John Redwood today is trying a new approach to explaining the scope of the financial crisis:
Let us look at the financial plight of an imaginary Mr and Mrs Public Sector. They are on a good income of around £50,000 a year. They don’t feel it is nearly enough, as they are spending this year £67,500, financing the extra £17,500 from borrowing. They are lucky, because they do not have to pay any tax on the income, so what they earn they can spend.
They already have an £80,000 mortgage. They owe £110,000 to the pension fund, as they have not paid any pension contributions in for years. They have borrowed another £50,000 on credit cards and hire purchase to buy furniture they fancied and to undertake some training courses. They have guaranteed a couple of businesses that have gross debts of £300,000, but the businesses also have plenty of assets so they are hopeful they wont lose too much on them.
All these figures are about 1/10,000,000 of the real public sector ones.
It does put things in perspective, doesn’t it?