The Telegraph: Britain is inexorably heading for bankruptcy

Pic.: The Spectator.co.uk

The Office for Budget Responsibility (OBR) and Chancellor of the Exchequer Rachel Reeves have begun talking again. The March 26 Spring Statement looms, but the overall picture is already clear: once again there isn’t any money, ‘The Telegraph’ writes.

The Chancellor’s gargantuan tax-and-spend Budget of just three months ago, supposedly the last in a generation, is already out of date. The planned “headroom”, that is, the £9 billion gap between what the fiscal rules say can be spent and what actually will be, has already vanished in a puff of smoke. Indeed we learn there may now be an “overspend” of up to £20 billion.

There will be much discussion about these numbers over the next six weeks. Important though they are, in a way they are beside the point. What matters is the big picture. And that picture is that the country is heading ever faster towards unsustainability: that is, we’re slowly going bust.

It needs to be repeated constantly: growth per head has basically stopped. The 30 years of over-regulation, of ever-increasing tax and public spending, of high energy costs and the net zero fantasy, and finally the huge shock of Covid, have finally furred up the economy’s arteries. We are only growing at all because of immigration, but the wave of low-skilled migrants, dependents and non-contributors is driving down income per person. That’s why we all feel poorer.

The problem is that, when we look at the government rather than at our own bank accounts, we still behave like a country that is growing. We expect public spending to keep going up by 2-3 per cent a year. But we haven’t got that money and have to borrow it instead.

And the constantly increasing burden of tax, spending and debt crushes the economy still further. The truth is that we can’t afford to increase government spending at all.

This is at the heart of Rachel Reeves’s problem. We’re in a vicious circle. High taxes and spending, low productivity and growth, each reinforces the other. Unless she can break out somehow, the Chancellor will face the consequences at every “fiscal event” until she’s fired. Each time she will find that her “headroom” has disappeared because growth is slower and spending higher than planned.

Can she break out of it?

So everything in Reeves’s party’s philosophy prevents her dealing with the problem. She can’t raise taxes. She can’t cut spending. And she can’t deregulate.

Her future is one of cheeseparing spending cuts, of begging the OBR to be positive, and of putting whatever pressure she can get away with on the Bank to cut rates further. But these are all just palliatives. Her own personal best hope is that she isn’t in office when the debt bomb goes off.

For the rest of us, economic pain is coming. The only question is whether it’s the pain of letting our problems overwhelm us, or the pain of trying to fix them. No politicians, of any party, seem to want to be honest about this. But reality will not be denied. We need someone to step up – or bankruptcy is looming.

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