Politics | 18 April 2009

It is difficult to overdramatise the danger that is engulfing our country. In some ways our position is more precarious than in 1940 when we stood alone against the Nazi tyranny.

The danger can be stated easily enough. Far from building up reserves during the latter stages of the boom, the government went on a borrowing spree amounting to £200 billion or so. This borrowing disguised the fundamental structural imbalance in our national accounts. No government, however intent on making the pips of the rich squeak, has been able to raise in taxation more than 37 per cent of our gross domestic product. It is as though one of Adam Smith’s invisible hands has constructed a lead ceiling over the amount of income governments can lift off us taxpayers.

But no such ceiling operates on government expenditure. The most profligate of administrations spend up to half of all the income we create to finance what appears to have been a never-ending extension of public projects.