Facing up to reality

As the Financial Times points out today, there is a big hole in the plans of the political parties to deal with the deficit: Hole

The FT points out that in terms of defined spending cuts, the Conservatives and Labour has each outlined less than £10bn, far less than the minimum £40bn needed in the first three years. There has been much talk of 'efficiency savings', but much vagueness about how these will be secured, particularly on the timescale required. It gives voters the impression that a few bureaucrats in back offices may lose their jobs, but there will be no broader impacts.

As the FT also points out, none of the projections taking account of the likely rising costs of servicing the debt which may well go up by 50 per cent over the period. Social security also faces pressure from rising pensioner numbers.

What no one is saying but is very likely to happen is that VAT will have to go up, at least to 18.5 per cent, if not higher. There should also be serious thought about securing an earlier reduction in the pensionable age.