Paucity of ambition

The government has been increasing public sector debt by three or four per cent of GDP since about 2000 (which is not as bad as it sounds, seeing as GDP was growing by three per cent or so - a form of mortgage equity withdrawal, if you will), which is as much as they thought they could get away with, seeing as they were constantly trumpeting how well the economy was doing (it wasn't doing well at all, obviously, it was mainly fuelled by cheap credit).

They are now making the best of the recession and using it as an excuse for a massive increase in spending and borrowing, which is expected to be nearly ten per cent of GDP each year for the next couple of years.

Anybody who believes that this increase is directly caused by the recession itself is a mug, of course. If GDP shrinks by four per cent, and the average tax rate is fifty per cent, that would only create a two per cent of GDP shortfall, and we have hitherto spent about two per cent of GDP on unemployment benefit etc, so if unemployment went up by a million, that would be another one per cent shortfall. Conversely, in a recession, a lot of things get cheaper, so the government ought to be able to get better value for money, so if they kept real spending constant, you wouldn't expect the deficit to increase very much.

No, my gullible friends, they are ramping up government spending (and hence taxes) like mad because they know it's politically possible to do it during a 'recession' (they've gone just as mental in the USA as well, interestingly enough).

Anyway, I digress. Any sensible policy ought to be about getting the public finances into balance ASAP; they don't even have that ambition; The Badger has now proudly said that they would try and halve the deficit within four years. That's a bit like a burglar asking for leniency and promising to cut down the number of homes he'll burgle in four years' time to half as many as he intends to burgle this year.

Just sayin', is all.