The Spectator

Debt bomb

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Sir Ian McKellen’s visits to Downing Street were supposedly to discuss gay rights. To study the Prime Minister’s conference speech at Bournemouth, though, suggests another possibility: that our foremost Shakespearian actor has been giving Tony Blair some voice training. The trembling, impassioned delivery, the pregnant pauses: while most retired prime ministers these days are assured of a lucrative second career addressing annual corporate beanfeasts in glitzy convention halls across America, Tony Blair’s talents will earn him a place, too, on the provincial theatre circuit.

Puffy, red-blooded socialists who only a few moments earlier were plotting over pints of Tetleys were caught sobbing, on camera. Even trade-unionist troublemakers were reduced to the mildest objections. Anyone who had been hoping to witness Mr Blair being slain at his podium had overestimated the death of tribalism in the Labour party. No matter the grumblings about Iraq and foundation hospitals, Mr Blair can count on enough spotty student groupies and podgy party faithfuls to shore up his position as leader for some time to come.

When Tony Blair is finally driven from Downing Street, outblubbing Mrs Thatcher as he goes, it won’t be as a result of fratricide by Gordon Brown or because of disgrace at the verdict of Lord Hutton. The end, when it arrives, is more likely to come through the ballot box. Anybody who believes a majority of 166 to be too great to be overturned in one election has not spotted the timebomb ticking away beneath Mr Blair: debt.

The figures worth watching are not the opinion polls but economic data. While the Prime Minister was doing his stuff at Bournemouth, the Office for National Statistics (ONS) was having its own say. In the three months to June, the government’s deficit was £14.5 billion — £3 billion more than Gordon Brown had bargained for. With the Chancellor splurging ever increasing sums on the public sector — an extra £68 billion a year has been promised by 2007/8 — and tax revenues coming in more slowly than he has predicted, public debt is growing at an alarming rate.

But public debt is only half the story. Private debt is at equally dangerous levels. In August, consumers borrowed an extra £7.7 billion against the value of their homes and put an extra £1.6 billion on their credit cards to boot. If there is one reason why this government retained high levels of popular support longer than any other, it is the exhilarating effect of cheap money. Low interest rates and relaxed lending practices by the banks have convinced the British consumer, too, to do a Gordon Brown and bung everything down on the never-never. The shining PFI hospitals and brand-new schools mentioned by Mr Blair in his speech are echoed by tens of thousands of conservatories and fitted kitchens which consumers have added to their homes, courtesy of their building societies.

As Mr Brown’s Treasury minions have proved through example, economic forecasting is a mug’s game. But one thing is for sure: the spending splurge has gone too far to end happily. If interest rates go up even modestly, consumers will be struggling with their repayments. If interest rates stay low, it will be because wage rises have remained low. Young homeowners, a disproportionate number of whom live in the growing Middle-England towns that Labour captured from the Tories in 1997, will realise that their debt burden will be with them for decades; it will not be eaten away within a few years by inflation as were their parents’ mortgages.

Meanwhile, we all face yet more tax rises to fill Gordon Brown’s black hole. The depressing thing for the government, not to mention the taxpayers who pick up the bill for its activities, is that very little tangible benefit is coming from high public spending. Tony Blair claims that the nation is full of new schools so visually exciting that kiddies are begging their mums for an alarm clock so as not to miss a minute of the school day. The statisticians, however, are struggling to weigh these new schools against the money going into education. Inflation is not quite dead; it has merely been nationalised. While spending on public services has increased by 11.8 per cent, reveals the ONS, the improvement in public services has been a mere 3.9 per cent, the difference disappearing in wage rises, administration costs and the creation of non-jobs.

Sooner or later, taxpayers will realise that they have been short-changed. Not just that: many will discover that Gordonomics do not work much better with the home finances. The bills for those kitchens and conservatories will have to be paid at some point, perhaps sooner rather than later. While it would be unfair to blame the government for private-spending decisions, one can be sure that the millions of Britons who face potential problems with their debts will blame Mr Blair’s administration nonetheless, just as they have given him undue credit for the low interest rates they now enjoy. Tony Blair is a prime minister living not so much on borrowed time as on borrowed money.