Cover of MoneyWeek magazine issue no 580

National Treasures

16 March 2012 / Issue 580

Profit from state-owned resources


  • Where do the world's billionaires live?
  • The Queen of Shops opens her own factory
  • The downfall of Britain's Bernie Madoff


Slash spending and taxes

So just how bad are things in Britain? Dr Tim Morgan of Tullett Prebon appears to be on a mission to make sure no one thinks for a second that the answer is anything but “awful”.

He’s been circulating a UK economy primer that sums up our problems all too clearly. The economy has for too long been “excessively dependent” on the “twin drivers of private borrowing and public spending”. Both are now dead in the water, something that has left 70% of the economy in “growth lockdown”.

At the same time, Britain is so over-leveraged that the government has had no choice but to focus on deficit cutting – and find novel ways to finance its debt (Osborne’s new plan to issue 100-year gilts into the world’s yield-starved bond markets).

But the deficit plan it insists on following depends largely on growth and hence on rising tax revenues, rather than on genuinely large cuts in spending. Without the twin drivers mentioned above there is no growth. The upshot? If we carry on as we are, we get to keep the deficit and the debt and we get to have a stagnant economy too. Not good.

• Read the full editor’s letter here: Slash spending and taxes.