UK FINANCES AND TRADE: Bankruptcy for Dummies.


Question-marks over huge public-sector outgoings in May

Financial and economic realism collided with a sickening thud in this morning’s ONS statistics about UK reserves….following the trade-gap figures of three weeks ago.

The value of the country’s reserves at the end of May 2010 was just £34 billion net.

During that time, the £ fell 8 cents against the Dollar – thus increasing our cost of imports and raw materials.

The month before that, our trade gap was £9.7 billion.

Simple maths deduces that if we don’t better that trend, all the reserves will have gone by September. But we show few if any signs of bettering it: despite the Pound being cheaper than the Buck now than at any time for years, UK exports continue to flounder…and now the £ is rising again.

Now look at that net reserve figure of £34 billion and compare it to our fiscal deficit projections of £150 billion for this year alone.

Now see the reserves dwarfed by the total size of our National Debt – £890 billion.

I’ll offer you an analogy: imagine you have a business projected to lose £108,000 per annum. Your one asset – the house – is worth £34,000, and falling….but your mortgage on it is £890,000. How easy do you think it would be to borrow more money? And at what point do you think repossession might be on the agenda? Do you think your accountant would say you were close to trading insolvently? Or do you think he might just recommend you default and go bankrupt?

After all the clever-clever relativism and putting of the good spin on things, it’s not very nice now to see the facts in black and white. But in the end, facts are facts.

In the face of these facts, however, somehow – in one month, May – the outgoing Government managed to whack up the public sector outlay by £208 million.

“The oldest trick in the book” said Alistair Darling ten days ago, “is for the incoming Government to say the outgoing one went on a spending spree”.

Well Ali, based on the official figures, its even easier to say that….when that’s precisely what the outgoing Government did.