The dangerous inheritance

Gary Duncan makes a couple of important points about borrowing in today’s Times:

“If, as seems all too likely, Mr Darling’s gamble on growth fails to pay off, then the eventual peak in the Government’s borrowing could leap above £200 billion. Some authoritative forecasters believe it could soar to £230 billion, or a stunning 16 percent of national income.

Worse still, even the Treasury’s own numbers suggest that about three quarters of the predicted borrowing peak of 12 percent of national income is not owing to the ‘cyclical’ ups and downs of the economy, but to more permanent, structual factors. Thus, even if strong growth does emerge, borrowing will not fall away as rapidly as it has climbed.”

Thanks to New Labour’s profligacy, the black hole in the public finances is both collosal and entrenched.  As Lord Lamont suggested yesterday, the Budget does little to rectify matters.  Alistair Darling’s “path to sustainability” is actually a path to a distinctly unsustainble 5 percent deficit.