The loss of the UK's AAA rating is just the start of 'permanent recession' for the country if drastic action – like cutting back welfare spending – is not pursued quickly, argues UKIP MEP Godfrey Bloom.
• On Saturday morning I awoke, after a pleasurable post-debate soiree with the Durham University undergraduates to listen to an alleged expert from Liverpool Business School airing some particularly non-expert views in response to the usual witless television early morning presenter. Where do they get them? Obviously, his mantra was 'now is the time for complacency'. It did not matter - the United States and France have lost their AAA status, people 'will still buy our debt regardless' and so on. Presumably his organisation is government-sponsored so he did not want to frighten such horses as we have not yet eaten.
I managed fixed interest funds in the 1980s and 1990s, not without some success. Indeed, I even won a few prizes for so doing. I make mention of this in no boastful way. In fact, I struggled with my maths O-level and to this day make a mess of scoring in pub darts. I do however know how to read the bottom line of a balance sheet and use a pocket calculator, which is all you need to make an assessment of any bond or gilt.
The problem is sovereign debt does not have to meet the reporting standards of a corporate bond launch. A FTSE company, which presents accounts without responsibility for guarantors and pensions, would find itself heavily fined. The directors could face custodial sentences. An individual would also fall foul of the law if they applied for a mortgage and failed to mention guarantees on other loans, which legally affected their credit ratings.
If proper criteria were applied to United Kingdom sovereign debt, the picture would look very different. The credit rating agencies argue that UK national debt might peak at 90 per cent of gross domestic product in 2016. They have not favoured me with their calculations but they need not, I can do my own. If public funding initiatives are included along with public sector pension commitments, compulsory in public limited company accounts, the debt ratio to GDP now is approaching 215 per cent. Yes, you spotted it, the same as Greece. It was this aspect that so annoyed the French government when it lost the AAA rating last year.
This historically all peacetime high for our nation is getting worse. The British Chancellor boasts he is cutting the deficit by 25 per cent. Of course, any school boy could work out that to reduce national debt the government needs to cut public spending by 125 per cent. Or any figure over 100 per cent, at the very least. National debt is rising by about 10 per annum, post the 2010 election. This administration will finish its term in 2015 with the national debt up by 48 per cent, at this rate.
An unreformed tax system will never produce enough growth to acquire the velocity to escape this debt black hole. Government spending at nearly 50 per cent of GDP cannot continue. Manufacturing and 'the high street' are in terminal decline. Add the suicidal energy policies pursued by the coalition and the pound will continue to tumble. It would be worse if other countries were also not incompetently governed. Social and corporate welfare must be slashed and soon. We are going into a permanent recession of our own making. I am happy to send my pocket calculator to the British Chancellor immediately on request.
Godfrey Bloom is a UKIP MEP for Yorkshire and North Lincolnshire