Budget 2010: The days of spend now and pay back later are over. Later is now
By Jeff Randall
Published: 8:17PM BST 17 Jun 2010
To appreciate the scale of Britain's economic problems, imagine what would happen if, over the course of five years, your expenditure went up by about 40 per cent but your income remained roughly the same. For many, the outcome would be unavoidable: an early appointment with the bankruptcy court.
This is the task facing George Osborne, as he prepares next week's emergency Budget. Since 2005, government outlay has ballooned from about £500 billion to £700 billion, while tax revenues (forecast to be £541 billion in 2010-11) have barely increased. We, as a nation, have lived beyond our means for so long – the last balanced Budget was 2001 – that spending more than we earn has become an accepted, albeit perverse, feature of public finances.
If we are to be hauled back from the brink of ruin, the Conservative-led Coalition will need to introduce something far more radical than short-term nifty housekeeping. Its goal must be nothing less than the recalibration of a collective mindset. Those who want it all, demand it now, and expect to pay later – or, better still, hope that someone else will – have run out of road. For the Dick Turpin generation, next stop is York Assizes. The game is up.
According to Dr Tim Morgan of Tullett Prebon, a City broking firm: "Western societies have been succumbing to a psychology which decrees that tomorrow doesn't matter, at least until it arrives… An excessively relaxed attitude to debt is the real problem, applying pretty equally to governments, businesses and individuals… Borrowing means over-consuming now at the expense of under-consuming later. Welcome to 'later'."
As Voltaire noted: "The art of government consists of taking as much money as possible from one class of citizens to give to the other.".....
In order to prevent our national solvency from being overwhelmed by debt, Mr Osborne must cut public spending by many times that amount. If he merely achieves the goal set out by his predecessor, a halving of the UK's annual £155 billion deficit by the end of this Parliament, the total amount we owe will double to £1.4 trillion, implying interest charges of about £70 billion a year.
Think of how your credit card works. Paying off no more than the minimum each month results in the outstanding balance becoming bigger and bigger, until the limit is breached and the issuer withdraws the facility. At some point the UK's lenders will lose patience. To believe otherwise is delusional. .......
www.telegraph.co.uk/finance/financetopics/...Later-is-now.html