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”
Oxford Kevin
Lamont's lamentable borrowing blather http://bit.ly/94ONBX . Don't let ConDem con you about who to blame for the increase in debt.
Guido Fawkes
Will I think you are knowingly ignoring at least two critical factors. How high would yields be if the Bank of England didn’t buy £200 billion of gilt issuance with money it had just printed?
Also Brown Enron’d government expenditure, putting liabilities off the balance sheet. Even HMRC’s offices are owned by an offshore entity.
Don’t get me started on unfunded pension obligations. The IEA estimates that the true level of government indebtedness more accurately estimated by including pension liabilities, and a reasonable estimate of the likely liabilities to be incurred by the government in respect of the banking sector is actually £4.8 trillion (333% of GDP), over six times the size of the declared national debt.
James Vernoit
Will Straw – 'GB brought debt down from 42.5 per cent on becoming Chancellor in 1997 to 36.0 per cent in 2007' => http://bit.ly/aSSGMN
Fat Bloke on Tour
Tracy Beaker @ 12.34
Away and look at the real figures not the Dog Boiler’s synopsis put out by the upper middle class, deficit obsessed establishment.
The story shows that GB / AD had the economy under control coming into the Credit Crunch and that they were plannig a slight squeeze:
1.7% growth in real terms to public spending.
2.5%’ish growth going forward.
Consequently everything was under control with the only major issue, raw material inflation, being a problem of success.
One final issue, you mention the public sector has reached 48% of GDP. Any thoughts or comments when public spending has been similarly high?
Fat Bloke on Tour
Semen Staines @ 1.52
QE = Merv’s lever of choice.
PFI = KC’s nice little trick to keep the public debt below the Masstricht criteria.
Banks = You love talking about the bad news, what about the good news? That is the assets involved with these liabilities?
I fear your concern suggests you think that Sniffy / Danny the Janny will cut to the point of economic suicide and the whole banking edifice will collapse due to a slump generated by the Dog Boilers in the upper middle class establishment.
Vote of confidence indeed in the two apprentices ruuning the economy.