During the recent London Mayoral elections, some hot new contestants appeared on the scene, and whilst they had the unfortunate accolade of having to share the peripheral ground with eccentric absurdities such as Count Binface, the combined competitors made for the largest number of candidates for many years. Largely this was down to split opinions on many political topics ranging from the increasing crime figures across the United Kingdom to views on the draconian lockdowns that the British public and businesses have been mercilessly subjected to for over a year.
At least three new political parties have been formed, some of which put forward their candidates for London's Mayoral seat with the single policy of ending lockdowns and reviving the trapped economy. At least two of the new parties promote financial responsibility and careful management of money via personal conservatism.
The mainstream parliament has become viewed by many members of the public as a self-serving, out of touch elite, constantly advocating lockdowns and crippling the livelihoods of the good hard-working public. Yesterday, another metric that fuels that fire was announced, and it makes for interesting reading. Britain's national debt now stands at £2.17 trillion, which is 98.5% of GDP, which is the highest ratio since 1962 and in 1962 Britain was as provincial as could be and was still repairing itself from the tremendous cost of the war effort.
Since then, the United Kingdom has become a global economic powerhouse, its blue-chip companies have become the envy of the world and London has held the prestigious position of being the world's largest and most professionally run financial markets powerhouse. Britain has also spent the past twenty years as one of the world's most important technology innovation centers. It is a modern, highly urbane and sophisticated society with a massive collection of brilliant minds, and until March 2020 was in absolutely perfect condition.
However, the scale of spending on bureaucratic measures relating to the government's fixation on lockdowns and restrictions as well as wage guarantees to stop unemployment rising significantly during the sharpest economic downturn in more than 300 years meant the deficit was still three times higher than the level in April 2019.
Samuel Tombs, the chief UK economist at the consultancy Pantheon Macroeconomics today told the Guardian newspaper "Public finances were healing faster than predicted due to the resilience of the labour market, but meanwhile, central government total expenditure of £95.9bn undershot the OBR’s £98.8bn forecast, primarily due to debt interest payments coming in £1.8bn lower than it expected as a result of smaller-than-expected increases in the retail prices index in previous months."
Some analysts have stated that the improvements in recent months could leave the Chancellor of the Exchequer (finance minister) with an undershoot of about £20 billion on OBR forecasts for the year, and possibly more if GDP growth picks up as the Bank of England predicts to about 7% this year. The OBR (Office for Budget Responsibility) forecast is the Treasury’s official and most trusted forecaster.
Incumbent chancellor Rishi Sunak said yesterday “At the budget, I set out the steps we are taking to keep the public finances on a sustainable footing by bringing debt under control over the medium term." He also alluded to what he deemed to be a 'support package' to get businesses and employees back to normal, however until now, the support packages have been in the form of debt, borrowed by involuntarily locked down small businesses and freelancers, which must be paid back which will be difficult considering that many businesses have had no revenue for over a year due to the government's restrictions.
Britain is a credit-based society. Almost everything from new cars to household luxuries are easily available and are often leased or paid for by hire purchase or finance agreements, credit vehicles which are now being curtailed as banks have been reducing the credit limit on credit cards for thousands of bank customers without a reason, even if the cardholders have had good credit for many years.
The government which presides over the most important national center for global financial markets now has a national debt crisis on its hands, and if the Bounce Back Loans issued without underwriting by banks with government backing last year are defaulted on - and a 60% default ratio is predicted - this national debt will likely rise even further. Eventually someone will have to pay the piper, and in doing so, there may well be volatility relating to the value of the Pound, and potentially some degree of reassessment by credit rating agencies, too.