Britain’s finances spiral out of control, as fear and loathing stalk the land
Any idea that the Conservative party is the home of prudent economic and fiscal policy is surely out the window, now that government borrowing has pushed past the GBP2tn mark.
That eye-watering total amounts to nearly 102% of GDP, the highest level British government debt has been at since 1961, and the highest level ever that isn’t related to war-time expenditure.
It’s no accident that the country’s Chancellor of the Exchequer is the most popular politician in Britain at the moment either. A large chunk of the money that’s been borrowed has been funneled straight into the hands of a panicky electorate, grateful for any source of solace they can find.
In itself that’s an unusual turn of events – Chancellors are usually unpopular figures associated with taxation and penny-pinching. But times change. In socialist-conservative Britain, people are paid not to work, and they seem to like it.
Although government policy over coronavirus in general is in chaos, and remains as it always has done, a mass of contradictions, polling has consistently showed that certain key policies remain popular. Giving away money is one. Enforced wearing of masks is another.
But the Chancellor does face some longer-term problems. No one predicted that the nation’s panic attack would last this long. Remember the talk about “flattening the curve?”. That was achieved in May. Protecting hospitals? – the Nightingales went largely unused. Death rates? Haven’t moved much over the past couple of months.
It’s only case rates that are rising, which is nasty, but it’s not the Black Death wiping out a third of the European population. It’s not even Spanish Flu.
And this is what the predictions got wrong: everyone in authority assumed a kind of emotional and psychological resilience on the part of the British population, which apparently it does not have.
Gone is the Dunkirk spirit, gone is the hardiness that won through in the Blitz. Never mind what the popular press would have you believe, there’s little trace at all.
Instead, the Conservative government is being asked to hold everybody’s hand every step of the way out of this crisis, and because it’s a government, and governments like to command and control, it’s happy to do so.
Having said that, the process is taking longer than predicted, and accordingly the cost is turning out to be much higher too.
How high? That depends how you measure these things.
Every month the country’s furlough scheme cost approximately ten times the annual income of Cancer Research UK. But that kind of trade-off – arguing about the real cost benefits of spending money on one disease rather than another – doesn’t even enter into the standard debate.
What will catch peoples’ attention is when their taxes rise.
That’s coming, no doubt about it.
The popular Chancellor Sunak has spoken about “difficult” decisions ahead. And they will no doubt be very difficult indeed, although if he’s got any sense he’ll be firmly ensconced in the Prime Minister’s chair by then.
Why “difficult?” – because not only has government borrowing gone up, but its income has gone down. Economic activity has been deliberately muted and curtailed, and those workers who are being paid not to work are not creating any additional income tax revenue.
What’s more, one way the government has been able to borrow more has been by being complicit with the Bank of England in a massive new round of money printing. One effect of that will be to reduce the value of the nation’s debt in real terms, which will be good. But it also serves to devalue the pound in everyone else’s pocket as well. It’s a round of ‘Beggar thy Neighbour’ that’s only just beginning.
So what are we to make of this government? As the political editor of the New Statesman wrote this week: “they do not really have a plan for the economy in general, other than not to upset anybody.”
That’s about as apt and as pithy as you can put it. It’s no way to run a country, even one that is emotionally and psychologically fragile as Britain.