Paste your Google Webmaster Tools verification code here

Government debt addiction means you can be sure of one thing: Stealth taxes will rise

Posted by on April 26, 2017 in Blog, Debt, GDP, Government Spending, Politics, Taxation | 2 comments

Government debt addiction means you can be sure of one thing: Stealth taxes will rise

Elections create uncertainty. But we can be sure of one thing. Regardless of the result, during the course of the next Parliament, stealth taxes will rise. This week, we have a sharp rise in speeding fines. Even doing between 31 and 40mph in a 30mph zone can now land you with a penalty of 50 per cent of your weekly income.

Governments across the West are running out of ways to pay for the spending levels which the electorates appear to demand.

A key way in which public spending has been financed over the past 40 years has been through debt. Almost everywhere, the level of public sector debt relative to GDP has risen sharply.

A few years ago, the International Monetary Fund (IMF) published long runs of historical data on the public debt to GDP ratio for countries across the globe. The Bank of International Settlements (BIS) updates the ratio regularly.

In 1977, gross public debt in the United States was 39 per cent of GDP. In 2016, it was 98 per cent. Over the same period, the UK, using the IMF and BIS definitions, the rise was from 49 to 115 per cent of GDP. In France, the ratio went up from 15 to 115 per cent. Even in debt-wary Germany, there was an increase from 27 per cent in 1977, to 78 per cent in 2016.

There are different ways of defining public debt, and no two measures are the same. But regardless of how we put the figures together, the conclusion is clear.

Public sector debt has risen massively. The simple fact is that most governments in most years now routinely spend more than they dare raise in taxes. The resulting deficit has to be financed by issuing debt. But the limits are now being reached, a lesson the Greeks have learned so harshly in recent years.

Over the course of history, public sector debt, relative to the size of the economy, has been at much higher levels than it is now, with no apparent serious consequences. In 1946, for example, UK public debt was 270 per cent of GDP.

But in the past, governments with high debt levels typically did one of two things. They either defaulted, or they tried to pay it off. The left wing Labour government of Clement Attlee ran huge budget surpluses in the late 1940s, peaking at around £100bn a year in today’s terms.

Most debt used to be incurred as a result of war. In 1861, US public debt was less than 2 per cent of GDP. The Civil War bumped this up to 30 per cent. In the late 1810s, as a result of the Napoleonic Wars, the first truly global conflict, British debt was 260 per cent of GDP. It took decades to get it down to sustainable levels, but governments did succeed and pay it off.

In stark contrast, debt has been built up in the late twentieth and early twenty-first century to finance the services provided to voters. It is simply unsustainable.

As published in City AM Wednesday 26th April 2017

Image: Speed Trap by Peter Holmes is licensed under CC by 2.0

2 Comments

  1. all right and thank you for visiting online casino agents for Indonesia.

    Here we are here to meet the expense of right of entry for fans of sbobet casino who
    desire to join the international agent site
    Promosbobet.

    The products offered are totally diverse and are no question the best choice.
    Derived from providers that have credibility and have been proven to have the best predicate in serving their customers.

    Providers once Sbobet, Maxbet and many more.

    As the best online casino and soccer gambling site in Indonesia.

    We provide maximum encourage considering customer hold that works online 24 full hours all day.
    appropriately members can put it on whenever and wherever without fearing
    to direction the possibility of difficulties or confusion.

  2. Wagering becomes more enjoyable following the advent associated with internet technology.

    In contrast to before where wagering games can easily end up being enjoyed with the upper classes and
    a new lot of compromise to try out it, now you
    can usually enjoy the games presented by the particular joker123 site.

    Your own desire to enjoy online gambling will be now better to pay out because playing gambling no
    longer must be done through high-class gambling
    houses available in a special region such
    as those in Vegas or Macau. Now the joker123 site has launched complex technology
    for all Indonesian men and women and now you can enjoy all typically the games you would like through your screen or even your current smartphone.

    For all those of you who else want to attempt to enjoy how
    fun online betting video games are, the Joker123 site is the particular
    best choice to be your partner enjoying betting. Joker123 site
    provides all types of gambling video games that
    you require. Popular games such as Roulette, Baccarat,
    Sicbo, Baccarat, and Slot machine games can be played with just one customer ID
    on the particular joker123 site.

    To join the Joker123 game, you must first join as a
    member associated with the official Joker123 agent, Unexpectedsims.
    Is actually easy, just visit the site and register by filling in the registration type with your personal identity completely in addition to correctly.

    In only a few minutes you can get the user ID needed to access almost all Joker123 gambling video games.

    As a member of UnexpectedSims, members will obtain the best characteristics
    that will give members ease inside playing online betting.

Leave a Reply to agen sbobet casino Cancel reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.