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Originally Posted by cashman
,but theres always a downside.
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Exactly. All capitalist economies work in cycles of boom and downside. The problem is that Brown has claimed 50 quarters of continuous economic growth, the longest ever sustained period in UK history. His memory is somewhat faulty, however, because the first 5 years of this boom were, under conservative rule (1992-1997).
After all this time of sustained growth, Brown has to borrow the equivalent of 3.5% of GNP in order to meet the difference between tax revenue and spending, because government spending which was 34% of GNP in 1997 is now almost 40% of GNP; in other words, government spending has grown far faster than the ability of the taxpayer to pay for it.
Where is all this additional spending going? Well, its not on new hospitals and schools because most of those are PPP and off the balance sheet; to some extent its going on additional police, teachers, nurses, etc but for the most part its going on extra bureaucrats (600,000 at the last count). You have a guess at how many of these are graduates in lesbian and media studies and otherwise unemployable. If they were on the rock & roll on seventy quid a week, it would'nt be too bad; but they're not, they're pi**ing it away on 30 or 40K a year plus all the pension liability stack-up
So we're paying for this lot now by borrowing. What is going to happen when a recession starts and tax revenue falls...More borrowing? You can rule that one out straightaway, because we're already on our limit. Public sector lay-offs? Unlikely - that won't happen (not amongst bureaucrats, anyway). The only answer is a hitch in the tax rates. What happens then? Less investment and less growth and we again end up the crap hole of Europe as we were back in 1979.