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According to independent forecasters Capital Economics, Britain will be borrowing £100 billion a year by 2011. That is: £1,647 a year for every person in Britain. or £3,215 a year for every taxpayer in Britain.
Gordon Brown’s tax con: £30 billion
On top of all this borrowing, Gordon Brown is intending to borrow an additional
£30 billion. Allies of Gordon Brown have briefed the press that the government
will announce a £30 billion fiscal stimulus package in the November Pre-Budget
Report: “the “fiscal stimulus” package could be worth between £15 billion
and £30 billion - all funded through extra state borrowing.” (PA, 16Nov08).
Paying for this will mean £30 billion in tax rises…
Debt
After this, Gordon Brown will have borrowed more than all previous British
governments combined. When Labour came to power in May 1997, net debt stood
at £351 billion. It was at £618 billion at the time of the last budget. Assuming
a £30 billion fiscal stimulus package, and an extra £64 billion borrowing
this year alone, that means Labour would have added £361 billion to our debt
– more than the combined total of all previous governments.
Debt interest
• Gordon Brown is spending more on servicing his debts than educating Britain’s children.
• The average taxpayer already spends over £300 a year just on paying off Gordon Brown’s debt. The government spends 5.3 per cent of its total tax take on paying off debt interest. 5.3 per cent of the average earner’s income tax bill is equivalent to £306 this year.
• Gordon Brown is spending more on debt interest than schools or transport. According to the Treasury, debt interest payments are already predicted to be £34 billion by 2010. This is already larger than what the government is spending on schools or transport.
Conservative Approach
• Introduce an independent Office for Budget Responsibility that would make the budget forecasts and hold governments to account.
• Reduce the growth rate of spending in 2010-11 and future years below the levels currently forecast by the Government.
Conservatives have repeatedly made the point that Gordon Brown failed to fix the roof when the sun was shining. This means we went into the recession with the largest budget deficit of any major economy. We have consistently argued that monetary policy is the primary tool for managing demand. We need radical new approaches to get credit and money to start to flow again, including the establishment of new institutions to underwrite lending so that businesses can get the money they need. These measures could include government guarantees for new business lending, provided at a fee to protect taxpayers.
And because the underlying fiscal position is so poor, a borrowing binge would only add to our problems in the near future. It would force the government to raise taxes, placing a bombshell under any recovery.
Gordon Brown’s past recklessness therefore means we are worst-placed to embark on any fiscal stimulus package. That is why a large package now would risk further damage to Britain’s economy, on top of a decline in the value of sterling, as international investors lose confidence in the competence of the British government
More borrowing will store up problems for the future
• Government borrowing is already projected to be £68 billion this year – the highest since records began in 1946. All this debt will have to be paid off by future generations.
• Already our debt interest payments are larger than our spending on schools and transport.
Michael Saunders, Chief Economist at Citi: “I didn’t think it would be necessary a year ago and I don’t think it’s necessary now. Fiscal stimulus is for you to draw upon when you can no longer use monetary policy. It’s one thing for a government like the US that has used up its monetary policy but another for a government behind in the polls to talk about fiscal stimulus. Government is trying to do pre-election giveaways and camouflage it as a pseudo- Keynesian philosophy.” (Financial Times, 13Nov08)