In one of my recent posts (‘Energy and the Dismal Science’) I said that “our complex society … doesn’t work – it just doesn’t work – unless the economy grows consistently and reliably at around 3% per year … without economic growth the system starts to implode, and pretty quickly at that; honest.”
If proof were ever needed that government finances start to go pear shaped (fast) as the money runs out (aka low/no economic growth), we learn today that come 2015 the government is going to be £64 billion short. This is because – and without wishing to put too fine a point on it – here in the western world we’ve reached the end of mankind’s 200 year era of fossil-fuel powered economic growth.
The Institute for Fiscal Studies (see link below) tells us today that “within the current parliament the Chancellor has chosen not to cut spending or raise taxes further to offset much higher borrowing resulting from a weaker economy. As a result borrowing is forecast to be £64 billion higher in 2014–15 than he originally hoped.” Note the key term “a weaker economy”.
It remains to be seen whether the IFS’s forecast of a return to a rate of economic growth of 2.1% in 2014, rising to 2.9% in 2017 (averaging 1.9% over the period 2013 – 2017) will come to pass. Even then, an average growth rate of 1.9% over 4 or 5 years is significantly less than the historic trend and one wonders if, even now, the political class understands the implications of this for state spending … and in turn for the stability of our complex society.
Incidentally, to add some perspective, the annual cost of all of the United Kingdom’s secondary health care facilities (hospitals etc) is £69 billion.
Meantime, thank God that gay people will soon be able to get married under the eyes of the law (and, no, I’m not homophobic – a must-include disclaimer reflecting the level of Orwellian political correctness that pervades our society today).
The IFS Green Budget Feb 13: http://tinyurl.com/a9fdrej
Also posted at ‘The Renegade Economist’: http://tinyurl.com/b8lbvj6