You can’t live with them, and you can’t live without them. That’s budgets. Most of us budget even if we don’t write it down. I’ve got a certain amount in my bank account. If I spend more than is stamped at the end of my statement, then trouble may ensure. Not always given our modern dependency on credit. A problem arises only when spending gets out of control.
Mr Micawber cautioned about debt’s downside: “Annual income twenty pounds, annual expenditure nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty-pound and six, result misery.” In his time, Charles Dickens was acutely aware of what unsustainable debt could do to people.
We’ve had weeks where the news media has created a landslide of content on a budget. The repetition of point scoring has got tedious. It’s way out of normal everyday human experience. I don’t know about you, but I can’t easily relate to a number like £1,226 billion[1]. Every year public expenditure totals numbers of that order. It happens. It’s real.
Today, our UK “billion” is a thousand million. That’s spelled out as a one followed by nine noughts. At one time in the past the UK “billion” meant a million million. That’s spelled out as a one followed by twelve noughts. That got dropped for the sake of international harmony.
I have used such numbers in lectures on aviation safety. To think, I often got people glazing over when I talked about ten to the minus nine per flight hour. That’s a billionth of something. A mighty small number. In these cases, a number denoting a probability of something happening.
So, here we are in October getting excited over a change of couple of hundredth of typical annual national expenditure. Not without reason. That figure sound like a small number, and it would be, if it wasn’t for the subject Dickens raises, namely debt.
Wisdom comes from learning from experience. Lessons learned are incredibly valuable. That’s not rocket science. Only we need to factor in how easily we forget bad experiences.
In terms of budgeting, recently two reckless politicians taught us a lot[2]. Truss and Kwarteng sound like a comedy double act or a dodgy back street lawyers office. Those two monster brains had the marvellous idea of borrowing more to give it away. In a short flash of genius what they did increased borrowing costs and spooked just about everyone.
Debt matters. Nation States are not like people, so the home economics analogies don’t stand up. However, borrow too much without being absolutely clear as to the answer for question like – who, what, where, when, why and how and the results are likely to be extremely unpleasant.
Let’s see if the day ends with a pint of beer being more expensive or not. Love them or hate them, budgets are not going away anytime soon.
[1] https://obr.uk/forecasts-in-depth/brief-guides-and-explainers/public-finances/
[2] https://www.niesr.ac.uk/blog/truss-kwarteng-mini-budget-one-year
John Vincent 