ICAEW Chart of the week

This week's 'Chart of the Week' shows two things.

First, that when the government talks about net borrowing, it doesn't actually include everything that gives rise to an increase in the Government's debts.  This is a statistical convention, but we accountants tend to think it is misleading as it under-represents the extent to which the country is living beyond its means.

Two, and more importantly, that the UK state is still spending significantly more than it earns in tax and other revenues.  It's all very well calling for increases in public spending, but as existing spending is not currently covered by revenues, spending more creates an even bigger long term problem (with interest!) in the form of a growing debt burden. All that does is delay the difficult decisions about whether to raise taxes or cut spending to levels we can afford, all the while putting ever more pressure on public spending as the interest bill goes up.

As business people we know that the state is not a business, but in the long run similar rules apply and if it was a business, then it would be running at an ever increasing loss. We really need to improve financial management in government.