Blog 2023 Malcolm Blair-Robinson

It is sobering to look at the figures for the interest the U.K. government now has to pay out of taxes to cover the national debt. This debt pile grows by the second and will continue to do so until the budget is brought into balance. We are now paying over £40 billion per year and this is set to rise soon to £50 billion. This is more than the whole defence  budget and nearly half the NHS. This first demand on the income of the nation, which grows day by day, is the reason why it is imperative to cut the deficit as quickly as possible, rather than at a pace which is less painful.

We can see what happens if nothing is done. The bill becomes so big that it becomes too much to pay and the resultant retraction of the economy ensures that it can never be paid. This is why Greece is where it is. The fact that, when setting up the Euro, its founders baulked at the controversy of how to govern a common economic policy to support the common currency, is why the Euro zone is in its current crisis.

This is why we did not join the Euro. The flaw was there from the start, clear for all those who looked, to see. It is also why, after the post war experience and the IMF humiliation of the nineteen seventies, a more cautious approach to government borrowing prevailed in the UK. Labour needs to remind itself of that, as do the unions. Emotion is easy to inflame, but in the end it all comes down to the money. At the moment that money just is not there.It is on its way to pay for past follies. Demanding another folly will not help.

The Chinese Premier, on his tour of Europe, has said that China supports the Euro and will continue to invest in Euro bonds. This has offered some respite in the deepening crisis gripping the single currency zone, which is part political, part economic and part financial. However these kind words should not be over-interpreted.  They do not mean that the issues do not need resolving. They mean the crisis has not become a catastrophe. Had Mr Wen Jiabao declared that China had lost confidence in the Euro and would stop buying the bonds, things in Euro land (and  across the world) would have taken a grim turn. It is often easier to measure value by taking it away.

What this declaration does is calm jittery markets a bit and give the pipe dreamers another little high. Its effect is therefore useful. Its meaning, on the other hand, is epoch making and profound. China may be in number two slot in the ranking of the globe’s economies, but it is already the world’s top economic power. This is because China has money. It has more money than anybody else. In the global economy it is not guns, but money, that defines power.

In an interview with Robert Peston he defined his position on Europe with the quotation  ‘a friend in need is a friend indeed’. These were Churchill’s words to FDR in appreciation of the US coming to the rescue of Europe in WWII. Wen Jiabao is not only a lover of Shakespeare. He  has a sense of history. He reminds us that times have changed. Indeed they have.