Result Misery

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.

Innumeracy

I was only half listening to the Today programme’s business report at 6.15 a.m. this morning so I didn’t catch the name of the lady that the reporter was talking to. I think she worked for a firm that advised on investments. Even if I had millions to invest, which I do not, I would not waste any time seeking out this ladies company. It was a throw-away comment that she made at the beginning of the interview which annoyed me, it was something along the lines of ‘trillions, whatever they are.’ This is so exasperating, how can one be so ignorant?
A trillion* is 1 followed by twelve zeroes it looks like this 1,000,000,000,000. It could be referred to as 1 million million. It is an enormous number. If you shared it fairly amongst every one of the 17.1 million families in the UK they would each have over £58,000. Assuming that each family lives in an average priced home, which they don’t, and each family has a 100% mortgage, which they don’t, then this money would pay-off close to 40% of the debt.
Actually, the average household debt in the UK is approximately £59,730 (including mortgages), thus this much money would virtually clear that debt at a stroke.




* This is the American version. My feelings on the demise of the superior British system will be the subject of another blog.