If you didn’t catch the Pre-Budget Report ‘live’, take it from me – you didn’t miss much.
It was pretty dull stuff – a “damp squib”, says Malcolm Cuthbert at Killik & Co. With a general election looming next year, that’s no great surprise. But the big problem facing investors in UK Plc remains. That’s the total lack of detail on the number one question – how on earth this country’s going to stop itself drowning in debt.
The Chancellor has upped his public borrowing forecast for this year from £175bn to £178bn. And he’s ‘cut’ his guess for 2013/14 from £97bn to, wait for it, £96bn. You cannot be serious, Alistair. Having forecast a current year shortfall of ‘just’ £118bn in the 2008 PBR, adding or subtracting a billion or two won’t fool anyone.
The sheer scale of Britain’s state borrowing is truly scary – a “dreadful mess”, says Andrew Smith of KPMG. As James Kirkup points out in the Telegraph, the PBR admits that by 2014/15, the UK’s national debt will have climbed to £1,473bn. That equals almost 80% of GDP. And that’s assuming that you believe the government’s fairly racy growth forecasts of between 1-1.5% next year and 3.5% in 2011-12.
So Britain is still heading for its highest-ever peacetime national debt, while the economy is more vulnerable than for many years. Some say the UK’s national debt/GDP ratio has been a lot higher – like after the Napoleonic Wars – and we still pulled through. But that’s not a valid comparison. After 1815, Britain pretty well ruled the world for a century. Our real GDP was almost certainly much higher than the ‘official’ figures suggest. There’s little chance of that happening now.
And whatever was – or wasn’t – said yesterday, “there’s no magic wand”, says Smith. “The bottom line is that higher taxes and NICs, reduced public service provision and the likely imposition of user-fees for previously “free” services add up to a cut in the standard of living for pretty much everyone. Welcome to the new Age of Austerity”.