£3trillion. Did you know that we’re jointly and severally liable for it? It’s the debt of the nation.
The Government doesn’t have any real existence beyond the people, and the thing that guarantees the debt is what we pay in taxes.
And the taxes have to go up to pay the debt in the end, so we all share in responsibility for this £3trillion.
But unfortunately, it’s worse than that because the Government has a deficit every year that is running at over five per cent of GDP, where nominal growth is only about four per cent of GDP.
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That is the vicious cycle, because it means that your debt every year is getting bigger, but you’ve got to 100 per cent level every year.
It’s getting worse because we’re not just borrowing more than we’re receiving in income through tax receipts and so on.
We’re borrowing more than the economy is growing by even including inflation. And historically, that has been a very dangerous position for a country to be in.
And the deep set problem is that we are spending too much. If you look at tax receipts in this country, look at it in the post-war period, they tend never to get higher than 38 per cent of GDP.
When they do, we change our behaviour and they fall back again. So when tax rates were at 38, at 98 per cent, tax receipts were actually lower than they were when they came down to 40 per cent.
People changed their behaviour once tax gets too onerous, but we are spending 44 to 45 per cent of GDP a year.
And we have gone through two crises that we have funded the global financial crisis in 2008, the Covid crisis. We spent money like a drunken sailor, and then we haven’t done enough to bring things back into order.
And some expenditures that were Covid emergency expenditures, particularly in welfare, are continuing willy nilly and debt has reached £3trillion.
Now, the main thing isn’t actually the total sum.
The main problem is the relationship to GDP, and if it is affordable in our history, we do not go to 100 per cent of GDP in peacetime.
Yes, we did it to defeat Napoleon. Yes, we did it to defeat the Kaiser. Yes, we did it to defeat Hitler and more.
But to do it in peacetime is not a normal situation to be in.
It is a risk, and I would expect that we will see emergency cuts and expenditure within the next few years if we continue on this route.
We are teetering on the edge of bankruptcy and you and I are jointly and severally liable.
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