Bernard Ginns: The UK is spending more on debt interest than education

The Chancellor of the Exchequer said Britain needs to cut £25bn in spending after next year’s election to reduce borrowing and the welfare budget is likely to bear the brunt of further cuts.

Harder truths for some than others then, particularly those who are dependent on benefits.

Speaking at a factory in Birmingham yesterday, Mr Osborne said: “For the first time in a long time, there’s a real sense that Britain is on the rise.”

But he also warned against any complacency that the hard part of the job is done. “That’s the choice in 2014: to go on working through a plan that is delivering for Britain, putting us back in control of our destiny with the security and peace of mind that brings; or squander what we’ve achieved and go back to economic ruin,” said Mr Osborne.

The speech could have been drafted especially for the various funds and institutions that lend Britain around £100bn a year. This is the money that keeps the show on the road.

The national debt has hit £1.24 trillion and is on course to reach £11.64 trillion by 2017-18.

“This is why it is so important to get our debts under control as markets are starting to talk more freely about interest rates rising sooner than we previously thought,” according to the Leeds office of stockbroker Charles Stanley.

“Every penny that a government spends beyond its means not only adds to the national debt, but results in a further increase in the debt interest that taxpayers have to pay.

“Here in the UK, over the next year, the cost of servicing government debt will outstrip education to become the third largest item of government expenditure.

“The fact that we are spending more money on debt interest payments than educating our children is not only scary but in our view morally wrong. And this is even before we see interest rates start to rise.”

Professor Bernard Lee, an expert on sovereign wealth funds, said that debtor countries need to put their public finances in order to avoid clearly unsustainable public debt levels.

“The key is that debtor countries must demonstrate that they can put sound policies in place, so that any public borrowing will translate into tangible investments and economic growth, not just consumption and or unproductive public spending,” he writes in a new book for World Scientific.

Hence the new Tory attack on welfare spending.

n Who is more important to the Yorkshire economy, the company director or the accountant?

I posed this question in my last column of 2013, alongside revelations about the handsome rewards of partners at Big Four accountancy firms.

A well-placed source said that a new partner at a typical Big Four accountancy firm in Yorkshire will get paid around £250,000 a year. He or she can expect this to increase by £50,000 a year.

A partner with several years’ experience can be earning more than half a million pounds a year in Yorkshire. (Never mind London, where pay is much higher.)

Contrast this against the average pay of a company director in Yorkshire and you will see why I asked the question about who is more important to the regional economy.

The company director, the one who takes the risk and creates the wealth, earns an average of £178,000 a year in Yorkshire.

Who shoulders more responsibility? Who has to take more risks? Who experiences greater job insecurity?

The anecdotal story is of the Big Four partner who leaves his flashy car in the garage at home to visit a client in a more understated BMW. It seems apt.

Ron Carbutt OBE, a reader from Barnsley, wrote to say that my column brought to mind a board meeting at a family-owned Huddersfield textile company.

“The accountant dared to offer his considered opinion. The chairman scathingly turned on him and said ‘Shurrup lad, tha’s nobbut the scorer’. How things have changed,” said Mr Carbutt.

Indeed. Why aren’t the company directors, the ones who pay the hefty fees of these accountants, speaking up?

Big Four firms increasingly rely on selling consultancy as well as audit services.

Do all those extra services really create extra value for their clients?

Twitter: @bernardginns