Ed Balls is a liar!

There is no charitable way to put this, Ed Balls has been on the airwaves lying like there is no tomorrow.

Sue me Ed, if you dare.

As Fraser Nelson notes here, and then after the angry phone call here, Ed Balls has claimed that Alistair Darling's 2009 budget laid down plans to reduce the public debt.

Ed Ball's lied thus:

Alistair Darling in the budget set out plans which show the deficit coming down, national debt coming down.

The problem is that he is using a measure of debt most people would not use, and measured on a basis no serious economist believes.

The statement is true if you think reducing borrowing growth to a level where the economy is growing faster is reducing national debt. Basically if you imagine a household budget, you are still increasing your overdraft every year till 2017, but you will get pay rises every year till then of 3.5% and in 2017, the accumulated debt will look like less in percentage terms against your wages.

The problem is that this is still increasing debt in net terms, and the supposed real terms decrease on which the lie is based is founded on the idea that economic growth will start right now, be sustained, (no double dip recession) and then go on the serial above trend growth over several years of 3.5%.

It all comes unstuck there for two reasons. First of all most people would still regard continued borrowing as increasing rather than decreasing debt, but secondly and most importantly it relies on amazing growth figures for years to come.

That is not going to happen because overall debt (government, household and corporate debt combined) is running at 400% of GDP whilst real interest rates are near 5% (not what the Bank of England base rate actually is, but what lenders are actually charging for new loans) which means that this lot could cost us 20% of GDP every year. Quite a lot of that money is going abroad to foreign lenders. It drains money from the economy.

Whilst it is possible that there may be a strong bounce back in growth after a recession as inventories are built up, it seems utter fantasy land that such a bounce would last several years with this much debt.

Hat tip to Manwiddicombe for the links to Fraser's article.

The Budget 2009: My Comment.

Well, this government intends on borrowing eye watering amounts of money. In the net two years alone, if its laughably optimistic figures are to be believed, £381 billion. That is more than ALL OTHER GOVERNMENTS OF THIS COUNTRY HAVE BORROWED PUT TOGETHER!

As if that is not bad enough, the growth figures that future borrowing are based on are very optimistic. The net result is public debt will double.

Lefties the blogosphere over will be saying how this will ensure growth etc.

Rubbish. Firstly the numbers have no credibility in terms of showing how the public finances will be brought back to balance, and so drive up the cost of borrowing. Secondly borrowing is not free money, it is deferred taxation. As the tax rises and spending cuts to pay for it kick in, growth will be reduced.

The government think that growth will end up trending at 3.5%. This is a pipe dream. For a start the last 10 years of growth under Labour have been funded by both public and private debt. That can´t continue, secondly growth will be strangled because the government will have to pay back debt with higher taxes.

In short, we are in a very bad mess.

The BBC has this, with this report on David Cameron´s reaction , whilst Stephany Flanders has this.

UK bond sale fails

The sale of gilts, to cover government debt failed yesterday, in that the sale did not raise all of the money it was intended to raise.

To be fair, it was for a 40 year bond, and this sort of thing has happened before, so there is no intrinsic reason to panic.

However the next bind sale occurs during the G20 summit. If that fails, we have huge problems.

The BBC has this, the Daily Telegraph has this.