At the World Economic Forum in Davos recently, Lord Mandleson of The 32-Word Title criticised Tory leader David Cameron for 'talking down Britain'. Well, it's hard to talk up Britain when you see what a pickle Lord M and his colleagues have got us into. The huge, debt- fuelled, public-spending-powered boom inevitably had to end in bust, and it did. Both households and the government found themselves broke and overstretched.
Private households have done the right thing – cutting back on their spending and reducing their debt. The government, of course, keeps adding to its debt stockpile. This year alone it will increase its debt by an amount equal to £3,000 for every man, woman, child and infant in Britain, and it plans to do exactly the same again this year. Like the government, many households have found themselves unable to make ends meet, but do not have the same happy option of forcing taxpayers to bail them out. Last year there were 134,000 personal insolvencies in England & Wales, up a quarter on 2008. The more insolvencies there are, the more suppliers there are whose bills don't get paid, and the more loans and credit-card debts have to be written off by the banks. Really, it is bad business all round.
It means, of course, that potential investors have become more wary too. They are demanding bigger returns and higher interest to cushion them against the threat of their borrowers not being able to pay them back. Indeed, some investors even worry that the UK government might not be able to pay its debts. The markets have the jitters about Greece, and indeed Portugal. Britain of course has the benefit of not being in the Euro, and its falling exchange rate has at least kept its export trade alive. When trade is down all over the Western world though, the boost we get from that is limited. Yes, it's hard to talk up Britain, and it will remain so, until politicians realise that they have to do what households are already doing – cut their spending and their borrowing, and balance their budget, fast.
Dr Butler's new book The Alternative Manifesto (Gibson Square Books) is out now.
