Dear Sir,

According to Mr Chris Bryant, Parliamentary Under Secretary of State in the Foreign & Commonwealth Office, the US Federal Government budget deficit will expand to approximately US$1.7 trillion. This represents 13.51 percent of forecast GDP. GDP is forecast to contract by 2.4 percent in 2009 and expand by 2.7 percent in 2010. The deficit will increase even further as an inverse relationship holds. It should be noted that the US is able to finance this deficit by issuing government debt or effectively borrowing from its public and other nations, most notably the Chinese. (I digress).

Surprisingly, you would think that our deficit is far worse than that. However, data released recently by the Economics and Statistics Office indicate that at no point in the past seven years has the deficit exceeded 6 percent. Although it is alarming that this particular statistic has seen a precipitous rise and fall from a 3.3 percent surplus to a nearly 6 percent deficit, it does not surpass the deficits faced by many advanced economies. While the calamitous policies of the People’s Progressive Movement have exacerbated our situation; I am curious to know why the present government, in its efforts to stimulate our economy through borrowing, is being hindered while the governments of advanced economies, including the UK, have borrowed excessively at a real cost to posterity.

It should be noted that PPM forecast budgets based on expected future revenue streams. At a time of economic prosperity and a general lack of fiscal prudence by both parties, it is difficult to see the UDP making contrary forecasts. Although, the present Leader of Government Business has stated that he predicted the current crises coming.

“Policy makers have to get the right balance between restoring confidence in the markets, by boosting economic activity, and ensuring debt remains affordable.” The basis of our economic success has been the low tax regime. The implementation of taxes or “more predictable revenue bases” would have a detrimental effect on our ability to continue to generate revenue based on our current economic model and thus increase our economic difficulties. Therefore, I cannot see how this is advisable. Effectively, the economic noose is being tightened under the guise of fiscal responsibility. Isn’t that ironic when considering the UK governments own spending policies and follies (See expenses scandal).

While I do agree with the general consensus that big government is the root cause of the problem, the UK can hardly point an accusatory finger. Actually, I doubt the UK government can afford to take on the unprecedented levels of debt and subsequently execute their exit strategies relating to quantitative easing.

Government debt represents a failure to live within its means. However, broadening our tax bases will not necessarily equate to surplus. I believe it far more advisable to contain expenditure and eliminated unnecessary operating costs. According to the IMF, a sustainable level of debt is that which a country can have today without running into servicing difficulties given reasonable expectations regarding future fiscal effort. Therefore, expenses must be cut, superfluous agencies wound down and privatization should occur. Civil servants should then be repatriated by employment relations into the private sector. Once this occurs, in addition to amendments to the Public Management and Finance Law and appointment of a competent Financial Secretary who is able to champion the law, borrowing is sustainable. Also, I thought one of the perquisites for being an MLA was to be a successful businessman. Apparently the transition is as smooth as sandpaper.

I therefore advocate short-term borrowing, backed by a long term reduction in government spending, in lieu of additional taxes. Does anybody remember the joke from Master and Commander when Captain James Aubrey asked a botanist which of two similar weevils he would choose? Accordingly, one must always choose the lesser of two weevils.

Lastly, although unrelated, this comment is directed to Mr Barlow. I fear you underestimate the importance of statistical data regarding our economy and thus the ESO. I’m not saying goat counting is a meaningful statistic either. Regarding confidence in our niche market, investor must have all available information in order to take responsible investment actions. Therefore, I would actually petition for enhanced and more frequent reporting from the ESO.

As always, I would not assume that the above is the answer, but merely a proposition to further facilitate a necessary discussion.

Ronald Reagan said it well, “Government is not the solution, Government is the problem”. George Bush said even better, “No new Taxes”.

Colin Forster