The coalition is once again struggling to keep down the size of the deficit and is missing their targets for this year. It is down, of course, from the worrying levels of 2010.
But my New Economics Foundation colleague James Meadway has written a very interesting blog for the New Economics Foundation which suggests that, although the government borrowing total is down, the rest of the economy is still absolutely constipated with debt.
The latest debt statistics show that the average household debt including mortgages is £54,700. Outstanding consumer credit debt is up another £5 billion on last year.
James Meadway says that the total liabilities of the UK financial sector is now over 1,300 per cent of GDP.
Why have we created the kind of economy that seems to require money to be lent as much as it requires oil to be extracted form the ground?
Debt is a problem in the private sector because of the activities of the corporate raiders – if your balance sheet is free of debt, then you are a takeover target. The struggling consumer sector, especially when it comes to electronic equipment – rather like the airline industry – can’t survive without pumping vast amounts of debt, either into the consumers or into the airlines.
Was there a moment when everything went wrong? A moment when we plucked the apple marked debt from the tree of economic knowledge?
Well, not really. But I’ve always wondered at the possibly mythical moment when a young Nigel Lawson persuaded the debt-phobic Margaret Thatcher that a society of homeowners could only be created by encouraging people into debt.
It was true – for a time. But that fatal conversation, which seems to have happened at the Conservative Party conference in October 1979, led to everything else. See the full story in my book Broke.
But there is another reason. Creating debt is the way that banks create most of our money in circulation. It is controversial, archaic and definitely not fit for purpose. In fact, 60 per cent of the money in circulation started life as mortgages.
It is a sobering thought that, without the house price boom, we would have so little money that life would grind slowly to a halt.
It is, in short, a ridiculous way for a modern economy to organise itself. High time somebody put forward proposals for reform. And of course, people have. The new economics pioneer James Robertson in particular.
The real question is why we don’t get any of these proposals in mainstream political debate. But even that may change now that Martin Wolf, the Financial Times columnist, has been pressing for change…