UK General Election 2015

The UK general election is not tackling the real issue which Britain faces, which is the problem of private debt. It is only concentrating on government debt. We are being treated to arguments about minor differences about how much the government should spend and tax over the course of the next parliament or 5 years, if the next parliament lasts that long even though there is a legal obligation for  a government not to resign.

At present the whole of the British economy generates about £1.6 trillion in one year. Our public national debt is some 80% of GDP which is around £1.3 trillion. £1.3 trillion is a colossal sum of money which results in interest payments of around £48 billion per year which the government must finance before it spends any money on welfare, the national health service, education and etc.
The UK's total annual spending is about £714 billion pounds. The budget deficit is around £100 billion as the government raises just over £600 billion pounds in taxes.

The difference between the political parties' spending and tax plans is around £12 billion per year. They are arguing about a tiny proportion of the national debt and the public sector borrowing requirement.

http://en.wikipedia.org/wiki/Economy_of_the_United_Kingdom

http://www.ukpublicspending.co.uk/breakdown_2014UKbt_14bc5n

http://www.theguardian.com/business/2014/apr/23/uk-deficit-lowest-financial-crisis-osborne-budget

The national public debt of £1.3 trillion is dwarfed by private debt, which stands at over  £5 trillion; this is almost unimaginable. Price Waterhouse predict that for the fiscal year 2105 total UK debt will rise to about £10.2 trillion. £1.4 trillion will be the national public debt and the rest will be private debt.

Households will owe £1.9 trillion mostly in the form of mortgages. These debts are secured but if another housing market bubble burst many of these debts will become un-secured or will have their collateral severely reduced.

Financial sector debt is predicted to be £4.2 trillion and although much of this debt is balanced by assets  but a lot of those assets are at risk.

Non-financial companies owe £2.2 trillion and around half of this debt is secured against property.

Britain's total private and public debt has not reduced substantially since 2009 when the financial crisis was in full swing. In 2009 it stood at 543% of GDP and PWC predict that for 2015
 it will be 536%. The balance sheet of Britain is still just as precarious as 2009.

http://www.theguardian.com/news/datablog/2010/nov/09/economicgrowth-debt-relief#data

The high level of private debt is crippling our economy by reducing the amount of credit that the Bank's can grant to small and mid sized companies.

The Bank's are in so much difficulty that the government of the UK has bought £375 billion pounds of gilts and mortgage backed securities from them. This £375 billion which has been spent by the Bank of England as part of its quantitative easing programme has shored up the Banks' balance sheets to protect the UK Banking sector  from collapsing. Little of this money has found its way into the real economy to support businesses. If a substantial amount of this money had found its way into the real economy then we would have had inflation.

None of this £375 billion bonanza has been spent on a hospital, a care home, a library or a road.

This money was spent by both the Labour and Conservative governments between 2009 and 2012 without any real discussion and no-one voted for it. Why therefore are the politicians arguing about £12 billion?

One day we shall have to pay back the £375 billion of quantitative easing which the governments have borrowed on our behalf. To spend £8 billion on the NHS is chicken feed in comparison.

The level of private debt could create another dangerous asset bubble which if it bursts will create
such havoc that it could break our economy. We cannot afford to bail the Banks out again. None of our politicians want to talk about this . They are just living in hope that a little pruning of the budgets here and a little additional taxation here will somehow pay off all our debts.

In the future, we don't know when, interest rates will have to rise and when they do the whole economy will suffer again. Unfortunately this is an unavoidable consequence of too much private debt rather than public debt. No political party has an answer. In 2005 most politicians, economists and members of the public though the garden was rosy. In 2015 we would all be fools to think the same thing again. The trouble is there is no-one to vote for who has got any idea how we are going to balance the books of UK PLC. We need a new economic model of capitalism and quickly.