Ed Miliband’s embarrassing mistake last week – the bit when he forgot to mention the deficit – led to much talk about how important dealing with it is.
But given that the Conservative conference is on and there is now talk about how well we are getting on with dealing with our apparent inability to live within our national means it is, I think, worth reminding ourselves just how much we still borrow every year and how much our total national debt now stands at.
The total debt now comes in over £1,430bn (Institute for Fiscal Studies). That’s not far off double what it was in 2010. Worse, David Smith, writing in the Times, puts new borrowing in the first five months of this fiscal year (April to August) at £45.5bn – that’s up rather than down from £42.8bn this time a year ago.
The public spending cuts may be continuing apace, says Smith, but unfortunately, thanks to the rise in the personal income tax allowance and the failure of wages to rise in line with inflation, tax revenues are falling too. That means that we are all set to have yet another £100bn-plus budget deficit over the full year.
“Even now”, says Liam Halligan in the Telegraph, “with interest rates at rock bottom and the market for sovereign debt effectively rigged by virtual money printing, the British government is spending far more on debt interest than on defence and almost the same as on education”.
Not going well, is it?
The UK is unlikely to run out of money any time soon (though as Halligan points out, our deficit is knocking around the levels it hit when we were forced to go “cap in hand” to the IMF in the 1970s) but should Miliband want a hint as to why it isn’t a good idea to forget about your debts, he might look over towards the Pacific Ocean.
Nauru is a tiny island state with a 10,000 strong population and no obvious way of supporting them (think 90% unemployment). It has just spent its last dollar. Its offshore bank accounts have just been frozen by a hedge fund, which is demanding to be paid £18m it says it is owed by Nauru for a bond issue. Nauru has nothing in reserve.
The result, says its finance minister, is simple: “essentially…the Republic of Nauru will cease to be able to operate”. The Times wrote about this earlier this week. Its headline is one I hope to never see in reference to the UK: “Island grinds to a halt as cash runs out”.