The dangers of mounting national debt are spelt out clearly and persuasively by Frank Field in an article for today’s Guardian. Well worth reading the whole thing, but the bottom line is that desperate times may call for desperate measures:
“If the debt can’t be sold, it will be impossible for the government to continue. The only options then will be to print money, with all the dangers for a country of going along with such a policy; or for the political parties to come together – in a national government – to try to convince the gilt market that the country is serious about bringing under control the gap between projected government expenditure and its falling tax revenue base.
It is crucial that we begin to plan for this scenario for, once in this totally uncharted territory, we may not then have that long to convince the markets that Britain’s political class really means business in trying to get the nation’s accounts into some sort of order. If we fail to convince at this point, then the outlook for the country is truly unimaginable.”
While I’m not completely convinced by the idea of a national government – for starters, can anyone imagine Gordon Brown ceding even the slightest morsel of power to opposition politicians? – Field’s central point still stands. So far as our economy’s concerned, it’s crucially important that investors are convinced of the government’s ability, and willingness, to pay back all that debt. Problem is, Brown doesn’t exactly have a great track record on that front, and the optimistic forecasts in the PBR suggest that the government isn’t facing up to the magnitude of what lies ahead. It’s here that the Tories will hope their Office for Budget Responsibility counts for something, although the question remains of whether that’s enough. Any thoughts, CoffeeHousers?
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