Douglas Carswell's Blog

No time for AAA-rated smugness

French finance ministers might not agree, but it is a great relief Britain will be staying clear of Europe’s mutual suicide pact, also known as European Fiscal Union. 

But don't let's get smug. 

Euroland is in a mess for all sorts of reasons; a lack of competitiveness, one-size-fits-all monetary policy, the Euro's tendency to export failure and punish thrift. Above all, it is a problem of debt. Monetary Union enabled governments to carry on writing out IOUs in exchange for money from investors and central banks long after the markets would otherwise have called time on such folly.

But what makes you so sure we've not been doing much the same?

The British state has been living way beyond the tax base for years – and successive administrations, including the current one, have borrowed recklessly to make up the short fall. 

When pet media pundits talk of “cuts” they tell us more about their inability to count than they do about the state of Britain’s public finances. The fact is that the Coalition has spent and borrowed more money this year than the Labour government did in their final year in office.  The Treasury’s policy of “Continuity Brown” means we look set to borrow more money in this Parliament than Gordon Brown managed in 13 years.

Our debt reduction strategy isn’t cutting debt. Our growth strategy has produced no growth. Indeed, our debts are no increasing faster than our GDP. Sound familiar? 

Like some of those Eurozone countries, market distortions are allowing us to keep on borrowing long after it became imprudent to do so. In their case it was the fantasy that Greek, Spanish and Italian debt was the same things as German and Finnish debt. In our case, it is the fantasy that this bond bubble will last.

The laws of maths apply in any language. We must not get cocky.  Without a change in direction, we are heading for trouble too.

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