes high or raise them further. Or to generate any growth until very recently, of course.
Then the second graph show the total debt and its growth, which is apporaching parabolic. The effect of compound interest is huge as is the garganutan nature of the speed of increase. each month £9 or £10 billion is added to the total bill, costing another £25 million in interest per annum, just to sit still. All this in a low interest environment where gilts are still trading at below 3%. A return to more normal economic conditions, or another euro crisis, could see gilts move up 25% or even 50%. This in an of itself would add something like £20 billion to the PSBR per annum. Drastic cuts would be needed just to stand still.
Also of course, with PSBR this year at £100 billion its hard to see how this gets to zero in say five or six year, especially when the rate of decline has been about £10 billion a year during the Tory 'cuts.' Economic growth and tax receipt increases should help a lot, but still, its not realistically going to come close. Meanwhile total debt is going to arrive at north of 100% of GDP during the next Parliament whoever is in charge; leaving the interest rate time bomb lurking for any incumbent.
The most likely outcome of the election is currently a small Labour majority Government. When the economy enters its post-election downturn, mild, but likely when you look back and see we normally have downturn every 7 years of some sort, the maths will be too hard to beat. Being Labour, they will eschew cuts to NHS, Welfare or Pensions, as even the perhaps Tories would. So instead its going to be really massive tax hikes for the middle and upper income segments or begging to the IMF. Red Ed really will bring back the 1970's. I wonder if George Osborne will be opposition leader then? Somehow I doubt it.
