Debt worries

Robert Chote, the director of the IFS, has a piece in today’s Times detailing just how bad the state of the public finances is. As Chote puts is, ‘public spending will have to be squeezed and taxes will have to rise’ whoever wins the next election.

The real worry, though, is that Gordon Brown trashes the public finances so comprehensively in the next PBR before going to the polls that it becomes more expensive for this country to borrow:

“The Pre-Budget Report assumed that the Government would continue to pay an average interest rate of only a little over 4 per cent on its debt. There are good reasons to hope that this will remain low, but if investors decide that they would prefer to lend to governments other than our own, then the fiscal arithmetic will become a lot more unpleasant. This underlines the need to persuade them and us that the public finances will be repaired.