Kicking the Can
The realities of our predicament were starkly laid out by Angela Merkel in 2012: “Europe accounts for 7 per cent of the world’s population, 25 per cent of its economy and 50 per cent of its social welfare expenditure.”
The second reality is that the UK can never raise more than 38 per cent of GDP from taxation. It’s spending 44 per cent. That 6 per cent deficit has to be borrowed – and lenders are getting mighty edgy.
That’s the shape of the truth: we can’t afford to go on like this.
To pay for our present excesses, our politicians are shunting the bill to our grandchildren on the nation’s credit card. We have run deficits in 47 of the last 51 years. Bond yields (the cost of borrowing money) are higher than ever. This is what happens when politicians keep avoiding essential structural reforms – eventually, the problems will eat you alive.
The iron law of life is that when there’s no pain, there’s no gain. Churchill promised only “blood, toil, tears and sweat” while Thatcher was desperately unpopular as she led us through tough reforms – remember “The lady’s not for turning”? It was vital for a brighter future. The same tough messages were delivered by Attlee, Konrad Adenauer and Roosevelt. So, it can be done.
I wish Andy Burnham well. Let’s hope he’s more than a nice guy.
He must deal with welfare. In so doing, he has to deal with the opposition of his Labour MPs, the majority of whom have no commercial experience whatsoever. Burnham must cut billions from our unaffordable national bill, encouraging many millions into work.
He simply has to state that if his Labour MPs don’t support this essential legislation, he will do what Major did over Maastricht and call an election.
Warren’s Wisdom
Warren Buffett offers five rules for not going broke:
1: Never buy a new car.
2: Never spend, say, £5,000 plus (each) on a holiday.
3: Never stretch yourself to the limit when buying a house.
4: Never spend money on buying new furniture all at once.
5: Invest your savings with experienced managers in the stock market. Over 100 years, the stock market has easily beaten house appreciation, and, despite many savage corrections, it always bounces back.