Tim Morgan, writing about the future, says:
First, I think few people understand how rapidly government revenue capability is going to slump, how hard it’s going to be to cope with that, and how angry a lot of people are going to be about the necessary responses.
At constant 2020 values, revenue is likely to be about £810bn this year. On a trend basis, using consensus numbers, this would rise to just under £1,000bn by 2030. SEEDS puts the out-turn for 2030 at £812bn. That includes taxing a lot of things that are untaxed or low-taxed at the moment. Trend expenditures (excluding debt interest) are about £1,050 in 2030. That implies the need to cut spending by at least 20%.
Then there’s discretionary consumption. This is going to collapse, even on the assumption that annual investment is trimmed to the bone (and what does that do to RE investment?)
Third, the UK is important-dependent, not least for energy, components and a sizeable part of food supplies, and also has substantial financial commitments in other currencies. Britain cannot afford a currency crash. This implies rates far higher than anything yet being discussed. The UK economy has been driven by credit expansion, and by over-inflated (and rising) property prices. Neither of these motors can survive sharp rises in rates or, for that matter, enormous compression of affordability.
If we stood up in Hyde Park and outlined even some of the necessary response measures, we’d probably be lynched.
In short, the situation is turning so bad so quickly that nobody really has any idea of what lies ahead.
I would add that, whilst I’m no fan of Mr Johnson – or for that matter of Mr Starmer – I wouldn’t want to be in the position that the PM and his ministers face in the next few years, in which I include 2022.