I don’t enjoy telling you this, but Britain will go bankrupt

It’s not much fun being a Cassandra – making dismal prophecies that nobody believes. But our ruling elites (politicians, journalists, bureaucrats and bankers) are so incompetent, self-serving and dishonest that someone has to try to tell the truth.

When I wrote PLUNDERING THE PUBLIC SECTOR I attacked New Labour for wasting £70bn of our money on consultants. In particular, I lambasted the £10bn NHS IT project and predicted it would end in utter failure. At the time, I was summoned to a meeting with Sir John Bourne (then head of the National Audit Office – NAO) and told in no uncertain terms that an NAO report had found that the NHS IT project was well-managed and would be a success. Seven years and over £2bn later the whole mess was abandoned.

In SQUANDERED, I predicted that Gordon Brown would waste over £1trn of our money. This was at a time when the sycophantic press were still telling us that Brown was an economic genius whose prudence was legendary. Few people believed me. But now we know that Brown was financially incontinent, a recidivist liar and probably the worst chancellor Britain has ever been cursed with.

In my blog, I used the fact that there are over a million Romanians and Bulgarians in Italy and a similar number in Spain, to predict that well over a million will come to Britain. Our politicians are talking about just 50,000 a year. In a few years, we’ll see who was right.

And now I cannot come to any other conclusion other than that Britain is going to face a massive financial crisis somewhere around 2017. The problem is, of course, our ever-rising debt – £700bn in 2010, £1.15trn now, £1.4trn in 2015, £1.52trn in 2016, £1.64trn (120% of GDP) in 2017 and so on. We cannot go on like this. It has to end in tears.

Our debt as a % of GDP (vertical axis) is almost as high as Portugal, Ireland and Belgium. But more worryingly, only 3 countries – Spain, Ireland and Greece – have a higher deficit (horizontal axis). The deficit, of course, is the rate at which our debt increases.

Our politicians and newspapers are keen to tell us all about the problems in the Eurozone, particularly in Greece, Spain, Italy and Cyprus. But by the time of the 2015 election, Britain will be in a worse financial state than some of the most bankrupt Eurozone countries.

What will happen? We can’t go on printing electronic money to buy our own debt. So at some point markets will lose confidence in the British government, the interest we pay on our debt will shoot up to £80bn or more a year and our government will be forced by rising interest costs or by the IMF to take drastic action. As Labour will be in power, there won’t be any serious cuts to benefits or the NHS. So there’s only one thing the Labour government can do to raise money – punitive taxes on our earnings, savings and pensions and capital controls to prevent us moving our money abroad – similar to what we’ve seen in Cyprus.

Think this can’t happen in Britain? Well, the Bank of England issued a report in December 2012 where it recommended confiscation of savings, even below the supposedly guaranteed £85,000 in the event of a major bank collapse http://www.economicsfortherestofus1.blogspot.ca/2013/03/the-usa-uk-and-eu-are-planning-to-take.html