There is one thing that has been bothering me during the recent campaigning and that is every time a politician talks about halving the deficit, interviewers and analysts respond as if the topic under discussion is halving the debt. Why has nobody pointed out that they are not the same thing? If I spend £15,000 last year when I had £10,000 income and then prudently halve my deficit this year to £2,500 then my debt will have increased by 50% to £7,500. How is that better? It is just less worse than it might have been. Running a deficit of any size increases debt and I was led to believe that our debt was already too high.
Still it may be just a pipe-dream that I will ever see this country with a negligible debt. Take a look at the post titled ‘Tackling Our Fiscal Black Hole - People Ain't Dumb’ by Wat Tyler on
Burning Our Money which states that just to reduce our ‘
government debt back to the maximum safe sustainable level relative to national income (the maximum level reckoned by the IMF and others to be 60%)’ we need to:
cut spending or increase taxes by £180bn pa. Which in round numbers is the equivalent of: - £7000 pa extra taxes/ lower spending per household;
- increase in the basic rate of income tax to 65p; or
- increase in the standard rate of VAT to 57%; or
- 25% off total public spending
Just look at those numbers, 65% income tax, 57% VAT. We really are in a bad way.
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