Sunday, September 20, 2009

Another Day Older And Deeper In Debt

Borrowing Brown's disgraceful legacy of debt is a truly titanic amount even after cooking the books but only the tip of the iceberg. Real debt is hidden behind an illusion of smoke and mirrors accounting which would make Derren Brown proud. Can the patient recover from ballooning national debt? As Callaghan was told in 1976, it's worse than that, he's dead, Jim.

A country in the grips of a billion pounds depression make for gloomy reading. The Times thunders unpalatable truths about the dire state of UK Plc: "Public debt hits £800 billion - the highest on record." It's up £16 billion a month - more than the whole of last year.

Boy George Osborne put the cat among the pigeons when he blew Borrowing Brown out of the water with secret treasury documents showing two-faced Brown has misled MPs and the public over spending cuts.

No more nasty Tory Mr 10 percent 'cuts' vs nice New Labour 'investment'. The country's finances are on more of a knife-edge than during Callaghan's Labour government and chancellor Healey's quick turn around to go cloth-cap in hand to IMF moneylenders more than 30 years ago.

Accurate figures regarding the national finances are one of this government's best kept secrets. The government is clocking up debt at a rate of £6,017 a second, according to The Times.

As hapless Darling struggles to balance the cooked books, official figures from the Office of National Statistics show Borrowing Brown has been left to bridge the gap by going cap in hand to the moneymen.

But even this just scratches the surface. Official figures do not tell the whole story. Big government debts do not make even a guest appearance on the public accounting charade.

The public account balance sheet is a masterstroke of smoke and mirrors accounting to massage a political ego. Derren Brown would be proud and so too his namesake, who's on a life mission to hide the truth behind the horrendous scale of borrowing to fool the public with a false sense of insecurity.

Raids on the pension funds pot left the cupboard bare but pensions have to be paid out sometime as the real cost of pension promises come home to roost. With no money set aside, anything between £700 billion to over £1 trillion due to be paid out will have to be found.

The £1.3 trillion of taxpayers cash to bailout high street banks is largely excluded from the public accounts. Anyone who thinks that cash will soon wing its way back to treasury coffers is living in cloud cuckoo land.

But most of all it's the future financing costs of the massive 'off balance sheet' liabilities and the sham of the PFI rip-off schemes which creates the biggest borrowing black hole.

Billions have been borrowed to pay for vanity projects and shiny temples to New Labour which do not appear on public accounts. Building firms riddled with corruption are on a nice little earner building roads, schools, hospitals, prisons and the like, then leasing them back for 25 or 30 years.

Over 800 deals have been signed under PFI since the launch, committing the taxpayer to future spending of around £215 billion. Taxpayers will be saddled with the debt for decades to come.

On top of that there's essential spending that has been put off and put back as the country tightens its belt. Worn out prisons, hospitals, military kit, power stations all need to be built and funded eventually and add to government debt.

The answer is not to bury your head in the sand in the hope it will all blow over. It won't. As anyone seduced into racking up a mountain of personal debt will testify when the bailiffs hammer down the door.

This, the Orange Party would suggest, is the real scandal and the real extent of the public finances sham.

The true scale of debt is unpalatable for any political party. When that real cost is finally unmasked and the black hole of debt laid bare, current talk of savage cuts and tax hikes will sound like a walk in the park. And that raises issues which even the new hero of cuts and chancellor-to-be, Osborne, would find difficult to wrestle with.

The ego has landed. International moneylenders are on the case. Overseas investors are thinking twice before buying sterling assets to prop up the UK trade deficit.

As with the 1976 IMF crisis, borrowing will come but with some very tight strings attached. Salad Days of swanking around when the government thought it could con the public with life's little luxuries like the £9-14 billion London Olympics will feel like a distant sunny memory.

Top graphic: Gerald Scarfe, Sunday Times. Mid graphic, The Times

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