Friday, 24 April 2009

Why Brown Can't afford Not to Spend.

There are voices from several quarters now questioning Labour policy on public spending. Quite right too: we're heading for the largest national debt since the Second World War. Hold on, lets put that in perspective: it's taken 12 months to put us in a much debt as it did for the country to wage total global war over 6 years.

Hold on, you'd think that if continuing as we are will push up national debt to new historical highs, then the government would start cutting back a bit and start saving money instead of spending it.

The problem is, they can't. The secret that no one will tell you is that the whole economy relies on large amounts of government borrowing, taxation and spending. Government is our industry, because we no longer have any wealth-creating industry to speak of. Government has taken over the role.

Let me explain:

Last time we were in this position, at the end of the second world war, the government quite rightly put UK industry to the task of winning exports. Literally, thats all that UK industry did: supply goods to foreign countries in order to earn money for the country. As an example, the first Land Rovers were all shipped abroad. You had a hard time getting one if you lived here because you weren't a priority. Earning that foreign cash was.

Roll the clock forward to now and the mess we're currently in. We have no large industry any more. We have nothing to export as the goods we make here can be made cheaper in China and shipped all over the globe as easily as if they were made here.

So what has happened over time is government has become the biggest company in the UK. If you're not working directly for local or national government, you may be working in a call centre for one of their agencies, or working on a government sponsored training scheme, or even a Government-funded charity. Even if you don't work for the government, you tip up a high percentage of your wages over to them so they can employ somebody to pay some of that back to you in tax credits.

Basically the money is being churned around in an endless cycle, with relatively small profit and growth.

If the government had let the banks fail and if they had cut public spending to reduce borrowing and debt, whole swathes of the population of this country would have been out of work, due to the reliance on the state to provide jobs. There would definately have been riots on the streets.

So Gordon Brown is committed to continue funding at these rediculously high levels for a good while yet, and the next government too, will find it hard to wean the population off the state teat. It will take a decade at least to undo what Labour have done to this country without causing catastrophic problems, and another decade on top of that to get back to middling levels of prosperity. Hopefully then we can start reducing the national debt.

By that time I hope to be retired, or dead. It's my children I worry about most. They will have to carry this burden in higher taxes for a significant part of their working lives.

All because of 12 months of recklessness on the part of Gordon Brown.

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