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cashinmattress

Road To Stockholm

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The British state is large – and it is getting larger. That is troubling. Even if one could set aside the cost of the current crisis, it would be unsustainable. Long-term trends are moving against the country. The UK faces painful choices about the role and size of its state.

Over the past three decades, the British exchequer benefited from a series of tax-and-spend tailwinds that allowed the country to have an easy ride, enjoying public service improvements without needing matching increases in tax rates.

First, the high birthrates of the late 1940s and early 1960s swelled the British workforce. The country enjoyed gains in output and productivity because of the expanded working population.

Second, the UK’s North Sea oil reserves contributed, at their peak in 1984-5, 3.2 per cent of UK output to the exchequer. Since then, they have generated a tax stream averaging 0.5 per cent of GDP.

Third, the cold war ended. With the UK no longer on a few minutes notice of Armageddon, the country was able to slow defence spending from 4 per cent of output in 1989 to 2.6 per cent this year.

Fourth, the UK also benefited from falling debt interest payments; in 1989, government debt was serviced at an average rate of 10.9 per cent. In 2007, the government paid 5.1 per cent.

But, now, the baby boomers are drifting into retirement and North Sea oil revenues are expected to fall. The armed forces have been stretched to breaking point and the newly bloated debt burden will raise the cost of the national debt. Britain’s 30-year tax honeymoon is ending.

Some of this fiscal free lunch was well-invested. The Thatcher revolution would not have been possible without it. But, as FT research showed this week, these temporary gains have been treated as permanent, funding increased current spending.

Even without the financial crisis, which created a gaping 12 per cent deficit, the British would have found that maintaining their health, education and welfare policies was unaffordable. Keeping these services at current levels means shifting to a higher-tax economic model.

But Britain is not Sweden. Large, diverse, market-oriented and individualist, the land that spawned John Locke will not ­easily adopt communitarianism. Indeed, it should not. As the UK reels in its enormous fiscal deficit, it must permanently shrink the size of its state, cutting back on some of what it does. The UK must not take the road to Stockholm.

Good points. There is no stopping the decline of UKCS oil and gas, and the mathematical truths of demographics show us that in years ahead things will be a lot tougher.

The real killer will be the cost of servicing Britain's debt. To what disgusting and nationally humiliating levels will the future government(s) stoop in order to preserve some semblance of the era of greed which was the last quarter of the 20th century?

Are you prepared to see China, India, and other buying up our national assets for a song? We will have to accept it, because it is the only way to preserve this false economy.

FYI:

Jacket image of the Compact Oxford English Dictionary

communitarianism

/kmyoonitairiniz’m/

• noun 1 a system of social organization based on small self-governing communities. 2 an ideology which emphasizes the responsibility of the individual to the community and the importance of the family unit.

— DERIVATIVES communitarian adjective & noun.

Edited by cashinmattress

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Good points. There is no stopping the decline of UKCS oil and gas, and the mathematical truths of demographics show us that in years ahead things will be a lot tougher.

Yadda Yadda Yadda.

Complete twaddle of course - from start to finish. The bit that made my day?

...Some of this fiscal free lunch was well-invested. The Thatcher revolution would not have been possible without it...

One of the funniest things I've read in ages. Really enjoyed it - thanks!

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Complete twaddle of course - from start to finish. The bit that made my day?

...Some of this fiscal free lunch was well-invested. The Thatcher revolution would not have been possible without it...

One of the funniest things I've read in ages. Really enjoyed it - thanks!

One cannot deny that the Thatcher/Reagan shift to full blown casino capitalism changed the world.

Was it worth it? Depends on your title, surname, and bank account I guess.

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One cannot deny that the Thatcher/Reagan shift to full blown casino capitalism changed the world.

Was it worth it? Depends on your title, surname, and bank account I guess.

casino capitalism really started in 1971

everyone needs to play as the house continues to devalue the chips in circulation

unfortunately the house (bankers) always win

until the rules of the game change

free market in money needed

all states need to shrink - unfortunately they wont until it is forced upon them

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