The greater part of the public still don’t really believe that the
financial slump is anything to do with them, Well it is- and this
points the way it will hit them. All the fatuous talk of resumed
growth will be seen for the cynical ‘spinning’ it was.
Politically Labour have given up, and they are doing all the wrong
things because they’ve rightly worked out that the collapse is
almost certainly timed for after the election. They just don’t care.
But we look like being stuck with them for another 13 months
xxxxxxxxxxx cs
I am sending this out separately from the other critical posting
today from Ambrose Evans-Pritchard on the world economic scene and
how the international crisis is likely to intensify the pressures on
Britain. That one follows shortly,
============
SUNDAY TELEGRAPH 26.4.09
Only Tory daring can drag Britain back from the brink
I suspect that, in years to come, we'll all remember where we were
when Alistair Darling stood at the Commons despatch box on April 22,
2009. Last Wednesday was a genuine "when Kennedy was shot" event.
By Liam Halligan

The graph above shows how steeply our national debt will rise
That's because this ghastly Budget – the culmination of a decade of
grotesque financial mismanagement – will be seen in retrospect as
the moment the UK was irrevocably relegated from the world's economic
premier league.
I know that was said when we went "cap-in-hand" to the IMF in 1976 –
following the last bout of Labour "tax-and-spend"
there's been no Arab oil embargo, no 20pc-plus inflation, no militant
trade unions. This sub-prime debacle is almost entirely self-
inflicted, making it so much worse.
Our political and financial "elite" has acted recklessly in recent
years – spending with abandon and stripping away the regulatory
safeguards that underpinned stability. UK consumers have played their
part – engaging in a decade-long, credit-fuelled shopping frenzy.
Our media, too, is culpable – having generated this tawdry,
celebrity-obsessed "want it now" culture and all but banning serious
prime-time debate.
So here we are. UK households are mired in debt. Our currency, having
lost a third of its value in just over a year, is extremely
vulnerable. And, above all, our public finances have spun wildly out
of control. This once great country is close to insolvency.
. Look how the official estimates have changed since last year, the
extent to which Labour – the entire political class, in fact – has
been in denial. And the steeply rising curve from 2008/09 will, in
reality, be even steeper. You see now why this is a turning point in
history?
During his 2008 Budget, Darling said he'd borrow £70bn during the
financial years 2009/10 and 2010/11. Last week we learnt that, in
fact, £348bn of new debt will be racked up over that period – a jaw-
dropping five-fold increase on estimates of just 12 months ago.
Between now and 2013/14, the UK government will need at least £703bn
of debt-finance, rather than the £434bn estimate Darling made at the
time of his November Pre-Budget Report. That's an astonishing £30,000
of extra borrowing for every UK household – all of which will have
to be serviced, and paid back, from future taxation.
This is state profligacy on an unprecedented scale – a morally
repugnant raid on our children and grandchildren. Yet even these
blood-curdling borrowing forecasts are under-estimates.
In his Budget, Darling made some ridiculous UK growth assumptions –
basing his calculations on a contraction of 3.5pc this year, but
growth of 1.25pc in 2010 and a booming 3.5pc in 2011.
Yet no sooner had the Chancellor sat down than the IMF issued a new
forecast that UK GDP would shrink 4.1pc this year and 0.4pc the next
– in line with the vast majority of independent opinion. And I know
not a single forecaster outside the Treasury betting on growth
anywhere near 3.5pc in 2011.
Since Wednesday, the Budget numbers have even been undermined from
the Government's own side. Official data released on Friday showed
the UK economy shrunk 1.9pc during the first quarter of this year –
casting huge doubt over Darling's 3.5pc contraction for the year as a
whole. I don't believe for a second that, at the time of the Budget,
the Treasury hadn't seen these official numbers – a subject for a
future column.
For now, the Chancellor is pretending the UK will rapidly return to
the underlying trend growth rate of the last decade – when, it is
now clear, the economy was driven by an unsustainable combination of
high debt, ever-rising house prices, endless mortgage equity
withdrawal and a bloated public sector.
So when growth turns out to be slower than Darling foresees, UK
borrowing will spiral even higher – as tax revenues slump further
and welfare payments soar. On top of that, the Government won't raise
the penciled-in £16bn from "asset sales". The £9bn of fabled
"efficiency savings" also won't materialize – they never do.
Remember, also, the hundreds of billions of pounds of off-balance
sheet liabilities – not least the bill for public-sector pensions
and the utterly dishonest private finance initiative.
For all these reasons, even Darling's outlandish borrowing totals are
just the start of the Government's extra debts. Oh – and by the way,
much of the cost of the massive bank rescues isn't in these numbers
either. The Budget fine print claims officials "haven't yet been able
to calculate their impact […] on public sector net debt".
So these borrowing estimates can only rise – as they have after
every Labour Budget since 2001. Already, debt service is the fourth
biggest item on the Government's balance sheet. Soon we'll be
spending more public money on interest payments than on schools and
universities combined.
In truth, Labour is now an irrelevance. Don't misunderstand me –
Gordon Brown's incompetence will cast an economic pall over this
country for decades to come. But barring a political earthquake, it's
the Tories who'll issue most of the £700bn of UK sovereign debt (and
counting) between now and 2014.
That's why I found David Cameron's response to the Chancellor even
more worrying than the statement made by Darling himself.
The next half decade or so will make or break the UK's credibility on
international debt markets. Our demography turns nasty during that
period as the baby-boomers start retiring in earnest. That would have
strained our public finances even without Labour's spending orgy.
But now we know that, over the same period – just as other recession-
hit Western nations are flogging lots of sovereign paper – this
country will borrow a higher multiple of its reserves, and a higher
share of its GDP, than any nation on earth.
This is a "global crisis" to some extent. But, given their leading
role in the world financial services industry and setting the policy
agenda, the US and UK are mostly to blame. America, with its reserve
currency status, helpful demography and massive resilience, will
muscle through. But the importance of the bombed-out housing and
finance sectors to our economy, and tax take, makes the UK's
situation the most desperate.
A sovereign downgrade now looms. Given these disastrous borrowing
numbers, and the reality they'll rise further, anyone who doesn't
accept that is either stupid or wilfully blind.
So I was truly alarmed to hear nothing from Cameron suggesting the
Tory leader has even grasped the perilous financial dangers the UK
faces – let alone worked out how to steer us away from the precipice.
Last year, institutional investors began dumping UK government debt.
In recent weeks, several gilt auctions have been under-subscribed.
Since this Budget, gilt yields have spiked – as creditors demand
ever-higher risk premiums to lend our feckless politicians cash.
The Tories need to grasp this situation by the neck and do everything
possible to reassure international debt markets the UK will soon be
run by somebody who can actually add up.
Yet, instead, Cameron took the easy route of slogans and cheap
political potshots. There was no credible plan showing how the Tories
will rein in the UK's sprawling state – or even a convincing
statement they understand the need to do so.
David Cameron will be radical or he will fail. If that radicalism
doesn't start now, the bond market vigilantes will consign the UK to
the dustbin of history.
[I can agree with all of that except that the official Tory reply to
the Budget was not the off-the-cuff reaction to the speech by
Cameron, but the considered reply after a first look at the books the
next day by George Osaborne. and what happened the next day - NONE
of the press or the broadcast media reported Osborne’s speech
properly, none of the commentators analysed it and even Conservative
Home Blog ignored it until long after it was newsworthy. (- You got
the speech from me, however! ) The is sheer laziness on the part of
all concerned. There were acres of comment on the disastrous top-
rate tax change which is an im portant issue but not central to the
vast problem. Sometimes one wonders if we don’t deserve what’s
coming to us. -cs]
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