The C word

No not that one, I mean CUTS!

The BBC has a new bone and it is clear that it intends to make the most out of it. As Conservativehome’s Tim Montgomerie points out the BBC seem to only have two stories at the moment, how damaging the Tory cuts are and how people are opposed to the Pope’s visit.
It has infuriated me for some time that the has been little attempt in the media to explain the cause or level of the national debt or to provide any balance to the cuts narrative. One exception to this is the ever excellent Evan Davis and his program Evan Loves Tax on Radio 4 (don’t let the title put you off fellow Conservatives), it’s well worth a listen.
I think one of the problems is that the figures involved are too big to comprehend and the fact that it is government income and spending makes the argument too remote. Let’s personalise the issue and see if that helps to explain the dire straits that we are in.
Imaging your take home pay was £750 per month, also imagine that your outgoings were £1,000 per month, you therefore need to borrow £250 per month just to pay the bills. This is the situation that the country was in when the coalition took office. Can you imagine what the advice would be from one of those personal finance phone in programs would be? Would it be “keep borrowing and hope that you get a pay rise in the next few months” or would it be “cut up your credit cards, reduce your spending and start trying to reduce your debts”.
The simple truth is that before the election were were on a tightrope, confidence in the UK’s financial situation was at rock bottom and there was a very real chance that our sources of borrowing would dry up. If that had happened the discomfort of the next few years (and there will be plenty of discomfort) would have been infinitely worse.
And before the Labour leadership hopefuls and the Bob Crow’s of this world try to claim that it’s all about the banks, over half of our structural deficit was built up before the banking crisis, when times were good. It was Gordon Brown who ran up these huge debts and now George Osborne is now doing what is necessary in the short term and right in the long term.

One response to “The C word

  1. Such a simplistic comparison to personal finances is deliberately misleading. If you applied similar logic to business then Google would never have made it into profit.

    There are few years since 1980 when the UK government has not been in deficit (during periods of high economic growth, not when battling to avoid a double dip recession).

    But the first advice from a personal financial advisor would be to cut the interest you pay on your debts, fortunately we have extremely low interest rates at present for government bonds (not quite as low as before the Greek debt crisis, but still better than at any other time).

    The second piece of advise would probably that you don't need two new nuclear submarines which you only park outside your house to defend your home from attack. It looks like the Conservatives may finally be listening to the MOD and Lib Dems who opposed a rush to renew Trident.

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