The great deceit: how Gordon cooked the nation’s books
The great debt deceit: how Gordon Brown cooked the nation’s books A few months before the general election which brought New Labour to power, Geoffrey Robinson had David Davis to dinner in his flat overlooking Hyde Park. The flat had been the scene of much recent political activity, used as a den by Gordon Brown who would invite his allies around and plot his personal strategy, pausing only to watch the football and eat pizzas. But that night the Labour guests had cleared off, and the then Tory Europe Minister was treated to the disorientating experience of being served supper by the butler of a Labour MP. As the conversation turned to the inevitable Labour victory, Mr Robinson said how much he was looking forward to turning the government spending tap on again, putting an end to what he saw as the years of Tory parsimony. Mr Davis was bewildered. ‘You can’t do that,’ he replied. ‘You’ve promised to keep within our spending plans.’ The future Paymaster-General smiled broadly. ‘We’re going to do it as capital,’ he said. ‘And then put it on as PFI.’ Davis was understandably baffled. The Private Finance Initiative (PFI) was a controversial, but little-used mechanism established by Norman Lamont to privatise specific construction projects. But it meant something much more to New Labour. Officially, the scheme could be a beacon for the Third Way: a means of injecting the ethos of the private sector into the sluggish public sector, and an opportunity to get projects completed quickly and efficiently. Unofficially — and this is what Mr Brown grasped from the off, and what Mr Robinson was hinting at — PFI was an incredibly convenient way of concealing the true extent of public debt. Rather than pay upfront, the government promised to make fixed payments in each project over a period of about 30 years — keeping the whole thing off the books. PFI was a wizard’s cloak of invisibility which could be thrown around expensive new projects. Eleven years later, the bulge under that cloak is impossible to ignore. As the Labour party gathers in Manchester, agonising over the gathering mutiny in its ranks, it should also confront a much more depressing reality: HMS Labour is sailing towards a financial storm, whoever it chooses as its captain. The sheer weight of debt makes it virtually impossible to change course. ‘What we urgently need to do is help people by cutting taxes,’ one Cabinet member told The Spectator. ‘Why can’t we? Debt.’ Just how much debt the nation is burdened by can only be established by looking at all 630 major PFI projects and assembling the full, grotesque reality that a Conservative government would have to confront. How did it come to this? As trauma continues to course through the global financial system in the wake of the Lehman Brothers crash, the PM and his colleagues reassure us constantly that Britain is ‘well-prepared’ to withstand the shock of economic crisis. In fact, the opposite is true. It is a basic principle that most governments, even socialist ones, pay off debts in times of prosperity. Mr Brown’s innovation was to reject this tradition. Since Labour came to power, the national debt has risen 25 per cent to £581 billion. During the second it took you to read that last sentence, it rose by £1,520 — and that’s by the government’s more optimistic measure. This figure does not include the layers of hidden debt, or the various IOUs made out in convoluted ways on behalf of the unsuspecting British taxpayer. Add up all the money pledged through PFI, and the independent Institute for Fiscal Studies believes that you will quickly reach the sum of £110 billion. The institute’s findings suggest that, were this PFI lump-sum added to officially acknowledged government debt, the total figure would represent 45 per cent of gross domestic product — making a mockery of Mr Brown’s ‘sustainable investment’ rule, by which government debt is not meant to exceed 40 per cent of GDP. If this seems no more than a statistical abstraction, think of it this way: the overall national debt works out as £26,100 for every British household. This amounts to a second mortgage which all of us, including our children, must eventually pay off. And this is before the consequences of the Northern Rock crash or the £1 trillion of unfunded public sector pension liabilities are factored in. snip http://tinyurl.com/4zc8v8 Long but a very good piece.
The great debt deceit: how Gordon Brown cooked the nation’s books A few months before the general election which brought New Labour to power, Geoffrey Robinson had David Davis to dinner in his flat overlooking Hyde Park. The flat had been the scene of much recent political activity, used as a den by Gordon Brown who would invite his allies around and plot his personal strategy, pausing only to watch the football and eat pizzas. But that night the Labour guests had cleared off, and the then Tory Europe Minister was treated to the disorientating experience of being served supper by the butler of a Labour MP. As the conversation turned to the inevitable Labour victory, Mr Robinson said how much he was looking forward to turning the government spending tap on again, putting an end to what he saw as the years of Tory parsimony. Mr Davis was bewildered. ‘You can’t do that,’ he replied. ‘You’ve promised to keep within our spending plans.’ The future Paymaster-General smiled broadly. ‘We’re going to do it as capital,’ he said. ‘And then put it on as PFI.’ Davis was understandably baffled. The Private Finance Initiative (PFI) was a controversial, but little-used mechanism established by Norman Lamont to privatise specific construction projects. But it meant something much more to New Labour. Officially, the scheme could be a beacon for the Third Way: a means of injecting the ethos of the private sector into the sluggish public sector, and an opportunity to get projects completed quickly and efficiently. Unofficially — and this is what Mr Brown grasped from the off, and what Mr Robinson was hinting at — PFI was an incredibly convenient way of concealing the true extent of public debt. Rather than pay upfront, the government promised to make fixed payments in each project over a period of about 30 years — keeping the whole thing off the books. PFI was a wizard’s cloak of invisibility which could be thrown around expensive new projects. Eleven years later, the bulge under that cloak is impossible to ignore. As the Labour party gathers in Manchester, agonising over the gathering mutiny in its ranks, it should also confront a much more depressing reality: HMS Labour is sailing towards a financial storm, whoever it chooses as its captain. The sheer weight of debt makes it virtually impossible to change course. ‘What we urgently need to do is help people by cutting taxes,’ one Cabinet member told The Spectator. ‘Why can’t we? Debt.’ Just how much debt the nation is burdened by can only be established by looking at all 630 major PFI projects and assembling the full, grotesque reality that a Conservative government would have to confront. How did it come to this? As trauma continues to course through the global financial system in the wake of the Lehman Brothers crash, the PM and his colleagues reassure us constantly that Britain is ‘well-prepared’ to withstand the shock of economic crisis. In fact, the opposite is true. It is a basic principle that most governments, even socialist ones, pay off debts in times of prosperity. Mr Brown’s innovation was to reject this tradition. Since Labour came to power, the national debt has risen 25 per cent to £581 billion. During the second it took you to read that last sentence, it rose by £1,520 — and that’s by the government’s more optimistic measure. This figure does not include the layers of hidden debt, or the various IOUs made out in convoluted ways on behalf of the unsuspecting British taxpayer. Add up all the money pledged through PFI, and the independent Institute for Fiscal Studies believes that you will quickly reach the sum of £110 billion. The institute’s findings suggest that, were this PFI lump-sum added to officially acknowledged government debt, the total figure would represent 45 per cent of gross domestic product — making a mockery of Mr Brown’s ‘sustainable investment’ rule, by which government debt is not meant to exceed 40 per cent of GDP. If this seems no more than a statistical abstraction, think of it this way: the overall national debt works out as £26,100 for every British household. This amounts to a second mortgage which all of us, including our children, must eventually pay off. And this is before the consequences of the Northern Rock crash or the £1 trillion of unfunded public sector pension liabilities are factored in. snip http://tinyurl.com/4zc8v8 Long but a very good piece.