Tuesday, 20 October 2015

A deficit with Chinese characteristics

Remind me, who was supposed to be 'a serious risk to our nation’s security, our economy’s security and your family’s security?':
As the FT’s Giles Wilkes put it succinctly last month:
'Wish someone would explain why flying 15000km to beg for Chinese cash is a better way of funding UK infrastructure than just borrowing at 3%...'

 ...the Conservatives, and George Osborne in particular, have made eliminating the deficit their raison d’ĂȘtre. The state deficit was the political stick the Conservatives chose to use against Labour and now they have to see it through. They have, therefore, just passed a law ruling out borrowing for investment after 2019. Of course, this is pure baloney as all governments in modern times have borrowed to fund infrastructure but it means that the capital spending the country needs must be funded through the disguised borrowing of foreign investment and PFI deals.*

But while the expedient may be short-term the ramifications of China taking a stake in the UK could be huge...

...For reasons of ideology and political expediency, the government is sleepwalking into a potential geopolitical shift. No-one can be sure where this will lead or what the implications might be. At best, it will leave future generations paying some of their tax money to a foreign dictatorship. At worst, well, who knows?
The reliably excellent Rick at Flip Chart Fairy Tales has some cautionary thoughts on George's hot date with sugar daddy Xi.

Now we know that Britain's 'long-term economic plan' depends on a big dose of that off-balance-sheet creative accountancy which worked out so well for the banks, are we feeling more secure yet?

*My emphasis.