Yesterday's video clip from MoneyWeek got me digging. What I have turned up (far from a complete picture I confess) has got me deeply concerned. There was some further fuel added late last night when I read a report that one of the largest circulation Chinese daily papers ran an editorial basically saying that China didn't need Britain, "a small and no longer significant nation that has impoverished itself and has nothing to offer China". Sadly, I suspect they may well be right on the money despite the Prime Minister's much vaunted 6 billion pound trade deals. I note he didn't say which way the 6 billion would be going - to Britain or to China.
We should all be deeply concerned by the fact that our National Debt has shot through the 'billions' and is now over 1.4 trillion Pounds. We need to be even more concerned over the fact that, despite the much vaunted 'cuts' in all manner of 'services' and 'benefits' the overall spending in Whitehall has actually increased. This is not a new phenomenon, Whitehall 'cuts' and 'savings' always seem to translate into increases in their overall budgets. All talk of 'value for money' almost invariably means a reduction in delivery and a massive hike in the cost of whatever it is. Th awful truth of our National Debt is that it is over 9x the National GDP. Put another way, the Demand on the "Money Supply" is 9 times greater than the Supply. This can't go on.
But the terrible truth is that neither Parliament (the prime source of the problem) nor Whitehall are capable of dealing with it. Even if they wanted to, the truth is that the either haven't a clue as to how to do so, or, they are afraid to.
So what will happen if the country runs out of money? Who will really suffer?
My studies of the late Roman Empire and its collapse revealed that the majority of Middle and Working Class folk were the first victims. The rich and powerful carved out little fiefdoms for themselves, hired soldiers and sat tight, the middle classes and the workers found themselves being squeezed for massive tax demands, then for 'protection' and finally surrendered their property and liberty just for food and shelter. The wealthy families survived, eventually becoming, through marriages, 'little' wars and adoption of the tactics of the barbarian invaders, the 'noble' families who ruled Europe until the wars of Revolution in the 18th and 19th Centuries.
I suspect something similar is about to happen in Britain.
Let's take a look at what will happen if the government can no longer service its debt and the money supply dries up. As in Greece, the first to be hit will be those who depend on the State for their income. Civil Servants, teachers, doctors, nurses, fire fighters, police, soldiers, sailors and airmen, pensioners, the disabled, students and the unemployed. Health services will be crippled, those with debts, mortgages, loans and so on will no longer be able to pay for them. Unemployment and homelessness will soar, so will the need for food depots, child protection and so on. Some communities, where there is a strong community support ethic (the Muslim groups come to mind) will survive by coming together and taking care of their own as they do in the Middle East and elsewhere, the richer members of families providing the basics for the less fortunate. For the rest, used to "The Government" providing everything, there will be a major problem as the Greeks have discovered. You can't feed a family out of grow bags on the balcony of a flat, you might if you have a greenhouse or an allotment, but both of those will become very vulnerable to the desperate hungry who don't have access to such facilities themselves.
There will be riots over the cessation of 'benefits' and certainly the likes of the National Union of Students will embark on campaigns of anarchy over their Student Grants and Loans being stopped. They will be joined by others dependent on the hand-out culture we have created, and both will simply make the situation ten times worse. We can be sure a number of expensive projects will cease. The new aircraft carriers being one, but others will include things like road maintenance, keeping the rail infrastructure up to date and so on. Health care will become basic - unless you can pay for it yourself - and we can expect fuel to become increasingly expensive and scarce. That will mean cold homes for many, which, coupled with minimal food supplies will mean a rise in deaths from disease and the cold.
While Whitehall will desperately target all the 'High Profile' projects and Services (Fire, Military, Student Grants and Loans, Pensioners and so on) they will be saving 'pennies' simply because they will not dare to tackle the real cause of the problem - the major slice of the money we overspend from the Treasury goes on the 'Welfare Benefit' handouts and the massive Whitehall machine that administers it. Defence, even including the new carriers, is under 2% of our GDP, less than most of Europe spends, half what the US spends (in equivalent terms) and less than a quarter of what many Middle Eastern and 'Developing' nations we currently give Aid to, spend. By contrast, according to some sources (it is difficult to make sense of some figures since the 'benefits' now handed out are spread across several Departments and not, as one would think, under one umbrella) our 'Welfare' bill accounts for around 50% of GDP!
So far all the 'austerity' measures have done little more than rearrange the deck chairs on this sinking ship. The HMRC (as a friend discovered this week) is so desperate to find extra money they are now 'auditing' pensioners in the hope of finding hidden billions in undeclared savings. As my friend reported, the pennies they do find are far outweighed in real terms by the cost of these 'teams' chasing them. Those who do have the sort of money the HMRC would love to tax have it where it can't be got at, or have used all the loopholes in the Tax book to protect it. The only option now for the Treasury is to 'nationalise' all the 'private wealth' such as savings and private (invested) pension funds as has been done in some of the Eastern European countries trying to get their debt under control.
It is obvious that this situation cannot continue. We're broke, living on the Credit Card and praying for a Lottery win. Parliament can't fix it, Whitehall won't. So, sooner or later, we're going to go bust. All most of us can do, at this stage, is hope and pray we can weather the catastrophe somehow, and make sure that the government can, in the end, be remodelled, its powers to give away what isn't theirs in the first place restricted and at least some of the best of our society and culture salvaged.
It isn't a good picture, and the troubling part is that it is very likely that those who caused it all will be the ones who survive with wealth and power intact.