Max Hastings

My wife asked last week: “Is GBP35bn a lot of money?” This was not intended to be a facetious question, and was certainly not a foolish one. It was prompted by news that GBP35bn is the latest unofficial estimate for the cost of the Beijing Olympics and its associated infrastructure projects. In September 2007, the British government’s bail-out of the Northern Rock Bank was said to have reached GBP7.75bn. A few months ago, we were told that the UK Ministry of Defence faced a financial crisis because there is a GBP2bn “black hole” in its annual budget.

Yet in the past four months, the financial meltdown has yielded a flood of global figures that make all the above sums sound small change. The British government has injected GBP37bn into part-nationalisation of the banking system, and is said to be exposed to GBP150bn of potential mortgage liabilities. The US administration has pumped vast sums into its banks and mortgage institutions, and Barack Obama plans infrastructure spending and an economic fiscal stimulus that will cost close to a trillion dollars. A $17bn bail-out is projected for US motor manufacturers. Last year, GBP30 trillion was wiped off the value of the world’s stock markets.

The point of my wife’s question, which I was unable to answer, is that in the face of such tidings most of us have succumbed to number blindness. In the short term, such ignorance helps incumbent political parties. Electorates are grateful for any government action that promises to stave off immediate pain, job losses, bankruptcies, factory closures. A few months ago it was deemed a scandal that the UK was committed to spend GBP9.3bn of taxpayers’ money on the 2012 London Olympics. Now, that sum sounds paltry.

Nobody seems to take a billion pounds seriously any more. The nation’s gross domestic product is projected to be GBP1,473bn. The central government’s budgeted expenditure is GBP455bn, that of local authorities a further GBP166bn. Central government will spend GBP110bn on healthcare, GBP52bn on welfare, GBP28bn on education, GBP37bn on defence, GBP10bn on transport. All these commitments have been made before the government embarks on further bank and industrial rescues, infrastructure projects and new unemployment relief programmes. Even on the basis of the November pre-budget report numbers, government borrowing next year will reach GBP118bn.

I can grasp that the collapse of Bernard Madoff’s hedge fund, to which UK banks are substantially exposed, has written off a sum almost as great as Britain’s annual defence budget. I understand that central banks have little choice save to keep printing money, to start credit moving again and stave off a depression. Thereafter I have little or no understanding of the implications of this huge government borrowing. Perhaps it is a mistake for a newspaper columnist to avow such ignorance. But it may make similarly bewildered readers feel better, if a professional pundit occasionally runs up the white flag.