In These New Times

The British government had the option to either put the banks through bankruptcy or to take on their liabilities and bankrupt the state. In the end it was always going to be what in popular parlance is now referred to as a “no-brainer” and the latter option was to be the preferred one. The British state has done the right thing on behalf of private interests and agreed to sacrifice itself and £60 million citizens on the altar of oligarchy. Do not send to ask for whom the bell tolls; it tolls for thee.

Government borrowing has now rocketed to £79.3bn in the last year, and it’s ramping up with every passing month – so Chancellor Alistair Darling’s forecast of £77.6bn for the current financial year is clearly going to end up being ludicrously low. The annual budget deficit has been forecast by the Treasury to rise to £118bn in 2008/9, equivalent to 8% of GDP – but the consensus now is that it will probably soar to £130bn, with no recovery likely until 2011/12 at the earliest.

There are two main reasons for this. First and foremost, the tax take is going down – way down. Given the impact of self-assessments, bonuses and end-of-year corporate profits, January always sees the biggest take of the year. But this year income tax is down £1bn, corporation tax down £2.4bn, and of course, VAT receipts are down too. In fact, the exchequer has collected £10bn less in tax in this financial year than it had at the same point last time round – despite Darling’s claim that the shortfall would be just £2bn for the entire year….

At the same time, the Government’s financial commitments have been going up: as well as the various public spending initiatives that are being hurried through to boost the economy, the benefits bill has been steadily rising as more and more people have been joining the dole queue. Taken together, this meant the January surplus of £3.3bn was far lower than usual (and far lower even than the £7bn the City was expecting).

What’s more, these dismal numbers are about to even get worse, when the ONS adds RBS and Lloyds onto the public books. This will increase the public debt by somewhere between £1trn and £1.5trn – which, on the more pessimistic figure, is roughly equivalent to the UK’s entire annual income. It’s clear that the country is going to be paying for the mistakes of recent years for a very long time to come..