Summary
TWO recent independent analyses - one by the Institute of Fiscal Studies and the other by the OECD - warn us of the calamitous condition of the public finances. The annual budget deficit is heading for 14-per cent of GDP, and the National Debt, including off- balancesheet items such as public sector pension liabilities, amounts to 200-per cent of GDP - both way beyond the projections of April's Budget. No other advanced country is in such a state, nor as likely to face a gilts strike by foreign investors.
We are caught in a fiscal pincer. Non-cyclical spending on welfare and services accounts for 75-per cent of the public deficit; only 25-per cent can be attributed to the costs of rising unemployment. Tax receipts have collapsed as the financial services sector, formerly accounting for 20-per cent of the economy and Government revenues, has shrivelled like a punctured balloon. The Prime Minister, egged on by the ambitious Mr and Mrs Balls, has been the architect of this house of cards that is now collapsing on the hapless Mr Darling. Gordon Brown's incontinent monetary and regulatory policies after 2000 unleashed banking insanity, an irresponsible binge of private borrowing, a classic asset price bubble, but also oodles of tax revenues from the City. This was not enough.See the full content of this document
Extract
We Are Caught in a Fiscal Pincer and There's No End in Sight
To add to the folly, he then borrowed in order to be able to throw extra squillions of pounds at wel...
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