The economic facts


Anyone who thought Gordon was the last person in Britain to recognise the desperate need for cuts should pick up a copy of Wednesday’s Guardian. Yes, there is someone left behind, someone even more deaf to the truth, someone even more pig-headedly allied to their big-state creed, someone even more hopelessly set against the surge of public opinion, and, yes, it’s Polly Toynbee.

Her latest column “Spend now, pay later" (sadly not a DFS advert) tells us that:

  1. “There is no urgent rush to pay down a deficit."
  2. “There is no danger of not sustaining our triple A-rated debt."
  3. “Low inflation makes [the debt] relatively cheap to run."
  4. “Rapid cuts are not necessary, while there are tax rises that would be less painful."

Let’s look at the facts:

1. The National Debt currently stands at £800bn, that’s £32,000 for every family in Britain. It stands to increase to £1,400bn by 2014. We’ve also got £1,120bn of pension promises to pay, and £1,500bn of liabilities through the nationalized banks.

2. Britain’s AAA rating was only saved by Conservative promises to cut spending, and would be in jeopardy if cuts were abandoned.

3. Even at historically low rates, government debt will cost more to service than we spend on education. Given the inflationary time-bomb set by printing £175bn to fund spending, holding interest rates at record lows, and forcing banks to extend credit, this is only going to increase.

4. The average tax burden is already 37% of income. The state spends 44% of GDP and directly employs one in four of the British workforce. Firms and individuals are already fleeing high-taxes to more competitive nations abroad.

The British state is a clumsy giant, suffocating the private sector under enormous taxation and regulation. It feeds its enormous gut by borrowing on our behalf, building up debt for our children and grandchildren, and spewing money aimlessly and unproductively across the economy. It has never been so urgent to cut spending, to let the private sector prosper, to pay off this enormous debt, and to allow the growth that will bring better times.

You can’t borrow your way out of a recession, and you can’t tax your way to growth. The only cure to our economic woes is a drastic reduction in the size of the public sector. Adam Smith knew this, Cameron has caught on earlier this year, and even Brown’s starting to get it. When will Tonybee realise she’s wrong?