Is Britain now on the edge of its own bankruptcy
Britain is on the verge of a financial breakdown and it could happen next week, next month or next year. Your political persuasion is irrelevant and it makes little difference who is in power, now or in the future.
When the Coalition government formed in 2010, we were presented with the news of a huge mountain of debt. In fact, the previous government had left the country sinking under £700bn of debt, you may remember one politician joking that there was no money left at the treasury.
By the general election in 2015, it was estimated that our national debt was well over £1.3 trillion. Today, that debt has grown to £1.7 trillion and accumulating at the rate of £5,170 per second.
Britain is now one of the most heavily indebted countries in the Western world in comparison to the size of it’s economy. In fact, Britain is now inside the top five most indebted with total debt to GDP standing at well over 400 per cent.
Proportionally, Britain now has more debt than Portugal, Italy, Spain and twice as much debt as Greece. These four countries, without the assistance of Europe as a whole would be dead and buried. Italy is literally falling apart due it failing banks.
All this debt accumulated after the second word war. The peace dividend offered to the people was greater and greater levels of welfare. Politicians soon realised it was a vote winner and the road has ever since been a spiralling one.
It was the same in Europe, the USA and Japan – the post war powerhouses with seemingly endless growth and economic prospects made promises to their people that simply got bigger with scant regard to the longer-term economic future.
A wave of idealogical promise enacted within laws that included every fabric of life from birth to death. Education, health, police, social welfare, the list was endless and continues to be so. Politicians were, and still are too weak to deal with the realities of life – it’s simple, you can’t spend more than you earn.
Of course, one should not forget the endless tax-payer funded billions that has gone into saving irresponsible banks with an ever growing list of crimes that never ceases to amaze everyone.
The state pension liability now stands at an eye-watering £5trillion with no real prospect of actually paying it when due. So desperate are governments of recent years to raise money, they have been quietly raiding private pensions funds which has almost now become the norm and will continue to be so. The other method being used it to delay pension payments by moving the legal definition of pensionable age.
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Our much loved NHS, buckling under the strain of age-related illnesses and ever more expensive ways of keeping us alive longer is in the cross-hairs of the current political incumbents with their privatisation weapon. The ‘social protection’ cost in welfare alone matches that of the NHS bill to add to our mounting financial woes.
In the last 30 years interest rates have been declining and that has allowed successive governments to borrow more. It is here that the real threat to our way of life meets us. Long-term interest rates have bottomed out and we are on the brink of a return to long-term interest rate increases. At what many would consider a normal rate of say 5% in economic decline, the British economy is all but sunk as repayments on current debt would increase 300%.
Some economists say that in that scenario, Britain would have no choice but wield a hefty axe through just about everything in social protection such as state pensions, funding the NHS, the police and looking after our needy and vulnerable.
In all of this debate one factor keeps being overlooked by both governments officials, the opposition and economists. Big corporate business does not pay it’s fair proportion of tax. The government, G20 and OECD make the usual promises to tackle multinational tax avoidance, which here in the UK sits at an astonishing £120bn per year. Even HMRC have put it somewhere between £35bn and £50bn – an embarrassing admission at best.
The Conservatives are determined on hunting down so called benefit scroungers who cost the taxpayer £1.2bn annually. Hunting down corporations who deliberately break national taxation laws would be a greater use of our resources and may well help to plug a massive hole on our public finances. But, what chance of that when the political elite are on the boards of the very companies that are set to profit from the demise of critical social infrastructure such as health and education.
Thanks to the insane arrogance, vanity strutting and serial incompetence of the Government’s of Labour, the coalition and Conservatives and a group of bankers, the possibility of national bankruptcy is now not unrealistic.
Interest rates from 1975 to 1992 moved up and down in a range of around 13% to 10% give or take and then the plunge started from May 1992 when rates went below 10%. From there, rates kept falling, finally resting at 0.5% where it has stayed since March 2009.
Government’s, ever more desperate for GDP growth fuelled the economy by turning on a fountain of cheap credit. House prices escalated and debt went through the roof for individuals and companies.
For about 20% of the population, life got better, for the remainder the quality of life plunged. As inequality in Britain reached levels not seen since the great depression the writing was on the wall of a backlash.
David Cameron, desperate to write into the history books a legacy that continued Thatcher’s work, a dice was rolled for his political future that has set a train in motion, impossible to reset. Having alienated large swathes of the electorate across the land he arrogantly offered a protest vote – and lost. Brexit may be good in the long-run, but for now, things are not looking so good.
Britain’s Pound sterling now beats Argentine peso to become 2016’s worst performing currency. Interest rates look set to fall. Could they go into negative territory just like Japan, the ECB, Denmark, Switzerland and Sweden. This is a strategy to promote growth through yet more borrowing.
Whatever happens in the coming months and years, one thing is for sure, debt in Britain for millions of households, many companies and the government and has become totally unsustainable. Falling asset prices such as house prices and the stock market are symptoms of an inevitable correction.