The Debt Panic….
Interesting post on Left Foot Forward which argues Britain’s net debt is set to remain roughly in-line with the rest of the OECD;
As the ONS publish data showing that Net Debt as a percentage of GDP (including financial sector interventions) has risen this month to 58.9 per cent (p.11), the OECD predict that Britain’s gross financial liabilities (a similar measure) will rise no higher than the OECD average (p.70).Gross financial liabilites do not net the UK’s financial assets such as holdings in UK banks.
Meanwhile, the media is full this morning of stories creating what equates to an atmosphere of near-hysteria about Britain’s debt-level. Sky News booms Britain Hits Record Public Sector Borrowing while in The Guardian it ‘soars’. Notably, more positive news about a rise in mortgage lending is buried as is the news of a rise in retail sales. It would be simplistic to see this as part of the Conservatives getting their message across more on the media; rather they have adroitly positioned themselves to capitalise on what is an already accepted narrative by the government as well as illustrated by the Fiscal Responsibility Bill.As Mark Reckons rightly points out this is a timebomb set right under the Conservative government which will go off when the mood music starts to change from ‘must reduce the debt’. Then Cameron and Co. will have a dramatically reduced audience for ‘austerity’ and a ‘big society’ because their measures will prolong the pain in the real economy; the jobs market and in peoples wages.
However, in accepting the media narrative and implicitly the debt panic, the government has put itself in such an awkward position. As the incumbent it is naturally going to be the agency held most responsible for the debt and the implication, that it’s core vote should prepare for swinging cuts, is not likely to be well received or very motivating for it to actually turn out and vote for it.
Instead, what should have been done is that the debt should have been acknowledged and explained and justified. The government, if it had any sense, would be the one putting articles like the one on Left Foot Forward out as press releases. Economists like Danny Blanchflower could be wheeled out. Furthermore, had it shifted the blame to the banks it would receive popular support and people would implicitly become more understanding of the governments position.
As it is the government is unlikely to benefit even if recovery does begin before the next election. However, for this, it only has itself to blame as it is the Labour Parties lack of alternative vision that lays at the core of the governments weak defence of it’s position. Had it had that vision it would have behaved differently; as it doesn’t it will be hoisted by it’s own petard before any damage is done to the Conservatives.