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”
Guido Fawkes
I think bad banks should be wound up, capitalism is a profit and loss system, losers exit the game.
Fat Bloke on Tour
Stephen W
Good try but not good enough.
It is far too early to determine the effectiveness of the ConDenNation’s slash and burn tactics?
The markets could go all Greece2 on us.
That is love the cuts but wonder how we will ever be able to pay the money back if we go into a Double Dip recession with no levers available apart from a second round of cuts.
Gilt yields have come down for a number of reasons.
One of which was a flight to quality, or rather relative quality.
Things were not great but they were better than the Euro and Club Med.
Consequently go easy on all the Dog Boiler triumphalism.
mike
a price well worth paying
bank bonuses never bigger
loads of money
Edward Leathem
RT @leftfootfwd: Lamont's lamentable borrowing blather http://bit.ly/94ONBX