Britannia Radio

The politicians seem to have forgotten about the foreign investor.   
Apart from direct investment in British companies, he's the one that 
buys all the Treasury Bonds that make the government's borrowing 
possible.    With a falling pound and low interwst rates they'll go 
somewhere else and indications are that they are trickling away - 
'trickling' so far - to euro-denominated bonds.

Ken Clarke speaks with a forcefulness and directness that seems to 
escape the Tory party's present leaders.  He  was interviewed by the 
Telegraph and you can see the interview on that paper's website  on 
http://www.telegraph.co.uk/finance/financetopics/recession/3446686/
Ken-Clarke-warns-Britain-is-on-the-brink-of-meltdown.html

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TELEGRAPH   12.11.08
Foreign investors are deserting Britain with good reason
Gordon Brown, the UK prime minister, hoped to banish boom and bust, 
yet enjoyed the former and now faces the latter.

By Ian Campbell,

As in the past the UK has a funding crisis. Investors are wary of a 
nation with a big trade deficit and a government with a vaulting 
budget one. Unlike in the past, high inflation is not part of the 
crisis. Instead the Bank of England now forecasts inflation of only 
1pc, half its 2pc target, and sees a risk of deflation that could 
make the downturn all the worse.

The pain is just beginning to be felt. Unemployment rose in September 
to a decade high of 1.8m. Many more jobs will be lost as consumers 
across the country tighten their belts.

Meanwhile the government is loosening its own belt. Brown is 
gradually making his preference clear. The shift in policy will be 
from "tax and spend" to "keep spending and, perhaps, cut taxes".

That risks turning a budgetary position that became dubious even when 
the economy was bubbling to one that is terrible now the home-made 
soup has gone cold.

The government's deficit and its debt are set to soar at an 
astonishing rate. The Economist Intelligence Unit forecasts a deficit 
that is 8.4pc of GDP by 2009/10 - three times in excess of the 
prudent limits set by the Maastricht treaty. Annual government 
borrowing is set to rocket above an annual £100bn.

Foreign investors are wary. A deflationary recession, in which 
earnings are low, would make the government's soaring deficit and 
debt all the more onerous.

Foreign investors, until recently the chief buyers of UK government 
debt, are pulling out fast. That outflow is reflected in a 
precipitous drop in the pound, down on Wednesday to its lowest level 
since 1996 on a trade-weighted basis.

The UK's outlook is clear. The paths for growth, the Bank of England 
policy interest rate, jobs and the pound are all sharply down. The 
paths for the government deficit and its debt are sharply up. Bust is 
following boom. There is no easy way out.
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TELEGRAPH   12.11.08
Ken Clarke warns Britain is on the brink of 'meltdown'
Kenneth Clarke, the former Conservative Chancellor, has warned the 
economy is on the brink of "meltdown" and unemployment could reach 
three million.
  By Rupert Neate and Robert Miller

Mr Clarke, 68, said the British economy is headed for a "catastrophic 
crisis" that will be "far worse than anything that has occurred in my 
lifetime".
"There will be a very serious recession next year," he said in an 
interview with Telegraph TV. "I think the big problem in 2009 will be 
the catastrophic fall in consumer spending demand, spending in shops 
will get worse."

Mr Clarke, who as Chancellor of the Exchequer between 1993 and 1997 
led Britain's recovery from Black Wednesday, called for a temporary 
cut in VAT to boost spending.

Speaking as the Office of National Statistics revealed unemployment 
has reached an 11-year high of 1.82m, Mr Clarke said the number of 
jobless could soon reach three million.
"It is going to go up a long way... whether we will get back to three 
million again is one of those slightly morbid questions I really 
don't know the answer to. But it could get pretty big," he said. 
Rising unemployment will have a "devastating effect" on families and 
lead to more people being unable to pay their mortgages, he said.

The former Chancellor said Gordon Brown has received undue credit for 
his role in attempting to shore up the global economy. "The idea that 
Gordon has saved the world is not true," he said. "We still have a 
major, major crisis in this country and... public finances are in a 
terrible mess".

Mr Clarke said the larger than expected 1.5 percentage point cut in 
the base rate was a good move, but cautioned that it would not end 
the crisis. "We had a big cut in interest rates, about which there 
was a wholly exaggerated expectation, in the short term it will have 
modest effects, if any. Long-term it will begin to have effects.
"We are not yet in a state where we can be absolutely certain we are 
not going to have something close to meltdown next year", he said. 
"You do have to see what can be done with taxes."

He cautioned that Britain has "mounting debt, which is unsustainable" 
but said policymakers should bear in mind the effect a "full-blown 
depression will have on public finances". Looking forward to the Pre-
Budget Report he said any fiscal stimulus package would have to work 
in both the national interest and contribute to worldwide efforts to 
stabilise the global economy.

Mr Clarke said the public can see the Prime Minister has got more 
"confident" in his economic judgement, but said he imagines the 
Treasury is being "driven crazy by the wild way" in which he and his 
advisers spark speculation about the way the Government intends to 
combat the financial crisis.

According to Mr Clarke, public respect for banks, which are "hated 
institutions" at the best of times, has collapsed. He was also "very 
concerned" that the Government could make the crisis worse by forcing 
banks into "lending that they cannot afford".

"When I hear these stories of the Chancellor being presumably ordered 
by the Prime Minister to get the banks in and waving newspaper 
headlines at them I think that is no way of making policy," he said