Some Honesty Needed

The size of the black hole in the public finances is a consequence of Gordon Brown’s belief that increased spending by the state is always good. Too late, he realized that uncontrolled spending leads to uncontrolled debt which can destroy the whole economy. Brown used to be called the Enron Chancellor because of his off-balance sheet activities. Now he is starting to look like the Lehman Prime Minister, in the sense that Dick Fuld kept increasing his company’s debts until they reached the point where lenders simply refused to extend further credit. Something similar could easily happen to Britain. If foreign investors lose confidence in our ability to repay our colossal debts, we will go bust. There will be no way out of the downward spiral of rocketing interest rates, rising unemployment, and a contracting economy. If there is one thing more depressing than that dismal scenario, it is Brown’s attempts to mislead the electorate about the implications for Britain’s public finances. First, he insisted that Labour would continue to increase spending. Last week, he was forced into a humiliating retreat, admitting at the TUC Conference that the seriousness of the economic situation would force cuts in spending. Now we learn that the shortfall in tax receipts will be so great that the Tories claim that it can only be remedied by raising income tax by £14.8 billion, or 3p in the pound. The decision to hide the scale of the problem from the public suggests that Brown believes that we cannot be allowed to know the full facts about our national finance – for if we did, we might decide not to vote Labour. The Government, however, insists that it never concealed the size of the shortfall from the electorate. It cites obscure official documents where the numbers have been published in tables. But the reality is that neither the Prime Minister nor the Chancellor has ever indicated to the public what they must have known: that the sheer scale of the funding gap makes tax rises inevitable. There is one silver lining. The scale of the spending over the past decade means that there is much that can be cut without loss. Yet ministers seem unable to grasp the gravity of the situation: instead of forcefully insisting that all grandiose new projects are postponed or abandoned, they quibble over whether to jettison ID cards, and even manage to oversee an expansion in the number of people on the public payroll. Such is the scale of the deficit that even the most drastic cuts may indeed have to be matched by tax rises, though we pray they are temporary. But we are owed some clarity. If the Government will not be straight with us, the Conservatives must explain which taxes they will raise, and what elements of state spending they will cut, to ensure that Britain remains solvent. The public is entitled to honesty on this most serious of issues

Advertisements

%d bloggers like this: