What we were not told

The dust has settled, and we have more or less got our heads round the size of the debts our government will have incurred. They are truly astronomical, and make us look like the banana republic we are beginning to seem.

How will they be repaid? This we were not told, merely that the size of successive deficits will diminish up to 2013. Whether they will continue after that and by what amount was not revealed.

No suggestion was made about repaying the debt, as sundry governments have tried to do at intervals. Even leaving out some liabilities such as guarantees to banks, PFI commitments on schools, hospitals and other infrastructure, as well as the truly enormous obligation to pay gold-plated public sector pensions, what remains is approaching £1 trillion.

This debt must be serviced, that is have interest paid. If the government is able to borrow at 5%, then we must pay £50 billion upwards each year in these interest payments, which is equivalent to over 10p on the standard rate of income tax!

The government has made a gesture.

We know about the restoration of the full 17.5% VAT rate after one year, and it seems certain from a published document that this would have been increased to 18.5% after the election.

We know that tax allowances will be frozen in 2011 for at least one year, which will bring many people into the 40% band.

We know that the government has been looking at what assets it could sell. There are not many left.

We know that National Insurance, a tax in all but name, will increase by 0.5%, which will not help much to promote employment, being a tax on employment.

These will not go far in reducing future budgetary deficits, even if all are taken together. If, in addition, the chancellor's forecasts are wrong, - he and Brown have underestimated recession and over-estimated growth on a regular basis, then the deficits will be larger and longer lived, and his so far announced attempts at financing them will prove even more inadequate.

The chancellor may be right, however, with recovery beginning next summer (third quarter). Most experts find it difficult to believe. If is is right and they are wrong, than we have at best 7 years of large budget deficits.

There is one further factor. The government has claimed to find possible savings, and factored these into their prescriptions. These are difficult, not least because they often involve making public sector workers redundant. The government this year, despite the difficulties, has appointed 50,000 additional civil servants, and made the Guardian newspaper prosperous in the process. The PBR presupposes that yet more will be required, to help lending to business and to deal with the growing army of unemployed.

It is difficult to see Brown & Co. making cuts among public sector workers, especially at a time of high unemployment. So they are left with freezing posts, not replacing those who retire, or transferring in others from elsewhere. They have not been very successful at this hitherto.

Sop the way is open for the Conservatives to show us something more positive, as they cannot go on merely criticising Brown indefinitely. It will be interesting to see what they come up with. Immediately they could release civil servants to replace retiring colleagues elsewhere, by abolishing many of the vast number of quangos, and especially the regional ones, by cancelling the ID card scheme and the national database, which are both enormous white elephants and suspected to be such by an increasing number of citizens.

In the medium term the Conservatives could engage in a full reformation of education and health, and ensure that services are not cut in any way but are performed more efficiently by removing a vast army of pen-pushers.The bureaucrats thus displaced could them be transferred elsewhere or allowed to leave for the private sector in the by then recovering economy.

So far we have the situation of temprorary tax cuts to be followed by tax rises which are permanent. We can see that the government has taken the opportunity to increase duties on fueld, tobacco and alcohol. We do not know what further "bombshells" await us, as clearly on the government's figures they have not covered the earlier deficits and any inability to pay interest out of taxation must perpetuate the period of deficit.