Brooks Newmark is MP for Braintree, Essex, was a Member of the Treasury Select Committee and is now the Conservative Treasury Whip. This Platform summaries a paper that Brooks has written for the Centre for Policy Studies, available of the CPS website.
The Government has hubristically congratulated itself on its efforts to keep public finances on a stable and sustainable footing. Yesterday Gordon Brown even claimed:
"Debt is considerably lower than a decade ago.”
However, Britain’s public debt is actually an astronomical £1,866 billion, which is equivalent to 125.5% of GDP, nearly three times larger than the Government’s published figure of £645 billion or 43.4% of GDP. This equates to each British household being hobbled by the ball and chain of public debt to a sum of £76,475.
The Government has shrouded its public finances in an opaque blanket of manipulations and masquerades, hoping the British public would be as short-sighted as their own economic policies have been. Yet, in ‘The Price of Irresponsibility’, a report published with the CPS, the Government’s claims of a prudent financial and fiscal policy have been proved flagrantly wrong. ‘The Price of Irresponsibility’ brings onto the balance sheet the full cost of projects financed through the PFI, the extent of unfunded public sector pension liabilities, the debt incurred by Network Rail and the recent nationalisation of Bradford and Bingley. It also includes the £87 billion Northern Rock debt that the Government claims should not be included in the official debt figure of £645 billion.
The Government’s recent bail-out of the banking sector could imply a further addition of as much as £500 billion to the balance sheet. This would increase public debt to a massive £2,366 billion, which is 159.1% of GDP, or over £96,967 per British household.
Hiding substantial liabilities off the Government balance sheet has enabled it to circumvent Gordon Brown’s much lauded ‘Golden Rule’ and ‘Sustainable Investment Rule’. Yet, short-term political expediency has been exposed as the true Government debt of £1,866 billion tears holes in the ‘golden rule’ and emphatically obliterates the ‘sustainable investment rule’. It is time the Government recognises these failings and looks towards the future with an entirely new and forward-thinking fiscal framework.
However, the Government still maintains it has been the saviour of
public debt. An utter lack of transparency has enabled this charade to
continue for too long. Without any hint of apparent irony, the
Chancellor slams the banking sector for actions identical to his own:
“I agree with…the need for far greater transparency. There also needs
to be stricter rules in relation to off-balance sheet activity, which
has enabled some banks to get round their other regulatory
responsibilities. That is clearly not a satisfactory position.”
To call for transparency and accountability in the private sector,
while seemingly unwilling to apply this in the public sector treads a
dangerous line of hypocrisy and double standards. For the sake of the
millions of British people saddled with this stealthily increased
public debt, an Office for Budget Responsibility must urgently be
established to conduct an independent audit of the government books.
Using off-balance sheet instruments as a stealth tool to keep public
debt off the balance sheet is being a little economical with the truth
to the British people. Already grappling with the effects of the credit
crunch, millions of British households and businesses are depending on
the Government to provide reliable and sustainable solutions to their
problems. Yet, with one of the largest budget deficits in the world,
the Government is ill-prepared to look after its own citizens. Gordon
Brown ploughs on regardless, sticking to what he knows best in pledging
to continue borrowing in a desperate attempt to spend his way out of
the current economic crisis.
The extraordinary level of public debt is already pushing the costs of
current spending onto future generations of taxpayers, wholly at odds
with the Government’s claim of intergenerational fairness.
Gordon Brown has presided over his own Age of Irresponsibility, and now
the British public is being forced to pay the price of this. The true
figures of the public finances are a damning indictment of the
Government’s loose fiscal policies, but we may yet find more financial
skeletons locked in Number 11’s closet.
The decade-long spending binge that has brought our public debt up to
£1,866 billion, by the most conservative estimates, is unsustainable.
The Government must first recognise the true scale of public debt and
then bring some much-needed transparency onto the books before the
public finances spiral even further out of control.