One life. Live it.

The economic facts behind the Autumn Statement, in as far as they are known or forecast, are available in the Economic and Fiscal Outlook from the Office for Budget Responsibility. Table 4.7 provides forecast current receipts. Table 4.18 provides total managed expenditure. So, here’s a chart of current receipts (i.e. tax) and total managed expenditure (i.e. spending) for the next few years:

The reality is that the Government intend to increase spending every year of the forecast period and to meet that spending with increased revenues. There will only be cuts as a proportion of GDP, and only if it grows. There will only be real cuts if there is inflation.

It’s tragic that we have created for ourselves a state which cannot provide more with more money and that, from the perspective of real public services, there are cuts at all.

There’s much to be said about inflation, inflating the debt away and, indeed, inflating away public expenditure. There’s something fundamentally dishonest about it. That’s why I co-founded The Cobden Centre to press for honest money: our inflationary financial system is undermining society, just as Keynes and Mises said it would.

Keynes wrote,

There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

And Mises explained,

Inflation is the last word in destructionism. The Bolshevists, with their inimitable gift for rationalizing their resentments and interpreting defeats as victories, have represented their financial policy as an effort to abolish Capitalism by destroying the institution of money. But although inflation does indeed destroy Capitalism, it does not do away with private property. It effects great changes of fortune and income, it destroys the whole finely organized mechanism of production based on division of labour, it can cause a relapse into an economy without trade if the use of metal money or at least of barter trade is not maintained. But it cannot create anything, not even a socialist order of society.

We have been plunged into the present misery by a long credit boom caused by low interest rates. Politicians now seem to be helpless in the face of a crisis caused by the inflationary financial institutions they have allowed for the decades following the collapse of Bretton Woods. The only prescription for recovery appears to be more inflation or, as they call it today, “quantitative easing” and “credit easing”.

Yet more money and bank credit may lead to a boom initially, or perhaps merely to a moderation in our difficulties compared to our neighbours, but it is bound to erode the capital stock, to hide losses and to cause a yet worse problem later. The illusion of prosperity created by “monetary activism” cannot last.

If we are to have lasting prosperity and a just socio-economic system, we need instead, as the Chancellor used to say, an economy based on save and invest. That requires, as prerequisites, honest money which holds its value and a state which lives within its means.

NB: The author is Tim Hewish, who I am glad to welcome as a contributor. — Steve

We are drowning in an ocean of debt. The video above may be an American example, but it serves us well when highlighting the dire straits the British economy is in under this Labour Government.

Government isn’t any different from the average person – in that it shouldn’t act in a fiscally irresponsible manner. If you or I were to go into debt, there would be pressure heaped on us to pay back that money and we certainly couldn’t print our own ‘new’ money and call it quits.

The current Government thinks it can get away with doing simply that. By piling up huge piles of debt and flooding the economy with printed money we don’t have (Quantitative Easing) we are perilously close to a debt deficit mirroring the Greek state, which is in a State of Emergency. Dan Hannan MEP also underlines the level of the problem:

Gordon Brown will borrow more in the next two years than in the whole history of our national debt, since it was instituted in 1693.

In short, a Government must live within its means.

Labour also need to understand that Governments don’t possess money themselves. What they do have is access to tax payers’ money now and in future, so when they decide to raise taxes it shouldn’t be to service their level of debt.

I am in full agreement with Policy Exchange’s report titled: Controlling Spending and Government Deficits, which examines how Britain might best rid itself of its astronomical debt. Andrew Lilico, Policy Exchange’s Chief Economist, says:

We found that a number of countries which cut their deficits benefited from lower long term interest rates and higher confidence, leading to faster growth as a result. However, it is important that most of the deficit reduction effort should come from spending cuts not tax rises. We found that countries which tried to fix their finances mostly with tax rises have tended to fail.

This is also closely allied to the idea that Britain needs to get back to being a nation of savers. As David Cameron has stated on a number of occasions we need a culture of personal responsibility and what better place to start than being economically and fiscally responsible in your everyday transactions.

This is something Labour does not grasp in public policy, take for example, the recent revelation about their secret plan for a 10% ‘death tax’, as Mark Wallace of the Taxpayers’ Alliance said:

It is totally unfair to punish people for doing the right thing and saving up all their lives, when they are taxed on earning and saving the money in the first place.

In effect what Labour is doing is encouraging a reckless spending culture. This does not teach responsibility and if a Government can’t take a lead and act responsibility then they are not fit to govern.