We will pay for these promises

PROMISES, promises – but there is no money. One of the most depressing things about this pretty depressing Election campaign is the financial illiteracy of the claims the politicians are making.

They are all talking as though the fiscal position of the country is secure. It’s not.

Sure, it is much better than it was ten years ago, when the deficit hit 10 per cent of GDP. But the deficit this year is running at about 2 per cent of GDP. That is higher than the growth rate, forecast to be 1.2 per cent.

You don’t have to have a degree in higher mathematics to figure out that this means the national debt will go up.

Dig a bit deeper and the story gets worse. We must be close to the top of the economic cycle. It is a mug’s game trying to forecast when the next downturn will come but it must be an odds-on bet it will be during the life of the next Parliament.

The economy is running at or close to full capacity, with unemployment the lowest since the 1970s.

Any slowdown would cut tax revenues and increase social security spending. And quite aside from this cyclical position, the next government faces the long-term structural pressure from an ageing population, whose pensions have to be paid and who will require more health and care spending.

So what are the major parties saying?

The Labour plans are the most outlandish, though they do acknowledge that taxes have to go up to fund them.

The trouble there is that even if such a huge increase in the size of the State – larger than at any time since the Second World War – were a good idea, they would struggle to raise enough tax to pay for it.

The Lib Dems’ main claim is that by not leaving the EU they would have an extra £50 billion to spend.

A sudden windfall may sound attractive in theory. But look at the scale of this. That sum would be over five years, so £10 billion a year. This year, public revenue is budgeted to be just over £800 billion.

So the annual ‘bonus’ – if it were indeed to happen at all, which must be in some doubt – would be just over 1 per cent of total revenue. In national accounting terms that is tiny.

As for the Tories, you sort of hope that they would be more realistic.

They have, after all, had to spend nearly a decade getting that deficit down and know how unpopular that slog has been. But no, they too seem eager to behave as though the past decade has been a bad dream.

We don’t have full details of their plans yet, but we do know that already the national finances are heading deeper into the red. Just last week, we heard that the deficit in October was the highest for five years.

As for their tax plans, from what we know it will be tax cuts for nearly all Britons and if there are going to be any tax increases, these will be for foreigners who want to buy homes here. It may be admirable that there should be 6,000 more GPs and 20,000 more police officers, but someone has to pay for them. And that means us.

I HAVE just returned from two weeks in Washington, where it has been wall-to-wall stuff about the impeachment of Donald

Trump. But there is another running story that will ultimately become much more important – and that is the evolving relationship between the US and China.

There are, of course, the rumbling trade tensions and while a truce is widely expected in the next few weeks, the general view is that these are the first skirmishes in an economic war that will last for a generation.

But just last week the whole relationship between the world’s largest and second-largest economies has been brought into the spotlight by Congress passing the Hong Kong Human Rights and Democracy Act. The President is expected to sign this in the next few days.

Common sense says there should be an interim deal on trade, and some sort of accommodation between the countervailing parties in Hong Kong. But I fear common sense may not prevail, which would be deeply troubling for all of us.

Politicians talk as though Britain’s fiscal position is secure. It is not