Ruth Lea: Britain on borrowed time as Darling delays confronting the painful truth

VERY rarely do I find myself in agreement with the European Commission, but earlier this week I found myself nodding when Brussels told the Prime Minister to curb public spending.

Chancellor Alistair Darling has made much of his "fiscal consolidation" programme, aimed at restraining the gaping public sector deficits and the Government has introduced the grandiosely titled "Fiscal Responsibility Act". But the truth is that borrowing figures for the next few years look horrendous.

The Government is borrowing about one pound in every four it spends. Goodness only knows what Wilkins Micawber would have said about this. Instead of "annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery", he may have said "annual income twenty pounds, annual expenditure twenty-six pounds thirteen shillings and five pence, result depends on the financial markets to lend

you the money and a great deal of misery."

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Some players in the financial markets are already getting nervous about Britain's indebtedness. Bill Gross, the managing director of the US investment firm PIMCO recently said Britain's gilts (Government IOUs) were "resting on a bed of nitroglycerine". Be warned. If other would-be buyers of our debt took a similarly jaundiced view, the Government could find it very difficult to finance its borrowing unless it paid very high interest rates or, in extremis, at all. Incidentally one Andrew Balls, the brother of would-be Chancellor Ed Balls, is in

charge of managing PIMCO's European portfolio.

Bill Gross may be accused of using rather florid language, but his comment was not unreasonable. Alistair Darling's borrowing forecasts in last December's Pre-Budget Report made grim reading. For the current financial year, soon to expire, he projected 178bn, over 12 per cent of GDP. It now looks as though this forecast will be undershot a tad and I expect the Chancellor to revise the figure to around 170bn in next week's Budget. If he does, he may take this stroke of luck as an opportunity to claim that matters are "improving" and a consequence of canny management. If so, he should be reminded that 170bn is still a staggeringly high borrowing figure. And please note that 170bn represents nearly 3,000 of borrowing for each man, woman and child in this country.

Another way to envisage the borrowing numbers is to use the analogy of time. It takes eleven-and-a-half days for a million seconds to tick away. A billion seconds, a thousand million seconds, take thirty-one-and-a-half years. 170 billion seconds are equivalent to nearly 5,500 years and take us back to the days of the building of Stonehenge. The borrowing numbers are, in other words, simply enormous.

But it is not just that the Government is borrowing 170bn in the current financial year (2009-2010). The Chancellor forecast in December that the deficit would be 176bn in the next financial year, 140bn in 2011-12, 117bn in 2012-13, 96bn in 2013-14 and still as much as 82bn in 2014-15 – after all his so-called "tough, responsible fiscal consolidation". On these projections the stock of debt rockets and is expected to be nearly 1.5 trillion by the end of 2014-15. A trillion seconds, by the way, represent 31,500 years – back to the Upper Paleolithic!

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Interest payments will, of course, have to be made to investors who are prepared to fund this mountain of debt. In 2008-9 these payments amounted to 30bn – that's 500 for each person in the country. By 2014-15 they are projected to rise to 71bn – nearly 1,200 per person.

Of course, I accept that the effects of the recession have significantly contributed to the fiscal misery we are now facing. But the previous Chancellor's gross profligacy in the run up to the credit crunch in August 2007 was also a major factor. If this were not the case, Britain's borrowing data would not be the worst of any major economy and almost as bad as that of Greece.

We are, however, where we are and no I would not start from here if I were going to Limerick. And now we need the Government to show more steel than it has so far in cutting the horrendous level of borrowing. But in the run-up to the General Election the debate on the necessary

pruning has unfortunately, and perhaps inevitably, become a political football.

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The Government, for example, claims the high ground which could be summarised as "responsibility in cutting the deficit without jeopardising recovery" while tarring the opposition, unfairly, as using "slash and burn tactics".

This brings me to next week's Budget. Alistair Darling should say something like, "I have already implemented some fiscal tightening. But I must do more. Much, much more. I am, therefore, providing some detailed plans for public spending cuts and further tax rises. I believe these are necessary to retain the confidence of the financial markets in British sovereign debt. They will of course be very painful."

But, of course, he won't. And the British people will have to wait until the other side of the election before the painful truth becomes apparent.

Ruth Lea is an economic adviser to Arbuthnot Banking Group