Posted on 12/20/2007 9:38:48 PM PST by bruinbirdman
Official figures are showing a very different economic picture from that drawn by the Prime Minister and Chancellor.
Claims by Gordon Brown and Alistair Darling this week that the economy is fundamentally sound and well placed to ride out worsening world conditions were badly undermined yesterday by a spate of bleak official figures.
City economists lined up to sound warnings that the latest grim economic news suggested that Britain's economy is badly exposed to a global downturn and “dangerously unbalanced”.
In a double blow to an increasingly embattled Chancellor, the slew of worrying data showed the Government's finances in the red to a record extent last month, and the country as a whole living far beyond its means, with another record-breaking deficit on the balance of payments.
“The latest flurry of UK data painted a distinctly ugly picture of a dangerously unbalanced economy, supporting our view that the coming slowdown will be a prolonged and potentially painful period of adjustment,” said Jonathan Loynes of Capital Economics.
The biggest shock in yesterday's figures came as balance of payments data showed that the current account - the broadest measure of the country's international financial position — was in deficit by a huge £20 billion in the third quarter (Q3), the highest figure since records began in 1955.
The vast total marked a ballooning of the deficit from £13.7 billion in the previous quarter, and saw it swell to a massive 5.7 per cent of national income. As a proportion of GDP, this left Britain's balance of payments as deep in the red as that of the United States. The percentage deficit matched records set in the 1980s boom.
Earlier quarters' current account deficits were also revised up, with the overall total for 2006 now put at 3.9 per cent of GDP, against previous estimates of a more modest 2.5 per cent.
The pound's overall value on its trade-weighted index tumbled to its lowest level for a year and a half, and shed more than two cents against the dollar, as economists said that the situation looked unsustainable and left Britain exposed to a difficult rebalancing of the economy. Analysts cautioned that a further slide in the pound, fuelling inflationary pressures, could hinder the Bank of England's ability to fend off a downturn with aggressive cuts in interest rates.
The severe deterioration in the balance of payments was driven by a combination of a record £22.6 billion trade deficit in Q3, with an abrupt shift in Britain's investment income from abroad. In the past, Britain has raked in far more on income from its direct investments in companies and projects abroad than it has paid out to foreigners investing in the UK, but the position has now worsened markedly.
The nation's surplus on direct investment income in Q3 fell to £4.9 billion, from £7.5 billion in Q2, while £23 billion was wiped off a revised surplus for the past 18 months. Economists pinned the blame on a boom in foreign direct investment and takeovers in the UK, meaning the country must pay out more overseas on income on the assets that have been bought up.
In a further headache for the Chancellor, yesterday's poor data on the public finances sparked renewed warnings that government borrowing could surge well above £40 billion for the present financial year, against a £38 billion Treasury forecast, and reach annual totals as high as £50 billion in future years.
November saw monthly public borrowing in the red by a record £11.2 billion, compared with £9.2 billion in the same month last year, as government spending rose faster than implied by Treasury plans, and despite strong tax revenues. For the eight months of the financial year so far, borrowing has reached £36.2 billion, up from £26 billion in the same period last year, and also a record.
Economists said Mr Darling could be forced to impose tougher curbs on spending if the credit crisis hits tax revenues from City institutions. “The Chancellor is likely to be playing Scrooge for some years in order to get this uncomfortably high budget deficit back under control,” said John Hawksworth, of PricewaterhouseCoopers.
Other GDP figures yesterday showed that while GDP growth remained strong in Q3, at an upgraded 3.3 per cent annual pace, this was driven by resilient consumer spending that seemed to come at the expense of households dipping into savings. The savings ratio, a key gauge of what people are putting aside from pay, fell from 4 per cent to 3.4 per cent in the quarter.
I've seen their parliamentary committee hearings. They use folding chairs and card tables.
10 Downing Street shares common walls with 9 and 11.
Cameras. Last time I was in London, they were everywhere. (and I mean EVERYWHERE)
The money goes on ludicrously high housing prices.
Simple answer...socialism doesn’t work.
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