The Office for National Statistics has published UK's debt statistics. Not good news.
Debt as a percentage of GDP has nearly doubled since 2002 and is now almost 60% of GDP, a figure which is unsustainable. Gordon Brown is sounding increasingly out of touch when he claims that Labour would oversee an increase in public spending. His line is just not credible.There is still acres of waste in public spending which needs to be reduced and some tough decisions will need to be made. We should be honest with voters about that.
An easy contender for spending cuts is in the advertising budget, Phil Taylor has highlighted a huge increase in recent years (worth noting the peaks ahead of each general election).
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Cut public spending - That is a very shallow analysis of what needs to happen, but not surprising given the Tory party obsession.
First it should be remembered that GDP has gone down in the last year, while public spending during the recession has gone up (quite correctly according to most economists). This accounts for a small part of the change and is both part of a cyclical effect and emphasised by the drop in GDP.
The main reason is that the government has needed to bail out banks, through semi-nationalisation and by providing massive loans. When these banks are re-privatised (and they must be) then the public debt will drop dramatically. There is no problem here as long as the government gets a good price from the sale. Since they bought at the bottom of the market, they should make a good profit and reduce the public debt back down to reasonable levels.
Similarly with the loans they have provided to banks they recieve interest well above inflation or GDP growth, this should slightly reduce public debt in the future.
The economy is not in a good state at the moment, but cutting public spending is the best way to lengthen the recession and will hit the poorest hardest.
If there were 'acres of waste' then there would not be tough decisions to be made. There is some waste and these small cuts should be very simple to make. But a reduction in public spending of 20% of GDP (£250bn) would be a disaster for the economy.
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