Acknowledging Britain's Balance of Payments Crisis

Posted on 13-11-17 by John Rye Number of votes: 1 | Number of comments: 3

In 2016 the UK had its worst Balance of Payments deficit on its entire history. As the ONS put it:

"The current account deficit widened in 2016 to 5.9% of nominal gross domestic product (GDP), showing the largest deficit on record".

There was a time when such news would have poured out of every channel with the potential to bring down the government, yet today it is hardly mentioned.

It was the hard-right economic thinkers of the 1970's and 80's who said that we need not care about Balance of Payments deficit, and subsequent governments have followed that line without question ever since.

Year after year, because we have bought far more goods and services from the rest of the world than we sell to it, capital has been drained from the UK to be replaced by the much-vaunted Inward Investment, which is of course just more debt, and debt to be repaid with interest. After all, who in their right mind makes an investment without expecting a return.

However, UK Governments like this type of debt because it does not appear on their books. It appears instead on our books. For example, the Chinese and French built nuclear power station will drag more capital from the UK than is invested by means of raised electricity prices to be paid for by hard pressed working people and by the UK businesses that employ them.

Continued, long-term Balance of Payments deficit cannot be ignored. Left unchecked it will bring the UK economy and the public services that depend on revenues from that economy to their knees. Long-term Balance of Payments deficit is also telling us something about the UK economy that matters to ordinary working people; it tells us where good well-paid and secure jobs are.  They're not here!

Nor can a long-term Balance of Payments deficit be easily fixed. There is no panacea. It is instead, a long journey, but let us make a start.

Bring Balance of Payments back into the public debate by requiring every government spending proposal to be vetted by the OBR, not only for cost to the UK taxpayer as at present, but also for its effect on the UK's Balance of Payments.  At the same time review all current in-place spending decisions to see if any should be stopped and replaced with those with less damaging effects on the Balance of Payments.

Referring to: Economy, Business and Trade

The Economy, Business and Trade Policy Commission develops Labour's economic and business policy, including industrial strategy, energy and international trade.

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