Debt

If I were to ask you about budgeting, in particular how you manage your household budget, you may answer differently to someone else. You might think it is okay to have a credit card, as long as you pay it off every month, someone else might think it is okay as long as you pay the interest every month. Some people don't have a credit card and will never have one, and they only buy something if they can afford it and have the money in the bank, which I suppose is the most sensible thing to do. You could say if everyone behaved frugally this country wouldn't be in the mess it is in now, and you would probably be right. To Put it simply, we should all live within our means. Putting all that aside, the simple truth is, we as a country are in debt, huge amounts of it. So, the question has to be asked, how do we get out of this mess? The government have decided to act quickly, they have announced £6 billion worth of cuts. I believe this is a tiny drop in the huge ocean of waste and I truly believe if the Government doesn't do something quite radical and make huge cuts we will see this country go under. That sounds very pessimistic, but unfortunately for you and me the facts speak for themselves. So let us look at our countries finances and after we have looked at them, I want you to think about what you would do.

Currently the official figure for our national debt is around £800 billion, but some analysts put that figure as high as £2,200 billion. This is how they came to the second figure:

Public sector pension liability £1,400 billion.

Contingent liability for Network rail £22 billion

Public Finance Initiative £139 billion, a major attraction of PFI is that, in theory, it transfers the risk of failure for a project from the Government to the private sector. However the reality is the Government carry most of the risk. Because if the project fails the Government have to pay, this happened a number of years ago with the London Fire Brigade. A company took on the maintenance contract for all stations and equipment but found that, when they took on the contract they hadn't taken into consideration the diesel cost and could not afford to carry on. The fire authority then had to take on the contract.

£130 billion of intervention in the financial sector.

The total of all this comes to about £1,395 billion, bringing a total of about £2,200 billion. That is our countries debt, the government aren't even dealing with this, they are trying to deal with the deficit, which is about £163 billion every year. The situation is this, the Government raises about £540 billion pounds every year but currently we are spending about £700 billion every year, by any ones calculations this is not good. It seems that if something isn't done soon this country could go bankrupt. You might say that sounds a bit over the top, let me tell you this, currently this country has a triple A rating when it comes to our economy. That means when we borrow money we have a low interest rate and financial markets don't see us as being a risky country to invest in. If we do not sort our finances out speculators and investors will not invest and we will have to borrow money at a high interest rate and we will have to go to the IMF cap in hand and ask them for financial aid. As I have said above the Government are making £6 billion worth of cuts, I believe this is a ridiculously small amount and the Government needs to be doing more. Let me put this into context, imagine your income was £30,000 a year but your outgoings were £39,000 a year, you would have to do something about it, or else you would eventually end up bankrupt. So you decide you would cut some of your spending by £900 a year, I am sure I don't need to tell you that £900 is not really going to make much difference to your financial situation (Imagine on top that figure, having £120,000 on credit cards and loans). This is what the Government are doing, £6 billion sounds like a lot of money, and to you and me it is, but if you look at our countries debt it is a tiny amount.

So, what could we do that wouldn't have an affect upon the public sector and still pay off the debt? I have already talked about waste in a previous post, but I just want to mention a few things here that hopefully will make you think.

Currently the Government is committed to spending £18 billion on a climate change bill. The Government wants to cover our beautiful countryside with wind turbines which are not going to produce enough energy for our needs, and we the tax payer are paying for it.

At the moment we have a very costly welfare system with over 70 different types of benefits, the Government could cut costs by £8 billion just by reforming it.

We pay £16 billion into the EU every year. Leaving would have no detrimental affect upon our economy. And before you start quoting figures about 60% of our exports going to the EU, the figure is nearer 40%, manufacturing only makes up 13.7% our economy. The EU are going to regulate Hedge funds, which generated £5.4 billion last year for our economy. Hedge funds had nothing to do with the financial crises and 80% of them are dealt with in London, if they are regulated they will leave and set up in Geneva, Dubai or the far east.

We need to deregulate; SABMiller, the 17th largest British Company is thinking of moving its head quarters outside of London because of over regulation. Unilever is thinking of doing the same, this will mean less income for our economy and less prestige for the City of London, meaning more and more companies could end up leaving, thus taking their jobs and tax elsewhere. You may say good riddance, but be careful, London is currently the largest financial centre in the world and generates huge amounts of money for our economy.

Cut QUANGOS by half, thus saving about £45 billion. Many QUANGOS overlap and 250 chief executives of these QUANGOS are paid over £150,000 a year.

There are over 25,000 public sector workers earning over £100,000 a year, and over a 1000 earning over £150,000 a year. This needs reforming.

I haven't got started on how we could boost manufacturing, I will leave that for another post (I am sure you can't wait). There we have a few simple ideas which I have researched, I am no economist and no expert in financial management but something needs to be done. I want to finish with this; when Labour came to power in 1997 our national debt was £350 billion and our deficit was £6 billion, that is pretty manageable. We are now in a situation in which we are hugely in debt and I put that down to Labour's total mismanagement and in particularly Gordon Brown. Gordon Brown will walk away from politics in the near future in a financially sound position unlike the country which he ran, he will probably follow his predecessor onto the lecture circuit making even more money. I believe Gordon Brown should stand trial for what he and his Government did. Remember this, we live in a democracy and people should be held to account for their actions, unfortunately they won't be and we the British people will continue to suffer the consequenses of his total mismanagement.