That’s an EXTRA £1,500,000,000,000 on the national debt [I think] . It’s rather the size of the universe with so many million-milions of stars, constellations just in our own galaxy, the Milky Way. All all of it galloping away from us so fast you cannot imagine - mark you I don’t blame them!
That’s what’s happening to the National Debt, it seems. Maybe - just possibly - the media will wake up to the priority issue of our time. There’s one thing to be said, however - Cameron has and made that priority his on Wednesday.
Then Edmund Conway looks closer at the figures and issues some hefty warnings, and Sir Adrian Montague looks how public sector savings can be achieved and says bluntly that civil sevants can’t and wouldn’t do it.
Elsewhere things are also down-beat with ---
Insolvencies hit record high
The number of insolvencies has increased by 28.2% over the past year as unemployment and credit problems bite, Insolvency Service figures show
The number of people in England and Wales becoming insolvent rose to a record 35,242 in the third quarter of this year, figures from the Insolvency Service showed today, and experts warned it could reach 130,000 by the end of the year.
AND----
WASHINGTON - U.S. employers cut a deeper-than-expected 190,000 jobs in October, government data showed on Friday, driving the unemployment rate to 10.2 percent, the highest in 26-1/2 years.
Christina
INDEPENDENT 5.11.09
£1.5trn could be added to national debt
By Russell Lynch, Press Association
The financial crisis is likely to add up to £1.5 trillion to the national debt, the Office for National Statistics (ONS) said today.
The surge comes from the huge liabilities of bailed out banks such as Royal Bank of Scotland and Lloyds Banking Group being taken on to the public balance sheet.
The Government has also offered a total of £330 billion in guarantees to the financial sector as of the end of September, the ONS said.
Today's £1.5 trillion figure represents the economic output of the entire country for one year.
Added to the latest Treasury figures - which forecast UK debt of £792 billion for the current financial year, the sum would take the UK's national debt to a whopping £2.3 trillion.
It is also at the upper end of the range put forward by the ONS when it made its initial estimate of the impact of the crisis on the public accounts in February.
The liabilities of the bail-outs has been added for classification purposes, but taxpayers are not on the hook for the whole amount.
This would mean every loan held by a bailed-out or fully-nationalised bank such as Northern Rock had turned sour, while sales back to the private sector would eventually reduce the public sector's exposure.
But the measures taken so far added an extra £4.7 billion to net borrowing in 2008 and a further £3.3 billion in the first three quarters of 2009 - mainly from the extra money the Government needed to finance its intervention.
In April Chancellor Alistair Darling said he expected losses of up to £50 billion to the taxpayer on moves to prop up the banks - although he now expects to revise this figure lower in the forthcoming Pre-Budget statement.
TELEGRAPH 6.11.09
1. The one thing worse than quantitative easing would be no QE at all
The fat lady is not singing yet, but she is clearing her throat. Quantitative easing (QE) - the drastic money-creation programme carried out by the Bank of England over the past eight months - is not over.
By Edmund Conway
The Bank will, unless things take a drastic turn either for the better or the worse, spend £25bn on bonds over the next quarter. But Thursday's Monetary Policy Committee decision seemed to imply that this grand monetary experiment's end is drawing nigh.
Or is it? The market certainly thinks so, and has plenty of evidence to back up its theory. Leaving aside the Bank's own body language, it is clear that the economy is starting to recover. The third quarter of the year may have seen the UK still stuck in recession, but the vast majority of independent economic surveys suggest that the outlook, whether for consumer confidence, company activity or asset prices, has improved immeasurably.
There are fears, too, that this new world of near-zero interest rates in the UK and US is at risk of generating a new asset bubble as investors borrow cheap in the West to invest in emerging economies. So it is to be expected that the world's major central banks are now starting to contemplate ending QE.
But it is too early to assume that the policy is now effectively over. It seems far more likely that the Bank will keep its finger hovering over the start button on its presses over the next year or so, and for one big reason. Britain is about to undergo the biggest fiscal squeeze in living memory.
Unless it is prepared to dice with default, the next Government is almost certain to have to slash spending and raise taxes. Both will depress the economic recovery significantly, but then both are necessary if the UK is to retain the trust of the capital markets. Indeed, the squeeze will start as soon as January, as the temporary cut in VAT is rescinded and the stamp duty holiday, which has been quietly supporting the housing market, ends (notwithstanding any pre-Budget report surprises).
Throughout this crisis it has been plain that with the Government unable to provide much direct help, due to the parlous state of its finances even before the collapse of Lehman Brothers, it has been up to the Bank to support the economy through monetary policy. This helps explain why it has embarked on a QE programme worth over 14pc of gross domestic product, compared with less than 4pc in both the US and euro area. But it also underlines the possibility that, with the state unable to finance a further spree in the coming years, the Bank will be forced to stand by, potentially creating even more money.
The Bank attempted to persuade us in its statement that this policy is working, but given it has shifted the apparent yardstick for success so many times it is hardly convincing. For every sign of success (higher asset prices, lower long-term interest rates) there are plenty of outstanding issues (banks are still not lending as freely, money growth remains stagnant).
Nevertheless, without this policy, Britain would have slumped to an even deeper depression. It is a conclusion shared by George Trefgarne, formerly Economics Editor of this newspaper, who in a new pamphlet for the Centre for Policy Studies has conducted one of the most thorough and thoughtful investigations into the policy yet. His overriding point (unexpected from a right-leaning organisation) is that the one thing worse than QE would be no QE at all.
That said, he points out that of the three previous occasions on which money-creation was experimented with in the 19th and then early 20th century, twice it resulted in an inflationary spike that caused further hardship even after the immediate crisis was over.
That we were left in such a position reflects most harshly on Gordon Brown, whose profligacy in the second half of his Chancellorship is largely to blame. But the Bank is not entirely blameless. Despite its insistence early on in the scheme that it would spend as much as possible of the money it is creating on private sector debt, it has, in fact, spent almost all of it on gilts. Its excuse was that Britain's debt market was simply too small to dip into, but this is unconvincing. There may be few assets out there with the liquidity of government debt, but that is no excuse for spending only 1pc of the QE on private sector debt, compared with more than two-thirds in the US.
The American plan may mean the central bank has to take more of a risk with its investment, but it does not leave it as dangerously exposed to accusations that it is part of a nefarious plot to monetise [=”give legal value to or establish as the legal tender of a country”] the deficit. As independent a central banker as Meryvn King is, it hardly looks good when the public sector institution he runs has bought almost all the debt the Government issued so far this year. Any dent to his or the Bank's credibility in the coming years and Britain will really be in trouble. The rickety ride towards economic recovery will be a white-knuckle one. [IF - for example - the assumption that Brown will be off the scene next year were to be questioned ‘Britain will really be in trouble.’ -cs]
2. Skint? Britain's financial crisis is much, much worse than that
The budget crisis is a crisis of government – and the public sector is at fault, says Adrian Montague.
Sir Stuart Rose, the head of Marks and Spencer, said it all in six words yesterday: "We are skint as a country." Sir Stuart was talking to the press to announce his company's latest sales figures. But he brought up the terrible state of the Government's books because it is now threatening businesses, jobs and the economy alike.
"Skint" is actually an understatement. We haven't just run out of money as a nation. We are building up debts that, without brave action, will keep us skint for years to come. The scale of government spending is so great that numbers almost lose their meaning. Who can picture £175 billion – the Chancellor's current estimate of what he needs to borrow this year?
But we can get a sense of the gravity of the situation when we think that this amount of borrowing is nearly twice the level that forced the UK to seek the support of the IMF in the 1970s. Britain is the only one of the world's major economies to remain in recession. Our national debt is spiralling to a level at which capital markets are starting to ask questions about Britain's long-term credit rating.
For his April Budget, Alistair Darling rightly decided that honesty was the best policy. He faced down the temptation to fudge the Budget numbers and faced up to the scale of the problem. The shock waves are still reverberating around the City and Whitehall. But in his next major statement, the pre-Budget report expected within weeks, he may well announce that the government deficit is even worse.
Sir Stuart went on to say that he expected taxes to rise to fill the Government's coffers (beyond the existing plan to raise the top rate to 50 per cent on earnings above £150,000 per year). He forecast that VAT could climb above 17.5 per cent.
But if a government chooses to take the route of higher taxes, that would only be the beginning. Even doubling the basic rate of income tax would raise only £80 billion. And extra taxes drive people abroad and feed tax avoidance. Even higher taxes would be needed. This is a nightmare vision, in which our common hopes of a prosperous, enterprising, secure economy would be indefinitely postponed.
The budget crisis is actually a crisis of government. As a country, we used the years of economic growth to redistribute wealth to the public sector without taking steps to improve its efficiency at the same time. It would be wrong in every way to raise taxes now to protect those inefficiencies from change.
The public sector needs fundamental reform in any case, delivering as it does lower productivity and higher pensions and greater job protection than the private sector. But the budget crisis makes such reform essential.
Leading business people rise to the challenge when they are asked to take out, say, a fifth of a company's costs without damaging the service to customers. Many business leaders will be doing that and more in this recession. But while it has been tried in business, it has never been tried in government.
We need the new ministers (of whatever party) taking office next May to challenge their departments on our behalf. They need to ask: "Why does your work need to be done at all? What good does it serve? Why does it need to be done in the public sector? Where only the public sector can do it, is it being delivered as efficiently as possible? How will you reduce your costs by 20 per cent in the next 18 months?"
Any organisation will naturally resist this kind of questioning, if only out of inertia. A chief executive in the private sector would look to independent advice. He would take on a separate team with responsibility to review every cost and with the authority to ignore the argument that: "We do this because we've always done this." I don't think ministers are any different.
The review of government undertaken in the early 1980s (led by Lord Rayner, the head of Marks and Spencer in those days) faltered. It was staffed by civil servants; they were some of the brightest and the best of their day, but they were inevitably light on the understanding of how the best private-sector companies would do it. The next reform of government needs to use people from outside of government with real independence.
A searching reappraisal of this kind won't produce a list of "efficiency savings" of the kind that Whitehall has produced before. Our problem is not that the British ship of state is a perfectly efficient craft which needs only a few barnacles to be scraped off in order to return to full cruising speed.
Instead, the poor performance of government lies in its superstructure – its very fabric. The "front line" of services – doctors, nurses, teachers and police officers – need better leadership in order to change their ways of working. The preparations should start now so that the task of reducing the costs of government can begin on the first day of the new Parliament.
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Sir Adrian Montague is chairman of Anglian Water Group and the new chairman of the advisory board of the think tank Reform (www.reform.co.uk)
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