In today’s Daily Telegraph, former Chancellor Norman Lamont trots out the normal Conservative lines about “Labour’s legacy of borrowing” and Gordon Brown’s “spending addiction”. Putting aside his own record of raising debt, he goes on to claim that Britain was reaching the limit of its “borrowing capacity”. The claim doesn’t stand up.
Towards the end of his piece in the Telegraph, Lamont writes:
Governments of the richest industrialised nations, including Britain, are reaching the limits of their borrowing capacity. Having bailed out the banks, they have now been bailing out each other, with the crisis ricocheting back to banks that have also been lending to the same governments. We are running out of lenders of last resort. If there is another crisis, some heavily indebted countries won’t find it easy to support the European Central Bank and the IMF.
Some have jokingly suggested there will only be the Chinese and the Brazilians left to lend. To suggest, even half-seriously, that the debts of the rich should be borne by the shoulders of the poor shows why the Government is right. Now is the time to act and to do it right. Good luck, George.
But the following graph – using Bank of England figures – shows that the yield on conventional 10-year gilts remain at low levels. Meanwhile, as Martin Wolf outlined last week, we are seeing an “epidemic of private sector frugality” with the UK private sector set to run a “huge excess” of income over spending (ie savings) equivalent to 9.7 per cent of GDP. So Britain has no need to resort to China for borrowing anyway – borrowing can be paid for from domestic savings.
And what of Norman Lamont’s own record? When he became Chancellor, public sector net debt was 26.0 per cent of GDP rising to 36.5 per cent by the time he left. By contrast, Gordon Brown brought debt down from 42.5 per cent on becoming Chancellor in 1997 to 36.0 per cent in 2007. The subsequent rise has been primarily due to the financial crash, bail outs, and subsequent recession, rather than any so-called “spending addiction”.
14 Responses to “Lamont’s lamentable borrowing blather”
Roland M-Horne
RT @leftfootfwd: Lamont's lamentable borrowing blather http://bit.ly/94ONBX
Paul Evans
Norman Lamont really does have brass balls doesn't he? http://bit.ly/bdZ63q
tracy j
“Gordon Brown brought debt down from 42.5 per cent on becoming Chancellor in 1997 to 36.0 per cent in 2007. The subsequent rise has been primarily due to the financial crash, bail outs, and subsequent recession, rather than any so-called “spending addiction”.”
utter fantasy. GB was borrowing heavily every year after 2001. He did indeed pay off some of the national debt when he was sticking to the conservative spending plans. after 2001 he increased government spending from 36-48% of GDP, borrowing heavily every year. he thought he had abolished the banking cycle.
LockPickerNet
Lamont's lamentable borrowing blather http://bit.ly/94ONBX via @leftfootfwd
Stephen W
What an utter load of rubbish.
You still have not answered the basic question of how you think we can go on borrowing more and more forever, whoever we are borrowing it from?
And take a quick look at your pretty graph, and you may notice gilt prices coming sharply down AFTER LABOUR LOST THE ELECTION.
Gilt prices are reasonable because the world believes we have a credible deficit plan. In fact, the reduction in gilt yields due to this plan has already saved us a forecast £6 billion a year in year on year interest payments. That’s £6 billion that can be spent on public services year on year, that would have been wasted under Labour’s spending plan.
Gilt yields are low because the Coalition has a credible plan to cut spending. It is not a reason to go on borrowing forever. If we do that the rate will sharply rise back to 4% and probably higher.