At the end of January 2010, UK government debt stood at £848bn and around 60% of GDP. The European Commission says ‘additional fiscal tightening measures’ are required. The Tories warn that investors are getting anxious and that the ratings agencies (who also certified the security of mortgage-backed derivatives) are about to downgrade the UK government’s debt, with the likely consequence of increased interest rates to pacify bond-holders.
Two-thirds of Treasury bonds are held by UK citizens and institutions – mainly banks and pension funds – that rely on them as secure and predictable basic assets. This is UK government money owed to UK citizens by the UK government. It is a purely internal redistribution of claims that cannot be compared, as it sometimes is, to household debt. The one-third of Treasury bonds held by foreign investors, such as other central banks and financial institutions, is a rather different story. Clearly these bond-holders have less direct interest in the long-run health of the UK economy, and so may and sometimes do, exert pressure on governments to increase the rates of return on the new bonds they issue. Were these rates of return to exceed a reasonable expectation of the political and economic tax revenue capacity of the UK government, then there would be difficulty in continuing to fund the current level of debt in the same way. In fact this situation seems a long way off. Currently interest rates are low, UK debt is not particularly high relative to other countries, and the UK has strong social and economic assets to back its liabilities. This makes UK government debt a particularly safe form of wealth in a time of economic turbulence and one that tightening capital regulations are likely to create even more demand for. The real question about the UK’s debt is not so much whether it is sustainable, but whether it is fair. Continue reading Debt and Deficits – Sustainable but Unfair
The Conservative Party leader David Cameron has today published in the Guardian the text of a speech in which he outlines a programme of constitutional reform. What he says is interesting, but shouldn’t be taken too seriously. We mustn’t forget that David Cameron is no political thinker. He is and has always been a political operator. He is the type of individual we need less of in Parliament. Still we must make do with what we have, and maybe he can serve an important purpose. Certainly he may have jumped on the right bandwagon. Labour, having promised constitutional reform to appeal to their less tribally-committed supporters over the years, have as far as Westminster is concerned signally failed to deliver. Indeed it is practically (and may effectively turn out to be so) criminal that the government has not transferred many of the systems trialled in the Scottish Parliament and Welsh Assembly (proportional representation, powerful and independent committees, transparent expense arrangements, to name but a few) to Westminster. It is probably too late to claim the initiative back on these issues, and so we have the strange sight of the Conservatives leading on them. Continue reading Welcome to Cameronia!
The Daily Telegraph and their informant have certainly opened a veritable can of worms! Their publication day after day of new revelations of MPs’ expense claims has certainly boosted their sales, despite the widespread reporting of every detail in other outlets. But if they also have a political agenda, this must be a dangerous game, both for the paper’s chosen champions, David Cameron’s Tories, and for the rest of us. The likely public response to the Telegraph’s uncovering of the somewhat murky operations of the Commons Fees Office is ‘a plague on all their houses’. This will probably encompass all the prominent parties in Westminster: Labour, Conservatives and Liberal Democrats. Many will presumably opt not to vote in the Euro elections on 4th June and perhaps in the General Election which must come within the next 12 months. Some may be persuaded to vote for candidates they would not otherwise have voted for. If they are going to do so let us hope they are clear on exactly the issues at stake. Continue reading A New Politics?