The coalition government, and Nick Clegg in particular, is fond of arguing that we must deal with the public spending deficit quickly rather than leaving the burden to our children and grandchildren. He oversimplifies a little (not that he is alone in that).
Deep breath...
We are told we have a deficit (net government borrowing) of £155bn per year. This is down from a projection of about £170bn by the outgoing government, I seem to remember, but it may be politically disadvantageous to remember that. The actual figure for 2009/10 was £159.8bn according to the Office of National Statistics
£109bn of that is judged to be structural deficit - the problem that remains when economic activity returns to "normal" conditions, whatever they are.
This structural deficit must be eliminated by 2015, which I take to mean "by the end of the financial year 2014/2015", so that the government has a chance of achieving a result by the time of the next election. This could be seen as normal political cynicism, or perhaps refreshing honesty.
They really have four working years to achieve their aim (2011/12, 2012/13, 2013/14, 2014/15), plus a few things like the VAT increase which take effect before May 2011.
Now, the interest we are paying on our national debt, the size of which is rarely mentioned (but in March 2010 was about £1000bn according to the ONS) is £43bn per year. That's £118m per day (even I can work that out), but which year does that apply to? 2010/11?
If we "carry on as we are" those interest payments will increase to £63bn per year by 2015 (2014/15 or 2015/16?). Or is that the figure we will reach with the proposed cuts?
Whatever, to deal with our £109bn structural deficit, we are going to make cuts of £83bn (or maybe £81bn, depending on your spokesman) "by 2015".
To have any sensible effect, that £83bn must be an annual figure, to chip into but not entirely eliminate the £109bn shortfall, though sometimes it is quoted as a reduction over the next four (or five) years. But we are not going to achieve the full £83bn until 2014/15 (I think), which seemingly will leave us with a structural deficit of £26bn per year, and a national debt of (you work it out).
We will then be paying more interest per year (and per day) than we do now, because the national debt will have grown even if the annual deficit has shrunk. We will therefore be handing on to the next parliament (our children and grandchildren will come along a little later) a much bigger bill than we currently owe.
Nothing here should be taken as a criticism of the decisions taken today (though I may have many). The presentation of these numbers does look inadequate, but would anybody being honest about them ever get elected?
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